[Federal Register Volume 77, Number 109 (Wednesday, June 6, 2012)]
[Notices]
[Pages 33405-33420]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-13738]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-570-929]


Small Diameter Graphite Electrodes From the People's Republic of 
China: Affirmative Preliminary Determination of Circumvention of the 
Antidumping Duty Order and Extension of Final Determination

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

SUMMARY: The Department of Commerce (``Department'') preliminarily 
determines that certain small diameter graphite electrodes (``SDGE'') 
are being exported from the United Kingdom (``U.K.'') to the United 
States by UK Carbon and Graphite Co., Ltd. (``UKCG'') in circumvention 
of the antidumping duty order on SDGE from the People's Republic of 
China (``PRC''),\1\ as provided in section 781(b) of the Tariff Act of 
1930, as amended (``the Act'').
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    \1\ See Antidumping Duty Order: Small Diameter Graphite 
Electrodes from the People's Republic of China, 74 FR 8775 (February 
26, 2009) (``SDGE Order'').

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DATES: Effective Date: June 6, 2012.

FOR FURTHER INFORMATION CONTACT: Brendan Quinn, Office 8, Import 
Administration, International Trade Administration, U.S. Department of 
Commerce, 14th Street and Constitution Avenue NW., Washington, DC 
20230; telephone: (202) 482-5848.

SUPPLEMENTARY INFORMATION:

Background

    On October 12, 2010, SGL Carbon LLC and Superior Graphite Co. 
(``Petitioners'') filed a submission alleging that UKCG, a company 
located in the United Kingdom, is engaged in circumvention of the SDGE 
Order by importing artificial graphite rods/unfinished SDGE components 
\2\ from the PRC to the United Kingdom, performing minor completion and 
assembly on these items, and exporting finished subject merchandise to 
the United States as SDGE of U.K. origin.\3\ In this submission, 
Petitioners requested that the Department initiate a scope inquiry to 
clarify whether the unfinished graphitized SDGE components imported by 
UKCG from the PRC are included in the SDGE Order. In the alternative, 
should the Department find it appropriate based on the available 
information, Petitioners requested that the Department initiate an 
anticircumvention proceeding, pursuant to 19 CFR 351.225(h), to 
determine whether the importation of the PRC-origin SDGE components by 
UKCG for finishing in the United Kingdom and subsequent sale to the 
United States constitutes circumvention of the SDGE Order, as defined 
in section 781(b) of the Act.
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    \2\ According to Petitioners, the unfinished merchandise in 
question is defined in UKCG's submissions as, e.g., ``graphite 
electrodes,'' ``rods,'' ``graphite billets,'' graphite shapes,'' 
``synthetic graphite electrode rod,'' and ``re-machined graphite 
electrode.'' Petitioners characterize these inputs as ``unfinished 
SDGE,'' whereas UKCG refers to them as ``blanks'' or ``artificial 
graphite.'' For customs purposes, these materials are, generally, 
classified under Harmonized Tariff Schedule (``HTS'') sub-heading 
3801.10.00, defined as ``Artificial Graphite; Colloidal or Semi-
Colloidal Graphite; Preparations Based on Graphite or Other Carbon 
in the Form of Pastes, Blocks, Plates or Other Semi-Finished 
Goods.'' For ease of reference, these materials are referred to as 
``unfinished SDGE components'' or ``artificial graphite rods'' 
throughout this notice.
    \3\ See Letter from Petitioners to the Department entitled, 
``Small Diameter Graphite Electrodes from the People's Republic of 
China,'' dated October 12, 2010 (``Petitioners' Initiation 
Request'').
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    On March 18, 2011, the Department initiated an anticircumvention 
inquiry on imports of SDGE exported by UKCG.\4\ This inquiry covers the 
period July 1, 2009, through June 30, 2010.
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    \4\ See Small Diameter Graphite Electrodes from the People's 
Republic of China: Initiation of Anticircumvention Inquiry, 76 FR 
14910, 14912, 14916-17 (March 18, 2011) (``Initiation Notice'').
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Questionnaires

    Subsequent to the initiation of this proceeding, the Department 
issued questionnaires to UKCG regarding the nature of its sales of SDGE 
to the United States and sourcing of inputs from the

[[Page 33406]]

PRC on May 20, 2011,\5\ August 3, 2011,\6\ September 16, 2011,\7\ and 
January 26, 2012.\8\ UKCG submitted timely responses to the Department 
on June 24, 2011,\9\ September 6, 2011,\10\ September 23, 2011,\11\ and 
February 6, 2012.\12\ UKCG provided further information on July 18, 
2011,\13\ July 19, 2011\14\ and October 7, 2011.\15\ Petitioners 
submitted comments regarding UKCG's submissions, and the 
anticircumvention proceeding in general, on July 11, 2011,\16\ 
September 20, 2011,\17\ October 7, 2011,\18\ October 18, 2011,\19\ and 
February 13, 2012.\20\
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    \5\ See Letter entitled, ``Small Diameter Graphite Electrodes 
from the People's Republic of China: Anticircumvention Inquiry 
Regarding Imports of Small Diameter Graphite Electrodes from the UK 
Carbon and Graphite Company, Ltd.: Supplemental Questionnaire,'' 
dated May 20, 2011.
    \6\ See Letter entitled, ``Small Diameter Graphite Electrodes 
from the People's Republic of China: Anticircumvention Inquiry 
Regarding Imports of Small Diameter Graphite Electrodes from the UK 
Carbon and Graphite Company, Ltd.: Second Supplemental 
Questionnaire,'' dated August 3, 2011.
    \7\ See Letter entitled, ``Small Diameter Graphite Electrodes 
from the People's Republic of China: Anticircumvention Inquiry 
Regarding Imports of Small Diameter Graphite Electrodes from the UK 
Carbon and Graphite Company, Ltd.: Second Supplemental 
Questionnaire,'' dated September 16, 2011. Please note that the 
Department made an inadvertent error by not changing the title of 
this letter to reflect the proper sequence, and this document is 
actually the third, and not the second, supplemental questionnaire.
    \8\ See Letter entitled, ``Small Diameter Graphite Electrodes 
from the People's Republic of China: Anticircumvention Inquiry 
Regarding Imports of Small Diameter Graphite Electrodes from the UK 
Carbon and Graphite Company, Ltd.: Post-Preliminary Determination 
Supplemental Questionnaire,'' dated January 26, 2012. Please note 
that the Department made an inadvertent error by not changing the 
title of this letter to reflect the proper sequence, and this 
document is actually the fourth supplemental questionnaire issued 
prior to this preliminary determination.
    \9\ See Letter entitled, ``Small Diameter Graphite Electrodes 
from the People's Republic of China: Supplemental Questionnaire 
Response,'' dated June 24, 2011 (``UKCG's First SQR'').
    \10\ See Letter entitled, ``Small Diameter Graphite Electrodes 
from the People's Republic of China: Second Supplemental 
Questionnaire Response,'' dated September 6, 2011; Letter from UKCG 
to the Department entitled, ``Small Diameter Graphite Electrodes 
from the People's Republic of China: Supplement to Second 
Supplemental Questionnaire Response,'' dated September 9, 2011; and 
Letter from UKCG to the Department entitled, ``Small Diameter 
Graphite Electrodes from the People's Republic of China: Correction 
to Second Supplemental Questionnaire Response,'' dated September 30, 
2011 (collectively, ``UKCG's Second SQR'').
    \11\ See Letter entitled, ``Small Diameter Graphite Electrodes 
from the People's Republic of China: Third Supplemental 
Questionnaire Response,'' dated September 23, 2011 and Letter from 
UKCG to the Department entitled, ``Small Diameter Graphite 
Electrodes from the People's Republic of China: Third Supplemental 
Questionnaire Response--Exhibits 12-14,'' dated September 26, 2011 
(collectively ``UKCG's Third SQR'').
    \12\ See Letter entitled, ``Small Diameter Graphite Electrodes 
from the People's Republic of China: Fourth Supplemental 
Questionnaire Response,'' dated February 6, 2012 (``UKCG's Fourth 
SQR'').
    \13\ See Letter entitled, ``Small Diameter Graphite Electrodes 
from the People's Republic of China: Response to Petitioners' Letter 
of July 11, 2011,'' dated July 18, 2011 (``UKCG's July 18 
Submission'').
    \14\ See Letter entitled, ``Small Diameter Graphite Electrodes 
from the People's Republic of China: Submission of Renewed European 
Community Binding Origin Information,'' dated July 19, 2011 
(``UKCG's BOI Submission'').
    \15\ See Letter entitled, ``Small Diameter Graphite Electrodes 
from the People's Republic of China: Comments and Submission 
Regarding Value Added Calculations,'' dated October 7, 2011 
(``UKCG's Value-Added Submission'').
    \16\ See Letter entitled, ``Small Diameter Graphite Electrodes 
from the People's Republic of China: Anticircumvention Inquiry 
Regarding Imports of Small Diameter Graphite Electrodes from UK 
Carbon and Graphite Company, Ltd.,'' dated July 11, 2011 
(``Petitioners' Comments on Processing and Request for Expedition of 
the Proceeding'').
    \17\ See Letter entitled, ``Small Diameter Graphite Electrodes 
from the People's Republic of China,'' dated September 20, 2011 
(``Petitioners' Comments on UKCG's Second SQR'').
    \18\ See Letter entitled, ``Small Diameter Graphite Electrodes 
from the People's Republic of China,'' dated October 7, 2011 
(``Petitioners' Comments on UKCG's Third SQR'').
    \19\ See Letter entitled, ``Small Diameter Graphite Electrodes 
from the People's Republic of China,'' dated October 18, 2011 
(``Petitioners' Rebuttal to UKCG's Value-Added Submission'').
    \20\ See Letter entitled, ``Small Diameter Graphite Electrodes 
from the People's Republic of China (``PRC''): Pre-Verification 
Comments,'' dated February 13, 2012 (``Petitioners' Pre-Verification 
Comments'').
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Surrogate Country and Surrogate Value Submissions

    On August 15, 2011, we requested that the Import Administration's 
Office of Policy provide a list of surrogate countries that are 
economically similar to the PRC for use in this proceeding.\21\ On 
August 29, 2011, the Office of Policy provided the requested list.\22\ 
On September 2, 2011, the Department notified interested parties of the 
potential surrogate country list and requested that parties provide 
comment on surrogate country selection and surrogate factors 
valuation.\23\ UKCG provided comments on surrogate country selection on 
September 16, 2011.\24\ Petitioners provided comments on surrogate 
country and surrogate value (``SV'') selection on September 20, 
2011.\25\ UKCG provided SV comments on September 23, 2011.\26\
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    \21\ See Memorandum entitled, ``Anticircumvention Inquiry 
Regarding Imports of Small Diameter Graphite Electrodes from the UK 
Carbon and Graphite Company, Ltd.: Selection of Surrogate 
Countries,'' dated August 15, 2011.
    \22\ See Memorandum entitled, ``Request for a List of Surrogate 
Countries for Anticircumvention Inquiry of the Antidumping Duty 
Order on Small Diameter Graphite Electrodes from the People's 
Republic of China,'' dated August 29, 2011 (``Surrogate Country 
List'').
    \23\ See Letter entitled, ``Small Diameter Graphite Electrodes 
from the People's Republic of China: Anticircumvention Inquiry 
Regarding Imports of Small Diameter Graphite Electrodes from the UK 
Carbon and Graphite Company, Ltd.: List of Surrogate Countries,'' 
dated September 2, 2011.
    \24\ See Letter entitled, ``Small Diameter Graphite Electrodes 
from the People's Republic of China: Surrogate Country Comments,'' 
dated September 16, 2011 (``UKCG's Surrogate Country Comments'').
    \25\ See Letter entitled, ``Small Diameter Graphite Electrodes 
from the People's Republic of China: Surrogate Country Selection,'' 
dated September 16, 2011 (``Petitioners' Surrogate Country 
Comments'').
    \26\ See Letter entitled, ``Small Diameter Graphite Electrodes 
from the People's Republic of China: Comments on Surrogate Values,'' 
dated September 23, 2011 (``UKCG's Surrogate Value Comments'').
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Verification

    On February 16 and February 17, 2012, the Department conducted a 
verification of the aforementioned questionnaire responses at UKCG's 
facilities in Belper and Rotherham, United Kingdom, in accordance with 
19 CFR 351.307. The Department used standard verification procedures, 
including the examination of relevant accounting and production 
records, as well as original source documents provided by UKCG.\27\
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    \27\ See Memorandum to the File entitled, ``Verification of 
Responses of UK Carbon & Graphite Company Limited (``UKCG'') in the 
Anticircumvention Inquiry of Certain Graphite Electrodes From the 
People's Republic of China (``PRC''),'' dated concurrently with this 
notice. On February 21, 2012, UKCG submitted onto the record the 
exhibits accepted by the Department at verification. See Letter from 
UKCG to the Department entitled, ``Small Diameter Graphite 
Electrodes from the People's Republic of China: Verification 
Exhibits,'' dated February 21, 2012. These two documents are 
referred to as ``UKCG's Verification Report,'' collectively.
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Scope of the Antidumping Duty Order

    The merchandise covered by this order includes all small diameter 
graphite electrodes of any length, whether or not finished, of a kind 
used in furnaces, with a nominal or actual diameter of 400 millimeters 
(16 inches) or less, and whether or not attached to a graphite pin 
joining system or any other type of joining system or hardware. The 
merchandise covered by this order also includes graphite pin joining 
systems for small diameter graphite electrodes, of any length, whether 
or not finished, of a kind used in furnaces, and whether or not the 
graphite pin joining system is attached to, sold with, or sold 
separately from, the small diameter graphite electrode. Small diameter 
graphite electrodes and graphite pin joining systems for small diameter 
graphite electrodes are most commonly used in primary melting, ladle 
metallurgy, and specialty furnace applications in industries including 
foundries, smelters, and steel refining operations. Small diameter 
graphite electrodes and graphite pin joining systems for small diameter 
graphite

[[Page 33407]]

electrodes that are subject to this order are currently classified 
under the Harmonized Tariff Schedule of the United States (``HTSUS'') 
subheading 8545.11.0000. The HTSUS number is provided for convenience 
and customs purposes, but the written description of the scope is 
dispositive.

