Rule2024-05509
Regulations Improving and Strengthening the Enforcement of Trade Remedies Through the Administration of the Antidumping and Countervailing Duty Laws
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
March 25, 2024
Effective
April 24, 2024
Issuing agencies
Commerce DepartmentInternational Trade Administration
Abstract
Pursuant to its authority under the Tariff Act of 1930, as amended (the Act), the U.S. Department of Commerce (Commerce) is amending its regulations to enhance, improve and strengthen its enforcement and administration of the antidumping duty (AD) and countervailing duty (CVD) laws. Specifically, Commerce is revising some of its procedures, codifying certain areas of its practice, and enhancing certain areas of its methodologies and analyses to address price and cost distortions, as well as certain countervailable subsidies, in different capacities.
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[Federal Register Volume 89, Number 58 (Monday, March 25, 2024)]
[Rules and Regulations]
[Pages 20766-20841]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-05509]
[[Page 20765]]
Vol. 89
Monday,
No. 58
March 25, 2024
Part II
Department of Commerce
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International Trade Administration
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19 CFR Part 351
Regulations Improving and Strengthening the Enforcement of Trade
Remedies Through the Administration of the Antidumping and
Countervailing Duty Law; Final Rule
Federal Register / Vol. 89 , No. 58 / Monday, March 25, 2024 / Rules
and Regulations
[[Page 20766]]
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DEPARTMENT OF COMMERCE
International Trade Administration
19 CFR Part 351
[Docket No. 240307-0075]
RIN 0625-AB23
Regulations Improving and Strengthening the Enforcement of Trade
Remedies Through the Administration of the Antidumping and
Countervailing Duty Laws
AGENCY: Enforcement and Compliance, International Trade Administration,
Department of Commerce.
ACTION: Final rule.
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SUMMARY: Pursuant to its authority under the Tariff Act of 1930, as
amended (the Act), the U.S. Department of Commerce (Commerce) is
amending its regulations to enhance, improve and strengthen its
enforcement and administration of the antidumping duty (AD) and
countervailing duty (CVD) laws. Specifically, Commerce is revising some
of its procedures, codifying certain areas of its practice, and
enhancing certain areas of its methodologies and analyses to address
price and cost distortions, as well as certain countervailable
subsidies, in different capacities.
DATES: These amendments are effective April 24, 2024.
FOR FURTHER INFORMATION CONTACT: Scott McBride, Associate Deputy Chief
Counsel, at (202) 482-6292, Ian McInerney, Attorney, at (202) 482-2327,
Hendricks Valenzuela, Attorney, at (202) 482-3558, or Ariela Garvett,
Senior Advisor, at <a href="/cdn-cgi/l/email-protection#7534071c1019145b321407031001013501071411105b121a03"><span class="__cf_email__" data-cfemail="1a5b68737f767b345d7b686c7f6e6e5a6e687b7e7f347d756c">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
General Background
On May 9, 2023, Commerce proposed amendments to its existing
regulations, 19 CFR part 351, to improve, strengthen and enhance its
enforcement of the AD and CVD laws.\1\ Relevant to this final rule are
the AD/CVD statutory and regulatory provisions in general, as well as
those pertaining to filing requirements, scope, circumvention, and
covered merchandise inquiries, the use of new factual information, the
CVD facts available hierarchy, surrogate value and CVD benchmark
selections, particular market situations (PMS), and certain types of
countervailable subsidies, which we summarize below.
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\1\ See Regulations Improving and Strengthening the Enforcement
of Trade Remedies Through the Administration of the Antidumping and
Countervailing Duty Laws, 88 FR 29850 (May 9, 2023) (Proposed Rule).
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Title VII of the Act vests Commerce with authority to administer
the AD/CVD laws. In particular, section 731 of the Act directs Commerce
to impose an AD order on merchandise entering the United States when it
determines that a producer or exporter is selling a class or kind of
foreign merchandise into the United States at less than fair value
(i.e., dumping), and the U.S. International Trade Commission (ITC)
finds material injury or threat of material injury to that industry in
the United States. Section 701 of the Act directs Commerce to impose a
CVD order when it determines that a government of a country, or any
public entity within the territory of a country, is providing, directly
or indirectly, a countervailable subsidy with respect to the
manufacture, production, or export of a class or kind of merchandise
that is imported into the United States, and when the ITC finds that
material injury or threat of material injury to that industry in the
United States.\2\
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\2\ A countervailable subsidy is further defined under section
771(5)(B) of the Act as existing when: a government or any public
entity within the territory of a country provides a financial
contribution; provides any form of income or price support; or makes
a payment to a funding mechanism to provide a financial
contribution, or entrusts or directs a private entity to make a
financial contribution, if providing the contribution would normally
be vested in the government and the practice does not differ in
substance from practices normally followed by governments; and a
benefit is thereby conferred. To be countervailable, a subsidy must
be specific within the meaning of section 771(5A) of the Act.
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On September 20, 2021, Commerce revised its scope regulations (19
CFR 351.225) and issued new circumvention (19 CFR 351.226) and covered
merchandise (19 CFR 351.227) regulations. See Scope and Circumvention
Final Rule, 86 FR 52300 (September 20, 2021) (Scope and Circumvention
Final Rule). See also Scope and Circumvention Proposed Rule, 85 FR
49472 (August 13, 2020) (Scope and Circumvention Proposed Rule). These
revised and new regulations became effective November 4, 2021. On
September 29, 2023, after publication of the May 2023 Proposed Rule,
Commerce identified some technical issues in those scope,
circumvention, and covered merchandise referral regulations, and
amended those regulations to address those issues.\3\ We have
incorporated those changes into these final revised regulations.
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\3\ See Administrative Protective Order, Service, and Other
Procedures in Antidumping and Countervailing Duty Proceedings, 88 FR
67069, 67077-78 (September 29, 2023) (APO and Service Final Rule).
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As we explained throughout the preamble to the Proposed Rule, the
purpose of these modifications and additions to our regulations is to
improve, strengthen and enhance the enforcement and administration of
the AD/CVD laws, make such enforcement and administration more
efficient, and to address factors which distort costs and prices--
factors that make the ``playing field'' less ``level'' for domestic
interested parties and can contribute to unfair trade. In order to
achieve the purpose of those regulations, Commerce may at times need to
request further documentation from interested parties that clarifies
the record to better understand the facts of a particular case. Other
times, Commerce may need to extend the deadline to issue a
determination so that its decision is fully informed and complete. To
address unfair trade adequately and appropriately, Commerce may need to
remove unnecessary restrictions in its regulations to address updated
challenges, like the agency's withdrawal of the prohibitive
transnational subsidies regulation. Commerce recognizes that in the
year 2024, there are complexities and challenges in international trade
which did not exist, or did not exist in the same manner or to the same
degree, when previous regulations were issued. Accordingly, Commerce
has determined that revisions and updates to Commerce's trade remedy
regulations are warranted.
Section 516A(b)(2) of the Act provides a definition of Commerce's
administrative record in AD/CVD proceedings and Sec. 351.104(a)(1)
describes in greater detail the information contained on the official
record. Nonetheless, interested parties sometimes make the mistake of
merely citing sources, or placing Uniform Resource Locator (URL)
website information, or hyperlinks, in their submissions to Commerce,
and then later presuming the information contained at the source
documents is considered part of the record. This becomes a problem, for
example, when parties submit their case briefs and rebuttal briefs on
the record pursuant to Sec. 351.309 and quote from, or otherwise rely
on, information or data derived from the cited sources that were never
submitted on the official record. Commerce therefore proposed adding
clarification on this point to Sec. 351.104(a)(1) in the Proposed
Rule.\4\ Commerce also proposed listing documents which do not need to
be
[[Page 20767]]
placed on the record, but can merely be cited, in the Proposed Rule.\5\
We received a large number of comments on these proposals, and as we
describe in greater detail below, we have revised Sec. 351.104 to
provide greater clarity on these issues.\6\
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\4\ See Proposed Rule, 88 FR 29852-53.
\5\ Id.
\6\ Commerce also proposed a change to Sec. 351.301(c)(4),
which deals with the use of record information as well. However, the
comments Commerce received were overwhelmingly opposed to such a
change. Accordingly, Commerce is not making a change to the existing
provision as proposed.
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In the Proposed Rule, Commerce proposed language to be added to the
regulations addressing scope, circumvention, and covered merchandise
inquiries pertaining to filing deadlines, clarification requests,
merchandise not yet imported but commercially-produced and sold,
extensions of time, regulatory restrictions covering new factual
information, and scope clarifications.\7\ Commerce subsequently
received comments from several interested parties on each of its
suggestions. In response to those comments, for the reasons we explain
below, Commerce has made certain modifications to its final
regulations--primarily on the language pertaining to scope
clarifications.
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\7\See Proposed Rule, 88 FR 29853-57.
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There are times when interested parties seek to file Notices of
Subsequent Authority with Commerce, in which a party argues in a given
segment of a proceeding that a new Federal court or Commerce decision
supports, contradicts, or undermines particular arguments before the
agency. However, Commerce's current regulations do not address the
timing for submitting Notices of Subsequent Authority, responsive
comments to a Notice of Subsequent Authority, and new factual
information regarding the filing of a Notice of Subsequent Authority,
nor the content requirements of a Notice of Subsequent Authority.
Commerce, therefore, proposed an addition to Sec. 351.301, at
paragraph (c)(6), to provide guidance for future Notices of Subsequent
Authority.\8\ We received comments on that proposal, and as we describe
in greater detail below, we have provided some additional language to
clarify this provision in response to those comments.
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\8\Id., 88 FR 29857.
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Section 776(d) of the Act provides that in circumstances in which
Commerce is applying adverse facts available (AFA) in selecting a
program rate pursuant to sections 776(a) and (b) of the Act, it may use
a countervailable subsidy rate determined for the same or similar
program in a CVD proceeding involving the same country. Alternatively,
if there is no same or similar program, Commerce may instead use a
countervailable subsidy rate for a subsidy program from a proceeding
that Commerce considers reasonable to use, including the highest of
such rates. Commerce developed its practice of applying its current
hierarchy in selecting AFA rates in CVD proceedings over many years,
preceding its codification into the Act, to effectuate the statutory
purpose of section 776(b) of the Act to induce respondents to provide
Commerce with complete and accurate information in CVD proceedings in a
timely manner. For purposes of these regulations, Commerce chose to
codify that hierarchy in a new paragraph of Sec. 351.308.\9\ We
received comments on that proposal in response to the Proposed Rule,
and in response to those comments we have modified certain language
pertaining to the CVD hierarchy in investigations.
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\9\Id., 88 FR 29858.
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In the Proposed Rule, Commerce acknowledged that both government
action and government inaction can benefit producers or exporters.\10\
For example, when a government issues a fee, fine, or penalty to a
company, yet never collects the payment, that revenue forgone is
considered a financial contribution pursuant to section 771(5)(D)(ii)
of the Act. Accordingly, Commerce proposed a new regulation at Sec.
351.529, which codifies its practice in countervailing such a
subsidy.\11\ In addition, Commerce proposed considering nonexistent,
weak, or ineffective property (including intellectual property), human
rights, labor, and environmental protections which may distort costs of
production in selecting surrogate values in accordance with section
773(c)(1) of the Act in Sec. 351.408.\12\ Likewise, in determining if
a product has been sold for less than adequate remuneration, Commerce
proposed considering the distortive effect of those same factors on
prices and costs in selecting a benchmark country price or prices, in
Sec. 351.511.\13\ Finally, Commerce proposed that those factors might
be the foundation of a cost-based PMS, and proposed two examples in the
Proposed Rule to reflect those factors, to be codified in Sec.
351.416.\14\ We received numerous comments on those proposals, and
although we have made no changes to the fees, fines, and penalties and
less than adequate remuneration proposed regulations, and only minor
edits to the surrogate value proposed regulation, we have made some
changes to the PMS regulation, for the reasons provided.
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\10\Id., 88 FR 29858-61.
\11\Id.
\12\Id.
\13\Id.
\14\Id.
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On November 18, 2022, Commerce issued an advanced notice of
proposed rulemaking indicating that it was considering issuing a
regulation that would address the steps taken by Commerce to determine
the existence of a PMS that distorts the costs of production. See
Determining the Existence of a Particular Market Situation That
Distorts Costs of Production; Advanced Notice of Proposed Rulemaking,
87 FR 69234 (November 18, 2022) (hereinafter, PMS ANPR). Commerce
received 19 comments in response to that notice and addressed or
incorporated many of those comments into its proposed regulation at
Sec. 351.416 in the Proposed Rule.\15 \In addition, Commerce proposed
regulatory provisions addressing both a sales-based PMS, as well as a
cost-based PMS.\16\ Its proposed regulation described information that
Commerce would normally consider in determining the existence of a PMS,
set forth information that Commerce would not be required to consider
in every case, and explained that under certain factual situations,
Commerce could determine that a cost-based PMS contributed to the
existence of a sales-based PMS.\17\ In addition, Commerce set forth 12
examples of circumstances that reflect a PMS that is likely to result
in a distortion to costs.\18\ The PMS regulation was the primary issue
Commerce received comments on in response to the Proposed Rule, and for
the reasons described below, Commerce has revised some of the language
throughout Sec. 351.416 for clarity and consistency in response to
many of those comments.
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\15\Id., 88 FR 29861-67.
\16\Id.
\17\Id.
\18\Id.
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In addition, Commerce proposed modifications to several of its CVD
regulations, including those covering benefit (Sec. 351.503), loans
(Sec. 351.505), equity (Sec. 351.507), debt forgiveness (Sec.
351.508), direct taxes (Sec. 351.509), export insurance (Sec.
351.520), and the attribution of subsidies to products in its CVD
calculations (Sec. 351.525). We received several comments in response
[[Page 20768]]
to some of those regulation changes and have made some revisions to
certain regulations in response, as set forth below.
Finally, in awareness of changes in the world economy, Commerce
proposed eliminating the current regulation prohibiting the
countervailing of certain transnational subsidies, Sec. 351.527, and
instead reserving it for future consideration.\19\ We received numerous
comments on this change to our regulations as well and have determined
to make no changes from the Proposed Rule, for the reasons explained
below.
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\19\ Id., 88 FR 29870.
