Antidumping Methodologies for Proceedings that Involve Significant Cost Changes Throughout the Period of Investigation (POI)/Period of Review (POR) that May Require Using Shorter Cost Averaging Periods; Request for Comment, 26364-26367 [E8-10527]
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26364
Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Notices
Two parties also argued that the
Department should have excluded
Indian and South Korean wage rates
from the regression analysis because of
subsidy programs in these countries.
They contend that the Department’s
normal practice is to exclude surrogate
data from countries with generally
available subsidies and that India and
South Korea are countries in which
these subsidies are available.
One party argued that the Ordinary
Least Squares (‘‘OLS’’) regression
analysis used by the Department will
inherently lead to inaccurate results
when applying it to the dataset used in
the expected NME wages calculation
because the dataset exhibits
heteroscedasticity. They argue that the
Department should use a Generalized
Least Squares regression to predict NME
wages because this method would give
more reliable results.
Department’s Position
With respect to the use of the
incorrect exchange rate in converting
Madagascar’s labor rate, the Department
agrees that this is a clerical error and
will change the 2007 calculation. The
ILO wage data for Madagascar are
reported in FMG per hour. The
International Financial Statistics (‘‘IFS’’)
exchange rate data do not specify the
name of the currency; however, the IFS
does say that the exchange rates are
reported in units of the national
currency per U.S. dollar. Moreover, the
International Monetary Fund’s 2007
Annual Report on Exchange
Arrangements and Exchange
Restrictions (‘‘IMF Report’’) states that,
‘‘The currency of Madagascar is the
ariary.’’ Instead of converting the ILO
wage data reported for Madagascar
directly into U.S. dollars using the
exchange rate suggested by the parties,
the Department converted the
Madagascar wage data from FMG to
ariary, and then from ariary to US
dollars, using the ariary/FMG rate in the
IMF Report and the IFS ariary/dollar
rate. The IMF Report notes that
Madagascar’s two currencies are
convertible at the rate of 1 ariary per 5
FMG.
The suggestion that the wage rates
from India and South Korea should be
excluded from the expected NME wage
rate analysis is a comment on the
calculation methodology and not a
clerical error. India and South Korea are
countries for which the Department has
reason to believe or suspect maintain
generally available export subsidies;
however, this practice has no bearing on
the use of domestic prices, including
labor rates, within these countries.
The argument that the Department
should use a Generalized Least Squares
Country
regression instead of an Ordinary Least
Squares regression is also a comment on
the methodology and not a clerical
error. The specific issue of
heteroscedasticity has been recently
addressed by the court, which
concluded that, given (i) the inherent
difficulties in identifying
heteroscedasticity and (ii) the fact that
the OLS estimators remain unbiased and
consistent even in the face of
heteroscedasticity, the Department’s
decision not to account for the
possibility of heteroscedasticity was
reasonable. See Dorbest Ltd., et al. v.
United States, Slip Op. 2008–24 (CIT
feb. 27, 2008) at 4–19.
Results
Following the data compilation and
regression methodology described in the
Antidumping Methodologies notice, and
using Gross National Income and wage
data for 2005, the regression results are:
Wage = 0.2721729 + 0.0004477* GNI.
The final expected NME wage rates, as
calculated with the above mentioned
change, are shown in Attachment 1.
Dated: May 6, 2008.
David M. Spooner,
Assistant Secretary for Import
Administration.
Attachment 1
2005 GNI (USD per annum)
Armenia ................................................................................................................
Azerbaijan ............................................................................................................
Belarus .................................................................................................................
China ....................................................................................................................
Georgia ................................................................................................................
Kyrgyz Republic ...................................................................................................
Moldova ...............................................................................................................
Tajikistan ..............................................................................................................
Uzbekistan ...........................................................................................................
Vietnam ................................................................................................................
The World Bank did not publish a
GNI for Turkmenistan.
The final results and underlying data
for the 2007 calculation have been
posted on the Import Administration
Web site at (https://ia.ita.doc.gov).
[FR Doc. E8–10525 Filed 5–8–04; 8:45 am]
BILLING CODE 3510–DS–S
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DEPARTMENT OF COMMERCE
International Trade Administration
Antidumping Methodologies for
Proceedings that Involve Significant
Cost Changes Throughout the Period
of Investigation (POI)/Period of Review
(POR) that May Require Using Shorter
Cost Averaging Periods; Request for
Comment
Import Administration,
International Trade Administration,
Department of Commerce.
jlentini on PROD1PC65 with NOTICES
AGENCY:
ACTION:
Request for comment.
SUMMARY: The Department of Commerce
(Department) seeks public comment on
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Expected NME wage rate
(USD per hour)
0.93
0.84
1.51
1.05
0.85
0.47
0.70
0.42
0.51
0.55
its development of a predictable
methodology for determining when the
use of shorter cost averaging periods is
more appropriate than the established
practice of using annual cost averages
due to the occurrence of significant cost
changes throughout the POI/POR.
Although the Department maintains that
the established practice of using annual
cost averages is the most appropriate
methodology to use in a majority of
proceedings, it may be preferable to use
an alternative methodology in certain
cases. The Department now seeks
comments from the public on the factors
to consider, the tests to apply, and the
thresholds to adhere to in determining
whether or not shorter cost averaging
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periods (e.g., quarterly) are more
appropriate.
DATES: Comments must be submitted
within thirty days from the publication
of this notice.
