Modification of Regulations Regarding Price Adjustments in Antidumping Duty Proceedings, 15641-15646 [2016-06698]

Download as PDF Federal Register / Vol. 81, No. 57 / Thursday, March 24, 2016 / Rules and Regulations or procedural or that do not substantially change the effect of the regulations being amended.61 The actions herein fall within this categorical exclusion in the Commission’s regulations. VI. Effective Date and Congressional Notification 39. This Final Rule is effective May 23, 2016. The Commission has determined, with the concurrence of the Administrator of the Office of Information and Regulatory Affairs of OMB, that this rule is not a ‘‘major rule’’ as defined in section 351 of the Small Business Regulatory Enforcement Fairness Act of 1996. This Final Rule is being submitted to the Senate, House, and Government Accountability Office. VII. Document Availability 40. In addition to publishing the full text of this document in the Federal Register, the Commission provides all interested persons an opportunity to view and/or print the contents of this document via the Internet through the Commission’s Home Page (https:// www.ferc.gov) and in the Commission’s Public Reference Room during normal business hours (8:30 a.m. to 5:00 p.m. Eastern time) at 888 First Street NE., Room 2A, Washington, DC 20426. 41. From the Commission’s Home Page on the Internet, this information is available on eLibrary. The full text of this document is available on eLibrary in PDF and Microsoft Word format for viewing, printing, and/or downloading. To access this document in eLibrary, type the docket number of this 15641 document, excluding the last three digits, in the docket number field. 42. User assistance is available for eLibrary and the Commission’s Web site during normal business hours from the Commission’s Online Support at 202– 502–6652 (toll free at 1–866–208–3676) or email at ferconlinesupport@ferc.gov, or the Public Reference Room at (202) 502–8371, TTY (202) 502–8659. Email the Public Reference Room at public.referenceroom@ferc.gov. By the Commission. Issued: March 17, 2016. Nathaniel J. Davis, Sr., Deputy Secretary. Note: The following Appendix will not appear in the Code of Federal Regulations. Appendix COMMENTERS Abbreviation Commenter EEI ........................................................... Idaho Power ............................................ ITC ........................................................... Luminant .................................................. NERC ....................................................... NAGF ....................................................... Tri-State ................................................... Edison Electric Institute. Idaho Power Company. International Transmission Company. Luminant Generation Company LLC. North American Electric Reliability Corporation. North American Generator Forum. Tri-State Generation and Transmission Association, Inc. [FR Doc. 2016–06508 Filed 3–23–16; 8:45 am] BILLING CODE 6717–01–P DEPARTMENT OF COMMERCE International Trade Administration 19 CFR Part 351 [Docket No. 140929814–6136–02] RIN 0625–AB02 Modification of Regulations Regarding Price Adjustments in Antidumping Duty Proceedings Enforcement and Compliance, International Trade Administration, Department of Commerce. ACTION: Final rule. AGENCY: The Department of Commerce (the Department) is modifying its regulations pertaining to price adjustments in antidumping duty proceedings. These modifications clarify that the Department does not intend to accept a price adjustment that is made after the time of sale unless the interested party demonstrates, to the satisfaction of the Department, its entitlement to such an adjustment. The asabaliauskas on DSK3SPTVN1PROD with RULES SUMMARY: 61 18 Department has further adopted in this final rule a non-exhaustive list of factors that it may consider in determining whether to accept a price adjustment that is made after the time of sale. DATES: Effective date: April 25, 2016. Applicability date: This rule will apply to all proceedings initiated on or after April 25, 2016. FOR FURTHER INFORMATION CONTACT: Jessica Link at (202) 482–1411, James Ahrens at (202) 482–3558, or Melissa Skinner at (202) 482–0461. SUPPLEMENTARY INFORMATION: Background Section 731 of the Tariff Act of 1930, as amended (the Act) provides that when a company is selling foreign merchandise into the United States at less than fair value, and material injury or threat of material injury is found by the International Trade Commission, the Department shall impose an antidumping duty. An antidumping duty analysis involves a comparison of the company’s sales price in the United States (known as the export price or constructed export price) with the price or cost in the foreign market (known as the normal value). See 19 CFR 351.401(a). See also section 772 of the Act (defining export price and constructed export price) and section 773 of the Act (defining normal value). The prices used to establish export price, constructed export price, and normal value involve certain adjustments. See, e.g., 19 CFR 351.401(b). In its May 19, 1997 final rulemaking, the Department promulgated regulatory provisions governing the use of price adjustments in the calculation of export price, constructed export price, and normal value in antidumping duty proceedings. Antidumping Duties; Countervailing Duties; Final Rule, 62 FR 27296 (May 19, 1997) (‘‘1997 Final Rule’’). In particular, the Department promulgated the current regulation at 19 CFR 351.102(b)(38), which provides a definition of ‘‘price adjustment.’’ In providing this definition, the Department stated that ‘‘[t]his term is intended to describe a category of changes to a price, such as discounts, rebates and post-sale price adjustments, that affect the net outlay of funds by the purchaser.’’ 1997 Final Rule, 62 FR at 27300. The Department also enacted 19 CFR 351.401(c) that explains how the Department will use a price net of price CFR 380.4(a)(2)(ii) (2015). VerDate Sep<11>2014 16:15 Mar 23, 2016 Jkt 238001 PO 00000 Frm 00029 Fmt 4700 Sfmt 4700 E:\FR\FM\24MRR1.SGM 24MRR1 15642 Federal Register / Vol. 81, No. 57 / Thursday, March 24, 2016 / Rules and Regulations adjustments. In the 1997 Final Rule, the Department explained that 19 CFR 351.401(c) was intended to ‘‘restate[] the Department’s practice with respect to price adjustments, such as discounts and rebates.’’ Id., 62 FR at 27344. The Department also addressed the following comment received on the 1997 Final Rule’s proposed rulemaking, regarding whether ‘‘after the fact’’ price adjustments, that were not contemplated at the time of sale, would be accepted under 19 CFR 351.401(c): asabaliauskas on DSK3SPTVN1PROD with RULES One commenter suggested that, at least for purposes of normal value, the regulations should clarify that the only rebates Commerce will consider are ones that were contemplated at the time of sale. This commenter argued that foreign producers should not be allowed to eliminate dumping margins by providing ‘‘rebates’’ only after the existence of margins becomes apparent. The Department has not adopted this suggestion at this time. We do not disagree with the proposition that exporters or producers will not be allowed to eliminate dumping margins by providing price adjustments ‘‘after the fact.’’ However, as discussed above, the Department’s treatment of price adjustments in general has been the subject of considerable confusion. In resolving this confusion, we intend to proceed cautiously and incrementally. The regulatory revisions contained in these final rules constitute a first step at clarifying our treatment of price adjustments. We will consider adding other regulatory refinements at a later date. Id., 62 FR at 27344. Since enacting these regulations, the Department has consistently applied its practice of not granting price adjustments where the terms and conditions were not established and known to the customer at the time of sale (sometimes referred to as determining the ‘‘legitimacy’’ of a price adjustment) because of the potential for manipulation of the dumping margins through so-called ‘‘after-the-fact’’, or post-sale, adjustments. See, e.g., Certain Oil Country Tubular Goods From Taiwan: Final Determination of Sales at Less Than Fair Value, 79 FR 41979 (July 18, 2014) and accompanying Issues and Decision Memorandum, Cmt. 3; Lightweight Thermal Paper From Germany: Notice of Final Results of the First Antidumping Duty Administrative Review, 76 FR 22078 (April 20, 2011) (Lightweight Thermal Paper from Germany) and accompanying Issues and Decision Memorandum, Cmt. 3; Canned Pineapple Fruit from Thailand: Final Results and Partial Rescission of Antidumping Duty Administrative Review, 71 FR 70948 (Dec. 7, 2006) and accompanying Issues and Decision Memorandum, Cmt. 1; Ball Bearings and Parts Thereof from France, VerDate Sep<11>2014 16:15 Mar 23, 2016 Jkt 238001 Germany, Italy, Japan, and the United Kingdom: Final Results of Antidumping Duty Administrative Reviews, 71 FR 40064 (July 14, 2006) and accompanying Issues and Decision Memorandum, Cmt. 19. On March 25, 2014, the Court of International Trade issued Papierfabrik August Koehler AG v. United States, 971 F. Supp. 2d 1246 (Ct. Int’l Trade 2014) (Koehler AG), remanding the Department’s decision in Lightweight Thermal Paper from Germany, noted above. The Court ordered the Department to reconsider Papierfabrik August Koehler AG’s rebate program. The Court disagreed with the Department’s determination that the regulations permitted it to disregard certain price adjustments, the terms and conditions of which were not established or known to the customer at the time of sale, stating that ‘‘the regulations set forth a broad definition of price adjustment encompassing ‘any change in the price charged for . . . the foreign like product’ that ‘are reflected in the purchaser’s net outlay.’ ’’ 971 F. Supp. 2d at 1251–52 (quoting 19 CFR 351.102(b)(38)) (emphasis added by Court). In accordance with the Court’s order, on remand, under protest, the Department granted an adjustment for the rebates at issue. See Final Results of Redetermination Pursuant to Court Remand, Lightweight Thermal Paper from Germany, Papierfabrik August Koehler AG v. United States, Court No.11–00147, Slip Op.14–31 (Ct. Int’l Trade March 25, 2014), dated June 20, 2014. On December 31, 2014, the Department published a proposed modification of its regulations, 19 CFR 351.102(b)(38) and 19 CFR 351.401(c), which concern price adjustments in antidumping duty proceedings. See Modification of Regulations Regarding Price Adjustments in Antidumping Duty Proceedings, 79 FR 78742 (December 31, 2014) (Proposed Rule). The Proposed Rule explained the Department’s proposal, in light of the Court of International Trade’s decision in Koehler AG, to clarify that the Department generally will not consider a price adjustment that reduces or eliminates dumping margins unless the party claiming such price adjustment demonstrates that the terms and conditions of the adjustment were established and known to the customer at the time of sale. The Department received numerous comments on the Proposed Rule and has addressed these comments below. The Proposed Rule, comments received, and this final rule can be accessed using the Federal eRulemaking portal at https:// PO 00000 Frm 00030 Fmt 4700 Sfmt 4700 www.Regulations.gov under Docket Number ITA–2014–0001. After analyzing and carefully considering all of the comments that the Department received in response to the Proposed Rule, the Department has adopted the modification with certain changes, and is amending its regulations accordingly. Explanation of Regulatory Provision and Final Modification The Department is modifying two of its regulations relating to price adjustments in antidumping duty proceedings: the definition of the term ‘‘price adjustment’’ in 19 CFR 351.102(b)(38), and the Department’s explanation of its use of prices net of price adjustments in 19 CFR 351.401(c). In the Proposed Rule, the Department proposed minor refinements to the definition of price adjustment in 19 CFR 351.102(b)(38). In this final rule, and in light of a party’s comment, as discussed in further detail below, the Department is modifying 19 CFR 351.102(b)(38) to refine the definition of price adjustment. In particular, we are including language in 19 CFR 351.102(b)(38) to clarify that a price adjustment is not limited to discounts or rebates, but encompasses other adjustments as well. Prior to the Proposed Rule, 19 CFR 351.401(c) provided an explanation of the Department’s use of prices net of price adjustment in calculating export price (or constructed exported price) and normal value (where price is used as the basis for normal value). In the Proposed Rule, the Department proposed to modify 19 CFR 351.401(c), in light of the Court of International Trade’s decision on Koehler AG, in two respects. First, in the first sentence of 19 CFR 351.401(c), the Department proposed language indicating that it would normally use a price that is net of any price adjustment. Second, the Department proposed to add a second sentence to 19 CFR 351.401(c) that clarified the Department generally would not consider a price adjustment that reduces or eliminates a dumping margin unless the party claiming such price adjustment demonstrates that the terms and conditions of the adjustment were established and known to the customer at the time of sale. In the final rule, as discussed below, in light of comments received from interested parties, the Department is modifying 19 CFR 351.401(c) to clarify that the Department does not intend to accept a price adjustment that is made after the time of sale unless the interested party demonstrates, to the satisfaction of the Department, its entitlement to such an adjustment. The Department has further provided in this E:\FR\FM\24MRR1.SGM 24MRR1 Federal Register / Vol. 81, No. 57 / Thursday, March 24, 2016 / Rules and Regulations final rule, as discussed in further detail below, a non-exhaustive list of factors which it may consider in determining whether to accept price adjustments that are made after the time of sale, also referred to as ‘‘after-the-fact’’ or ‘‘postsale’’ adjustments. asabaliauskas on DSK3SPTVN1PROD with RULES Response to Comments on the Proposed Rule The Department received numerous comments on its Proposed Rule. Below is a summary of the comments, grouped by issue category, followed by the Department’s response. 1. Whether Any Changes to 19 CFR 351.102(b)(38) and 19 CFR 351.401(c) Are Necessary Several commenters argue that the Proposed Rule is the appropriate response to Koehler AG and is necessary to maintain the integrity of the Department’s proceedings and to prevent the manipulation of dumping margins through ‘‘after-the-fact’’ adjustments. These commenters argue that in Koehler AG, the Court improperly found that the plain language of the current regulations precludes the disallowance of any postsale price adjustments. Without the Proposed Rule, these commenters argue that foreign producers and exporters would have every incentive to calculate the U.S. price reduction necessary to eliminate dumping, and then lower their prices accordingly through retroactive rebates to customers in the home or third-country market, thereby reducing or eliminating the dumping margins and undermining the integrity of the Department’s proceedings. One commenter argues that the Proposed Rule is unnecessary because the Department has provided no evidence of respondents utilizing manipulative post-sale price adjustments and that existing regulations are sufficient to maintain the integrity of the Department’s proceedings because, under 19 CFR 351.401(b)(1), the Department can already deny a price adjustment if it determines that the adjustment is not bona fide. This commenter further argues that the Proposed Rule unduly burdens respondents operating in industries where many discounts and rebates are agreed to on an ad hoc basis without documentation over the course of multiple transactions many months before the Department’s proceedings. Response: The Department finds that the proposed changes will help protect the integrity of our proceedings and are an appropriate response to Koehler AG, which hinders the Department’s ability to address after-the-fact rebates which VerDate Sep<11>2014 16:15 Mar 23, 2016 Jkt 238001 present the potential for manipulation of dumping margins. In Koehler AG the Court of International Trade held that the Department did not have the discretion under 19 CFR 351.102(b)(38) and 19 CFR 351.401(c)—as currently written—to address such manipulative after-the-fact rebates. See 971 F. Supp. 2d at 1251–52. The Proposed Rule, and the further modifications adopted in this final rule, codify the Department’s intent and discretion to prevent certain post-sale price adjustments, like those at issue in Koehler AG, and therefore are appropriate to protect the integrity of our proceedings. We believe that these further modifications, discussed below, should address any concerns that the Proposed Rule was unduly burdensome and does not account for actual business practices. 2. Whether the Proposed Rule Is Consistent With the Statute and U.S. International Obligations Several commenters state that the Proposed Rule is consistent with the Department’s general statutory authority to impose antidumping duties pursuant to section 731 of the Act. One commenter argues that the Proposed Rule is inconsistent with section 773(a)(6)(C)(iii) of the Act. This commenter argues that a discount or rebate, regardless of when it is established and known to the customer, is a circumstance of sale which falls within the statute’s instruction that normal value shall be increased or decreased by the amount of any difference between export price (or constructed export price) and normal value established to the Department’s satisfaction to be due to differences in the circumstances of sale. This commenter notes that the statute does not include a requirement that the customer have knowledge of the adjustment prior to the sale. This same commenter argues that the Proposed Rule is inconsistent with Article 2.4 of the Antidumping (AD) Agreement, which provides that due allowance shall be made for differences that affect price comparability, including differences in conditions and terms of sale. This commenter notes the opinion of Dispute Settlement Body (DSB) of the World Trade Organization (WTO) in United States—Stainless Steel (Korea) that a condition or term of sale within the meaning of Article 2.4 is a condition or term that reasonably can be anticipated and accounted for at the time of sale. An additional commenter argues that any regulation that would necessarily disallow an adjustment only if it reduced or eliminated dumping margins could be construed as violating PO 00000 Frm 00031 Fmt 4700 Sfmt 4700 15643 the ‘‘fair comparison’’ requirement of Article 2.4 of the AD Agreement. Response: The Department disagrees with the commenter’s argument that the Department’s proposed modifications to 19 CFR 351.102(b)(38) and 19 CFR 351.401(c) are inconsistent with the statute. As an initial matter, the commenter argues that these modifications are inconsistent with section 773(a)(6)(C)(iii) of the Act, which states that normal value shall be increased or decreased by the amount of any difference between export price (or constructed export price) and normal value established to the Department’s satisfaction to be due to differences in the circumstances of sale. However, the statutory basis for the price adjustments addressed in 19 CFR 351.102(b)(38) and 19 CFR 351.401(c) is not section 773(a)(6)(C)(iii) of the Act, but rather, is found in sections 772(a) and 773(a)(1)(B)(i), which provide that in determining export price or normal value the Department begins with the price at which the subject merchandise or foreign like product is first sold—in other words, the basic ‘‘starting price’’ provisions. See 1997 Final Rule, 62 FR at 27344 (‘‘[The] use of a net price is consistent with the view that discounts, rebates and similar price adjustments are not expenses, but instead are items taken into account to derive the price paid by the purchaser.’’) This is confirmed by the Department’s treatment of the price adjustments described in 19 CFR 351.401(c) as something other than a circumstance of sale adjustment. Compare 19 CFR 351.401(c) (addressing use of price net of price adjustments) with 19 CFR 351.410 (addressing circumstances of sale adjustments which specifically cover direct selling expenses and assumed expenses between the seller and the buyer). We disagree with the commenter’s contention that the Proposed Rule was nevertheless inconsistent with the statute, which requires the Department to make adjustments for differences which affect price comparability, as well as the Department’s obligation under U.S. law to calculate dumping margins as accurately as possible. As several commenters recognized, and as discussed in further detail below, the Department has a longstanding practice of denying certain post-sale price adjustments where there exists a potential for manipulation of the dumping