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Explanation of Modifications From the Proposed Rule to the Final Rule
and Responses to Comments
In the Proposed Rule, Commerce invited the public to submit
comments.\20\ Commerce received 53 submissions from interested parties
providing comments, including domestic producers, domestic industrial
users, exporters, importers, foreign governments, and foreign entities.
We have determined to make certain modifications to the Proposed Rule
in response to certain issues and concerns raised in those submissions.
We considered the merits of each submission and analyzed the legal and
policy arguments in light of both our past practice, as well as our
desire to improve, strengthen, and enhance the administration and
enforcement of our AD/CVD laws.
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\20\ Id., 88 FR 29850-51.
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The preamble to the Proposed Rule provides background, analysis,
and explanation which are relevant to these regulations. With some
modifications, as noted, this final rule would codify those proposed on
May 9, 2023. Accordingly, to the extent that parties wish to have a
greater understanding of these regulations, we encourage not only
considering the preamble of these final regulations, but also a review
of the analysis and explanations in the preamble to the Proposed Rule.
In drafting this final rule, Commerce carefully considered each of
the comments received. The following sections generally contain a brief
discussion of each regulatory provision(s), a summary of the comments
we received, and Commerce's responses to those comments. In addition,
these sections contain explanations of changes Commerce made to the
Proposed Rule, either in response to comments or that it deemed
appropriate for conforming, clarifying, or providing additional public
benefit.
1. Commerce has revised Sec. 351.104(a)(1) and added Sec.
351.104(a)(3) through (7) to clarify the information sources that may
be cited in submissions without placing them on the official record and
the information sources that must be placed on the official record for
Commerce to consider them.
In the Proposed Rule, Commerce explained that it was updating Sec.
351.104(a), which describes in detail the information contained on the
official record, to reflect Commerce's long-standing interpretation
that mere citations and references (e.g., hyperlinks and website URLs)
do not incorporate the information located at the cited sources onto
the official record. Commerce explained that this was true whether the
citation is to sources such as textbooks, academic or economic studies,
foreign laws, newspaper articles, or websites of foreign governments,
businesses, or organizations.\21\ Commerce explained that if an
interested party wished to submit information on the record, it would
be required to submit the actual source material in a timely manner and
not merely share internet links or citations to those sources in its
questionnaire responses, submissions, briefs, or rebuttal briefs.
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\21\ Id., 88 FR 29852-53. Commerce provided reasons that such an
update to the regulation was necessary, including to avoid the time
and resources it takes for Commerce to make filers remove
submissions from the record and resubmit them without arguments
relying on websites and URLs. Another reason for the policy is that
information on websites can, and frequently does, change. At the
time a weblink is placed on the record, the website might contain
certain information, but later in the segment of the proceeding,
that website and the information contained therein might change.
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Commerce also explained, however, that there are exceptions to this
rule which it adopted over the years, and set forth those exceptions in
the proposed regulations at Sec. 351.104(a)(1). Specifically, Commerce
identified the following as sources which parties could cite and rely
upon, without placing the sources on the record: U.S. statutes and
regulations; published U.S. legislative history; U.S. court decisions
and orders; certain notices of the Secretary and ITC published in the
Federal Register, as well as decision memoranda and reports adopted by
those notices; and the agreements identified in Sec. 351.101(a).\22\
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\22\ Id., 88 FR 29871.
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Commerce explained that Commerce-authored ``Issues and Decision
Memoranda,'' included in that list of excepted citation sources, were
adopted by Federal Register notices and were ``not the separate
calculation and analysis memoranda that Commerce frequently uses in its
proceedings.'' \23\ Commerce stated in the preamble that
``{c{time} alculation and analysis memoranda'' included ``initiation
checklists, respondent selection memoranda, new subsidy allegation
memoranda, and affiliation/collapsing memoranda from other proceedings
or other segments of the same proceeding.'' Commerce provided that all
of those documents would not be considered to be on the official record
``unless they have been placed on the record by Commerce or one of the
interested parties to the proceeding.'' \24\ Furthermore, Commerce
explained that remand redeterminations, determinations issued pursuant
to section 129 of the Uruguay Round Agreements Act (URAA) (section 129
determinations), and scope rulings must ``each be submitted on the
official record of another segment or proceeding'' for Commerce to
consider the contents and analysis of those determinations in that
segment or proceeding.\25\
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\23\ Id., 88 FR 29853.
\24\ Id.
\25\ Id.
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A. The revised regulation addresses documents not originating with
Commerce, published in the Federal Register, containing proprietary
information, or not associated with an ACCESS barcode number.
Commerce received several comments on both the proposed regulation
language, as well as Commerce's description of its practice in the
preamble to the Proposed Rule. One commenter expressed concerns with
Commerce's restrictions on citations and references (e.g., hyperlinks
and website URLs) to documents not originating with Commerce. That
commenter suggested that if documents and information (e.g., academic
publications) were previously placed on the record in other segments or
proceedings, then parties should be able to cite those documents using
Enforcement and Compliance's Antidumping Duty and Countervailing Duty
Centralized Electronic Service System (ACCESS) barcode numbers, without
placing the sources anew on the record of the immediate segment.
However, there is no question that factual information that has been
filed by interested parties with Commerce originating outside of the
agency meets the definition of factual information under Sec.
351.102(b)(21). Furthermore, Sec. 351.301(c) requires that new factual
information be submitted on each
[[Page 20769]]
segment of the record under specific deadlines and in a certain form.
Accordingly, as each segment is composed of a separate record, and
information from outside of the agency should be placed on the record
for consideration, we will continue to maintain that requirement as it
applies to documents not originating with Commerce.
Certain commenters also expressed concerns that Commerce's list of
documents that it allows to be cited without placing the information on
the record was incomplete. Specifically, one party pointed out that
Commerce frequently allows citations to dictionary definitions without
requiring them to be separately placed on the record. Another commenter
noted that parties frequently cite World Trade Organization (WTO) panel
and appellate body (hereinafter the Panel and Appellate Body,
respectively) decisions, as well as North American Free Trade Agreement
dispute Panel decisions, without submitting those decisions on the
record. That party also suggested that Commerce should allow for all
Federal Government determinations and notices published in the Federal
Register (e.g., Presidential proclamations, Executive orders, and
United States Trade Representative (USTR) section 301 determinations,
etc.) to be cited without submitting them on the record. We agree with
all of those comments and have modified the proposed regulation to
include references to dictionary definitions, dispute settlement
determinations arising out of international agreements cited in Sec.
351.101 (Sec. 351.104(a)(3)(ii)), and Federal Register citations in
general (Sec. 351.104(a)(5)).
In addition, one party suggested that Commerce should also include
various U.S. Customs and Border Protection (CBP) rulings, including
those pertaining to the Harmonized Tariff Schedule of the United States
(HTSUS), on the list of documents not subject to the requirements of
Sec. 351.301. Many such rulings are on the CBP website, but it is as
time consuming for Commerce as it is for the interested parties to
research the rulings of other agencies not published in the Federal
Register. Accordingly, because interested parties bear the burden to
provide sources not originating with Commerce or published in the
Federal Register on the record, we have decided not to include CBP
rulings or unpublished determinations of any other agency, except for
the ITC in AD and CVD proceedings, on the list of sources excluded from
the filing and timing requirements of Sec. 351.301.
In revising the proposed regulations at Sec. 351.104(a) for this
final rule, Commerce has included new paragraphs (a)(3) through (7) to
further clarify which documents may be cited without submitting
information on the record under Sec. 351.301. Specifically, Commerce
has revised Sec. 351.104(a)(1) to largely reflect the current
regulatory language, but adds language that states that scope,
circumvention, or covered merchandise inquiries will be conducted on
the record of the AD segment of a proceeding when there are companion
orders.
Commerce has made no changes to Sec. 351.104(a)(2) but has added
an additional paragraph (a)(3) which specifically addresses ``filing
requirements for documents not originating with the Department.'' This
provision clarifies that if a document does not originate with
Commerce, it must be placed on the record, with the exception of the
aforementioned list of citations Commerce has historically permitted to
be cited without submitting such documents on the record. Notably, the
reference to Commerce memoranda and Federal Register notices and
determinations initially referenced in the Proposed Rule has been
removed from this listing because it is addressed elsewhere in the
revised regulation. This provision explains that unless a document not
originating with Commerce appears on the list of exceptions, the
procedural and timing requirements of Sec. 351.301 apply.\26\ It also
explains that each citation must be cited in full, and that Commerce
may decline to consider information sources in its analysis or
determination if those citations are not cited in full.
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\26\ We note that the term ``the Department'' has been applied
for these provisions to clarify application to documents authored by
all Commerce employees distinct from the Secretary's determinations.
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In the new Sec. 351.104(a)(4), Commerce has clarified that even
though parties may take proprietary, privileged, and classified
information from other segments of the same proceeding and place them
on the record of another segment, they cannot do so with mere
citations. All documents, even those originating with Commerce, which
contain business proprietary information must be placed on the official
record in their entirety in accordance with the filing and timing
restrictions of Sec. 351.301.
Furthermore, new Sec. 351.104(a)(5) clarifies that all of
Commerce's Federal Register notifications and determinations may be
cited by parties in submissions on the record without the requirement
that they be submitted on the official record, as long as those notices
and determinations are cited in full. If they are not cited in full,
Commerce may decline to consider those notifications or determinations
in its analysis. This is consistent with Commerce's longstanding
practice, and the provision states clearly that the procedural and
timing requirements of Sec. 351.301 do not apply to such documents.
Finally, Sec. 351.104(a)(7) states that public versions of
documents originating with Commerce from other segments or proceedings,
but which are not associated with an ACCESS barcode number for whatever
reason, including those documents issued before ACCESS was established,
must be filed on the record in their entirety to be considered by
Commerce in its analysis. Otherwise, the record would be incomplete
because other interested parties would not have access to the cited
documents. Therefore, the provision explains that the procedural and
timing requirements of Sec. 351.301 apply to such documents.
B. Public versions of unpublished documents originating with
Commerce and associated with an ACCESS barcode number.
The record issue which foreign exporters, foreign governments, U.S.
importers, U.S. consumers, and domestic industries all agreed upon
involved Commerce's treatment of unpublished Commerce determinations
associated with an ACCESS barcode number. Every commenter on Commerce's
treatment of the record in the Proposed Rule disagreed with Commerce
that public versions of draft and final remand redeterminations,
preliminary and final section 129 determination memoranda, and scope
ruling memoranda from other segments and proceedings, that are
associated with an ACCESS barcode number, should be required to be
placed on the administrative record of the segment before it. Several
commenters claimed that those sources do not meet the five definitions
of ``factual information'' in Sec. 351.102(b)(21), and therefore,
should not be subject to the filing and timing requirements for new
factual information in Sec. 351.301.
Instead, those commenters claimed that each of these documents is
an agency legal determination that should be treated like other agency
legal determination documents which are unpublished but are not
required to be submitted on the record of other segments or proceedings
(e.g., preliminary decision memoranda and final issues and decision
memoranda in investigations and administrative reviews). They suggested
that the mere
[[Page 20770]]
fact that those particular documents were not published in the Federal
Register does not make them any less agency legal determinations.
With respect to remand redeterminations in particular, some
commenters expressed confusion with how Commerce could conclude that
agency determinations issued pursuant to a Federal court proceeding and
then eventually affirmed and discussed in a public Federal court
holding could be treated as ``new factual information,'' incapable of
citation and reference in a subsequent Commerce proceeding without
submitting it on the segment of an administrative record. One commenter
pointed out that all remand redeterminations are publicly available on
the Public Access to Court Electronic Records (PACER) website,\27\ as
well as on ACCESS, and courts are free to consider documents from both
sources, which the commenter stated undercut a claim that this
information was ``new'' or merely ``factual.''
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\27\ See Public Access to Court Electronic Records, available at
<a href="https://pacer.uscourts.gov">https://pacer.uscourts.gov</a>.
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In addition to those documents, however, all commenters expressed
concerns that the issue was much more extensive than just those three
examples. They suggested that every unpublished public analysis
document originating with Commerce and associated with an ACCESS
barcode number should be citable without submitting the agency analysis
document on the record. The commenters expressed concerns that there
was no factual or legal distinction between other AD or CVD analysis
memoranda and the preliminary and final issues and decision memoranda
which Commerce has permitted to be cited in arguments, briefs, and
rebuttal briefs without requiring them to be submitted on each record.
The commenters noted that ACCESS is Commerce's filing system and
Commerce analysis teams have the ability to retrieve any of the cited
documents from any segment instantly, as long as they have the
appropriate barcode number. Therefore, they suggested that Commerce
should provide a uniform citation for all submitters in using an ACCESS
barcode in their filings and apply that to all Commerce-authored
documents.
To the extent that Commerce explained in the Proposed Rule that
preliminary and final issues and decision memoranda could be cited
without placement on the record because those were adopted by reference
in a published Federal Register document, several commenters stated
their belief that there was no rational legal distinction between those
incorporated by a Federal Register document and those not incorporated
by a Federal Register document. However, even if there was a legal
distinction between the two types of memoranda based on reference in
the Federal Register, many commenters pointed out that Commerce
frequently cites many of its other analysis memoranda, such as post-
preliminary memoranda and new subsidy allegation memoranda in Federal
Register documents, yet the record information policy described in the
Proposed Rule would not allow any of those to be cited without
submitting them on the record.
Some commenters claimed that Commerce's historical treatment of
citations to various public and unpublished analysis memoranda was, at
times, inconsistent. In addition, they suggested that Commerce was
incorrect in treating any of those analysis memoranda as new facts
because just as the five definitions of ``factual information'' in
Sec. 351.102(b)(21) do not apply to remand redeterminations, section
129 determination memoranda, and scope rulings, they equally do not
apply to the rest of Commerce's other public analysis memoranda. They
acknowledged that each of those public memoranda analyze facts, just
like the aforementioned preliminary and final issues and decision
memoranda, but also recognized that the more important aspect of those
memoranda was that Commerce was making an analysis of those facts and
issuing policy and legal determinations based on those facts. They
expressed concerns that nothing in Sec. 351.102(b)(21) suggests that
the new factual information regulations were intended to apply to
Commerce analysis and calculation memoranda, and nothing in the
regulation was drafted with the intent of prohibiting parties from
citing past Commerce practice and relying on that practice for support
of arguments before the agency. In short, several of the commenters
stated that none of these memoranda are ``factual information,'' but
are instead the very basis for Commerce's policies and practices, and
therefore, interested parties should be able to cite them in all
documents, including briefs and rebuttal briefs, without having to
submit them on the record under certain timelines and certain
procedures as ``new factual information,'' pursuant to Sec. 351.301.
