[Federal Register Volume 78, Number 129 (Friday, July 5, 2013)]
[Notices]
[Pages 40430-40434]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-16171]


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DEPARTMENT OF COMMERCE

International Trade Administration

[Docket No. 130612543-3543-01]
RIN 0625-XC007


De Facto Criteria for Establishing a Separate Rate in Antidumping 
Proceedings Involving Non-Market Economy Countries

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

ACTION: Determination to Address Certain Criteria on a Case-by-Case 
Basis.

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SUMMARY: On December 16, 2010, the Department of Commerce (``the 
Department'') published a Federal Register notice announcing that it 
was considering revising its current practice with respect to the de 
facto criteria \1\ examined for purposes of determining whether to 
grant separate rate status to individual exporters in antidumping 
proceedings involving non-market economy (``NME'') countries. Through 
that notice, the Department invited the public to comment on the 
current test.\2\ Numerous parties filed comments in response, 
addressing the Department's current practice and proposing additional 
criteria for the Department to consider in its analysis. The Department 
has determined that several of these comments warrant consideration on 
a case-by-case basis, as discussed below, when assessing whether a 
foreign producer/exporter in an NME country is sufficiently free of 
government control of its export activities to warrant separate rate 
status.\3\
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    \1\ The Department did not make a request for comments on the de 
jure criteria currently examined for purposes of establishing a 
company's separate rate.
    \2\ See De Facto Criteria for Establishing a Separate Rate in 
Antidumping Proceedings Involving Non-Market Economy Countries, 75 
FR 78676 (December 16, 2010).
    \3\ The Department currently considers the following countries 
to be NME countries--Armenia, Belarus, Georgia, the Kyrgyz Republic, 
Moldova, the People's Republic of China, the Republic of Azerbaijan, 
the Socialist Republic of Vietnam, Tajikistan, Turkmenistan and 
Uzbekistan.

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DATES: Effective Date: Date of publication in the Federal Register.

FOR FURTHER INFORMATION CONTACT: Eugene Degnan, Program Manager, Office 
8, Import Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue NW., Washington, DC 20230; telephone: (202) 482-
0414.

SUPPLEMENTARY INFORMATION:

Background

    In proceedings involving NME countries, the Department has had a 
rebuttable presumption that the export activities of all companies 
within the country are subject to government control and, thus, should 
be assessed a single antidumping duty rate, i.e., the NME-Entity 
rate.\4\ It has been the Department's practice to assign all exporters 
of merchandise subject to an antidumping investigation or review from 
an NME country this single rate unless an exporter can demonstrate that 
it is sufficiently independent of the government in its export 
activities, on both a de jure and de facto basis, so as to be entitled 
to a separate rate. The Department has analyzed each entity exporting 
the subject merchandise that applies for a separate rate under a test 
that was first articulated in Final Determination of Sales at Less Than 
Fair Value: Sparklers from the People's Republic of China, 56 FR 20588 
(May 6, 1991) (``Sparklers''), as further developed in Final 
Determination of Sales at Less Than Fair Value: Silicon

[[Page 40431]]