ADDRESSES: Written comments (original
and six copies) should be sent to the
Secretary of Commerce, Attn: Import
Administration, APO/Dockets Unit,
Room 1870, U.S. Department of
Commerce, 14th Street & Constitution
Ave., NW, Washington, DC 20230.
FOR FURTHER INFORMATION CONTACT: Neal
M. Halper, Director, Office of
Accounting, or Taija A. Slaughter, Lead
Accountant, Office of Accounting,
Import Administration, U.S. Department
of Commerce, 14th Street and
Constitution Avenue, NW., Washington,
DC 20230; telephone: (202) 482–2989
and (202) 482–3563, respectively.
SUPPLEMENTARY INFORMATION:
Background
The Department’s methodology for
calculating the cost of manufacture
(COM) of subject merchandise in less–
than-fair–value investigations and
antidumping administrative reviews is
based on the cost over the entire POI or
POR (i.e., on an annual basis). This
yearly based methodology results in a
normalized, weighted–average
production cost that can then be
compared to sales prices covering the
same extended period of time.
Therefore, the Department’s
questionnaire requests that all
respondents report their costs of
producing merchandise on an annual
average basis over the entire POI or
POR. See, e.g., Certain Pasta from Italy:
Final Results of Antidumping Duty
Administrative Review, 65 FR 77852
(Dec. 13, 2000) (Pasta from Italy), and
accompanying Issues and Decision
Memorandum at Comment 18 and
Notice of Final Results of Antidumping
Duty Administrative Review of Carbon
and Certain Alloy Steel Wire Rod from
Canada, 71 FR 3822 (Jan. 24, 2006)
(Wire Rod from Canada), and
accompanying Issues and Decision
Memorandum at Comment 5 (explaining
the Department’s practice of computing
a single weighted–average cost for the
entire period). This methodology is
predictable and generally applied
consistently in all proceedings.
The Tariff Act of 1930, as amended
(the Act), and the Department’s
regulations describe the role of the cost
of production (COP) in the Department’s
antidumping analysis. ‘‘Dumping’’ is
defined in section 771(34) of the Act as
the sale or likely sale of goods at less
than normal value (NV) in the United
States. A ‘‘dumping margin,’’ as defined
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by section 771(35)(A) of the Act, is the
amount by which the NV exceeds the
export price (EP) or constructed export
price (CEP) of the subject merchandise.
In calculating NV, section 773(a)(1)(B)
of the Act states that the Department
will consider only those sales in the
comparison market that are made in the
‘‘ordinary course of trade.’’ Section
771(15) of the Act and 19 CFR 351.102
explain that sales are generally made
‘‘in the ordinary course of trade’’ if they
are sold under ‘‘conditions and
practices which, for a reasonable period
of time prior to the exportation of the
subject merchandise, have been normal’’
for sales of the foreign like product.1
None of these provisions provides
guidance on the methodology which the
Department should use in calculating a
respondent’s COP.
Furthermore, section 773(b)(1) of the
Act and 19 C.F.R. 351. 406 provide that
sales may be disregarded if they have
been made at prices which represent
less than the COP of that product.
Section 773(b)(3) of the Act defines the
COP as:
an amount equal to the sum of(A) the cost of materials and of fabrication
or other processing of any kind employed in
producing the foreign like product, during a
period which would ordinarily permit the
production of that foreign like product in the
ordinary course of business;
(B) an amount for selling, general, and
administrative expenses based on actual data
pertaining to production and sales of the
foreign like product by the exporter in
question; and
(C) the cost of all containers and coverings
of whatever nature, and all other expenses
incidental to placing the foreign like product
in condition packed ready for shipment.
Thus, although the Act states that the
COP is calculated using a ‘‘period which
would ordinarily permit the
production’’ of the foreign like product,
no guidance is given with regard to
whether or not the Department should
use only a single, weighted–average
period of time, or multiple time periods
within that ‘‘production period’’ for
purposes of making comparisons and
calculating a dumping margin.
The Department has established a
practice of using a single weighted–
average COP that applies to the entire
POI/POR, which it has applied in the
vast majority of its investigations and
reviews. Factors such as erratic
production levels, the extent to which
and how accurately monthly accruals
1 Section 773(b)(1) of the Act states that if no sales
made in the ordinary course of trade remain, the
normal value shall be based on the constructed
value (CV) of the merchandise. See also 19 CFR
351.405(a). CV is defined at section 773(e) of the
Act as the cost of materials, plus fabrication
expenses, selling, general and administrative
expenses, profit and packing expenses.
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are made, periodic maintenance,
inventory valuation methods, etc. all
impact the timing and accuracy of per–
unit costing over short periods of time.
Relying on an annual average cost tends
to smooth out these short–term per–unit
cost fluctuations resulting in a
normalized average production cost to
be compared to sales prices over the
same extended period of time. See Color
Television Receivers from the Republic
of Korea; Final Results of Antidumping
Duty Administrative Review, 55 FR
26225, 26228 (June 27, 1990) (where the
Department stated that the use of
quarterly data would cause aberrations
due to short–term cost fluctuations) and
Grey Portland Cement and Clinker From
Mexico; Final Results of Antidumping
Duty Administrative Review, 58 FR
47253, 47257 (September 8, 1993)
(where the Department explained that
the annual period used for calculating
costs accounts for any seasonal
fluctuation which may occur as it
accounts for a full operation cycle).