One commenter pointed out that in Commerce's 1997 regulations, in
responding to comments on Sec. 351.301, Commerce described the
information which could be relied upon in briefs and rebuttal briefs,
and stated that in ``making their arguments, parties may use factual
information already on the record or may draw on information in the
public realm to highlight any perceived inaccuracies . . . .'' \28\
That commenter noted that all of the public memoranda issued by
Commerce are in the public realm, and therefore, consistent with its
previous comments, Commerce should allow all of its public analysis
memoranda from other segments and proceedings to be cited without being
required to submit those memoranda on the record prior to the drafting
and submission of briefs and rebuttal briefs. Another commenter agreed
with this idea, noting that public versions of Commerce's documents are
``just as available to the public as Commerce's issues and decision
memoranda'' because anyone with an ACCESS account can obtain those
documents.
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\28 \ See Antidumping Duties; Countervailing Duties; Final Rule,
62 FR 27295, 27332 (May 19, 1997).
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Furthermore, several commenters found the approach described by
Commerce in the Proposed Rule to agency-authored documents to be
problematic with respect to post-preliminary determination and results
documents. Some commenters expressed concerns that adopting a wholesale
rule that prohibits parties from demonstrating in a case or rebuttal
brief that Commerce has taken a position in a preliminary determination
or administrative results that is inconsistent with the agency's
position in another segment or proceeding would result in Commerce
being unable to address inconsistencies in its approach across reviews
and likely lead to increased judicial oversight. Yet another commenter
explained that interested parties are confronted with a predicament
when they prepare case briefs, because, at the time that they answered
Commerce's questionnaires, they did not include in their submissions
all relevant Commerce memoranda that would aid Commerce in its
decision-making process. Therefore, because Commerce prohibits
citations to other relevant Commerce public determination memoranda in
briefs and rebuttal briefs, interested parties cannot provide Commerce
with necessary public references that would better inform Commerce's
final determinations. In addition, certain commenters argued that the
alleged ``new'' rule forced interested parties to identify and submit
all relevant memoranda 30 days prior to a preliminary determination or
results,
[[Page 20771]]
even if it later became evident that it might be beneficial to the
agency for the interested parties to cite to other Commerce memoranda.
Such restrictions, they stated, would lead to unnecessary
inconsistencies in Commerce's policies and practice.
Finally, another commenter expressed concerns that Commerce's
proposal is unlawful because it would deprive interested parties of a
transparent process and, for importers in particular, it would deprive
them of their due process rights under the Fifth Amendment of the
United States Constitution. That commenter suggested that Commerce's
proposal contradicts fundamental principle of transparency in
administrative law, citing Slater Steels Corps. v. United States, 279
F. Supp. 2d 1370, 1379 (CIT 2003) and MacLean-Fogg Co. v. United
States, 100 F. Supp. 3d 1349, 1362 (CIT 2015) for the concept that
there is a fundamental public interest in transparency in government.
That commenter explained that all of the public versions of Commerce-
originated documents at issue, including calculation and analysis
memoranda, are publicly available, and Commerce's issues and decision
memoranda frequently rely on such documents to complete the rationale
underlying the agency's determinations. The commenter noted that in
Chefline Corp. v. United States, 219 F. Supp. 2d 1303, 1309 (CIT 2002),
the U.S. Court of International Trade (CIT) recognized that when
``credible evidence from outside the record indicates a significant
error in the agency's determination,'' it would take judicial notice of
that information. Thus, the commenter advocated that Commerce allow
parties to cite past analysis documents in their briefs and rebuttal
briefs and avoid the inevitable litigation which would otherwise follow
under the approach suggested in the Proposed Rule.
In addition, that commenter expressed concerns that Commerce's
proposed changes to its regulation would also violate an importer's due
process rights under the Fifth Amendment. It stated that a fundamental
requirement of due process is for parties to have the ``opportunity to
be heard at a meaningful time and in a meaningful manner,'' citing
Mathews v. Eldridge, 424 U.S. 319, 332 (1976) and Young v. Dep't of
Housing and Urban Dev., 706 F. 3d 1372, 1376 (Fed. Cir. 2013). Further,
the commenter pointed to a U.S. Court of Appeals for the Federal
Circuit's (Federal Circuit) holding which held that ``the arbitrary
administration of law is subject to judicial intervention'' and that
parties are ``due a fair and honest process'' (NEC Corp v. United
States, 151 F. 3d 1361, 1370-71 (Fed. Cir. 1998)). The commenter
explained that the relevant deadlines for the submission of factual
information occur prior to Commerce's preliminary determinations, but
that in many instances, Commerce's reasoning or methodological choices
are not clear until it releases its preliminary determination. The
commenter explained that if an interested party is prohibited from
referencing a publicly available document in its case brief unless that
document has already been submitted on the record or is a preliminary
or final issues and decision memorandum, it is caught in an unfortunate
situation because interested parties could not know if certain
memoranda were relevant until after the preliminary determination or
results were issued, after the deadline for submitting information on
the record had passed. Thus, according to that commenter, this is a
clear deprivation of those parties' due process rights to be heard in a
meaningful manner.
Commerce's Response:
In response to all of the above comments, Commerce has decided to
make a substantial revision to its regulations. Pursuant to Sec.
351.104(a)(6), interested parties may, in all submissions, cite certain
public preliminary and final issues and decision memoranda in the
following segments, without the timing and filing restrictions of Sec.
351.301, as long as they are fully cited and accompanied by an ACCESS
barcode number in the citation: investigations, pursuant to Sec. Sec.
351.205 and 351.210; administrative reviews, pursuant to Sec. 351.213;
new shipper reviews, pursuant to Sec. 351.214; changed circumstances
reviews, pursuant to Sec. 351.216; sunset reviews, pursuant to Sec.
351.218; and circumvention inquiries, pursuant to Sec. 351.226.
Commerce has historically allowed all of these documents to be cited
without requiring them to be placed on the record of other segments or
proceedings, and Commerce will codify that practice in these
regulations.
In addition, the same citation allowance will also be applied to
public versions of preliminary and final scope rulings pursuant to
Sec. 351.225, and covered merchandise inquiries pursuant to Sec.
351.227, draft and final redeterminations on remand, and draft and
final redeterminations issued pursuant to section 129 of the URAA.
After consideration of the arguments pertaining to scope rulings,
remand redeterminations, and section 129 determinations from multiple
commenters, we agree that those documents should also be able to be
cited without the requirement that those documents be placed on the
administrative record. Like the other documents listed above, they are
statutory and regulatory public and final determinations made by
Commerce in individual segments of a proceeding.
Furthermore, Commerce has determined that four additional types of
documents argued by interested parties should also be able to be cited
without the requirement that those documents be placed on the
administrative record: initiation decision documents, such as
initiation checklists; memoranda which describe and analyze new subsidy
allegations; scope memoranda issued in an investigation; and post-
preliminary determination or results memoranda which address issues for
the first time after the preliminary determination or results has been
issued and before the final determination or results is issued. In the
first two types of documents, Commerce is making a determination to
initiate, or not initiate, based on certain information, while in the
third document Commerce is conducting an analysis on whether a product
is, or is not covered by the scope of an investigation. Finally, in the
fourth document, Commerce is making a determination for the first time
upon which parties may file comments. We find each of these documents
serves a unique purpose in the agency's proceedings and is largely
self-contained (i.e., they do not require Commerce employees to look
outside of the four corners of the document to understand the
analysis). Accordingly, we determine that Commerce and interested
parties should be able to cite to those documents in other segments or
proceedings without separately placing them on the record.
We emphasize that all citations must be cited in full. Commerce can
only consider and rely on a cited information source if it is able to
retrieve that information source, which may not be possible if the
citation to the information source is incomplete. Furthermore, we also
emphasize that unlike in past cases, the regulations will now require
that all of these document citations include reference to the
associated ACCESS barcode numbers. The inclusion of the associated
ACCESS barcode numbers in the citation is an additional requirement
from what was permitted before, but one that most commenters indicated
would be an improvement for parties both outside and within Commerce to
easily retrieve the documents and consider them in making preliminary
and final determinations. If the citations are not
[[Page 20772]]
cited in full, including the associated ACCESS barcode numbers, the
regulation states that Commerce may decline to consider the cited
information sources in its analysis or determination.
With respect to the other public documents authored by Commerce and
argued by the comments, it is important to stress that the conduct of
an administrative proceeding is a time-intensive, resource-intensive,
and fact-intensive endeavor. Although several commenters stated that
collapsing memoranda or calculation memoranda, for example, taken from
other segments or other proceedings are not ``factual information''
under the regulatory definition of the term in Sec. 351.102(b)(21), we
disagree with that assessment. A collapsing determination, under Sec.
351.104(f) requires that Commerce first determine if two entities were
affiliated during a particular period of investigation or review, and
then determine whether there is a significant potential for the
manipulation of prices or production between the two entities such that
they should be treated as one collapsed entity. Likewise, when Commerce
issues calculation memoranda, its calculations are based upon the
record and data before it in that particular segment of a proceeding.
Thus, although we agree with the commenters who noted that each
collapsing and calculation memoranda is a legal analysis and decision
by the agency, each of those memoranda also reflect conclusions based
on the facts unique to the segment of the proceeding in which they were
issued. Each document is publicly available, accessible on ACCESS,
potentially relevant to a segment or proceeding before Commerce, and
contains factual information being introduced on the record of the
ongoing segment or proceeding for the first time.
When Commerce employees are considering such submissions on the
record, they frequently must review the record of the segment from
which the memoranda at issue originated and review further information
on those records pertaining to those agency decisions to understand the
broader facts and context in which the decisions at issue were made by
the agency. It is a time-consuming exercise and, depending on the
complexity of the facts and the record of the other segment or
proceeding, can be difficult and may require that Commerce employees
put even more documents from those other segments or proceedings on the
record. This problem becomes even more profound when one recognizes
that there are dozens of decision memoranda issued by Commerce on a
monthly basis in various segments, with some of those documents being
more descriptive of the facts under consideration and self-contained
than others. Accordingly, for many decision memoranda not listed in
Sec. 351.104(a)(6), Commerce has determined that it would be best to
continue its practice of requiring interested parties pointing to those
analysis and decision memoranda from other segments and proceedings to
submit those documents on the record of the segment to which the
parties are arguing that those memoranda are relevant. We appreciate
that some interested parties explained that it would be easier for them
to simply cite all public Commerce decision memoranda, but their points
do not take into consideration the time and effort Commerce employees
already devote to analyzing the information placed on the record unique
to the segment before the agency. If Commerce were required to
independently review the details and context of the records of numerous
additional segments in each case, it would quickly become unmanageable.
In response to the arguments that Commerce has tried to prohibit
references to past practices and policies in issuing these regulations
(i.e., deprived interested parties of a transparent process or deprive
importers of their due process rights under the Fifth Amendment of the
United States Constitution) we disagree. Commerce believes, in fact,
that there is no support for such contentions. Interested parties may,
in fact, cite all of Commerce's public decision memoranda from other
segments and proceedings and rely on those memoranda for purposes of
their arguments in every case. There is no regulation that restricts
such citation or argument, and nothing in the Proposed Rule suggested
that Commerce would prevent reliance on such documents in any given
segment. These regulations merely require that when interested parties
cite public documents originating with Commerce, and where those
documents are not listed under Sec. 351.104(a)(6), then the interested
party must submit a copy of that public decision document on the record
of the segment in which it is participating. If the interested party is
already citing that document to support its claims, then the interested
party will naturally have access to the document and should be easily
able to take the additional step and submit the document on the record
of the segment at issue. If anything, Commerce concludes that this
additional step creates a procedure which is more, and not less,
transparent, than the practice advocated by the commenters, and in no
way deprives importers or any other party of their due process rights
under the Fifth Amendment of the United States Constitution.
Finally, with respect to the statements made by commenters on post-
preliminary determination and results submissions, we recognize that
parties may cite any of the documents listed in section Sec.
351.104(a)(6) to argue that Commerce acted inconsistently with its
practices or procedures in a preliminary Commerce determination. There
is no question that collapsing and calculation memoranda, for example,
from other segments might provide greater factual detail on certain
policies or practices, as suggested by some of the commenters. However,
it is the very factual specificity of the data in such documents which
we believe also warrants the provision of such documents and data on
the record for consideration in accordance with the timing and filing
requirements of Sec. 351.301. The inclusion of such documents on the
record allows analysts and interested parties to consider that
information in detail in determining the relevance of those previous
Commerce decisions to the facts on the record before the agency.
2. Commerce will not revise Sec. 351.301(c)(4), as proposed.
Section 351.301(c) is the provision in Commerce's regulations that
provides timelines and procedures for parties to place new factual
information on the official record, and allows other interested parties
the opportunity to respond to those submissions. Section 351.301(c)(4),
in particular, pertains to Commerce and its ability to submit new
factual information on the record. In light of multiple cases in which
parties have filed unrelated and irrelevant new factual information on
the record in response to Commerce's placement of a calculation
document on the record, Commerce proposed an exception to Sec.
351.301(c)(4) in the Proposed Rule, which would allow Commerce to place
a calculation or analysis memorandum from another segment or proceeding
on the record to clarify its practice in response to the parties'
arguments in their briefs and rebuttal briefs, while interested parties
could respond with comments, but not with further new factual
information.\29\
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\29\ See Proposed Rule, 88 FR 29857.
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Commenters were universally opposed to Commerce's proposal to amend
Sec. 351.301(c)(4) and to allow the agency to place agency analysis
and calculation memoranda on the record in
[[Page 20773]]
response to arguments made in briefs and rebuttal briefs without
allowing interested parties an opportunity to submit other agency
analyses or calculation memoranda in response. Certain commenters
expressed concerns that merely allowing responsive arguments, but not
responsive evidence, would severely limit interested parties' ability
to meaningfully respond to the documents placed on the record by
Commerce, and would prohibit interested parties from being able to
provide additional information showing that Commerce's past practice
and policies were inconsistent with that being claimed by the agency,
or, at minimum, clarifying minute distinctions between cases in which
those policies and practices were applied.
