Proposed Modification to Regulation Concerning the Use of Market Economy Input Prices in Nonmarket Economy Proceedings, 38553-38556 [2012-15436]

Agencies

• DEPARTMENT OF COMMERCE
• International Trade Administration

[Federal Register Volume 77, Number 125 (Thursday, June 28, 2012)]
[Proposed Rules]
[Pages 38553-38556]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-15436]


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DEPARTMENT OF COMMERCE

International Trade Administration

19 CFR Part 351


Proposed Modification to Regulation Concerning the Use of Market 
Economy Input Prices in Nonmarket Economy Proceedings

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

ACTION: Proposed rule; request for comments.

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SUMMARY: The Department of Commerce (``Department'') proposes to modify 
its regulation which states that the Department normally will use the 
price that a nonmarket economy (``NME'') producer pays to a market 
economy supplier when a factor of production is purchased from a market 
economy supplier and paid for in market economy currency, in the 
calculation of normal value (``NV'') in antidumping proceedings 
involving NME countries. The rule, if adopted, would establish (1) a 
requirement that the input at issue be produced in one or more market 
economy countries, and (2) a revised threshold requiring that 
``substantially all'' of an input be purchased from one or more market 
economy suppliers before the Department would use the purchase price 
paid to value the entire factor of production. Through this proposed 
modification, the Department is announcing its proposed definition of 
``substantially all'' to be 85 percent of the total purchased volume of 
the particular input. The Department invites public comment on this 
proposed change.

[[Page 38554]]


DATES: To be assured of consideration, comments must be received no 
later than July 30, 2012.

ADDRESSES: All comments must be submitted through the Federal 
eRulemaking Portal at https://www.Regulations.gov, Docket No. ITA-2012-
0002, and the Department prefers this means of submitting comments. 
However, if a commenter does not have access to the Internet, as an 
alternative, he or she may submit the original and two copies of each 
set of comments by mail or hand delivery/courier. All comments should 
be addressed to Paul Piquado, Assistant Secretary for Import 
Administration, Room 1870, Department of Commerce, 14th Street and 
Constitution Ave. NW., Washington, DC 20230. The comments should be 
identified by Regulation Identifier Number (RIN) 0625-AA89.
    The Department will consider all comments received before the close 
of the comment period. The Department will not accept comments 
accompanied by a request that part or all of the material be treated 
confidentially because of its business proprietary nature or for any 
other reason. All comments responding to this notice will be a matter 
of public record and will be available for inspection at Import 
Administration's Central Records Unit (Room 7046 of the Herbert C. 
Hoover Building) and online at https://www.Regulations.gov and on the 
Department's Web site at https://www.trade.gov/ia/.
    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.

FOR FURTHER INFORMATION CONTACT: Wendy Frankel at (202) 482-5849 or 
Scott McBride at (202) 482-6292.

SUPPLEMENTARY INFORMATION: 