margins, and the courts have affirmed this practice as consistent with the statute. See Koenig & Bauer-Albert AG v. United States, 15 F. Supp. 2d 834, 840 (Ct. Int’l Trade 1998) (‘‘Commerce’s decision to reject price amendments that E:\FR\FM\24MRR1.SGM 24MRR1 15644 Federal Register / Vol. 81, No. 57 / Thursday, March 24, 2016 / Rules and Regulations asabaliauskas on DSK3SPTVN1PROD with RULES present the potential for price manipulation was a permissible interpretation of the statute.’’); Mitsubishi Elec. Corp. v. United States, 700 F. Supp. 538, 555 (Ct. Int’l Trade 1988) (‘‘The ITA has been vested with authority to administer the antidumping laws in accordance with the legislative intent. To this end, the ITA has a certain amount of discretion [to act] . . . with the purpose in mind of preventing the intentional evasion or circumvention of the antidumping duty law.’’), aff’d 898 F.2d 1577 (1990). The Proposed Rule, in proposing certain modifications to 19 CFR 351.102(b)(38) and 19 CFR 351.401(c), was intended to codify the Department’s intent to prevent such potentially manipulative post-sale price adjustments. As discussed below, in this final rule the Department has made further modifications to these regulations to clarify that the Department does not intend to accept a price adjustment that is made after the time of sale unless the interested party demonstrates, to the satisfaction of the Department, its entitlement to such an adjustment. These final modifications continue to be consistent with the Department’s statutory authority, in setting the ‘‘starting price’’ of normal value or export price, and prevent the potential manipulation of dumping margins through certain post-sale price adjustments. Finally, the Department disagrees with those commenters that argue that the Proposed Rule was inconsistent with the United States’ WTO obligations. To the contrary, the Department finds that the Proposed Rule was consistent with U.S. law, which is consistent with our obligations under the AD Agreement. In any case, the relevant language which one commenter objected to with respect to specifically disallowing adjustments which reduce or eliminate dumping margins does not appear in the final rule. 3. Whether the Proposed Rule Is Consistent With the Department’s Practice Several commenters argue that the Proposed Rule codifies the Department’s longstanding practice of disallowing price adjustments that reduce or eliminate dumping margins where the terms and conditions of the adjustment were not established and known to the customer at the time of sale. Several of these commenters argue that the Proposed Rule is consistent with other aspects of the Department’s practice based on the principle that the Department’s proceedings should be VerDate Sep<11>2014 16:15 Mar 23, 2016 Jkt 238001 determining whether to grant a price adjustment normally under its regulations. This commenter suggests that the Department could consider the following: (1) How common such postsale price adjustments are for the industry; (2) the timing of the adjustment; (3) the number of such adjustments in the proceeding; (4) whether the reported changes reflect both increases and decreases to the originally negotiated prices in the relevant markets; (5) whether there is commercial documentation maintained in the ordinary course of business demonstrating that the price changes were negotiated by the parties and resulted in a change in the purchaser’s net outlay and a change in the producer’s net revenues; and (6) any other factors tending to reflect on the legitimacy of the claimed adjustment. Other commenters argue that the Proposed Rule in its current form is inconsistent with normal business practices in many industries investigated by the Department. One commenter proposes modifying 19 CFR 351.401(c) to allow for a price adjustment if the party seeking the adjustment can demonstrate that the adjustment at issue is within the party’s standard business practice that existed prior to the initiation of the proceeding. Response: With respect to the proposed changes to 19 CFR 351.102(b)(38) in the Proposed Rule, these modifications were not intended to foreclose other types of price adjustments, such as billing adjustments and post-sale decreases to home market prices or increases to U.S. prices. Nonetheless, in light of a party’s 4. Whether the Department Should comment, the Department is modifying Implement Any Changes to the 19 CFR 351.102(b)(38) to refine the Proposed Rule definition of price adjustment and to Several commenters argue that the clarify that a price adjustment is not just Department should adopt the Proposed limited to discounts or rebates, but Rule in its entirety, as it is an encompasses other adjustments as well. With respect to 19 CFR 351.401(c), in appropriate and necessary codification of the Department’s established practice light of concerns that the modifications in the Proposed Rule may have the of disallowing certain post-sale price unintended consequence of being overly adjustments. One commenter argues that the restrictive and limiting the Department’s Department should clarify that the discretion to accept certain post-sale Proposed Rule is not intended to limit price adjustments which it has the Department’s discretion to address previously accepted, the Department is post-sale price adjustments other than modifying 19 CFR 351.401(c) to clarify rebates or discounts, such as billings that the Department generally will not adjustments. This commenter observes accept a price adjustment that is made that whereas prior to this modification after the time of sale unless the 19 CFR 351.102(b)(38) listed discounts, interested party demonstrates, to the rebates, and post-sale price adjustments satisfaction of the Department, its as examples of changes in price that entitlement to such an adjustment. In determining whether a party has could qualify as price adjustments, the Proposed Rule does not include the term demonstrated its entitlement to such an adjustment, the Department may ‘‘post-sale price adjustments.’’ This consider: (1) Whether the terms and same commenter suggests that the conditions of the adjustment were Department consider a set of factors in free from outcome-driven manipulation and that dumping margins should reflect the respondent’s pricing behavior in the ordinary course of business. One commenter argues that the Proposed Rule in its current form is overly broad and, if adopted, threatens to eliminate certain legitimate post-sale price adjustments that were previously granted by the Department. This commenter argues that the Department’s practice has allowed for at least three categories of post-sale price adjustments that the Proposed Rule would preclude: (1) Price protection adjustments whereby a buyer seeks a price adjustment to sell a commodity downstream when commodity prices are rapidly changing; (2) post-invoice consumer rebates that offer the buyer a rebate at the time it sells the product to an end user, where such rebates often are not fixed at the time of the first sale; and (3) quality-upon-receipt discounts, which are common for perishable goods. Response: We find that the Proposed Rule was intended to codify the Department’s intent and discretion to prevent certain post-sale price adjustments. However, in light of certain comments, we recognize that the proposed modifications to 19 CFR 351.401(c) could have the unintended effect of limiting the Department’s discretion to accept certain post-sale price adjustments which the Department has previously accepted. Therefore, as discussed below, we have made further modifications to 19 CFR 351.401(c) to ensure that the Department maintains its intended discretion. PO 00000 Frm 00032 Fmt 4700 Sfmt 4700 E:\FR\FM\24MRR1.SGM 24MRR1 Federal Register / Vol. 81, No. 57 / Thursday, March 24, 2016 / Rules and Regulations asabaliauskas on DSK3SPTVN1PROD with RULES established and/or known to the customer at the time of sale, and whether this can be demonstrated through documentation; (2) how common such post-sale price adjustments are for the company and/or industry; (3) the timing of the adjustment; (4) the number of such adjustments in the proceeding; and (5) any other factors tending to reflect on the legitimacy of the claimed adjustment. The Department may consider any one or a combination of these factors in making its determination, which will be made on a case-by-case basis and in light of the evidence and arguments on each record. As demonstrated above, the Department is expressly referencing in this final rule certain of the factors suggested by one commenter. Other factors which are not expressly adopted here might fall under the last category we identify, i.e., ‘‘any other factors tending to reflect on the legitimacy of the claimed adjustment.’’ We have not adopted the one commenter’s suggestion, either in the regulation itself, or in this final rule, to accept post-sale price adjustments if a company can demonstrate that the adjustment at issue is part of its standard business practice that existed prior to the initiation of the proceeding. We believe that the list we have identified above provides adequate factors for the Department to consider in determining whether a company has demonstrated its entitlement to an adjustment. We also note that the timing of the adjustment is one of those criteria. However, we believe that allowing a company to simply show that certain adjustments are part of its standard business practice might permit certain adjustments, such as those at issue in Koehler AG, that have the potential to manipulate the dumping margins. As discussed above, it is the Department’s intention to codify its discretion to reject those types of adjustments. 