Anti-Dumping Case II U.S. DEPARTMENT OF COMMERCE PRELIMINARY DETERMINATION OF SALES AT LESS THAN FAIR VALUE: STEEL WIRE ROPE FROM THE P. R.

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1 Anti-Dumping Case II U.S. DEPARTMENT OF COMMERCE PRELIMINARY DETERMINATION OF SALES AT LESS THAN FAIR VALUE: STEEL WIRE ROPE FROM THE P. R. CHINA EFFECTIVE DATE: October 2, CASE MATERIAL EDITED AND PREPARED BY WANG XIAOLIN 1

2 BACKGROUND The Committee of Domestic Steel Wire Rope and Specialty Cable Manufacturers petitioned the Department of Commerce (DOC), alleging that steel wire rope from China was being sold at less than fair value and caused material injury to the U.S. like product producers. The DOC initiated the investigations on March 17, The periods of investigation (POI) was from July 1, 1999, through December 31, 1999 On April 26, 2000, the U. S. International Trade Commission (the ITC) preliminarily determined that there is a reasonable indication that imports of wire rope from the PRC are materially injuring the United States industry. On April 28, 2000, the DOC issued letter to the Ministry of Foreign Trade & Economic Cooperation (MOFTEC) requesting information on exporters of steel wire rope from the PRC and the volume of merchandise that those exporters had shipped to the United States during the period of investigation (POI). On May 17, 2000, DOC sent the antidumping questionnaire to MOFTEC with a letter requesting that it forward the questionnaire to all exporters of steel wire rope who had shipments during the POI. In addition, on May 17, 2000, DOC sent the questionnaire to all Chinese exporters who had contacted us through counsel, with instructions to complete and return the questionnaire by the given deadline. THE QUESTIONNAIRE The antidumping questionnaire consists of several sections (1) Section A requests general information concerning a company's corporate structure and business practices, the merchandise under investigation that it sells, and the manner in which it sells that merchandise in all of its markets. (2) Section B requests a complete listing of all home market sales, or, if the home market is not viable, of sales in the most appropriate third-country market (This section is not applicable to respondents in non-market economy (NME) cases). (3) Section C requests a complete listing of U.S. sales. (4) Section D requests information on the cost of production (COP) of the foreign like product and the constructed value (CV) of the merchandise under investigation. (5) Section E requests information on further manufacturing. SCOPE OF INVESTIGATION The investigated product is steel wire rope. Steel wire rope encompasses ropes, cables, and cordage of iron or carbon or stainless steel, other than stranded wire, not fitted with fittings or made up into articles, and not made up of brass-plated wire. 1

3 LEGAL ISSUE IN DOC PRELIMINARY INVESTIGATION The legal issue in DOC preliminary antidumping investigation focuses on whether and to what extent steel wire rope from China is being sold in the United States at less than fair value (LTFV). LEGAL SIGNIFICANCE OF DOC PRELIMINARY INVESTIGATION If DOC finds that the imports are being sold in the U.S. at less than fair value, i.e. being dumped, DOC will assess the preliminary dumping margin. An order of Suspension of Liquidation will be issued and custom clearance will be suspended until the importers pay their respective preliminary dumping duty. The preliminary dumping duty is subject to adjustment according to DOC s final determination. If DOC finds in its preliminary investigation that there is no dumping, the investigation will go forward and enter into the stage of final dumping investigation. SELECTION OF RESPONDENTS DOC will calculate individual dumping margins for each known exporter and producer of the subject merchandise. Where it is not practicable to examine all known producers/exporters of subject merchandise, DOC will investigate either 1) a sample of exporters, producers, or types of products that is statistically valid based on the information available at the time of selection, or 2) exporters and producers accounting for the largest volume of the subject merchandise that can reasonably be examined. In this case, DOC decided to investigate only the two largest producers: Fasten Import-Export Company (Fasten) and Nantong Zhongde (Nantong). I. Fair Value Comparisons CASE ANALYSIS To determine whether sales of imports from a market economy country are made in the United States at less than fair value, DOC compares the export price (EP) and the constructed export price (CEP) to the normal value (NV). However, since China is an NME, to determine whether sales of steel wire rope from the PRC were made in the United States at less than fair value, DOC compared EP and CEP to a NV based on an NME analysis, as described below. DOC calculated weighted-average EPs and CEPs and then compared these to CV. II. Export Price and Constructed Export Price Export Priceis the price at which the subject merchandise is first sold by the exporter or producer outside the United States to an unaffiliated purchaser for exportation to the United 2