Scope of the Anticircumvention Inquiry

    The products covered by this inquiry are small diameter graphite 
electrodes produced by UKCG from PRC-manufactured artificial/synthetic 
graphite forms, of a size and shape (e.g., blanks, rods, cylinders, 
billets, blocks, etc.) which requires additional machining processes 
(i.e., tooling and shaping) to become a finished SDGE (or graphite pin 
joining system). The SDGE products in question are finished graphite 
electrodes manufactured by UKCG from PRC-originated artificial/
synthetic graphite forms. While UKCG argues that the SDGE it produces 
and imports to the United States are of U.K. origin under U.K. law, the 
focus and intent of this inquiry is to determine whether artificial/
synthetic graphite forms (1) Manufactured in the PRC; (2) exported to 
the United Kingdom for processing (finishing); and (3) re-exported to 
the United States as U.K. origin merchandise constitute circumvention 
of the SDGE Order under 781(b) of the Act.

Period of Review

    The period of review (``POR'') is July 1, 2009, through June 30, 
2010. This period corresponds to UKCG most recent complete fiscal year 
(``FY'') subsequent to the issuance of the SDGE Order.

Methodology for Valuing Inputs From the Country Subject to the 
Antidumping Duty Order on SDGE

    In the less than fair value (``LTFV'') investigation of SDGE from 
the PRC, the Department treated the PRC as a non-market economy 
(``NME'') country.\28\ In accordance with section 771(18)(C)(i) of the 
Act, any determination that a foreign country is an NME country shall 
remain in effect until revoked by the administering authority.\29\ No 
party has challenged the designation of the PRC as an NME country in 
this anticircumvention inquiry. Therefore, we continue to treat the PRC 
as an NME country for purposes of the preliminary determination of this 
anticircumvention inquiry.
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    \28\ See Small Diameter Graphite Electrodes From the People's 
Republic of China: Preliminary Determination of Sales at Less Than 
Fair Value, Postponement of Final Determination, and Affirmative 
Preliminary Determination of Critical Circumstances, in Part, 73 FR 
49408, 49412 (August 21, 2008), unchanged in Final Determination of 
Sales at Less Than Fair Value and Affirmative Determination of 
Critical Circumstances: Small Diameter Graphite Electrodes from the 
People's Republic of China, 74 FR 2049 (January 14, 2009).
    \29\ See, e.g., Preliminary Determination of Sales at Less Than 
Fair Value and Postponement of Final Determination: Coated Free 
Sheet Paper from the People's Republic of China, 72 FR 30758, 30760 
(June 4, 2007), unchanged in Final Determination of Sales at Less 
Than Fair Value: Coated Free Sheet Paper from the People's Republic 
of China, 72 FR 60632 (October 25, 2007).
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    When conducting proceedings involving imports from an NME country, 
section 773(c)(1) of the Act directs the Department to base normal 
value (``NV''), in most cases, on the NME producer's factors of 
production (``FOP''), valued in a surrogate market-economy (``ME'') 
country considered appropriate by the Department. In accordance with 
section 773(c)(4) of the Act, the Department will value FOPs using ``to 
the extent possible, the prices or costs of the FOPs in one or more 
market-economy countries that are: (A) at a level of economic 
development comparable to that of the NME country, and (B) significant 
producers of comparable merchandise.'' In this anticircumvention 
inquiry, the artificial graphite/unfinished SDGE employed by UKCG to 
produce finished SDGE are produced in the PRC.
    UKCG asserts that the statute neither requires nor permits the 
Department to use a surrogate for valuing the input sourced from the 
PRC in anticircumvention proceedings, and that doing so here would be 
unlawful. UKCG argues that the NME provisions apply only to the 
determination of NV, which is not calculated in anticircumvention 
inquiries, and thus a SV should not be applied to value inputs to 
merchandise produced by a ME company in an ME country. UKCG argues that 
the provisions of the statute that allow for the application of SVs 
require that subject merchandise be exported from an NME country.\30\ 
Furthermore, UKCG contends that, the meaning of ``value'' \31\ under 
section 781(b)(1)(D) of the Act, must be defined (as is implied by 
section 781(b)(2)(E) of the Act) to mean actual paid values, and not 
SVs. Therefore, UKCG contends that the Department should conduct the 
relevant analyses using actual prices paid for the input rather than 
constructing a NV for the input based on the NME FOP methodology.\32\
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    \30\ See UKCG's Surrogate Value Comments at 1-5.
    \31\ See UKCG's Surrogate Value Comments at 3 (citing, e.g., 
Sorenson v. Secretary of Treasury, 475 U.S. 851, 860 (U.S. 1986) 
(quoting Helvering v. Stockholms Enskilda Bank, 293 U.S. 84, 87 
(1934))).
    \32\ See UKCG's Surrogate Value Comments at 1-5.
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    We disagree with UKCG's assertion that the use of an SV for the 
valuation of the artificial graphite/unfinished SDGE input is 
inappropriate in the instant case. The material input in question, the 
only raw material input of any significance in this analysis, is 
produced in the PRC, an NME country. While real prices paid for PRC-
produced inputs are typically used in the cost buildup for ME companies 
in ME proceedings, we note that this is an anticircumvention proceeding 
initiated under the antidumping duty order on SDGE from the PRC, which 
is an NME proceeding. The purpose of this proceeding is not to 
determine the antidumping margin of a U.K. firm, but rather to 
determine whether PRC-produced merchandise is being sold to the United 
States in circumvention of the SDGE Order on the PRC. Thus, an analysis 
of UKCG's input costs falls directly and explicitly under the purview 
of the Department's NME methodology.\33\ As such, because key elements 
of the Department's analysis under section 781(b)(1)(D) of the Act 
necessitates obtaining a value for an NME input, we have determined to 
use an SV for this input from an appropriate ME, consistent with both 
section 773(c)(1) of the Act as well as the Department's past 
practice.\34\ However, because UKCG is a market economy firm in a 
market economy country, we agree with UKCG that we should use actual 
costs incurred by UKCG in the United Kingdom in a market economy 
currency, along with its actual U.S. sales prices, for aspects of the 
Department's analyses under sections 781(b)(1)(D) and 781(b)(2)(E) of 
the Act.
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    \33\ See, e.g., Steel Wire Garment Hangers from the People's 
Republic of China: Affirmative Preliminary Determination of 
Circumvention of the Antidumping Duty Order and Extension of Final 
Determination, 76 FR 27007, 27008 (May 10, 2011) (``Hangers 
Anticircumvention Prelim''), unchanged in Steel Wire Garment Hangers 
From the People's Republic of China: Affirmative Final Determination 
of Circumvention of the Antidumping Duty Order, 76 FR 66895 (October 
28, 2011) (``Hangers Anticircumvention Final''); Certain Tissue 
Paper Products From the People's Republic of China: Affirmative 
Preliminary Determination of Circumvention of the Antidumping Duty 
Order and Extension of Final Determination, 73 FR 21580, 21584-85 
(April 22, 2008) (``Tissue Paper Anticircumvention Prelim''), 
unchanged in Certain Tissue Paper Products from the People's 
Republic of China: Affirmative Final Determination of Circumvention 
of the Antidumping Duty Order, 73 FR 57591 (October 3, 2008) 
(``Tissue Paper Anticircumvention Final'').
    \34\ See, e.g., id.
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    UKCG maintains that, because the European Union (``E.U.'') has 
identified

[[Page 33408]]

UKCG finished graphite electrodes as a product of U.K. origin, the 
Department should use UKCG's actual purchase prices from the PRC. As 
explained above, the instant anticircumvention inquiry was initiated to 
examine specifically whether PRC-manufactured merchandise was, after 
alteration, re-exported to the United States in circumvention of the 
SDGE Order. The fact that finished SDGE, as exported by UKCG, were 
identified by the E.U. as products of the United Kingdom is not 
determinative in the Department's analysis. The purpose of the E.U.'s 
country of origin analysis was not to determine whether a U.S. 
antidumping order was being circumvented. Moreover, this country of 
origin analysis was based on the laws of the E.U. and not the laws of 
the United States under which the Department conducts this 
investigation.

Surrogate Country

    In the August 29, 2011, Surrogate Country List, the Import 
Administration's Office of Policy identified Ukraine, South Africa, 
Colombia, the Philippines, Indonesia, and Thailand, as countries 
comparable to the PRC for the purposes of surrogate valuation. The 
Department released this list to interested parties and solicited 
comments regarding the selection of both the surrogate country and SV 
for the PRC-sourced input in question. On September 16, 2011, UKCG 
submitted comments suggesting that, in the event that the Department 
uses SVs to value artificial graphite/unfinished electrodes, the 
Department should base its SV calculations on export data from Ukraine 
provided by Global Trade Atlas (``GTA''). UKCG additionally provided 
public information demonstrating that Ukraine and South Africa are 
economically comparable to the PRC and significant producers of 
artificial graphite.\35\ On September 20, 2011, Petitioners submitted 
comments arguing that Ukraine is the most appropriate surrogate country 
based on the fact that: (a) There is a well-developed graphite 
electrode industry in the country; (b) public information confirms the 
existence of a company which produces significant volumes of identical 
merchandise; and (c) Ukraine is a major importer of Chinese inputs 
similar to those sourced by UKCG.\36\ Because record evidence 
identified Ukraine as an economically comparable country to the PRC and 
a significant producer of artificial graphite, the Department has 
preliminarily selected Ukraine as the primary surrogate country from 
which to value UKCG's PRC-sourced inputs.
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    \35\ See UKCG's Surrogate Country Comments.
    \36\ See Petitioners' Surrogate Country Comments.
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Factor Valuation

    Petitioners suggest that the Department value UKCG's artificial 
graphite/unfinished SDGE inputs using the weighted-average value of 
Ukrainian imports under HTS subcategories 3801.10 (``Artificial 
Graphite'') and 8545.11 (``Carbon or Graphite Electrodes, of a Kind 
Used for Furnaces'').\37\ Petitioners additionally suggest removing 
certain ``aberrant'' values representing imports from Russia and 
Switzerland from the HTS categories.\38\
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    \37\ See id.
    \38\ See id.
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    UKCG rebuts Petitioners' recommendation to include Ukrainian 
imports under HTS 8545.11, which includes finished SDGE. UKCG 
additionally argues that, while the 3801.10 HTS category better 
reflects the input it consumes, in this case, using the value of 
Ukrainian imports under HTS 3801.10 results in an unreasonable average 
value, seven times higher than the value of the finished product. Thus, 
because neither category appears to be appropriate to value artificial 
graphite/unfinished SDGE, UKCG argues that, should the Department 
conduct the relevant analysis using an SV, the Department should use 
Ukrainian or South African export data under HTS category 3801.10 
rather than the import data suggested by Petitioners.\39\
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    \39\ See UKCG's Surrogate Value Comments at 5-7 and UKCG's 
Surrogate Country Comments at Exhibit 1.
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    As an initial matter the Department finds that, because the PRC-
manufactured merchandise imported into the United Kingdom is not 
finished, HTS 3801.10 (which provides for semi-finished artificial 
graphite forms) is more specific to the product than HTS 8545.11 (which 
provides for finished ``carbon electrodes; of a kind used for 
furnaces''). Additionally, as discussed above, we have determined 
Ukraine to be the appropriate primary surrogate country for this 
proceeding. Accordingly, we have selected Ukrainian imports under HTS 
3801.10 to value UKCG's artificial graphite/unfinished SDGE inputs.\40\ 
In addition, we disagree with Petitioners' proposal to exclude certain 
country-specific average unit values (``AUVs'') from this calculation. 
The Department finds that Petitioners have not supported their 
contention that the AUV of artificial graphite imports into Ukraine 
from Russia and Switzerland are aberrational.\41\ Though Ukrainian 
imports under HTS 3801.10 may result in an unreasonably high surrogate 
AUV when Russian and Swiss data is excluded ($31.02 U.S. dollars 
(``USD'') per kilogram (``Kg'')), when the data from these two 
countries is included, we find the resulting AUV for Ukrainian imports 
under HTS 3801.10 to be appropriate for the purposes of valuing 
artificial graphite in this case ($3.39 USD per Kg), based on the 
Department's standard SV methodology. As such, in response to UKCG's 
argument that Ukrainian imports under HTS 3801.10 provide an 
unreasonable average value seven times higher than the value of the 
finished product, as provided by Petitioners with Russian and Swiss 
data excluded, we note that the use of the

[[Page 33409]]

full dataset (including data from both countries) results in a 
surrogate AUV ($3.39 per Kg) which is lower than that of the value of 
Ukrainian imports of finished product under HTS 8545.11 ($4.54 per Kg).
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    \40\ The Department's preference is to use, where possible, a 
range of publicly available, non-export, tax-exclusive, and product-
specific prices for the POR, with each of these factors applied non-
hierarchically to the particular case-specific facts and with 
preference for data from a single surrogate country. See, e.g., 
Certain Cut-To-Length Carbon Steel Plate from Romania: Notice of 
Final Results and Final Partial Rescission of Antidumping Duty 
Administrative Review, 70 FR 12651 (March 15, 2005) (``CTL Plate/
Romania'') and accompanying Issues and Decision Memorandum (``IDM'') 
at Comment 3. Although our ultimate analysis concludes that the 
materials in question, as imported by UKCG, are identical to the 
unfinished SDGE products considered within the subject of the scope 
of the SDGE Order, and need only minor processing to be used as 
finished SDGE under the 8545.11 HTS classification, we agree with 
UKCG that the input may be properly reported within the 3801.10 HTS 
subcategory for customs purposes. As such, for the purpose of 
selecting a SV for semi-manufactured artificial graphite cylinders 
from customs data, we find subcategory 3801.10 to be the most 
appropriate classification for this kind of input (however similar 
the input may be to the finished products imported under HTS 
8545.11). Finally, we do not believe it appropriate to mix HTS 
categories to determine the relevant surrogate value, as our normal 
practice is to select the most specific single category to the 
product at issue. See, e.g., Certain Coated Paper Suitable for High-
Quality Print Graphics Using Sheet-Fed Presses From the People's 
Republic of China: Final Determination of Sales at Less Than Fair 
Value, 75 FR 59217 (September 27, 2010) and accompanying IDM at 
Comment 19 (``With the exception of unusual circumstances, the 
Department's preference is to select the single best value and not 
to average multiple HTS categories.'').
    \41\ Department precedent requires parties to corroborate a 
claim of aberrationality, and that citing to the mere existence of 
outlying price points does not constitute prima facie evidence of 
aberrationality. See, e.g., Tapered Roller Bearings and Parts 
Thereof, Finished and Unfinished, From the People's Republic of 
China: Final Results of the 2008-2009 Antidumping Duty 
Administrative Review, 76 FR 3086 (January 19, 2011) and 
accompanying IDM at Comment 15 and Certain New Pneumatic Off-The-
Road Tires from the People's Republic of China: Final Affirmative 
Determination of Sales at Less Than Fair Value and Partial 
Affirmative Determination of Critical Circumstances, 73 FR 40485 
(July 15, 2008) and accompanying IDM at Comment 9. In particular, we 
do not believe it appropriate to exclude the data from a country 
(Russia) that provides 91 percent of Ukraine's imports because of a 
relatively low AUV without any specific evidence as to why such data 
are inappropriate to value artificial graphite inputs.
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    With respect to UKCG's alternative proposal to use Ukrainian or 
South African export prices to value the input, it is the Department's 
long standing practice to use import, not export, data when considering 
SVs.\42\ Moreover, we note that UKCG provides no argument as to why 
Ukrainian import data, when taken as a whole, are unusable or why 
export data would be preferable in the alternative. As such, we see no 
reason to depart from the standard practice of using publicly 
available, non-export, tax-exclusive, product-specific, and 
contemporaneous data from the primary surrogate.
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    \42\ See, e.g., CTL Plate/Romania and accompanying IDM at 
Comment 3. See also, Silicon Metal from the People's Republic of 
China: Notice of Final Results of 2005/2006 New Shipper Reviews, 72 
FR 58641 (October 16, 2007) and accompanying IDM at Comment 5.
---------------------------------------------------------------------------

    Therefore, the Department has preliminarily determined to use 
Ukrainian import values under HTS 3801.10 to value artificial graphite/
unfinished SDGE imported from the PRC.