5. Effective Date of Final Rule One commenter agrees with the Department’s proposal in the Proposed Rule to set the effective date of the final rule to apply to proceedings initiated on or after 30 days following the publication of the final rule. This commenter states that the proposed effective date is appropriate, and that it would be unfair to apply the final rule to shipments that took place prior to publication of the final rule. Response: The Department agrees that it is appropriate that the final rule be effective for proceedings which are initiated on or after 30 days following VerDate Sep<11>2014 16:15 Mar 23, 2016 Jkt 238001 the date of publication of the final rule. We note that the final rule will therefore apply to entries of merchandise that took place prior to publication of the final rule. However, we believe this does not result in unfairness as the regulations, both in their current form and in this final rulemaking, merely guide the Department on what adjustments to make to export price or constructed export price and normal value under certain factual scenarios in the course of an antidumping duty proceeding. The final rule therefore impacts the way in which the Department makes certain calculations in antidumping duty proceedings, and no entities would be required to undertake additional compliance measures or expenditures on entries that have already taken place. Changes From the Proposed Rule In the final rule, the Department has added further refinements to the definition of price adjustment in 19 CFR 351.102(b)(38) to clarify that a price adjustment is not limited to discounts or rebates, but encompasses other adjustments as well. The Department has also made certain modifications to the new second sentence of 19 CFR 351.401(c) to clarify that the Department does not intend to accept a price adjustment that is made after the time of sale unless the interested party demonstrates, to the satisfaction of the Department, its entitlement to such an adjustment. Classifications Executive Order 12866 It has been determined that this rule is not significant for purposes of Executive Order 12866. Paperwork Reduction Act This rule contains no new collection of information subject to the Paperwork Reduction Act, 44 U.S.C. Chapter 35. Executive Order 13132 This rule does not contain policies with federalism implications as that term is defined in section 1(a) of Executive Order 13132, dated August 4, 1999 (64 FR 43255 (August 10, 1999)). Regulatory Flexibility Act In accordance with the Regulatory Flexibility Act, 5 U.S.C. 601 et seq., the Chief Counsel for Regulation at the Department of Commerce has certified to the Chief Counsel for Advocacy, Small Business Administration, that this final rule would not have a significant economic impact on a substantial number of small entities. The factual basis for this certification was published PO 00000 Frm 00033 Fmt 4700 Sfmt 4700 15645 with the Proposed Rule and is not repeated here. No comments were received regarding the economic impact of this rule. As a result, the conclusion in the certification memorandum for the Proposed Rule remains unchanged and a final 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, Cheese, Confidential business information, Countervailing duties, Freedom of information, Investigations, Reporting and recordkeeping requirements. Dated: March 17, 2016. Paul Piquado, Assistant Secretary for Enforcement and Compliance. For the reasons stated, 19 CFR part 351 is 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 § 351.102, revise paragraph (b)(38) to read as follows: ■ § 351.102 Definitions. * * * * * (b) * * * (38) Price adjustment. ‘‘Price adjustment’’ means a change in the price charged for subject merchandise or the foreign like product, such as a discount, rebate, or other adjustment, including, under certain circumstances, a change that is made after the time of sale (see § 351.401(c)), that is reflected in the purchaser’s net outlay. * * * * * ■ 3. In § 351.401, revise paragraph (c) to read as follows: § 351.401 In general. * * * * * (c) Use of price net of price adjustments. In calculating export price, constructed export price, and normal value (where normal value is based on price), the Secretary normally will use a price that is net of price adjustments, as defined in § 351.102(b), that are reasonably attributable to the subject merchandise or the foreign like product (whichever is applicable). The Secretary will not accept a price adjustment that is made after the time of sale unless the interested party demonstrates, to the E:\FR\FM\24MRR1.SGM 24MRR1 15646 Federal Register / Vol. 81, No. 57 / Thursday, March 24, 2016 / Rules and Regulations satisfaction of the Secretary, its entitlement to such an adjustment. * * * * * [FR Doc. 2016–06698 Filed 3–23–16; 8:45 am] BILLING CODE 3510–DS–P LEGAL SERVICES CORPORATION 45 CFR Chapter XVI Compliance Supplement for Audits of LSC Recipients Legal Services Corporation. Notice of final changes to Compliance Supplement for Audits of LSC Recipients. AGENCY: ACTION: The Legal Services Corporation (‘‘LSC’’) Office of Inspector General (‘‘OIG’’) is updating its Compliance Supplement for Audits of LSC Recipients for fiscal years ending April 30, 2016, and thereafter. The revisions primarily affect certain regulatory requirements to be audited pursuant to LSC regulations. In addition, the LSC OIG has included for audit certain regulatory requirements which impact recipient staff’s involvement in the outside practice of law. Finally, suggested audit procedures for several regulations have been updated and revised for clarification and simplification purposes. DATES: The Compliance Supplement for Audits of LSC Recipients will be effective on April 25, 2016. FOR FURTHER INFORMATION CONTACT: Anthony M. Ramirez, Director of Planning, Policy & Reporting, Legal Services Corporation Office of Inspector General, 3333 K Street NW., Washington, DC 20007; (202) 295–1668 (phone), (202) 337–6616 (fax), or aramirez@oig.lsc.gov. SUPPLEMENTARY INFORMATION: asabaliauskas on DSK3SPTVN1PROD with RULES SUMMARY: I. History of This Action The purpose of the Compliance Supplement for Audits of LSC Recipients is to set forth the LSC regulatory requirements to be audited by the Independent Public Accountants (‘‘IPA’’) as part of the recipients’ annual financial statement audit and to provide suggested guidance to the IPAs in accomplishing this task. Pursuant to 45 CFR part 1641, IPAs are subject to suspension, removal, and/or debarment for not following OIG audit guidance as set out in the Compliance Supplement for Audits of LSC Recipients. Since the last revision of the LSC OIG’s Compliance Supplement for Audits of LSC Recipients, LSC has significantly revised and updated several regulations. By revising the Compliance Supplement VerDate Sep<11>2014 16:15 Mar 23, 2016 Jkt 238001 for Audits of LSC Recipients, the LSC OIG intends that the Compliance Supplement accurately reflects these regulatory revisions and updates, including the corresponding changes to suggested audit guidance provided to the IPAs. A summary of the proposed changes follows. The LSC OIG has included regulatory requirements under 45 CFR part 1604 in the Compliance Supplement for Audits of LSC Recipients. The inclusion sets forth the requirements dealing with the permissibility of recipient staff engaged in the outside practice of law along with suggested audit guidance for use by the IPAs. The LSC OIG made major revisions to several regulatory summaries to reflect LSC’s revisions to its regulations. Revised summaries include those for 45 CFR parts 1609 (fee generating cases); 1611 (eligibility); 1614 (private attorney involvement); 1626 (restrictions on legal assistance to aliens); and to a lesser extent, 1635 (timekeeping requirement). The summaries now follow the existing law and LSC regulations. The suggested audit procedures for each of these sections have been revised and updated to incorporate and take into consideration the regulatory changes. The LSC OIG revised the case sampling methodology by reducing criteria utilized in the case selection process to clarify and simplify the process. The LSC OIG updated and revised suggested audit procedures for the regulations. The updates and revisions are intended for clarification and simplification purposes and to provide added emphasis on internal controls. II. General Discussion of Comments The LSC OIG received ten comments during the public comment period. Four comments were submitted by LSC funded recipients: Prairie State Legal Services (PSLS), Colorado Legal Services (CLS), Land of Lincoln Legal Assistance Foundation, Inc. (LOLLAF) and Legal Assistance Foundation of Metropolitan Chicago (LAF). Three comments were submitted by IPAs. One comment was submitted by the Lawyers Trust Fund of Illinois (LTFI), separately joined by LAF. One comment was submitted by the Standing Committee on Legal Aid & Indigent Defendants (SCLAID) of the American Bar Association. One comment was submitted by the non-LSC funded nonprofit National Legal Aid and Defender Association (NLADA) through its Civil Policy Group and its Regulations and Policy Committee, which was also separately joined by LAF. All commenters appeared generally PO 00000 Frm 00034 Fmt 4700 Sfmt 4700 supportive of the changes the LSC OIG proposed to the Compliance Supplement for Audits of LSC Recipients. The LSC OIG proposed making the Compliance Supplement for Audits of LSC Recipients effective for audits of fiscal years ending on or after December 31, 2015. Four commenters (PSLS, NLADA, CLS, LTFI) expressed concern over retroactive application of the revised Compliance Supplement for Audits of LSC Recipients which they believed would result in additional audit costs, delays in submission and impact the current audit process that may be underway. The LSC OIG will make the Compliance Supplement for Audits of LSC Recipients effective for audits of fiscal years ending on or after April 30, 2016. As part of finalizing the Compliance Supplement for Audits of LSC Recipients, typos were corrected and formatting problems were resolved in both the regulatory summaries and in the suggested audit procedures. One commenter (SCLAID) identified a formatting issue and typos in separate regulatory summaries that were all corrected. III. Section-by-Section Discussion of Comments A. Proposed Inclusion of 45 CFR Part 1604—Outside Practice of Law The LSC OIG proposed inclusion of 45 CFR part 1604 in the Compliance Supplement for Audits of LSC Recipients and provided a regulatory summary of the applicable compliance requirements. Comment—Two commenters (NLADA, CLS) expressed concern that the regulatory summary did not fully list all the permissible circumstances for the outside practice of law, specifically those contained in 45 CFR 1604.4(c)(2) and (c)(3). Response—The LSC OIG has revised the regulatory summary to include the language contained in 45 CFR 1604.4(c)(2), (c)(3) and (c)(4). B. Proposed Regulatory Summary for 45 CFR Part 1611—Financial Eligibility The LSC OIG proposed revisions to update the regulatory summary for 45 CFR part 1611 in order to follow the current LSC regulation. The LSC OIG also proposed what it believed to be clarifying language relating to Older Americans Act (OAA) funds. Comment 1—Six commenters (including NLADA, PSLS, CLS, LOLLAF, LTFI, LAF) expressed significant concern on the inclusion of the language relating to the OAA funds, E:\FR\FM\24MRR1.SGM 24MRR1