Several other commenters clarified that they were not opposed to a
restriction on unrelated, irrelevant, and non-responsive factual
information from interested parties, and some even indicated they would
support such limited restrictions, but those commenters stated that a
wholesale prohibition on responsive factual information was
unreasonable.
Commerce's Response:
In light of the comments received by Commerce in response to the
Proposed Rule on both the proposed changes to Sec. Sec. 351.104(a) and
351.301(c)(4), Commerce has determined that it agrees that the
regulation change, as proposed, would not provide interested parties
with sufficient opportunity to respond to information placed by
Commerce on the record late in a segment of a proceeding. Accordingly,
Commerce will not adopt the changes proposed to Sec. 351.301(c)(4) in
the Proposed Rule.
3. Commerce has made certain revisions to the proposed amendments
to Sec. Sec. 351.225, 351.226, and 351.227.
A. Commerce will accept responsive arguments pre-initiation in
scope and circumvention inquiries in Sec. Sec. 351.225(c)(3) and
351.226(c)(3), and allow responsive factual information pre-initiation
in circumvention inquiries.
In 2021, Commerce revised its regulations covering scope inquiries
at Sec. 351.225 and created new regulations addressing circumvention
inquiries pursuant to section 781 of the Act.\30\ The revisions were
extensive, and the reasons behind many of the changes were numerous.
One of the significant changes was the requirement that if an
interested party requested a scope ruling, the party must file a
standardized scope application. Section 351.225(c) provides a listing
of all of the required information for a scope ruling,\31\ and Sec.
351.226(c) largely incorporates the same requirements for a
circumvention inquiry request.\32\ Commerce explained in the Scope and
Circumvention Final Rule that it hoped that by listing criteria and
standardizing the filing requirements in scope and circumvention
inquiries, it would accelerate the process by allowing all of the
information necessary to initiate to be submitted on the record at
once, rather than requiring Commerce to issue supplemental
questionnaires and ask for further information, both before and after
initiation.
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\30\ See Scope and Circumvention Final Rule, 86 FR 52300
(September 20, 2021) (Scope and Circumvention Final Rule).
\31\ Id., 86 FR 52313-15.
\32\ Id., 86 FR 52339-41.
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In the Proposed Rule, Commerce noted that in the Scope and
Circumvention Final Rule, Commerce had indicated that parties would
have an opportunity to challenge the adequacy or veracity of a scope
ruling application or circumvention inquiry request. However, such an
opportunity was never codified in Sec. Sec. 351.225 and 351.226.\33\
Commerce's experience since the issuance of the scope and circumvention
rules was that it would be beneficial to the agency to allow
``interested parties, other than the applicant or a requestor, a clear
opportunity to submit comments to Commerce on the adequacy of the
application or request, within 10 days after the submission of the
application or request.'' \34\ Thus, such a change to the regulation
was proposed.
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\33\ See Proposed Rule, 88 FR 29853, n. 9.
\34\ Id., 88 FR 29853.
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Furthermore, Commerce explained that the factors considered in a
circumvention inquiry differ from a scope inquiry in that, for example,
circumvention inquiries frequently require Commerce to consider if
there were patterns of trade. Thus, Commerce explained in the Proposed
Rule that Commerce was also proposing that in circumvention inquiries
specifically, responsive new factual information could be provided in
that 10-day time period and that the party alleging circumvention could
respond five days afterwards with comments and new factual information
to rebut, clarify, or correct the interested parties' new factual
information. Commerce explained that it expected ``that by allowing for
both comments and new factual information in this manner,'' the record
would contain even greater amounts of information so that the agency
could determine if the criteria to initiate were satisfied.\35\
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\35\ Id.
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Commerce received several comments on these proposals. Some
commenters opposed allowing interested parties to file comments on a
scope application pre-initiation in scope inquiries and comments on a
circumvention inquiry request and new factual information pre-
initiation in circumvention inquiries. They complained that the
procedure would be burdensome and slow the process down for initiation,
when in fact, the new and revised regulations were intended to speed up
the process for scope and circumvention inquiries. They commented that
the proposed regulation changes would lead to a mini-investigation in
each case and create an adversarial process before the case was ever
even initiated, and that the very purpose of a scope or circumvention
inquiry is to gather information and to make a determination on the
basis of the record--not to conduct such an analysis pre-initiation.
Some commenters even pointed to a proposed bill pending before Congress
that would prohibit Commerce from accepting any unsolicited
communications from any person other than an interested party
requesting a circumvention inquiry pre-initiation and suggested that
Commerce should act in accordance with that proposed legislation and
codify the prohibition of all such submissions. Overwhelmingly, the
main concern from those opposed to the consideration of additional
information before initiation was that it would slow the process down.
In the alternative, some parties suggested that if Commerce
continues to accept comments and new factual information before
initiation, the date for such filings should not be due 10 days after
filing of a scope ruling application or circumvention inquiry request,
but instead after the administrative protective order (APO) is
established. They explained that this would give responsive submitting
parties more adequate time to review a scope ruling application or
circumvention inquiry request.
Commerce's Response:
Commerce has made no changes to the proposed Sec. Sec.
351.225(c)(3) and 351.226(c)(3) and will permit the submission of
arguments and information as provided in those regulatory provisions.
Since 2021, Commerce has conducted scope and circumvention inquiries in
which interested parties have indicated to Commerce that information in
a scope
[[Page 20774]]
ruling application or circumvention inquiry request was not accurate or
was missing key information, and it became evident that the regulations
did not adequately provide a means for such concerns to be raised and
considered in a timely fashion. These changes remedy that problem. We
believe allowing interested parties to file comments 10 days after the
filing of a scope application to address the adequacy of the
application, and file comments and new factual information 10 days
after the filing of a circumvention inquiry request to address the
adequacy of that inquiry request, is consistent with current practice,
is fair to all interested parties, and better informs Commerce so that
the agency does not initiate a scope inquiry or circumvention inquiry
on inaccurate or incomplete data. To the extent that the bill before
Congress proposed that Commerce should be prohibited from considering
information which would better inform the agency in determining to
initiate a segment, Commerce is in no way bound by that proposed
legislation and must prepare regulations which we believe best serve
the parties and the government.
To the extent that parties are concerned that this will slow down
the initiation process, it is the agency's belief that for scope ruling
applications, it should make no difference. If Commerce does not
initiate a scope inquiry or reject a scope application within 31 days,
it will be deemed initiated pursuant to Sec. 351.225(d)(1). For
circumvention inquiry requests, it is possible that the addition of new
factual information may delay initiation by a few days, as we explained
in the Proposed Rule and describe further below, but we believe that
greater amounts of information filed in a timely fashion will assist
the agency in making an informed and fair decision to initiate, or not
initiate, a circumvention inquiry.
Finally, we will continue to require the date for filing responsive
arguments, and in circumvention inquiries, new factual information, to
be 10 days from the filing of the application or request. The date of
issuance of the APO will differ from case to case, and one of the
purposes of these regulations is to standardize procedures and bring
predictability to scope and circumvention inquiries. We believe that 10
days from the date of submission on the record is adequate time for
interested parties to consider if there are reasons to be concerned
about the completeness or veracity of an application or circumvention
inquiry request, and if so, to raise those concerns with Commerce on
the record.
B. Commerce may request clarifications from a scope ruling
applicant or circumvention inquiry requestor, reset the initiation
deadline from the date of filing a complete response to the
clarification request, and extend the deadline for initiating a
circumvention inquiry by 30 days if an interested party has filed new
factual information in response to the circumvention inquiry request,
in the Sec. Sec. 351.225(d)(1) introductory text and (d)(1)(ii) and
(iii) and 351.226(d)(1) introductory text and (d)(1)(ii) and (iii).
Commerce explained in the Proposed Rule that one issue which has
arisen several times since the 2021 scope and circumvention regulations
were issued is that there have been proceedings in which Commerce
wished to seek clarification on one or more aspects of a submission,
but the regulation only permitted initiation or rejection of an
application.\36\ Frequently, Commerce may only seek answers, for
example, to less than a page of questions, and it is an inefficient use
of the agency's, scope applicants', and circumvention inquiry
requesters' time to reject a submission, and then have the requesters
resubmit everything with just the answers to those few questions added
to the application or request. Commerce, therefore, proposed a
modification to its scope and circumvention inquiry regulations to
reset the 30-day deadline to start after a party files a timely
response to a clarification request by Commerce.
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\36\ See Proposed Rule, 88 FR 29854.
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In addition, Commerce recognized that by allowing parties to submit
new factual information in response to a circumvention inquiry request
and allowing requesters to respond with new factual information on
surrebuttal, the additional data may require Commerce to extend beyond
the normal allowance of up to an additional 15 days if it is not
practicable for Commerce to initiate within 30 days. Accordingly,
Commerce proposed up to an additional 15-day extension in that
scenario, to allow a combined extension of no more than 30 days beyond
the original 30-day deadline if new factual information was submitted
on the record pre-initiation.\37\
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\37\ Id., 88 FR 29856.
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Commerce received several comments on these provisions. Most of the
commenters expressed a frustration that while the 2021 regulations had
created procedures in scope and circumvention inquiries that would lead
to 30-day initiations in scope inquiries, and no more than 45-day
initiations in circumvention inquiries, the addition of allowing
Commerce to seek clarification, and then resetting the 30-day clock
after a timely response to the clarification request, seemed to
undermine, or at least slow down, much of that expedient process. For
that reason, a few commenters objected to Commerce being able to seek
clarification, while others requested that Commerce limit its ability
to request clarification pre-initiation to a single request.
Likewise, several commenters objected to Commerce allowing for an
additional 15-day extension to initiate circumvention inquiries if new
factual information had been submitted on the record in response to a
scope application or circumvention inquiry request. They commented that
this would extend the period even further than the scope and
circumvention regulations anticipated when they were issued and would
be unnecessary and impractical. One commenter expressed concerns that
by extending the deadline from 30 days to 60 days, it was an open
invitation to exporters to ship additional circumventing merchandise to
the United States, to the detriment of domestic producers, because
those entries would not be covered by a subsequent circumvention
finding. They suggested that the best defense to prevent further
circumventing merchandise from being exported to the United States
would be to allow for no extensions and no additional information on
the record pre-initiation.
One commenter expressed disagreement with those commenters opposed
to allowing Commerce to seek clarification. That commenter stated that
it is a waste of time for Commerce and applicants or requestors to
refile because of a few small issues, which could have quickly been
resolved and provided to the agency upon request if given an
opportunity. That commenter explained that, in the past, foreign
exporters and importers took advantage of rejected circumvention
inquiry requests and shipped additional products to the United States
before domestic producers could refile their submissions with necessary
supplemental information (thereby allowing their merchandise shipped
pre-initiation from being covered by an affirmative circumvention
finding).
Another commenter suggested that if Commerce retains its ability to
seek clarification from scope ruling applicants or circumvention
inquiry requestors, Commerce should revise the regulation to allow
interested parties to submit comments on the adequacy of the responses
to Commerce's requests for clarification 10 days after they are
[[Page 20775]]
submitted or 10 days after an APO has been established, whichever is
latest.
Commerce's Response:
Commerce explained in the Proposed Rule that it is both fair and
more efficient to allow the agency to seek clarifications and reset the
10-day deadline rather than reject a scope ruling application or
circumvention inquiry request outright, when the agency just needs a
limited amount of clarifying information. It is evident that the
greatest concern from many commenters is that Commerce will use the
ability to seek comments as a de facto way to grant extensions and
delay scope and circumvention inquiries. That is not the purpose or
intention of that provision. If a scope ruling application is generally
incomplete and inadequate, Commerce will reject it. However, if
Commerce determines that it needs additional information to supplement
one or two sections of an application, for example, or it needs to
understand responses to a limited number of questions, Commerce should
be able to seek those answers without rejecting the scope application
or circumvention inquiry request. The purpose of these modifications to
the regulation is not to let the ``exception become the rule'' in this
regard--we agree that one of the purposes of the standardization and
the addition of express requirements in the scope and circumvention
regulations was to accelerate the process of initiating and conducting
scope and circumvention inquiries. The ability to seek clarification
should not be interpreted as a means for anyone to inhibit that
purpose.
Furthermore, the commenters that opposed allowing for an additional
15 days to consider whether or not to initiate a circumvention inquiry
expressed little understanding of the time and resources it takes for
an agency to consider record information and determine whether
initiation is warranted. We understand the desire of some commenters
for a speedy process, but as we explained above, we do not believe that
Commerce should ignore or prohibit facts and arguments in circumvention
cases that might undermine the accuracy or completeness of a
circumvention inquiry request. Commerce's determinations are based on
record information, and it is important that when the agency initiates
a scope or circumvention inquiry, it does so based on accurate and,
when possible, complete information.
We therefore continue to find that it is advisable for Commerce to
seek clarifications from applicants or requestors pre-initiation, when
necessary. Further, we find that allowing for an extra 15 days for the
agency to review and analyze new factual responsive information on the
record pre-initiation is not unreasonable.
Commerce does not, however, agree that the agency should allow
other parties to submit further, new factual information and arguments
on the record after a party files a timely submission in response to
Commerce's request for clarification, as suggested by some commenters.
If the facts are simple, then Commerce may be able to initiate quickly
after receiving the responses or reject the application or request
quickly as well. In other words, Commerce may not need, or want, 30
full days after the timely clarification response has been filed to
initiate a scope or circumvention inquiry. If Commerce was required to
allow parties to provide additional submissions after a clarification
has been requested and a response has been filed, we believe that there
would be too much of a possibility of unnecessary delay--the concern
expressed by most of the commenters on this issue. This would be true
whether the deadline is after the submission of the response or, as
some commenters suggested, after the APO has been established.
Therefore, we have not codified an additional layer of comments and
submission of new facts following the receipt of clarification
responses on the record, pre-initiation.
Finally, we note that on September 29, 2023, Commerce revised the
language of Sec. Sec. 351.225(d) and 351.226(d) with some small
changes.\38\ The new language does not conflict with this revised
addition to the regulation, and Commerce is merging the two sets of
textual revisions together in the final regulation.
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\38\ See APO and Service Final Rule, 88 FR 67077-78.
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C. Commerce agrees that the proposed provisions under Sec. Sec.
351.225(f), 351.226(f), and 351.227(d) should be revised to reflect
that only the filing and timing restrictions set forth in Sec.
351.301(c) do not apply to the filing deadlines set forth in the scope,
circumvention, and covered merchandise regulations.