Extension of Determination Deadline

    Pursuant to section 781(f) of the Act, to the maximum extent 
practicable, the Department shall issue a final determination within 
300 days from the date of initiation of the antidumping circumvention 
inquiry. On December 14, 2011,\43\ and March 26, 2012,\44\ the 
Department extended the deadline for issuance of the final 
determination in the instant proceeding. As a result, the final 
determination of this anticircumvention inquiry is currently due June 
20, 2012. Due to the complicated nature of this proceeding and the 
extent of comments expected to be received from interested parties, the 
current deadline is no longer practicable. As such, we hereby extend 
the deadline for the final determination until July 31, 2012.
---------------------------------------------------------------------------

    \43\ See Letter entitled, ``Small Diameter Graphite Electrodes 
from the People's Republic of China: Anticircumvention Inquiry 
Regarding Imports of Small Diameter Graphite Electrodes from the UK 
Carbon and Graphite Company, Ltd.: Extension of Deadline for 
Issuance of Final Determination,'' dated December 14, 2011.
    \44\ See Letter entitled, ``Small Diameter Graphite Electrodes 
from the People's Republic of China: Anticircumvention Inquiry 
Regarding Imports of Small Diameter Graphite Electrodes from the UK 
Carbon and Graphite Company, Ltd.: Second Extension of Deadline for 
Issuance of Final Determination,'' dated March 26, 2012.
---------------------------------------------------------------------------

Use of Facts Available

    Section 776(a) of the Act provides that the Department shall apply 
facts available (``FA'') if (1) necessary information is not on the 
record, or (2) an interested party or any other person (A) withholds 
information that has been requested, (B) fails to provide information 
within the deadlines established, or in the form and manner requested 
by the Department, subject to subsections (c)(1) and (e) of section 782 
of the Act, (C) significantly impedes a proceeding, or (D) provides 
information that cannot be verified as provided by section 782(i) of 
the Act.
    For this preliminary determination, in accordance with section 
776(a) of the Act, we have determined that the use of FA is warranted 
for a portion of the pattern of trade analysis, as discussed below.

Affirmative Preliminary Determination of Circumvention

    For the reasons described below, we preliminarily determine that, 
pursuant to section 781(b) of the Act, circumvention of the SDGE Order 
is occurring by reason of the exportation of semi-manufactured 
artificial graphite/unfinished SDGE components from the PRC sold to and 
imported by UKCG, which subsequently undergo further manufacture in the 
United Kingdom before exportation as finished SDGE to the United 
States.

Applicable Statute

    Section 781 of the Act addresses circumvention of antidumping or 
countervailing duty orders.\45\ With respect to merchandise assembled 
or completed in a third country, section 781(b)(1) of the Act provides 
that if: (A) The merchandise imported into the United States is of the 
same class or kind as any merchandise produced in a foreign country 
that is the subject of an antidumping duty order; (B) before 
importation into the United States, such imported merchandise is 
completed or assembled in a third country from merchandise which is 
subject to such an order or is produced in the foreign country with 
respect to which such order applies; (C) the process of assembly or 
completion in a third country is minor or insignificant; (D) the value 
of the merchandise produced in the foreign country to which the 
antidumping duty order applies is a significant portion of the total 
value of the merchandise exported to the United States; and (E) the 
Department determines that action is appropriate to prevent evasion of 
an order, the Department, after taking into account any advice provided 
by the International Trade Commission (``ITC'') under section 781(e) of 
the Act may include such imported merchandise within the scope of an 
order at any time an order is in effect.
---------------------------------------------------------------------------

    \45\ Specifically, the legislative history to section 781(b) 
indicates that Congress intended the Department to make 
determinations regarding circumvention on a case-by-case basis in 
recognition that the facts of individual cases and the nature of 
specific industries vary widely. See S. Rep. No. 103-412 (1994), at 
81-82.
---------------------------------------------------------------------------

    In determining whether the process of assembly or completion in a 
third country is minor or insignificant under section 781(b)(1)(C) of 
the Act, section 781(b)(2) of the Act directs the Department to 
consider: (A) The level of investment in the third country; (B) the 
level of research and development in the third country; (C) the nature 
of the production process in the third country; (D) the extent of 
production facilities in the third country; and (E) whether the value 
of processing performed in the third country represents a small 
proportion of the value of the merchandise imported into the United 
States. However, none of these five factors, by itself, is controlling 
on the Department's determination of whether the process of assembly or 
completion in a third country is minor or insignificant.\46\ 
Accordingly, it is the Department's practice to evaluate each of these 
factors as they exist in the third country depending on the particular 
anticircumvention inquiry.\47\ Further, section 781(b)(3) of the Act 
sets forth the factors to consider in determining whether to include 
merchandise assembled or completed in a third country in an antidumping 
duty order. Specifically, the Department shall take into account such 
factors as: (A) The pattern of trade, including sourcing patterns; (B) 
whether the manufacturer or exporter of the merchandise is affiliated 
with the person who, in the third country, uses the merchandise to 
complete or assemble in the merchandise which is subsequently imported 
into the United States; and (C) whether imports into the third country 
of the merchandise have increased after the initiation of the LTFV 
investigation that resulted in the issuance of an order.
---------------------------------------------------------------------------

    \46\ See Statement of Administrative Action (``SAA'') 
accompanying the Uruguay Round Agreements Act, H. Doc. No. 103-316, 
at 893 (1994) at 893.
    \47\ See Tissue Paper Anticircumvention Final, 73 FR at 57592.

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[[Page 33410]]

Statutory Analysis

(A) Whether Merchandise Imported Into the United States Is of the Same 
Class or Kind as Merchandise That Is Subject to the SDGE Order

    The finished products, as sold by UKCG to the United States, are 
identical to those covered by the SDGE Order. This is corroborated by 
UKCG's product list,\48\ as well as the plain language of respondent's 
submissions in comparison to the language of the scope of the SDGE 
Order, and no interested party to this proceeding has contested this 
fact. As such, we find that the finished SDGE products exported to the 
United States by UKCG are of the same class or kind as other 
merchandise that is subject to the SDGE Order.
---------------------------------------------------------------------------

    \48\ See UKCG's First Supplemental Response at Exhibit 6.
---------------------------------------------------------------------------

(B) Whether, Before Importation Into the United States, Such Imported 
Merchandise Is Completed or Assembled in a Third Country From 
Merchandise Which Is Subject to the Order or Produced in the Foreign 
Country That Is Subject to the Order

    As noted above, the merchandise subject to this proceeding is 
finished SDGE exported to the United States that is finished in the 
United Kingdom by UKCG from inputs of PRC-origin unfinished artificial/
synthetic graphite forms. There is no dispute between UKCG and 
Petitioners as to whether this input was produced in the PRC or that it 
comprises 100 percent of the direct material for the finished product. 
However, UKCG and Petitioners disagree as to whether the artificial 
graphite input constitutes ``unfinished SDGE'' as mentioned by the 
plain language of the scope.\49\
---------------------------------------------------------------------------

    \49\ See, e.g., Petitioners' Comments on Processing and Request 
for Expedition of the Proceeding at 5-8.
---------------------------------------------------------------------------

    UKCG has argued that the term ``{SDGE{time}  whether or not 
finished'' in the scope of the SDGE Order has no meaning in the 
industry and that UKCG's imports are of ``artificial graphite rods,'' 
which were not included in the SDGE Order and are distinct from 
unfinished SDGE, according to U.S. Customs and U.K./E.U. Customs 
findings.\50\ To bolster its claim that there is a distinction between 
artificial graphite and finished SDGE, UKCG has provided a renewed E.U. 
Binding Origin Information (``BOI'') ruling, stating that UKCG's 
processing of artificial graphite blanks into finished SDGE confers 
U.K. country of origin status on the finished product.\51\ UKCG 
maintains that the inputs do not comprise subject merchandise, as they 
are classified as artificial graphite under HTS subcategory 3801.10 and 
not the 8545.11 category contemplated in the scope of the SDGE Order, a 
distinction that UKCG claims is recognized by Petitioners.\52\ UKCG 
argues that, should the Department agree with Petitioners that 
artificial graphite rods are ``unfinished SDGE,'' the Department would 
impermissibly expand the scope of the SDGE Order to include all items 
of artificial graphite, which is clearly beyond the intent of the SDGE 
Order, as artificial graphite can also be used to produce certain non-
subject products.\53\
---------------------------------------------------------------------------

    \50\ See Initiation Notice, 76 FR at 14914-14915.
    \51\ See UKCG's First Supplemental Response at 10-14. See also 
UKCG BOI Submission.
    \52\ See UKCG's July 18 Submission at 2-3. While UKCG 
acknowledges that the HTS numbers included in the scope description 
are not dispositive of the scope of the order, the respondent argues 
that the inclusion of specific numbers is particularly relevant to 
the instant proceeding because Petitioners were aware that 
unfinished blanks or rods could be imported under 3801.10 at the 
time when the scope language was being formulated during the initial 
petition and LTFV investigation, but made an explicit decision not 
to include them in the scope of the SDGE Order. As evidence of this 
decision on the part of Petitioners, UKCG provides documentation (at 
Exhibit 1 of the same submission) showing that, prior to the initial 
petition, Petitioners imported ``graphite nipple rods'' under HTS 
3801 and ``graphite nipples'' under HTS 8545, with the implication 
that the former were an unfinished version of the latter. See id. at 
Exhibit 1. UKCG provides other similar import documentation to 
demonstrate that Petitioners have continued to make this distinction 
between rods and finished products in their importation of materials 
subsequent to the LTFV investigation, despite their arguments 
against such a practice in the instant proceeding.
    \53\ See UKCG's July 18 Submission at 4. See also UKCG's First 
Supplemental Response at 6 and Exhibits 10 and 11.
---------------------------------------------------------------------------

    While UKCG concedes that the term ``graphite electrode'' is 
occasionally used in its internal recordkeeping and correspondence with 
suppliers to describe the artificial graphite inputs in question, it 
contends that this term is a reference to the physical quality of the 
input materials purchased and the use of this term should not be 
construed to mean that such materials are interchangeable with finished 
SDGE.\54\ Instead, UKCG emphasizes the use of the term ``blanks'' \55\ 
as specified in UKCG's purchase orders to its PRC suppliers), and notes 
that these ``blanks'' can also be used to produce certain non-subject 
products.\56\
---------------------------------------------------------------------------

    \54\ See UKCG's First Supplemental Response at 6-7.
    \55\ See, e.g., Letter from UKCG to the Department entitled, 
``Small Diameter Graphite Electrodes from the People's Republic of 
China: Comments on Surrogate Values,'' dated September 23, 2011 
(``UKCG's Surrogate Value Comments'') at 1, stating that the ``only 
item being purchased from China * * * {is{time}  the rods (sometimes 
known as blanks).''
    \56\ See UKCG's July 18 Submission at 4; UKCG's First SQR at 6-7 
and Exhibits 9, 10, and 11; and UKCG's Verification Report at 
Section II.B (``Other Issues'') and Exhibit 1.
---------------------------------------------------------------------------

    The Department finds that the merchandise subject to this 
anticircumvention inquiry was completed or assembled in the United 
Kingdom from PRC-origin merchandise that is subject to the SDGE Order 
for the reasons articulated below. As an initial matter, the Department 
continues to find that U.S. and E.U. customs rulings are not 
controlling in determining whether the artificial graphite imported by 
UKCG from the PRC is subject to the instant SDGE Order within the 
context of U.S. anticircumvention proceedings, as the two 
determinations are made for different reasons and under different 
laws.\57\
---------------------------------------------------------------------------

    \57\ Throughout this proceeding UKCG places repeated emphasis on 
European Union BOI rulings as evidence that a sovereign government 
has already determined that UKCG's production substantially 
transforms the PRC-sourced input in question into a new product of 
UK origin. See, e.g., UKCG's BOI Submission and UKCG's July 18 
Submission. As noted in the Initiation Notice, 76 FR at 14917, we 
again emphasize that rulings from other agencies (whether a European 
BOI or U.S. Customs and Border Protection (``CBP'') ruling) are not 
legally binding for the purposes of antidumping proceedings in the 
United States, as we make these decisions for different reasons, 
including circumvention and whether the merchandise is subject to 
the antidumping order. See, e.g., Tapered Roller Bearings and Parts 
Thereof, Finished and Unfinished, from the People's Republic of 
China: Final Results of the 2007-2008 Administrative Review of the 
Antidumping Duty Order, 75 FR 844 (January 6, 2010) and accompanying 
IDM at Comment 1.
---------------------------------------------------------------------------