Agencies

[Federal Register Volume 81, Number 57 (Thursday, March 24, 2016)]
[Rules and Regulations]
[Pages 15641-15646]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-06698]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF COMMERCE

International Trade Administration

19 CFR Part 351

[Docket No. 140929814-6136-02]
RIN 0625-AB02


Modification of Regulations Regarding Price Adjustments in 
Antidumping Duty Proceedings

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

ACTION: Final rule.

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

SUMMARY: The Department of Commerce (the Department) is modifying its 
regulations pertaining to price adjustments in antidumping duty 
proceedings. These modifications clarify that the Department does not 
intend to accept a price adjustment that is made after the time of sale 
unless the interested party demonstrates, to the satisfaction of the 
Department, its entitlement to such an adjustment. The Department has 
further adopted in this final rule a non-exhaustive list of factors 
that it may consider in determining whether to accept a price 
adjustment that is made after the time of sale.

DATES: Effective date: April 25, 2016. Applicability date: This rule 
will apply to all proceedings initiated on or after April 25, 2016.

FOR FURTHER INFORMATION CONTACT:  Jessica Link at (202) 482-1411, James 
Ahrens at (202) 482-3558, or Melissa Skinner at (202) 482-0461.

SUPPLEMENTARY INFORMATION: 

Background

    Section 731 of the Tariff Act of 1930, as amended (the Act) 
provides that when a company is selling foreign merchandise into the 
United States at less than fair value, and material injury or threat of 
material injury is found by the International Trade Commission, the 
Department shall impose an antidumping duty. An antidumping duty 
analysis involves a comparison of the company's sales price in the 
United States (known as the export price or constructed export price) 
with the price or cost in the foreign market (known as the normal 
value). See 19 CFR 351.401(a). See also section 772 of the Act 
(defining export price and constructed export price) and section 773 of 
the Act (defining normal value). The prices used to establish export 
price, constructed export price, and normal value involve certain 
adjustments. See, e.g., 19 CFR 351.401(b). In its May 19, 1997 final 
rulemaking, the Department promulgated regulatory provisions governing 
the use of price adjustments in the calculation of export price, 
constructed export price, and normal value in antidumping duty 
proceedings. Antidumping Duties; Countervailing Duties; Final Rule, 62 
FR 27296 (May 19, 1997) (``1997 Final Rule''). In particular, the 
Department promulgated the current regulation at 19 CFR 351.102(b)(38), 
which provides a definition of ``price adjustment.'' In providing this 
definition, the Department stated that ``[t]his term is intended to 
describe a category of changes to a price, such as discounts, rebates 
and post-sale price adjustments, that affect the net outlay of funds by 
the purchaser.'' 1997 Final Rule, 62 FR at 27300.
    The Department also enacted 19 CFR 351.401(c) that explains how the 
Department will use a price net of price

[[Page 15642]]

adjustments. In the 1997 Final Rule, the Department explained that 19 
CFR 351.401(c) was intended to ``restate[] the Department's practice 
with respect to price adjustments, such as discounts and rebates.'' 
Id., 62 FR at 27344.
    The Department also addressed the following comment received on the 
1997 Final Rule's proposed rulemaking, regarding whether ``after the 
fact'' price adjustments, that were not contemplated at the time of 
sale, would be accepted under 19 CFR 351.401(c):

    One commenter suggested that, at least for purposes of normal 
value, the regulations should clarify that the only rebates Commerce 
will consider are ones that were contemplated at the time of sale. 
This commenter argued that foreign producers should not be allowed 
to eliminate dumping margins by providing ``rebates'' only after the 
existence of margins becomes apparent.
    The Department has not adopted this suggestion at this time. We 
do not disagree with the proposition that exporters or producers 
will not be allowed to eliminate dumping margins by providing price 
adjustments ``after the fact.'' However, as discussed above, the 
Department's treatment of price adjustments in general has been the 
subject of considerable confusion. In resolving this confusion, we 
intend to proceed cautiously and incrementally. The regulatory 
revisions contained in these final rules constitute a first step at 
clarifying our treatment of price adjustments. We will consider 
adding other regulatory refinements at a later date.