The Department has, however, in a
limited number of cases, deviated from
its normal methodology of calculating
costs on an annual average basis over
the entire POI/POR and resorted to
shorter cost averaging periods.
Examples of instances where the
Department departed from its standard
cost averaging period include high
technology products that experienced
significant and consistent cost and price
changes over a short period of time. See
Notice of Final Determination of Sales
at Less Than Fair Value: Static Random
Access Memory Semiconductors from
Taiwan, 63 FR 8909, 8926 (Feb. 23,
1998) (SRAMS from Taiwan) (where the
Department determined that quarterly,
rather than annual, averages resulted in
a more accurate comparison of pricing
behavior during the period of
investigation (POI) given the significant
decrease in the price and cost of static
random access memory semiconductors
throughout the POI) and Final
Determination of Sales at Less Than
Fair Value: Erasable Programmable
Read Only Memories from Japan, 51 FR
39680, 39685 (Oct. 30, 1986) (EPROMS
from Japan) (where the Department
found that significant changes in the
COP during a short period of time due
to technological advancements and
changes in the production process
justified the use of quarterly weighted–
average costs).
The Department also found that
shorter period averages resulted in a
more accurate comparison of pricing
behavior where the respondent’s COM
changed significantly throughout the
cost reporting period. In Final Results of
Antidumping Duty Administrative
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Review and Determination Not to
Revoke the Antidumping Duty Order:
Brass Sheet and Strip from Netherlands,
65 FR 742 (Jan. 6, 2000) (Brass Sheet
and Strip from Netherlands), the
Department was able to make a
contemporaneous comparison of metal
values and sales prices which resulted
in a more accurate calculation of the
dumping margin in that instance
because the respondent treated the cost
of the input metals as a pass–through to
its customers in its normal books and
records. See id. at 747–748.
Accordingly, in Brass Sheet and Strip
from Netherlands, the Department
determined it appropriate to deviate
from calculating cost on an annual
average basis over the entire cost
reporting period because record
evidence showed that the cost of metal
inputs represented a significant
percentage of the total cost of producing
brass sheet and strip, the cost of the
metal inputs dropped consistently and
significantly throughout the POR, and
prices and costs for the shorter periods
could be accurately matched.2
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Issues of Concern
In several recent proceedings, we
have received requests from
respondents to report costs using
averaging periods of less than one year.
See Certain Steel Concrete Reinforcing
Bars from Turkey; Final Results,
Rescission of Antidumping Duty
Administrative Review in Part, and
Determination To Revoke in Part, 70 FR
67665 (November 8, 2005) (Rebar from
Turkey), and accompanying Issues and
Decision memorandum at Comment 1;
Final Results of Antidumping Duty
Administrative Review: Carbon and
Certain Alloy Steel Wire Rod from
Canada, 71 FR 3822 (January 24, 2006);
and Final Results of Antidumping Duty
Administrative Review: Stainless Steel
Sheet and Strip in Coils From France,
71 FR 6269 (February 7, 2006). In these
2 The Department also deviated from its practice
of using POR average costs in Notice of Final
Results of Antidumping Duty Administrative
Review: Canned Pineapple Fruit From Thailand, 63
FR 7392 (Feb. 13, 1998). In this case the POR
covered an 18-month period. For purposes of
calculating the dumping margin, the Department
initially used the POR-wide weighted-average cost.
However, the Department later matched the sales
and costs by segregating the POR into two fiscal
years for purposes of its dumping analysis. See
Final Results of Redetermination Pursuant to
United States Court of International Trade Remand
Order Thai Pineapple Canning Industry Corp. Ltd.
And Mitsubishi International Corp. Ltd. v. United
States, Court No. 98–03–00487 (CIT Feb. 5, 2002) ,
dated May 31, 2002, at 3 found at https://
ia.ita.doc.gov. Although the Department matched
sales prices to average costs for periods of time that
were shorter than the span of the entire POR, it is
important to note that the shorter averaging periods
used were fiscal years, and not quarters or months.
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cases, we primarily relied on two factors
in determining whether it was
appropriate to deviate from our normal
practice of using an annual average cost
method: (1) whether the cost changes
throughout the POI/POR were
significant, and (2) whether sales during
the shorter averaging periods could be
accurately linked with the COP/CV
during the same shorter averaging
periods.
In these recent proceedings, we
analyzed the significance of the cost
changes throughout the POI/POR by
conducting a comparative COM analysis
between the annual average cost method
and the suggested shorter period average
cost method (e.g., quarterly cost
averaging period). See, e.g., Rebar from
Turkey. In comparing the costs under
the two methods, the Department
examined the five most frequently sold
models of the foreign like product (i.e.,
control numbers or ‘‘CONNUMs’’) in the
comparison market. For each of the five
models, the Department compared the
difference between the annual–average
COM and the shorter period average
COMs.3
In considering whether a shorter cost
averaging period reflects a more
accurate measure of dumping, we also
explained in those proceedings that
sales during the shorter averaging
period must be closely linked with the
COP of the shorter period. In certain
cases there are various factors4 which
may affect the timing relationship
between the purchase of the raw
materials, the production of a product,
and its subsequent sale. Therefore,
arbitrarily relying on a shorter cost
reporting period can create uncertainty
as to how accurately the average costs
during the shorter period relate to the
sales that occurred during that same
shorter period. Thus, we believe it is
necessary for a respondent to provide
evidence on the administrative record of
a direct linkage between resulting costs
and sales prices before we consider
using a cost–averaging period that does
not extend throughout the entire POI/
POR. In the above–mentioned recent
proceedings, in assessing whether sales
3 In each case, the analysis was conducted using
the total COM and not the cost of an input or one
element of the COM.