    We also preliminarily disagree with UKCG's assessment that by not 
including ``artificial graphite'' within the language of the scope 
Petitioners were providing an explicit exclusion for artificial 
graphite. The scope of an antidumping duty order must be read in its 
entirety to ensure a full and proper understanding of the scope. In 
this case, the Petition specifically defined ``unfinished {SDGE{time}  
within the scope of this petition'' as any semi-manufactured SDGE 
product that ``undergo{s{time}  no further processing beyond the 
graphitization stage other than machining.'' We find this language is 
sufficiently broad to include any graphitized product that only 
requires machining to produce finished SDGE. Additionally, the Petition 
further states that ``{the merchandise subject to the scope includes 
all SDGE{time}  whether or not with a machine finished outside surface 
* * * including finished and unfinished graphite electrodes.'' \58\ The

[[Page 33411]]

ITC Final Report similarly finds that ``unfinished SDGE undergo no 
further processing beyond the graphitization stage other than 
machining.'' \59\ Therefore, because the Petition and ITC Final Report 
clearly cover artificial/synthetic graphite forms that need only 
machining to become finished SDGE and the scope of the SDGE Order 
explicitly includes both finished and unfinished SDGE, the Department 
finds the artificial/synthetic graphite imported by UKCG from the PRC 
meet the description of merchandise covered by the scope of the SDGE 
Order. Thus, notwithstanding the HTS classification, the general 
definition of ``unfinished SDGE'' imparted by the scope language 
specifically includes the type of artificial/synthetic graphite 
imported by UKCG into the United Kingdom from the PRC.
---------------------------------------------------------------------------

    \58\ See Petitioners' Initiation Request at Exhibit 8 (i.e., 
Letter from Petitioners entitled, ``Antidumping Petition on Small 
Diameter Graphite Electrodes from China,'' dated January 17, 2008 
(``Petition'') at 4 and 6).
    \59\ See Small Diameter Graphite Electrodes from China, Inv. 
731-TA-1143 (Final), ITC Pub. 4062, dated February 2009 (``ITC Final 
Report'') at I-9.
---------------------------------------------------------------------------

    While the import information submitted by UKCG does suggest that 
Petitioners have themselves used the HTS subheadings in a manner that 
may differentiate between artificial graphite and finished SDGE, the 
Department does not agree with UKCG's conclusion that Petitioners' use 
of the term electrode ``rods'' to describe certain imports under 
3801.10 constitutes a tacit admission that such unfinished materials 
are expressly excluded from the scope of the SDGE Order. As discussed 
above, and clearly articulated in the scope itself, the language of the 
scope of an order is controlling, not the HTS category numbers, which 
are listed for convenience and customs purposes. Moreover, we do not 
believe that Petitioners' classification of imports provides reason to 
compel the Department to reexamine the intent behind the inclusion of 
products covered under the initial scope language nor does it provide 
insight or justification regarding the actions of UKCG during the POR. 
More compelling is the plain language of the scope of the SDGE Order. 
Based on a full review of the record, including a review of the 
submissions by the parties, the plain language of the scope of the SDGE 
Order, as well as the language from the Petition and the ITC 
investigation, as discussed above, the Department preliminarily 
determines that the unfinished artificial graphite inputs sourced from 
the PRC by UKCG constitute products identical to the ``unfinished 
electrodes'' considered subject merchandise under the scope of the SDGE 
Order.
    The Department also disagrees with UKCG's argument that finding 
UKCG's artificial graphite inputs to be the ``unfinished'' SDGE covered 
by the scope of the SDGE Order would impermissibly expand the scope to 
cover all unfinished graphite products. For this preliminary 
determination, the Department is not finding that all artificial 
graphite is definitively ``unfinished'' SDGE subject to the scope of 
this order, but rather is finding that UKCG's imported artificial 
graphite rods are unfinished SDGE as described by the plain language of 
the scope. As with any scope or circumvention proceeding, any such 
determination is made on a case-by-case basis taking into consideration 
the specific facts of each proceeding.
    Finally, the Department does not agree with UKCG's assertion that, 
because the input materials may be cut and machined to create certain 
non-electrode products, that they are necessarily manufactured for use 
as inputs in a variety of end products and thus are not within the 
scope of the proceeding. First, the totality of the sourcing/
procurement information and corresponding sales documentation on record 
clearly demonstrate that the inputs in question are either custom 
ordered for the exact length, width, diameter, and chemical composition 
required by a customer's order of SDGE or as stock orders for industry-
standard sizes of finished electrodes and, as such, the artificial 
graphite inputs are procured (and, thus, initially manufactured) 
specifically for an intended end-use as finished SDGE.\60\ Moreover, 
the fact that UKCG is able to demonstrate that that the inputs in 
question may be used, on occasion,\61\ to make other non-electrode 
products does not constitute evidence that the inputs themselves are 
substantially dissimilar from subject merchandise. While artificial 
graphite may be used to manufacture non-subject merchandise, this fact 
has no bearing on the Department's finding that the finished SDGE 
imported into the U.S. by UKCG was manufactured from artificial 
graphite sourced from the PRC that constitutes unfinished SDGE as 
specifically discussed by the scope of the SDGE Order.
---------------------------------------------------------------------------

    \60\ See UKCG's Verification Report at Section IV. See also 
UKCG's First SQR at Exhibit 9 and UKCG's Second SQR at Exhibits 4-
11.
    \61\ See UKCG's First SQR at Exhibits 9, 10, and 11; and UKCG's 
Verification Report at Section II.B. and Exhibit 1.
---------------------------------------------------------------------------

(C) Whether the Process of Assembly or Completion in the Third Country 
is Minor or Insignificant

    Pursuant to section 781(b)(1)(C) of the Act, section 781(b)(2) of 
the Act provides the criteria for determining whether the process of 
assembly or completion is minor or insignificant. These criteria are:

781(b)(2)(A): the level of investment in the third country;
781(b)(2)(B): the level of research and development in the third 
country;
781(b)(2)(C): the nature of the production process in the third 
country;
781(b)(2)(D): the extent of the production facilities in the third 
country; and
781(b)(2)(E): whether the value of the processing performed in the 
third country represents a small proportion of the value of the 
merchandise imported into the United States.

    The SAA explains that no single factor listed in section 781(b)(2) 
of the Act will be controlling.\62\ Accordingly, it is the Department's 
practice to evaluate each of the factors as they exist in the United 
States or foreign country depending on the particular anticircumvention 
inquiry.\63\ In this anticircumvention inquiry, based on the record, we 
have considered and evaluated each statutory criterion and all factors 
in determining whether the process of converting the PRC-sourced 
artificial graphite rod/unfinished SDGE components in the U.K. was 
minor or insignificant, in accordance with section 781(b)(2) of the 
Act, consistent with our analysis in prior anticircumvention 
inquiries.\64\
---------------------------------------------------------------------------

    \62\ See SAA at 893.
    \63\ See Tissue Paper Anticircumvention Final, 73 FR at 57592.
    \64\ See, e.g., Anticircumvention Inquiry of the Antidumping and 
Countervailing Duty Orders on Certain Pasta From Italy: Affirmative 
Preliminary Determinations of Circumvention of Antidumping and 
Countervailing Duty Orders, 68 FR 46571 (August 6, 2003) (``Pasta 
Circumvention Prelim''), unchanged in Anticircumvention Inquiry of 
the Antidumping and Countervailing Duty Orders on Certain Pasta from 
Italy: Affirmative Final Determinations of Circumvention of 
Antidumping and Countervailing Duty Orders, 68 FR 54888 (September 
19, 2003) (``Pasta Circumvention Final''); and Hot-Rolled Lead and 
Bismuth Carbon Steel Products from Germany and the United Kingdom; 
Negative Final Determination of Circumvention of Antidumping and 
Countervailing Duty Orders, 64 FR 40336, 40347-48 (July 26, 1999) 
(explaining that Congress has directed the Department to focus more 
on the nature of the production process and less on the difference 
in value between the subject merchandise and the imported parts or 
components and that any attempt to establish a numerical standard 
would be contrary to the intent of Congress).

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

[[Page 33412]]

781(b)(2)(A) & (B): The Levels of Investment and Research and 
Development
    On June 24, 2011, UKCG provided further information regarding the 
level of its investment, including the initial investment in the 
company in 2002 as well as the amount of fixed assets included in its 
most recent financial statement.\65\ UKCG notes that all investments 
are used primarily to produce SDGE, but that they can be used to 
produce larger electrodes as well.\66\ A review of the facility used by 
UKCG to produce subject merchandise during the POR at verification 
supported the level of investment information previously submitted on 
the record.\67\ UKCG notes that it does not have a separate Research 
and Development (``R&D'') department or facility, but that ``all R&D is 
conducted as a part of the ongoing improvement of the production 
process and is conducted as a part of the regular duties of the 
production and other personnel.'' \68\
---------------------------------------------------------------------------

    \65\ See UKCG First SQR at Exhibits 4, 14, and 15.
    \66\ See id. at 16. Based on UKCG's response on page 7 and 
Exhibits 10 and 11 of the same questionnaire, the investments may 
also be used to produce certain non-SDGE merchandise.
    \67\ See UKCG's Verification Report at Section VI.
    \68\ See id. at 4.
---------------------------------------------------------------------------

    The record in this case continues to demonstrate that PRC producers 
have invested extensively in the SDGE industry, which includes 
significant investment in both manufacturing facilities and production 
equipment worth many millions of dollars, the bulk of which goes to the 
heavy industrial processes required for the production of SDGE (e.g., 
raw material handling, mixing, forming, baking, impregnating, and 
graphitizing), each of which occur prior to the final machining 
stage.\69\ On the contrary, the total worth of UKCG's plant, including 
its single machine shop and finishing equipment, as shown in UKCG's 
financial statement, demonstrates that the level of investment required 
for a PRC manufacturer to produce an unfinished graphitized electrode 
is far greater than the level of investment needed by UKCG to perform 
its finishing processes.\70\
---------------------------------------------------------------------------

    \69\ See Petitioners' July 11, 2011, submission at 3-5 and 
Exhibit 1.
    \70\ See Initiation Request at 25-26 and Initiation Notice, 76 
FR at 14916-17. See Analysis Memo for a full discussion of the 
proprietary information used in this analysis.
---------------------------------------------------------------------------

    Accordingly, pursuant to section 781(b)(2)(A) of the Act, we 
preliminarily find that the level of investment in the United Kingdom 
by UKCG in the equipment used to complete the PRC-origin input is minor 
compared to the level of investment, both in initial capital and 
equipment, required by the producers of the input in the PRC.\71\ 
Pursuant to section 781(b)(2)(B) of the Act, we also preliminarily find 
that the UKCG has not provided any substantial evidence of R&D programs 
or expenditures and that R&D is not a significant factor in UKCG's 
processing.
---------------------------------------------------------------------------

    \71\ See Analysis Memo.
---------------------------------------------------------------------------

781(b)(2)(C) & (D): The Nature of Production Processes, and Extent of 
Production Facilities in the United Kingdom
    With regard to the nature of the production process and the extent 
of its production facilities, UKCG provides a detailed description of 
its facilities and the processes performed by UKCG in order to 
transform the artificial graphite/unfinished electrode component into a 
finished SDGE for shipment to the United States, including all 
movement, testing, unpacking, packing, and machining processes 
involved.\72\ UKCG also explained that its production facilities 
included one manufacturing plant and one sales/administrative 
location.\73\ Details regarding the specific type of production 
equipment owned by UKCG, as well as the number of workers employed in 
its production shop, were provided in several proprietary exhibits.\74\ 
The Department's review of the production facility and processes used 
by UKCG to produce subject merchandise during the POR at verification 
supported the production process information previously submitted on 
the record.\75\ UKCG also provided a narrative describing how its 
manufacturing and testing processes differ from similar finishing 
processes as performed by PRC producers of graphite electrodes, arguing 
that its machining processes are more exacting, precise, and employ a 
higher quality control than that found with PRC finishing and, thus, 
provide significant value-added to the product.\76\
---------------------------------------------------------------------------

    \72\ See UKCG Second SQR at Exhibit 2.
    \73\ See UKCG First SQR at 3-4, 14-16.
    \74\ See id. at Exhibits 14 and 15 (for production equipment 
details) and Exhibit 4 (UKCG's 2010 Financial Statement, which 
details the number of employees in each department).
    \75\ See UKCG's Verification Report at Section VI.
    \76\ See UKCG Second SQR at Exhibit 3 and Exhibit 16 and UKCG's 
Verification Report at II.B. Because UKCG bracketed out the details 
of this narrative as proprietary, see Analysis Memo for further 
detail of UKCG's arguments regarding a comparison of its production 
processes to those of PRC suppliers of SDGE.
---------------------------------------------------------------------------

    Petitioners argue that, in order to properly evaluate whether 
UKCG's further manufacturing is minor or insignificant, the 
Department's analysis must consider UKCG's business processes in 
comparison to the corresponding processes for a PRC manufacturer of 
subject SDGEs.\77\ As such, Petitioners provide certain proprietary 
information regarding the production process of SDGEs submitted by 
respondents in the recent 2008-2010 administrative review of SDGE's 
from the PRC.\78\ Using this proprietary information, Petitioners argue 
that the processes, production time, R&D costs, facilities, equipment, 
number of production employees, initial investment and fixed costs 
needed for a PRC SDGE manufacturer to produce the artificial graphite/
unfinished SDGE component used as an input by UKCG is relatively 
massive when compared to the level of overall investment, R&D, 
sophistication of production processes, and production facilities 
reported by UKCG, and that the amount of resources involved in 
machining a graphitized electrode cylinder into a finished SDGE is 
minor when compared to the entirety of the SDGE production process.\79\ 
UKCG argues that Petitioners' analysis is unreliable because it 
compares the average number of employees and investment for a large PRC 
producer of electrodes with UKCG, a small company with a comparably 
small customer base.\80\
---------------------------------------------------------------------------