Id., 62 FR at 27344. Since enacting these regulations, the Department 
has consistently applied its practice of not granting price adjustments 
where the terms and conditions were not established and known to the 
customer at the time of sale (sometimes referred to as determining the 
``legitimacy'' of a price adjustment) because of the potential for 
manipulation of the dumping margins through so-called ``after-the-
fact'', or post-sale, adjustments. See, e.g., Certain Oil Country 
Tubular Goods From Taiwan: Final Determination of Sales at Less Than 
Fair Value, 79 FR 41979 (July 18, 2014) and accompanying Issues and 
Decision Memorandum, Cmt. 3; Lightweight Thermal Paper From Germany: 
Notice of Final Results of the First Antidumping Duty Administrative 
Review, 76 FR 22078 (April 20, 2011) (Lightweight Thermal Paper from 
Germany) and accompanying Issues and Decision Memorandum, Cmt. 3; 
Canned Pineapple Fruit from Thailand: Final Results and Partial 
Rescission of Antidumping Duty Administrative Review, 71 FR 70948 (Dec. 
7, 2006) and accompanying Issues and Decision Memorandum, Cmt. 1; Ball 
Bearings and Parts Thereof from France, Germany, Italy, Japan, and the 
United Kingdom: Final Results of Antidumping Duty Administrative 
Reviews, 71 FR 40064 (July 14, 2006) and accompanying Issues and 
Decision Memorandum, Cmt. 19.
    On March 25, 2014, the Court of International Trade issued 
Papierfabrik August Koehler AG v. United States, 971 F. Supp. 2d 1246 
(Ct. Int'l Trade 2014) (Koehler AG), remanding the Department's 
decision in Lightweight Thermal Paper from Germany, noted above. The 
Court ordered the Department to reconsider Papierfabrik August Koehler 
AG's rebate program. The Court disagreed with the Department's 
determination that the regulations permitted it to disregard certain 
price adjustments, the terms and conditions of which were not 
established or known to the customer at the time of sale, stating that 
``the regulations set forth a broad definition of price adjustment 
encompassing `any change in the price charged for . . . the foreign 
like product' that `are reflected in the purchaser's net outlay.' '' 
971 F. Supp. 2d at 1251-52 (quoting 19 CFR 351.102(b)(38)) (emphasis 
added by Court). In accordance with the Court's order, on remand, under 
protest, the Department granted an adjustment for the rebates at issue. 
See Final Results of Redetermination Pursuant to Court Remand, 
Lightweight Thermal Paper from Germany, Papierfabrik August Koehler AG 
v. United States, Court No.11-00147, Slip Op.14-31 (Ct. Int'l Trade 
March 25, 2014), dated June 20, 2014.
    On December 31, 2014, the Department published a proposed 
modification of its regulations, 19 CFR 351.102(b)(38) and 19 CFR 
351.401(c), which concern price adjustments in antidumping duty 
proceedings. See Modification of Regulations Regarding Price 
Adjustments in Antidumping Duty Proceedings, 79 FR 78742 (December 31, 
2014) (Proposed Rule). The Proposed Rule explained the Department's 
proposal, in light of the Court of International Trade's decision in 
Koehler AG, to clarify that the Department generally will not consider 
a price adjustment that reduces or eliminates dumping margins unless 
the party claiming such price adjustment demonstrates that the terms 
and conditions of the adjustment were established and known to the 
customer at the time of sale.
    The Department received numerous comments on the Proposed Rule and 
has addressed these comments below. The Proposed Rule, comments 
received, and this final rule can be accessed using the Federal 
eRulemaking portal at https://www.Regulations.gov under Docket Number 
ITA-2014-0001. After analyzing and carefully considering all of the 
comments that the Department received in response to the Proposed Rule, 
the Department has adopted the modification with certain changes, and 
is amending its regulations accordingly.

Explanation of Regulatory Provision and Final Modification

    The Department is modifying two of its regulations relating to 
price adjustments in antidumping duty proceedings: the definition of 
the term ``price adjustment'' in 19 CFR 351.102(b)(38), and the 
Department's explanation of its use of prices net of price adjustments 
in 19 CFR 351.401(c).
    In the Proposed Rule, the Department proposed minor refinements to 
the definition of price adjustment in 19 CFR 351.102(b)(38). In this 
final rule, and in light of a party's comment, as discussed in further 
detail below, the Department is modifying 19 CFR 351.102(b)(38) to 
refine the definition of price adjustment. In particular, we are 
including language in 19 CFR 351.102(b)(38) to clarify that a price 
adjustment is not limited to discounts or rebates, but encompasses 
other adjustments as well.
    Prior to the Proposed Rule, 19 CFR 351.401(c) provided an 
explanation of the Department's use of prices net of price adjustment 
in calculating export price (or constructed exported price) and normal 
value (where price is used as the basis for normal value). In the 
Proposed Rule, the Department proposed to modify 19 CFR 351.401(c), in 
light of the Court of International Trade's decision on Koehler AG, in 
two respects. First, in the first sentence of 19 CFR 351.401(c), the 
Department proposed language indicating that it would normally use a 
price that is net of any price adjustment. Second, the Department 
proposed to add a second sentence to 19 CFR 351.401(c) that clarified 
the Department generally would not consider a price adjustment that 
reduces or eliminates a dumping margin unless the party claiming such 
price adjustment demonstrates that the terms and conditions of the 
adjustment were established and known to the customer at the time of 
sale.
    In the final rule, as discussed below, in light of comments 
received from interested parties, the Department is modifying 19 CFR 
351.401(c) to clarify that the Department does not intend to accept a 
price adjustment that is made after the time of sale unless the 
interested party demonstrates, to the satisfaction of the Department, 
its entitlement to such an adjustment. The Department has further 
provided in this

[[Page 15643]]

final rule, as discussed in further detail below, a non-exhaustive list 
of factors which it may consider in determining whether to accept price 
adjustments that are made after the time of sale, also referred to as 
``after-the-fact'' or ``post-sale'' adjustments.

Response to Comments on the Proposed Rule

    The Department received numerous comments on its Proposed Rule. 
Below is a summary of the comments, grouped by issue category, followed 
by the Department's response.

1. Whether Any Changes to 19 CFR 351.102(b)(38) and 19 CFR 351.401(c) 
Are Necessary

    Several commenters argue that the Proposed Rule is the appropriate 
response to Koehler AG and is necessary to maintain the integrity of 
the Department's proceedings and to prevent the manipulation of dumping 
margins through ``after-the-fact'' adjustments. These commenters argue 
that in Koehler AG, the Court improperly found that the plain language 
of the current regulations precludes the disallowance of any post-sale 
price adjustments. Without the Proposed Rule, these commenters argue 
that foreign producers and exporters would have every incentive to 
calculate the U.S. price reduction necessary to eliminate dumping, and 
then lower their prices accordingly through retroactive rebates to 
customers in the home or third-country market, thereby reducing or 
eliminating the dumping margins and undermining the integrity of the 
Department's proceedings.
    One commenter argues that the Proposed Rule is unnecessary because 
the Department has provided no evidence of respondents utilizing 
manipulative post-sale price adjustments and that existing regulations 
are sufficient to maintain the integrity of the Department's 
proceedings because, under 19 CFR 351.401(b)(1), the Department can 
already deny a price adjustment if it determines that the adjustment is 
not bona fide. This commenter further argues that the Proposed Rule 
unduly burdens respondents operating in industries where many discounts 
and rebates are agreed to on an ad hoc basis without documentation over 
the course of multiple transactions many months before the Department's 
proceedings.
    Response: The Department finds that the proposed changes will help 
protect the integrity of our proceedings and are an appropriate 
response to Koehler AG, which hinders the Department's ability to 
address after-the-fact rebates which present the potential for 
manipulation of dumping margins. In Koehler AG the Court of 
International Trade held that the Department did not have the 
discretion under 19 CFR 351.102(b)(38) and 19 CFR 351.401(c)--as 
currently written--to address such manipulative after-the-fact rebates. 
See 971 F. Supp. 2d at 1251-52. The Proposed Rule, and the further 
modifications adopted in this final rule, codify the Department's 
intent and discretion to prevent certain post-sale price adjustments, 
like those at issue in Koehler AG, and therefore are appropriate to 
protect the integrity of our proceedings. We believe that these further 
modifications, discussed below, should address any concerns that the 
Proposed Rule was unduly burdensome and does not account for actual 
business practices.