Background

    In antidumping proceedings involving NME countries, the Department 
calculates NV by valuing the NME producer's factors of production, to 
the extent possible, using prices from a market economy that is at a 
comparable level of economic development and that is also a significant 
producer of comparable merchandise. See section 773(c)(4) of the Tariff 
Act of 1930, as amended (``the Act''). The goal of this surrogate 
factor valuation is to use the ``best available information'' to 
determine NV. See section 773(c)(1) of the Act; see also Dorbest Ltd, 
et al. v. United States, 604 F.3d 1363 (Fed. Cir. 2010). Pursuant to 19 
CFR 351.408(c)(1), as currently written, when an NME producer purchases 
inputs from market economy suppliers and pays for those purchases in a 
market economy currency, the Department normally uses the weighted-
average price paid by the NME producer for these inputs to value the 
input in question, where possible. When a portion of the input is 
purchased from a market economy supplier and the remainder from a 
nonmarket economy supplier, the Department will normally use the price 
paid for the input sourced from market economy suppliers to value all 
of the input, provided that the volume of the market economy input as a 
share of total purchases from all sources is ``meaningful.'' See 
Antidumping Duties; Countervailing Duties, Final Rule, 62 FR 27296, 
27366 (May 19, 1997); Shakeproof Assembly Components Div. of Ill. Tool 
Works, Inc. v. United States, 268 F. 3d 1376 (Fed. Cir. 2001).
    In Antidumping Methodologies: Market Economy Inputs, Expected Non-
Market Economy Wages, Duty Drawback; and Request for Comments, 71 FR 
61716 (October 19, 2006), the Department instituted a rebuttable 
presumption that market economy input prices are the best available 
information for valuing all of an input when the total volume of the 
input purchased by the respondent from all market economy sources 
during the period of investigation or review exceeds 33 percent of the 
total volume of the input purchased from all sources during the period. 
Under this practice, unless case-specific facts provide adequate 
grounds to rebut the Department's presumption, the Department uses the 
weighted-average market economy purchase price to value all of the 
input. Alternatively, when the volume of an NME firm's purchases of a 
particular input from market economy suppliers during the period of 
investigation/review does not exceed this 33 percent threshold, the 
Department weight-averages the (weighted-average) market economy 
purchase price and an appropriate surrogate value,\1\ using as weights 
the relative quantities of the input imported and purchased from 
domestic sources.
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    \1\ The Department will choose a surrogate value from a market 
economy country which is at a level of economic development 
comparable to that of the nonmarket economy country and is a 
significant producer of comparable merchandise.
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    In determining whether market economy purchases meet this 33 
percent threshold, the Department compares the volume that the 
respondent purchased from market economy sources during the period of 
investigation or review with the respondent's total purchases during 
the period. When a firm has made market economy input purchases that 
may have been dumped (e.g., the country covered by our proceeding has 
an antidumping measure on the input from the source country) or from a 
country that the Department has a ``reason to believe or suspect'' 
maintains general export subsidies, are not bona fide, or are otherwise 
not acceptable for use in a dumping calculation (i.e. if the purchases 
are from an affiliate and are not made at arm's length), the Department 
excludes them from the numerator of the ratio to ensure a fair 
determination of whether valid market economy purchases meet the 33 
percent threshold.
    The Department now proposes to revise 19 CFR 351.408(c)(1) to 
establish that where substantially all (i.e., 85 percent or more) of an 
input is purchased from market economy suppliers (from one or more 
market economy countries) as a share of total purchases of that input 
from all sources during a particular period of investigation or review, 
the Department will normally use the weighted-average purchase price 
paid to the market economy supplier(s) to value all of the input. When 
the 85 percent threshold is not met, the Department will weight-average 
the market economy purchase price(s) and an appropriate surrogate 
value, using the respective quantities of the input sourced, from 
market economy and nonmarket economy suppliers. One reason for this 
proposed revision is a concern that, when market economy purchases of 
an input do not account for substantially all purchases of the input 
(imported and domestically supplied), a market economy input price is 
not the best available information, particularly since it would not be 
possible to determine objectively whether the price for the input would 
have been the same had the firm purchased solely from market economy 
suppliers. The Department has confidence in the market economy purchase 
price(s) only when the proportion of the total volume of the input that 
is sourced from market economies is substantially all (i.e., for 
purposes of this provision, 85 percent or more) of the total purchases 
of that particular input.
    The Department also proposes to add a requirement to 19 CFR 
351.408(c)(1) that the market economy input at issue actually be 
produced in one or more market economy countries, and not just sold 
through market economy countries, to address concerns that the pricing 
of an NME-produced input by a market economy supplier (or reseller) can 
be

[[Page 38555]]

distorted by NME cost or supply factors. For example, NME input prices 
that reflect non-profit objectives or low or suppressed capital, land, 
energy or other factors of production costs in the NME country can be 
reflected in, and therefore distort, the prices charged by market 
economy suppliers or resellers of that input. That is not to say that 
prices of market economy-produced inputs can never be distorted, but 
only that they are normally not reflective of systemic, economy-wide 
distortions, as are NME prices.

Explanation of Proposed Modification to 19 CFR 351.408

    The second sentence of 19 CFR 351.408(c)(1) states that ``[w]here a 
factor is purchased from a market economy supplier and paid for in a 
market economy currency, the Secretary normally will use the price paid 
to the market economy supplier.'' The Department proposes modifying the 
existing sentence and adding two parts to that sentence. First, the 
Department proposes adding ``produced in one or more market economy 
countries'' after ``[w]here a factor is.'' Second, the Department 
proposes changing the subsequent clauses to read ``purchased from one 
or more market economy suppliers and paid for in market economy 
currency, the Secretary normally will use the price(s) paid to the 
market economy supplier(s).'' Third, the Department proposes adding the 
following to the end of that sentence: ``If substantially all of the 
total volume of the factor is purchased from one or more market economy 
suppliers. For purposes of this provision, the Secretary defines the 
term `substantially all' to be 85 percent or more of the total volume 
of purchases of the factor used in the production of subject 
merchandise.'' We view these additions as necessary to specify which 
inputs qualify and useful to clearly define the proposed threshold.
    The current third sentence of 19 CFR 351.408(c)(1) states ``In 
those instances where a portion of the factor is purchased from a 
market economy supplier and the remainder from a nonmarket economy 
supplier, the Secretary normally will value the factor using the price 
paid to the market economy supplier.'' The Department proposes deleting 
``a portion of the factor'' from the beginning of that sentence and 
replacing it with ``less than substantially all of the total volume of 
the factor.'' The Department also proposes adding ``produced in one or 
more market economy countries and'' before ``purchased from a market 
economy supplier,'' and changing the latter clause to read ``purchased 
from one or more market economy suppliers.'' In addition, the 
Department proposes deleting ``and the remainder from a nonmarket 
economy supplier.'' The Department also proposes deleting ``value the 
factor using the price paid to the market economy supplier'' at the end 
of that sentence. The Department is replacing these passages with 
``weight-average the actual price(s) paid for the market economy 
portion and the surrogate value for the nonmarket economy portion by 
their respective quantities.'' We view these changes as necessary to 
explain the methodology the Department will use when a respondent 
purchases less than substantially all of the input from market economy 
suppliers or only part of the input is produced in one or moremarket 
economy countries.

