[Federal Register Volume 88, Number 89 (Tuesday, May 9, 2023)]
[Proposed Rules]
[Pages 29850-29878]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-09052]


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DEPARTMENT OF COMMERCE

International Trade Administration

19 CFR Part 351

[Docket No. 230424-0112]
RIN 0625-AB23


Regulations Improving and Strengthening the Enforcement of Trade 
Remedies Through the Administration of the Antidumping and 
Countervailing Duty Laws

AGENCY: Enforcement and Compliance, International Trade Administration, 
Department of Commerce.

ACTION: Proposed rule; request for comments.

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SUMMARY: Pursuant to its authority under Title VII of the Tariff Act of 
1930, as amended (the Act), the U.S. Department of Commerce (Commerce) 
proposes to amend its regulations to enhance, improve and strengthen 
its enforcement of trade remedies through the administration of 
antidumping duty (AD) and countervailing duty (CVD) laws. In this 
proposed rule, Commerce would revise many of its procedures, codify 
many areas of its practice, and enhance certain areas of its 
methodologies and analyses to address price and cost distortions in 
different capacities. Commerce is seeking public comment on these 
proposed revisions to the AD and CVD regulations.

DATES: To be assured of consideration, written comments must be 
received no later than July 10, 2023.

ADDRESSES:  Submit electronic comments only through the Federal 
eRulemaking Portal at https://www.Regulations.gov, Docket No. ITA-2023-
0003. Comments may also be submitted by mail or hand delivery/courier, 
addressed to Lisa W. Wang, Assistant Secretary for Enforcement and 
Compliance, Room 18022, U.S. Department of Commerce, 1401 Constitution 
Avenue NW, Washington, DC 20230. An appointment must be made in advance 
with the Administrative Protective Order (APO)/Dockets Unit at (202) 
482-4920 to submit comments in person by hand delivery or courier. All 
comments submitted during the comment period permitted by this document 
will be a matter of public record and will be available on the Federal 
eRulemaking Portal at https://www.Regulations.gov. Commerce will not 
accept comments accompanied by a request that part or all the material 
be treated as confidential because of its business proprietary nature 
or for any other

[[Page 29851]]

reason. Therefore, do not submit confidential business information or 
otherwise sensitive or protected information.
    Any questions concerning the process for submitting comments should 
be submitted to Enforcement & Compliance (E&C) Communications office at 
[email protected] or to Ariela Garvett, Senior Advisor, at 
[email protected]. Inquiries may also be made of the E&C 
Communications office during normal business hours at (202) 482-0063.

FOR FURTHER INFORMATION CONTACT:  Scott McBride, Associate Deputy Chief 
Counsel, at (202) 482-6292, Ian McInerney, Attorney, at (202) 482-2327, 
Hendricks Valenzuela, Attorney, at (202) 482-3558, or Brishailah Brown, 
Attorney, at (202) 482-5051.

SUPPLEMENTARY INFORMATION: 

General Background

    Title VII of the Act vests Commerce with authority to administer 
the AD/CVD trade remedy laws. In particular, section 731 of the Act 
directs Commerce to impose an AD order on merchandise entering the 
United States when it determines that a producer or exporter is selling 
a class or kind of foreign merchandise into the United States at less 
than fair value (i.e., dumping), and material injury or threat of 
material injury to that industry in the United States is found by the 
U.S. International Trade Commission (ITC). Section 701 of the Act 
directs Commerce to impose a CVD order when it determines that a 
government of a country or any public entity within the territory of a 
country is providing, directly or indirectly, a countervailable subsidy 
with respect to the manufacture, production, or export of a class or 
kind of merchandise that is imported into the United States, and 
material injury or threat of material injury to that industry in the 
United States is found by the ITC.\1\
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    \1\ A countervailable subsidy is further defined under section 
771(5)(B) of the Act as existing when: a government or any public 
entity within the territory of a country provides a financial 
contribution; provides any form of income or price support; or makes 
a payment to a funding mechanism to provide a financial 
contribution, or entrusts or directs a private entity to make a 
financial contribution, if providing the contribution would normally 
be vested in the government and the practice does not differ in 
substance from practices normally followed by governments; and a 
benefit is thereby conferred. To be countervailable, a subsidy must 
be specific within the meaning of section 771(5A) of the Act.
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    On September 20, 2021, Commerce revised its scope regulations (19 
CFR 351.225) and issued new circumvention (19 CFR 351.226) and covered 
merchandise (19 CFR 351.227) regulations. See Scope and Circumvention 
Final Rule, 86 FR 52300 (September 20, 2021). See also Scope and 
Circumvention Proposed Rule, 85 FR 49472 (August 13, 2020) (hereinafter 
``Scope and Circumvention Final Rule'' and ``Scope and Circumvention 
Proposed Rule'').
    The revised and new regulations became effective November 4, 
2021.\2\ We have subsequently identified some corrections and 
improvements to the scope, circumvention, and covered merchandise 
referral regulations. On November 28, 2022, Commerce issued a proposed 
regulation which provided some technical amendments to those regulatory 
provisions.\3\ This proposed rule provides additional substantive 
amendments to those provisions.
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    \2\ Id.
    \3\ See Administrative Protective Order, Service, and Other 
Procedures in Antidumping and Countervailing Duty Proceedings: 
Proposed Rule, 87 FR 72916, 72921-27 (November 28, 2022). A final 
rule to those regulatory proposals is forthcoming.
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    On November 18, 2022, Commerce issued an advanced notice of 
proposed rulemaking, indicating that it was considering issuing a 
regulation that would address the steps taken by Commerce to determine 
the existence of a particular market situation (PMS) that distorts the 
costs of production. Determining the Existence of a Particular Market 
Situation That Distorts Costs of Production; Advanced Notice of 
Proposed Rulemaking, 87 FR 69234 (November 18, 2022) (hereinafter ``PMS 
ANPR''). Commerce requested public comment for 30 days in response to 
three questions which it posed in that notice, and received 19 
comments.

Explanation of the Proposed Rule

    We are proposing several modifications to the AD and CVD 
regulations to clarify and bring them into conformity with our practice 
and procedures, as well as to enhance and strengthen other regulatory 
provisions to enforce the trade remedy laws more effectively. The 
proposed changes are summarized here and discussed in greater detail 
below. We invite comments on these proposed regulatory changes and 
clarifications, including suggestions to improve these proposed 
regulations.
     Modify section 104 to clarify that references, citations, 
and hyperlinks to most documents provided in a submission do not 
incorporate the underlying referenced information on to the official 
record. The modification also explains the exception and the documents 
that meet the exception to this rule. This clarification is necessary 
because some interested parties over time have failed to put 
information on the official record such as website printouts and 
academic literature, creating confusion and inefficiencies.
     Modify sections 225, 226, 227, 301 and 306 to update and 
address scope, circumvention and covered merchandise issues that have 
arisen since Commerce amended and created those regulations in 2021. 
This includes addressing merchandise commercially produced, but not yet 
imported; the acceptance of pre-initiation submissions in response to 
scope applications and circumvention inquiry requests; the revision of 
time limits if Commerce seeks clarification on a scope application or 
circumvention inquiry request; clarification of when section 301 does 
and does not apply to such proceedings; a clarification of when 
``continue to suspend'' language applies to entries pre-initiation in 
scope and covered merchandise proceedings; revisions to allow the 
sharing of information between AD and CVD segments when scope, 
circumvention, or covered merchandise inquiries for companion orders 
are conducted on the AD segment; providing greater detail on the 
application of scope clarifications; and allowing for extensions for 
initiation and preliminary circumvention determinations.
     Modify section 301 to allow Commerce to place previous 
analysis and calculation memoranda from other segments or proceedings 
on the record after written arguments have been submitted without being 
required to allow other parties to submit new factual information in 
response. Interested parties may still submit arguments as to the 
relevance of the agency analysis and calculation memoranda, but the 
submission of new factual information so late in the segment created 
unreasonable administrative burdens on the agency.
     Modify section 301 to address notices of subsequent 
authority submitted on the record and allow for the filing of 
responsive arguments and factual information.
     Modify section 308 to include the CVD adverse facts 
available hierarchy.
     Modify sections 408 and 511, and create new section 529, 
to address foreign government inactions that benefit foreign producers. 
This includes codifying Commerce's practice of determining that 
countervailable subsidies are conferred by certain unpaid or deferred 
fees, fines, and penalties. It also addresses the consideration of 
evidence on the record of weak, ineffective, or nonexistent property, 
intellectual property, human rights, labor, and environmental

[[Page 29852]]

protections and the impact that the lack of such protections has on the 
prices and costs of products in selecting surrogate values and 
benchmarks.
     Create a new section 416 to address a determination of the 
existence of a PMS, including a PMS such that the cost of materials and 
fabrication or other processing of any kind does not accurately reflect 
the cost of production in the ordinary course of trade. This regulation 
takes into consideration the comments received from the public in 
response to the PMS ANPR and addresses the elements that Commerce may 
consider in determining if a market situation exists that likely 
distorts the cost of production and if the market situation is 
particular. It also provides 12 examples of scenarios in which Commerce 
might determine the existence of a PMS which distorts the cost of 
production and indicates that allegations of a PMS must be accompanied 
on the record by relevant information reasonably available to the 
interested party making the allegation.
     Modify sections 503, 505, 507, 508, 509, 520, and 525 to 
provide guidance to the public by incorporating our long-standing 
practices into the regulations. This includes addressing subsidies 
provided to support compliance with government-imposed mandates; 
treatment of outstanding loans as grants after three years of no 
payments of interest and principal; the use of an outside investor 
standard in determining the benefit of an equity infusion; the 
allocation period in measuring the benefit of an equity infusion; the 
allocation period in measuring the benefit of debt forgiveness; the 
treatment of certain income tax subsidy benefits as not tied with 
respect to particular markets or products; the use of a five-year 
period to determine if the premium rates charged on export insurance 
are inadequate to cover long-term operating costs and losses; and the 
use of alternative methodologies in attributing export subsidies and 
domestic subsidies to certain products exported and/or sold by a firm.

1. References, Citations, and Hyperlinks Made in a Submission Do Not 
Place the Referenced Underlying Information on the Official Record--
Sec.  351.104(a)(1)

    Section 516A(b)(2) of the Act provides a definition of Commerce's 
administrative record in AD/CVD proceedings and Sec.  351.104(a)(1) 
describes in greater detail the information contained on the official 
record. Nonetheless, interested parties sometimes make the mistake of 
merely citing sources, or placing Uniform Resource Locator (URL) 
website information, or hyperlinks, in their submissions to Commerce, 
and then later presuming the information contained at the source 
documents is considered part of the record. This becomes a problem, for 
example, when parties submit their case briefs and rebuttal briefs on 
the record, pursuant to Sec.  351.309, and quote from, or otherwise 
rely on, information or data derived from the cited sources that were 
never submitted on the official record. Commerce at that point has one 
of two choices--either reject the submissions as containing untimely 
filed new factual information or inquire further with the parties to 
put additional information on the record. In light of the statutory and 
regulatory time limits by which Commerce must abide, gathering further 
information is often not a reasonable or viable option, particularly at 
such a late stage in the segment of the proceeding.
    Therefore, Commerce is proposing that additional language be added 
to Sec.  351.104(a)(1) to reflect its long-standing interpretation of 
the official record; expressly articulating that for the vast majority 
of source materials, mere citations and references, including 
hyperlinks and website URLs, do not incorporate the information located 
at the cited sources onto the official record. This is true whether the 
citation is to sources such as textbooks, academic or economic studies, 
foreign laws, newspaper articles, or websites of foreign governments, 
businesses, or organizations.\4\ If an interested party wishes to 
submit information on the record, it must submit the actual source 
material in a timely manner, and not merely share internet links or 
citations to those sources in its questionnaire responses, submissions, 
briefs, or rebuttal briefs. Placement of such information on the record 
is the responsibility of the interested party and it is not Commerce's 
obligation to search for the information referenced by the links and 
citations. Commerce does not have the resources or time to 
independently gather such external data or information.
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    \4\ Information on websites can, and frequently does, change. At 
the time a weblink is placed on the record, the website might 
contain certain information, but later in the segment of the 
proceeding, that website and the information contained on it might 
change. We therefore emphasize that if interested parties wish to 
submit on the official record information derived from a website, 
they must make copies of each page and submit those copies on the 
record in a timely fashion.
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    Notably, there are a few limited exceptions to this understanding 
of the official record which Commerce adopted through its practice over 
the years. Commerce therefore also proposes identifying in the 
regulation those exceptions, all of which relate to certain publicly 
available sources. Commerce expects that, by including such information 
in the regulation, interested parties will better understand those 
limited exceptions, and may rely on those specified references and 
citations in making their arguments in those specific circumstances.
    Specifically, parties may cite U.S. statutory and regulatory 
language, as well as publicly available U.S. court decisions and 
orders, without submitting copies of those legal sources on the record. 
Likewise, copies of certain U.S. legislative history sources, such as 
the Statement of Administrative Action,\5\ and specific World Trade 
Organization international trade agreements identified in the 
regulation need not be submitted on the official record for Commerce to 
consider arguments pertaining to those sources. Finally, Commerce and 
the ITC publish determinations in the Federal Register, as well as 
public decision memoranda/reports which are adopted by those Federal 
Register notices, and copies of those determinations, memoranda, and 
reports need not be submitted on the record.\6\
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    \5\ See Statement of Administrative Action Accompanying the 
Uruguay Round Agreements Act, H.R. Doc. 103-316, Vol. 1 (1994) 
(SAA).
    \6\ Commerce's preliminary and final issues and decision 
memoranda and ITC preliminary and final injury reports are unique 
among documents that are unpublished in the Federal Register but can 
be incorporated on the record by citation. For example, ``Final 
Results of Remand Redetermination,'' issued pursuant to court orders 
or under direction by a United States Mexico Canada Agreement 
dispute panel, preliminary and final section 129 determinations, 
issued pursuant to 19 U.S.C. 3538 (section 129 of the Uruguay Round 
Agreements Act) and the direction of the United States Trade 
Representative, and scope rulings, issued pursuant to Sec.  351.225, 
are not published in the Federal Register. Accordingly, each of 
those Commerce determinations cannot be incorporated onto the record 
of another segment merely by citation under the Sec.  351.104(a)(1) 
exception. Thus, remand redeterminations, section 129 
determinations, and scope rulings must each be submitted on the 
official record of another segment or proceeding for Commerce to 
consider the contents and analysis of those determinations in that 
segment or proceeding. On the other hand, for example, if only the 
outcome of a section 129 determination is being referenced, (and not 
the parties' arguments, the facts, or Commerce's analysis), then the 
notice which Commerce publishes in the Federal Register at the very 
end of the section 129 segment that summarizes the ultimate results 
of the section 129 process can be cited for that limited purpose, 
because that conclusion has been published in the Federal Register. 
See, e.g., Implementation of Determinations Pursuant to Section 129 
of the Uruguay Round Agreements Act, 81 FR 37180 (June 9, 2018).
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    To be clear, the Commerce-authored ``Issues and Decision 
Memoranda''

[[Page 29853]]

adopted by Federal Register notices are not the separate calculation 
and analysis memoranda that Commerce frequently uses in its 
proceedings. Calculation and analysis memoranda, which include, for 
example, initiation checklists, respondent selection memoranda, new 
subsidy allegation memoranda, and affiliation/collapsing memoranda from 
other proceedings or other segments of the same proceeding, are not on 
the record before Commerce unless they have been placed on the record 
by Commerce or one of the interested parties to the proceeding.
    In sum, the language being proposed to include in Sec.  
351.104(a)(1) explains that if parties cite sources without submitting 
the source data or information on the record, unless Commerce or 
another interested party placed the information on the record or the 
information meets one of the articulated exceptions, Commerce will not 
consider the underlying information to be part of the official record 
and will not consider that underlying information in its analysis.

2. Conducting Scope Inquiries of Merchandise Not Yet Imported, But 
Commercially Produced and Sold--Sec.  351.225(c)(1)

    It is Commerce's practice to allow parties, including importers of 
non-subject merchandise, to request a scope ruling, even if the product 
at issue is not yet imported, provided the product is in actual 
production. This language was codified in Sec.  351.225(c)(1) (``An 
interested party may submit a scope ruling application requesting that 
the Secretary conduct a scope inquiry to determine whether a product, 
which is or has been in actual production by the time of the filing of 
the application, is covered by the scope of an order.'') (emphasis 
added). The benefit of allowing a scope ruling in that situation are 
twofold. First, it does not require an exporter and importer to expend 
the time and resources to ship and import its commercially traded 
merchandise to the United States for the sole purpose of getting a 
scope ruling. Second, it does not require Commerce to expend the time 
and resources to make a scope determination on a product that the 
company may decide to never export to the United States again, 
depending on the outcome of the agency's scope ruling.
    The phrase ``actual production'' is not defined in the regulation. 
However, under Commerce's practice, for a product to be ``actually'' 
produced, it must be commercially manufactured and sold, i.e., produced 
for sale in a market and then subsequently purchased.\7\ That market 
could be the home market or a third country market, but in either case, 
it must be produced for sale and then sold in that market. In other 
words, the agency will not consider samples, prototypes, or mere models 
of merchandise to be ``actually in production.'' The policy reasons for 
that interpretation are clear: Commerce is under no obligation to issue 
a scope ruling for a product that may never be commercially produced, 
sold, or exported, and it would be unreasonable for the agency to 
devote time and resources to reviewing a product that is neither traded 
domestically nor internationally. As Commerce acknowledged in the 
Preamble to the Scope and Circumvention Final Rule, ``Commerce 
sometimes conducts scope inquiries on merchandise that is already in 
commercial production but has not yet been exported to the United 
States. . . .'' \8\
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    \7\ See, e.g., Commerce's Letters, Second Unacuna Scope Inquiry 
Rejection Letter, dated December 23, 2014 (ACCESS barcode: 3249258-
01) (``{Commerce{time}  does not consider prototypes or models of 
merchandise to be `actually in production.' For merchandise to be 
`actually in production,' it has to be commercially produced--in 
other words, produced for sale in a market. That market could be the 
home market or a third country market, but in either case, it has to 
be produced for sale''); and ``RNG International, Inc.'s Scope 
Inquiry: Crystalline Silicon Photovoltaic Cells, Whether or Not 
Assembled into Modules from the People's Republic of China,'' dated 
March 15, 2022 (ACCESS barcode: 4221972-01) (``Commerce does not 
consider prototypes or models of merchandise to be `in actual 
production.' For merchandise to be `in actual production,' it must 
be commercially produced--in other words, produced for sale in a 
market. That market could be the home market or a third country 
market, but in either case, it must be produced for sale'').
    \8\ See Scope and Circumvention Final Rule, 86 FR 52314.
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    For consistency with Commerce's practice and because it would not 
be sensible to expend agency resources on a product which may never 
realistically enter the commerce of United States and become 
``subject'' to an AD or CVD order, Commerce proposes certain revisions 
to Sec.  351.225(c)(1). Commerce proposes adding language to Sec.  
351.225(c)(1) that indicates that if a product has not been imported 
into the United States, the scope applicant must provide additional 
evidence that the product was actually produced and sold. In addition, 
Commerce proposes adding a new provision, paragraph (c)(2)(x), to Sec.  
351.225, to direct an applicant to provide such evidence under this 
scenario.

3. Allowing Pre-Initiation Submissions in Response to Scope Ruling 
Applications and Circumvention Inquiry Requests--Sec. Sec.  
351.225(c)(3) and 351.226(c)(3)

    The regulations under Sec. Sec.  351.225, 351.226, and 351.227 
currently do not provide guidance or procedures for pre-initiation 
submissions from interested parties other than the applicant in a scope 
inquiry and the requester in a circumvention inquiry. We indicated in 
the Preamble to the Scope and Circumvention Final Rule that we 
anticipated that after a scope ruling application has been submitted to 
the record, parties will have the opportunity to challenge the adequacy 
of the application before a decision is made to initiate or not 
initiate.\9\ Subsequent to the revision of Sec.  351.225 and creation 
of Sec.  351.226, we discovered that the lack of guidance in the 
regulations with respect to such submissions has created some 
confusion. Accordingly, we have determined to revise the regulations in 
Sec. Sec.  351.225(c)(3) and 351.226(c)(3) to provide interested 
parties, other than the applicant or requestor, a clear opportunity to 
submit comments to Commerce on the adequacy of the application or 
request, within 10 days after the submission of the application or 
request.
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    \9\ Id., 86 FR 52316 (explaining that parties will ``have an 
opportunity to file arguments with Commerce before initiation'').
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    Notably, the factors we consider in initiating a scope inquiry 
differ from a circumvention inquiry, in that we normally do not look 
at, for example, patterns of trade in most scope cases in determining 
whether to initiate a scope ruling. Because a circumvention inquiry 
often requires Commerce to review such additional information, we 
further propose that for circumvention inquiries, specifically, 
interested parties also be permitted to submit new factual information 
regarding the adequacy of the circumvention inquiry request with their 
comments, and then allow the requestor five days after the submission 
of the new factual information, to have an opportunity to submit 
comments and factual information to rebut, clarify, or correct the 
interested parties' new factual information. It is our expectation 
that, by allowing for both comments and new factual information in this 
manner, the record will be even more detailed for Commerce in 
determining whether the criteria needed to initiate a circumvention 
inquiry are satisfied.

[[Page 29854]]

4. Time Limit Revisions If Commerce Seeks Clarification on the 
Application or Request--Sec. Sec.  351.225(d)(1) Introductory Text and 
(d)(1)(ii) and (iii), as Well as Sec. Sec.  351.226(d)(1) Introductory 
Text and (d)(1)(ii) and (iii)

    The regulations currently allow for Commerce only to reject or 
accept a scope application or circumvention inquiry request. However, 
there are instances in which the application or request may be 
generally acceptable, but Commerce still needs clarification on one or 
more aspects of the submission. We propose revising and adding 
provisions to both the scope and circumvention regulations to revise 
the time limitation for initiation if Commerce seeks clarification from 
the applicant or requestor and the applicant or requestor, in turn, 
provides responses to Commerce's requests for further information. 
Specifically, we would revise Sec. Sec.  351.225(d)(1) introductory 
text and 351.226(d)(1)(ii) to allow for Commerce's decision to initiate 
or not initiate an inquiry to be made within 30 days after the 
submission of the applicant's or requestor's timely response to 
Commerce's questions. Under the current regulations, if Commerce does 
not reject a scope ruling application or initiate a scope inquiry 
within 31 days after the filing of the application, the application 
will be deemed accepted and the scope inquiry will be deemed 
initiated.\10\ Likewise, a new Sec.  351.225(d)(1)(iii) would be added 
to the scope regulations to allow for deemed initiation of a scope 
inquiry 31 days after the applicant's timely response to Commerce's 
questions were submitted with the agency. Further, a new Sec.  
351.226(d)(1)(iii) would be added to the circumvention regulations to 
clarify that Commerce will make its decision to initiate or not 
initiate a circumvention inquiry after it receives the requestor's 
timely response to Commerce's questions.
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    \10\ See Sec.  351.225(d)(1)(ii).
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    It is Commerce's expectation that such a proposed change to the 
regulations, basing the initiation deadline on timely responses to the 
questions issued by Commerce seeking clarification of the application 
or circumvention inquiry request, instead of the date of submission of 
the application or request itself, will ensure a fair and more 
efficient process.