    \77\ See Petitioners' Comments on Processing and Request for 
Expedition of the Proceeding at 3.
    \78\ See id. at Exhibit 1.
    \79\ See id. at 3-8.
    \80\ See UKCG's July 18 Submission at 6-7.
---------------------------------------------------------------------------

    We agree with the Petitioners' analysis of the record information, 
and find no information on the record to contradict the Department's 
initial findings in the Initiation Notice that the nature of the 
production process, and extent of production facilities in the United 
Kingdom are minor in comparison to those utilized in the PRC for the 
production of the unfinished artificial/synthetic graphite components 
sourced from the PRC.\81\
---------------------------------------------------------------------------

    \81\ See Initiation Notice, 76 FR at 14916-17 and Analysis Memo.
---------------------------------------------------------------------------

    As an initial matter, the Department disagrees with UKCG's 
implication that the comparison between UKCG and the PRC producer is 
not reliable. Because UKCG only performs final stage processing of 
SDGE, the Department finds that it is wholly relevant to evaluate the 
extent of UKCG's portion of production vis-[agrave]-vis the PRC 
manufacturing process for the unfinished artificial/synthetic graphite. 
Furthermore, we find that the evaluation of the assembly/completion 
stages (including investment, R&D, production process, and facilities) 
with regard to the overall manufacture of subject merchandise is 
consistent with

[[Page 33413]]

the Department's practice in prior anticircumvention proceedings.\82\ 
In comparing UKCG's production process to the manufacturing process of 
the unfinished input, the Department finds that the level of 
investment, R&D, and facilities/equipment needed for UKCG to further 
manufacture artificial graphite/unfinished SDGE into finished SDGE 
represents a minor fraction of the overall manufacturing process and is 
insignificant in comparison to the production process required to 
manufacture the input UKCG consumes in its facility.\83\
---------------------------------------------------------------------------

    \82\ See, e.g., Hangers Anticircumvention Prelim, 76 FR at 
27010-27011, unchanged in Hangers Anticircumvention Final.
    \83\ See Analysis Memo for a full discussion of this proprietary 
information.
---------------------------------------------------------------------------

    With respect to UKCG's precision finishing and custom 
specifications, the Department finds no record evidence to suggest that 
the resources and processes utilized by UKCG's finishing differs in any 
significant way from the finishing applied by PRC producers of SDGE 
products subject to the SDGE Order. A qualitative analysis demonstrates 
the processes, types of machinery, and resources involved to be very 
similar with respect to the actual finishing operations performed by 
both UKCG and PRC suppliers subject to the SDGE Order.\84\ Furthermore, 
the Department finds that, of the 39 steps listed in UKCG's detailed 
description of its finishing process, 29 of the steps appear to be 
related to unpacking, packing, movement, cleaning, and/or testing of 
the merchandise, while another four steps appear to be ``as needed'' 
manufacturing. Therefore, only six of the steps listed appear to be 
related to manufacturing consistently performed on the merchandise in 
question.\85\ The Department's review of the finishing processes (along 
with the other non-manufacturing and ``as-needed'' steps) at 
verification demonstrated that the finishing is essential for the 
finished products' end use in a metallurgical furnace.\86\ However, 
record evidence pertaining to the relevant statutory value-added 
criteria indicates that the finishing performed by UKCG does not 
represent significant processing when compared with the totality of the 
processing necessary to produce a finished electrode.\87\
---------------------------------------------------------------------------

    \84\ See Analysis Memo for a full discussion of this proprietary 
information.
    \85\ See UKCG's Verification Report at Section VI for a full 
discussion of the production process as reviewed by Department 
officials. See also Analysis Memo.
    \86\ See UKCG's Verification Report at Section VI.
    \87\ See Analysis Memo for a full discussion of this proprietary 
information.
---------------------------------------------------------------------------

    UKCG also claims that it performs and applies superior quality 
control and testing standards to its finishing beyond that of the PRC 
producers. However, UKCG has not provided supporting evidence 
documenting any inferiority of PRC-finished products. Moreover, even if 
the Department were to fully accept UKCG's assertions regarding quality 
control and testing, and their potential competitive impact, UKCG has 
not demonstrated how such quality control and testing are relevant to 
the criteria analyzed by the Department in an anticircumvention 
analysis pursuant to section 781(b) of the Act, which requires the 
Department to consider processes of ``assembly and completion.'' Thus, 
we conclude that the quality control and testing--however thorough--is 
not a ``process of assembly or completion'' to be considered by the 
analysis under section 781(b)(2) of the Act.
    In sum, pursuant to section 781(b)(2)(C) of the Act, the Department 
preliminarily finds that the finishing process occurring in the United 
Kingdom represents a relatively minor portion of the overall 
manufacturing of finished SDGE in terms of the processes involved, and 
total production time in comparison to the same elements utilized to 
manufacture the unfinished electrodes in the PRC that serve as the 
input for UKCG's finishing operations. Similarly, pursuant to section 
781(b)(2)(D) of the Act, we find that the extent of UKCG's production 
facilities are relatively minor because the materials, energy, labor, 
and capital equipment used by UKCG in converting the PRC-origin, 
artificial graphite/unfinished SDGE into finished SDGE is not 
substantial in comparison to the materials, labor, energy, and capital 
equipment used by its PRC suppliers in the production of the input.
781(b)(2)(E): Whether the Value of the Processing Performed in the 
United Kingdom Represents a Small Proportion of the Value of the 
Merchandise Imported Into the United States
    In prior anticircumvention inquiries, the Department has explained 
that Congress directed the agency to focus more on the nature of the 
production process and less on the difference in value between the 
subject merchandise and the parts and components imported into the 
processing country.\88\ Additionally, the Department has explained 
that, following the Uruguay Round Agreements Act, Congress redirected 
the agency's focus away from a rigid numerical calculation of value-
added toward a more qualitative focus on the nature of the production 
process.\89\ In this anticircumvention inquiry, we note that the sole 
direct material input, artificial graphite rods/unfinished SDGE 
components, used by UKCG to produce finished SDGE were manufactured and 
supplied by producers in the PRC.\90\ Aside from the cost of labor and 
energy, UKCG did not consume or impart any additional direct material 
inputs to produce the finished SDGE. Thus, we find that the value of 
energy and labor consumed by UKCG in the production of the finished 
SDGE represents an insignificant value when compared to the value of 
the merchandise sold to the United States.\91\ Nonetheless, while the 
Department believes that this qualitative analysis is sufficient to 
determine whether the value of processing in the third country 
constitutes a small portion of the value of the merchandise exported to 
the United States, the Department has obtained the information 
necessary to evaluate the proportion of UKCG's processing, as discussed 
below.
---------------------------------------------------------------------------

    \88\ See, e.g., Pasta Circumvention Prelim, 68 FR at 46575, 
unchanged in Pasta Circumvention Final. Although that case involved 
assembly or processing in the United States under section 781(a) of 
the Act, the language regarding the value of processing or assembly 
is essentially the same under both sections 781(a)(2)(E) and 
(b)(2)(E) of the Act. Accordingly, we find that our prior rationale 
is equally applicable to value of assembly or processing in a third-
country under section 781(b)(2)(E) of the Act. See Hangers 
Anticircumvention Prelim, 76 FR at 27012, unchanged in Hangers 
Anticircumvention Final.
    \89\ See Pasta Circumvention Prelim, 68 FR at 46575, unchanged 
in Pasta Circumvention Final.
    \90\ See, e.g., UKCG's First SQR at 9.
    \91\ This is consistent with our 781(b)(2)(E) analysis in the 
recent Hangers Anticircumvention Prelim. See Hangers 
Anticircumvention Prelim, 76 FR at 27012, unchanged in Hangers 
Anticircumvention Final.
---------------------------------------------------------------------------

    UKCG has provided allocations of total costs during the POR broken 
down to reflect the processing costs related to the finishing processes 
it performed on the SDGE it sold to the United States.\92\ UKCG 
suggests that the Department should compare the sales value of the 
merchandise exported to the United States to the value of the 
difference between the sales value and the price it paid for the 
artificial graphite input during the POR.\93\ UKCG argues that this 
represents the ``value'' of the input, as required by the statute, and 
not simply the ``cost'' of further manufacture and demonstrates that 
the value of processing is a significant proportion of the value of the 
merchandise imported into the United States.\94\
---------------------------------------------------------------------------

    \92\ See UKCG's Second SQR at Exhibit 26 and UKCG's Third SQR at 
Exhibit 1.
    \93\ See UKCG's Value-Added Submission at 3.
    \94\ See id.

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

[[Page 33414]]

    Petitioners request that the Department determine the proportion of 
UKCG processing value by dividing UKCG's reported further manufacturing 
costs by the sum of the Ukrainian artificial graphite SV and UKCG's 
reported processing costs (as opposed to the actual value of sales 
suggested by UKCG).\95\ Additionally, Petitioners maintain that UKCG 
mis-reported certain data. First, Petitioners argue that, by reporting 
the quantity and value of sales of subject merchandise to the United 
States during the POR based on invoice date rather than date of 
shipment, UKCG failed to report a significant percentage of subject 
sales.\96\ Second, Petitioners assert that UKCG did not include certain 
packing expenses associated with materials acquired by UKCG in the 
process of importing the artificial graphite/unfinished SDGE inputs 
from the PRC which were subsequently re-used by UKCG when exporting the 
finished electrodes to the United States.\97\ Third, Petitioners 
contend that UKCG did not report its sales and further manufacturing 
costs on the same basis. Specifically, they assert that UKCG included 
reconditioning and machining costs for re-claimed electrodes in the 
numerator, but excluded sales of reconditioned or re-claimed electrodes 
from the denominator of the further manufacturing costs to sales value 
ratio, thus significantly overstating the further processing occurring 
in the United Kingdom in this calculation. Finally, Petitioners 
conclude that, notwithstanding these discrepancies, the record supports 
a conclusion that UKCG's processing is insignificant.\98\
---------------------------------------------------------------------------

    \95\ See Petitioners' Comments on UKCG's Second SQR at 5. 
Petitioners also suggest a similar method for calculating this 
percentage on an unconverted per MT basis based upon a subsequent 
submission by UKCG. See Petitioners' Comments on UKCG's Third SQR at 
4-5.
    \96\ See Petitioners' Pre-Verification Comments.
    \97\ See Petitioners' Surrogate Country Comments at 6-9 and 
Exhibit 2. See also Petitioners' Pre-Verification Comments. Because 
both of Petitioners' suggested value-added calculations utilize the 
Ukrainian SV for artificial graphite inputs in the denominator of 
the calculation, their corresponding assertion that certain packing 
surrogate values should also be included in the buildup would seem 
to be applicable to both the calculation discussed above (i.e., the 
section 781(b)(2)(E) value-added analysis) and the instant value-
added calculation. However, because the Department has only employed 
SVs to determine the value of merchandise produced in the PRC for 
the instant analysis pursuant to section 781(b)(1)(D) of the Act 
(and instead utilized UKCG's reported further processing costs and 
reported U.S. sales value for the section 781(b)(2)(E) calculation 
discussed above), we address this surrogate value issue herein.
    \98\ See Petitioners' Comments on UKCG's Second SQR at 7-10. See 
also Petitioners' Pre-Verification Comments.
---------------------------------------------------------------------------

    As discussed in the Methodology for Valuing Inputs from the Country 
Subject to the Antidumping Duty Order on SDGE section, above, the 
Department does not find it appropriate to use the price paid for the 
NME-sourced input for the purposes of this anticircumvention 
proceeding. As a result, we have not used UKCG's suggested calculation, 
which relies on the actual price paid for the PRC-sourced artificial 
graphite inputs, for the purposes of the instant analysis. Furthermore, 
we disagree with UKCG that the difference between input price and sales 
price should be used as the numerator in the calculation required under 
section 781(b)(2)(E) of the Act and that the cost of further 
manufacture does not represent an appropriate ``value.'' The statute 
directs the Department to consider the ``value of processing'' 
performed in the third country which is, by definition, a valuation of 
all processes performed in the third country (i.e., the cost of further 
manufacture), and the use of processing costs as the numerator for this 
calculation is supported by the Department's practice in recent 
anticircumvention proceedings.\99\ With respect to Petitioners' 
suggested calculation, we do not find it appropriate to derive an 
export value (i.e., U.S. price) when the actual sales prices exist on 
the record, and have instead used UKCG's reported value of U.S. sales 
of subject merchandise as the denominator in the instant calculation.
---------------------------------------------------------------------------

    \99\ See, e.g., Tissue Paper Anticircumvention Prelim, unchanged 
in Tissue Paper Anticircumvention Final.
---------------------------------------------------------------------------

    Additionally, with respect to Petitioners' concerns regarding 
UKCG's cost and sales reporting, we examined each of these issues at 
verification. First, with regard to U.S. sales, UKCG reported its 
quantity and value of U.S. sales of subject merchandise using two 
different methodologies. One methodology (based on invoice, not 
shipment, date) was used to report sales values and quantities for 
purposes of the further-processing value-added ratio calculation and 
the other (based on shipment date (i.e., dispatch from the factory)) 
was used for the pattern of trade analysis. At verification, the 
Department noted that U.S. sales of SDGE shipped in June 2010, and 
reported for the pattern of trade analysis, were not included in the 
reported quantity and value data for the further-processing value-added 
ratio calculation because these sales were recorded in UKCG's books 
based on the invoice date, and therefore were not included in the 
fiscal year financial statement corresponding to the POR.\100\ In this 
way, UKCG appropriately reported costs and sales corresponding to a 
single fiscal year for the further-processing value-added ratio 
calculation, and we relied on this data for this purpose. With regard 
to the pattern of trade data, UKCG reported sales based on shipment 
date to reflect the actual pattern of exports during the period in 
question.
---------------------------------------------------------------------------

    \100\ See UKCG's Verification Report at Section VII.D. See also 
Analysis Memo.
---------------------------------------------------------------------------

    Second, regarding the packing inputs, we note that UKCG reported 
its per metric ton (``MT'') further-processing costs (i.e., the 
numerator of the calculation used for this analysis, as discussed 
below) exclusive of all material costs, including packing.\101\ As 
such, we find Petitioners' concern regarding the inclusion of certain 
packing costs in the value-added buildup to be moot, as we do not find 
that an exact figure reporting the quantity or value of these re-used 
inputs to be relevant to the Department's analysis of the 781(b)(2)(E) 
criteria.
---------------------------------------------------------------------------