In Sec. Sec. 351.225(a), 351.226(a), and 351.227(a), each
provision states that ``unless otherwise specified, the procedures as
described in subpart C of this part (Sec. Sec. 351.301 through 351.308
and 351.312 through 351.313) apply to this section.'' There were
outstanding questions as what procedures were ``otherwise specified''
in Commerce's 2021 regulations, and in the Proposed Rule, Commerce
proposed that Sec. Sec. 351.225(f), 351.226(f), and 351.227(d) be
amended to incorporate language that stated that none of the procedures
described in subpart C applied to the scope, circumvention and covered
merchandise filing deadlines and procedures.\39\
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\39\ See Proposed Rule, 88 FR 29854.
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Three commenters pointed out that the language proposed by Commerce
inadvertently covered too many regulatory provisions, because there was
no reason to believe that the timing and filing provisions of
Sec. Sec. 351.225, 351.226, and 351.227 intended to forgo, for
example, the formatting requirements of Sec. 351.303, or the rules
pertaining to treatment of, access to, and use of business proprietary
information under Sec. 351.306. Those commenters suggested that, in
fact, Commerce intended only to state that Sec. 351.301(c) does not
apply to those regulations, because that is the general regulatory
provision that sets forth filing and timing restrictions for
submissions of factual information in AD and CVD inquiries.
Commerce's Response:
We agree with the commenters who stated that Commerce intended only
for the filing and timing restrictions of Sec. 351.301(c) to be
inapplicable to the scope, circumvention, and covered merchandise
regulations. Accordingly, we have revised the proposed language in
Sec. Sec. 351.225(f) and 351.226(f) to state that ``The filing and
timing restrictions of Sec. 351.301(c) do not apply to this paragraph
(f), and factual information submitted inconsistent with the terms of
this paragraph may be rejected as unsolicited and untimely,'' and
revised the proposed language in Sec. 351.227(d) to state that ``the
filing and timing restrictions of Sec. 351.301(c) do not apply to this
paragraph (d), and factual information submitted inconsistent with the
terms of this paragraph may be rejected as unsolicited and untimely.''
With respect to Sec. 351.301(b), Commerce expects that the types of
factual information submitted under Sec. Sec. 351.225(f), 351.226(f),
and 351.227(d) will normally be covered by Sec. 351.102(b)(21)(i) and
(ii). Accordingly, the written explanation requirements of Sec.
351.301(b) will continue to apply to those regulations.
D. Commerce will continue to allow for extensions to preliminary
circumvention determinations up to 90 days in Sec. 351.226(e)(1).
Section 351.226(e)(1) states that a preliminary circumvention
determination will be issued no more than 150 days after the
publication of the notice of initiation and does not
[[Page 20776]]
expressly provide for the opportunity of an extension. Furthermore,
Sec. 351.226(l)(2)(ii) provides that if Commerce preliminarily
determines that merchandise was circumventing an AD or CVD order during
a given period of time, and the merchandise was not being suspended
pursuant to those orders, Commerce will normally direct CBP to suspend
liquidation of all entries of the merchandise entered on or after
initiation and collect cash deposits on those entries. The preamble to
the Scope and Circumvention Final Rule explains the reason for this
sequence. In summary, Commerce determined that in most cases, the
publication of the initiation of a circumvention inquiry in the Federal
Register would be sufficient notice for producers, exporters, and
importers that their non-subject merchandise might subsequently be
determined to be subject to an order through a circumvention
determination.\40\ Thus, rather than direct suspension starting at the
date of an affirmative preliminary determination, the regulation
provides that normally Commerce will direct suspension, and the
collection of cash deposits, to be applied retroactively to entries on
or after initiation--thereby preventing parties from quickly shipping
merchandise after initiation to the United States in avoidance of
potential future ADs or CVDs.
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\40\ See Scope and Circumvention Final Rule, 86 FR 52344-50.
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In the Proposed Rule, Commerce explained that given the complexity
of certain circumvention inquiries, it was reasonable to expressly
provide for an extension to the issuance of a preliminary circumvention
determination.\41\ Commerce determined that a 90-day extension, for a
deadline of no more than 240 days from the date of publication of the
notice of initiation, was a reasonable extension amount, and emphasized
that this would not alter the maximum deadline for issuing a final
circumvention determination of 365 days.\42\
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\41\ See Proposed Rule, 88 FR 29856.
\42\ Id., 88 FR 29856-57.
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Multiple commenters objected to Commerce's addition of an extension
allowance to Sec. 351.226(e)(1). They expressed concerns that because
no suspension and collection of cash deposits would commence for
entries not already suspended under the AD or CVD orders until a
preliminary determination was issued, that any extension of a
preliminary determination would provide circumventing parties with a
longer time in which they could benefit from duty-free entry and
possibly evade the payment of ADs or CVDs altogether. The commenters
suggested that Commerce's ability to extend a preliminary circumvention
determination was unnecessary and that allowing for an extension
largely undermined the remedy provided in the Scope and Circumvention
Final Rule in Sec. 351.226(l)(2)(ii), perpetuating ongoing harm to
domestic producers. In particular, some commenters expressed concerns
that extending a preliminary circumvention determination by three
months could, in fact, guarantee that many entries which entered
earlier in the period of the inquiry, and were the foundation of a
circumvention allegation, would be liquidated without regard to any ADs
or CVDs, defeating the very purpose of a circumvention inquiry and
determination.
In the alternative, some commenters suggested that if Commerce
continues to allow for an extension of a preliminary circumvention
determination, then it should limit such an extension to only 45 days,
rather than 90 days. Others proposed that Commerce should limit an
extension to 50 days, to allow for no more than 200 days before
issuance of a preliminary determination after publication of the
initiation Federal Register notice. Those commenters also suggested
that Commerce should consider revising its regulations under Sec.
351.226(l), and permit suspension of liquidation of entries in every
circumvention inquiry starting immediately at initiation, rather than
waiting for a preliminary affirmative circumvention determination,
thereby mitigating the significant risk of merchandise being liquidated
as entered before Commerce issues its preliminary determination.
Commerce's Response:
Since Commerce issued its Scope and Circumvention Final Rule in
2021, Commerce has found good cause to extend multiple preliminary
circumvention determinations pursuant to Sec. 351.302(b). This is
because circumvention inquiries can be extremely complicated. For
example, in analyzing if merchandise was assembled or completed in a
third country in circumvention of AD or CVD orders, Commerce must
consider the five factors which establish if there was circumvention,
the factors which inform Commerce if a process of assembly or
completion is minor or insignificant, an analysis of patterns of trade,
a determination of affiliations, and consideration of increases in
imports of particular merchandise into the foreign country.\43\ If
there are multiple parties involved, such analyses require that
Commerce request a large amount of information from the interested
parties, and then analyze all of that data on the administrative
record. It has been the agency's experience that in many circumvention
inquiries, 150 days is simply not enough time for Commerce to gather
sufficient information, conduct such an analysis, and make a
preliminary determination.
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\43\ See sections 781(b)(1), (2), and (3) of the Act.
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We appreciate that parties are concerned that extending a
preliminary determination could possibly allow more entries of
merchandise to be liquidated without regard to ADs or CVDs than if
Commerce issued its preliminary circumvention determination earlier.
However, the presumption behind that complaint is that Commerce would
be able to adequately gather all of the necessary information and
conduct the necessary analysis of all of the statutory and regulatory
criteria needed in a preliminary circumvention determination within 150
days in every circumvention inquiry. Given the complexity and number of
circumvention determinations, not to mention other AD and CVD
proceedings demanding resources and time from Enforcement and
Compliance teams, we stress that such a presumption is mistaken.
Our experience has shown that there will be some circumvention
inquiries which do not require more time, or at least not an additional
90 days, to complete a preliminary circumvention determination. For
example, a circumvention inquiry with a single producer or exporter
conducted pursuant to a minor alterations allegation under section
781(c) of the Act might not require Commerce gather as much information
or conduct such a lengthy analysis as, for example, a further assembly
or completed circumvention allegation under section 781(a) of the Act,
in a case involving multiple producers or exporters. It is a case-by-
case determination, but ultimately, Commerce needs the flexibility to
extend its preliminary circumvention determination when the strains on
the record and the agency's resources require such an extension.
Furthermore, we continue to believe that Commerce should not direct
CBP to suspend liquidation and collect cash deposits on non-subject
merchandise not already suspended until it has made an affirmative
circumvention determination, as reflected in Sec. 351.226(l)(2)(ii),
for all of the reasons
[[Page 20777]]
provided in the Scope and Circumvention Final Rule. Therefore, we have
made no changes to Sec. 351.226(l).
In addition, although we appreciate why some commenters have
suggested that Commerce reduce the 90-day extension allowance to 45 or
50 days, we continue to believe that a 90-day allowance remains
appropriate. Just because the 90-day allowance exists in the regulation
does not mean that Commerce will always extend up to the full 90 days.
Furthermore, regardless of the length of the extension, Sec.
351.226(e)(2) still requires Commerce to issue its final circumvention
determination no later than 365 days from the date Commerce published
the initiation notice in the Federal Register.
Finally, we must emphasize that even if some additional entries
might be liquidated without regard to ADs or CVDs if Commerce extends a
preliminary circumvention determination, that extension will not
``undermine'' the circumvention law or defeat the very purpose of a
circumvention inquiry and determination, as some commenters alleged.
Commerce will continue to direct CBP to continue to suspend entries
which are already suspended at initiation under Sec. 351.226(l)(1).
Further, Commerce will continue to direct CBP to suspend entries of,
and collect cash deposits on, merchandise covered by an affirmative
circumvention determination retroactively to the date of initiation, in
accordance with Sec. 351.226(l)(2)(ii). That means that even if the
period in which Commerce made its preliminary determination was
extended, the effect of that decision will only reach further back to
cover more entries that have not yet been liquidated. Accordingly, most
of the remedy available without the extension provision in Sec.
351.226(e)(1) will remain in place with the addition of the extension
provision to Sec. 351.226(e)(1), and the benefit will be that Commerce
will be able to conduct its inquiry, complete its preliminary analysis,
and enter a preliminary circumvention determination consistent with its
statutory and regulatory obligations.
E. Commerce will continue to codify its practice that it will only
conduct a scope ruling of merchandise not yet imported if it has been
historically commercially produced and sold in Sec. 351.225(c)(1) and
(c)(2)(x).
Commerce explained in the Proposed Rule that although it will
conduct scope inquiries of merchandise not yet imported into the United
States, under its practice, it will only do so if that merchandise has
been commercially produced and sold.\44\ Commerce proposed to codify
that practice in Sec. 351.225(c)(1) and (c)(2)(x).
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\44\ See Proposed Rule, 88 FR 29853.
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Some commenters were critical of Commerce's practice and the
codification of that practice in the regulations. They expressed
concerns that the ``heightened standard'' would place an unreasonable
burden on applicants. They suggested that Commerce should clarify that
scope ruling applicants need only be required to provide evidence
available to them, and not be required in every case to prove that a
product has been commercially produced and sold because sometimes scope
applicants may not have access to such information. They pointed out
that the initial language of Sec. 351.225(c)(2) actually provides that
all of the information required in the application is based on language
that states, ``to the extent reasonably available to the applicant.''
\45\ Their concern was that that language proposed for Sec.
351.225(c)(1) states that the applicant ``must provide evidence that
the product has been commercially produced and sold,'' with no
``reasonably available'' language attached to it.\46\
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\45\ See Sec. 351.225(c)(2).
\46\ See Proposed Rule, 88 FR 29871.
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Commerce's Response:
It is Commerce's practice to require evidence that merchandise
which has not yet been imported into the United States was commercially
produced and sold in other foreign markets before Commerce will
initiate a scope inquiry on that merchandise. We have therefore not
changed the language in Sec. 351.225(c)(1) as proposed in the Proposed
Rule. As some of the commenters pointed out, there are many areas in
our law in which Commerce will consider allegations and complaints
based on information which is reasonably available to the party making
the allegation or claim. In this case, however, Commerce is extending a
service to review merchandise which has not yet even entered the United
States stream of trade. In providing such a service, it is therefore
critical that Commerce not expend its time and resources on sample
sales, prototypes, or mere models of merchandise not yet commercially
produced. It is also critical that Commerce not expend its time or
resources on merchandise which has never been commercially sold and
might never be commercially sold in the United States in the future.
Accordingly, the requirement that applicants provide evidence of both
of these factors is reasonable and Commerce will not revise its
practice or the proposed evidentiary standard in this final rule.
With respect to the language set forth in proposed Sec.
351.225(c)(2)(x), although it falls under the introductory language of
paragraph (c)(2), like all of the other elements requesting information
from scope ruling applicants, we wish to be clear that if an applicant
is unable to provide (1) a statement that the product has been
commercially produced, (2) a description of the countries in which the
product is sold, or has been sold, and (3) relevant documentation which
reflects the details surrounding the production and sale of that
product in countries other than the United States, then Commerce will
not conduct a scope inquiry of that merchandise. We have made one minor
change, however, from the Proposed Rule to Sec. 351.225(c)(2)(x)(B),
that allows evidence of countries in which merchandise is either
currently being sold, or evidence of countries in which the merchandise
``has been sold'' in the past. Although the contemporaneity of such
sales would be important, there is no requirement under Commerce's
practice that the sales must be currently made in other countries.
F. Commerce has modified its scope clarification regulation, Sec.
351.225(q), in response to the comments received.
Section 351.225(q) was added to the regulations in the Scope and
Circumvention Final Rule and Commerce explained in the Proposed Rule
that it was intended to codify Commerce's historical usage of such
clarifications to address scope-related issues not addressed by scope
rulings.\47\ The current regulation provides an example in which, after
Commerce has previously issued repeated interpretations of particular
language in a scope, Commerce issues a scope clarification that takes
the form of an interpretive footnote to the scope when the scope is
published or set forth in instructions to CBP. However, Commerce
explained in the Proposed Rule that this was not the only situation in
which Commerce issues a scope clarification post-order, and it
determined that the regulation would benefit by setting forth other
instances in the regulation in which a scope clarification would be
appropriate. Further, Commerce provided examples in which a scope
clarification could take different forms (e.g., Federal Register
notices, memoranda in the context of an
[[Page 20778]]
ongoing segment, and the aforementioned interpretive footnote).\48\
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\47\ Id., 88 FR 29855-56.
\48\ Id.
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Commerce received a few comments on the proposed changes to Sec.