2. Whether the Proposed Rule Is Consistent With the Statute and U.S. 
International Obligations

    Several commenters state that the Proposed Rule is consistent with 
the Department's general statutory authority to impose antidumping 
duties pursuant to section 731 of the Act. One commenter argues that 
the Proposed Rule is inconsistent with section 773(a)(6)(C)(iii) of the 
Act. This commenter argues that a discount or rebate, regardless of 
when it is established and known to the customer, is a circumstance of 
sale which falls within the statute's instruction that normal value 
shall be increased or decreased by the amount of any difference between 
export price (or constructed export price) and normal value established 
to the Department's satisfaction to be due to differences in the 
circumstances of sale. This commenter notes that the statute does not 
include a requirement that the customer have knowledge of the 
adjustment prior to the sale.
    This same commenter argues that the Proposed Rule is inconsistent 
with Article 2.4 of the Antidumping (AD) Agreement, which provides that 
due allowance shall be made for differences that affect price 
comparability, including differences in conditions and terms of sale. 
This commenter notes the opinion of Dispute Settlement Body (DSB) of 
the World Trade Organization (WTO) in United States--Stainless Steel 
(Korea) that a condition or term of sale within the meaning of Article 
2.4 is a condition or term that reasonably can be anticipated and 
accounted for at the time of sale. An additional commenter argues that 
any regulation that would necessarily disallow an adjustment only if it 
reduced or eliminated dumping margins could be construed as violating 
the ``fair comparison'' requirement of Article 2.4 of the AD Agreement.
    Response: The Department disagrees with the commenter's argument 
that the Department's proposed modifications to 19 CFR 351.102(b)(38) 
and 19 CFR 351.401(c) are inconsistent with the statute. As an initial 
matter, the commenter argues that these modifications are inconsistent 
with section 773(a)(6)(C)(iii) of the Act, which states that normal 
value shall be increased or decreased by the amount of any difference 
between export price (or constructed export price) and normal value 
established to the Department's satisfaction to be due to differences 
in the circumstances of sale. However, the statutory basis for the 
price adjustments addressed in 19 CFR 351.102(b)(38) and 19 CFR 
351.401(c) is not section 773(a)(6)(C)(iii) of the Act, but rather, is 
found in sections 772(a) and 773(a)(1)(B)(i), which provide that in 
determining export price or normal value the Department begins with the 
price at which the subject merchandise or foreign like product is first 
sold--in other words, the basic ``starting price'' provisions. See 1997 
Final Rule, 62 FR at 27344 (``[The] use of a net price is consistent 
with the view that discounts, rebates and similar price adjustments are 
not expenses, but instead are items taken into account to derive the 
price paid by the purchaser.'') This is confirmed by the Department's 
treatment of the price adjustments described in 19 CFR 351.401(c) as 
something other than a circumstance of sale adjustment. Compare 19 CFR 
351.401(c) (addressing use of price net of price adjustments) with 19 
CFR 351.410 (addressing circumstances of sale adjustments which 
specifically cover direct selling expenses and assumed expenses between 
the seller and the buyer).
    We disagree with the commenter's contention that the Proposed Rule 
was nevertheless inconsistent with the statute, which requires the 
Department to make adjustments for differences which affect price 
comparability, as well as the Department's obligation under U.S. law to 
calculate dumping margins as accurately as possible. As several 
commenters recognized, and as discussed in further detail below, the 
Department has a longstanding practice of denying certain post-sale 
price adjustments where there exists a potential for manipulation of 
the dumping margins, and the courts have affirmed this practice as 
consistent with the statute. See Koenig & Bauer-Albert AG v. United 
States, 15 F. Supp. 2d 834, 840 (Ct. Int'l Trade 1998) (``Commerce's 
decision to reject price amendments that

[[Page 15644]]

present the potential for price manipulation was a permissible 
interpretation of the statute.''); Mitsubishi Elec. Corp. v. United 
States, 700 F. Supp. 538, 555 (Ct. Int'l Trade 1988) (``The ITA has 
been vested with authority to administer the antidumping laws in 
accordance with the legislative intent. To this end, the ITA has a 
certain amount of discretion [to act] . . . with the purpose in mind of 
preventing the intentional evasion or circumvention of the antidumping 
duty law.''), aff'd 898 F.2d 1577 (1990).
    The Proposed Rule, in proposing certain modifications to 19 CFR 
351.102(b)(38) and 19 CFR 351.401(c), was intended to codify the 
Department's intent to prevent such potentially manipulative post-sale 
price adjustments. As discussed below, in this final rule the 
Department has made further modifications to these regulations to 
clarify that the Department does not intend to accept a price 
adjustment that is made after the time of sale unless the interested 
party demonstrates, to the satisfaction of the Department, its 
entitlement to such an adjustment. These final modifications continue 
to be consistent with the Department's statutory authority, in setting 
the ``starting price'' of normal value or export price, and prevent the 
potential manipulation of dumping margins through certain post-sale 
price adjustments.
    Finally, the Department disagrees with those commenters that argue 
that the Proposed Rule was inconsistent with the United States' WTO 
obligations. To the contrary, the Department finds that the Proposed 
Rule was consistent with U.S. law, which is consistent with our 
obligations under the AD Agreement. In any case, the relevant language 
which one commenter objected to with respect to specifically 
disallowing adjustments which reduce or eliminate dumping margins does 
not appear in the final rule.

3. Whether the Proposed Rule Is Consistent With the Department's 
Practice

    Several commenters argue that the Proposed Rule codifies the 
Department's longstanding practice of disallowing price adjustments 
that reduce or eliminate dumping margins where the terms and conditions 
of the adjustment were not established and known to the customer at the 
time of sale. Several of these commenters argue that the Proposed Rule 
is consistent with other aspects of the Department's practice based on 
the principle that the Department's proceedings should be free from 
outcome-driven manipulation and that dumping margins should reflect the 
respondent's pricing behavior in the ordinary course of business.
    One commenter argues that the Proposed Rule in its current form is 
overly broad and, if adopted, threatens to eliminate certain legitimate 
post-sale price adjustments that were previously granted by the 
Department. This commenter argues that the Department's practice has 
allowed for at least three categories of post-sale price adjustments 
that the Proposed Rule would preclude: (1) Price protection adjustments 
whereby a buyer seeks a price adjustment to sell a commodity downstream 
when commodity prices are rapidly changing; (2) post-invoice consumer 
rebates that offer the buyer a rebate at the time it sells the product 
to an end user, where such rebates often are not fixed at the time of 
the first sale; and (3) quality-upon-receipt discounts, which are 
common for perishable goods.
    Response: We find that the Proposed Rule was intended to codify the 
Department's intent and discretion to prevent certain post-sale price 
adjustments. However, in light of certain comments, we recognize that 
the proposed modifications to 19 CFR 351.401(c) could have the 
unintended effect of limiting the Department's discretion to accept 
certain post-sale price adjustments which the Department has previously 
accepted. Therefore, as discussed below, we have made further 
modifications to 19 CFR 351.401(c) to ensure that the Department 
maintains its intended discretion.