    \101\ See UKCG's Verification Report at Section IX and Exhibit 
7.
---------------------------------------------------------------------------

    Third, with respect to Petitioners' concerns regarding the 
inclusion of costs related to reconditioned materials in the numerator 
of the instant calculation, we find that UKCG sufficiently demonstrated 
at verification that these added costs are minimal, that the additional 
processes are applied to a very small percentage of sales and that the 
company had no way to track or separate out such costs from total costs 
and, thus, appropriately allocated the costs over all products.\102\ 
Accordingly, we did not remove these costs from the numerator of our 
calculation. However, to ensure that the numerator and denominator were 
derived on the same basis, we included sales of the reconditioned and 
re-claimed electrodes in the denominator of the calculation.
---------------------------------------------------------------------------

    \102\ See UKCG's Verification Report at Section VI and Section 
IX.
---------------------------------------------------------------------------

    Finally, the Department has made one additional change to the cost 
data reported by UKCG. We find that UKCG's inclusion of office/selling/
general/administrative overhead costs and interest expenses in the cost 
build-up to be inappropriate. UKCG cites no authority to support the 
inclusion of such costs in the cost build-up. On the other hand, 
section 781(b)(2)(E) of the Act instructs the Department to focus on 
``the value of processing.'' Because factory overhead costs directly 
related to UKCG's processing activities have been separately accounted 
for,\103\ we find that

[[Page 33415]]

these ``other'' office/selling/general/administrative overhead and 
interest expenses do not reflect costs associated with the production 
of the merchandise and, thus, do not reflect value-added by UKCG's 
processing. As such, we have removed the per MT general and 
administrative expense from the buildup of value-added.\104\
---------------------------------------------------------------------------

    \103\ See UKCG's Verification Report at Section IX and Exhibit 
7.
    \104\ See Analysis Memo for a full discussion of how the 
Department has addressed Petitioners' concerns regarding the 
reporting and of how certain findings from verification have been 
treated with respect to this value-added analysis.
---------------------------------------------------------------------------

    To determine the proportion of UKCG's further processing value, the 
Department has compared UKCG's further processing costs to the actual 
value of the merchandise exported to the United States during the POR 
(i.e., U.S. price) and preliminarily finds that the UKCG's value-added 
comprises only a small proportion of the total export value.\105\ This 
quantitative finding lends additional support to the Department's 
qualitative finding discussed above that, pursuant to section 
781(b)(2)(E) of the Act, the value of UKCG's processing represents a 
small proportion of the value of the merchandise sold in the United 
States.\106\ In sum, pursuant to section 781(b)(1)(C) of the Act, we 
preliminarily conclude that the record evidence of this 
anticircumvention inquiry supports a finding that the process or 
completion of the PRC-origin, artificial graphite/unfinished SDGE into 
finished SDGE in the United Kingdom is minor or insignificant.
---------------------------------------------------------------------------

    \105\ This information is business proprietary. See Analysis 
Memo for exact values.
    \106\ See Analysis Memo.
---------------------------------------------------------------------------

(D) Whether the Value of the Merchandise Produced in the Foreign 
Country to Which the Order Applies Is a Significant Portion of the 
Total Value of the Merchandise Exported to the United States

    Under section 781(b)(1)(D) of the Act, the value of the merchandise 
produced in the foreign country to which an antidumping duty order 
applies must be a significant portion of the total value of the 
merchandise exported to the United States in order to find 
circumvention. As discussed in the Surrogate Country and Factor 
Valuation sections, above, because semi-manufactured artificial 
graphite/unfinished SDGE components are sourced entirely from suppliers 
in the PRC, an NME country, the Department has determined to value the 
input merchandise produced in the country to which the SDGE Order 
applies by using Ukrainian import data for HTS subcategory 3801.10.
    Similar to its suggested calculation for the analysis under section 
781(b)(2)(E) of the Act, above, UKCG suggests that the Department only 
use actual prices paid in this analysis, resulting in a simple 
calculation of UKCG's reported price paid for inputs divided by the 
total export sales value,\107\ whereas Petitioners suggest that the 
Department divide the per-piece or per-Kg price of processing by the 
SV.\108\ Furthermore, as discussed in the section 781(b)(2)(E) 
analysis, above, Petitioners assert that any analysis which utilizes an 
SV buildup for the value of materials sourced from the PRC should 
include the value of any packing materials acquired from the PRC which 
were subsequently re-used to export the finished electrodes to the 
United States, in addition to the value of the artificial graphite 
inputs.\109\
---------------------------------------------------------------------------

    \107\ See UKCG's Value-added Submission at 2.
    \108\ See Petitioners' Comments on UKCG's Second SQR at 5-6 and 
Petitioners' Comments on UKCG's Third SQR at 3-4. Petitioners 
suggest two value-added calculations: 1) third country processing as 
a percentage of the value of the finished good (calculated by 
dividing UKCG's reported costs by the sum of the costs and the 
Ukrainian SV, as described in the discussion of our analysis of 
section 781(b)(2)(E) of the Act, above); and 2) UKCG's processing 
costs as a percentage of the Chinese input (calculated by simply 
dividing UKCG's reported costs by the Ukrainian SV). See 
Petitioners' Comments on UKCG's Second SQR at 5-6 and Petitioners' 
Comments on UKCG's Third SQR at 3-4. Because the former calculation 
expresses UKCG's reported cost of further manufacturing as a 
percentage of a buildup to U.S. price, we have discussed this 
calculation in the 781(b)(2)(E) value-added analysis section, above, 
and address the latter calculation herein. However, as discussed 
below, this calculation (where the cost of further manufacture is 
expressed as a percentage of the input) does not address the 
statutory requirements of analysis provided by either section 
781(b)(2)(E) or 781(b)(1)(D) of the Act.
    \109\ See Petitioners' Surrogate Country Comments at 6-9 and 
Exhibit 2. See also Petitioners' Pre-Verification Comments.
---------------------------------------------------------------------------

    As previously stated, the Department does not find the use of 
UKCG's prices paid for the PRC-sourced input to be appropriate in this 
circumstance because of the PRC's designation as an NME country.\110\ 
Furthermore, the Department finds that Petitioners' suggested 
calculation, which expresses the cost of further manufacture as a 
percentage of the input value, does not address the intent of this 
segment of the analysis (i.e., whether the value of the merchandise 
produced in the PRC is a significant portion of the total value of the 
merchandise exported to the United States).\111\ As such, we have not 
used Petitioners' proposed calculation in our analysis.
---------------------------------------------------------------------------

    \110\ Although the Department does not agree with UKCG's 
suggested methodology to use the actual purchase price for inputs in 
this calculation, we note that UKCG's own analysis of section 
781(b)(1)(D) of the Act using this methodology ``shows that this 
percentage qualifies as `a significant portion' of the value of the 
total merchandise exported.'' See UKCG's Value-Added Submission at 
2. Thus, regardless of the methodology used, UKCG does not contest 
that the finding that the PRC-produced artificial graphite inputs 
represent a significant portion of the total value of finished 
merchandise exported to the U.S.
    \111\ Nor does this calculation address whether the value-added 
by UKCG's processing represents a significant value of the 
merchandise imported into the U.S., pursuant to section 781(b)(2)(E) 
of the Act, as discussed above.
---------------------------------------------------------------------------

    With respect to the packing inputs, we agree with Petitioners that 
the analysis under 781(b)(1)(D) of the Act must take into account the 
full value of all materials sourced from the foreign country to which 
the order applies, including any packing materials. However, because we 
have relied on Ukrainian import prices for inputs in question, as 
reported by GTA, which represent market prices paid for artificial 
graphite inputs inclusive of any packing, the Department has already 
accounted for the value of any re-used packing materials in its 
analysis. Finally, our analysis under Section 781(b)(1)(d) of the Act 
shows the artificial graphite SV to be a significant portion of the 
finished product export value even without the inclusion of these 
materials.\112\
---------------------------------------------------------------------------

    \112\ Moreover, as discussed above, UKCG does not contest this 
finding. Instead, UKCG's own calculations confirm that the value of 
the input represents a significant portion of the value of the 
exported merchandise and requests that the Department focus its 
analysis on whether the process of assembly or completion in the 
U.K. is minor or insignificant pursuant to section 781(b)(2)(E) of 
the Act. See UKCG's Value-Added Submission at 2.
---------------------------------------------------------------------------

    As established in the analysis of section 781(b)(2)(E) of the Act, 
above, the Department determined UKCG's sales value of finished 
merchandise exported to the United States based on actual sales to the 
United States. Therefore, we determine that the appropriate calculation 
expresses the SV for the artificial graphite input in question as a 
percentage of UKCG's reported total sales value. In comparing the SV of 
the artificial graphite/unfinished electrode input to UKCG's total 
sales value, this analysis finds that the PRC produced merchandise 
represents a significant percentage of the sales value of UKCG's 
exports of finished merchandise.\113\ Therefore, based on our analysis 
and record evidence, we find that the value of the PRC-origin 
artificial graphite/unfinished SDGE constitutes a significant portion 
of the value of the finished product ultimately exported to the United 
States.
---------------------------------------------------------------------------

    \113\ This information is business proprietary. See Analysis 
Memo for exact values.
---------------------------------------------------------------------------

Other Factors To Consider

    In making a determination whether to include merchandise assembled 
or completed in a foreign country within

[[Page 33416]]

an order, section 781(b)(3) of the Act instructs the Department to take 
into account such factors as: (A) The pattern of trade, including 
sourcing patterns; (B) whether affiliation exists between the 
manufacturer or exporter of the merchandise in the country subject to 
the order and the person who uses the merchandise to assemble or 
complete in the third country the merchandise that is exported to the 
United States; and (C) whether imports into the third country of the 
merchandise described in section 781(b)(1)(B) of the Act have increased 
since the initiation of the original investigation. Each of these 
factors is examined below.

(A) Pattern of Trade and Sourcing

    The first factor to consider under section 781(b)(3) of the Act is 
changes in the pattern of trade, including changes in the sourcing 
patterns. According to UKCG, it started sourcing PRC-origin, artificial 
graphite rods/unfinished SDGE component inputs and exporting finished 
SDGE processed from these inputs to the United States in 2002.\114\ 
UKCG provided separate worksheets reporting the total amount of 
finished SDGE exported to the United States and the total amount of 
artificial graphite/unfinished SDGE inputs sourced from the PRC since 
2002 (in MTs, broken down into monthly and yearly totals).\115\
---------------------------------------------------------------------------

    \114\ See UKCG's First SQR at 15. See also UKCG's Verification 
Report.
    \115\ UKCG provided these worksheets at Exhibits 12 and 13 of 
its September 6, 2011, Second SQR, but noted that data were only 
available from August 2003.
---------------------------------------------------------------------------

    With respect to the timing and quantities of UKCG's exports of 
finished SDGE to the United States, we note that between 2003 and 2008 
UKCG exported an average of X metric tons a year.\116\ Between 2003 and 
2007, the export volume for any given year remained relatively 
consistent, ranging from 76 to 123 percent of X, wherein UKCG typically 
made shipments of SDGE to a limited set of U.S. customers. In 2008, the 
year of the Petition and LTFV investigation, UKCG had a very limited 
set of SDGE sales to the United States. However, beginning in January 
2009, the month the final determination of the LTFV investigation were 
published, UKCG's exports of finished SDGE increased dramatically. In 
2009, UKCG shipped finished SDGE to a larger set of U.S. customers for 
a total volume of 435 percent of X. In 2010, the total quantity of 
UKCG's shipments of finished SDGE to the U.S. was 1085 percent of the X 
baseline. Indeed, UKCG's exports of finished SDGE to the United States 
in the two years following the publication of the final determination 
were 2.65 times the volume exported in the previous five and a half 
years combined.\117\
---------------------------------------------------------------------------

    \116\ See UKCG's Second SQR at Exhibit 12. Due to the 
proprietary nature of this information, we are using the baseline 
``X'' to represent the average quantity of UKCG's yearly exports of 
SDGE to the U.S. from 2003 until 2008. See Analysis Memo for actual 
values and full discussion of the pattern of trade analysis. 
Furthermore, the individual sale-specific information reported in 
these databases was reported with a date corresponding to the date 
the sale was dispatched from UKCG's factory. As a result, our 
analysis of the monthly and yearly trends relies on the sales date 
as reported for this analysis (i.e., dispatch date), regardless of 
when the sale may have been booked or invoiced by UKCG. Also, our 
analysis considers yearly trends based on the calendar year, as 
reported, and not the fiscal year.
    \117\ See id.
---------------------------------------------------------------------------

    The Department's analysis of the corresponding data regarding the 
timing and quantities of UKCG's purchases of PRC-produced artificial 
graphite/unfinished SDGE inputs,\118\ however, demonstrates that it 
contains identical data as the pattern of trade in sales exhibit 
discussed above and, therefore, is not representative of actual 
purchase quantity.\119\ However, due to the time constraints of the 
verification, the Department did not discover this discrepancy until 
after verification when reviewing this data in comparison to the sales 
data reviewed at verification.
---------------------------------------------------------------------------

    \118\ See UKCG's Second SQR at Exhibit 13.
    \119\ Both documents are based off of a master trade spreadsheet 
kept by UKCG's managing director, which tracks all sales (including 
the tonnage of each sale) and contains a great deal of information 
corresponding to each sale, including the supplier. See UKCG's 
Verification Report at III.G.3, for a discussion of this master 
trade sheet used in UKCG's reporting. Further review confirmed that 
pattern of trade in sourcing shown in Exhibit 13 of UKCG's Second 
SQR was identical to the list provided for sales in Exhibit 12 of 
the same submission, with the supplier name provided for each sale 
rather than the customer name, and that the minor difference in 
yearly quantities between the two exhibits (previously assumed to be 
a result of the yield loss from the finishing and/or lag between 
delivery date of the input and sale date of the finished product) 
was merely a result re-conditioned merchandise having been excluded 
from the latter dataset. Thus, the pattern of trade in sourcing 
information on the record does not actually list input purchases 
based on date of purchase and quantity purchased but instead re-
states the pattern of trade in sales information (i.e., month of 
sale and quantity of the sale) showing the supplier of the 
artificial graphite input used to produced the finished product 
rather than the name of the U.S. customer.
---------------------------------------------------------------------------