5. Clarifying What Provisions Under Sec. Sec.  351.225, 351.226, and 
351.227 Are the ``Otherwise Specified'' Procedures in Which Sec. Sec.  
351.301 Through 351.308 and 351.312 Through 351.313 Do Not Apply--
Sec. Sec.  351.225(f), 351.226(f), and 351.227(d)

    Current Sec. Sec.  351.301 through 351.308 and 351.312 and 351.313, 
generally, outline the procedures for the submission and use of factual 
information in Commerce proceedings. In particular, Sec.  351.301 
establishes the time limits for submissions of factual information. 
When Commerce issued its scope, circumvention, and covered merchandise 
regulations in the Scope and Circumvention Final Rule, Commerce 
included several new timing provisions that were intended to supplant 
certain provisions of Sec.  351.301. Commerce intended to specify 
separate and distinct time limits for scope inquiries, circumvention 
inquiries, and covered merchandise referrals. Specifically, Sec. Sec.  
351.225, 351.226, and 351.227 all contain the same clause, 
``{u{time} nless otherwise specified, the procedures as described in 
subpart C of this part (Sec. Sec.  351.301 through 351.308 and 351.312 
through 351.313) apply to this section.'' \11\ Within Sec. Sec.  
351.225, 351.226, and 351.227, other time limitations have been 
specified for the submission of questionnaire responses and other 
documents. However, Commerce did not, in those provisions, specifically 
indicate where Sec.  351.301 did not apply. Accordingly, we propose 
clarifying this matter in the regulations.
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    \11\ See Sec. Sec.  351.225(a), 351.226(a), and 351.227(a).
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    Specifically, Commerce proposes adding a new clause to Sec. Sec.  
351.225(f), 351.226(f), and 351.227(d) that expressly states that the 
time limits in these regulations are distinct and separate from the 
procedures outlined in Sec.  351.301. For example: ``{t{time} he 
procedures as described in subpart C of this part (Sec. Sec.  351.301 
through 351.308 and 351.312 through 351.313) do not apply to this 
paragraph, but are unique to scope ruling inquiries.'' These changes 
will clarify which time limitations apply across scope inquiries, 
circumvention inquiries, and scope clarifications, respectively.\12\
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    \12\ Section 351.302(b) allows Commerce to extend ``any time 
limit,'' ``unless expressly precluded by statute,'' for ``good 
cause,'' and Commerce is not intending to modify that authority 
through this revision to its regulations. ``Good cause,'' is not a 
defined set of circumstances, and is determined on a case-by-case 
basis. We note that in the Scope and Circumvention Proposed Rule, 85 
FR 49496, proposed Sec.  351.225(e)(1) stated that ``Situations in 
which good cause has been demonstrated may include, but are not 
limited to'' two examples, while in the final version of Sec.  
351.225(e)(2), it stated that ``Situations in which good cause has 
been demonstrated may include,'' followed by the same examples, with 
no explanation of why the ``but are not limited to'' distinguishing 
language was removed. See Scope and Circumvention Final Rule, 86 FR 
52375. To be clear, it was not Commerce's intention by adjusting the 
language between the Proposed and Final Scope and Circumvention 
Rules to suggest that the two examples of ``good cause'' found in 
Sec.  351.225(e)(2) are exhaustive, which is evidenced by the 
continued use of the permissive phrase ``may include.'' It continues 
to be Commerce's understanding that any time the ``good cause'' 
standard appears in the AD and CVD regulations, a determination of 
``good cause'' is left to the discretion of Commerce, based on the 
facts before it in a given case.
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6. Clarifying Continued Suspension of Liquidation With Respect to 
Certain Segments of Commerce's Proceedings--Sec. Sec.  351.225(l)(1) 
and 351.227(l)(1)

    In scope and covered merchandise inquiries, if Commerce has issued 
a final determination in an administrative review, pursuant to Sec.  
351.212(b), or a rescission notice, pursuant to Sec.  351.213(d), or 
automatic liquidation instructions are forthcoming, in accordance with 
Sec.  351.212(c), and around the same time period Commerce determines 
to initiate a scope inquiry or covered merchandise inquiry, the current 
regulations do not indicate whether, upon initiation of the scope or 
covered merchandise segment of the proceeding, the suspension of 
liquidation of entries covered by the final determination, automatic 
liquidation instructions, or rescissions should be ``continued'' as 
that term is used in Sec. Sec.  351.225(l)(1) and 351.227(l)(1). This 
issue arises if U.S. Customs and Border Protection (CBP) has not yet 
liquidated those entries, in accordance with 19 CFR part 159, when 
Commerce issues its suspension instructions under Sec. Sec.  
351.225(l)(1) and 351.227(l)(1).\13\ We, therefore, propose 
modifications to those two provisions to explain that suspension of 
such entries should continue, as well as suspension of any other 
entries suspended by CBP in administering the AD and CVD laws and not 
yet liquidated, pending the completion of the scope or covered 
merchandise inquiries.
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    \13\ At this time, Commerce does not believe a similar 
adjustment to Sec.  351.226(l)(1) is appropriate because the nature 
of a circumvention inquiry is such that merchandise which would have 
been covered by the aforementioned assessment instructions would not 
meet the description of non-subject merchandise that is allegedly 
circumventing an AD or CVD order.
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7. Record Issues in Scope, Circumvention, and Covered Merchandise 
Inquiries for Companion AD and CVD Orders--Sec.  351.104(a); Sec.  
351.306(b); Sec. Sec.  351.225(m)(2), 351.226(m)(2), and 351.227(m)(2)

    Current paragraphs (m)(2) of Sec. Sec.  351.225, 351.226, and 
351.227

[[Page 29855]]

generally provide that if there are companion AD and CVD orders 
covering the same merchandise from the same country of origin, the 
application/request/referral pertaining to both orders must be placed 
only on the record of the AD proceeding. Further, if Commerce initiates 
an inquiry, it will conduct a single inquiry with respect to the 
product at issue for both orders only on the record of the AD 
proceeding. Once Commerce issues a final scope ruling/circumvention 
determination/covered merchandise determination on the record of the AD 
proceeding, Commerce will include a copy of that final determination on 
the record of the CVD proceeding. The purpose of these regulations was 
to address the issue of differing administrative records related to the 
same scope/circumvention/covered merchandise determination.\14\ 
However, since the regulations were issued, Commerce identified an 
issue which must be addressed.
---------------------------------------------------------------------------

    \14\ See Scope and Circumvention Proposed Rule, 85 FR 49484 
(``By limiting the scope inquiry only to the record of one 
proceeding, the chances of incomplete records, or confusing records 
being filed with courts on appeal, should be lessened'').
---------------------------------------------------------------------------

    Under Commerce's current practice, APO authorized representatives 
may use business proprietary information (BPI) from a previous segment 
and submit that information in certain subsequent segments within the 
same proceeding.\15\ However, parties may not use BPI from a previous 
AD segment in a subsequent CVD proceeding, nor BPI from a previous CVD 
segment in a subsequent AD proceeding.\16\ Therefore, it would not be 
possible for a party to submit relevant BPI from a previous CVD segment 
on the AD record that serves as the official record for the single 
inquiry covering both AD and CVD companion orders. This may inhibit 
interested parties from providing (and relying on) another party's BPI 
in support of their positions in a scope, circumvention, or covered 
merchandise inquiry. Likewise, there might be information which is on 
the record of the AD segment during the scope, circumvention, or 
covered merchandise inquiry which might prove to be helpful in future 
segments under the CVD order, but the current prohibition against using 
BPI from other proceedings would prevent Commerce from using and 
relying on such data.
---------------------------------------------------------------------------

    \15\ See Antidumping and Countervailing Duty Proceedings: 
Administrative Protective Order Procedures; Procedures for Imposing 
Sanctions for Violation of a Protective Order, 63 FR 24391, 24398 
(May 4, 1998).
    \16\ Id., 63 FR 24399.
---------------------------------------------------------------------------

    To address these concerns, Commerce proposes amending Sec.  
351.306(b) to permit cross-order sharing of BPI between companion 
orders when paragraphs (m)(2) of Sec.  351.225, Sec.  351.226, or Sec.  
351.227 are invoked. Such language would allow for certain relevant BPI 
from a previous CVD scope, circumvention, or covered merchandise 
inquiry segment to be placed on the AD record of the scope, 
circumvention, or covered merchandise inquiry that is covering both 
companion orders under Sec.  351.225(m)(2), Sec.  351.226(m)(2), or 
Sec.  351.227(m)(2). Likewise, it would also allow BPI from the AD 
record during a scope, circumvention, or covered merchandise inquiry to 
be submitted in subsequent CVD segments.
    In addition, to help further clarify that the AD segment record is 
intended to be the official record of the scope, circumvention, or 
covered merchandise inquiry in the event of litigation, we propose 
adding new language to Sec.  351.104(a) which explains that the record 
of the AD segment will normally be the official record for scope, 
circumvention, and covered merchandise segments covering companion AD 
and CVD orders.
    For clarification of the information under Sec. Sec.  351.225(m) 
and 351.226(m) that should be specifically on the AD record and CVD 
records, when there are companion orders affected by a scope or 
circumvention determination, we are proposing a revision of the opening 
sentence in paragraph (m)(2) of both provisions that states that scope 
ruling applications and circumvention inquiry requests are to be 
submitted on the records of both proceedings, but once they are 
received, Commerce will notify interested parties that all subsequent 
submissions must be submitted only on the record of the AD proceeding. 
This allows for an opening of the CVD segment, but then makes it clear 
that interested parties must subsequently file all their submissions on 
the AD segment, and not on the record of the CVD segment, for the 
remainder of the segment of the proceeding.
    Commerce also proposes removing extraneous language about 
contacting CBP that was included in Sec.  351.227(m) that was not 
included in Sec. Sec.  351.225(m) and 351.226(m) and is unnecessary.
    Finally, Commerce proposes adding at the end of Sec. Sec.  
351.225(m)(2), 351.226(m)(2), and 351.227(m)(2) language that says that 
in addition to a final scope ruling, circumvention determination, or 
covered merchandise determination being placed on the CVD record, a 
copy of the preliminary scope ruling, circumvention determination, or 
covered merchandise determination, if applicable, as well as ``all 
relevant instructions to the Customs Service,'' will also be placed on 
the CVD record at that time.

8. Providing Greater Detail on Scope Clarifications, Including Its 
Ability To Address the Governmental Exception Provision of Section 
771(20)(B) of the Act--Sec.  351.225(q)

    Historically, Commerce has used scope clarifications in 
investigations and after an order is issued in different ways, as we 
explained in the Preambles to both the Scope and Circumvention Proposed 
Rule and Scope and Circumvention Final Rule.\17\ A scope clarification 
is not intended to be a scope ruling, by which Commerce applies an 
analysis under Sec.  351.225(k) to determine if something is covered by 
an AD or CVD order. Instead, scope clarifications are means by which 
Commerce otherwise addresses other scope-related items in any segment 
of the proceeding. For example, current Sec.  351.225(q) provides an 
example in which Commerce, based on its previous scope determinations 
and rulings, may provide an interpretation of specific language in the 
scope of an order and reflect that interpretation in the form of an 
interpretive footnote to the scope when the scope is published or set 
forth in instructions to CBP.
---------------------------------------------------------------------------

    \17\ See Scope and Circumvention Proposed Rule, 85 FR 49480-81, 
n. 51; and Scope and Circumvention Final Rule, 86 FR 52336-37.
---------------------------------------------------------------------------

    Although this is one means by which Commerce may use a scope 
clarification post-order, there are other instances in which Commerce 
has been faced with scope-related questions and Commerce has determined 
to address those questions in the form of a scope clarification. 
Accordingly, Commerce proposes modifying this provision to extend its 
description to be more comprehensive and illustrative.
    For example, section 771(20)(B) of the Act states that merchandise 
which is subject to the scope of an order (and therefore a scope 
inquiry and scope ruling would be unnecessary) may be treated as not 
subject to the imposition of ADs or CVDs. In sum, it creates an 
exception to the imposition of ADs or CVDs for merchandise that is 
imported by, or for the use of, the U.S. Department of Defense. To 
qualify for this exception the subject merchandise must: (1) be 
acquired in accordance with a memorandum of understanding between the 
U.S. Department of Defense and a country; and (2) have no substantial 
nonmilitary use.\18\ Commerce has addressed this provision 
infrequently, and only in the context of ongoing administrative 
reviews. Still, a scope clarification, by its nature, would be the 
appropriate means by which

[[Page 29856]]

Commerce could address the U.S. Department of Defense exception.
---------------------------------------------------------------------------

    \18\ See section 771(20)(B) of the Act.
---------------------------------------------------------------------------

    In another example, at times, Harmonized Tariff Schedule (HTS) 
classifications have been updated and those updates have removed or 
revised HTS classification subheadings that were set forth in an AD or 
CVD order.\19\ For a variety of reasons, Commerce might find it 
appropriate to clarify that an existing scope, which identified HTS 
classifications that no longer exist, applies to the updated and 
revised HTS classifications. One means to do this would be through a 
scope clarification.
---------------------------------------------------------------------------

    \19\ See, e.g., Polyethylene Retail Carrier Bags from Indonesia, 
Malaysia, the People's Republic of China, Taiwan, Thailand, and the 
Socialist Republic of Vietnam: Final Results of the Expedited Sunset 
Reviews of the Antidumping Duty Orders, 86 FR 35478 (July 6, 2021), 
and accompanying Issues and Decision Memorandum (IDM) at 3; see also 
53-Foot Domestic Dry Containers from the People's Republic of China: 
Final Determination of Sales at Less Than Fair Value; Final Negative 
Determination of Critical Circumstances, 80 FR 21203 (April 17, 
2015), and accompanying IDM at 23, n. 121.
---------------------------------------------------------------------------

    Likewise, the written description of the scope may include 
references to various industry standards which may be revised or 
updated at some point. Again, Commerce could issue a scope 
clarification under Sec.  351.225(q) to clarify which standards apply 
after such revisions or updates.
    A scope clarification can also assist in clarifying the country of 
origin of a product. For example, if Commerce previously issued a 
country of origin determination (in an investigation or review), in 
which it described, as part of its analysis, that that the ``essential 
characteristics were imparted'' in producing the subject merchandise at 
one stage of the production of the subject merchandise under Sec.  
351.225(j)(2), and that the country of origin was established at that 
stage, it is possible that in a subsequent segment of the proceeding 
the record might reflect that parties did some processing to the 
merchandise immediately before, in, or after that generally-described 
stage in a third country, but the exact line of where the identified 
production stage begins and ends is under debate. Under such a 
scenario, if there is a question from the parties or CBP as to whether 
that processing was understood to be included in, or separate from, the 
described ``essential characteristics'' stage, Commerce could clarify 
the issue in a scope clarification. In other words, rather than 
conducting a new country of origin analysis, under such a scenario 
Commerce would be interpreting and clarifying its previous country of 
origin determination. Commerce could then issue a memo addressing this 
issue and issue instructions to CBP reflecting the results of its scope 
clarification.
    Notably, scope clarifications can take different forms, such as the 
aforementioned footnote to the scope, a memorandum in the context of an 
ongoing segment of the proceeding, such as an administrative review, or 
even in a standalone ``Notice of Scope Clarification'' that would be 
published in the Federal Register. Moreover, these examples are not 
exhaustive, but we do expect that it would be helpful to identify them 
in our proposed regulations to provide greater clarity and certainty in 
this area of the AD and CVD laws.
    Accordingly, Commerce proposes changes to Sec.  351.225(q) that 
explain that scope clarifications can serve a broader purpose than the 
purpose narrowly articulated in the Scope and Circumvention Final Rule.

9. Extensions of Initiation and Preliminary Determination Time Limits--
Sec.  351.226(d)(1) and (e)(1)

    After issuing Sec.  351.226 in the Scope and Circumvention Final 
Rule, Commerce experienced certain timing difficulties with respect to 
the initiation of circumvention inquiries and issuing of preliminary 
circumvention determinations, under Sec.  351.226(d)(1) and (e)(1), in 
some of its proceedings.
    For initiations specifically, Sec.  351.226(d)(1) allows Commerce a 
maximum of only 45 days, fully extended, in which to determine to 
initiate or not initiate a circumvention inquiry. However, given the 
complexity of certain cases and certain circumvention requests and the 
need to consider certain factors, such as, for example, whether there 
are patterns of trade, increases in imports, and potential affiliations 
between producers and exporters with those assembling merchandise under 
sections 781(a)(3) and (b)(3) of the Act, 45 days has proven to be 
insufficient time for Commerce to consider all of the relevant 
information on the record in many cases. In particular, it has proven 
most difficult when parties submitted new factual information on the 
record to challenge the adequacy of a circumvention inquiry request.
    As we explain above, we have concluded that it would be beneficial 
to allow interested parties to submit both comments and new factual 
information in response to a circumvention inquiry request, and to 
allow the requestor to respond to such submissions with further 
responsive factual information. In accordance with that proposed 
modification to the regulations, Commerce proposes amending Sec.  
351.226(d)(1) to provide for three scenarios. First, Commerce will be 
required to make a determination to initiate or not initiate within 30 
days after the submission of the request if Commerce is able to make 
such a determination based on the record evidence. Second, if it is not 
practicable to make such a determination in 30 days, and no party has 
submitted new factual information on the record in response to the 
circumvention request, then Commerce may extend its determination by an 
additional 15 days--to the current maximum of 45 days after submission 
of the request. Third, if the 30-day deadline proves to be impractical 
and interested parties have submitted new factual information on the 
record in response to the circumvention request, then Commerce will be 
permitted to extend the 30-day deadline by another 30 days--to a 
maximum of 60 days after the submission of the request in which to make 
a determination to initiate or not initiate a circumvention inquiry. We 
expect this timeline will provide Commerce with a better opportunity to 
make an informed decision as to whether the standards to initiate a 
circumvention inquiry have been met.\20\
---------------------------------------------------------------------------

    \20\ We note that we also propose amending the regulation at 
Sec.  351.226(d)(1)(ii) so that if Commerce issues questionnaires to 
the requestor seeking clarification on certain issues, the deadlines 
described herein will be triggered off of the submission of the 
timely submitted responses to Commerce's questions, and not the 
submission of the circumvention inquiry request.
---------------------------------------------------------------------------

    In addition to proposing an extension to the time limits for 
initiation, we also propose that the regulation be amended to allow for 
the extension of preliminary circumvention determinations. Section 
351.226(e)(1) provides a deadline of no later than 150 days from the 
date of publication of the notice of initiation for the publication of 
the preliminary circumvention determination. Although the Act does not 
prohibit Commerce from extending preliminary circumvention 
determinations, no language was included in the regulation to expressly 
allow for an extension. Given the complexity of certain circumvention 
inquiries, we have determined that it is reasonable for Commerce to 
normally be able to extend the deadline for issuing a preliminary 
circumvention determination. Accordingly, Commerce proposes amending 
Sec.  351.226(e)(1) to allow for a preliminary determination extension 
of up to 90 days (to provide a deadline of no later than 240 days from 
the date of publication of the notice of initiation) if Commerce 
concludes that an extension is warranted. Such a modification

[[Page 29857]]

would not alter the maximum deadline for a final circumvention 
determination of 365 days, set forth in Sec.  351.226(e)(2).

10. Procedures for Commerce To Place Previous Analysis and Calculation 
Memoranda From Other Segments or Proceedings on the Record After 
Written Arguments Have Been Submitted But Before the Final 
Determination or Results Has Been Issued--Sec.  351.301(c)(4)

    Pursuant to Sec.  351.301(c)(4), Commerce may place new factual 
information on the record at any time, and when it does so, interested 
parties are permitted one opportunity to submit arguments and new 
factual information to ``rebut, clarify, or correct'' the factual 
information Commerce placed on the record, by a date set by Commerce. 
Throughout most of a segment of a proceeding, this regulation works as 
it should. However, since this regulation was issued, Commerce has on 
multiple occasions experienced a particular problem with this provision 
at the end of some of its segments, and that problem created 
unnecessary burdens for the agency in completing segments of its 
proceedings.
    Specifically, in certain segments, after parties have submitted 
briefs and rebuttal briefs, in accordance with Sec.  351.309, arguing 
that Commerce should take certain actions, Commerce has determined 
after consideration of those written arguments that in another 
proceeding, or segment of the same proceeding, it addressed the 
arguments now before it, in whole or in part. To explain how it 
addressed that issue or argument in the prior segment or proceeding, 
Commerce needed to rely on a calculation or analysis memorandum from 
that other segment or proceeding, and because calculation and analysis 
memoranda are new factual information, Commerce placed the memoranda on 
the record of the ongoing segment. Accordingly, consistent with Sec.  
351.301(c)(4), certain interested parties not only submitted arguments 
on the record challenging the applicability and relevance of the agency 
memoranda, but also submitted additional new factual information on the 
record, and Commerce was required to address both its previous 
practice, as well as the new factual information, whether or not 
directly applicable and responsive, in the final results or 
determination.
    The benefit for Commerce to be able to place its former analysis 
and calculation memoranda on the record in response to arguments raised 
in the written arguments is evident, as is the opportunity for parties 
to argue why those former analysis and calculation memoranda are 
relevant or irrelevant. On the other hand, it is a significant burden 
on Commerce's time and resources to prepare and provide a meaningful 
response to new factual information placed on the record for the first 
time so late in the proceeding, and provides serious administrative and 
technical difficulties for the agency in issuing a timely and complete 
final determination or results.
    For this reason, Commerce is proposing a modification to Sec.  
351.301(c)(4). Specifically, we are proposing that Sec.  351.301(c)(4) 
be divided into two paragraphs: one paragraph applicable under the 
current procedures to nearly all submissions in a segment of a 
proceeding and one paragraph applicable specifically only after written 
arguments have been submitted to Commerce and Commerce subsequently 
determines, after considering those written arguments, that an agency 
analysis or calculation memorandum issued in another segment or 
proceeding is relevant to the ongoing segment. In that narrow 
situation, proposed Sec.  351.301(c)(4)(ii) states that Commerce will 
identify on the record the issue to which the memorandum it is placing 
on the record appears to be relevant, and interested parties will 
subsequently have an opportunity to provide comments addressing the 
relevance of the memoranda and Commerce's analysis in the other segment 
to the issue to the agency. Interested parties will be able to argue 
that the facts and analysis in the memoranda are distinguishable from 
the facts and issues before Commerce in the immediate case, for 
example, but the regulation also makes clear under this narrow 
exception to the overall provision, that such comments on the agency 
calculation or analysis memorandum will not be permitted to be 
accompanied by new factual information.