351.225(q), primarily concerned with the breadth and reach of the
language of the provision. Commenters expressed concerns that Commerce
was trying to avoid the disciplines of the scope ruling regulation
requirements through the scope clarification provision. Commenters
worried that the provision was trying to avoid notice and comment, due
process protections, and essentially issue scope rulings without a
fulsome analysis. Some commented that the current language was
sufficient, while others questioned even the current (i.e., unmodified)
language of the provision, challenging the clause in Sec. 351.225(q)
which states that scope clarifications can be used to clarify ``whether
a product is covered or excluded by the scope of an order at issue
based on previous scope determinations covering the same or similar
products'' \49\ and asking how that analysis differs from the analysis
conducted under Sec. 351.225(k)(1)(i)(C).
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\49\ See Sec. 351.225(q).
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Some commenters suggested that all scope clarifications should be
published in the Federal Register, or that, at minimum, Commerce should
include all scope clarifications in the quarterly notice of scope
rulings published in the Federal Register in accordance with Sec.
351.225(o). They also objected to the fact that it is Commerce's
practice to issue scope clarifications in the context of ongoing
segments, instead of conducting a separate segment, like a scope
ruling, and allowing parties outside of the segment to comment on a
clarification. They stated that scope clarifications, by their nature,
are not company-specific and could affect the trading community
broadly.
Other commenters requested that Commerce explain in greater detail
its authority to interpret a scope through a scope clarification, and
one commenter protested Commerce's reference to the four scenarios set
forth in the proposed regulation as just examples, and its statement in
the Proposed Rule preamble that ``these examples are not exhaustive.''
\50\ That commenter expressed concerns that such broad language
provided uncertainty to the parties and, again, suggested that Commerce
was trying to evade the disciplines of a scope ruling analysis under
Sec. 351.225(k) through scope clarifications.
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\50\ See Proposed Rule, 88 FR 29856.
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Commerce's Response:
Commerce has considered the comments raised by the commenters and
concluded that the language of Sec. 351.225(q) should be narrowed and
revised to better reflect the purpose and form of a scope
clarification.
To begin, Commerce has the statutory and regulatory authority as
the administrator of the trade remedy laws to clarify the scope of an
order when the need arises. Commerce has a long history of issuing
clarifications in its proceedings, and there is no question that such
clarifications assist in the administration of the AD and CVD laws.
However, a scope clarification is not equivalent to a scope ruling or
scope determination, and Commerce never intended for the regulation to
equivocate the two through the codification of the original Sec.
351.225(q) or the proposed revision in the Proposed Rule. The
commenters have pointed to concerns with both the original and modified
language, and we understand those concerns. Thus, we have revised the
provision in response to those concerns.
First, in the introductory language to Sec. 351.225(q), Commerce
explains that a scope clarification may be issued in any segment of a
proceeding that provides an interpretation of specific language in the
scope of an order and addresses other scope-related issues, but makes
clear that a scope clarification may not analyze or determine whether a
product is covered by the scope of an order in the first instance,
outside of the situations explicitly listed in the regulation. The
purpose of a scope ruling, unlike a scope clarification, is to
determine if a specific physical product, in the first instance, is
covered or not covered by an AD or CVD order.
Next, rather than provide ``examples'' that were non-exhaustive, as
was set forth in the Proposed Rule, the new Sec. 351.225(q)(1)
provides four specific situations in which a scope clarification may be
applied. First, it may be used to determine if a product is covered or
excluded by the scope of an order if Commerce has previously issued at
least two scope determinations or rulings covering the same products
with the same physical characteristics. This is the example which is
set forth in the existing regulation. Such a situation arises, for
example, when one exporter exports a product with certain physical
characteristics, and Commerce issues a scope ruling on that product.
Then, another exporter exports a product with the same physical
characteristics, and Commerce issues a scope ruling on that product as
well. Then a third exporter exports a product, again, with the same
physical characteristics, and Commerce determines that rather than
repeat the same analysis through multiple scope rulings, a scope
clarification is the appropriate means of communicating its
determination in general going forward for that particular product with
specific physical characteristics.
In response to those commenters who requested that Commerce explain
the difference between this language and the analysis set forth in
Sec. 351.225(k)(1)(i)(C), in Commerce's analysis under Sec.
351.225(k), Commerce is considering whether a product is covered, or
not covered, by an AD or CVD order in the first instance, and is
looking to Commerce's earlier scope rulings and determinations covering
physically same or similar products under the order at issue, as well
as orders with same or similar scope language, for guidance. In the
example above, Commerce would likely consider the sources listed in
Sec. 351.225(k)(1)(i)(C) as part of its analysis of the products
exported by the first and second scope ruling applicants to determine
if both products are covered, or not covered, by the scope of an AD or
CVD order. It is only once Commerce continues to receive repeated
requests for scope rulings on the same physical product that Commerce
might determine, instead, to issue a general scope clarification
covering products with the same physical characteristics.
The second situation set forth in the regulation pertains to
section 771(20)(B) of the Act, for merchandise imported by, or for the
use of, the Department of Defense, in which coverage by the scope of an
AD or CVD order is not at issue. Under that provision, the issue is not
if the product is covered by an order, but if the merchandise is able
to avoid the payment of duties pursuant to the limited governmental
importation exception set forth in the statutory provision. The purpose
of a scope ruling is to determine if a product is covered by the scope
of an order, not if subject merchandise should be excluded from
coverage pursuant to a statutory exception to the trade remedy laws. In
that situation, a scope clarification is an appropriate means of
addressing the issue.
The third situation relates to language or descriptors in the scope
of an order that has been subsequently updated, revised, or replaced
under certain circumstances. The regulation explains that those
circumstances involve modifications to the language in the scope of an
order pursuant to litigation or a changed circumstances review under
section 751(b) of the Act, changes to HTSUS clarifications, as
administered by the ITC, and changes to
[[Page 20779]]
industrial standards set forth in a scope, as determined by the
industry source for those standards identified in the scope. Such
changes have the potential to lead to confusion and, therefore, in
those circumstances a scope clarification might be beneficial. For
example, sometimes, products covered by a particular HTSUS
classification set forth in an AD or CVD order following an
investigation may not be subsequently covered by that same HTSUS
classification when it is revised in the future. In that case, Commerce
might issue a scope clarification in an ongoing segment of a
proceeding, explaining that the HTSUS classifications are provided for
illustrative reasons, but are not binding on the merchandise covered by
a scope. Accordingly, if the product was covered at the time the AD or
CVD order was issued, Commerce could explain through a scope
clarification that the subsequent change in that classification would
not change the coverage status of merchandise under the AD or CVD
order.
Finally, the fourth situation pertains to the need for
clarification of an analysis conducted by Commerce in a previous scope
determination or scope ruling. The regulation provides an example where
Commerce previously determined in a country-of-origin determination,
pursuant to Sec. 351.225(j)(2), that the country-of-origin was
established at a certain stage of production where the agency
determined that the essential component of the product was produced or
where the essential characteristics of the product were imported. If
Commerce observes that a company in a segment of the proceeding has
divided that stage of production between two or more countries,
Commerce may need to clarify its previous country-of-origin analysis to
explain in which part of the stage of production was the essential
component produced or the essential characteristics imparted. Such an
analysis might not require a new scope ruling but could instead be
addressed through a scope clarification.
In response to those commenters suggesting that scope
clarifications should never be conducted in segments of proceedings,
and should always be published in the Federal Register, or at least be
published in the quarterly notice of scope rulings under Sec.
351.225(o), we disagree that publication in the Federal Register is
usually necessary. Historically, Commerce has addressed scope
clarifications in individual segments because the nature of a scope
clarification is such that it is targeted only to a limited issue
before the agency, like many other calculation and methodological
issues which Commerce normally faces in its investigations and
administrative reviews on a case-by-case basis. However, we recognize
that there may be situations in which a scope clarification may be less
specific to the case at hand and may have outsized effects on those
subject to an AD or CVD order in general. In that situation, Commerce
believes the agency would benefit from the broader participation of the
``trading community,'' as noted by one of the commenters. Accordingly,
removing the ``examples'' language from the proposed regulation,
Commerce has modified Sec. 351.225(q)(2) to provide that scope
clarifications may take the form of an interpretive footnote to the
scope when the scope is published or issued in its instructions to CBP,
in a memorandum issued in an ongoing segment of a proceeding, or, at
the discretion of the Secretary, in a Federal Register document. The
regulation provides that when the scope clarification is conducted as a
standalone segment, Commerce will publish a preliminary notice of scope
clarification in the Federal Register, provide parties with at least 30
days to file comments with the Secretary, and then address comments
received in a final notice of scope clarification published in the
Federal Register. To be clear, Commerce does not believe that the
publication of a scope clarification in the Federal Register will be
necessary for most scope clarifications, but Commerce does agree that
it should be an option available for Commerce in certain circumstances.
G. Commerce has made minor edits to Sec. Sec. 351.225(m)(2),
351.226(m)(2), and 351.227(m)(2) to clarify certain terms in those
provisions.
In reviewing the proposed revisions to the scope, circumvention,
and covered merchandise regulations, Commerce became aware that
language proposed for Sec. Sec. 351.225(m)(2), 351.226(m)(2), and
351.227(m)(2) stated that the Secretary would include on the record of
the CVD proceeding a copy of the ``final determination'' and a
``preliminary determination.'' \51\ We have concluded that such
language is not sufficiently clear. Therefore, in the final
regulations, we are revising that sentence in Sec. 351.225(m)(2) to
state that once the Secretary issues a final scope ruling on the record
of the AD proceeding, the Secretary will include a copy of the final
scope ruling memoranda, a copy of the preliminary scope ruling
memoranda if one had been issued, and ``all relevant instructions to
U.S. Customs and Border Protection.'' The language for Sec.
351.227(m)(2) will align with the circumvention language, but will
instead apply to a covered merchandise proceeding. We determine that
this change will provide added clarity on the information which will be
placed on the record of the CVD proceeding following a scope,
circumvention or covered merchandise determination issued on the record
of the companion AD proceeding.
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\51\ See Proposed Rule, 88 FR 29872, 29873.
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H. Commerce made no changes in responses to other scope and
circumvention issues raised in the comments on the Proposed Rule.
One commenter criticized Commerce's existing regulations that
require that scope, circumvention, and covered merchandise proceedings
in companion orders should be conducted on the record of the AD
proceeding. That commenter also suggested that Commerce should place
preliminary scope, circumvention, and covered merchandise rulings/
determinations on the record at the same time that those preliminary
determinations are placed on the AD record. Furthermore, that commenter
expressed frustration that although parties with an APO in previous AD
segments could move information from one AD segment to another under
the revised Sec. 351.306(b)(3), those who were not covered by an APO
in those segments could not.
Another commenter expressed concerns with the language of the
current standard APO, stating that it does not reflect the cross-
proceeding sharing provisions of Sec. 351.306(b)(3) and (4). They
offered suggestions for language to revise the standard APO once these
regulations become final.
Commerce's Response:
Commerce will continue to conduct scope, circumvention, and covered
merchandise segments covering companion orders on the record of the AD
segment. We will not place information on the CVD record following the
notification to interested parties that all subsequent filings should
be filed on the AD segment of the proceeding, as explained in
Sec. Sec. 351.225(m)(2), 351.226(m)(2), and 351.227(m)(2), until final
scope rulings and circumvention and covered merchandise determinations
are issued. With respect to the APO, Commerce intends to modify its
standard language to incorporate the changes to the regulation, but
those changes will not be reflected in the regulation and the APO will
not be revised until the effective date of the final rule.
4. Commerce has made certain revisions to the proposed amendments
[[Page 20780]]
to Notices of Subsequent Authority--Sec. 351.301(c)(6).
As Commerce explained in the Proposed Rule, sometimes while an
administrative segment is ongoing, a Federal court may issue a holding,
or Commerce may issue an administrative decision, in another case which
an interested party believes is directly applicable to an issue
currently before the agency.\52\ When that occurs, the interested party
may file on the record a Notice of Subsequent Authority. The uniqueness
of a Notice of Subsequent Authority is that the subsequent authority
may occur at any time, including after the time for new factual
information under Sec. 351.301(c) has passed, after briefs and
rebuttal briefs have been filed consistent with Sec. 351.309(c) and
(d), and possibly right up until Commerce issues a final determination
or final results in a segment of an AD or CVD proceeding.
---------------------------------------------------------------------------
\52\ Id., 88 FR 29857.
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Currently, Commerce has no regulation guiding the filing of, or
receipt and use of, a Notice of Subsequent Authority, nor is there any
regulation allowing other interested parties to comment on such a
Notice. Further, there is no regulation which addresses the filing of a
Notice of Subsequent Authority in light of the administrative
procedures and deadlines which Commerce faces in the last few weeks of
a segment (e.g., meeting internally to get official clearances for the
agency's decisions and positions, drafting and finalizing positions,
completing calculations when necessary, and preparing documents for
publication in the Federal Register and for release to the parties
under the APO). Accordingly, under statutory deadlines, it might simply
be untenable for Commerce to consider a Notice of Subsequent Authority
in the days immediately preceding a final determination or final
results. Commerce, therefore, determined in the Proposed Rule that it
would be beneficial to issue a regulation which addressed the
procedures and deadlines for the filing of a Notice of Subsequent
Authority and a response to such a notice.\53\ It therefore proposed a
new regulatory provision, Sec. 351.301(c)(6), which stated that
Commerce would ``only be required to consider and address'' a Notice of
Subsequent Authority if it was filed 30 days or more before a final
determination or results deadline and a response to that Notice if it
was filed 25 days or more before that final determination or results
deadline.\54\ Furthermore, the proposed regulation set forth the
content requirements of such a Notice and responsive comments in Sec.
351.301(c)(6)(iii).
---------------------------------------------------------------------------
\53\ Id.
\54\ Id., 88 FR 29873.
---------------------------------------------------------------------------
Some commenters generally accepted Commerce's proposal, while four
commenters expressed concerns. Two commented that Commerce already had
sufficient discretion to consider and address Notice of Subsequent
Authority whenever and however it wished, and voiced concerns that
parties would abuse what they consider ``subsequent authority'' under
this provision. Another expressed concerns that not only did Commerce
have such discretion, but if Commerce was unable to consider arguments
before its final determination or results, then the party would have
the opportunity to appeal the decision and Commerce could address the
alleged authority in a remand redetermination. That party also stated
that Commerce's restriction of filing dates of 30 days and 25 days
might be unlawful, because when a precedential court or agency decision
is issued, Commerce is required by law to consider it and follow it,
regardless of whether the decision is issued one day or one month
before a final determination or decision. That commenter emphasized
that constraining parties to file by 30 days and 25 days would not
relieve Commerce of its legal obligation to follow binding precedent.