4 For example, factors such as: 1) the raw material
inventory turnover period; 2) the inventory
valuation method used by the company (e.g., lastin, first-out versus first-in, first-out versus
weighted-average, etc.); 3) the extent to which raw
materials are purchased pursuant to long-term
contracts; 4) erratic production levels throughout
the year; 5) sales made pursuant to long-term
contracts; 6) the extent to which monthly accruals
are made; and 7) year-end adjustments all affect the
timing relationship between sales transactions and
costs.
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can be accurately linked with the
concurrent quarterly average costs, we
analyzed the relationship of the cost and
price trends throughout the POI/POR.
In addition, in a recent remand
redetermination, filed with the Court of
International Trade, we assessed how
closely sales prices and costs tracked
each other during the shorter cost
calculation periods by analyzing the
consistency of the shorter cost averaging
period profit percentages on comparison
market sales. See Final Results of
Redetermination Pursuant to Court
Remand, Habas Sinai ve Tibbi Gazlar
Istihsal ve Endustrisi A.S. v. United
States, Court No. 05–00613, Slip Op. 07–
167 (CIT Nov. 15, 2007), dated March 3,
2008 found at https://ia.ita.doc.gov. In
that remand redetermination, to
calculate the shorter cost averaging
period profit percentages, we subtracted
the shorter average cost of producing
such sales from the shorter averaging
period comparison market net sales
revenue, and divided this figure by the
same shorter average cost of producing
such sales. Using this analysis, we
concluded that the required linkage
between sales and costs did not exist in
that case such as to warrant using
shorter time periods.
Request for Comments
We continue to regard our practice of
using annual cost averages in
proceedings as generally the most
appropriate methodology, and we
intend to deviate from this practice only
under limited circumstances. The use of
annual cost averages results in an
approach that normally evens out
swings in production costs that a
respondent may have experienced over
short periods (i.e., months or quarters)
of time, and reasonably reflects the COP
for sales made throughout the year.
However, in certain cases, possible
distortions may result when an annual–
average cost method is used during a
period of significant cost changes.
Conversely, many factors, as noted
above, may result in distortions when
using shorter period average costs.
Consequently, relying on a shorter cost
reporting period can create uncertainty
as to how accurately the average costs
during the shorter period relate to the
sales that occurred during that same
shorter period. In light of these
competing considerations, the
Department requests comments and
suggestions on the factors to consider,
tests to apply, and thresholds to adhere
to when deciding to rely on cost
averaging periods of less than a year.
Below is a list of specific questions
we would like parties to comment
on:
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(i) Are there other factors relevant to
the consideration of whether and
when to rely on shorter cost
averaging periods besides
significant cost changes and the
linking of sales and costs during the
same shorter period? If so, identify
the factor(s) and explain in detail
why such factor(s) should be
considered.
(ii) How should the significant cost
changes factor be analyzed and
what numeric threshold should we
rely upon as a basis for resorting to
shorter cost averaging periods?
Provide the basis for your suggested
threshold number. Should the
nature of the industry (e.g., steel,
consumer electronics, perishable
products, etc.) affect the analysis? If
so, explain in detail how the
analysis would be affected.
(iii) How should the correlation
between prices and shorter cost
averaging periods be analyzed to
reasonably assess that the prices
and shorter period average costs are
accurately linked?
(iv) Should it matter whether costs are
trending consistently up,
consistently down, or up and down
throughout the POI/POR in the
decision to use shorter cost
averaging periods? Explain in detail
why or why not.
(v) If shorter cost averaging periods
are used based on the argument that
it is distortive to rely on a single
average cost when costs have
changed significantly throughout
the year, should the recovery of cost
test be modified in any way? That
is, should sales that are below the
shorter cost averaging period still be
considered to provide for the
recovery of costs within a
reasonable period time if they are
above the annual average cost? See
section 773(b)(2)(D) of the Act.
(vi) To what extent should the costs
from the window periods5 in
reviews affect the overall analysis?
(vii) If we were to gather information
5 In administrative reviews of existing
antidumping orders, the Department normally
compares the export price (or constructed export
price) of an individual U.S. sale to an average
normal value for a contemporaneous month. The
preferred month is the month in which the
particular U.S. sale was made. If, during the
preferred month, there are no sales in the foreign
market of a foreign like product that is identical to
the subject merchandise, the Department will then
employ a six-month window period for the
selection of contemporaneous sales. For each U.S.
sale, the Department will calculate an average price
for sales of identical merchandise in the most recent
of the three months (90 days) prior to the month
of the U.S. sale. If there are no such sales, the
Department will use sales of identical merchandise
in the earlier of the two months (60 days) following
the month of the U.S. sale.
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at the outset of every segment of a
proceeding in order to determine
early on whether a respondent
needed to provide cost information
for shorter cost averaging periods,
what information should we
request? Provide specific questions
that could be incorporated into the
section A questionnaire.
(viii) Should shortening the cost
averaging period affect price
comparisons? For sales comparison
purposes, should prices be
compared across cost–averaging
periods?
(ix) Are there other points you deem
relevant to the issue at hand?