Classification

Executive Order 12866

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

 Initial Regulatory Flexibility Act (IRFA)

    Pursuant to Section 603 of the Regulatory Flexibility Act, the 
Department has prepared the following IRFA to analyze the potential 
impact that this proposed rule, if adopted, would have on small 
entities.

Description of the Reasons Why Action Is Being Considered

    The policy reasons for issuing this proposed rule are discussed in 
the Background section of this document, and are not repeated here.

Statement of the Objectives of, and Legal Basis for, the Proposed Rule; 
Identification of All Relevant Federal Rules That May Duplicate, 
Overlap, or Conflict With the Proposed Rule

    This proposed rule is intended to revise 19 CFR 351.408(c)(1) to 
establish that in valuing factors of production in antidumping 
proceedings involving nonmarket economies, if substantially all of an 
input is purchased from market economy suppliers as a share of total 
purchases of that input from all sources during the investigation or 
review period, the Department will use the weighted-average purchase 
price paid to market economy suppliers to value all of the input. 
Further, the proposed rule is also intended to add a requirement to 19 
CFR 351.408(c)(1) that the market economy input at issue actually be 
produced in one or more market economy countries, and not just be sold 
through market economy countries.
    The legal basis for this rule is 5 U.S.C. 301; 19 U.S.C. 1202 note; 
19 U.S.C. 1303 note; and 19 U.S.C. 1671 et seq. No other Federal rules 
duplicate, overlap or conflict with this proposed rule.

Number and Description of Small Entities Regulated by the Proposed Rule

    The proposed rule regulates entities that are: (1) Producing 
merchandise in a nonmarket economy that is exported to the United 
States and is subject to an antidumping duty order; (2) being 
individually examined in an antidumping proceeding; and (3) claiming 
that market economy purchase prices should be used to value a factor of 
production in the calculation of the exporter's weighted average 
dumping margin and antidumping duty assessment rate. The resulting 
antidumping duty assessment rate determines the amount of antidumping 
duties to be paid by importers of record of the subject merchandise 
imported into the United States.
    Entities that produce and export merchandise subject to U.S. 
antidumping duty orders are rarely U.S. companies. Some producers and 
exporters of subject merchandise do have U.S. affiliates, some of which 
may be considered small entities under the appropriate Small Business 
Administration (SBA) small business size standard. The Department is 
not able to estimate the number of exporters and producer domestic 
affiliates that may be considered small entities, but anticipates, 
based on its experience in these proceedings, that the number will not 
be substantial.
    Importers may be U.S. or foreign companies, and some of these 
entities may be considered small entities under the appropriate SBA 
small business size standard. There are no means by which the 
Department can readily determine whether or not a substantial number of 
small importers will be impacted by this rule, as the effect of the 
Department's change in methodology will differ from proceeding to 
proceeding, on a case-by-case basis, and the importers depositing cash 
deposits and/or paying antidumping duties will also differ from 
proceeding to proceeding.

Description of the Projected Reporting, Recordkeeping, and Other 
Compliance Requirements of the Proposed Rule

    The proposed rule will require exporters or producers to establish 
on the administrative record that 85 percent or more of an input has 
been purchased from market economy suppliers from one or more market 
economy countries as a share of total purchases of that input from all 
sources (domestic and foreign) during a particular period of 
investigation or

[[Page 38556]]

administrative review, if the exporter or producer wishes the 
Department to use the weighted-average purchase price paid to the 
market economy supplier(s) to value all of the input (from all 
sources). Furthermore, the proposed rule will require that exporters or 
producers also establish on the administrative record that the market 
economy input at issue was produced in a market economy, rather than 
merely being sold through a market economy supplier. There will be no 
additional reporting or recordkeeping burdens on U.S. importers as a 
result of this rule.