The three commenters therefore suggested that Commerce should not
implement the proposed Notice of Subsequent Authority provisions, or at
least not implement the timing restrictions, in the proposal.
The fourth commenter expressed concerns that the 30-day and 25-day
deadlines would lead to unnecessary litigation when subsequent
authorities, of which Commerce was aware, arose and Commerce
nonetheless issued final determinations or results inconsistent with
binding authorities. That commenter suggested that the regulation
should allow Commerce to consider extensions in certain circumstances,
or at least move the deadlines closer to the final determination or
results deadlines by 15 days.
Commerce's Response:
After consideration of the comments, we agree that the timing
language as proposed in Sec. 351.301(c)(6)(ii) was too restrictive
given Commerce's legal obligation to consider subsequent authorities
when possible. Accordingly, we have removed the language of Sec.
351.301(c)(6)(ii) which stated that Commerce would ``only be required
to consider and address'' Notices of Subsequent Authority and rebuttal
comments submitted within the 30-day and 25-day deadlines. Instead, the
revised language states only that Commerce ``will consider and
address'' Notices of Subsequent Authority and rebuttal comments filed
within those deadlines.
On the other hand, we also believe that interested parties should
file Notices of Subsequent Authority only when the authorities are
immediate and ``subsequent'' to agency actions. Commerce has timing
requirements in each of its segments for parties to make the agency
aware of relevant court and agency decisions as the segment progresses.
If a party is aware of the existence of an alleged binding authority
but does not alert Commerce of that alleged authority until 30 days
before the deadline for issuing the final determination or results, we
believe that such an action would be inconsistent with our normal
deadlines and an abuse of this provision. Accordingly, we have added a
second timing requirement to the regulation that Notice of Subsequent
Authority may only be filed within 30 days after the alleged subsequent
authority was issued.
In addition, a new sentence was added to the regulation which
states that given statutory deadlines, ``the Secretary may be unable to
consider and address the arguments and applicability of alleged
subsequent authorities adequately in a final determination or final
results if a Notice of Subsequent Authority or rebuttal submission is
submitted later in the segment of the proceeding.'' Finally, we edited
references to final results ``of administrative review'' to make it
just final results in general because a Notice of Subsequent Authority
may be filed in other administrative segments, such as circumvention
inquiry proceedings under section 781 of the Act and Sec. 351.226 or a
scope ruling proceeding under Sec. 351.225.
We appreciate the concerns expressed by the commenters that if a
court holding, for example, is binding on Commerce and arises
immediately before the issuance of a final determination or results,
Commerce may be lawfully bound by that holding despite the fact that
Commerce may also be administratively unable to consider and address
that holding before the agency decision is issued by a statutory
deadline. As one of the commenters stated, in that case, the only
option may be for parties to litigate the issue and have Commerce
address the subsequent authority in a remand redetermination.
[[Page 20781]]
Still, though, it is possible in some cases that Commerce may be able
to consider and address subsequent authorities and arguments in less
than 30 or 25 days before the deadline for a final determination or
final results, but Commerce's ability or inability to consider and
address subsequent authority in a truncated period of time would be
highly case-specific and cannot be guaranteed by the regulation.
Section 351.301(c)(6)(ii) primarily is intended to inform the
public that if Notices of Subsequent Authority are filed 30 days or
more before the deadline of a final determination or results, and a
response is filed 25 days or more before the deadline for a final
determination or results, Commerce will be able to consider and address
the alleged authority and arguments for and against its application to
the segment of the proceeding. Accordingly, if the alleged authority
was issued before those deadlines, interested parties must file their
Notice of Subsequent Authority by the 30-day deadline. If interested
parties wait to submit notice of the alleged authority after those
deadlines, or if the alleged authority was issued after those
deadlines, then Commerce's ability to consider and address the alleged
authority will be entirely dependent on the agency's administrative
resources and existing time constraints before the agency issues its
final determination or results.
5. Commerce has made certain revisions to the CVD AFA hierarchies
in--Sec. 351.308(j).
In 2015, in the Trade Preferences Extension Act (TPEA), Congress
added section 776(d) to the Act, which addresses Commerce's application
of AFA under sections 776(a) and 776(b). The provision discusses
Commerce's ability to select the highest CVD rate or highest dumping
margin in certain circumstances, provides that there are no obligations
to make certain estimates or address certain claims, and gives guidance
for Commerce in otherwise selecting a CVD rate or dumping margin from
the facts otherwise available.\55\ With respect to CVD proceedings, in
particular, section 776(d) of the Act states that Commerce may ``(i)
use a countervailable subsidy rate applied for the same or similar
program in a countervailing duty proceeding involving the same country;
or (ii) if there is no same or similar program, use a countervailable
subsidy rate for a subsidy program from a proceeding that the
administering authority considers reasonable to use.'' \56\ That
language implements, in general, Commerce's longstanding use of CVD AFA
hierarchies, and Commerce stated in the Proposed Rule that it was
codifying those hierarchies, in full, by adding a new paragraph to
Sec. 351.308.\57\
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\55\ See TPEA of 2015, Public Law 114-27, 129 Stat. 362, 384
(2015), sec. 502, codified at 19 U.S.C. 1677e(b)(1).
\56\ See sections 776(d)(1)(A)(i) and (ii) of the Act.
\57\ See Proposed Rule, 88 FR 29858.
---------------------------------------------------------------------------
As a preliminary matter, although Commerce proposed that the CVD
AFA hierarchies be codified as Sec. 351.308(g) in the Proposed Rule,
we have subsequently concluded that other provisions found in section
776(d) of the Act, and parts of Commerce's AFA practice in general,
should be codified in Sec. 351.308 and should logically precede the
CVD AFA hierarchies in the regulation. Accordingly, we have moved the
CVD AFA hierarchies to Sec. 351.308(j) in this final rule, and have
reserved Sec. 351.308(g), (h), and (i) for future rulemaking.\58\
---------------------------------------------------------------------------
\58\ To prevent confusion, to the extent parties made arguments
about proposed Sec. 351.308(g) in their comments, we have referred
to those comments below as referencing Sec. 351.308(j).
---------------------------------------------------------------------------
In the CVD hierarchy regulation, Commerce provides for one
hierarchy for investigations in Sec. 351.308(j)(1) and a second
hierarchy for administrative reviews in Sec. 351.308(j)(2). In
addition, the regulation provides guidance on the application of the
CVD hierarchy in both types of segments in Sec. 351.308(j)(3),
providing that Commerce will treat rates less than 0.5 percent as a de
minimis rate, will normally determine a program to be a similar or
comparable program based on Commerce's treatment of the program's
benefit, and will normally select the highest program rate available in
accordance with the hierarchical sequence, unless Commerce determines
that the highest rate is otherwise inappropriate. In addition, in
accordance with section 776(c)(1) of the Act, which requires certain
facts available derived from secondary information to be corroborated,
Sec. 351.308(j)(3)(iv) states that when Commerce determines a CVD AFA
rate from secondary information using the hierarchy, it will determine
those facts available to be corroborated.
Commerce received several comments on the AFA CVD hierarchies.
Generally, the comments were supportive, though most of those
commenters expressing support for the provision opposed Commerce's
proposed use of an ``above-zero'' threshold in the first step of the
AFA hierarchy governing investigations, and instead suggested that the
regulation should include an ``above-de minimis'' threshold. While
these commenters recognized that the intention of the proposed rule was
to codify existing Commerce practice, they also commented that the
``above-de minimis'' threshold in no way conflicted with the statutory
language and, in fact, would better reflect the purpose and goals of
the AFA CVD hierarchy. Those commenters focused primarily on concerns
that parties could obtain a more favorable result by failing to
cooperate than if they had cooperated fully by gaming the ``above-
zero'' threshold, undermining Commerce's statutory directive to
discourage non-compliance. Further, some commenters also expressed
concerns that even though section 776(d)(3) of the Act was added by
Congress in the TPEA and explicitly states that in selecting an AFA
rate Commerce is not required to estimate what a CVD rate would have
been if the respondent had cooperated, or demonstrate that an AFA rate
reflects a respondent's ``alleged commercial reality,'' the ``above-
zero'' threshold implicitly considers both.
In addition, multiple commenters suggested revisions to the
proposed regulation as it relates to instances when Commerce may
determine that a rate selected from a hierarchy is inappropriate.
Section 351.308(j)(3)(iii) states that ``{the{time} Secretary will
normally select the highest program rate available in accordance with
the hierarchical sequence, unless the Secretary determines that such a
rate is otherwise inappropriate.'' One commenter noted that deviation
from the hierarchy may be necessary to ensure the statutory purpose of
AFA is achieved and stated that the placement of Sec.
351.308(j)(3)(iii) at the end of the regulatory provision made this
purpose seem like an afterthought. This commenter suggested moving a
portion of this paragraph to the introductory section of paragraph (j),
and subsequently deleting Sec. 351.308(j)(3)(iii).
Other commenters requested that Commerce elaborate on specific
instances in which Commerce may deviate from an AFA hierarchy or
otherwise deem a rate selected via a hierarchy to be inappropriate.
These suggestions included, inter alia, requests that: Commerce clarify
that the use of the word ``normally'' permits deviation from the
hierarchy when it fails to effectuate the purpose of the AFA statute;
an explicit statement that Commerce will not apply the hierarchy to
generate a de minimis CVD rate for uncooperative respondents; and
modifications to paragraph (j)(3)(iii) of Sec. 351.308 to specifically
note that Commerce may deviate from a hierarchy if the rate ``fails to
ensure that the party
[[Page 20782]]
does not obtain a more favorable result by failing to cooperate than if
it had cooperated fully, or is not sufficiently adverse so as to deter
future noncompliance.''
In addition, one commenter requested that Commerce clarify that it
will not apply lower AFA rates in response to the same types of
uncooperative responses regarding the same program from one segment of
a proceeding to another, while another commenter suggested that
Commerce must calculate ``a reasonably accurate estimate of the
respondent's actual rate'' and, therefore, should edit paragraphs
(j)(1)(iii) and (j)(2)(ii) and (iii) of Sec. 351.308 to read that
Commerce will ``apply the highest calculated above-de minimis rate for
the most similar or comparable program.''
Finally, another commenter expressed broad disagreement with the
proposed regulation, claiming that the application of an adverse
inference in CVD rate calculations is not permitted by the WTO and
inconsistent with the ``spirit'' of the CIT's understanding of the use
of AFA in general. This commenter referenced certain Panel and
Appellate Body decisions in support of its statement that the 1994 WTO
Agreement on Subsidies and Countervailing Measures (SCM Agreement) does
not allow the imposition of ``punitive'' measures and that the purpose
of Article 12.7 of the SCM Agreement is not to ``punish non-cooperating
parties.'' Further, that same commenter stated that Commerce's use of
AFA ``contradicts the legal principles'' expressed by the CIT,
referencing challenges to AD proceedings and CVD proceedings which did
not involve Commerce's application of the CVD AFA hierarchies.
Commerce's Response:
After consideration of the comments, we have determined to make one
change to the proposed regulation covering the AFA hierarchies. We are
replacing ``above-zero'' with ``above-de minimis'' in Sec.
351.308(j)(1)(i). While Commerce seeks to balance the dual goals of
relevancy and inducement in its application of AFA, it must do so while
properly effectuating the statutory goal of compliance and ensuring
that parties do not obtain a more favorable result by failing to
cooperate than if they had cooperated fully. We believe replacing the
``above-zero'' requirement with an ``above-de minimis'' threshold in
paragraph (g)(1)(i) of Sec. 351.308 better accomplishes this
objective, for the reasons stated by the commenters. For example, as
the commenters pointed out, there could be situations in which parties
obtain a more favorable result by failing to cooperate than if they had
cooperated fully through an abuse of the ``above-zero'' threshold. Such
an outcome would be unacceptable. We do not believe the same situation
would arise with the use of an ``above-de minimis'' threshold.
Accordingly, we have adopted the suggested revised standard in this
final rule.
On the other hand, we disagree with the one commenter's proposal to
move the ``normally select'' and ``unless the Secretary determines that
such a rate is otherwise inappropriate'' language in Sec.
351.308(j)(3)(iii) to elsewhere in the regulation. Section
351.308(j)(3) contains several generally-applicable rules and
principles for when Commerce is utilizing the AFA hierarchies, and we
believe a general principle that Commerce will select the highest
program rate available in accordance with the hierarchical sequence,
unless otherwise deemed inappropriate, is properly placed in this
section, whereas moving this statement to the introductory section
would not provide additional clarity. Moreover, we disagree that the
placement of paragraph (j)(3)(iii) in Sec. 351.308 does not indicate
that this provision is more or less important than any other in the
regulation.
Regarding the requests that we elaborate on specific instances in
which Commerce may deviate from an AFA hierarchy or otherwise deem a
rate selected via a hierarchy to be inappropriate in the regulation, we
have not elected to make such explicit declarations in this final rule,
as we believe that codifying such scenarios would unnecessarily inhibit
Commerce's flexibility to address situations on a case-by-case basis.