Submission of Comments
Persons wishing to comment should
file a signed original and six copies of
each set of comments by the date
specified above. The Department will
consider all comments received by the
close of the comment period. Comments
received after the end of the comment
period will be considered, if possible,
but their consideration cannot be
assured. The Department will not accept
comments accompanied by a request
that a part or all of the material be
treated confidentially due to business
proprietary concerns or for any other
reason. The Department will return such
comments and materials to the persons
submitting the comments and will not
consider them in its development of a
methodology for when it is appropriate
to deviate from the annual average cost
reporting method to shorter cost
averaging periods. The Department
requires that comments be submitted in
written form. The Department also
requests submission of comments in
electronic form to accompany the
required paper copies. Comments filed
in electronic form should be submitted
either by e–mail to the webmaster
below, or on CD–ROM, as comments
submitted on diskettes are likely to be
damaged by postal radiation treatment
Comments received in electronic form
will be made available to the public in
Portable Document Format (PDF) on the
Internet at the Import Administration
website at the following address: http:/
ia.ita.doc.gov.
Any questions concerning file
formatting, document conversion,
access on the Internet, or other
electronic filing issues should be
addressed to Andrew Lee Beller, Import
Administration Webmaster, at (202)
482–0866, email address: webmaster–
support@ita.doc.gov.
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26367
Dated: May 5, 2008.
David M. Spooner,
Assistant Secretary for Import
Administration.
[FR Doc. E8–10527 Filed 5–8–04; 8:45 am]
BILLING CODE 3510–DS–S
DEPARTMENT OF COMMERCE
International Trade Administration
Clean Energy and Environment Trade
Mission to China and India
International Trade
Administration, U.S. Department of
Commerce.
ACTION: Notice.
AGENCY:
SUMMARY: Clean Energy and
Environment Trade Mission to China
and India.
DATES: September 1–12, 2008.
FOR FURTHER INFORMATION CONTACT:
Brian O’Hanlon at
brian.ohanlon@mail.doc.gov or Debra
Delay at debra.delay@mail.doc.gov or
visit the mission Web site at https://
www.export.gov/cleanenergymission.
SUPPLEMENTARY INFORMATION:
Mission Description: The United
States Department of Commerce,
International Trade Administration, is
organizing a Clean Energy and
Environment Trade Mission to China
and India, September 1–12, 2008. The
trade mission will target a broad range
of clean energy and environmental
technologies such as renewable energy,
biofuels, energy efficiency, clean coal,
distributed generation, waste handling
and treatment, wastewater treatment,
packaging recycling, and drinking water
treatment. The mission will make stops
in Beijing, Jinan, and Shanghai, China
as well as New Delhi, Hyderabad, and
Mumbai, India. It will be led by
Assistant Secretary of Commerce David
Bohigian.
Through this mission, ITA seeks to
match participating U.S. companies
with prescreened partners, agents,
distributors, representatives, licensees,
or retailers in each of these important
sectors. In addition to one-on-one
business meetings, the agenda will also
include meetings with national and
local government officials, networking
opportunities, country briefings,
seminars, and site visits.
Background: This mission builds on
two previous U.S. Clean Energy
Technologies Trade Missions, which
took place in April 2007 and January
2008. Each brought 17 U.S. companies
to China and India. This trade mission
takes place within the context of both
the President’s international framework
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]]>Agencies
[Federal Register Volume 73, Number 91 (Friday, May 9, 2008)]
[Notices]
[Pages 26364-26367]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-10527]
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DEPARTMENT OF COMMERCE
International Trade Administration
Antidumping Methodologies for Proceedings that Involve
Significant Cost Changes Throughout the Period of Investigation (POI)/
Period of Review (POR) that May Require Using Shorter Cost Averaging
Periods; Request for Comment
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Request for comment.
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SUMMARY: The Department of Commerce (Department) seeks public comment
on its development of a predictable methodology for determining when
the use of shorter cost averaging periods is more appropriate than the
established practice of using annual cost averages due to the
occurrence of significant cost changes throughout the POI/POR. Although
the Department maintains that the established practice of using annual
cost averages is the most appropriate methodology to use in a majority
of proceedings, it may be preferable to use an alternative methodology
in certain cases. The Department now seeks comments from the public on
the factors to consider, the tests to apply, and the thresholds to
adhere to in determining whether or not shorter cost averaging
[[Page 26365]]
periods (e.g., quarterly) are more appropriate.
DATES: Comments must be submitted within thirty days from the
publication of this notice.
ADDRESSES: Written comments (original and six copies) should be sent to
the Secretary of Commerce, Attn: Import Administration, APO/Dockets
Unit, Room 1870, U.S. Department of Commerce, 14th Street &
Constitution Ave., NW, Washington, DC 20230.
FOR FURTHER INFORMATION CONTACT: Neal M. Halper, Director, Office of
Accounting, or Taija A. Slaughter, Lead Accountant, Office of
Accounting, Import Administration, U.S. Department of Commerce, 14th
Street and Constitution Avenue, NW., Washington, DC 20230; telephone:
(202) 482-2989 and (202) 482-3563, respectively.