    Although the record lacks the specific input purchase quantity 
information necessary for the Department's pattern of trade in sourcing 
analysis, we find sufficient information otherwise exists on the record 
to demonstrate that there is a strong correlation between UKCG's 
pattern of trade in sourcing and its pattern of trade in sales (where 
the quantity figures have been reported appropriately and verified). 
For example, the facts available on the record demonstrate that 
artificial graphite rods are the sole input utilized by UKCG in the 
production of finished SDGE and the PRC-produced inputs are procured to 
fulfill specific sales orders and are not typically held in inventory 
longer than the time needed for final machining.\120\ As such, we have 
relied on this other information as facts available, pursuant to 
section 776(a)(1) of the Act, to determine that UKCG's pattern of trade 
in sourcing of artificial graphite inputs has increased at a rate 
corresponding to UKCG's pattern of trade in sales of finished SDGE to 
the United States, as discussed above.
---------------------------------------------------------------------------

    \120\ See, e.g., UKCG's Verification Report at Section IV. Due 
to the proprietary nature of certain additional information related 
to UKCG's pattern of trade in sourcing, see Analysis Memo for full 
discussion of the pattern of trade analysis.
---------------------------------------------------------------------------

    Additionally, the Department examined: (A) U.S. import data 
obtained from GTA noting the monthly import quantity of HTS 8545.11 
from the PRC to the United States between 2004 and 2011, to evaluate 
whether imports of finished SDGE from the PRC have decreased since the 
issuance of the SDGE Order, and (B) U.S. import data obtained from GTA 
noting the monthly import quantity of HTS 8545.11 into the United 
States from the United Kingdom since August 2003, to corroborate UKCG's 
pattern of trade discussed above.\121\ A review of the data shows that 
PRC exports of finished SDGE to the United States under the 8545.11. 
HTSUS category specific to graphite electrodes (both large and small 
diameter), which more than doubled in quantity between 2004 and 2008 
(the year of the Petition and LTFV investigation), then decreased to 
just 41 percent of its 2008 level in 2009 and 53 percent of its 2008 
level in 2010.\122\ Imports to the United States from the United 
Kingdom for the identical HTSUS category increased by 1458 percent 
between 2008 and 2009 and 48 percent between 2009 and 2010. In fact, 
the reported quantity of imports of HTS 8545.11 from the United Kingdom 
to the United States since 2004 moved in proportion with UKCG's 
reported export

[[Page 33417]]

quantities in the same period.\123\ As such, an analysis of the pattern 
of trade based on the quantity of imports into the United States, 
reported in the GTA data, serves to indicate a significant upward trend 
in imports from the United Kingdom with a corresponding downward trend 
from the PRC since the publication of the SDGE Order. U.S. imports of 
electrodes from the United Kingdom were up 883 percent from the 2003-
2008 baseline in 2009, 1307 percent in 2010, and the combined total of 
2009-2010 import quantities (i.e., imports subsequent to the issuance 
of the SDGE Order) was over four times higher than the total quantity 
of all electrodes imported into the United States from the United 
Kingdom in the period between August 2003 and December 2008.\124\
---------------------------------------------------------------------------

    \121\ See Analysis Memo. Information for U.S. imports of both 
U.K. and PRC merchandise listed under the 8545110010 HTSUS 
subcategory specific to SDGE is not available prior to 2010, so the 
8545110000 HTSUS category specific to both large and small diameter 
graphite electrodes was used instead.
    \122\ Although U.S. import data have only been broken out into 
large, small, and ``other'' specific data since 2010, the trends in 
this data show that imports of SDGE from the PRC have continued to 
decrease since 2010. See Analysis Memo.
    \123\ See Analysis Memo.
    \124\ See Analysis Memo.
---------------------------------------------------------------------------

    Accordingly, we find that the data show that PRC exports of SDGE 
have decreased significantly whereas U.K. exports to the United States, 
UKCG's exports to the United States, and UKCG's sourcing of relevant 
inputs from the PRC, have increased since the initiation of the LTFV 
investigation. Therefore, based on the facts on the record, we find 
that the patterns of trade, discussed above, since the initiation of 
the LTFV investigation and the imposition of the SDGE Order supports a 
finding that circumvention has occurred.

(B) Affiliation

    The second factor to consider under section 781(b)(3) of the Act is 
whether the manufacturer or exporter of the artificial graphite/
unfinished SDGE in the country subject to the order is affiliated with 
the entity that assembles or completes the merchandise exported to the 
United States. Generally, we consider circumvention to be more likely 
to occur when the manufacturer of the covered merchandise is related to 
the third country assembler and is a critical element in our evaluation 
of circumvention.\125\ Prior to the Initiation Notice, UKCG claimed 
that it is not affiliated with any PRC suppliers, and no interested 
party to this proceeding has contested this fact. Since the Initiation 
Notice, UKCG has reiterated that it has no affiliation with any of its 
suppliers and materials submitted subsequent to the Initiation Notice 
further support this fact.\126\ Therefore, we preliminarily determine 
that UKCG is not affiliated with any PRC-producers of artificial 
graphite/unfinished SDGE.
---------------------------------------------------------------------------

    \125\ See, e.g., Tissue Paper Anticircumvention Prelim, 
unchanged in Tissue Paper Anticircumvention Final.
    \126\ See UKCG's First SQR at 20 and Exhibit 4 (containing 
UKCG's financial statements).
---------------------------------------------------------------------------

(C) Whether Imports Have Increased

    The third factor to consider under section 781(b)(3) of the Act is 
whether imports into the third country (i.e., the United Kingdom) of 
the merchandise described in section 781(b)(1)(B) of the Act (i.e., 
artificial graphite rods/unfinished SDGE) have increased since the 
initiation of the LTFV investigation. As described in detail in the 
Pattern of Trade and Sourcing section above, the Department finds that 
UKCG's own data demonstrate a significant increase in the sourcing of 
PRC-produced artificial graphite/unfinished SDGE inputs since the 
initiation of the LTFV investigation. However, because the 3801.10 HTS 
subcategory of the input (inclusive of all types of artificial graphite 
forms) is a broader basket category than the HTS 8545.11 category of 
the finished product (inclusive of only carbon electrodes used in 
furnaces), a comparison of the quantity of U.K. imports from the PRC 
under HTS 3801.10 to the reported quantity of UKCG's imports of the 
artificial graphite input during the POR does not exhibit the same 
level of correspondence between the two datasets as is seen with the 
finished product above.\127\ Nevertheless, GTA data for U.K. imports of 
HTS 3801.10 do show that artificial graphite imports from the PRC have 
increased an average of 60 percent per year since 2005 and, although 
the quantities of artificial graphite imported into the United Kingdom 
and the PRC-sourced inputs reported by UKCG do not approximate one 
another, a comparison of the trends in the monthly import totals in 
both datasets during the period January 2008-December 2010 demonstrates 
a correlation in the pattern of trade.\128\
---------------------------------------------------------------------------

    \127\ For example, whereas the relative narrowness of the 
products included in the 8545.11 category, along with the presumably 
limited number of U.K. exporters of 8545.11 merchandise in general, 
resulted in a significant correlation between the quantity totals of 
all imports of finished SDGE into the U.S. from the U.K. and UKCG's 
reported totals, the broader scope of products included in the 
3801.10 category, along with a presumably larger pool of U.K. 
importers of 3801.10 merchandise, results in a quantity of 
artificial graphite imports into the U.K. from the PRC reported by 
GTA which greatly exceeds the reported quantity of SDGE sold to the 
U.S. during the period reviewed, as reported in Exhibits 12 and 13 
of UKCG's Second SQR. Because, as discussed above, the Department 
has applied fact available pursuant to section 776(a)(1) of the Act 
to conclude that UKCG's pattern of trade in sourcing closely 
resembles its pattern of trade in sales, we find that this import 
quantity of artificial graphite also greatly exceeds the amount of 
artificial graphite inputs sourced by UKCG for use in the production 
of subject merchandise.
    \128\ See Analysis Memo.
---------------------------------------------------------------------------

    Accordingly, we find that the data show that, in addition to the 
aforementioned increase in UKCG's sourcing of relevant inputs from the 
PRC, PRC exports of unfinished artificial graphite to the United 
Kingdom have also increased significantly since the initiation of the 
LTFV investigation.

Summary of Analysis

    We preliminarily find that UKCG has circumvented the SDGE Order in 
accordance with sections 781(b)(1) and (2) of the Act. Pursuant to 
sections 781(b)(1)(A) and (B) of the Act, we find that the merchandise 
sold in the United States is identical to merchandise that is subject 
to the SDGE Order and was completed in the United Kingdom from 
merchandise which is: (a) indistinguishable from merchandise covered by 
the explicit language of the scope of the SDGE Order, and (b) produced 
in the PRC, the country to which the SDGE Order applies. Additionally, 
pursuant to section 781(b)(1)(C) of the Act, we find that the process 
of completion in the United Kingdom to be minor and insignificant based 
on each facet of the analysis under section 781(b)(2) of the Act. 
Furthermore, in accordance with section 781(b)(1)(D) of the Act, we 
find that the value of the merchandise produced in the PRC is a 
significant portion of the total value of the merchandise exported to 
the United States. Finally, upon taking into consideration section 
781(b)(3) of the Act, our analysis of the pattern of trade, including 
sourcing, and an affirmative finding of an increase in imports of 
artificial graphite/unfinished SDGE between the PRC and United Kingdom 
since the initiation of the initial LTFV investigation, action is 
appropriate to prevent evasion of the SDGE Order pursuant to 
781(b)(1)(E) of the Act. Consequently, our statutory analysis leads us 
to find that, during the period of time examined, there was 
circumvention of the SDGE Order as a result of UKCG's conversion of the 
PRC-origin artificial graphite/unfinished SDGE components to finished 
SDGE in the United Kingdom, as discussed above.

Suspension of Liquidation

    As stated above, the Department has made a preliminary affirmative 
finding of circumvention of the SDGE Order by UKCG. This circumvention 
finding applies to SDGE produced by UKCG from PRC-origin inputs. A 
review of certain information, bracketed as proprietary, that is 
contained in various submissions demonstrates that UKCG may have sales 
of finished SDGE to the United States further manufactured from non-
PRC-sourced artificial

[[Page 33418]]

graphite/unfinished SDGE inputs,\129\ and that UKCG may be able to 
differentiate which of its exports of finished SDGE to the United 
States are sourced from non-PRC-origin inputs.\130\ Further proprietary 
statements demonstrate that UKCG sources a certain percentage of 
relevant inputs from PRC supplier(s) of SDGE with their own antidumping 
duty rates and that UKCG may be able to identify these exports and 
relevant PRC suppliers.\131\ Moreover, UKCG stated and the Department 
verified that its record-keeping system is able to track orders of 
artificial rod inputs from the PRC (or elsewhere) to the production 
process of finished SDGE and through to the subsequent shipment to the 
customer.\132\ Thus, the Department preliminarily determines, based on 
the aforementioned record evidence, that UKCG is able to provide 
documentation to its U.S. importers that would allow U.S. Customs and 
Border Protection (``CBP'') to distinguish between UKCG's SDGE sourced 
from a PRC supplier subject to the PRC-wide rate, UKCG's SDGE sourced 
from a PRC supplier subject to an individual rate, and UKCG's exports 
of non-PRC-sourced SDGE which are not within the scope of the SDGE 
Order.\133\
---------------------------------------------------------------------------

    \129\ See, e.g., UKCG's First SQR at 20.
    \130\ See UKCG's First SQR at 8.
    \131\ See UKCG's First SQR at 8-9.
    \132\ See UKCG's Fourth SQR at 1-2.
    \133\ UKCG stated that it retains financial records for seven 
years, in accordance with law. See UKCG's Fourth SQR at 1-2. 
Furthermore, at verification, the Department confirmed that UKCG has 
maintained all necessary documentation going back to the March 18, 
2011, date of initiation.
---------------------------------------------------------------------------

    In accordance with section 19 CFR 351.225(l)(2), the Department 
will direct CBP to suspend liquidation and to require a cash deposit of 
estimated duties at the applicable rate on unliquidated entries of SDGE 
produced and/or exported by UKCG that were entered, or withdrawn from 
warehouse, for consumption on or after March 18, 2011, the date of 
initiation of the anticircumvention inquiry. Where the importer can 
demonstrate that the primary input material was produced by a company 
that has a separate rate, CBP will collect that company's cash deposit 
rate. Where the importer can demonstrate that the SDGE at issue was 
produced from reconditioned rods or rods sourced from a third country 
producer, CBP should not suspend those entries or collect AD duties on 
those entries. For all other entries of merchandise exported by UKCG, 
CBP will require a cash deposit equal to the PRC-wide rate of 159.64 
percent. For all entries of finished SDGE produced from artificial 
graphite inputs subject to the scope of this proceeding which UKCG 
believes should be assessed at a rate other than the PRC-wide rate, 
UKCG is required to furnish its customers/importers with a 
certification identifying, as appropriate, the manufacturer/exporter of 
the primary input into the SDGE it processes in the U.K. prior to 
exportation to the United States. For all entries of SDGE produced from 
inputs not subject to the scope of this proceeding (i.e., from 
reconditioned inputs or inputs produced in a third country), UKCG is 
required to furnish its customers/importers with a certification 
identifying the supplier or producer (as appropriate) \134\ of the 
primary input into the SDGE it processes in the U.K. prior to 
exportation to the United States. Importers are also required to sign 
and maintain certifications for these types of entries. The 
certification formats are provided in Appendices I, II, III, and IV to 
this notice. The importer will be required to retain each certificate 
for individual entries for the later of: (1) A period of five years 
from the date of entry or (2) a period of three years after the 
conclusion of any antidumping duty litigation regarding such entries. 
It is the importer's responsibility to accurately declare to CBP the 
appropriate antidumping duty rate (or that no antidumping duty applies) 
for each entry. Accordingly, the Department will instruct CBP to: (i) 
Require cash deposits at the rate established for the PRC supplier if 
that supplier has its own rate; (ii) require cash deposits at the PRC-
wide rate of 159.64 percent if the PRC supplier does not have its own 
rate or if the importer cannot identify the supplier. If the importer 
is able to demonstrate that the source of the artificial graphite/
unfinished SDGE used in the production of finished SDGE imported from 
UKCG is not of PRC-origin or the finished SDGE is produced from 
reconditioned inputs, the imports are not subject to the SDGE 
Order.\135\ These instructions will apply to entries of SDGE produced 
and/or exported by UKCG that were entered, or withdrawn from warehouse, 
for consumption on or after March 18, 2011, the date of initiation of 
the anti-circumvention inquiry. For unliquidated entries made prior to 
March 18, 2011, UKCG will be required to provide the above-noted 
documentation to the importer. The importer will be required to provide 
the documentation to CBP within the time frame established by CBP. 
Consistent with past practice the Department has determined that a 
third-country AD case number for the United Kingdom is necessary as 
part of this determination for importers to identity merchandise as 
subject merchandise, and to ensure that CBP can collect AD duties on 
subject SDGEs that are processed in and exported from the United 
Kingdom.\136\
---------------------------------------------------------------------------

