Modification of Regulations Regarding Price Adjustments in Antidumping Duty Proceedings, 15641-15646 [2016-06698]
Download as PDF
<![CDATA[
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