SUPPLEMENTARY INFORMATION:
Background
The Department's methodology for calculating the cost of
manufacture (COM) of subject merchandise in less-than-fair-value
investigations and antidumping administrative reviews is based on the
cost over the entire POI or POR (i.e., on an annual basis). This yearly
based methodology results in a normalized, weighted-average production
cost that can then be compared to sales prices covering the same
extended period of time. Therefore, the Department's questionnaire
requests that all respondents report their costs of producing
merchandise on an annual average basis over the entire POI or POR. See,
e.g., Certain Pasta from Italy: Final Results of Antidumping Duty
Administrative Review, 65 FR 77852 (Dec. 13, 2000) (Pasta from Italy),
and accompanying Issues and Decision Memorandum at Comment 18 and
Notice of Final Results of Antidumping Duty Administrative Review of
Carbon and Certain Alloy Steel Wire Rod from Canada, 71 FR 3822 (Jan.
24, 2006) (Wire Rod from Canada), and accompanying Issues and Decision
Memorandum at Comment 5 (explaining the Department's practice of
computing a single weighted-average cost for the entire period). This
methodology is predictable and generally applied consistently in all
proceedings.
The Tariff Act of 1930, as amended (the Act), and the Department's
regulations describe the role of the cost of production (COP) in the
Department's antidumping analysis. ``Dumping'' is defined in section
771(34) of the Act as the sale or likely sale of goods at less than
normal value (NV) in the United States. A ``dumping margin,'' as
defined by section 771(35)(A) of the Act, is the amount by which the NV
exceeds the export price (EP) or constructed export price (CEP) of the
subject merchandise. In calculating NV, section 773(a)(1)(B) of the Act
states that the Department will consider only those sales in the
comparison market that are made in the ``ordinary course of trade.''
Section 771(15) of the Act and 19 CFR 351.102 explain that sales are
generally made ``in the ordinary course of trade'' if they are sold
under ``conditions and practices which, for a reasonable period of time
prior to the exportation of the subject merchandise, have been normal''
for sales of the foreign like product.\1\ None of these provisions
provides guidance on the methodology which the Department should use in
calculating a respondent's COP.
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\1\ Section 773(b)(1) of the Act states that if no sales made in
the ordinary course of trade remain, the normal value shall be based
on the constructed value (CV) of the merchandise. See also 19 CFR
351.405(a). CV is defined at section 773(e) of the Act as the cost
of materials, plus fabrication expenses, selling, general and
administrative expenses, profit and packing expenses.
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Furthermore, section 773(b)(1) of the Act and 19 C.F.R. 351. 406
provide that sales may be disregarded if they have been made at prices
which represent less than the COP of that product. Section 773(b)(3) of
the Act defines the COP as:
an amount equal to the sum of-
(A) the cost of materials and of fabrication or other
processing of any kind employed in producing the foreign like
product, during a period which would ordinarily permit the
production of that foreign like product in the ordinary course of
business;
(B) an amount for selling, general, and administrative expenses
based on actual data pertaining to production and sales of the
foreign like product by the exporter in question; and
(C) the cost of all containers and coverings of whatever
nature, and all other expenses incidental to placing the foreign
like product in condition packed ready for shipment.
Thus, although the Act states that the COP is calculated using a
``period which would ordinarily permit the production'' of the foreign
like product, no guidance is given with regard to whether or not the
Department should use only a single, weighted-average period of time,
or multiple time periods within that ``production period'' for purposes
of making comparisons and calculating a dumping margin.
The Department has established a practice of using a single
weighted-average COP that applies to the entire POI/POR, which it has
applied in the vast majority of its investigations and reviews. Factors
such as erratic production levels, the extent to which and how
accurately monthly accruals are made, periodic maintenance, inventory
valuation methods, etc. all impact the timing and accuracy of per-unit
costing over short periods of time. Relying on an annual average cost
tends to smooth out these short-term per-unit cost fluctuations
resulting in a normalized average production cost to be compared to
sales prices over the same extended period of time. See Color
Television Receivers from the Republic of Korea; Final Results of
Antidumping Duty Administrative Review, 55 FR 26225, 26228 (June 27,
1990) (where the Department stated that the use of quarterly data would
cause aberrations due to short-term cost fluctuations) and Grey
Portland Cement and Clinker From Mexico; Final Results of Antidumping
Duty Administrative Review, 58 FR 47253, 47257 (September 8, 1993)
(where the Department explained that the annual period used for
calculating costs accounts for any seasonal fluctuation which may occur
as it accounts for a full operation cycle).
The Department has, however, in a limited number of cases, deviated
from its normal methodology of calculating costs on an annual average
basis over the entire POI/POR and resorted to shorter cost averaging
periods. Examples of instances where the Department departed from its
standard cost averaging period include high technology products that
experienced significant and consistent cost and price changes over a
short period of time. See Notice of Final Determination of Sales at
Less Than Fair Value: Static Random Access Memory Semiconductors from
Taiwan, 63 FR 8909, 8926 (Feb. 23, 1998) (SRAMS from Taiwan) (where the
Department determined that quarterly, rather than annual, averages
resulted in a more accurate comparison of pricing behavior during the
period of investigation (POI) given the significant decrease in the
price and cost of static random access memory semiconductors throughout
the POI) and Final Determination of Sales at Less Than Fair Value:
Erasable Programmable Read Only Memories from Japan, 51 FR 39680, 39685
(Oct. 30, 1986) (EPROMS from Japan) (where the Department found that
significant changes in the COP during a short period of time due to
technological advancements and changes in the production process
justified the use of quarterly weighted-average costs).