11. Notices of Subsequent Authority--Sec.  351.301(c)(6)

    At times while a segment is ongoing, a Federal court, such as the 
U.S. Court of International Trade (CIT) or U.S. Court of Appeals for 
the Federal Circuit (Federal Circuit), may issue a decision that an 
interested party believes is directly applicable to an issue currently 
before Commerce. Likewise, Commerce may address the issue, or a similar 
issue, in another segment or proceeding, and again, the interested 
party might believe that determination is directly applicable to the 
current segment. In those situations, a party might submit on the 
record of an ongoing proceeding a Notice of Subsequent Authority.
    Our existing regulations do not address the timing of the 
submission of responsive comments and new factual information to the 
filing of a Notice of Subsequent Authority. Commerce is therefore 
proposing an addition to Sec.  351.301, a paragraph (c)(6), which 
provides that interested parties have five days after the Notice has 
been submitted to provide responsive comments and factual information 
to rebut or clarify the Notice.
    Furthermore, we recognize that when Commerce is in the last few 
weeks of the segment and is actively preparing the final determination 
or results, if a Notice of Subsequent Authority is submitted too close 
to the statutory deadline for the final determination or results, 
Commerce may not have enough time administratively to consider the 
arguments raised in the Notice and address them in the final 
determination or results.
    Accordingly, we propose that Sec.  351.301(c)(6) indicate that for 
Commerce to consider and address a Notice of Subsequent Authority in a 
final determination or results, it must be submitted with the agency no 
later than 30 days before the deadline for issuing the final 
determination or results. Likewise, for Commerce to consider responsive 
comments or factual information to the Notice of Subsequent Authority, 
responsive submissions must be filed no later than 25 days before the 
deadline for issuing the final determination or results.
    Furthermore, to be assured that a Notice of Subsequent Authority is 
sufficiently complete for Commerce to consider, proposed Sec.  
351.301(c)(6) also explains that the Notice must identify the court 
decision or agency determination that is alleged to be authoritative to 
the issue before Commerce, provide the date the decision or 
determination was issued, explain the relevance of that decision or 
determination to the issue before Commerce, and be accompanied by a 
complete copy of the court decision or agency determination. Again, to 
be assured that Commerce has all the information that it needs to 
address the matter raised in the Notice of Subsequent Authority in its 
final determination or results, the regulation also requires that 
responsive comments directly address the contents of the Notice of 
Subsequent Authority and explain how the comments and accompanying 
information rebut or clarify the Notice.

[[Page 29858]]

12. The Countervailing Duty Adverse Facts Available Hierarchy--Sec.  
351.308(g)

    Section 776(d) of the Act provides that, in circumstances in which 
Commerce is applying adverse facts available in selecting a program 
rate, pursuant to sections 776(a) and (b) of the Act, Commerce may use 
a countervailable subsidy rate determined for the same or similar 
program in CVD proceedings involving the same country, or, if there is 
no same or similar program, Commerce may, instead, use a 
countervailable subsidy rate for a subsidy program from a proceeding 
that Commerce considers reasonable to use, including the highest of 
such rates. Commerce developed its practice of applying our current 
hierarchy in selecting adverse facts available rates in CVD proceedings 
over many years, even before it was codified into the Act, to 
effectuate the statutory purpose of section 776(b) of the Act to induce 
respondents to provide Commerce with complete and accurate information 
in CVD proceedings in a timely manner.\21\ We believe clarifying the 
hierarchy in our AD/CVD regulations would be beneficial to those who 
participate in Commerce's CVD proceedings.
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    \21\ See Hyundai Steel Co. v. United States, 319 F.Supp.3d 1327, 
1354 (CIT 2018) (quoting Timken Co. v. United States, 354 F.3d 1345 
(Fed. Cir. 2004) (``Commerce may employ adverse inferences about the 
missing information to ensure that the party does not obtain a more 
favorable result by failing to cooperate than if it had cooperated 
fully'') (internal quotations and citations omitted)); see also Fine 
Furniture (Shanghai) Ltd. v. United States, 748 F.3d 1365, 1373 
(Fed. Cir. 2104) (``The purpose of (section 776(a) and (b) of the 
Act), according to the (SAA) . . . is to encourage future 
cooperation by `ensur{ing{time}  that the party does not obtain a 
more favorable result by failing to cooperate than if it had 
cooperated fully.' '' (quoting the SAA at 870) and explaining that 
an adverse rate was selected not ``to punish'' a party in a CVD 
proceeding, ``but rather to provide a remedy'' for the government's 
``failure to cooperate'').
---------------------------------------------------------------------------

    Accordingly, we are proposing that we outline the hierarchical 
analysis that Commerce will normally use in selecting a countervailable 
subsidy rate on the basis of facts otherwise available in a CVD 
proceeding in Sec.  351.308, by adding a new paragraph (g). Section 
351.308(g), as proposed, describes the different hierarchical steps and 
analyses that apply to CVD investigations and CVD administrative 
reviews, and sets forth certain guidelines and principles governing the 
application of these hierarchical analyses, consistent with Commerce's 
long-standing practice.

13. Foreign Government Inaction That Benefits Foreign Producers

13(a) Calculation of Normal Value of Merchandise From Non-Market 
Economy Countries--Sec.  351.408

13(b) Determination of Particular Market Situation--Sec.  351.416

13(c) Provision of Goods or Services--Sec.  351.511

13(d) Certain Fees, Fines, and Penalties--Sec.  351.529

    There are different means by which governments or other public 
entities benefit industries within their borders. One way is through 
direct subsidization, such as when a government takes certain actions 
to provide a subsidy to a firm within its borders, such as a grant,\22\ 
a loan,\23\ or a loan guarantee.\24\ Another means by which a 
government may provide a subsidy is through inaction--when the 
government fails to enforce its regulations, requirements, or 
obligations by not collecting a fee, a fine, or a penalty that the 
government should have otherwise collected under those regulations, 
requirements, or obligations. In that circumstance, the result is that 
the government has forgone revenue it was otherwise due, therefore 
benefiting the party not paying the fee, fine, or penalty. A government 
may also provide a subsidy by carving out circumstances where money, 
not related to tax revenues, is not due, therefore reducing foreign 
producers' cost of complying with regulatory requirements. Such 
inaction can be considered a financial contribution pursuant to section 
771(5)(D)(ii) of the Act. There are many examples of a government 
providing benefits to parties through inaction. For example, a firm 
might have owed certain fees to the government for management of waste 
disposal, certain fines for violations of occupational safety and 
health standards in its facility, or certain penalties for non-
compliance with other labor laws and regulations, yet the firm never 
paid the applicable fines or fees. A government may also have failed to 
take any action to collect fees, fines or penalties that were otherwise 
due in the first place. In both scenarios, it is Commerce's long-
standing practice to treat unpaid and deferred fees, fines, and 
penalties as a countervailable subsidy, no matter if the government 
took efforts to seek payment, or otherwise recognized that no payment 
had been made or indicated to the company that it was permitting a 
payment to be deferred.\25\
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    \22\ See Sec.  351.504.
    \23\ See Sec.  351.505.
    \24\ See Sec.  351.506.
    \25\ See, e.g., Certain Carbon and Alloy Steel Cut-to-Length 
Plate from the Republic of Korea: Preliminary Results of 
Countervailing Duty Administrative Review, and Intent to Rescind 
Review in Part; 2020, 87 FR 33720 (June 3, 2022), and accompanying 
Preliminary Decision Memorandum (PDM) at 17 (finding port usage fee 
exemptions provide a financial contribution in the form of revenue 
forgone, as described under section 771(5)(D)(ii) of the Act), 
unchanged in Certain Carbon and Alloy Steel Cut-to-Length Plate from 
the Republic of Korea: Final Results of Countervailing Duty 
Administrative Review; 2020, 87 FR 74597 (December 6, 2022), and 
accompanying IDM at 9; see also AK Steel Corp. v. United States, 192 
F.3d 1367, 1382 (Fed. Cir. 1999) (sustaining Commerce's 
determination to treat the exemption from dockyard fees as a 
countervailable benefit).
---------------------------------------------------------------------------

    We recognize that every country retains discretion to pursue its 
own priorities, whether through directed efforts to assist in the 
economic success of its domestic industries, such as subsidies and 
government assistance, or by implementing and enforcing certain laws, 
policies and standards for the public welfare.\26\ However, we also 
recognize that when governments take little or no action to implement 
or enforce such laws, policies, and standards, benefits may accrue to a 
company in a way that provides the company with a financial advantage 
over its competitors. We have, therefore, determined that it is 
important to issue a regulation under proposed Sec.  351.529, titled 
``Certain Fees, Fines, and Penalties,'' which incorporates our long-
standing practice covering unpaid or deferred fees, fines, and 
penalties. We note that the proposed addition of this regulatory 
provision is not intended to preclude Commerce from examining such 
fees, fines, penalties, and similar government measures as alternative 
forms of financial contributions under other provisions of the statute 
and regulations, where the facts in those instances indicate other 
legal and analytical approaches are appropriate.
---------------------------------------------------------------------------

    \26\ See Joel P. Trachtman, International Regulatory 
Competition, Externalization, and Jurisdiction, 14 Harv. Int'l L.J. 
47, 58 (1993).
---------------------------------------------------------------------------

    Proposed paragraph (a) under Sec.  351.529 explains that a 
financial contribution exists if Commerce determines that a fee, fine, 
or penalty which is otherwise due, has been forgone or not collected 
within the meaning of section 771(5)(D)(ii) of the Act, with or without 
evidence on the record that the government took efforts to seek payment 
or acknowledged nonpayment or deferral. As we have noted, this 
countervailable subsidy encompasses instances of government inaction, 
where it is that inaction which evinces the existence of the financial 
contribution.

[[Page 29859]]

    Proposed paragraph (b) explains that if the government has exempted 
or remitted a fee, fine, or penalty, in part or in full, and Commerce 
determines that it is revenue which has been forgone or not collected 
in paragraph (a), a benefit exists to the extent that the fee, fine, or 
penalty paid by the party is less than if the government had not 
exempted or remitted that fee, fine, or penalty. Likewise, also under 
proposed paragraph (b), if Commerce determines that payment of the fee, 
fine, or penalty was deferred, it will determine that a benefit exists 
to the extent that appropriate interest charges were not collected, and 
the deferral will normally be treated as a government loan in the 
amount of the payments deferred, according to the methodology described 
in Sec.  351.505. The language for determining the benefit for 
nonpayment or deferral is similar to other revenue forgone benefit 
regulations, such as Sec.  351.509, covering direct taxes, and Sec.  
351.510, covering indirect taxes and import charges (other than export 
programs).
    In addition to the non-collection of payment for fees, fines, or 
penalties, or deferring such payments, there are other means by which 
foreign governments can assist foreign producers and suppliers, to the 
disadvantage of their foreign competitors, through inaction--by 
allowing those producers and suppliers to avoid certain compliance 
costs which would otherwise apply.
    Government inaction and failure to enforce property (including 
intellectual property), human rights, labor, and environmental 
protections lowers the cost of production for firms in their 
jurisdiction.\27\ This is because such firms are not paying a ``cost of 
compliance'' for which firms operating in other jurisdictions are 
responsible to meet regulatory standards.\28\ The economics literature 
explains this in terms of externalities and public goods, identifying 
the fact that firms base their decisions almost exclusively on direct 
cost and profitability considerations, largely ignoring the indirect 
societal costs of their production decisions.\29\
---------------------------------------------------------------------------

    \27\ See OECD, OECD Regulatory Policy Outlook 2018: Glossary, 
https://www.oecd-ilibrary.org/sites/9789264303072-51-en/index.html?itemId=/content/component/9789264303072-51-en, accessed 
February 2, 2021.
    \28\ Id.
    \29\ See International Monetary Fund (Thomas Helbling), 
``Externalities: Prices Do Not Capture All Costs,'' Finance & 
Development (date unspecified); see also Coase, Ronald, ``The 
Problem of Social Cost.'' Journal of Law and Economics. 3 (1): 1-44 
(1960); Cornes, Richard, and Todd Sandler, The Theory of 
Externalities, Public Goods, and Club Goods, Cambridge University 
Press (1986); and Paul Samuelson, ``Diagrammatic Exposition of a 
Theory of Public Expenditure,'' The Review of Economics and 
Statistics, 37 (4): 350-56 (1955).
---------------------------------------------------------------------------

    For example, foreign government environmental laws, policies, and 
standards might be weak, ineffective, or even nonexistent, allowing 
producers to dump toxic waste into the local water supply, or spew 
corrosive smog into nearby neighborhoods, which may enable producers to 
produce merchandise at costs lower than would be possible if the 
environmental laws were in place and effectively enforced. In other 
words, if a government does not require companies to mitigate the 
environmental impact of production, either through investing resources 
to avoid or minimize the environmental impacts, or by paying 
compensation for such impacts, their costs of production will be 
lower.\30\ Of course, with lower costs, the foreign producers would 
also be able to take those cost savings and ``race to the bottom''--
charging their purchasers lower prices for their merchandise than their 
foreign competitors would be able to charge, all else being equal.
---------------------------------------------------------------------------

    \30\ See The World Bank, International Trade and Climate Change: 
Economic, Legal, and Institutional Perspectives (2008), at 30-31.
---------------------------------------------------------------------------

    In another example, failure by foreign governments to implement or 
enforce labor and human rights protection laws would allow for unsafe 
and unhealthy working conditions, slave or forced labor, child labor, 
and even human trafficking. This would allow companies to avoid paying 
costs associated with preventing or mitigating such adverse labor and 
human rights impacts and thereby reduce their costs of production.\31\
---------------------------------------------------------------------------

    \31\ See United Nations Human Rights Office of the High 
Commissioner, The Corporate Responsibility to Respect Human Rights 
(2012), at 5 and 40; and International Labor Organization, The 
benefits of International Labour Standards, https://www.ilo.org/
global/standards/introduction-to-international-labour-standards/the-
benefits-of-international-labour-standards/lang_en/index.htm, 
accessed January 30, 2023.
---------------------------------------------------------------------------

    Similarly, if a producer incorporates certain technology into its 
production of merchandise which is subject to patent protections in the 
foreign country or abroad, but the foreign government does not act to 
enforce the intellectual property rights of the patent owner, absent 
the need to pay usage or licensing fees, the producer might enjoy a 
windfall not available to international competitors who, by law, are 
required to honor the rights of the patent owner and pay such fees. Put 
another way, companies would be able to use the knowledge others create 
without the high fixed costs of creating that knowledge themselves, or 
without paying the creator of the knowledge for its use, allowing the 
foreign producers to enjoy lower costs of production than they would if 
the intellectual property rights were properly enforced.\32\ Again, 
with lower and distorted production costs, the foreign producer in that 
scenario would be able to charge its customers less, all else being 
equal, than producers from countries in which intellectual property 
rights are respected and enforced.
---------------------------------------------------------------------------

    \32\ See World Intelligence Property Organization, The Economics 
of Intellectual Property (January 2009), at 2.
---------------------------------------------------------------------------

    Likewise, an unrelated entity might forcefully take over a 
company's factory or inventory in violation of the producer's property 
and real property rights, while the national government takes no action 
to prevent such usurpation. The result of such a forced transfer of 
managerial control could result in the price of the producer's 
merchandise being lowered to unprofitable levels.
    These examples of foreign government inaction could result in costs 
and prices that are unreasonably suppressed and create an unlevel 
playing field between producers and suppliers in countries in which 
governments provide weak, ineffective, or nonexistent property 
(including intellectual property), human rights, labor, and 
environmental protections, and producers and suppliers in countries in 
which the governments provide and enforce such protections. When such 
standards are not enforced, the lack of enforcement does more than 
merely lower firms' production costs. Lower production costs can enable 
firms to lower prices for their products, which enable these firms to 
gain market share to the disadvantage of foreign competitors, including 
U.S. businesses, who pay such costs of compliance. For this reason, we 
propose to make certain modifications to the AD/CVD regulations to 
address this concern.
    First, we proposed a modification to Sec.  351.511(a), which 
applies to a CVD analysis covering the provision of goods or services. 
Under that provision, Commerce investigates whether goods or services 
are provided for less than adequate remuneration by the government.\33\ 
In determining the adequacy of remuneration, Commerce is directed by 
the regulation to compare the ``government price of the good or service 
to a market-determined price for the good or service.'' \34\ We believe 
that the lower and distorted prices that may result from the above-
mentioned types of government inaction may, in some

[[Page 29860]]

circumstances, not allow for appropriate comparisons.
---------------------------------------------------------------------------

    \33\ See section 771(5)(D)(iii) of the Act; and Sec.  351.511.
    \34\ See Sec.  351.511(a)(2)(i).
---------------------------------------------------------------------------

    For example, in selecting a benchmark under Sec.  351.511(a)(2), if 
Commerce determines that parties have demonstrated, with sufficient 
information, that the above-mentioned types of government inaction 
distorted certain potential benchmark prices, Commerce may determine 
that those prices are unusable and should be excluded from 
consideration as a benchmark.
    Historically, Commerce has rejected certain world market prices 
from its averaging exercise when evidence on the record supported a 
determination that certain ``factors affecting comparability'' existed 
that undermined the use of prices from a specific country,\35\ and the 
CIT has affirmed this practice, holding that Commerce's ``method of 
calculating a world market price'' was ``reasonable,'' and that 
``Commerce need not conduct an average where the prices to be included 
are not consistently reported or otherwise would have a distortive 
effect.'' \36\
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    \35\ Commerce explained in issuing the regulation in 1998 that 
rather than reject world market prices for not being comparable, it 
might, in specific circumstances, adjust world market prices for ADs 
and CVDs in those countries. However, it indicated that such an 
adjustment would only be made ``to reflect a determination of 
dumping or subsidization made by the importing country with respect 
to the input product imported from the country from which the world 
market price is derived.'' See Countervailing Duties; Final Rules, 
63 FR 65348 (November 25, 1998) (CVD Preamble).
    \36\ See Rebar Trade Action Coalition v. United States, 398 F. 
Supp. 3d 1374, 1383 (August 8, 2019), affirming Steel Concrete 
Reinforcing Bar from the Republic of Turkey, Final Results and 
Partial Rescission of Countervailing Duty Administrative Review; 
2015, 83 FR 16051 (April 13, 2018), and accompanying IDM.
---------------------------------------------------------------------------

    As explained above, one of the main purposes of the trade remedy 
laws is to ensure a level playing field between U.S. producers and 
their foreign competitors. To achieve that goal in the context of a 
less than adequate remuneration analysis, it is appropriate to use 
benchmark prices pursuant to Sec.  351.511(a)(2) that are not distorted 
due to government action or, in some cases, inaction.
    For purposes of determining a benchmark under Sec.  351.511(a)(2), 
in light of the fact that government inaction in certain matters can 
result in distorted prices, we therefore propose to add a provision to 
Sec.  351.511(a)(2) which states that when parties have demonstrated, 
with sufficient information, that there is a likely impact on prices of 
that input as a result of weak, ineffective, or nonexistent property 
(including intellectual property), human rights, labor, or 
environmental protections, we may exclude such prices from our 
benchmark analysis. It is important to note that this will not be an 
exercise Commerce intends to conduct in its analysis of every potential 
benchmark, but only when a party provides Commerce with sufficient 
evidence on the record which shows that a government's inaction in 
enforcing, for example, environmental or labor protections, is likely 
to result in unreasonably suppressed prices, and therefore, those 
prices should be excluded from the benchmark.\37\ If such arguments and 
evidence are provided to the agency, Commerce will consider that 
information and, where appropriate, exclude the use of prices from that 
country for that input in its benchmark calculation where Commerce 
determines that such practices likely render such prices unreliable and 
unreasonable.
---------------------------------------------------------------------------

    \37\ The inclusion of consideration of government inaction with 
respect to property (including intellectual property), human rights, 
labor, or environmental protections in Sec.  351.511(a)(2) is in no 
way intended to modify Commerce's practice to consider foreign 
government actions or other relevant market conditions in accepting 
or rejecting proposed benchmarks.
---------------------------------------------------------------------------

    Turning from the CVD law to the AD law, in selecting a surrogate 
value in determining normal value for non-market economy AD 
investigations and administrative reviews, Commerce is proposing a 
change to Sec.  351.408 to provide that Commerce may consider weak, 
ineffective, or nonexistent property (including intellectual property), 
human rights, labor, or environmental protections in its analysis, 
should interested parties raise the issue and submit information on the 
record in support of their claims.\38\
---------------------------------------------------------------------------

    \38\ In addition to the consideration of government inaction on 
property (including intellectual property), human rights, labor, or 
environmental protections, we have included three additional 
considerations for disregarding proposed surrogate values in 
proposed Sec.  351.408(d)(1) which were added to the Act in 2015 as 
section 773(c)(5), pursuant to the Trade Preferences Extension Act 
(TPEA). See TPEA of 2015, Public Law 114-27, 129 Stat. 362 (July 29, 
2015); see also Dates of Application of Amendments to the 
Antidumping and Countervailing Duty Laws Made by the Trade 
Preferences Extension Act of 2015, 80 FR 46793 (August 6, 2015) 
(TPEA Dates Notice). Section 773(c)(5) of the Act states that 
Commerce may ``disregard price or cost values without further 
investigation if the administering authority has determined that 
broadly available export subsidies existed.'' It also states that 
Commerce may disregard proposed surrogate values if ``particular 
instances of subsidization occurred with respect to those price or 
cost values.'' Finally, it states that Commerce may disregard 
proposed surrogate values ``if those price or cost values were 
subject to an antidumping order.''
---------------------------------------------------------------------------