4 States, before the date of importation, or to an unaffiliated purchaser for exportation to the United States. Constructive Export Price is the price at which the subject merchandise is first sold inside the United States before or after the date of importation, by or for the account of the producer or exporter of the merchandise, or by a seller affiliated with the producer or exporter, to an unaffiliated purchaser. For all respondents in this case, DOC calculated EP and CEP, as appropriate, based on the packed prices charged to the first unaffiliated customer in the United States. Then, DOC reduced the EP and CEP by movement expenses and export taxes and duties, where appropriate. For the PRC, where the respondent incurred NME movement expenses, including inland freight, insurance, brokerage and handling, marine insurance, and international ocean freight, DOC applied the appropriate surrogate value. Where the respondent incurred movement expenses through a market-economy provider, we utilized the per-unit expenses as reported in its section C questionnaire response. Where appropriate, DOC deducted direct and indirect selling expenses related to commercial activity in the United States and made an adjustment for CEP profit. DOC determined the EP or CEP for each company as follows: A. Fasten During the POI, Fasten made both EP and CEP transactions. DOC calculated an EP for sales where the merchandise was sold directly by Fasten to the first unaffiliated purchaser in the United States prior to importation, and CEP was not otherwise warranted based on the facts of record. DOC calculated a CEP for sales made by Fasten s affiliated reseller (Fasten U.S.A. Inc.) in the United States. EP and CEP sales were based on the packed delivered duty paid (DDP) U.S. port and C&F U.S. port prices. DOC made deductions from the starting price for movement expenses. These include foreign movement expense (inland freight), international freight, U.S. brokerage, insurance, U.S. duties and U.S. inland freight. For CEP sales, DOC deducted from the starting price indirect selling expenses. Finally, we made a deduction for CEP profit. B. Nantong DOC calculated an EP for all of Nantong s sales because the merchandise was sold directly by Nantong to the first unaffiliated purchaser in the United States prior to importation, and CEP was not otherwise warranted based on the facts of record. DOC made deductions from the starting price for movement expenses. These include foreign movement expenses (inland freight and insurance), international freight, and brokerage and handling. 3

5 III. Normal Value for Non-Market Economy Analysis A. Non-Market Economy Status for the People's Republic of China The DOC has treated the PRC as a NME country in all past antidumping investigations (see, e.g. Certain Cold-Rolled Flat-Rolled Carbon Quality Steel Products from the People's Republic of China (January 7, 2000) A designation as a NME remains in effect until it is revoked by the DOC. The respondents in this investigation have not requested a revocation of the PRC s NME status. DOC, therefore, continued to treat the PRC as a NME. In investigating imports from a NME, DOC calculates NV on the NME producer s factors of production, valued in a comparable market economy that is a significant producer of comparable merchandise. B. Separate Rates With regard to the PRC case, it is the DOC s policy to assign all exporters of merchandise subject to investigation in a NME country a single rate, unless an exporter can demonstrate that it is sufficiently independent so as to be entitled to a separate rate. The eight companies that have submitted section A responses have provided the requested companyspecific separate rates information and have stated that for each company, there is no element of government ownership or control. All eight companies have requested a separate companyspecific rate, including Fasten and Nantong, the two companies selected as mandatory respondents. In its questionnaire response, Fasten states that it is an independent company owned by all the people and controlled by the general assembly of workers and employees. Fasten further claims that it does not maintain any corporate relationship with the central, provincial, and local government in terms of production, management, and operations. Nantong is owned by Nantong Municipal Light Industry Bureau (an agency of the local government of Nantong City), the Municipal Collective Industrial Association, and by the employees of the company. Aside from this tie to the local government, Nantong does not maintain any corporate relationship with the central or provincial government. As stated in previous DOC decisions, ownership of a company by all the people does not require the application of a single rate. The Department's separate rate test focuses on controls over the investment, pricing, and output decision-making process at the individual firm level. To establish whether a firm is sufficiently independent to be entitled to a separate rate, the Department analyzes each exporting entity under the test established in the Final Determination of Sales at Less Than Fair Value: Sparklers from the People's Republic of China, (May 6, 1991). Under this test, the Department assigns separate rates in NME cases only if an exporter can affirmatively demonstrate the absence of both (1) de jure and (2) de facto governmental control over export activities. Fasten and Nantong have placed on the record a number of documents to demonstrate absence of de jure control, including the Foreign Trade Law of the People's Republic of China 4