The Department also found that shorter period averages resulted in
a more accurate comparison of pricing behavior where the respondent's
COM changed significantly throughout the cost reporting period. In
Final Results of Antidumping Duty Administrative
[[Page 26366]]
Review and Determination Not to Revoke the Antidumping Duty Order:
Brass Sheet and Strip from Netherlands, 65 FR 742 (Jan. 6, 2000) (Brass
Sheet and Strip from Netherlands), the Department was able to make a
contemporaneous comparison of metal values and sales prices which
resulted in a more accurate calculation of the dumping margin in that
instance because the respondent treated the cost of the input metals as
a pass-through to its customers in its normal books and records. See
id. at 747-748. Accordingly, in Brass Sheet and Strip from Netherlands,
the Department determined it appropriate to deviate from calculating
cost on an annual average basis over the entire cost reporting period
because record evidence showed that the cost of metal inputs
represented a significant percentage of the total cost of producing
brass sheet and strip, the cost of the metal inputs dropped
consistently and significantly throughout the POR, and prices and costs
for the shorter periods could be accurately matched.\2\
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\2\ The Department also deviated from its practice of using POR
average costs in Notice of Final Results of Antidumping Duty
Administrative Review: Canned Pineapple Fruit From Thailand, 63 FR
7392 (Feb. 13, 1998). In this case the POR covered an 18-month
period. For purposes of calculating the dumping margin, the
Department initially used the POR-wide weighted-average cost.
However, the Department later matched the sales and costs by
segregating the POR into two fiscal years for purposes of its
dumping analysis. See Final Results of Redetermination Pursuant to
United States Court of International Trade Remand Order Thai
Pineapple Canning Industry Corp. Ltd. And Mitsubishi International
Corp. Ltd. v. United States, Court No. 98-03-00487 (CIT Feb. 5,
2002) , dated May 31, 2002, at 3 found at https://ia.ita.doc.gov.
Although the Department matched sales prices to average costs for
periods of time that were shorter than the span of the entire POR,
it is important to note that the shorter averaging periods used were
fiscal years, and not quarters or months.
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Issues of Concern
In several recent proceedings, we have received requests from
respondents to report costs using averaging periods of less than one
year. See Certain Steel Concrete Reinforcing Bars from Turkey; Final
Results, Rescission of Antidumping Duty Administrative Review in Part,
and Determination To Revoke in Part, 70 FR 67665 (November 8, 2005)
(Rebar from Turkey), and accompanying Issues and Decision memorandum at
Comment 1; Final Results of Antidumping Duty Administrative Review:
Carbon and Certain Alloy Steel Wire Rod from Canada, 71 FR 3822
(January 24, 2006); and Final Results of Antidumping Duty
Administrative Review: Stainless Steel Sheet and Strip in Coils From
France, 71 FR 6269 (February 7, 2006). In these cases, we primarily
relied on two factors in determining whether it was appropriate to
deviate from our normal practice of using an annual average cost
method: (1) whether the cost changes throughout the POI/POR were
significant, and (2) whether sales during the shorter averaging periods
could be accurately linked with the COP/CV during the same shorter
averaging periods.
In these recent proceedings, we analyzed the significance of the
cost changes throughout the POI/POR by conducting a comparative COM
analysis between the annual average cost method and the suggested
shorter period average cost method (e.g., quarterly cost averaging
period). See, e.g., Rebar from Turkey. In comparing the costs under the
two methods, the Department examined the five most frequently sold
models of the foreign like product (i.e., control numbers or
``CONNUMs'') in the comparison market. For each of the five models, the
Department compared the difference between the annual-average COM and
the shorter period average COMs.\3\
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\3\ In each case, the analysis was conducted using the total COM
and not the cost of an input or one element of the COM.
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In considering whether a shorter cost averaging period reflects a
more accurate measure of dumping, we also explained in those
proceedings that sales during the shorter averaging period must be
closely linked with the COP of the shorter period. In certain cases
there are various factors\4\ which may affect the timing relationship
between the purchase of the raw materials, the production of a product,
and its subsequent sale. Therefore, arbitrarily relying on a shorter
cost reporting period can create uncertainty as to how accurately the
average costs during the shorter period relate to the sales that
occurred during that same shorter period. Thus, we believe it is
necessary for a respondent to provide evidence on the administrative
record of a direct linkage between resulting costs and sales prices
before we consider using a cost-averaging period that does not extend
throughout the entire POI/POR. In the above-mentioned recent
proceedings, in assessing whether sales can be accurately linked with
the concurrent quarterly average costs, we analyzed the relationship of
the cost and price trends throughout the POI/POR.
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\4\ For example, factors such as: 1) the raw material inventory
turnover period; 2) the inventory valuation method used by the
company (e.g., last-in, first-out versus first-in, first-out versus
weighted-average, etc.); 3) the extent to which raw materials are
purchased pursuant to long-term contracts; 4) erratic production
levels throughout the year; 5) sales made pursuant to long-term
contracts; 6) the extent to which monthly accruals are made; and 7)
year-end adjustments all affect the timing relationship between
sales transactions and costs.