    Section 773(c)(1) of the Act states that in investigations and 
administrative reviews concerning non-market economy countries, 
Commerce should apply surrogate values from a market economy to a 
company's factors of production in determining normal value. The 
provision states that Commerce should select surrogate values based 
``on the best available information regarding the values of such 
factors in a market economy country or countries considered to be 
appropriate by the administering authority.'' Generally, Commerce 
applies its standard factor valuation test, which is found in Sec.  
351.408(c), to determine appropriate surrogate values. However, 
Commerce proposes additional considerations in light of its practice 
and analysis over the last few years, especially in light of challenges 
to Commerce's use of certain labor values before the CIT,\39\ in which 
the CIT directed Commerce to reconsider further its standard 
consideration of an appropriate labor value for purposes of its 
surrogate value analysis. In those cases, on remand, Commerce addressed 
in detail the fact that there may be certain elements that impact the 
costs of production, yet those elements are not addressed in Commerce's 
current factor valuation test. In each remand, Commerce determined that 
it had the authority to reject the use of certain surrogate values as 
inappropriate, outside of its standard factor valuation test, and in 
each case the court affirmed Commerce's redetermination in that regard.
---------------------------------------------------------------------------

    \39\ See, e.g., Ad Hoc Shrimp Trade Action Comm. v. United 
States, 219 F. Supp. 3d 1286, 1292 (CIT 2017) (citing Final Results 
of Redetermination Pursuant to Court Remand, Ad Hoc Shrimp Trade 
Action Committee v. United States, Court No. 15-00279, Slip Op. 17-
27 (CIT March 16, 2017), dated June 6, 2017, available at https://access.trade.gov/resources/remands/17-27.pdf, aff'd Ad Hoc Shrimp 
Trade Action Comm. v. United States, 234 F. Supp. 3d 1315, 1320 (CIT 
2017)); see also Final Results of Redetermination Pursuant to Court 
Remand, Tri Union Frozen Products Inc. et al. v. United States, 
Consol. Court No. 14-00249, Slip Op. 17071 (CIT June 13, 2017), 
dated July 25, 2017, at 8-9, available at https://access.trade.gov/resources/remands/17-71.pdf, aff'd Tri Union Frozen Prods., Inc. v. 
United States, 254 F. Supp. 3d 1290 (CIT 2017), aff'd Tri Union 
Frozen Products, Inc. v. United States, 741 Fed. Appx. 801 (Fed. 
Cir. 2018) (collectively, Tri Union Frozen); Refillable Stainless 
Steel Kegs from the People's Republic of China: Final Affirmative 
Determination of Sales at Less Than Fair Value and Final Affirmative 
Determination of Critical Circumstances, in Part, 84 FR 57010 
(October 24, 2019), and accompanying IDM at 35; and Final Results of 
Redetermination Pursuant to Court Remand, New American Keg v. United 
States, Slip Op. 21-30 (March 23, 2021), dated July 7, 2021, at 3 
(citing Tri Union Frozen), available at https://access.trade.gov/resources/remands/21-30.pdf.
---------------------------------------------------------------------------

    For the reasons described above with respect to foreign government 
inaction, we have concluded that it would be beneficial to Commerce and 
the public to include this additional potential

[[Page 29861]]

analysis in the AD regulations. We, therefore, propose adding 
paragraphs (d)(1) and (2) to Sec.  351.408 which states that Commerce 
may disregard a particular surrogate value if it concludes that weak, 
ineffective, or nonexistent environmental, property (including 
intellectual property), labor, or human rights protections undermine 
the appropriateness of using a particular surrogate value in Commerce's 
analysis. Because such an analysis could be resource intensive, 
however, we are also proposing that such an analysis be applied only if 
the surrogate value at issue involves a significant input \40\ or 
labor, and only if that proposed surrogate value is sourced from a 
single surrogate country or an average of values derived from a limited 
number of countries.\41\
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    \40\ Commerce has not defined the term ``significant'' for 
purposes of its usage in the term ``significant input'' for purposes 
of these regulations. This is because we have found that an input 
might at times be the most expensive input in producing subject 
merchandise, and therefore distortions in the cost of the input have 
a direct effect on the cost of production, while at other times the 
value of the input may be small in the overall cost structure of the 
subject merchandise, but the importance or uniqueness of the input 
to the function or existence of the product makes it significant.
    \41\ Commerce anticipates that the phrase ``limited number'' 
will normally involve averaged values that are sourced from no more 
than three countries.
---------------------------------------------------------------------------

    Section 773(c)(4) of the Act provides that, in valuing factors of 
production, Commerce will ``utilize, to the extent possible, the prices 
or costs of factors of production in one or more market economy 
countries that are (A) at a level of economic development comparable to 
that of the non-market economy country and (B) significant producers of 
comparable merchandise.'' There may be times in which the 
administrative record reflects that all of the potential surrogate 
values for a particular input that come from a country at a level of 
economic development as the subject country and/or from a country that 
is a significant producer of comparable merchandise might not be 
appropriate to use as a surrogate value because of weak, ineffective, 
or nonexistent environmental, property (including intellectual 
property), labor, or human rights protections. In that case, if there 
are also alternative options on the record from countries that are not 
at a level of economic development comparable to the subject country 
and/or are not significant producers of comparable merchandise, we will 
consider those alternatives and might determine that the use of the 
comparable/significant producer valuations should not be used under the 
``extent possible'' language of the Act. We therefore propose adding 
paragraphs (d)(3) and (4) to Sec.  351.408 to allow for uses of 
potential surrogate values from other sources on the record in that 
situation.
    Finally, we also propose including consideration of weak, 
ineffective, or nonexistent property (including intellectual property), 
human rights, labor, and environmental protections that lower and 
distort costs of production as examples of a particular market 
situation, under proposed Sec.  351.416. We discuss those examples 
below in describing the proposed particular market situation 
regulation.

14. Regulation for Determining the Existence of a Particular Market 
Situation--Sec.  351.416

    On November 18, 2022, Commerce solicited comments from the public 
with respect to its cost-based PMS practice.\42\ As Commerce explained 
in its solicitation, in the TPEA, section 771(15) of the Act was 
amended to provide that Commerce consider sales to be outside the 
``ordinary course of trade'' when there are situations in which 
Commerce ``determines that the particular market situation prevents a 
proper comparison with the export price or constructed export price.'' 
\43\ Further, section 773(e) of the Act was amended to provide that in 
determining the ``costs of material and fabrication or other processing 
of any kind employed in producing the merchandise, during a period 
which would ordinarily permit the production of the merchandise in the 
ordinary course of trade,'' for determining constructed value, ``if a 
particular market situation exists such that the cost of materials and 
fabrication or other processing of any kind does not accurately reflect 
the cost of production in the ordinary course of trade,'' Commerce 
``may use another calculation methodology under this subtitle or any 
other calculation methodology.'' \44\ As Commerce explained in the PMS 
ANPR, application of the cost-based PMS provisions in AD law has been 
complicated by the fact that the Act does not: ``(1) define a 
particular market situation (`PMS'), (2) identify the information which 
Commerce should consider in determining the existence of a PMS that 
`does not accurately reflect the costs of production in the ordinary 
course of trade,' or (3) provide Commerce with guidance as to the 
information which Commerce should consider in determining if a market 
situation is, or is not, `particular.' '' \45\
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    \42\ See PMS ANPR.
    \43\ See the TPEA; see also TPEA Dates Notice, 80 FR 46793.
    \44\ See sections 771(15) and 773(e) of the Act.
    \45\ See PMS ANPR, 87 FR 69234.
---------------------------------------------------------------------------

    Commerce explained in the PMS ANPR that in 2022, the Federal 
Circuit issued a decision which provided Commerce with some guidance on 
factors which Commerce should continue to consider in determining 
whether a cost-based PMS exists and how to adjust for that cost-based 
PMS.\46\ In light of that decision, Commerce determined that it was 
appropriate to issue regulations explaining the procedures to determine 
if a cost-based PMS exists, and other matters related to a PMS 
determination.
---------------------------------------------------------------------------

    \46\ Id.
---------------------------------------------------------------------------

    The Federal Circuit held in NEXTEEL that Commerce's finding that a 
cost-based PMS existed in Korea during the period of review was 
unsupported by substantial evidence.\47\ In analyzing Commerce's PMS 
determination, the Federal Circuit appeared to reach at least four 
conclusions.
---------------------------------------------------------------------------

    \47\ See NEXTEEL Co. v. United States, 28 F.4th 1226 (Fed. Cir. 
2022) (NEXTEEL).
---------------------------------------------------------------------------

    (1) A cost-based PMS must cause costs to deviate from what they 
would have otherwise been in the ordinary course of trade.\48\
---------------------------------------------------------------------------

    \48\ Id., 28 F.4th at 1234.
---------------------------------------------------------------------------

    (2) A cost-based PMS must be particular to certain producers or 
exporters, inputs, or the market where the inputs are manufactured, 
during the relevant period.\49\
---------------------------------------------------------------------------

    \49\ Id., 28 F.4th at 1234 and 1236.
---------------------------------------------------------------------------

    (3) If the cost-based PMS involves a countervailable subsidy, 
Commerce's analysis should not be conclusory, but analyze if a subsidy 
existed during the period of review and indicate that the 
countervailable subsidy ``affected'' the costs of producing the subject 
merchandise or the prices and costs of an input into the cost of 
production.\50\
---------------------------------------------------------------------------

    \50\ Id., 28 F.4th at 1235-36.
---------------------------------------------------------------------------

    (4) Finally, Commerce is not required to precisely quantify a 
distortion in costs by the PMS to find the existence of a PMS, but if 
Commerce is able to quantify the distortion, such a quantification may 
help support a finding of the existence of a PMS.\51\
---------------------------------------------------------------------------

    \51\ Id., 28 F.4th at 1234.
---------------------------------------------------------------------------

    In light of the Federal Circuit's holding and analysis in NEXTEEL, 
as well as our experience in administering the PMS provision over the 
past several years, we determined that it was appropriate to revisit 
Commerce's approach to analyzing and determining the existence of a PMS 
that distorts costs of production.\52\ Therefore, the PMS ANPR 
requested public comment and, in particular, information on the

[[Page 29862]]

following: (1) identify information which they believe Commerce should 
consider in determining if a PMS exists which distorts the costs of 
production if that information is reasonably available and relevant to 
the PMS allegation; (2) identify information which they believe 
Commerce should not be required to consider when determining if a PMS 
exists; and (3) provide comments on adjustments which Commerce may make 
to its calculations when it determines the existence of a PMS, but the 
record before it does not allow for the precise quantification of cost 
distortions.\53\ We received 19 submissions providing responses to our 
questions, and offering additional suggestions and other views and 
arguments.
---------------------------------------------------------------------------

    \52\ See PMS ANPR, 87 FR 69235.
    \53\ Id.
---------------------------------------------------------------------------

    After considering Commerce's practice, the Federal Circuit's 
analysis in NEXTEEL, and the submissions we received in response to the 
PMS ANPR, we propose that we issue a new regulation--``Sec.  351.416 
Determination of a particular market situation.'' The proposed 
regulation has multiple paragraphs. The first proposed paragraph, (a), 
defines the two types of PMS identified in the statute--a PMS that 
prevents a proper comparison of sales prices in the home country market 
with U.S. export prices and constructed export prices (a ``sales-based 
PMS''), and a PMS that distorts the costs of production of the 
merchandise subject to an investigation, suspension agreement, or an AD 
order (a ``cost-based PMS'').
    Proposed paragraph (b) of Sec.  351.416 explains that an interested 
party making an allegation of a PMS must support that allegation on the 
record with information that is relevant to the allegation and 
reasonably available to that interested party. Commerce recognizes that 
sometimes importers and domestic producers, for example, may not have 
access to foreign prices and costs; thus, Commerce will expect that 
they provide only evidence with their claim that is reasonably 
available. That being said, if they are alleging the existence of a PMS 
that was alleged and/or analyzed in a previous segment of the same 
proceeding, the proposed regulation also explains that they must 
identify the facts and arguments in the submission which are 
distinguishable from the previous segment. It is a burden on both the 
agency and other parties when an allegation is submitted in a segment 
and the alleging party does not indicate where the facts or claims 
diverge from previous allegations before Commerce.
    Proposed paragraph (c) of Sec.  351.416 addresses a sales-based 
PMS, and in proposed Sec.  351.416(c)(1) provides examples of such 
particular market situations in the home market. Furthermore, proposed 
Sec.  351.416(c)(2) explains that similar government actions and 
inactions in a third country to those examples may prevent third 
country prices from being properly compared to export prices and 
constructed export prices. Finally, in proposed Sec.  351.416(c)(3), 
the proposed regulation explains that when Commerce determines that a 
circumstance or set of circumstances prevents a proper comparison 
between foreign market sales prices and export prices or constructed 
export prices, Commerce may conclude that it is necessary to determine 
normal value by using a constructed value, in accordance with section 
773(e) of the Act and Sec.  351.405.
    The remainder of proposed Sec.  351.416 addresses a cost-based PMS 
analysis. Proposed paragraph (d) of Sec.  351.416 explains that the 
first step in Commerce's analysis is to determine if the record 
information supports a determination that a market situation exists. 
Commerce will review the record information to determine if a distinct 
circumstance, or set of circumstances, exists that distorts the cost of 
production, such that: (1) the costs of materials and fabrication do 
not accurately reflect the cost of production in the ordinary course of 
trade; and (2) the record evidence reflects that the distinct 
circumstance or set of circumstances being alleged likely contributed 
to the distortion in prices or costs of a significant input, or the 
costs of production. This analysis is usually qualitative, rather than 
quantitative, in nature, although sometimes a market situation can be 
shown through a quantitative analysis--such as the nonpayment of trade 
remedies upon importation in a foreign country, or the reimbursement by 
a foreign government for the payment of trade remedies. In either case, 
whether Commerce's analysis is solely qualitative or both qualitative 
and quantitative, paragraph (d)(2) of proposed Sec.  351.416 explains 
that Commerce will consider all relevant information submitted on the 
record by interested parties, and provides some examples of information 
that Commerce has determined to be especially helpful in its analysis 
of alleged market situations: (1) comparisons of prices with and 
without the existence of the market situations; (2) detailed reports 
and documentation issued by foreign governments, market analysis 
organizations, or academic institutions that analyze government and 
nongovernmental programs and actions and conclude that considerably 
lower prices for a significant \54\ input into the production of 
subject merchandise would likely result; (3) similar reports that 
analyze, instead, price deviations for significant inputs and conclude 
that such deviations resulted, in whole or in part, from certain 
government or nongovernmental actions; and (4) Commerce's previous 
determinations, whether they be preliminary, final, or in a remand 
redetermination, that information on the record did, or did not, 
support the existence of the alleged PMS. Commerce also includes an 
additional type of information on the list, (5), which is unique to 
allegations of a market situation due to weak, ineffective, or 
nonexistent property, intellectual property, human rights, labor, and 
environmental protections, in that pursuant to such an allegation, 
Commerce will consider information derived from other countries where 
those protections are allegedly effectively enforced to determine if 
the lack of protections in the subject country contributed to cost 
distortions.
---------------------------------------------------------------------------

    \54\ As noted above, Commerce has intentionally not defined the 
term ``significant'' for purposes of its usage in the term 
``significant input'' in these regulations. This is because we have 
found that an input might at times be the most expensive input, 
while at other times the value of the input may be small but the 
importance or uniqueness of the input to the function or existence 
of the product makes it significant. For example, the cost of a 
unique microchip in manufacturing an electronic device might be 
relatively inexpensive in comparison to other inputs into the 
production of the device, but because of the importance of the 
microchip to the functions of the device, if the cost of the 
microchip is suddenly reduced by two-thirds, the considerable change 
in price might have out-sized effects on the overall cost of 
production of the device. We would find that such an input in that 
scenario is also a ``significant'' input.
---------------------------------------------------------------------------

    In requesting information from the public in the PMS 
ANPR,55 Commerce not only requested comments on the type of 
information that would be helpful to consider in most PMS analyses, but 
also requested comments on information that Commerce would not be 
required to consider, as a rule, in every case involving a cost-based 
PMS analysis.\56\ The reason behind this question is one of 
administrability and practicability. It has been our experience that 
some parties will provide information to Commerce that may seem 
relevant, but does not assist the agency's analysis. To save all 
parties involved time and effort, we have therefore determined to 
propose that Commerce not be required to consider

[[Page 29863]]

four types of information and associated arguments in every cost-based 
PMS analysis.\57\
---------------------------------------------------------------------------

    \55\ See PMS ANPR, 87 FR 69235.
    \56\ Id.
    \57\ This is not to say that Commerce is prohibited from 
considering such information and arguments, but we propose that 
Commerce be not required in most cases to consider data that, based 
on the agency's experience, are not helpful to the PMS analysis.
---------------------------------------------------------------------------

    For the first example of information that we will not be required 
to consider as part of our analysis in most of our cost-based PMS 
cases, in paragraph (d)(3) of proposed Sec.  351.416, we describe an 
argument in which a party claims that because the interested party 
alleging the existence of a PMS is unable to provide data on the record 
precisely quantifying the distortions of prices or costs in the market 
of the subject country, that inability to quantify the distortions with 
precision should prohibit a finding of a PMS. We do not find the lack 
of precision in the quantifiable data relating to the distortion of 
costs to be fatal to a PMS determination. Accordingly, we have proposed 
in the regulation that we will not normally consider challenges to the 
precision of such quantifiable data in our cost-based PMS analysis. As 
we explain above, the Federal Circuit in NEXTEEL explicitly stated that 
Commerce is not required to precisely quantify a distortion in costs by 
the PMS to find the existence of a PMS.\58\ This is logical because 
often Commerce has information on the record that shows certain 
governmental or nongovernmental actions (or inactions) that are likely 
to have an impact on the costs of production of subject merchandise in 
the market of the subject country, given the nature of the action or 
inaction and the product at issue, but no party has quantified, with 
precision, that impact. In such a case, the record might reflect that 
it is reasonable to determine that a PMS exists from the evidence 
before Commerce, but some interested parties would argue that we 
nonetheless should be prohibited from making such a determination 
because of the absence of precise quantifiable data. Although Commerce 
has the authority to consider such an argument, such an argument is 
typically unhelpful to our analysis. We therefore propose that Commerce 
would not be required to consider such an argument in its PMS analysis.
---------------------------------------------------------------------------

    \58\ See NEXTEEL, 28 F.4th at 1234.
---------------------------------------------------------------------------

    Second, we propose that Commerce would not be required to consider 
speculative costs or prices. In the event that an interested party 
speculates what the costs of the subject merchandise, or prices or 
costs of a significant input into the production of subject 
merchandise, would be absent the alleged market situation, or its 
contributing circumstances, without objective documentation to support 
such speculation, we would not be required to consider such speculative 
costs or prices in our analysis. Although Commerce need not use precise 
quantifiable data to find the existence of a PMS, Commerce also should 
not rely on mere hypotheticals and speculations, with no objective data 
to support such claims. Accordingly, we propose that Commerce not be 
required to address proffered costs and prices in its PMS analysis if 
those costs and prices are not supported by independent and government 
studies, former Commerce cost-based PMS determinations, or certain 
other economic information.
    Third, we proposed that Commerce not be required to consider 
information about actions taken or not taken by governments, state 
enterprises, or other public entities in other market economy countries 
in comparison with the actions taken or not taken by the government of 
the subject country. In general, actions taken by each government that 
might distort costs within its own borders have no bearing on the 
market-distorting actions taken by governments in other countries. An 
exception is when Commerce is considering whether government inaction 
in providing certain protections distorts the costs of production in 
the subject country, in which case Commerce might find certain actions 
taken by other governments in other countries to be informative and 
potentially beneficial. In such cases, if a government provides weak, 
ineffective, or nonexistent property, intellectual property, human 
rights, labor, or environmental protections to a producer of subject 
merchandise or a supplier of significant inputs into the production of 
subject merchandise, the lack of such protections might distort the 
costs of production, but the only potential way to identify such 
distortions is to consider the protections granted by other governments 
to similar industries in other countries and the costs of production 
for those similar industries under such governmental protections. 
Therefore, we propose that Commerce would not normally be required to 
consider the actions or inactions of governments of countries other 
than the subject country in our analysis, except when there are alleged 
market situations involving government failures to implement or enforce 
certain protections.
    Finally, we propose that Commerce would not be required to consider 
references to historical policies and previous actions taken by the 
government of the subject country with respect to the subject 
merchandise or a significant input into the production. Parties 
sometimes claim that because an export restriction, or other market-
distorting policy or practice, has existed for many years in the 
subject country, the costs resulting from those actions or policies are 
now part of the ``ordinary course of trade'' for that country, and thus 
Commerce cannot determine that such actions or policies ``distort'' 
costs. We do not find such a claim to be persuasive. As the proposed 
regulation states, ``the pre-existence of government actions or 
inactions, or other circumstances, does not make those situations 
market-based or nullify the distortion of costs during the relevant 
period of investigation or review.'' We find that actions taken by a 
foreign government that are not in accordance with general market 
principles or otherwise result in price suppression will normally 
distort costs of production and will continue to distort costs of 
production every year they are in effect. Therefore, we propose that 
Commerce not be required to consider such unreasonable claims and 
information in its market situation analysis.
    When Commerce determines the existence of a market situation in the 
subject country such that the cost of materials and fabrication or 
other processing does not accurately reflect the cost of production in 
the ordinary course of trade, proposed paragraph (e) of Sec.  351.416 
requires that Commerce next consider if that market situation is 
particular. Under proposed paragraph (e)(1) of Sec.  351.416, a market 
situation is particular if the resulting distortions in prices or costs 
impact only certain products or certain parties in the subject country. 
The distinction turns on whether the situation impacts a ``particular 
market,'' or all market activity in the country. If it impacts all 
market activity in a country in some way, Commerce must determine 
whether the market situation impacts certain parties or products to a 
greater extent than others, and is therefore still ``particular'' for 
purposes of a PMS analysis, or if the impact is generally spread 
uniformly among the country as a whole. In response to the numerous 
comments which we received from outside parties on this issue, proposed 
paragraph (e)(1) of Sec.  351.416 also makes clear that: (1) a market 
situation may be considered particular even if a large number of 
distinct products or parties are affected; (2) a market situation can 
exist in multiple countries and still be considered ``particular'' for 
purposes of