4. Whether the Department Should Implement Any Changes to the Proposed 
Rule

    Several commenters argue that the Department should adopt the 
Proposed Rule in its entirety, as it is an appropriate and necessary 
codification of the Department's established practice of disallowing 
certain post-sale price adjustments.
    One commenter argues that the Department should clarify that the 
Proposed Rule is not intended to limit the Department's discretion to 
address post-sale price adjustments other than rebates or discounts, 
such as billings adjustments. This commenter observes that whereas 
prior to this modification 19 CFR 351.102(b)(38) listed discounts, 
rebates, and post-sale price adjustments as examples of changes in 
price that could qualify as price adjustments, the Proposed Rule does 
not include the term ``post-sale price adjustments.'' This same 
commenter suggests that the Department consider a set of factors in 
determining whether to grant a price adjustment normally under its 
regulations. This commenter suggests that the Department could consider 
the following: (1) How common such post-sale price adjustments are for 
the industry; (2) the timing of the adjustment; (3) the number of such 
adjustments in the proceeding; (4) whether the reported changes reflect 
both increases and decreases to the originally negotiated prices in the 
relevant markets; (5) whether there is commercial documentation 
maintained in the ordinary course of business demonstrating that the 
price changes were negotiated by the parties and resulted in a change 
in the purchaser's net outlay and a change in the producer's net 
revenues; and (6) any other factors tending to reflect on the 
legitimacy of the claimed adjustment.
    Other commenters argue that the Proposed Rule in its current form 
is inconsistent with normal business practices in many industries 
investigated by the Department.
    One commenter proposes modifying 19 CFR 351.401(c) to allow for a 
price adjustment if the party seeking the adjustment can demonstrate 
that the adjustment at issue is within the party's standard business 
practice that existed prior to the initiation of the proceeding.
    Response: With respect to the proposed changes to 19 CFR 
351.102(b)(38) in the Proposed Rule, these modifications were not 
intended to foreclose other types of price adjustments, such as billing 
adjustments and post-sale decreases to home market prices or increases 
to U.S. prices. Nonetheless, in light of a party's comment, the 
Department is modifying 19 CFR 351.102(b)(38) to refine the definition 
of price adjustment and to clarify that a price adjustment is not just 
limited to discounts or rebates, but encompasses other adjustments as 
well.
    With respect to 19 CFR 351.401(c), in light of concerns that the 
modifications in the Proposed Rule may have the unintended consequence 
of being overly restrictive and limiting the Department's discretion to 
accept certain post-sale price adjustments which it has previously 
accepted, the Department is modifying 19 CFR 351.401(c) to clarify that 
the Department generally will not accept a price adjustment that is 
made after the time of sale unless the interested party demonstrates, 
to the satisfaction of the Department, its entitlement to such an 
adjustment.
    In determining whether a party has demonstrated its entitlement to 
such an adjustment, the Department may consider: (1) Whether the terms 
and conditions of the adjustment were

[[Page 15645]]

established and/or known to the customer at the time of sale, and 
whether this can be demonstrated through documentation; (2) how common 
such post-sale price adjustments are for the company and/or industry; 
(3) the timing of the adjustment; (4) the number of such adjustments in 
the proceeding; and (5) any other factors tending to reflect on the 
legitimacy of the claimed adjustment. The Department may consider any 
one or a combination of these factors in making its determination, 
which will be made on a case-by-case basis and in light of the evidence 
and arguments on each record.
    As demonstrated above, the Department is expressly referencing in 
this final rule certain of the factors suggested by one commenter. 
Other factors which are not expressly adopted here might fall under the 
last category we identify, i.e., ``any other factors tending to reflect 
on the legitimacy of the claimed adjustment.''
    We have not adopted the one commenter's suggestion, either in the 
regulation itself, or in this final rule, to accept post-sale price 
adjustments if a company can demonstrate that the adjustment at issue 
is part of its standard business practice that existed prior to the 
initiation of the proceeding. We believe that the list we have 
identified above provides adequate factors for the Department to 
consider in determining whether a company has demonstrated its 
entitlement to an adjustment. We also note that the timing of the 
adjustment is one of those criteria. However, we believe that allowing 
a company to simply show that certain adjustments are part of its 
standard business practice might permit certain adjustments, such as 
those at issue in Koehler AG, that have the potential to manipulate the 
dumping margins. As discussed above, it is the Department's intention 
to codify its discretion to reject those types of adjustments.

5. Effective Date of Final Rule

    One commenter agrees with the Department's proposal in the Proposed 
Rule to set the effective date of the final rule to apply to 
proceedings initiated on or after 30 days following the publication of 
the final rule. This commenter states that the proposed effective date 
is appropriate, and that it would be unfair to apply the final rule to 
shipments that took place prior to publication of the final rule.
    Response: The Department agrees that it is appropriate that the 
final rule be effective for proceedings which are initiated on or after 
30 days following the date of publication of the final rule. We note 
that the final rule will therefore apply to entries of merchandise that 
took place prior to publication of the final rule. However, we believe 
this does not result in unfairness as the regulations, both in their 
current form and in this final rulemaking, merely guide the Department 
on what adjustments to make to export price or constructed export price 
and normal value under certain factual scenarios in the course of an 
antidumping duty proceeding. The final rule therefore impacts the way 
in which the Department makes certain calculations in antidumping duty 
proceedings, and no entities would be required to undertake additional 
compliance measures or expenditures on entries that have already taken 
place.

Changes From the Proposed Rule

    In the final rule, the Department has added further refinements to 
the definition of price adjustment in 19 CFR 351.102(b)(38) to clarify 
that a price adjustment is not limited to discounts or rebates, but 
encompasses other adjustments as well. The Department has also made 
certain modifications to the new second sentence of 19 CFR 351.401(c) 
to clarify that the Department does not intend to accept a price 
adjustment that is made after the time of sale unless the interested 
party demonstrates, to the satisfaction of the Department, its 
entitlement to such an adjustment.

Classifications

Executive Order 12866

    It has been determined that this rule is not significant for 
purposes of Executive Order 12866.

Paperwork Reduction Act

    This rule contains no new collection of information subject to the 
Paperwork Reduction Act, 44 U.S.C. Chapter 35.

Executive Order 13132

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

Regulatory Flexibility Act

    In accordance with the Regulatory Flexibility Act, 5 U.S.C. 601 et 
seq., the Chief Counsel for Regulation at the Department of Commerce 
has certified to the Chief Counsel for Advocacy, Small Business 
Administration, that this final rule would not have a significant 
economic impact on a substantial number of small entities. The factual 
basis for this certification was published with the Proposed Rule and 
is not repeated here. No comments were received regarding the economic 
impact of this rule. As a result, the conclusion in the certification 
memorandum for the Proposed Rule remains unchanged and a final 
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, Cheese, Confidential business information, Countervailing 
duties, Freedom of information, Investigations, Reporting and 
recordkeeping requirements.

     Dated: March 17, 2016.
Paul Piquado,
Assistant Secretary for Enforcement and Compliance.

    For the reasons stated, 19 CFR part 351 is amended 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.  351.102, revise paragraph (b)(38) to read as follows:


Sec.  351.102  Definitions.

* * * * *
    (b) * * *
    (38) Price adjustment. ``Price adjustment'' means a change in the 
price charged for subject merchandise or the foreign like product, such 
as a discount, rebate, or other adjustment, including, under certain 
circumstances, a change that is made after the time of sale (see Sec.  
351.401(c)), that is reflected in the purchaser's net outlay.
* * * * *

0
3. In Sec.  351.401, revise paragraph (c) to read as follows:


Sec.  351.401  In general.

* * * * *
    (c) Use of price net of price adjustments. In calculating export 
price, constructed export price, and normal value (where normal value 
is based on price), the Secretary normally will use a price that is net 
of price adjustments, as defined in Sec.  351.102(b), that are 
reasonably attributable to the subject merchandise or the foreign like 
product (whichever is applicable). The Secretary will not accept a 
price adjustment that is made after the time of sale unless the 
interested party demonstrates, to the

[[Page 15646]]

satisfaction of the Secretary, its entitlement to such an adjustment.
* * * * *
[FR Doc. 2016-06698 Filed 3-23-16; 8:45 am]
 BILLING CODE 3510-DS-P
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.