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In addition, in a recent remand redetermination, filed with the
Court of International Trade, we assessed how closely sales prices and
costs tracked each other during the shorter cost calculation periods by
analyzing the consistency of the shorter cost averaging period profit
percentages on comparison market sales. See Final Results of
Redetermination Pursuant to Court Remand, Habas Sinai ve Tibbi Gazlar
Istihsal ve Endustrisi A.S. v. United States, Court No. 05-00613, Slip
Op. 07-167 (CIT Nov. 15, 2007), dated March 3, 2008 found at https://
ia.ita.doc.gov. In that remand redetermination, to calculate the
shorter cost averaging period profit percentages, we subtracted the
shorter average cost of producing such sales from the shorter averaging
period comparison market net sales revenue, and divided this figure by
the same shorter average cost of producing such sales. Using this
analysis, we concluded that the required linkage between sales and
costs did not exist in that case such as to warrant using shorter time
periods.
Request for Comments
We continue to regard our practice of using annual cost averages in
proceedings as generally the most appropriate methodology, and we
intend to deviate from this practice only under limited circumstances.
The use of annual cost averages results in an approach that normally
evens out swings in production costs that a respondent may have
experienced over short periods (i.e., months or quarters) of time, and
reasonably reflects the COP for sales made throughout the year.
However, in certain cases, possible distortions may result when an
annual-average cost method is used during a period of significant cost
changes. Conversely, many factors, as noted above, may result in
distortions when using shorter period average costs. Consequently,
relying on a shorter cost reporting period can create uncertainty as to
how accurately the average costs during the shorter period relate to
the sales that occurred during that same shorter period. In light of
these competing considerations, the Department requests comments and
suggestions on the factors to consider, tests to apply, and thresholds
to adhere to when deciding to rely on cost averaging periods of less
than a year.
Below is a list of specific questions we would like parties to
comment on:
[[Page 26367]]
(i) Are there other factors relevant to the consideration of
whether and when to rely on shorter cost averaging periods besides
significant cost changes and the linking of sales and costs during the
same shorter period? If so, identify the factor(s) and explain in
detail why such factor(s) should be considered.
(ii) How should the significant cost changes factor be analyzed and
what numeric threshold should we rely upon as a basis for resorting to
shorter cost averaging periods? Provide the basis for your suggested
threshold number. Should the nature of the industry (e.g., steel,
consumer electronics, perishable products, etc.) affect the analysis?
If so, explain in detail how the analysis would be affected.
(iii) How should the correlation between prices and shorter cost
averaging periods be analyzed to reasonably assess that the prices and
shorter period average costs are accurately linked?
(iv) Should it matter whether costs are trending consistently up,
consistently down, or up and down throughout the POI/POR in the
decision to use shorter cost averaging periods? Explain in detail why
or why not.
(v) If shorter cost averaging periods are used based on the
argument that it is distortive to rely on a single average cost when
costs have changed significantly throughout the year, should the
recovery of cost test be modified in any way? That is, should sales
that are below the shorter cost averaging period still be considered to
provide for the recovery of costs within a reasonable period time if
they are above the annual average cost? See section 773(b)(2)(D) of the
Act.
(vi) To what extent should the costs from the window periods\5\ in
reviews affect the overall analysis?
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\5\ In administrative reviews of existing antidumping orders,
the Department normally compares the export price (or constructed
export price) of an individual U.S. sale to an average normal value
for a contemporaneous month. The preferred month is the month in
which the particular U.S. sale was made. If, during the preferred
month, there are no sales in the foreign market of a foreign like
product that is identical to the subject merchandise, the Department
will then employ a six-month window period for the selection of
contemporaneous sales. For each U.S. sale, the Department will
calculate an average price for sales of identical merchandise in the
most recent of the three months (90 days) prior to the month of the
U.S. sale. If there are no such sales, the Department will use sales
of identical merchandise in the earlier of the two months (60 days)
following the month of the U.S. sale.
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(vii) If we were to gather information at the outset of every
segment of a proceeding in order to determine early on whether a
respondent needed to provide cost information for shorter cost
averaging periods, what information should we request? Provide specific
questions that could be incorporated into the section A questionnaire.
(viii) Should shortening the cost averaging period affect price
comparisons? For sales comparison purposes, should prices be compared
across cost-averaging periods?
(ix) Are there other points you deem relevant to the issue at hand?
Submission of Comments
Persons wishing to comment should file a signed original and six
copies of each set of comments by the date specified above. The
Department will consider all comments received by the close of the
comment period. Comments received after the end of the comment period
will be considered, if possible, but their consideration cannot be
assured. The Department will not accept comments accompanied by a
request that a part or all of the material be treated confidentially
due to business proprietary concerns or for any other reason. The
Department will return such comments and materials to the persons
submitting the comments and will not consider them in its development
of a methodology for when it is appropriate to deviate from the annual
average cost reporting method to shorter cost averaging periods. The
Department requires that comments be submitted in written form. The
Department also requests submission of comments in electronic form to
accompany the required paper copies. Comments filed in electronic form
should be submitted either by e-mail to the webmaster below, or on CD-
ROM, as comments submitted on diskettes are likely to be damaged by
postal radiation treatment
Comments received in electronic form will be made available to the
public in Portable Document Format (PDF) on the Internet at the Import
Administration website at the following address: http:/ia.ita.doc.gov.
Any questions concerning file formatting, document conversion,
access on the Internet, or other electronic filing issues should be
addressed to Andrew Lee Beller, Import Administration Webmaster, at
(202) 482-0866, email address: webmaster-support@ita.doc.gov.
Dated: May 5, 2008.
David M. Spooner,
Assistant Secretary for Import Administration.
[FR Doc. E8-10527 Filed 5-8-04; 8:45 am]
BILLING CODE 3510-DS-S