[[Page 29864]]

a PMS analysis if Commerce determines that the market situation 
distorts the costs of only certain products or affects only certain 
parties in the subject country; and (3) a market situation can be 
determined to be particular in several distinct circumstances, and can 
be particular to certain products, importers, producers, exporters, 
purchasers, users, enterprises, or industries, either individually or 
in combination with other entities. It is important to emphasize that 
although this list of particular entities that might be affected by a 
PMS is not exhaustive, multiple outside parties requested that Commerce 
emphasize in its regulations that for a market situation to be 
particular, it need not be ``unique'' or excessively narrow in its 
application. We agree with those concerns, and believe the language in 
the proposed regulation, including the list of particular entities that 
might be affected by potential market situations, will provide clarity 
in that regard.
    Just as the regulations under proposed paragraph (d)(2) of Sec.  
351.416 list information which Commerce normally will consider helpful 
in determining if a market situation exists that distorts the costs of 
production, proposed paragraph (e)(2) lists information which Commerce 
will likely find helpful in determining if a market situation is 
particular. Specifically, the provision states that Commerce may 
consider all relevant information submitted on the record by interested 
parties including, but not limited to, the size and nature of the 
market situation, the volume of merchandise potentially impacted by the 
price or cost distortions resulting from the market situation, and the 
number and nature of the potential entities affected by those price or 
cost distortions.
    We recognize that each type of PMS is distinct and different from 
others and, therefore, the factors Commerce considers in its 
particularity analyses will largely vary from market situation to 
situation. For example, if Commerce determines that a particular 
company has been permitted to produce subject merchandise without 
providing effective pollution controls or labor, health, and safety 
protections, the analysis Commerce will conduct to determine if such a 
circumstance is particular will be different from an analysis of a 
country-wide non-countervailable subsidy that benefits producers of 
certain aluminum products. For this reason, in these proposed 
regulations, we have refrained from identifying information which 
should not be required as part of our particularity analysis, because 
data which are important to determine if one market situation is 
particular might in fact be unimportant for another.
    In the PMS ANPR we also requested ``comments on adjustments which 
Commerce may make to its calculations when it determines the existence 
of a PMS, but the record before it does not allow for the 
quantification of cost distortions.'' \59\ As a matter of 
clarification, the Federal Circuit held in NEXTEEL that nothing ``in 
the statute requires Commerce to quantify the distortion precisely.'' 
\60\ Accordingly, under proposed paragraph (f) of Sec.  351.416, if 
Commerce is ``unable to precisely quantify distortions in costs based 
on record information,'' then Commerce may use any reasonable 
methodology to adjust its calculations based on the relevant 
information available. This proposed language was developed after 
consideration of the many adjustments suggested by outside parties 
including previously calculated CVD rates, regression analysis models, 
a benchmarking analysis, and the use of surrogate values. Although we 
agree that each of these suggested adjustments to Commerce's cost 
calculations might be warranted in certain circumstances, we propose 
that, as a general matter, when a PMS cannot be precisely quantified, 
Commerce may use a methodology to adjust its calculations that is 
reasonable based on the facts in the record before it.
---------------------------------------------------------------------------

    \59\ See PMS ANPR, 87 FR 69235.
    \60\ See NEXTEEL, 28 F.4th at 1235 (emphasis added).
---------------------------------------------------------------------------

    Many commenters on the PMS ANPR also indicated that it would be 
beneficial to both Commerce and the public if the regulations provided 
examples of particular market situations that distort, or contribute to 
the distortion of, the costs of production in the subject country. 
Therefore, proposed paragraph (g) provides 12 examples of potential 
particular market situations that alone, or in conjunction with other 
examples, may be addressed by Commerce in its AD calculations.
    In two of the examples (examples six and seven), a foreign 
government does not require an importer, producer, or exporter of the 
subject merchandise to pay duties or taxes associated with certain 
trade remedies for a significant input, or the foreign government 
rebates the duties or taxes paid by those parties.\61\ Because in both 
of those examples the market distortion can be precisely quantified by 
the unpaid or rebated duties, those examples do not require further 
analysis.
---------------------------------------------------------------------------

    \61\ For example, Commerce has found the nonpayment of ADs and 
safeguard measures to be a PMS. See, e.g., Circular Welded Carbon 
Steel Pipes and Tubes from Thailand: Final Results of Antidumping 
Duty Administrative Review and Final Determination of No Shipments; 
2017-2018, 84 FR 64041 (November 20, 2019), and accompanying IDM at 
Comment 2.
---------------------------------------------------------------------------

    Each of the remaining 10 examples requires that Commerce: (1) 
identify the potential market situation; (2) analyze and determine if 
the potential market situation likely contributes to cost or price 
distortions (and is therefore, in fact, a market situation); (3) 
analyze and determine whether the market situation is particular; and 
(4) assess whether the cost or price distortions ``can be addressed in 
the Secretary's calculations of the costs of production.''
    The first five examples apply only when the alleged PMS contributes 
to price or cost distortions of a significant input into the production 
of subject merchandise in the subject country. The first example 
involves the concern of global overcapacity; regardless of the impact 
of such overcapacity of the significant input on other countries, if 
the supply of the input is excessive enough to contribute to 
distortions of the price or cost of that input in the subject country, 
Commerce may address that overcapacity through its calculations.
    On the other hand, the second, third, fourth, and fifth examples 
pertain to circumstances involving the foreign government; specifically 
market situations in which: (A) the foreign government, a state-owned 
enterprise or other public entity is the predominant producer of a 
significant input; (B) the foreign government, a state-owned 
enterprise, or other public entity intervenes in the market for a 
significant input; (C) the foreign government limits exports of a 
significant input; and (D) the foreign government imposes export taxes 
on a significant input.
    Four of the remaining examples involve government, state-owned 
enterprise, or other public entity actions or inactions that contribute 
to distortions to either the price or the cost of a significant input 
into the production of subject merchandise, or directly to the overall 
cost of production of the subject merchandise itself. The eighth and 
ninth examples pertain to market situations in which those entities 
either provide direct financial assistance or other support to 
producers or exporters of the subject merchandise or significant 
inputs,\62\ or otherwise

[[Page 29865]]

influences the production of subject merchandise or significant inputs 
through indirect actions, such as domestic-content and technology 
transfer requirements. The tenth and eleventh examples pertain to 
government inaction, in which the foreign government or other public 
entity provides weak or ineffective property, intellectual property, 
human rights, labor, or environmental protections, which contribute to 
distortions in the costs of production of the subject merchandise or 
price or cost of significant inputs, or provides no protections 
whatsoever, and again, the result is the likely distortion of the costs 
of production of the subject merchandise or price or cost distortions 
of a significant input.
---------------------------------------------------------------------------

    \62\ To be clear, government assistance may take the form of a 
subsidy, whether countervailable or not, but may also take other 
forms. A countervailable subsidy requires that the subsidy be a 
financial contribution that provides a benefit and is specific. See 
sections 771(5) and (5A) of the Act. However, government assistance 
need not be countervailable to distort cost of production. 
Therefore, Commerce may consider if non-countervailable government 
assistance satisfies the criteria of a cost-based PMS.
---------------------------------------------------------------------------

    Finally, the last example involves no government involvement, but 
instead pertains to business relationships between producers and input 
suppliers, such as strategic alliances or noncompetitive arrangements, 
in which the prices of the significant inputs are not determined in 
accordance with market-based principles, and those relationships likely 
contribute as well to distortions in the costs of production.
    As we explain above, there are many types of distinct circumstances 
and sets of circumstances that may distort the costs of production in a 
subject country, and many combinations of potential products and 
parties that may be particularly impacted by those situations. 
Accordingly, although we believe these 12 examples are illustrative and 
helpful, we wish to make clear that the list of examples in proposed 
paragraph (g) of Sec.  351.416 is not intended to be exhaustive.
    Finally, we acknowledge in proposed paragraph (h) of Sec.  351.416 
that when Commerce determines the existence of a cost-based PMS, it is 
possible that in some cases that Commerce may conclude that the cost-
based PMS contributes to the existence of a price-based PMS, in 
accordance with section 771(15) of the Act. We expect that including 
this provision in the regulation will provide additional clarity to our 
enforcement of both types of particular market situations addressed in 
the Act.
    The proposed regulation does not include a ``cost-based improper 
comparison'' provision as suggested by some commenters, in which 
Commerce would presume as a matter of course that when it determines 
that there is a cost-based PMS that distorts the market to a certain 
degree, a proper comparison between foreign market prices and U.S. 
prices would automatically no longer be possible and Commerce would 
therefore determine normal value using a constructed value. Even in 
hypothetical situations in which a cost-based PMS is so distortive that 
it alone could lead to an improper comparison of prices between 
markets, Commerce would still need to consider the facts of the record 
before it, in the first instance, before reaching such a conclusion. We 
do not believe that it would be appropriate for the proposed 
regulations to incorporate such a presumption as to Commerce's 
conclusions on such a matter, and therefore the proposed regulation 
does not contain such a presumption.
    Commerce considered certain other suggestions by commenters and, 
although many were helpful and relevant, we have declined to include 
them in this proposed rule. For example, one commenter suggested that 
Commerce expand its consideration of government assistance in its cost-
based PMS analysis to include transnational subsidies, i.e., subsidies 
conferred by the government of a country that is not the exporting 
country in which the class or kind of merchandise is produced, 
exported, or sold. As we have not, to date, applied a cost-based PMS 
analysis in any investigation or administrative review to transnational 
subsidies, and believe that such an application in the first instance 
would require analysis and consideration of the program and facts 
unique to that program, we do not consider it appropriate to 
incorporate such an analysis into the proposed regulations.
    In addition, we have not incorporated submission deadlines in the 
proposed Sec.  351.416, but do want to emphasize that moving the 
deadline for the sales-based PMS allegation later in the proceeding, as 
suggested by some commenters, would make it more difficult for the 
agency to determine if a PMS exists that prevents a proper comparison 
of foreign market prices and U.S. prices. Thus, although we continue to 
have the ability to set time limits outside of these regulations in our 
investigations and administrative reviews, we have not proposed and do 
not intend to modify either of the deadlines for submitting a sales-
based or cost-based PMS allegation.
    Furthermore, this proposed rule does not incorporate a general 
``rebuttable presumption'' in its regulations, as suggested by 
commenters, that reflects that, when Commerce determines that a cost-
based PMS exists in the subject country such that the cost of materials 
and fabrication or other processing does not accurately reflect the 
cost of production in the ordinary course of trade in a particular 
segment of a proceeding, in future segments of the same proceeding 
Commerce would presume that the distortion of costs and a PMS continues 
to exist until a producer or exporter provides affirmative evidence 
that rebuts that presumption and shows that costs are no longer being 
distorted by the PMS. Commerce considered whether such a general 
presumption should exist only for those interested parties who were 
actually reviewed when Commerce found a PMS to exist in the first 
place, whether the presumption should apply to all potential parties 
impacted by a PMS in a given AD investigation or administrative review, 
or whether the presumption should apply to all future parties 
potentially impacted by a PMS under a given AD order. There was even a 
comment that Commerce should ``carry'' a PMS determination ``across 
cases'' such that an affirmative PMS finding in a particular market in 
one case would establish the existence of a PMS in that same market in 
other cases involving different merchandise unless new information is 
placed on the record of those other cases that contradicts that 
presumption.
    Commenters frequently emphasized that, as with Commerce's non-
market economy presumption, under section 773(c) of the Act, a finding 
of a cost-based PMS is also an acknowledgement that there are ``non-
market principles'' at play, and therefore, like the non-market economy 
presumption, when Commerce finds a cost-based PMS to exist, the burden 
to prove that it no longer exists in future segments should lie with 
the alleged recipients and beneficiaries of the cost-based PMS and not 
with Commerce.
    This proposed rule does not include a general cost-based PMS 
rebuttable presumption because, unlike a non-market economy 
designation, which applies to the entire economy, a cost-based PMS is 
focused on a distinct circumstance or set of circumstances, and may be 
particular to certain products or individuals one year, and then not 
apply to those products or individuals in the subsequent years. In 
fact, it is our observation that it is not uncommon for the existence 
of a PMS to change from period to period. Although ``non-market 
principles'' can be at play in finding that a PMS distorts costs, and 
some particular market situations may reliably continue from year to 
year, given the wide variety of types of particular market situations, 
the multiple possible PMS beneficiaries, and the constantly changing 
nature of

[[Page 29866]]

certain cost-based particular market situations, we determine that 
incorporating a general and overarching rebuttable presumption into 
these regulations for all cost-based particular market situations is 
inappropriate at this time.
    Finally, there were several comments on the appropriate analysis 
which Commerce should apply in determining if a PMS is distorting the 
cost of production. There were certain commenters that suggested that 
if Commerce qualitatively determines the existence of a market 
situation, Commerce should presume from that conclusion that 
distortions in prices or costs are caused by the PMS. On the other 
hand, there were commenters that suggested that Commerce must prove a 
``causal link'' between a PMS and cost distortions to prove that the 
costs do not accurately reflect the cost of production in the ordinary 
course of trade. One commenter even suggested that a cost-based PMS can 
only exist if it is so distortive as to create a price-based PMS that 
prevents a proper comparison, while other commenters expressed concerns 
with Commerce's description in its PMS ANPR of the Federal Circuit's 
analysis in NEXTEEL with respect to countervailable subsidies, 
suggesting that Commerce incorrectly claimed that the Federal Circuit 
required a ``pass-through'' analysis for Commerce to find the existence 
of a PMS under those circumstances.
    In considering comments on the appropriate standard that Commerce 
should apply in determining whether a PMS is distorting the cost of 
production, we recognize the real-world complexities and effects of 
particular market situations in concluding that a direct cause and 
effect analysis is simply not realistic or appropriate. For example, 
prices for specific inputs might not be publicly available for 
comparison purposes, or it might be impossible to precisely quantify 
the distortive effects of unenforced intellectual property protections, 
the failure to impose environmental protections, the use of slave or 
forced labor, or the imposition of domestic content or technology 
transfer requirements. Unquestionably, all these circumstances could 
contribute to market distorting situations, but adopting a direct 
``cause and effect'' or ``pass through'' analysis would allow many of 
those market-distorting situations to avoid being addressed as a PMS. 
Accordingly, we have not adopted a ``cause and effect'' standard in 
this proposed rule to identify the impact of a PMS on cost (and input 
price) distortions.
    On the other hand, neither have we adopted a presumption that all 
potential cost-based particular market situations distort costs absent 
information on the record that would support a claim of such distortion 
or suggest that an impact on costs or prices occurred or might be 
occurring. We do not believe such a presumption would be reasonable 
given the fact-intensive nature of PMS determinations.
    Accordingly, under proposed paragraph (g) of Sec.  351.416 Commerce 
will consider, on a case-by-case basis, all relevant information on the 
record pertaining to an alleged cost-based PMS and determine whether it 
is more likely than not that the alleged market situation is 
contributing to the distortion of prices or costs in the subject 
country. Using this ``likely to contribute to price or cost distortions 
standard,'' Commerce will take into consideration both the nature and 
details of an alleged PMS, as well as information relative to the costs 
of production of the subject merchandise or prices and costs of a 
significant input into the production of the subject merchandise. We 
believe that such a standard reflects the reality of a cost-based PMS 
analysis, while still being tied to the relevant evidence on the record 
pertaining to possible cost or price distortions.\63\
---------------------------------------------------------------------------

    \63\ We emphasize that our PMS analysis is based on record 
evidence. Although Commerce does not believe the application of a 
direct cause-and-effect analysis to particular market situations 
would satisfy the purpose of the legislation, and could in fact 
allow programs to go unaddressed that otherwise impact and suppress 
the costs of production, substantial evidence on the record still 
must support a determination that a PMS was more likely than not to 
contribute to distortions in the prices or costs of significant 
inputs or the cost of producing the subject merchandise. Therefore, 
Commerce may only find the existence of a PMS if the parties have 
submitted sufficient record information to demonstrate that the 
market situation exists, there has been a distortion in costs, and 
the market situation has more likely than not contributed to that 
distortion in costs.
---------------------------------------------------------------------------

    With respect to the Federal Circuit's analysis in NEXTEEL, Commerce 
determined in an antidumping administrative review that the Korean 
government provided subsidies to producers of hot-rolled steel flat 
products in Korea, and that those subsidies distorted the market costs 
of Korean hot-rolled coil (HRC), a significant input into the 
production of the merchandise under review. Indeed, Commerce concluded 
in the administrative review that because HRC, as an input, constituted 
approximately 80 percent of the cost of the subject merchandise, any 
distortions to the cost of HRC would have a significant impact on the 
overall production costs of that merchandise. In determining the 
existence of the countervailable subsidy, Commerce relied on its 
determination in the preceding investigation, which was based on 
application of adverse facts available, pursuant to sections 776(a) and 
(b) of the Act. The Federal Circuit, upon review of the record before 
it, and the remand redeterminations issued by Commerce in the 
litigation, concluded that even after the agency provided more analysis 
on remand, ``the record evidence is at best mixed on whether 
significant Korean government subsidies existed during the period of 
review.'' \64\ Further, after explaining that Commerce was required to 
show the subsidies ``affected the price of the input'' to the extent 
that they ``did `not accurately reflect the cost of production in the 
ordinary course of trade,' 19 U.S.C. 1677b(e),'' the Federal Circuit 
explained that Commerce had neither made a ``finding that any subsidies 
were passed through to the prices of HRC,'' or, referencing back to the 
particularity requirement, ``that they affected Korean OCTG producers 
any more than OCTG producers elsewhere.'' \65\
---------------------------------------------------------------------------

    \64\ See NEXTEEL, 28 F.4th at 1235.
    \65\ Id., 28 F.4th at 1235-36.
---------------------------------------------------------------------------

    We agree with the commenters who have explained that the Federal 
Circuit in this decision was not claiming that Commerce was obligated 
to apply a ``pass-through'' analysis every time it analyzes a 
countervailable subsidy to determine if that subsidy has also resulted 
in a cost-based PMS. We do not believe that the Federal Circuit's 
statement was intended to create a new obligation for Commerce to apply 
to allegations that a countervailable subsidy creates a cost-based PMS. 
Further, there is nothing in the Act, legislative history, or even in 
the facts of the administrative review which was before the Court in 
NEXTEEL that would suggest that Commerce is required to conduct an 
analysis which it would not normally even be required to apply in a CVD 
investigation or administrative review.
    However, it is evident that the Federal Circuit did not believe 
that the conclusory nature of Commerce's analysis of the alleged PMS in 
the case before it, which was associated with countervailable subsidies 
to Korean HRC producers, was an adequate basis to determine the 
existence of that particular cost-based PMS.\66\ The Federal Circuit 
mentioned that evidence was ``at best mixed'' of the continued 
existence of the subsidies at issue during the period of review, but 
also highlighted that there was essentially no analysis of the alleged 
effects of those

[[Page 29867]]

subsidies on the input at issue, Korean HRC. In light of the Federal 
Circuit's expressed concerns in NEXTEEL, we propose these regulations 
to provide a less conclusory and more methodical analysis when 
examining if a subsidy-based PMS exists. Accordingly, we believe that 
for most alleged cost-based particular market situations, the 
incorporation of a ``likely to contribute to price or cost 
distortions'' step in Commerce's PMS analysis, separate and removed 
from the identification of the market situation is not only reasonable, 
but satisfies the Federal Circuit's emphasis that an objective analysis 
determine if a PMS ``affects'' prices or costs.

15. Benefit--Sec.  351.503

    This proposed rule includes a proposed amendment involving 
Commerce's CVD benefit regulation at Sec.  351.503. We are proposing 
that we divide paragraph (c) of Sec.  351.503 into two paragraphs. The 
first paragraph would incorporate existing paragraph (c), with an 
additional explanation that Commerce is not required to consider 
whether there has been any change in a firm's behavior because of a 
subsidy.
    The proposed second paragraph would be new and would explain that 
when the government provides assistance to a firm to comply with 
certain government regulations, requirements, or obligations, Commerce 
will normally only measure the benefit of the subsidy and will not be 
required to also consider the compliance costs themselves. This 
proposed paragraph is not intended to change existing Sec.  351.503, 
which is based on the statutory language within sections 771(5)(C) and 
771(6) of the Act and was originally explained by examples in the CVD 
Preamble explicitly demonstrating this point.\67\ However, we are 
proposing this additional language for clarity on the issue of 
compliance costs so that parties will understand that if the firm 
accrues additional costs through compliance with government 
obligations, those costs need not be part of Commerce's benefit 
analysis of the subsidy.
---------------------------------------------------------------------------

    \67\ See CVD Preamble, 63 FR 65361.
---------------------------------------------------------------------------

16. Loans--Sec.  351.505

    With respect to Commerce's CVD loan regulation, we propose moving 
current Sec.  351.505(d) to a new Sec.  351.505(e) and adding a new 
provision in paragraph (d) titled ``Treatment of outstanding loans as 
grants after three years of no payments of interest or principal.''
    Proposed new Sec.  351.505(d) addresses loans upon which there have 
been no payments of interest and principal over a long period of time. 
Our current practice is that when we examine these types of loans in 
which there have been no payments of either interest or principal over 
an extended period of time we treat them as interest-free loans. It is 
evident, however, that if the foreign government or a government-owned 
bank has not collected interest or principal payments on an outstanding 
loan after a three-year period, the foreign government made a decision 
to simply not collect that interest or principal at all. We therefore 
propose that, if no interest and principal payments have been made to 
the government or a government-owned bank on a loan for three years, 
Commerce would normally treat the outstanding loan as a grant. To 
ensure consistency with section 771(5)(E)(ii) of the Act, we also 
propose that we would not treat this type of loan as a grant if the 
respondent can demonstrate that this nonpayment of interest and 
principal is consistent with the terms of a comparable commercial loan 
that it could obtain on the market.
    We propose a three-year period as the triggering time period for 
treating a loan as a grant. We considered standard practices for the 
period in which banks write off bad debt; however, these practices did 
not provide sufficient administrative and public clarity and guidance 
for purposes of the CVD regulations. For example, according to a survey 
by the Bank for International Settlements, most jurisdictions do not 
prescribe a timeline for the write-off of loans, leaving this to the 
discretion of banks.\68\ According to the World Bank Group, loans are 
usually written off if there are no realistic prospects of 
recovery.\69\ International Financial Reporting Standards (IFRS) 9 
requires a whole or partial write-off if ``an entity has no reasonable 
expectations of recovering the contractual cash flows on a financial 
asset.'' \70\ According to the Financial Accounting Manual for Federal 
Reserve Banks, January 2017 at Chapter 81.02, a bank should recognize 
an allowance for loan loss when it is probable that the bank will be 
unable to collect all amounts due, including both the contractual 
interest and principal payments under the loan agreement. Therefore, we 
propose a three-year period of nonpayment of interest and principal on 
the outstanding loan to identify when an outstanding loan would be 
treated as a grant. As noted, respondents may demonstrate that the loan 
should not be treated as a grant by showing that they could obtain a 
comparable loan with these terms of nonpayment.
---------------------------------------------------------------------------