Carbide from the People's Republic of China, 59 FR 22585 (May 2, 1994) 
(``Silicon Carbide'').\5\ However, if the Department determined that an 
exporter of NME-produced merchandise is wholly foreign-owned or located 
in a market economy (``ME'') country, the exporter has not been subject 
to the separate rates test.
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    \4\ See 19 CFR 107(d) (providing that ``in an antidumping 
proceeding involving imports from a nonmarket economy country, 
`rates' may consist of a single dumping margin applicable to all 
exporters and producers'').
    \5\ See also Policy Bulletin 05.1, which states: ``[w]hile 
continuing the practice of assigning separate rates only to 
exporters, all separate rates that the Department will now assign in 
its NME investigations will be specific to those producers that 
supplied the exporter during the period of investigation. Note, 
however, that one rate is calculated for the exporter and all of the 
producers which supplied subject merchandise to it during the period 
of investigation. This practice applies both to mandatory 
respondents receiving an individually calculated separate rate as 
well as the pool of non-investigated firms receiving the weighted-
average of the individually calculated rates. This practice is 
referred to as the application of ``combination rates'' because such 
rates apply to specific combinations of exporters and one or more 
producers. The cash-deposit rate assigned to an exporter will apply 
only to merchandise both exported by the firm in question and 
produced by a firm that supplied the exporter during the period of 
investigation.''
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    On December 16, 2010, the Department published a Federal Register 
notice announcing that it was considering revising its approach with 
respect to the de facto criteria examined for purposes of determining 
whether to grant separate rate status to individual exporters in 
antidumping proceedings involving NME countries.\6\ Through that 
notice, the Department invited the public to comment on modifying the 
test. Between January 18 and 31, 2011, the Department received comments 
from numerous parties.\7\ These comments and this Determination to 
Address Certain Criteria on a Case-by-Case Basis can be accessed using 
the Federal eRulemaking Portal at http://www.Regulations.gov under 
Docket Number ITA-2011-0010.
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    \6\ See De Facto Criteria for Establishing a Separate Rate in 
Antidumping Proceedings Involving Non-Market Economy Countries, 75 
FR 78676 (December 16, 2010).
    \7\ Commenters included: (1) the Ministry of Commerce of the 
People's Republic of China (``GOC''); (2) the Ministry of Industry 
and Trade of the Socialist Republic of Vietnam (``GOV''); (3) the 
Committee to Support U.S. Trade Laws (``CSUSTL''); (4) King and 
Spalding on behalf of: (A) American Furniture Manufacturers 
Committee for Legal Trade and its individual Members (AFMC); (B) 
Polyethylene Retail Carrier Bag Committee and its individual members 
(PRCB Committee); (C) Laminated Woven Sacks Committee and its 
individual members (LWS Committee); (D) US Magnesium LLC; (E) 
Bridgestone Americas, Inc. & Bridgestone Americas Tire Operations 
LLC (collectively Bridgestone); and (F) AK Steel Corporation; (5) 
Kelley Drye & Warren LLP on behalf of: (A) American Honey Producers 
Association; (B) American Spring Wire Corp., (C) Christopher Ranch, 
LLC; (D) Council Tool Company Inc.; (E) DAK Americas, LLC; (F) East 
Jordan Iron Works Inc.; (G) The Garlic Company; (H) Insteel Wire 
Products Company; (I) Neenah Foundry Company; (J) Nashville Wire 
Products, Inc.; (K) Norit Americas, Inc.; (L) SGL Carbon LLC; (M) 
Sioux Honey Association; (N) Superior SSW Holding Co., Inc.; (O) 
Sumiden Wire Products Corp.; (P) U.S. Foundry & Manufacturing Co.; 
(Q) Valley Garlic; (R) Vessey and Company; (6) Nucor; (7) Retail 
Industry Leaders Association (``RILA''); (8) Stewart & Stewart; (9) 
the Southern Shrimp Alliance (``SSA); (10) US Steel; (11) Vietnam 
Chamber of Commerce and Industry; and (12) Zhao-King, LLC (``ZK'').
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The Separate Rate Test

    Typically, the Department has considered four criteria in 
evaluating whether a respondent is subject to de facto governmental 
control over its export activities. They are: (1) Whether the 
respondent's export prices are set by or are subject to the approval of 
a governmental agency; (2) whether the respondent has authority to 
negotiate and sign contracts and other agreements; (3) whether the 
respondent has autonomy from the government in making decisions 
regarding the selection of management; and (4) whether the respondent 
retains the proceeds of its export sales and makes independent 
decisions regarding the disposition of profits or financing of 
losses.\8\ The Department has determined that an analysis of de facto 
control is critical in determining whether an exporter should receive a 
separate rate.
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    \8\ See Silicon Carbide; see also Notice of Final Determination 
of Sales at Less Than Fair Value: Furfuryl Alcohol From the People's 
Republic of China, 60 FR 22544, 22545 (May 8, 1995).
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    When conducting its de facto separate rate analysis, the Department 
has asked an exporter requesting a separate rate questions regarding: 
(1) Ownership of the exporter and whether any individual owners hold 
office at any level of the NME government; (2) export sales 
negotiations and prices; (3) composition of company management, the 
process through which they were selected, and whether any managers held 
government positions; (4) the disposition of profits; and (5) 
affiliations with any companies involved in the production or sale in 
the home market, third-country markets, or the United States of 
merchandise which would fall under the description of merchandise 
covered by the scope of the proceeding. The Department's full Separate 
Rate Status Application, Separate Rate Certification, and NME 
Antidumping Questionnaire are available on the Department's Web site at 
http://www.trade.gov/ia.