6 and the Law of the People's Republic of China on Industrial Enterprises Owned By the Whole People. In prior cases, the Department has analyzed these laws and found that they establish an absence of de jure control. (See, e.g., Partial-Extension Steel Drawer Slides with Rollers from the People's Republic of China, (October 24, 1995)). The DOC typically considers four factors in evaluating whether each respondent is subject to de facto governmental control of its export functions: (1) Whether the export prices are set by or are subject to the approval of a governmental agency; (2) whether the respondent has authority to negotiate and sign contracts and other agreements; (3) whether the respondent has autonomy from the government in making decisions regarding the selection of management; and (4) whether the respondent retains the proceeds of its export sales and makes independent decisions regarding disposition of profits or financing of losses. See, e.g., Silicon Carbide and Furfuryl Alcohol from China. Fasten and Nantong asserted the following: (1) they established their own export prices independently of the government and without the approval of a government authority; (2) they negotiate contracts, without guidance from any governmental entities or organizations; (3) they make their own personnel decisions including the selection of management; and (4) they retain the proceeds of their export sales, and utilize profits according to their business needs. DOC has preliminarily determined that Fasten and Nantong have met the criteria for the application of separate rates. DOC usually re-examine this matter further at verification. IN fact, DOC has preliminarily determined that all responding exporters have met the criteria for the application of separate rates. For non-responsive producers/exporters, DOC preliminarily determined, as facts available, that they did not met the criteria for application of separate rates. C. Surrogate Country As mentioned above, the DOC values the NME producer s factors of production, to the extent possible, in one or more market economy countries that: (1) are at a level of economic development comparable to that of the NME country; and (2) are significant producers of comparable merchandise. The DOC initially determined that India, Indonesia, Pakistan, Philippines and Sri Lanka were the countries most comparable to the PRC in terms of overall economic development. Because of a lack of the necessary factor price information from the other potential surrogate countries that are significant producers of comparable products to the subject merchandise, DOC have relied, where possible, on information from India, the source of the most complete information from among the potential surrogate countries. Accordingly, DOC has calculated normal value (NV) by applying Indian values to the PRC s producers factors of production for virtually all factors. 5