    \68\ See Non-Performing Loan Write-Offs: Practices in the CESEE 
Region, Policy Brief--September 2019, World Bank Group, at 4.
    \69\ Id. at 2.
    \70\ Id.
---------------------------------------------------------------------------

17. Equity--Sec.  351.507

    For Commerce's equity regulation, we propose moving current Sec.  
351.507(c), with minor modifications, to a new Sec.  351.507(d) and 
adding a new provision in paragraph (c) titled ``Outside investor 
standard.''
    The proposed investor standard would codify our long-standing 
practice in which the analysis of equity is conducted with respect to 
whether an outside private investor would make an equity investment 
into that firm under its usual investment practice, not whether a 
private investor who has already invested would continue to invest. 
Although not explicitly discussed in the CVD Preamble, in our analysis 
as to whether a firm is equityworthy, Commerce makes a distinction 
therein between ``inside'' shareholders and private ``outside'' 
investors.\71\ The CVD Preamble states that under the 1989 Proposed 
Regulations,72 an equityworthy firm was one that showed ``an 
ability to generate a reasonable rate of return within a reasonable 
period of time,'' and in 1998 Commerce codified that understanding in 
Sec.  351.507(a)(4)(i).\73\
---------------------------------------------------------------------------

    \71\ See CVD Preamble, 63 FR 65373.
    \72\ Id. (referencing Notice of Proposed Rulemaking and Request 
for Public Comments (Countervailing Duties), 54 FR 23366 (May 31, 
1989) (1989 Proposed Regulations).
    \73\ Id.
---------------------------------------------------------------------------

    This standard has long been part of Commerce's practice. For 
example, in 1986, in Groundfish from Canada,74 Commerce 
found that the company, Fishery Products International Limited (FPIL), 
was unequityworthy at the time of its reorganization. Although one 
private investor exchanged debt for an equivalent amount of equity in 
FPIL at the time of the government equity infusion, we did not consider 
that transaction to be an appropriate gauge by which to measure the 
government's infusion because, at that time, it seemed that the private 
investor's only chance for recovering the money it had already loaned 
to FPIL was to help it reorganize. Therefore, Commerce recognized that 
in Groundfish from Canada there may be motivations of an inside 
investor or lender to provide additional equity into a firm to keep the 
firm from failing in

[[Page 29868]]

an attempt to recover a previous investment.
---------------------------------------------------------------------------

    \74\ See Final Affirmative Countervailing Duty Determination; 
Certain Fresh Atlantic Groundfish from Canada, 51 FR 10041, 10047 
(March 24, 1986) (Groundfish from Canada).
---------------------------------------------------------------------------

    Also in 1986, Commerce explained in Stainless Plate from the United 
Kingdom 75 that examining past investments and sunk costs 
may be useful tools for corporate management in deciding how long to 
operate a loss-incurring company, or in evaluating proposed projects, 
but they are not relevant to the reasonable investor test used in our 
analysis of equityworthiness.\76\
---------------------------------------------------------------------------

    \75\ See Stainless Steel Plate from the United Kingdom; Final 
Results of Countervailing Administrative Review, 51 FR 44656 
(December 11, 1986) (Stainless Plate from the United Kingdom).
    \76\ See Final Affirmative Countervailing Duty Determination: 
Certain Steel Products from Austria, 58 FR 37217, 37225 (July 9, 
1993) (Steel Products from Austria), at the General Issues Appendix.
---------------------------------------------------------------------------

    Commerce provided further explanation regarding the outside 
investor standard in the 1989 CVD investigation of Steel Wheels from 
Brazil.77 Commerce explicitly stated that we do not examine 
equityworthiness based on the motivations of an owner-investor. 
Commerce explained that a rational investor does not let the value of 
past investments affect present or future decisions. The decision to 
invest is dependent only on the marginal return expected from each 
additional equity investment and these investments should not be 
affected by past investments or sunk costs.
---------------------------------------------------------------------------

    \77\ See Final Affirmative Countervailing Duty Determination; 
Steel Wheels from Brazil, 54 FR 15523, 15529-30 (April 18, 1989) 
(Steel Wheels from Brazil), at Comment 10.
---------------------------------------------------------------------------

    Subsequently, in 1993, within the General Issues Appendix attached 
to the Steel Products from Austria CVD final determination, Commerce 
provided further elaboration on the standard and prospective nature of 
Commerce's equityworthy analysis with respect to similar insider 
investor arguments raised by various respondents.\78\ Commerce stated 
that the fact that an inside investor may be influenced by other 
considerations extending beyond the attractiveness of the particular 
investment cannot be permitted to determine whether or not a subsidy 
arises out of that new investment. Consequently, the absence or 
presence of previous investments, and the status of those investments 
in terms of whether they have generated profits or losses, are 
extraneous considerations when looking at the equityworthiness of 
potential additional investments in a firm.
---------------------------------------------------------------------------

    \78\ See Steel Products from Austria, 58 FR 37225 (General 
Issues Appendix).
---------------------------------------------------------------------------

    Nearly two decades later, in 2012, in Refrigerators from Korea, 
Commerce did not rely on the equity investments made by private 
investors that participated with the government in a conversion of debt 
into equity as a benchmark for measuring equityworthiness.\79\ Commerce 
explained that the requirement for making an equityworthiness 
determination pursuant to Sec.  351.507(a)(4) is to determine whether a 
reasonable private investor, at the time the government-provided equity 
infusion was made, would invest in a firm based on the firm's ability 
to generate a reasonable rate of return within a reasonable time. The 
private investors that participated with the government in the debt-to-
equity conversions were existing creditors attempting to mitigate their 
losses from non-performing loans; they were not considering whether or 
not to purchase shares based on the projected rates of return. Commerce 
concluded its analysis of the issue by stating that the standard for 
determining whether a firm is equityworthy is not whether a private 
investor who already has invested in the firm would continue to invest, 
but rather whether an outside private investor would make an equity 
investment.\80\
---------------------------------------------------------------------------

    \79\ See Bottom Mount Combination Refrigerator-Freezers from the 
Republic of Korea: Final Affirmative Countervailing Duty 
Determination, 77 FR 17410 (March 26, 2012) (Refrigerators from 
Korea), and accompanying IDM at Comment 26.
    \80\ Id.
---------------------------------------------------------------------------

    In nearly 40 years of case precedent, in Commerce's analyses of 
whether a company is equityworthy and whether an equity investment by 
the government or an authority provides a benefit, Commerce normally 
examines the investment from the perspective of whether an outside 
private investor would make that investment, not from the perspective 
of whether an investor who already has invested in the firm would 
continue to make new investments. The actions of a private investor 
that already has equity or debt in a company that is subject to an 
equityworthiness examination would be considered from the perspective 
of a new private investor making an initial investment in the firm and 
not from the perspective of an owner, shareholder, or creditor of the 
firm. Accordingly, we have reflected that standard in the proposed 
modification to the regulation.
    The other proposed change to the equity regulation is to modify the 
allocation period of the benefit. Currently, the benefit conferred by 
equity will be allocated over the same time period as a non-recurring 
subsidy under Sec.  351.524(d), which is the average useful life (AUL) 
of assets. This standard works well for the vast majority of the cases 
in which Commerce finds a countervailable equity benefit. However, 
there are cases such as DRAMs from Korea 81 where this 
regulatory standard can lead to a result that appears to be 
inconsistent with the purpose of the CVD law to provide relief to the 
domestic industry from unfair and distortive foreign government 
subsidies.
---------------------------------------------------------------------------

    \81\ See Final Affirmative Countervailing Duty Determination: 
Dynamic Random Access Memory Semiconductors from the Republic of 
Korea, 68 FR 37122 (June 23, 2003) (DRAMs from Korea), and 
accompanying IDM at Comment 8.
---------------------------------------------------------------------------

    In DRAMs from Korea, Commerce investigated a massive government-led 
bailout and debt restructuring of the semiconductor manufacturer Hynix 
Semiconductor, Inc. (Hynix) that was implemented in 2001, to prevent 
the company's financial collapse. An essential part of this 2001 
government-led bailout of Hynix was the conversion of existing debt 
into equity and the forgiveness of debt. While Commerce found that this 
massive government bailout provided countervailable subsidies to Hynix 
in the form of both debt-to-equity conversion and debt forgiveness, the 
AUL for the dynamic random access memory semiconductors industry was 
only five years. Therefore, due to the five-year AUL period, the 
determination that this massive 2001 government bailout of Hynix 
provided countervailable subsidies to Hynix provided relief to the U.S. 
industry for only two years after the issuance of the CVD order.
    As the administering authority, we have concluded that a situation 
like that in DRAMs from Korea, where a massive countervailable 
government bailout of a firm or industry will be offset by CVDs for 
only such a limited period, is unreasonable. Therefore, we propose to 
modify Sec.  351.507 to state that the benefit conferred by an equity 
infusion shall be allocated over a period of 12 years, or the same 
period as a non-recurring subsidy under Sec.  351.524(d), whichever is 
longer.
    We have chosen the allocation period of 12 years in accordance with 
an analysis of Commerce's CVD measures from 1995 to 2020, conducted by 
the Congressional Research Service in 2021.\82\ According to the 
Congressional Research Service, the vast majority of U.S. CVD measures 
during that period were applied to four industries: (1) Base Metals; 
(2) Products of Chemical and Allied Industries; (3) Resins, Plastics, 
and Rubber; and (4) Machinery and

[[Page 29869]]

Electrical Equipment.\83\ Looking to the Modified Accelerated Cost 
Recovery Asset Life Table,\84\ we determined that those four industries 
fall under five asset classes, which, when averaged, results in a 12-
year class life of asset. Put another way, the AUL for the vast 
majority of products subject to CVD measures since 1995 has been 12 
years. We have concluded that 12 years is a reasonable allocation 
period for purposes of our CVD calculations on average, and 
accordingly, have incorporated that allocation period into our 
regulations.
---------------------------------------------------------------------------

    \82\ See Trade Remedies: Countervailing Duties, Congressional 
Research Service, R46882, dated August 23, 2021, at 15, Figure 5 
``CVD Measures By Sector.''
    \83\ Id.
    \84\ See Internal Revenue Service Publication 946 (2021), Table 
B-2, the Modified Accelerated Cost Recovery Asset Life Table.
---------------------------------------------------------------------------

    We expect that a provision such as this will provide equitable 
relief to the domestic industry from the harm caused by certain foreign 
government countervailable subsidies and have proposed a similar 
modification to the debt forgiveness regulation.

18. Debt Forgiveness--Sec.  351.508

    For the debt forgiveness regulation, we propose a modification to 
Sec.  351.508(c), which currently allocates the benefit of debt 
forgiveness over the same period of time as a non-recurring subsidy 
under Sec.  351.524(d). The modification to paragraph (c) would measure 
the allocation by that period, or over a period of 12 years, whichever 
allocation period is longer.
    The current standard, tied to the AUL of assets, works well for the 
vast majority of the cases in which Commerce finds a countervailable 
equity benefit. However, there are cases such as DRAMs from 
Korea,85 as discussed above, where this regulatory standard 
leads to a result that appears to be inconsistent with the purpose of 
the CVD law to provide relief to the domestic industry from unfair and 
distortive foreign government subsidies.
---------------------------------------------------------------------------

    \85\ See DRAMs from Korea, 68 FR 37122 and accompanying IDM.
---------------------------------------------------------------------------

    Therefore, we propose modifying Sec.  351.508(c) of our CVD 
regulations to state that Commerce will treat the benefit from debt 
forgiveness as a non-recurring subsidy, and will allocate the benefit 
to a particular period in accordance with Sec.  351.524(d), or over 12 
years, whichever is longer. We explain above why the use of 12 years, 
which is based on an average of the AULs for the vast majority of 
products covered by U.S. CVD measures, is reasonable and appropriate. 
We expect that such a provision will provide equitable relief to the 
domestic industry from the harm caused by certain foreign government 
countervailable subsidies. As noted above, this proposed change to the 
allocation period for a debt forgiveness subsidy is similar to the 
proposed change to the equity regulation modification of the allocation 
period of the benefit.

19. Direct Taxes--Sec.  351.509

    For purposes of the CVD regulation addressing direct taxes, we 
propose adding a new paragraph (d), which addresses income tax-related 
subsidies that are untied to particular products or markets. In the CVD 
Preamble, Commerce stated that we consider certain subsidies such as 
payments for plant closures, equity infusions, debt forgiveness, and 
debt-to-equity conversions, not to be tied to certain products or 
markets because they benefit all production.\86\ Commerce also stated 
in the CVD Preamble that we recognized that there may be scenarios 
where the attribution rules that are set forth under Sec.  351.525 do 
not precisely fit the facts of a particular case, and that we are 
``extremely sensitive to potential circumvention of the countervailing 
duty law.'' \87\ Moreover, Commerce concluded that if subsidies 
allegedly tied to a particular product are in fact provided to the 
overall operations of a company, Commerce will attribute the subsidy 
over sales of all products by the company.\88\ In addition, in the 
years following the issuance of the current CVD regulations, Commerce 
determined with respect to a tying claim of tax credits that tax 
credits reduce a firm's overall tax liability which benefits all of the 
firm's domestic production and sales.\89\
---------------------------------------------------------------------------

    \86\ See CVD Preamble, 63 FR 65400.
    \87\ Id.
    \88\ Id.
    \89\ See Large Residential Washers from the Republic of Korea: 
Final Affirmative Countervailing Duty Determination, 77 FR 75975 
(December 26, 2012) (Washers from Korea), and accompanying IDM.
---------------------------------------------------------------------------

    Therefore, based on the language in the CVD Preamble and our 
experience since the issuance of the current CVD regulations, propose 
to add a provision to the CVD regulations that, if a program provides 
for a full or partial exemption, reduction, credit, or remission of an 
income tax, we will normally consider any benefit not to be tied with 
respect to a particular market under Sec.  351.525(b)(4) or to a 
particular product under Sec.  351.525(b)(5). In accordance with this 
provision, even if subsidies are allegedly tied to a particular 
product, if they in fact benefit the overall operations of a firm, we 
will attribute the subsidy to all sales of all the firm's products.
    To be clear, these types of direct tax programs reduce or eliminate 
income taxes paid by a firm. Income taxes are based on a firm's total 
taxable income which is comprised of the overall tax liability 
generated from all the firm's domestic production and sales. Thus, 
these types of direct tax programs benefit the domestic production of a 
firm overall.
    Furthermore, we emphasize that the codification of this practice 
under Sec.  351.509(d) will not impact the attribution standards for 
export subsidies and domestic subsidies that are set forth under Sec.  
351.525(b)(2) and (3). The determination of whether a program is an 
export subsidy or domestic subsidy is made solely under the specificity 
section of the statute at sections 771(5A)(B) and (D) of the Act; 
therefore, the attribution of export subsidies and domestic subsidies 
is based on the specificity of a subsidy, not with respect to the 
standard of whether a benefit from a countervailable subsidy is tied or 
untied.

20. Export Insurance--Sec.  351.520

    With respect to export insurance, we propose a modification to 
Sec.  351.520(a) to include a period of time, normally five years, over 
which Commerce may examine whether premium rates charged were 
inadequate to cover the long-term operating costs and losses of the 
program. If they were inadequate to cover such costs and losses during 
that period of time, then Commerce may determine that a benefit exists.
    As Commerce explained in the CVD Preamble,90 this 
standard of benefit for export insurance is based on paragraph (j) of 
the Illustrative List.\91\ In the CVD Preamble, Commerce stated that in 
determining whether the premiums charged under an export insurance 
program covered the long-term operating costs and losses of the 
program, we anticipated that we would continue to make that 
determination based on the five-year rule.\92\ Since

[[Page 29870]]

1998, when the current CVD regulations were published, we have 
consistently applied a period of five years to analyze whether the 
premiums charged under an export insurance program are adequate to 
cover the long-term operating costs and losses of the program.\93\ 
Therefore, we are proposing to amend Sec.  351.520(a) to include the 
five-year period considered in Commerce's standard export insurance 
benefit analysis.
---------------------------------------------------------------------------

    \90\ See CVD Preamble, 63 FR 65385.
    \91\ See Illustrative List of Export Subsidies, annexed to the 
1994 World Trade Organization Agreement on Subsidies and 
Countervailing Measures as Annex I (Illustrative List); see also SAA 
at 928 (``Unlike existing section 771(5)(A)(i), new section 771(5) 
does not incorporate the Illustrative List of Export Subsidies into 
the statute. The Illustrative List, an annex to the Tokyo Round 
Code, continues in modified form as Annex I to the Subsidies 
Agreement. However, the Illustrative List has no direct application 
to the CVD portion of the Subsidies Agreement. . . . It is the 
Administration's intent that Commerce adhere to the Illustrative 
List except where the List is inconsistent with the principles set 
forth in the implementing bill'').
    \92\ See CVD Preamble, 63 FR 65385.
    \93\ See, e.g., Washers from Korea, 77 FR 75975; and 
Refrigerators from Korea, 77 FR 17410.
---------------------------------------------------------------------------

    Accordingly, any allegation made with respect to an export 
insurance program should be based on a five-year period to satisfy 
Commerce's standard benefit analysis for this program.

21. Calculation of Ad Valorem Subsidy Rate and Attribution of Subsidy 
to a Product--Sec.  351.525

    Commerce proposes a minor change to the language within paragraphs 
(b)(2) and (3) of Sec.  351.525, which concern the attribution of an 
export subsidy and a domestic subsidy. Currently under existing Sec.  
351.525(b)(2), when Commerce determines that a subsidy is specific 
within the meaning of sections 771(5A)(A) and (B) of the Act, because 
the subsidy is in law or fact contingent on export performance, alone 
or as one of two or more conditions, Commerce will attribute that 
export subsidy only to products exported by the firm.
    Similarly, when Commerce determines that a subsidy program is 
specific as a domestic subsidy as defined within the meaning of section 
771(5A)(D) of the Act, then under existing Sec.  351.525(b)(3), 
Commerce will attribute that domestic subsidy to all products sold by 
the firm, including products that are exported.
    As currently written, both Sec.  351.525(b)(2) and (3) use the 
language ``the Secretary will,'' without condition. Under the proposed 
amendment, the language used in both paragraphs (b)(2) and (3) of Sec.  
351.525 will be changed to ``the Secretary will normally.'' The change 
to this section of the regulation would not change our established 
practice of allocating an export subsidy only to products exported by 
the firm and allocating domestic subsidies to all products sold by the 
firm, including exports. The insertion of the word ``normally'' into 
both paragraphs (b)(2) and (3) would merely ensure that there is no 
perceived conflict with the language in paragraphs (b)(2) and (3) and 
the language in Sec.  351.525(b)(7) that allows Commerce to attribute a 
subsidy to multinational production under extremely limited 
circumstances. In addition, the proposed insertion of the word 
``normally'' into both paragraphs (b)(2) and (3) of Sec.  351.525 
indicates a provision of Commerce's discretion.
    Commerce recognizes that, over time, governments have developed 
more complicated and unique subsidy programs around the world, and 
therefore at some point in the future Commerce may encounter a unique 
type of subsidy program that warrants an allocation of an export or 
domestic subsidy in a manner that is otherwise not contemplated by the 
language of existing Sec.  351.525(b)(2) and (3). Accordingly, we 
expect that the insertion of the word ``normally,'' as proposed, in the 
regulation would acknowledge that Commerce retains the flexibility to 
address the CVD law in a manner that is consistent with the Act, no 
matter how new or unique the foreign subsidy harming the U.S. industry. 
By including such language, we would better ensure that the CVD law is 
applied effectively.

22. Transnational Subsidies--Sec.  351.527

    Finally, Commerce proposes eliminating the current transnational 
subsidies regulation, but reserving the provision for future 
consideration. When the current provision was adopted, Commerce 
explained in the preamble to its regulations that it believed ``neither 
the successorship of section 701 for Subsidies Code members, nor the 
repeal of section 303 by the {Uruguay Round Agreements Act{time} , 
eliminated the transnational subsidies rule,'' on which it indicated 
current Sec.  351.527 was based.\94\ Commerce also stated at that time 
that, based on its ``past administrative experience,'' ``the government 
of a country normally provides subsidies for the general purpose of 
promoting the economic and social health of that country and its 
people, and for the specific purpose of supporting, assisting or 
encouraging domestic manufacturing or production and related activities 
(including, for example, social policy activities such as the 
employment of its people).'' \95\ Commerce's understanding at the time 
was that a government ``would not normally be motivated to promote, at 
what would be considerable cost to its own taxpayers, manufacturing or 
production or higher employment in foreign countries.'' \96\
---------------------------------------------------------------------------

    \94\ CVD Preamble, 63 FR 65404-65405.
    \95\ Countervailing Duties, Proposed Rule, 62 FR 8818, 8847 
(Feb. 27, 1997) (referencing the subsidy attribution regulation 
covering multinational firms).
    \96\ See Final Affirmative Countervailing Duty Determination: 
Certain Steel Products From Austria, 58 FR 37217, 37231 (Jul. 9, 
1993).
---------------------------------------------------------------------------

    Since Sec.  351.527 was adopted, Commerce has observed through its 
administrative experiences that instances in which a government 
provides a subsidy that benefits foreign production are far more 
prevalent. Consequently, the assumptions underlying our interpretation 
of section 701 of the Act have changed. We now believe that our past 
interpretation of section 701 of the Act was overly restrictive. A 
limitation on Commerce's ability to countervail subsidies only if those 
subsidies were provided to entities of a country solely by the 
government of that country, when subsidies from other foreign 
governments would otherwise be determined countervailable under the CVD 
law and could prove injurious to producers of the domestic like 
product, is inconsistent with the very purpose of the CVD law, and we 
do not believe that the language of section 701 of the Act requires 
such a restrictive interpretation. Accordingly, we are proposing to 
eliminate the current regulation preventing consideration of 
allegations of transnational subsidies, and instead reserve the 
provision for future consideration.

Classifications

Executive Order 12866

    The Office of Management and Budget has determined that this 
proposed rule is significant for purposes of Executive Order 12866.

Executive Order 13132

    This proposed rule does not contain policies with federalism 
implications as that term is defined in section 1(a) of Executive Order 
13132 of August 4, 1999, 64 FR 43255 (August 10, 1999).

Paperwork Reduction Act

    This proposed rule does not contain a collection of information 
subject to the Paperwork Reduction Act of 1995, 44 U.S.C. Chapter 35.