Response to Comments

Case-by-case Consideration of Changes

    The Department agrees that certain suggestions by parties should be 
considered on a case-by-case basis in administrative proceedings where 
record information indicates that such consideration is warranted.
A. Refine the de facto Test With Requests for Additional Documentary 
Support and Additional Questions Regarding the Relevant Criteria
    Several commenters suggested that the Department more closely 
examine whether the government has direct or indirect power to appoint, 
remove, or control the selection of an entity's directors, senior 
officials, or other members of senior management, and whether it is 
able to direct the financial affairs of the company by, e.g., making 
selling or purchasing decisions. Several commenters argue that the 
Department currently conducts only a cursory review of the separate 
rate criteria, essentially shifting the burden to petitioners to show 
government control. They argue the burden should be shifted back to 
respondents and the Department should apply enhanced scrutiny to 
determine if there are additional types of documentation that would 
serve to support, or undermine, a respondent's claim that it is 
entitled to a rate separate from that of the NME-wide entity. Several 
commenters also suggested that the Department examine whether members 
of the government or its ruling party hold senior management positions 
in the enterprise because the government may maintain control over 
certain industries or enterprises by installing party members or 
government officials in positions where they directly participate in 
decision-making and management. One commenter asserted that the 
Department should find that a respondent is materially dependent on the 
government and deny the respondent a separate rate where two or more 
company managers or members of the board of directors are members of 
the local, provincial, or national government. Another commenter argued 
that the Department should consider whether any of the directors or 
managers of the respondent serve as directors or managers for any 
state-owned entities.
    As an initial matter, the Department does not agree that it has 
shifted the burden of proof onto petitioners or that the de facto 
criteria are designed to place an evidentiary burden on one party 
versus another. Instead, the criteria have been established because 
they are necessary to determine whether an exporter is sufficiently 
independent in its export activities to be entitled to a ``separate 
rate.'' The Department agrees, however, that identifying and reviewing 
additional information regarding certain of the topics raised by the 
commenters could be useful in

[[Page 40432]]

evaluating the extent to which a government controls an entity's 
pricing, selling and purchasing decisions as they relate to the 
company's export activities, when the record does not already clearly 
demonstrate the respondent's claimed independence. In general, the 
respondent companies are the parties in possession of the information 
regarding their day-to-day operations. The Department will therefore 
consider, on a case-by-case basis, issuing supplemental questionnaires 
to identify and review additional documentation and information that 
would directly or indirectly relate to the issue of de facto government 
control by any level of government in cases where the respondent's 
initial questionnaire responses do not provide sufficient information 
to support its claim. Depending on the record evidence, the 
supplemental questions might address: (1) Selection and removal of 
directors and managers at the producing/exporting company; (2) 
identification of parties that have the authority to approve contracts 
and bank transactions, etc., on behalf of the company; (3) ownership, 
including individual and corporate (direct and indirect shareholdings 
or equity holdings); (4) whether any corporate owners are state-owned, 
state-controlled, or otherwise affiliated with the State, at the 
national or sub-national government levels; and (5) whether any 
managers hold government positions at the national or sub-national 
government levels, among possible considerations. The specific facts of 
each case would be instructive to the Department in deciding to issue 
such questionnaires and what information such questionnaires would 
address.
B. Conduct More Separate Rate Verifications Where Budget and Resources 
Allow
    Several commenters suggested that the Department should conduct 
more verifications of entities claiming eligibility for a separate 
rate, particularly those entities for which record evidence indicates 
their claim of freedom from government control over export activities 
is questionable. The commenters suggest that such verifications could 
include, for example, the following: (1) Increased issue-focused 
verifications of exporters and their producing suppliers; (2) more 
focus on companies that have previously failed verification; or (3) 
enhanced verification of companies that previously received partial or 