Description of Any Significant Alternatives to the Proposed Rule That 
Accomplish the Stated Objectives of Applicable Statutes and That 
Minimize Any Significant Economic Impact of the Proposed Rule on Small 
Entities

    As required by 5 U.S.C. 603(c), the Department's analysis 
considered significant alternatives. The alternatives which the 
Department considered are: (1) The preferred alternative of modifying 
19 CFR 351.408(c)(1) to (a) establish that if substantially all of an 
input is purchased from market economy suppliers as a share of total 
purchases of that input from all sources during the investigation or 
review period, the Department will use the weighted-average purchase 
price paid to market economy suppliers to value all of the input and 
(b) require that the market economy input at issue actually be produced 
in one or more market economy countries, and not just be sold through 
market economy countries; (2) modify the regulation with respect to 
(1)(a), but not (1)(b); (3) modify the regulation with respect to 
(1)(b), but not (1)(a); or (4) maintain the status quo with respect to 
the valuation of inputs purchased from a market economy supplier and 
paid for in a market economy currency.
    Factors of production for the subject merchandise will be assigned 
a value in the calculation of the weighted average dumping margin and 
antidumping duty assessment rate, whether the assigned value is a 
market economy purchase price, a surrogate value from a market economy 
country, or a combination of the two. Accordingly, the economic impact 
of providing information and argument to the Department in relation to 
the valuation of the factors of production for entities individually 
examined in the Department's antidumping proceedings is roughly 
equivalent under each of the above-noted alternatives.
    In relation to the possible impact of the alternatives on the 
amount of antidumping duties to be paid by importers of record of the 
subject merchandise, the value of a factor of production is one of 
numerous elements in the calculation of a weighted average margin of 
dumping. Whether a particular factor value will have any impact on the 
resulting weighted average dumping margin is not certain. To the extent 
that a small U.S. importer will be economically impacted by this rule, 
it will only be through an increase or decrease in the cash deposits 
and duties posted by that importer as a result in the change of a 
weighted average dumping margin. In those circumstances where a change 
in the value of an input as a result of this regulatory modification 
does have an impact on the weighted average dumping margin, the impact 
to the small U.S. importer will depend on whether the publicly sourced 
value is higher or lower than the market economy purchase price(s).
    In this regard, the Department is required by 19 U.S.C. 
1677b(c)(1)(b) to rely on the best information available for valuing 
the producer's factors of production. The proposed modification to the 
regulation addresses the Department's concerns that a market economy 
input price may not be the best available information when: (1) Market 
economy purchases of an input are insufficient in proportion to NME 
purchases for the Department to objectively conclude that the purchase 
price for the input would have been the same had the firm purchased 
solely from market economy suppliers and (2) the reported pricing of an 
NME-produced input purchased from a market economy supplier (or 
reseller) can be distorted by NME cost or supply factors. Accordingly, 
the Department considers that the first, preferred alternative is the 
only alternative that fully addresses the Department's policy concerns 
explained in the Background section of this Notice.

Paperwork Reduction Act

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

List of Subjects in 19 CFR Part 351

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

    Dated: June 15, 2012.
Paul Piquado,
Assistant Secretary for Import Administration.
    For the reasons stated, 19 CFR part 351 is proposed to be amended 
as follows:

PART 351--ANTIDUMPING AND COUNTERVAILING DUTIES

    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.

    2. In Sec.  351.408, revise paragraph (c)(1) to read as follows:
    Information used to value factors. The Secretary normally will use 
publicly available information to value factors. However, where a 
factor is produced in one or more market economy countries, purchased 
from one or more market economy suppliers and paid for in market 
economy currency, the Secretary normally will use the price(s) paid to 
the market economy supplier(s) if substantially all of the total volume 
of the factor is purchased from the market economy supplier(s). For 
purposes of this provision, the Secretary defines the term 
``substantially all'' to be 85 percent or more of the total purchase 
volume of the factor used in the production of subject merchandise. In 
those instances where less than substantially all of the total volume 
of the factor is produced in one or more market economy countries and 
purchased from one or more market economy suppliers, the Secretary 
normally will weight-average the actual price(s) paid for the market 
economy portion and the surrogate value for the nonmarket economy 
portion by their respective quantities.

[FR Doc. 2012-15436 Filed 6-27-12; 8:45 am]
BILLING CODE 3510-DS-P