Regulatory Flexibility Act

    The Chief Counsel for Regulation has certified to the Chief Counsel 
for Advocacy of the Small Business Administration under the provisions 
of the Regulatory Flexibility Act, 5 U.S.C. 605(b), that the proposed 
rule would not have a significant economic impact on a substantial 
number of small business entities. A summary of the need for, 
objectives of, and legal basis for this rule is provided in the 
preamble, and is not repeated here.
    The entities upon which this rulemaking could have an impact 
include foreign governments, foreign exporters and producers, some of 
whom

[[Page 29871]]

are affiliated with U.S. companies, and U.S. importers. Enforcement and 
Compliance currently does not have information on the number of these 
entities that would be considered small under the Small Business 
Administration's size standards for small businesses in the relevant 
industries. However, some of the entities may be considered small 
entities under the appropriate industry size standards. Although this 
proposed rule may indirectly impact small entities that are parties to 
individual AD and CVD proceedings, it will not have a significant 
economic impact on any such entities because the proposed rule applies 
to administrative enforcement actions, only clarifying and establishing 
streamlined procedures; it does not impose any significant costs on 
regulated entities. Therefore, the proposed rule would not have a 
significant economic impact on a substantial number of small business 
entities. For this reason, an Initial Regulatory Flexibility Analysis 
is not required and one has not been prepared.

List of Subjects in 19 CFR Part 351

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

    Dated: April 25, 2023.
Lisa W. Wang,
Assistant Secretary for Enforcement and Compliance.

    For the reasons stated in the preamble, the U.S. Department of 
Commerce proposes to amend 19 CFR part 351 as follows:

PART 351--ANTIDUMPING AND COUNTERVAILING DUTIES

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

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

0
2. In Sec.  351.104, revise paragraph (a)(1) to read as follows:


Sec.  351.104  Record of proceedings.

    (a) * * *
    (1) In general. The Secretary will maintain an official record of 
each antidumping and countervailing duty proceeding. The Secretary will 
include in the official record all factual information, written 
argument, or other material developed by, presented to, or obtained by 
the Secretary during the course of a proceeding that pertains to the 
proceeding. The official record will include government memoranda 
pertaining to the proceeding, memoranda of ex parte meetings, 
determinations, notices published in the Federal Register, and 
transcripts of hearings. The official record will contain material that 
is public, business proprietary, privileged, and classified. With 
limited and enumerated exceptions, mere citations to hyperlinks, 
website Uniform Resource Locators, or other sources of information do 
not constitute placement of the information from those sources on the 
official record. To be considered part of the official record, the 
information itself must be placed on the record. The limited exceptions 
are as follows: United States statutes and regulations, published 
legislative history, United States court decisions and orders, certain 
notices of the Secretary and Commission published in the Federal 
Register, as well as decision memoranda and reports adopted by those 
notices, and the agreements identified in Sec.  351.101(a). For 
purposes of section 516A(b)(2) of the Act, the record is the official 
record of each segment of the proceeding. For a scope, circumvention, 
or covered merchandise inquiry pertaining to companion antidumping and 
countervailing duty orders conducted on the record of the antidumping 
duty segment of the proceeding, pursuant to Sec. Sec.  351.225, 
352.226, and 351.227, the record of the antidumping duty segment of the 
proceeding normally will be the official record.
* * * * *
0
3. In Sec.  351.225:
0
a. Revise paragraph (c)(1);
0
b. Add paragraphs (c)(2)(x) and (c)(3);
0
c. Revise paragraphs (d)(1) introductory text and (d)(1)(ii);
0
d. Add paragraph (d)(1)(iii);
0
e. Add introductory text to paragraph (f); and
0
f. Revise paragraphs (l)(1), (m)(2), and (q).
    The revisions and additions read as follows:


Sec.  351.225  Scope rulings.

* * * * *
    (c) * * *
    (1) Contents. An interested party may submit a scope ruling 
application requesting that the Secretary conduct a scope inquiry to 
determine whether a product, which is or has been in actual production 
by the time of the filing of the application, is covered by the scope 
of an order. If the product at issue has not been imported into the 
United States, the applicant must provide evidence that the product has 
been commercially produced and sold. The Secretary will make available 
a scope ruling application, which the applicant must fully complete and 
serve in accordance with the requirements of paragraph (n) of this 
section.
    (2) * * *
    (x) If the product has not been imported into the United States as 
of the date of the filing of the scope ruling application:
    (A) A statement that the product has been commercially produced;
    (B) A description of the countries in which the product is sold; 
and
    (C) Relevant documentation which reflects the details surrounding 
the production and sale of that product in countries other than the 
United States.
    (3) Comments on the adequacy of the request. Within 10 days after 
the filing of a scope ruling application under paragraph (c)(1) of this 
section, an interested party other than the applicant is permitted one 
opportunity to submit comments regarding the adequacy of the scope 
ruling application.
* * * * *
    (d) * * *
    (1) Initiation of a scope inquiry based on a scope ruling 
application. Except as provided under paragraph (d)(1)(ii) or (d)(2) of 
this section, within 30 days after the filing of a scope ruling 
application, the Secretary will determine whether to accept or reject 
the scope ruling application.
* * * * *
    (ii) If the Secretary issues questions to the applicant seeking 
clarification with respect to one or more aspects of a scope ruling 
application, the Secretary will determine whether or not to initiate 
within 30 days after the applicant files a timely response to the 
Secretary's questions.
    (iii) If the Secretary does not reject the scope ruling application 
or initiate the scope inquiry within 31 days after the filing of the 
application or the receipt of a timely response to the Secretary's 
questions, the application will be deemed accepted and the scope 
inquiry will be deemed initiated.
* * * * *
    (f) Scope inquiry procedures. The procedures described in subpart C 
of this part (Sec. Sec.  351.301 through 351.308 and 351.312 through 
351.313) do not apply to this paragraph (f).
* * * * *
    (l) * * *
    (1) When the Secretary initiates a scope inquiry under paragraph 
(b) or (d) of this section, the Secretary will notify the Customs 
Service of the initiation and direct the Customs Service to continue 
the suspension of liquidation

[[Page 29872]]

of entries of products subject to the scope inquiry that were already 
subject to the suspension of liquidation, and to apply the cash deposit 
rate that would be applicable if the product were determined to be 
covered by the scope of the order. Such suspension shall include, but 
shall not be limited to, entries covered by the final results of 
administrative review of an antidumping or countervailing duty order 
(pursuant to Sec.  351.212(b)), automatic assessment (pursuant to Sec.  
351.212(c)), a rescinded administrative review (pursuant to Sec.  
351.213(d)), and any other entries already suspended by the Customs 
Service under the antidumping and countervailing duty laws which have 
not yet been liquidated in accordance with 19 CFR part 159.
* * * * *
    (m) * * *
    (2) Companion antidumping and countervailing duty orders. If there 
are companion antidumping and countervailing duty orders covering the 
same merchandise from the samemcountry of origin, the requesting 
interested party under paragraph (c) of this section must file the 
scope ruling application pertaining to both orders on the records of 
both the antidumping duty and countervailing duty proceedings. If the 
Secretary accepts the scope applications on both records under 
paragraph (d) of this section, the Secretary will notify the requesting 
interested party that all subsequent filings should be filed only on 
the record of the antidumping duty proceeding. If the Secretary 
determines to initiate a scope inquiry under paragraph (b) or (d) of 
this section, the Secretary will initiate and conduct a single inquiry 
with respect to the product at issue for both orders only on the record 
of the antidumping duty proceeding. Once the Secretary issues a final 
scope ruling on the record of the antidumping duty proceeding, the 
Secretary will include on the record of the countervailing duty 
proceeding a copy of that scope ruling, a copy of the preliminary scope 
ruling, if one had been issued, and all relevant instructions to the 
Customs Service.
* * * * *
    (q) Scope clarifications. The Secretary may issue a scope 
clarification at any time which provides an interpretation of specific 
language in the scope of an order and addresses other scope-related 
issues.
    (1) Examples of scope clarifications include, but are not limited 
to, the following:
    (i) Whether a product is covered or excluded by the scope of an 
order based on previous scope determinations covering the same or 
similar products;
    (ii) Whether a product covered by the scope of an order is not 
subject to the imposition of antidumping or countervailing duties 
pursuant to a statutory exception to the trade remedy laws, such as the 
limited governmental importation exception set forth in section 
771(20)(B) of the Act;
    (iii) Whether language or descriptors in the scope of an order that 
are subsequently updated, revised, or replaced, continue to apply to 
the product at issue. This includes modifications to the language in 
the scope of an order pursuant to litigation or a changed circumstances 
review under section 751(b) of the Act, and changes to descriptors such 
as Harmonized Tariff Schedule classifications and identified industrial 
standards; and
    (iv) Whether certain third country processing is included in the 
stage of production where the Secretary has determined that the 
essential component of the product is produced or where the essential 
characteristics of the product are imparted, pursuant to paragraph 
(j)(2) of this section, in a previous country-of-origin analysis.
    (2) Examples of the forms taken by scope clarifications include, 
but are not limited to, the following:
    (i) An interpretive footnote to the scope when the scope is 
published or issued in instructions to the Customs Service;
    (ii) A memorandum in the context of an ongoing segment of a 
proceeding; and
    (iii) A Notice of Scope Clarification published in the Federal 
Register.
0
4. In Sec.  351.226:
0
a. Add paragraph (c)(3);
0
b. Revise paragraphs (d)(1) introductory text and (d)(1)(ii);
0
c. Add paragraph (d)(1)(iii);
0
d. Revise paragraph (e)(1);
0
e. Add introductory text to paragraph (f); and
0
f. Revise paragraph (m)(2).
    The additions and revisions read as follows:


Sec.  351.226  Circumvention inquiries.

* * * * *
    (c) * * *
    (3) Comments and information on the adequacy of the request. Within 
10 days after the filing of a circumvention inquiry request under 
paragraph (c)(1) of this section, an interested party other than the 
requestor is permitted one opportunity to submit comments and new 
factual information regarding the adequacy of the circumvention inquiry 
request. Within five days after the filing of new factual information 
in support of adequacy comments, the requestor is permitted one 
opportunity to submit comments and factual information to rebut, 
clarify, or correct that factual information.
    (d) * * *
    (1) Initiation of a circumvention inquiry. Except as provided under 
paragraphs (d)(1)(ii) and (d)(2) of this section, within 30 days after 
the filing of a request for a circumvention inquiry, the Secretary will 
determine whether to accept or reject the request and whether to 
initiate or not initiate a circumvention inquiry. If it is not 
practicable to make such determinations within 30 days, the Secretary 
may extend the 30-day deadline by an additional 15 days if no 
interested party has filed new factual information in response to the 
circumvention request, pursuant to paragraph (c)(3) of this section. If 
interested parties have filed new factual information pursuant to 
paragraph (c)(3) of this section, the Secretary may extend the 30-day 
deadline by an additional 30 days.
* * * * *
    (ii) If the Secretary issues questions to the requestor seeking 
clarification with respect to one or more aspects of a circumvention 
inquiry request, the Secretary will determine whether or not to 
initiate within 30 days after the requestor files a timely response to 
the Secretary's questions.
    (iii) If the Secretary determines that a request for a 
circumvention inquiry satisfies the requirements of paragraph (c) of 
this section, the Secretary will accept the request and initiate a 
circumvention inquiry. The Secretary will publish a notice of 
initiation in the Federal Register.
    (e) * * *
    (1) Preliminary determination. The Secretary will issue a 
preliminary determination under paragraph (g)(1) of this section no 
later than 150 days after the date of publication of the notice of 
initiation of paragraph (b) or (d) of this section. If the Secretary 
concludes that an extension of the preliminary determination is 
warranted, the Secretary may extend that deadline by no more than 90 
days.
* * * * *
    (f) Circumvention inquiry procedures. The procedures described in 
subpart C of this part (Sec. Sec.  351.301 through 351.308 and 351.312 
through 351.313) do not apply to this paragraph (f).
* * * * *
    (m) * * *
    (2) Companion antidumping and countervailing duty orders. If there 
are companion antidumping and

[[Page 29873]]

countervailing duty orders covering the same merchandise from the same 
country of origin, the requesting interested party under paragraph (c) 
of this section must file the request pertaining to both orders on the 
record of both the antidumping duty and countervailing duty segments of 
the proceeding. If the Secretary accepts the circumvention requests on 
both records under paragraph (d) of this section, the Secretary will 
notify the requesting interested party that all subsequent filings 
should be filed only on the record of the antidumping duty proceeding. 
If the Secretary determines to initiate a circumvention inquiry under 
paragraph (b) or (d) of this section, the Secretary will initiate and 
conduct a single inquiry with respect to the product at issue for both 
orders only on the record of the antidumping duty proceeding. Once the 
Secretary issues a final circumvention determination on the record of 
the antidumping duty proceeding, the Secretary will include on the 
record of the countervailing duty proceeding a copy of that 
determination, a copy of the preliminary circumvention determination, 
and all relevant instructions to the Customs Service.
* * * * *
0
5. In Sec.  351.227:
0
a. Add introductory text to paragraph (d); and
0
b. Revise paragraphs (l)(1) and (m)(2).
    The addition and revisions read as follows:


Sec.  351.227  Covered merchandise referrals.

* * * * *
    (d) Covered merchandise inquiry procedures. The procedures 
described in subpart C of this part (Sec. Sec.  351.301 through 351.308 
and 351.312 through 351.313) do not apply to this paragraph (d).
* * * * *
    (l) * * *
    (1) When the Secretary publishes a notice of initiation of a 
covered merchandise inquiry under paragraph (b)(1) of this section, the 
Secretary will notify the Customs Service of the initiation and direct 
the Customs Service to continue the suspension of liquidation of 
entries of products subject to the covered merchandise inquiry that 
were already subject to the suspension of liquidation, and to apply the 
cash deposit rate that would be applicable if the product were 
determined to be covered by the scope of the order. Such suspension 
shall include, but shall not be limited to, entries covered by a final 
results of administrative review of an antidumping or countervailing 
duty order (pursuant to Sec.  351.212(b)), automatic assessment 
(pursuant to Sec.  351.212(c)), a rescinded administrative review 
(pursuant to Sec.  351.213(d)), and any other entries already suspended 
by the Customs Service under the antidumping and countervailing duty 
laws which have not yet been liquidated in accordance with 19 CFR part 
159.
* * * * *
    (m) * * *
    (2) Companion antidumping and countervailing duty orders. If there 
are companion antidumping and countervailing duty orders covering the 
same merchandise from the same country of origin, and the Secretary 
determines to initiate a covered merchandise inquiry under paragraph 
(b)(1) of this section, the Secretary will initiate and conduct a 
single inquiry with respect to the product at issue only on the record 
of the antidumping duty proceeding. Once the Secretary issues a final 
covered merchandise determination on the record of the antidumping duty 
proceeding, the Secretary will include on the record of the 
countervailing duty proceeding a copy of that determination, a copy of 
the preliminary covered merchandise determination, if one was issued, 
and all relevant instructions to the Customs Service.
* * * * *
0
6. In Sec.  351.301, revise paragraph (c)(4) and add paragraph (c)(6) 
as follows:


Sec.  351.301  Time limits for submissions of factual information.

* * * * *
    (c) * * *
    (4) Factual information placed on the record of the proceeding by 
the Secretary. The Secretary may place factual information on the 
record of the proceeding at any time.
    (i) In general. For most factual information placed on the record 
by the Secretary, an interested party is permitted one opportunity to 
submit factual information to rebut, clarify, or correct factual 
information placed on the record of the proceeding by the Secretary by 
a date specified by the Secretary.
    (ii) Agency memoranda from other segments or proceedings following 
the submission of written arguments. If, following the submission of 
written arguments by interested parties, pursuant to Sec.  351.309, the 
Secretary determines that an agency analysis or calculation memorandum 
issued by the Secretary in another segment or proceeding is relevant to 
the ongoing segment of the proceeding, and places the public version of 
that memorandum on the record of the ongoing segment of the proceeding, 
the Secretary will identify on the record the issue to which the 
memorandum is relevant. Interested parties will have one opportunity to 
provide comments addressing the relevance of the agency analysis or 
calculation memorandum to the ongoing segment of the proceeding by a 
date specified by the Secretary. Such response comments shall not be 
accompanied by new factual information.
* * * * *
    (6) Notices of subsequent authority--(i) In general. If a United 
States Federal court issues a decision, or the Secretary in another 
segment or proceeding issues a determination, that an interested party 
believes is directly relevant to an issue in an ongoing segment of the 
proceeding, that interested party may submit a Notice of Subsequent 
Authority with the Secretary. Responsive comments and factual 
information to rebut or clarify the Notice of Subsequent Authority must 
be submitted by interested parties no later than five days after the 
submission of a Notice of Subsequent Authority.
    (ii) Timing restrictions for consideration. The Secretary will only 
be required to consider and address a Notice of Subsequent Authority in 
its final determinations or results of administrative review that is 
submitted 30 days or more before the deadline for issuing the final 
determination or results, and rebuttal submissions filed 25 days or 
more before that same deadline.
    (iii) Contents of a notice of subsequent authority and responsive 
submissions. A Notice of Subsequent Authority must identify the Federal 
court decision or determination by the Secretary in another segment or 
proceeding that is alleged to be authoritative to an issue in the 
ongoing segment of the proceeding, provide the date the decision or 
determination was issued, explain the relevance of that decision or 
determination to an issue in the ongoing segment of the proceeding, and 
be accompanied by a complete copy of the Federal court decision or 
agency determination. Responsive comments must directly address the 
contents of the Notice of Subsequent Authority and must explain how the 
responsive comments and any accompanying factual information rebut or 
clarify the Notice of Subsequent Authority.
0
7. In Sec.  351.306, revise paragraph (b) to read as follows:


Sec.  351.306  Use of business proprietary information.

* * * * *
    (b) By an authorized applicant. An authorized applicant may retain

[[Page 29874]]

business proprietary information for the time authorized by the terms 
of the administrative protective order (APO).
    (1) An authorized applicant may use business proprietary 
information for purposes of the segment of the proceeding in which the 
information was submitted.
    (2) If business proprietary information that was submitted to a 
segment of the proceeding is relevant to an issue in a different 
segment of the same proceeding, an authorized applicant may place such 
information on the record of the subsequent segment as authorized by 
the APO of the segment where the business proprietary information was 
submitted.
    (3) If business proprietary information that was submitted to a 
countervailing duty segment of the proceeding is relevant to a 
subsequent scope, circumvention, or covered merchandise inquiry 
conducted on the record of the companion antidumping duty segment of 
the proceeding pursuant to Sec.  351.225(m)(2), Sec.  351.226(m)(2), or 
Sec.  351.227(m)(2), an authorized applicant may place such information 
on the record of the companion antidumping duty segment of the 
proceeding as authorized by the APO of the countervailing duty segment 
where the business proprietary information was submitted.
    (4) If business proprietary information that was submitted to a 
scope, circumvention, or covered merchandise inquiry conducted on the 
record of a companion antidumping duty segment of the proceeding 
pursuant to Sec.  351.225(m)(2), Sec.  351.226(m)(2), or Sec.  
351.227(m)(2) is relevant to a subsequent countervailing duty segment 
of the proceeding, an authorized applicant may place such information 
on the record of the companion countervailing duty segment of the 
proceeding as authorized by the APO of the antidumping duty segment 
where the business proprietary information was submitted.
* * * * *
0
8. In Sec.  351.308, add paragraph (g) to read as follows:


Sec.  351.308  Determinations on the basis of facts available.

* * * * *
    (g) Adverse facts available hierarchy in countervailing duty 
proceedings. In accordance with sections 776(d)(1)(A) and 776(d)(2) of 
the Act, when the Secretary applies an adverse inference in selecting a 
countervailable subsidy rate on the basis of facts otherwise available 
in a countervailing duty proceeding, the Secretary will normally select 
the highest program rate available using a hierarchical analysis as 
follows:
    (1) For investigations, conducted pursuant to section 701 of the 
Act, the hierarchy will be applied in the following sequence:
    (i) If there are cooperating respondents in the investigation, the 
Secretary will determine if a cooperating respondent used an identical 
program in the investigation and apply the highest calculated above-
zero rate for the identical program;
    (ii) If no rate exists which the Secretary is able to apply under 
paragraph (g)(1)(i) of this section, the Secretary will determine if an 
identical program was used in another countervailing duty proceeding 
involving the same country and apply the highest calculated above-de 
minimis rate for the identical program;
    (iii) If no rate exists which the Secretary is able to apply under 
paragraph (g)(1)(ii) of this section, the Secretary will determine if 
there is a similar or comparable program in any countervailing duty 
proceeding involving the same country and apply the highest calculated 
above-de minimis rate for the similar or comparable program; and
    (iv) If no rate exists which the Secretary is able to apply under 
paragraph (g)(1)(iii) of this section, the Secretary will apply the 
highest calculated above-de minimis rate from any non-company-specific 
program in a countervailing duty proceeding involving the same country 
that the Secretary considers the company's industry could possibly use.
    (2) For administrative reviews, conducted pursuant to section 751 
of the Act, the hierarchy will be applied in the following sequence:
    (i) The Secretary will determine if an identical program has been 
used in any segment of the proceeding and apply the highest calculated 
above-de minimis rate for any respondent for the identical program;
    (ii) If no rate exists which the Secretary is able to apply under 
paragraph (g)(2)(i) of this section, the Secretary will determine if 
there is a similar or comparable program within any segment of the same 
proceeding and apply the highest calculated above-de minimis rate for 
the similar or comparable program;
    (iii) If no rate exists which the Secretary is able to apply under 
paragraph (g)(2)(ii) of this section, the Secretary will determine if 
there is an identical program in any countervailing duty proceeding 
involving the same country and apply the highest calculated above-de 
minimis rate for the identical program or, if there is no identical 
program or above-de minimis rate available, determine if there is a 
similar or comparable program in any countervailing duty proceeding 
involving the same country and apply the highest calculated above-de 
minimis rate for the similar or comparable program; and
    (iv) If no rate exists which the Secretary is able to apply under 
paragraph (g)(2)(iii) of this section, the Secretary will apply the 
highest calculated rate for any non-company-specific program from any 
countervailing duty proceeding involving the same country that the 
Secretary considers the company's industry could possibly use.
    (3) When the Secretary uses an adverse facts available 
countervailing duty hierarchy, the following will apply:
    (i) The Secretary will treat rates less than 0.5 percent as de 
minimis;
    (ii) The Secretary will normally determine a program to be a 
similar or comparable program based on the Secretary's treatment of the 
program's benefit;
    (iii) The Secretary will normally select the highest program rate 
available in accordance with the hierarchical sequence, unless the 
Secretary determines that such a rate is otherwise inappropriate; and
    (iv) When applicable, the Secretary will determine an adverse facts 
available rate selected using the hierarchy to be corroborated in 
accordance with section 776(c)(1) of the Act.
0
9. In Sec.  351.408, add paragraph (d) to read as follows:


Sec.  351.408  Calculation of normal value of merchandise from 
nonmarket economy countries.