total adverse facts available determinations based on their failure to 
cooperate to the best of their ability.
    The Department agrees that conducting verification may be helpful 
in enhancing the Department's ability to enforce the AD law, 
particularly when the issue of freedom from government control over a 
firm's export activities is brought into question by record evidence 
and past practice. The Department has conducted verification in such 
cases in the past, where budget and resources allow, and consistent 
with this practice and these comments, the Department will continue to 
consider verification of separate rate information where warranted, on 
a case-by-case basis.
C. Do Not Automatically Grant Separate Rates to Firms With Trading Arms 
and/or Producers Located in Market Economies
    One commenter suggested that the Department should end its practice 
of automatically granting separate rates to companies with export 
offices in ME countries because the respondent can simply set up a 
shell company in an ME to avoid a separate rate analysis.
    We agree that there is a legitimate concern that NME producers 
under government control selling through affiliated third-country 
resellers may, in fact, control that reseller and, in such cases, the 
reseller's exporting activities would also be under government control. 
However, we do not consider that the potential for this scenario 
warrants a wholesale change in practice. Rather, in cases where a 
respondent has a producing entity in the PRC and an affiliated reseller 
in an ME country, we will endeavor to examine, on a case-by-case basis, 
whether any supplemental information is required to determine if the 
affiliated reseller is under government control through the producer 
located in the NME country. In circumstances when the record indicates 
there may be government control through the NME producer, we may 
require both the NME producer and the ME exporter to provide 
information similar to that requested in the NME Separate Rate 
Application.
D. Deny the Respondent a Separate Rate Where the Integrity of Its Data 
and Recordkeeping Systems Does Not Allow it To Provide Complete 
Ownership Information, Because Such a Lack of Information Precludes the 
Department From Effectively Undertaking an Adequate Separate Rate 
Analysis
    The Department has discovered, through its administration of the 
antidumping duty law, that certain respondents fail to disclose their 
complete ownership, or substantiate their claimed ownership, on the 
administrative record, despite the Department's request for those data. 
This creates a substantial problem for the Department. When the company 
cannot demonstrate complete ownership, the Department is effectively 
precluded from conducting a full separate rate analysis. For example, 
absent such data, we are not able to make meaningful determinations 
about the: (1) Appointment of the Board of Directors, (2) selection of 
management, (3) day-to-day operational control of the company, and (4) 
affiliation with other parties, including those that might be managed/
operated by the government. Thus, without complete and verifiable 
ownership information on the administrative record, the Department 
generally is left with no evidentiary basis to find that the company is 
independent from de facto government control of its export activities. 
Accordingly, in these cases, the Department has treated the respondent 
as part of the NME-wide entity and denies the respondent a separate 
rate.\9\
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    \9\ See, e.g., Porcelain-on-Steel Cooking Ware from the People's 
Republic of China: Notice of Final Results of Antidumping Duty 
Administrative Review, 71 FR 24641 (April 26, 2006), and 
accompanying Issues and Decision Memorandum at Comment 1 (applying 
facts available because Commerce could not verify the respondent's 
ownership information).
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    If a respondent withholds or otherwise does not provide complete 
ownership information, the Department has normally concluded that the 
respondent has failed to act to the best of its ability in not 
providing such necessary information, pursuant to section 776(b) of the 
Act. That conclusion was warranted because, in the ordinary course of 
business, a company is expected to maintain complete ownership 
information. Additionally, in such cases, as a result of the failure to 
provide complete ownership information, the Department has applied an 
adverse inference in assigning a facts available rate to the NME-wide 
entity of which that respondent is a part.\10\ Under this analysis, the 
Department has not determined that ownership by an NME government 
automatically equated with control by the government. Instead, the 
Department determined that, when a producer or exporter fails to supply 
complete ownership information, we lacked an adequate basis on which to 
determine whether the respondent is subject to government control of 
its export activities. On the basis of the