7 D. Factors of Production DOC calculated NV based on factors of production reported by the companies in the PRC which produced steel wire rope for the exporters that sold steel wire rope to the United States during the POI. To calculate NV, the reported unit factor quantities were multiplied by publicly available Indian values. In selecting the surrogate values, we considered the quality, specificity, and contemporaneity of the data. As appropriate, we adjusted input prices to make them delivered prices. DOC added to Indian surrogate values a surrogate freight cost using the reported distance from the domestic supplier to the factory where this distance was shorter than the distance from the nearest seaport to the factory. Where a producer did not report the distance between the material supplier and the factory, DOC used as facts available the longest distance reported, i.e., the distance between the PRC seaport and the producer s location. For those values not contemporaneous with the POI, DOC adjusted for inflation using wholesale price indices published in the International Monetary Fund s International Financial Statistics. DOC valued material inputs and packing materials (i.e., where applicable, steel wire rod, acid, zinc, zinc sulfate, paper, wooden pallets, and wooden reels) by Harmonized Tariff Schedule (HTS) number, using imports statistics from the Monthly Statistics of the Foreign Trade of India. E. Antidumping Deposit Rate for Those Producers/Exporters That Responded Only to the Separate Rates Questionnaire For those PRC producers/exporters that responded to our separate rates questionnaire but did not respond to the full antidumping questionnaire (because they were not selected to respond or because they did not submit a voluntary response), we have calculated a weighted-average margin based on the rates calculated for those producers/exporters that were selected to respond. (See, e.g., Bicycles from the PRC ). F. The People's Republic of China-Wide Rate There are numerous producers/exporters of the subject merchandise in the PRC. All exporters were given the opportunity to respond to the separate rates questionnaire. DOC received timely responses from Fasten, Haicheng Greatx Industry Co. Ltd., Liaoning Metals & Minerals Import & Export Corp., Jiangsu COFCO, Jiangsu Guo Tai, Henan Baoi Wire Rope Factory, Nantong and Nantong Wire Rope Company. In accordance with our standard practice, as adverse facts available, DOC assigned to those companies that did not respond to the DOC s separate rates questionnaire the higher of: (1) the highest margin stated in the notice of initiation; or (2) the highest margin calculated for any respondent in this investigation (see, e.g., Cold Rolled Steel from the PRC). In this case, the adverse facts available margin is percent, which is the highest margin calculated for a respondent in this investigation. The margin for those companies that did respond to the DOC s section A questionnaire, but were not selected as respondents in this proceeding is percent, which is the weighted average of the dumping margins for the two mandatory respondents. 6

8 SUSPENSION OF LIQUIDATION Because of DOC preliminary affirmative critical circumstances findings in the cases involving the PRC, doc DIRECTED the Customs Service to suspend liquidation of any unliquidated entries of steel wire rope from the PRC entered, or withdrawn from warehouse, for consumption on or after the date which is 90 days prior to the date on which DOC preliminary determination notice is published in the Federal Register. DOC instructed the Customs Service to require a cash deposit or the posting of a bond equal to the weighted-average amount by which the NV exceeds the EP or CEP, as indicated in the chart below for imports from the PRC. These instructions suspending liquidation will remain in effect pending the final determination. The weighted-average dumping margins are provided below: Manufacturer/exporter Margin (%) Fasten Group Import and Export Co., Ltd Haicheng Greatx Industry Co. Ltd.* Henan Baoi Wire Rope Factory* Jiangsu COFCO* Jiangsu Guo Tai* Liaoning Metals & Minerals Import & Export Corp.* Nantong Wire Rope Company* Nantong Zhongde PRC-Wide Rate *All Others Rate The PRC-wide rate applies to all entries of the subject merchandise except for entries from exporters/factories that are identified individually above. 7

9 DISPOSITION OF THE CASE On February 28, 2001, the DOC in its final determination found that steel wire rope from the PRC was being sold, or was likely to be sold, in the U.S. at less than fair value. A continuation of suspension of liquidation was ordered. The final dumping margin was determined as follows: Manufacturer/exporter Margin (%) Fasten Group Import and Export Co., Ltd** 0.02 Haicheng Greatx Industry Co. Ltd.* Henan Baoi Wire Rope Factory* Jiangsu COFCO* Jiangsu Guo Tai* Liaoning Metals & Minerals Import & Export Corp.* Nantong Wire Rope Company* Nantong Zhongde PRC-Wide Rate * All others Rate ** De minimis Rate However, in March. 2001, the ITC has decided that an industry in the United States is not materially injured or threatened with material injury, and the establishment of an industry in the U.S. is not materially retarded, by reason of imports from China of steel wire rope that are allegedly sold in the United States at less than fair value. Thus, in the end of the antidumping battle, Chinese exporters won the case. 8