* * * * *
    (d) A determination that certain surrogate value information is not 
otherwise appropriate--(1) In general. Notwithstanding the factors 
considered under paragraph (c) of this section, the Secretary may 
disregard a proposed market economy country value for consideration as 
a surrogate value if the Secretary determines that evidence on the 
record reflects that the use of such a value would be inappropriate.
    (i) In accordance with section 773(c)(5), the Secretary may 
disregard a proposed surrogate value if that value is derived from a 
country that provides broadly available export subsidies, if particular 
instances of subsidization occurred with respect to that proposed 
surrogate value, or if that proposed

[[Page 29875]]

surrogate value was subject to an antidumping order.
    (ii) In addition, the Secretary may disregard a proposed surrogate 
value if that value is derived from a facility, party, industry, intra-
country region or a country with weak, ineffective, or nonexistent 
property (including intellectual property), human rights, labor, or 
environmental protections.
    (2) Requirements to disregard a proposed surrogate value based on 
weak, ineffective, or nonexistent protections. For purposes of 
paragraph (d)(1)(ii) of this section, the Secretary will only consider 
disregarding a proposed market economy country value as a surrogate 
value of production if the Secretary determines the following:
    (i) The proposed surrogate value at issue is for a significant 
input or labor;
    (ii) The proposed surrogate value is derived from one country or an 
average of values from a limited number of countries; and
    (iii) The information on the record supports a claim that the 
identified weak, ineffective, or nonexistent property (including 
intellectual property), human rights, labor, or environmental 
protections undermine the appropriateness of using that value as a 
surrogate value.
    (3) The use of a surrogate value located in a country which is not 
at a level of economic development comparable to that of the nonmarket 
economy. If the Secretary determines, pursuant to this section, after 
reviewing all proposed values on the record derived from market economy 
countries which are at a level of economic development comparable to 
the nonmarket economy, that no such proposed value is appropriate to 
value a specific factor of production, the Secretary may use a value on 
the record derived from a market economy country which is not at a 
level of economic development comparable to that of the nonmarket 
economy country as a surrogate to value that specific factor of 
production.
    (4) The use of a surrogate value not located in a country which is 
a significant producer of comparable merchandise. If the Secretary 
determines, pursuant to this section, after reviewing all proposed 
surrogate values on the record derived from market economy countries 
which are significant producers of merchandise comparable to the 
subject merchandise, that no such proposed value is appropriate to 
value a specific factor of production, the Secretary may use a value on 
the record derived from a market economy country which is not a 
significant producer of merchandise comparable to the subject 
merchandise as a surrogate to value that specific factor of production.
0
10. Add Sec.  351.416 to read as follows:


Sec.  351.416  Determination of a particular market situation.

    (a) In general. A particular market situation is a distinct 
circumstance or set of circumstances that does the following, as 
determined by the Secretary:
    (1) Prevents a proper comparison of sales prices in the home market 
or third country market with export prices and constructed export 
prices; or
    (2) Distorts the cost of production of the merchandise subject to 
an investigation, suspension agreement, or an antidumping duty order.
    (b) Information reasonably available to the interested party 
alleging the existence of a particular market situation. When an 
interested party files a timely allegation as to the existence of a 
particular market situation in an antidumping duty proceeding, relevant 
information reasonably available to that interested party supporting 
the claim must accompany the allegation. If the particular market 
situation being alleged is similar to an allegation of a particular 
market situation made in a previous segment of the same proceeding, the 
interested party must identify in the filing the facts and arguments 
which are distinct from those provided in the previous segment.
    (c) A determination that a particular market situation that 
prevents a proper comparison of prices exists. The Secretary may find 
that a particular market situation exists that prevents the proper 
comparison of prices, identified in paragraph (a)(1) of this section, 
when a circumstance or set of circumstances prevent or do not permit a 
proper comparison between sales prices in the home market or third 
country of the foreign like product and export prices or constructed 
export prices of the subject merchandise for purposes of an antidumping 
analysis.
    (1) Examples of particular market situations that prevent a proper 
comparison in the home market. Examples of a distinct circumstance or 
set of circumstances that may prevent a proper comparison of prices in 
the home market, and are therefore particular market situations, 
include, but are not limited to, the following:
    (i) The imposition of an export tax on subject merchandise;
    (ii) Limitations on exports of subject merchandise from the subject 
country;
    (iii) The issuance and enforcement of anticompetitive regulations 
that confer a unique status on favored producers or that create 
barriers to new entrants to an industry; and
    (iv) Direct government control over pricing of subject merchandise 
to such an extent that home market prices for subject merchandise 
cannot be considered competitively set.
    (2) Examples of particular market situations in a third country 
that may not permit a proper comparison of prices. The Secretary may 
determine that third country prices cannot be properly compared to 
export prices or constructed export prices for reasons similar to those 
listed in paragraph (c)(1) of this section.
    (3) The prevention of a proper comparison of prices may warrant use 
of constructed value. If the Secretary determines that a particular 
market situation prevents or does not permit a proper comparison of 
sales prices in the home market or third country with export prices or 
constructed export prices, the Secretary may conclude that it is 
necessary to determine normal value by constructing a value in 
accordance with section 773(e) of the Act and Sec.  351.405.
    (d) A determination that a market situation exists such that the 
cost of materials and fabrication or other processing of any kind does 
not accurately reflect the cost of production in the ordinary course of 
trade--(1) In general. For purposes of this paragraph (d)(1), the 
Secretary will determine that a distinct circumstance or set of 
circumstances is a market situation such that the cost of materials and 
fabrication or other processing of any kind does not accurately reflect 
the cost of production in the ordinary course of trade, if the 
Secretary determines that the costs of producing subject merchandise or 
the prices or costs for a significant input (or inputs) used in the 
production of the subject merchandise are not in accordance with 
market-based principles, or are distorted, and that it is likely that 
the distinct circumstance or set of circumstances contributed to the 
fact that those prices or costs are not in accordance with market-based 
principles or are distorted.
    (2) Information the Secretary may consider in determining the 
existence of a market situation. In determining whether a market 
situation exists in the subject country such that the cost of materials 
and fabrication or other processing does not accurately reflect the 
cost of production in the ordinary course of trade, the Secretary may 
consider all relevant information placed on the record by interested 
parties, including, but not limited to, the following:

[[Page 29876]]

    (i) Comparisons of prices paid for significant inputs used to 
produce the subject merchandise under the alleged market situation to 
prices paid for the same input under market-based circumstances, either 
in the home country or elsewhere;
    (ii) Detailed reports and other documentation issued by foreign 
governments or independent international, analytical or academic 
organizations indicating considerably lower prices for a significant 
input in the subject country would likely result from governmental or 
nongovernmental actions or inactions taken in the subject country or 
other countries;
    (iii) Detailed reports and other documentation issued by foreign 
governments or independent international, analytical or academic 
organizations indicating that prices for a significant input have 
deviated from a fair market value within the subject country, as a 
result, in part or in whole, of governmental or nongovernmental actions 
or inactions;
    (iv) Agency determinations or results in which the Secretary 
determined record evidence did or did not support the existence of the 
alleged particular market situation with regard to the same or similar 
merchandise in the subject country in previous proceedings or segments 
of the same proceeding; and
    (v) Information that property (including intellectual property), 
human rights, labor, or environmental protections in the subject 
country are weak, ineffective, or nonexistent, those protections exist 
and are effectively enforced in other countries, and that the 
ineffective enforcement or lack of protections may contribute to 
distortions in cost of production of subject merchandise or prices or 
costs of a significant input into the production of subject merchandise 
in the subject country.
    (3) No restrictions based on lack of precise quantifiable data, 
hypothetical prices or actions of governments and industries in other 
market economies. In determining whether a market situation exists in 
the subject country such that the cost of materials and fabrication or 
other processing does not accurately reflect the cost of production in 
the ordinary course of trade, the Secretary will not be required to 
consider the following information and associated arguments:
    (i) The lack of precision in the quantifiable data relating to the 
distortion of prices or costs in the subject country;
    (ii) The speculated costs of the subject merchandise, or the 
speculated prices or costs of a significant input into the production 
of subject merchandise, unsupported by objective data, that a party 
claims would hypothetically exist in the subject country absent the 
alleged particular market situation or its contributing circumstances;
    (iii) The actions taken or not taken by governments, state 
enterprises, or other public entities in other market economy countries 
in comparison with the actions taken or not taken by the government, 
state enterprise, or other public entity of the subject country, with 
the exception of information associated with the allegations addressed 
in paragraph (d)(2)(v) of this section; and
    (iv) The existence of historical policies and previous actions 
taken or not taken by the government or industry in the subject country 
with respect to the subject merchandise or a significant input into the 
production of subject merchandise, because the pre-existence of 
government actions or inactions, or other circumstances, does not make 
those situations market-based or nullify the distortion of costs during 
the relevant period of investigation or review.
    (e) A determination that a market situation that does not 
accurately reflect the cost of production in the ordinary course of 
trade is particular--(1) In general. For a market situation that does 
not accurately reflect the cost of production in the ordinary course of 
trade to be considered particular, the Secretary must determine that it 
is likely that the distinct circumstance or set of circumstances which 
contributed to distortions in prices or costs impact only certain 
products or certain parties in the subject country. In reaching this 
determination, the following applies:
    (i) A particular market situation may exist even if a large number 
of distinct products or parties are impacted by the circumstance or set 
of circumstances;
    (ii) The same or similar market situations can exist in multiple 
countries or markets and still be considered particular for purposes of 
this provision if the Secretary determines that a market situation 
exists which distorts cost of production for certain products or 
parties specifically in the subject country; and
    (iii) There are varied circumstances in which a market situation in 
a subject country can be determined to be particular, including a 
market situation that distorts the cost of production for certain 
products or for certain importers, producers, exporters, purchasers, 
users, enterprises, or industries, individually or in combination with 
other entities.
    (2) Information the Secretary may consider in determining if a 
market situation is particular. In determining if a market situation in 
the subject country is particular in accordance with paragraph (e)(1) 
of this section, the Secretary may consider all relevant information 
placed on the record by interested parties, including, but not limited 
to, the following:
    (i) The size and nature of the market situation;
    (ii) The volume of merchandise potentially impacted by the price or 
cost distortions resulting from the market situation; and
    (iii) The number and nature of the entities potentially affected by 
the price or cost distortions resulting from a market situation.
    (f) Adjusting for a particular market situation that does not 
accurately reflect the cost of production in the ordinary course of 
trade. If the Secretary determines a particular market situation exists 
in the subject country such that the cost of materials and fabrication 
or other processing does not accurately reflect the cost of production 
in the ordinary course of trade, in accordance with sections 771(15) 
and 773(e) of the Act, the Secretary may address distortions to the 
cost of production in its calculations. If the Secretary is unable to 
precisely quantify such distortions in the cost of production, based on 
record information, after consideration of the relevant information 
that is available, it may use any reasonable methodology to determine 
an appropriate adjustment to its calculations.
    (g) Examples of particular market situations that may not 
accurately reflect the cost of production in the ordinary course of 
trade. Examples of particular market situations which may distort, or 
contribute to the distortion of, the cost of production of subject 
merchandise in the subject country alone, or in conjunction with 
others, include, but are not limited to, the following:
    (1) A significant input into the production of subject merchandise 
is produced in such amounts that there is considerably more supply than 
demand in international markets for the input; the record reflects 
that, regardless of the impact of such overcapacity of the significant 
input on other countries, such overcapacity is likely to contribute to 
distortions of the price or cost of that input in the subject country; 
and those distortions can be addressed by the Secretary in its 
calculations of the cost of production;
    (2) A government, state-owned enterprise, or other public entity in 
the

[[Page 29877]]

subject country owns or controls the predominant producer or supplier 
of a significant input used in the production of subject merchandise; 
such ownership or control of the producer or supplier is likely to 
contribute to price or cost distortions of that input in the subject 
country; and those distortions can be addressed in the Secretary's 
calculations of the cost of production;
    (3) A government, state-owned enterprise, or other public entity in 
the subject country intervenes in the market for a significant input 
into the production of subject merchandise; such intervention is likely 
to contribute to price or cost distortions of that input in the subject 
country; and those distortions can be addressed in the Secretary's 
calculations of the cost of production;
    (4) A government in the subject country limits exports of a 
significant input into the production of subject merchandise; such 
export limitations are likely to contribute to price or cost 
distortions of that input in the subject country; and those distortions 
can be addressed in the Secretary's calculations of the cost of 
production;
    (5) A government in the subject country imposes export taxes on a 
significant input into the production of subject merchandise; such 
taxes are likely to contribute to price or cost distortions of that 
input in the subject country; and those distortions can be addressed in 
the Secretary's calculations of the cost of production;
    (6) A government in the subject country exempts an importer, 
producer or exporter of the subject merchandise from paying duties or 
taxes associated with trade remedies established by the government 
relating to a significant input into the production of subject 
merchandise;
    (7) A government in the subject country rebates duties or taxes 
paid by an importer, producer or exporter of the subject merchandise 
associated with trade remedies established by the government related to 
a significant input into the production of subject merchandise;
    (8) A government, state-owned enterprise, or other public entity in 
the subject country provides financial assistance or other support to 
the producer or exporter of the subject merchandise, or to a producer 
or supplier of a significant input into the production of the subject 
merchandise; such assistance or support is likely to contribute to cost 
distortions of the subject merchandise or distortions in the price or 
cost of a significant input into the production of subject merchandise 
in the subject country; and those distortions can be addressed by the 
Secretary in its calculations of the cost of production;
    (9) A government, state-owned enterprise, or other public entity in 
the subject country takes actions which otherwise influence the 
production of the subject merchandise or a significant input into the 
production of subject merchandise, such as domestic-content and 
technology transfer requirements; those actions are likely to 
contribute to cost distortions of the subject merchandise or 
distortions in the price or cost of a significant input into the 
production of subject merchandise in the subject country; and such 
distortions can be addressed in the Secretary's calculations of the 
cost of production;
    (10) A government or other public entity in the subject country 
does not enforce its property (including intellectual property), human 
rights, labor, or environmental protection laws and policies, or those 
laws and policies are otherwise shown to be ineffective with respect to 
a either a producer or exporter of the subject merchandise, or to a 
producer or supplier of a significant input into the production of the 
subject merchandise in the subject country; the lack of enforcement or 
effectiveness of such laws and policies is likely to contribute to cost 
distortions of the subject merchandise or distortions in the price or 
cost of a significant input into the production of subject merchandise; 
and those distortions can be addressed in the Secretary's calculations 
of the cost of production;
    (11) A government or other public entity does not implement 
property (including intellectual property), human rights, labor, or 
environmental protection laws and policies; the absence of such laws 
and policies is likely to contribute to cost distortions of the subject 
merchandise, or distortions in the price or cost of a significant input 
into the production of subject merchandise in the subject country; and 
those distortions can be addressed by the Secretary in its calculations 
of the cost of production; and
    (12) A business relationship between one or more producers of the 
subject merchandise and suppliers of significant inputs to the 
production of the subject merchandise is such that prices of the inputs 
are not determined in accordance with market-based principles, such as 
through a strategic alliance or noncompetitive arrangement; such a 
relationship is likely to contribute to cost distortions of the subject 
merchandise or distortions in the price or cost of a significant input 
into the production of subject merchandise in the subject country; and 
such distortions can be addressed in the Secretary's calculations of 
the cost of production.
    (h) A particular market situation that does not accurately reflect 
the cost of production in the ordinary course of trade may contribute 
to a particular market situation that prevents or does not permit a 
proper comparison of prices. If the Secretary determines that a 
particular market situation exists that does not accurately reflect the 
cost of production in the ordinary course of trade, the Secretary may 
consider whether this particular market situation contributes to the 
circumstance or set of circumstances that prevent, or do not permit, a 
proper comparison of home market or third country sales prices with 
export prices or constructed export prices, in accordance with section 
771(15) of the Act.
0
11. In Sec.  351.503, revise paragraph (c) to read as follows:


Sec.  351.503  Benefit.

* * * * *
    (c) Distinction from effect of subsidy--(1) In general. In 
determining whether a benefit is conferred, the Secretary is not 
required to consider the effect or impact of the government action on 
the firm's performance, including its costs, prices, output, or whether 
the firm's behavior is otherwise altered.
    (2) Subsidy provided to support compliance with a government-
imposed mandate. When a government provides assistance to a firm to 
comply with a government regulation, requirement or obligation, the 
Secretary, in measuring the benefit from the subsidy, will not consider 
whether the firm incurred a cost in complying with the government-
imposed regulation, requirement or obligation.
* * * * *
0
12. In Sec.  351.505, revise paragraph (d) and add paragraph (e) to 
read as follows:


Sec.  351.505  Loans.

* * * * *
    (d) Treatment of outstanding loans as grant after three years of no 
payments of interest or principal. With the exception of debt 
forgiveness tied to a particular loan and contingent liability 
interest-free loans, addressed in Sec.  351.508 and paragraph (e) of 
this section, the Secretary will normally treat a loan as a grant if no 
payments of interest and principal have been made in three years unless 
the loan recipient can demonstrate that nonpayment is consistent with 
the terms of a comparable commercial loan it could obtain on the 
market.

[[Page 29878]]

    (e) Contingent liability interest-free loans--(1) Treatment as 
loans. In the case of an interest-free loan, for which the repayment 
obligation is contingent upon the company taking some future action or 
achieving some goal in fulfillment of the loan's requirements, the 
Secretary normally will treat any balance on the loan outstanding 
during a year as an interest-free, short-term loan in accordance with 
paragraphs (a), (b), and (c)(1) of this section. However, if the event 
upon which repayment of the loan depends will occur at a point in time 
more than one year after the receipt of the contingent liability loan, 
the Secretary will use a long-term interest rate as the benchmark in 
accordance with paragraphs (a), (b), and (c)(2) of this section. In no 
event may the present value (in the year of receipt of the contingent 
liability loan) of the amounts calculated under this paragraph exceed 
the principal of the loan.
    (2) Treatment as grants. If, at any point in time, the Secretary 
determines that the event upon which repayment depends is not a viable 
contingency, the Secretary will treat the outstanding balance of the 
loan as a grant received in the year in which this condition manifests 
itself.
0
13. In Sec.  351.507, revise paragraph (c) and add paragraph (d) to 
read as follows:


Sec.  351.507  Equity.

* * * * *
    (c) Outside investor standard. Any analysis made under paragraph 
(a) of this section will be based upon the standard of a new private 
investor. The Secretary normally will consider whether an outside 
private investor, under its usual investment practice, would make an 
equity investment in the firm, and not whether a private investor who 
has already invested in the firm would continue to invest in the firm.
    (d) Allocation of benefit to a particular time period. The benefit 
conferred by an equity infusion shall be allocated over a period of 12 
years or the same time period as a non-recurring subsidy under Sec.  
351.524(d), whichever is longer.
0
14. In Sec.  351.508, revise paragraph (c)(1) to read as follows:


Sec.  351.508  Debt forgiveness.

* * * * *
    (c) * * *
    (1) In general. The Secretary will treat the benefit determined 
under paragraph (a) of this section as a non-recurring subsidy and will 
allocate the benefit to a particular year in accordance with Sec.  
351.524(d), or over a period of 12 years, whichever is longer.
* * * * *
0
15. In Sec.  351.509, add paragraph (d) to read as follows:


Sec.  351.509  Direct taxes.

* * * * *
    (d) Benefit not tied to particular markets or products. If a 
program provides for a full or partial exemption, reduction, credit or 
remission of an income tax, the Secretary normally will consider any 
benefit to be not tied with respect to a particular market under Sec.  
351.525(b)(4) or to a particular product under Sec.  351.525(b)(5).
0
16. In Sec.  351.511, add paragraph (a)(2)(v) to read as follows:


Sec.  351.511  Provision of goods or services.

    (a) * * *
    (2) * * *
    (v) Exclusion of certain prices. In measuring the adequacy of 
remuneration under this section, if parties have demonstrated, with 
sufficient information, that certain prices are derived from countries 
with weak, ineffective, or nonexistent property (including intellectual 
property), human rights, labor, or environmental protections, and that 
the lack of such protections would likely impact such prices, the 
Secretary may exclude those prices from its analysis.
* * * * *
0
17. In Sec.  351.520, revise paragraph (a)(1) to read as follows:


Sec.  351.520  Export insurance.

    (a) * * *
    (1) In general. In the case of export insurance, a benefit exists 
if the premium rates charged are inadequate to cover the long-term 
operating costs and losses of the program normally over a five-year 
period.
* * * * *
0
18. In Sec.  351.525, revise paragraphs (b)(2) and (3) to read as 
follows:


Sec.  351.525  Calculation of ad valorem subsidy rate and attribution 
of subsidy to a product.

* * * * *
    (b) * * *
    (2) Export subsidies. The Secretary will normally attribute an 
export subsidy only to products exported by a firm.
    (3) Domestic subsidies. The Secretary will normally attribute a 
domestic subsidy to all products sold by a firm, including products 
that are exported.
* * * * *


Sec.  351.527  [Removed and Reserved]

0
19. Remove and reserve Sec.  351.527.
0
20. Add Sec.  351.529 to read as follows:


Sec.  351.529  Certain fees, fines, and penalties.

    (a) Financial contribution. When determining if a fee, fine, or 
penalty that is otherwise due, has been forgone or not collected, 
within the meaning of section 771(5)(D)(ii) of the Act, the Secretary 
may conclude that a financial contribution exists if information on the 
record demonstrates that payment was otherwise required and was not 
made, in full or in part. In making such a determination, the Secretary 
will not be required to consider whether the government took efforts to 
seek payment or grant deferral, or otherwise acknowledged nonpayment, 
of the fee, fine, or penalty.
    (b) Benefit. If the Secretary determines that the government has 
exempted or remitted in part or in full, a fee, fine, or penalty under 
paragraph (a) of this section, a benefit exists to the extent that the 
fee, fine or penalty paid by a party is less than if the government had 
not exempted or remitted that fee, fine, or penalty. Further, if the 
government is determined to have deferred the payment of the fee, fine, 
or penalty, in part or in full, a benefit exists to the extent that 
appropriate interest charges are not collected. Normally, a deferral of 
payment of fees, fines, or penalties will be treated as a government 
provided loan in the amount of the payments deferred, according to the 
methodology described in Sec.  351.505.

[FR Doc. 2023-09052 Filed 5-8-23; 8:45 am]
BILLING CODE 3510-DS-P