[[Page 40433]]

comments received, we see no reason to deviate from this analytical 
approach.
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    \10\ See id. at Comment 2. See also Certain Frozen Warmwater 
Shrimp from the People's Republic of China: Preliminary Notice of 
Intent to Rescind Antidumping Duty New Shipper Review, 72 FR 41058, 
41060 (July 26, 2007).
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Comments the Department Believes Do Not Warrant a Reconsideration of 
Department Practice at This Time

    Numerous commenters asserted that the de facto analysis should 
include a threshold determination of state ownership, which would be 
dispositive of whether the NME government is exercising control over an 
entity's export activities. Some commenters further suggested that 
government control should be found: (1) Where any level of the NME 
government ownership is five percent or more; (2) where the separate 
rate applicant, or its parent company or ultimate owner, is under the 
supervision of a central, provisional, or local State-owned Assets 
Supervision and Administration Commission (``SASAC'') in the PRC; or 
(3) where, in a countervailing duty investigation, the Department has 
previously found the applicant to be so closely related to the 
government to be an ``authority'' under Section 771(5)(B) of the Tariff 
Act of 1930. Several other commenters argued that the Department should 
examine whether any shareholder owning more than ten percent of company 
stock has a leadership role in the Communist Party. Other commenters 
asserted that the Department should find that a respondent is 
materially dependent on the government and deny the respondent a 
separate rate where two or more company managers or members of the 
board of directors are members of the Communist Party or the PRC's 
People's Liberation Army or where any company manager, board member, or 
shareholder owning more than ten percent of company stock has a 
leadership role in the Communist Party or the local, provincial, or 
national state offices of the Communist Party.
    As the Department has stated in the past, we do not believe that 
ownership by the government, on its own, is sufficient to warrant a 
determination that the government controls the export activities of a 
given exporter and/or producer. In Silicon Carbide, we determined that, 
while state-owned enterprises were previously subject to central 
government control, reform had brought significant changes and devolved 
control of government-owned enterprises such that the application of a 
single country-wide rate to all respondents in an NME country was not 
always warranted.\11\ As such, we determined that an NME respondent may 
receive a separate rate if it establishes both de jure and de facto 
absence of governmental control of its export activities.
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    \11\ See Silicon Carbide.
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    Further, a determination by the Department that a company is an 
``authority'' in a countervailing duty investigation is not the same as 
determining the degree of control the government has over a company's 
export activities for purposes of an antidumping proceeding. 
Specifically, an ``authority'' analysis, exclusive to the 
countervailing duty law, is ultimately concerned with whether the 
government has provided a subsidy. On the other hand, the focus of the 
antidumping law with respect to the separate rates analysis is to 
determine whether the export activities of the respondent are 
controlled by the government. The U.S. antidumping and countervailing 
duty laws are distinct and separate, operating on different principles, 
concepts and requirements and remedying distinct unfair trade 
practices. Accordingly, we have declined to incorporate these proposed 
refinements to our separate rate analysis.
    Certain commenters argued that the Department should require all 
respondents to disclose the extent to which they export subject 
merchandise manufactured or supplied by another party, in order to 
analyze the extent that the respondent's activities may be directed by 
that party. Finally, one commenter suggested that the Department should 
require separate rate applications from NME exporters and their NME 
suppliers in combination to address the possibilities of (a) state-
controlled producers using independent exporters as conduits for 
subject merchandise or (b) exporters benefiting indirectly from 
government control of a producer. The Department's separate rate test 
already requires that all NME exporters demonstrate that they operate 
free of government control of their export activities. Generally, we do 
not find it necessary to require the producer to provide the same 
information already provided by the exporter. However, where, for 
example, the record indicates that a government-controlled supplier may 
control the export activities of the respondent, we may deem it 
appropriate to investigate the issue further. Accordingly, we have 
declined to incorporate these proposed refinements to our separate rate 
analysis.
    A number of commenters did not address the de facto criteria of the 
Department's separate rate analysis as applied to individual exporters. 
For example, some commenters representing either foreign producers/
exporters or the Chinese or Vietnamese governments argued that the 
Department should eliminate the separate rate test entirely or reverse 
the presumption of government control. One commenter argued that 
government control should be found only if the Department's collapsing 
criteria are satisfied with regard to the respondent and the 
government. These comments essentially argue for elimination of the 
separate rate test and, thus, are not responsive to the Department's 
request regarding enhancement of the de facto criteria.
    Other commenters suggested the Department examine industry-wide or 
national initiatives that go far beyond government involvement in day-
to-day operational decisions. For example, commenters asked the 
Department to inquire into whether the industry was subject to: (1) A 
government industrial plan governing either imports, exports, 
production or asset transfer; (2) government rules or regulations 
governing items such as foreign investment, asset transfers, capacity 
utilization, quality improvements, technological innovation, and 
purchasing decisions; (3) a mandatory export price/quota scheme or 
import price/quota scheme, as determined by a government-entity or a 
trade association; or (4) an export licensing scheme.
    The Department already examines laws and regulations regarding 
export licenses, certificates and other restrictions to an entity's 
ability to export under our de jure analysis. See the Department's 
Separate Rate Application at Section III. Thus, because the 
Department's analysis treats these issues as relevant to the de jure 
analysis, we consider them beyond the scope of this request for 
comments on the de facto criteria. Further, the remainder of these 
comments refer to macro-level factors which are not a part of the 
separate rate analysis, but, instead, relate more directly to an 
analysis of a market-oriented industry (``MOI'') or a market-economy 
status (``MES'') claim, which do not involve a single entity, but 
rather an industry or the economy as a whole.
    As the Department explained in its December 16, 2010, Federal 
Register notice, the Department requested comments only on possible 
refinements to the de facto criteria of its separate rates test. We 
understand that certain commenters wish to address the separate rate 
analysis in its entirety, but this is beyond the scope of the request 
for comments and, accordingly, the Department has not considered them 
further.

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Conclusion

    In sum, after reviewing and considering interested party comments 
and concerns, the Department has determined, as discussed above, that 
to the extent that we agree with some of the comments received, the 
Department will consider addressing the issues raised in those comments 
in our future administrative proceedings on a case-by-case basis.

    Dated: June 28, 2013.
Paul Piquado
Assistant Secretary for Import Administration.
[FR Doc. 2013-16171 Filed 7-3-13; 8:45 am]
BILLING CODE 3510-DS-P