    \134\ UKCG purchases broken/cracked or otherwise unusable 
electrodes from sources in various non-PRC countries, refurbishes 
them, and re-sells them for use as finished electrodes. These 
reclaimed products are not subject to the scope of this proceeding. 
Although UKCG can document the country in which it sourced the 
reclaimed electrodes, UKCG has stated to the record that it has no 
way of identifying the original country in which the electrode was 
initially produced. See UKCG's May 21, 2012 Submission. As a result, 
the Department is only requiring that UKCG certify to the supplier 
of the primary reconditioned input.
    \135\ The exporter-supplied certification will serve as the 
initial demonstration supporting the importer's claim regarding 
which antidumping duty rate (or that no antidumping duty rate) is 
applicable. However, should CPB determine that further demonstration 
is warranted, it may seek additional documentation from the importer 
pursuant to 19 CFR 163.6(a) and other applicable regulations and 
statutory authority. Under 19 CFR 163.6(a), CBP may require the 
production of entry records from any party required to maintain such 
records as defined in 19 CFR 163.2(a). 19 CFR 163.1(a)(2)(vii) 
defines such records to include any information made or normally 
kept in the ordinary course of business that pertains to an activity 
``required to be undertaken pursuant to the laws or regulations 
administered by Customs,'' which would include the proper assessment 
of antidumping duties. As such, for the purpose of demonstrating 
that a rate other than the PRC-wide rate should be assessed to 
entries subject to this proceeding, UKCG should be prepared to 
provide to its importers, where applicable, documentation to 
substantiate the supplier claim made on the UKCG certification to 
the importer. Thus, if CBP should determine further demonstration is 
necessary and request supporting documentation from the importer, 
UKCG will be responsible for providing to the importer additional 
documentation pursuant to 19 CFR 163.6(a) to substantiate the 
certification.
    \136\ See, e.g., Laminated Woven Sacks From the People's 
Republic of China: Final Results of First Antidumping Dutv 
Administrative Review, 76 FR 14906, 14907 (March 18, 2011) (noting 
that ``the Department has coordinated with CBP to resolve issues 
arising from differences between the Department's and CBP's 
respective country-of-origin classifications and from technical 
restrictions in CBP's electronic filing systems. As a result, the 
Department has added several case numbers to the Case Reference file 
within the Automated Commercial Environment to ensure that requisite 
entries are and can be properly claimed as scope merchandise.'').
---------------------------------------------------------------------------

Notification to the International Trade Commission

    The Department, consistent with section 781(e) of the Act, has 
notified the ITC of this preliminary determination to include the 
merchandise subject to this anticircumvention inquiry within the SDGE 
Order. Pursuant to section 781(e) of the Act, the ITC may request 
consultations concerning the Department's proposed inclusion of the 
subject merchandise. If, after

[[Page 33419]]

consultations, the ITC believes that a significant injury issue is 
presented by the proposed inclusion, it will have 15 days to provide 
written advice to the Department.

Public Comment

    Because the Department may seek additional information, the 
Department will establish the case and rebuttal brief schedule at a 
later time, and will notify parties of the schedule in accordance with 
19 CFR 351.309. These comments will be addressed in our final 
determination.
    Interested parties, who wish to request a hearing, or to 
participate if one is requested, must submit a written request within 
30 days after date of publication of this preliminary determination to 
the Assistant Secretary for Import Administration, U.S. Department of 
Commerce, and electronically file the request via the Department's 
Import Administration's Antidumping and Countervailing Duty Centralized 
Electronic Service System (IA ACCESS).\137\ Requests should contain the 
party's name, address, and telephone number, the number of 
participants, and a list of the issues to be discussed. If a hearing is 
requested, we will notify parties of the time and date for the hearing 
to be held at the U.S. Department of Commerce, 14th Street and 
Constitution Avenue NW, Washington, DC 20230. Issues raised in the 
hearing will be limited to those raised in the case briefs, pursuant to 
19 CFR 351.310(c).
---------------------------------------------------------------------------

    \137\ See 19 CFR 351.303(b) and 19 CFR 351.310(c).
---------------------------------------------------------------------------

Final Determination

    The Department intends to issue the final determination with 
respect to this anticircumvention inquiry no later than July 31, 2012, 
including the results of the Department's analysis of any written 
comments. This preliminary affirmative circumvention determination is 
published in accordance with section 781(b) of the Act and 19 CFR 
351.225.

    Dated: May 30, 2012.
Paul Piquado,
Assistant Secretary for Import Administration.

Appendix I

Certification of UK Carbon and Graphite Co., Ltd. for Non-Subject SDGE 
Exports

    I hereby certify that I am an official of UK Carbon and Graphite 
Co., Ltd. (``UKCG'') and that that the small diameter graphite 
electrode products processed by UKCG in the United Kingdom into the 
small diameter graphite electrodes included within this shipment 
pursuant to Invoice numbers \138\:
---------------------------------------------------------------------------

    \138\ If an individual invoice is representative of merchandise 
produced from both Chinese-origin artificial graphite rod inputs, as 
well as non-subject inputs, UKCG shall identify the non-subject 
merchandise in this certification, and will provide a companion 
certification identifying the subject merchandise based on the 
certification provided below in Appendix III.
---------------------------------------------------------------------------

     Invoice
     Invoice * * *

were produced from reconditioned rods or from non Chinese-origin 
artificial graphite rods.
    By signing this certificate, UKCG also hereby agrees to:
     Maintain sufficient documentation supporting the above 
statement for all non-Chinese-origin or reconditioned artificial 
graphite rods/unfinished SDGE used to produce the exported small 
diameter graphite electrode products.
     Provide such documentation to the importer of the 
merchandise subject to this certification if required by U.S. 
Customs and Border Protection (``CBP''). UKCG is required to 
maintain all such documentation for individual entries until the 
later of 1) a period of five years from the date of entry or 2) a 
period of three years after the conclusion of any litigation in 
United States courts regarding such entries.
     Submit to verification by the U.S. Government of the 
underlying documentation supporting the above statement pursuant to 
the administration of an antidumping duty proceeding covering small 
diameter graphite electrodes from the People's Republic of China.
     Provide this certification to the U.S. customer/
importer at the time of shipment.

UKCG agrees that failure to submit to verification of the 
documentation by the U.S. Government will result in immediate 
revocation of certification rights and understands that the importer 
of the merchandise will be required to post a cash deposit equal to 
the PRC-wide entity rate on all entries of small diameter graphite 
electrode products sourced from UKCG. In addition, if the Department 
of Commerce (``Commerce'') identifies any misrepresentation or 
inconsistencies regarding the certifications, UKCG recognizes that 
the matter may be reported to CBP by Commerce for possible 
enforcement action.

Signature:-------------------------------------------------------------
Printed Name:----------------------------------------------------------
Title:-----------------------------------------------------------------
Date:------------------------------------------------------------------

Appendix II

Certification of U.S. Importer for Non-Subject SDGE Exports

    I hereby certify that I am an official of {insert name of 
company importing small diameter graphite electrodes (``SDGE'') from 
UK Carbon and Graphite Co., Ltd. (``UKCG''),{time}  and that, to the 
best of my knowledge, the SDGE imported under the following entry 
numbers was produced from either reconditioned artificial graphite 
rods/unfinished SDGE or non-PRC-origin artificial graphite rods/
unfinished SDGE:

 Entry 
    Date of Entry:
 Entry 
    Date of Entry: * * *

    By signing this certificate, the importer stipulates its 
understanding that:
     It is the importer's responsibility to accurately 
declare this entry upon importation to U.S. Customs and Border 
Protection (``CBP'').
     The importer of the above certified merchandise is 
required to maintain this certification for individual entries for 
the later of 1) a period of five years from the date of entry or 2) 
a period of three years after the conclusion of any litigation in 
United States courts regarding such entries.
     The importer will be required to produce this 
certification and the exporter's certification upon the request of 
CBP.
     The importer may be required to produce additional 
documentation, sourced from UKCG, to substantiate the supplier claim 
made in the certification in response to a request from CBP.
     Should further investigation prove this certification 
to be false, CBP may take appropriate action to penalize the 
importer. As such, it is the importer's responsibility to provide 
any documentation from UKCG that may be needed to substantiate the 
above certified claims.
     The importer is required to complete this certification 
on the date of entry.
     If the importer is not able to demonstrate that the 
source of the artificial graphite rods/unfinished SDGE used in the 
production of finished SDGE imported from UKCG is of reconditioned 
rods or of non-PRC-origin, the imports are considered subject to the 
SDGE Order.

Signature:-------------------------------------------------------------
Printed Name:----------------------------------------------------------
Title:-----------------------------------------------------------------
Date:------------------------------------------------------------------

Appendix III

Certification of UK Carbon and Graphite Co., Ltd. for Exports of PRC-
Origin SDGE Sourced From PRC-Producers

    I hereby certify that I am an official of UK Carbon and Graphite 
Co., Ltd. (``UKCG'') and that the small diameter graphite electrode 
(``SDGE'') products processed by UKCG in the United Kingdom into the 
small diameter graphite electrodes included within this shipment 
pursuant to Invoice numbers \139\:
---------------------------------------------------------------------------

    \139\ If an individual invoice reflects the sale of subject and 
non-subject merchandise, UKCG shall provide to the customer/importer 
two certifications (and relevant supporting documentation) 
identifying the respective subject and non-subject merchandise, as 
discussed above.
---------------------------------------------------------------------------

     Invoice
     Invoice * * *

were produced from Chinese-origin artificial graphite rods/
unfinished SDGE subject to the antidumping duty order on small 
diameter graphite electrodes from the People's Republic of China 
(``PRC'') sourced from -------------------- (Name of PRC 
Manufacturer, or if the exporter is other than the manufacturer, the 
PRC exporter) \140\
---------------------------------------------------------------------------

    \140\ If there is more than one exporter/manufacturer, identify 
the exporter/manufacturer with each product from each invoice.
---------------------------------------------------------------------------

    By signing this certificate, UKCG also hereby agrees to:

[[Page 33420]]

     Maintain sufficient documentation supporting the above 
statement for all Chinese-origin artificial graphite rods/unfinished 
SDGE used to produce the exported small diameter graphite electrode 
products.
     Provide such documentation to the importer of the 
merchandise subject to this certification if required by U.S. 
Customs and Border Protection (CBP). UKCG is required to maintain 
all such documentation for individual entries until the later of (1) 
a period of five years from the date of entry or (2) a period of 
three years after the conclusion of any litigation in United States 
courts regarding such entries.
     Submit to verification by the U.S. Government of the 
underlying documentation supporting the above statement pursuant to 
the administration of an antidumping duty proceeding covering small 
diameter graphite electrodes from the People's Republic of China.
     Provide this certification to the U.S. customer/
importer at the time of shipment.

UKCG agrees that failure to submit to verification of the 
documentation by the U.S. government will result in immediate 
revocation of certification rights and that the importer of the 
merchandise will be required to post a cash deposit equal to the 
China-wide entity rate on all entries of small diameter graphite 
electrode products sourced from UKCG. In addition, if the Department 
of Commerce (``Commerce'') identifies any misrepresentation or 
inconsistencies regarding the certifications, UKCG recognizes that 
the matter may be reported to the U.S. Customs and Border Protection 
by Commerce for possible enforcement action.

Signature:-------------------------------------------------------------
Printed Name:----------------------------------------------------------
Title:-----------------------------------------------------------------
Date:------------------------------------------------------------------

Appendix IV

Certification of U.S. Importer for PRC SDGE Exports

    I hereby certify that I am an official of {insert name of 
company importing small diameter graphite electrodes (``SDGE'') from 
UKCG,{time}  and that, to the best of my knowledge, the SDGE 
imported under the following entry numbers was produced from PRC-
origin artificial graphite rods/unfinished SDGE:

 Entry 
    Date of Entry:
 Entry 
    Date of Entry: * * *

    By signing this certificate, the importer stipulates its 
understanding that:
     It is the importer's responsibility to accurately 
declare this entry upon importation to U.S. Customs and Border 
Protection (``CBP'') as an entry subject to antidumping duties and 
to accurately report the cash deposit rate applicable to these 
imports.
     The importer of the above certified merchandise is 
required to maintain this certification for individual entries for 
the later of (1) a period of five years from the date of entry or 
(2) a period of three years after the conclusion of any litigation 
in United States courts regarding such entries.
     The importer will be required to produce this 
certification and UKCG's certification upon the request of CBP.
     The importer may be required to produce additional 
documentation, sourced from UKCG, to substantiate the supplier claim 
made in the certification in response to a request from CBP.
     Should further investigation prove this certification 
to be false, CBP may take appropriate action to penalize the 
importer. As such, it is the importer's responsibility to provide 
any documentation from UKCG that may be needed to substantiate the 
above certified claims.
     The importer is required to complete this certification 
on the date of entry.
     For entries of SDGEs from UKCG which the importer 
believes should be assessed at a rate other than the PRC-wide rate, 
the importer must have a certification from UKCG identifying the 
supplier of the artificial graphite rods/unfinished SDGE subject to 
the antidumping duty order on SDGEs from the PRC.

Signature:-------------------------------------------------------------
Printed Name:----------------------------------------------------------
Title:-----------------------------------------------------------------
Date:------------------------------------------------------------------

[FR Doc. 2012-13738 Filed 6-5-12; 8:45 am]
BILLING CODE 3510-DS-P