The introductory language of paragraph (j) of Sec. 351.308 states that
``the Secretary will normally select the highest program rate available
using a hierarchical analysis as follows . . .'' and further provides
in paragraph (j)(3)(iii) that ``{the{time} Secretary will normally
select the highest program rate available in accordance with the
hierarchical sequence, unless the Secretary determines that such a rate
is otherwise inappropriate'' (emphasis added). We believe this language
provides Commerce with sufficient flexibility to codify its long-
standing practice, but still allows Commerce to apply an alternative
AFA remedy in exceptional situations. It is Commerce's long-standing
practice that it will normally utilize the applicable hierarchy (either
for investigations or administrative reviews) when selecting a program
rate as AFA. However, we recognize that there may be certain instances
where Commerce must deviate from this default approach when the facts
of a given case or of a particular type of subsidy program across
several cases necessitate such deviation. For example, in certain CVD
investigations, we have determined that rather than apply an AFA CVD
hierarchy to certain non-responsive companies for particular income tax
programs, the facts on the record warranted an adverse finding that
those non-cooperative companies paid no income tax during the relevant
period.\59\ Pursuant to such a finding, we therefore determined to
apply the corporate income tax rate as the highest possible benefit
that could be applied for such programs.\60\
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\59\ See, e.g., Countervailing Duty Investigation of Certain
Hardwood Plywood Products from the People's Republic of China: Final
Affirmative Determination, and Final Affirmative Critical
Circumstances Determination, in Part, 82 FR 53473 (November 16,
2017), and accompanying Issues and Decision Memorandum (IDM) at 8
(citing Aluminum Extrusions from the People's Republic of China:
Final Affirmative Countervailing Duty Determination, 76 FR 18521
(April 4, 2011), and accompanying IDM at the section, ``Application
of Adverse Inferences: Non-Cooperative Companies) (explaining that
Commerce applied an adverse inference that each of the non-
responsive companies paid no income tax during the period of
investigation and ``{the{time} standard corporate income tax rate
in China is 25 percent . . . . We, therefore, find the highest
possible benefit for all income tax exemption and reduction programs
combined is 25 percent (i.e., the income tax programs combined
provide a countervailable benefit of 25 percent).'').
\60\ Id.
---------------------------------------------------------------------------
Accordingly, given the wide variety of potential fact patterns and
unforeseen circumstances that Commerce may encounter in the future, we
do not believe specifically outlining and limiting the circumstances
Commerce may, or may not, deviate from its default methodology of
selecting the highest program rate in the regulation would be
beneficial to Commerce's application of AFA in CVD investigations and
administrative reviews in future cases.
Likewise, we will not place language in the regulations that states
that Commerce will or will not apply different AFA rates in response to
the same program for the same parties from one segment of a proceeding
to the next. Commerce applies two distinct hierarchical methodologies
for investigations and administrative reviews, and therefore,
naturally, the AFA rate which results from those two different
hierarchies might differ, even when applied to the same parties in a
different segment on the same proceeding. Commerce's use of different
hierarchies for investigations and administrative reviews, which
reflect inherent differences in the circumstances around investigations
versus administrative reviews, has been upheld by the CIT on multiple
[[Page 20783]]
occasions,\61\ accepting that ``the administrative review AFA hierarchy
achieves the dual goals of relevancy and inducing cooperation.'' \62\
Maintaining consistency in applying our CVD AFA hierarchy provides
predictability and transparency to parties involved in administrative
proceedings, and we see no reason to change that practice in these
regulations.
---------------------------------------------------------------------------
\61\ See, e.g., Clearon Corp. v. United States, 359 F. Supp. 3d.
1344, 1360-61 (CIT 2019) (sustaining Commerce's application of the
second step of the review hierarchy, noting the hierarchy method is
judicially approved); Essar Steel Ltd. v. United States, 908 F.
Supp. 2d 1306, 1310-11 (CIT 2013) (sustaining Commerce's application
of the second step of the review hierarchy and use of an adverse
rate calculated for Essar for a similar program in a previous
administrative review of the CVD order at issue), aff'd 753 F. 3d
1368 (Fed. Cir. 2014); and SolarWorld Ams. Inc. v. United States,
229 F. Supp. 3d 1362, 1366 (CIT 2017) (SolarWorld) (sustaining
Commerce's application of the second step of the review hierarchy
despite a lower rate than using the investigation hierarchy).
\62\ See SolarWorld, 229 F. Supp. 3d at 1370 (stating
``{t{time} he court assesses the methodology for reasonableness and
for sufficient explanation of the reasoning underlying the approach
. . .. Although it could be argued that a case-by-case hierarchy
system also would be reasonable, that possibility does not make
Commerce's hierarchy structure unreasonable.'').
---------------------------------------------------------------------------
The TPEA added section 776(d)(3)(A) to the Act which states that
Commerce ``is not required'' for ``any purpose'' to ``estimate what the
countervailable subsidy rate'' would have been if the party ``had
cooperated.'' \63\ Nonetheless, one commenter suggested that Commerce
should amend its hierarchies to do just that when applying AFA in CVD
proceedings. We have not adopted that suggestion in this final rule.
The proposed and final rule reflect Commerce's practice, which has been
upheld as in accordance with law by the CIT.\64\ Under that practice,
through the hierarchy, Commerce selects the highest above-de minimis
rate for similar or comparable programs, but not necessarily identical
or ``most'' similar programs. Under its practice, as now codified by
this final rule, Commerce determines a program to be a similar or
comparable program based on the Secretary's treatment of the benefit,
as stated in Sec. 351.308(j)(3)(ii).
---------------------------------------------------------------------------
\63\ See section 776(d)(3)(A) of the Act.
\64\ See Changzhou Trina Solar Energy Co. v. United States, 352
F. Supp. 3d 1316, 1329 (``Under Commerce's established
{hierarchy{time} methodology and consistent with the plain text of
the statute, Commerce selects a similar program, not necessarily the
most similar program.''); see also Bio-Lab Inc. v. United States,
487 F. Supp. 3d 1291, 1308 (CIT 2020) (``Selecting a program that is
similar is enough to satisfy the statute.'')
---------------------------------------------------------------------------
Finally, we disagree with the commenter who expressed concerns that
Commerce's CVD AFA hierarchy is inconsistent with the United States'
WTO obligations and the general AFA views of the CIT. Commerce's
practice and these regulations are fully in compliance with the United
States' WTO obligations. Furthermore, Commerce's use of CVD AFA
hierarchies has been sustained by the CIT on numerous occasions, as
noted earlier in this section. Thus, we find the commenter's suggestion
that Commerce may not utilize such AFA rates in its CVD calculations
(if circumstances warrant) to be unavailing and we have made no further
revisions to Sec. 351.308 other than as described above.
6. Commerce has made minor changes to its regulations addressing
government inaction which distorts certain costs through weak,
ineffective, or nonexistent property (including intellectual property),
human rights, labor, and environmental protections.
In the Proposed Rule, Commerce explained that because ``government
inaction and failure to enforce property (including intellectual
property), human rights, labor, and environmental protections lowers
the cost of production for firms in their jurisdiction,'' it was
proposing modifications to its regulations to consider such inaction
when determining if certain potential surrogate values, benchmark
prices, or input costs of production are potentially distorted or
otherwise not in accordance with market principles.\65\ Commerce
explained that this is because such firms are not paying a ``cost of
compliance'' to meet regulatory standards for which firms operating in
other jurisdictions are responsible.\66\ Commerce also discussed how
the economics literature explains this in terms of externalities and
public goods, identifying the fact that firms base their decisions
almost exclusively on direct cost and profitability considerations and
largely ignore the indirect societal costs of their production
decisions.\67\
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\65\ See Proposed Rule, 88 FR 29859-61; see also OECD, OECD
Regulatory Policy Outlook 2018: Glossary, available at <a href="https://www.oecd-ilibrary.org/sites/9789264303072-51-en/index.html?itemId=/content/component/9789264303072-51-en">https://www.oecd-ilibrary.org/sites/9789264303072-51-en/index.html?itemId=/content/component/9789264303072-51-en</a>, accessed February 2, 2021.
\66\ Id., 88 FR 29858-61.
\67\ Id., 88 FR 29859 (citing International Monetary Fund
(Thomas Helbling), ``Externalities: Prices Do Not Capture All
Costs,'' Finance & Development (date unspecified); Coase, Ronald,
``The Problem of Social Cost.'' Journal of Law and Economics, 3 (1):
1-44 (1960); Cornes, Richard, and Todd Sandler, The Theory of
Externalities, Public Goods, and Club Goods, Cambridge University
Press (1986); and Paul Samuelson, ``Diagrammatic Exposition of a
Theory of Public Expenditure,'' The Review of Economics and
Statistics, 37 (4): 350-56 (1955)).
---------------------------------------------------------------------------
Notably, although Commerce received several comments on the
proposed revisions to Sec. Sec. 351.408(d), 351.416(g)(10) and (11),
and 351.511(a)(2), it received no comments that challenged the concept
that weak, ineffective, or nonexistent real, personal and intellectual
property protections, human rights protections, labor protections, and
environmental protections can result in lower direct costs of
production that do not reflect indirect societal costs. Commerce
explained in the Proposed Rule that for each of these situations, there
are scenarios that can result in distorted costs of production (e.g., a
lack of environmental laws or the existence of slave, forced, or child
labor).\68\ Accordingly, Commerce explained that, consistent with its
statutory and inherent authority to select appropriate surrogate values
in determining a normal value for a non-market economy analysis, select
appropriate benchmarks prices in its less than adequate remuneration
analysis, and determine if a particular market situations exists that
distort costs of production, Commerce was codifying its ability to
consider such arguments if interested parties raised such claims and
provided sufficient evidence to support allegations.\69\
---------------------------------------------------------------------------
\68\ Id., 88 FR 29859.
\69\ Id.
---------------------------------------------------------------------------
A. Commerce does not agree with the overarching, generalized
concerns expressed by certain commenters.
Certain commenters expressed overarching concerns about Commerce's
proposals, claiming that Commerce did not have the appropriate
expertise or statutory authority to address the lack of various
``social'' protections in its analysis. One commenter suggested that
Commerce was ``attempting to set itself up as judge, jury and
executioner on matters of property rights, human rights, labor rights''
and ``environmental protections,'' and that by analyzing the
protections provided by various countries, Commerce was
``unilaterally'' ``asserting authority to stand in judgment of the
enforcement of various rights by other sovereign nations,'' despite the
fact that allegedly Commerce possesses no particular expertise in how
property rights (including intellectual property), human rights, labor
rights, or environmental protections should best be ``defined,
implemented and enforced.'' That commenter claimed that nothing in the
trade laws appoints Commerce to act as the ``global rights police'' and
expressed concerns that Commerce's proposal would ``punish respondents
for operating in countries that do not meet a U.S. administration's
policy preferences.''
Another commenter claimed that Commerce was trying to ``insert
social
[[Page 20784]]
considerations into AD calculations'' through ``social dumping,'' which
historically the United States did not advocate addressing in the AD
law. That commenter expressed concerns that by including social dumping
in its analysis, Commerce was inviting other countries to do the same,
and to punish United States' exporters because of the United States's
own alleged ``under enforcement of labor rights.''
Other commenters challenged Commerce's overall analysis as too
broad because it does not define what ``weak, ineffective, or
nonexistent property (including intellectual property), human rights,
labor, or environmental protections'' means in every case and does not
explain if objective international standards, U.S. standards, or other
standards are intended to be used in every case to determine if such
protections are deficient or not deficient.
Conversely, other commenters stated that not only was Commerce
acting within its statutory and inherent authority, but that Commerce's
proposal is too narrow, and Commerce should consider even more
scenarios involving property (including intellectual property), human
rights, labor, and environmental protections (and the resulting low or
nonexistent compliance costs). Specifically, those commenters suggested
that because a country could take immediate steps following an
allegation of a lack of effective protections in an effort to forestall
Commerce's actions and ``greenwash a failure to adopt and effectively
enforce such protections,'' Commerce should add a requirement to its
overarching language that Commerce would consider not only weak,
ineffective, or nonexistent protections, but also ``arbitrary''
protections with no lawful history or context. In other words, those
commenters advocated that interested parties should be able to argue
that an alleged protection in a given case was, in fact, set up solely
to avoid Commerce reconsidering prices or costs in its various
analyses, and that such ``arbitrary'' protections should not be treated
as actual or real protections by the agency.
Commerce's Response:
Commerce has the statutory and inherent authority to consider the
impact of weak, ineffective, or nonexistent protections on its analysis
of surrogate values, benchmark prices, and costs of production in its
PMS analysis. As explained in the Proposed Rule, it is well established
that Commerce has the authority to consider if potential benchmark
prices and potential surrogate values are distorted, and are,
therefore, inappropriate to use in its analysis.\70\ Not only have
courts affirmed such an authority, but Commerce's consideration of
potential labor surrogate values in light of evidence of the existence
of forced labor in potential surrogate countries was also prominent in
three cases before the CIT, again, cited in the Proposed Rule. \71\
---------------------------------------------------------------------------
\70\ Id., 88 FR 29860.
\71\ Id., at nn. 36 and 39 (citing, e.g., Ad Hoc Shrimp Trade
Action Comm. v. United States, 219 F. Supp. 3d 1286, 1292 (CIT 2017)
(citing Final Results of Redetermination Pursuant to Court Remand,
Ad Hoc Shrimp Trade Action Committee v. United States, Court No. 15-
00279, Slip Op. 17-27 (CIT March 16, 2017), dated June 6, 2017,
available at <a href="https://access.trade.gov/resources/remands/17-27.pdf">https://access.trade.gov/resources/remands/17-27.pdf</a>,
aff'd Ad Hoc Shrimp Trade Action Comm. v. United States, 234 F.
Supp. 3d 1315, 1320 (CIT 2017)); Final Results of Redetermination
Pursuant to Court Remand, Tri Union Frozen Products Inc. et al. v.
United States, Consol. Court No. 14-00249, Slip Op. 17071 (CIT June
13, 2017), dated July 25, 2017, at 8-9, available at <a href="https://access.trade.gov/resources/remands/17-71.pdf">https://access.trade.gov/resources/remands/17-71.pdf</a>, aff'd Tri Union Frozen
Prods., Inc. v. United States, 254 F. Supp. 3d 1290 (CIT 2017),
aff'd Tri Union Frozen Products, Inc. v. United States, 741 Fed.
Appx. 801 (Fed. Cir. 2018) (collectively, Tri Union Frozen);
Refillable Stainless Steel Kegs from the People's Republic of China:
Final Affirmative Determination of Sales at Less Than Fair Value and
Final Affirmative Determination of Critical Circumstances, in Part,
84 FR 57010 (October 24, 2019), and accompanying IDM at 35; and
Final Results of Redetermination Pursuant to Court Remand, New
American Keg v. United States, Slip Op. 21-30 (March 23, 2021),
dated July 7, 2021, at 3 (citing Tri Union Frozen), available at
<a href="https://access.trade.gov/resources/remands/21-30.pdf">https://access.trade.gov/resources/remands/21-30.pdf</a>).
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Commerce emphasizes that in each of the modified regulatory
provisions, the focus is on whether weak, ineffective, or nonexistent
protections distort prices or costs. This is the same distortion
analysis Commerce applies for all less than adequate remuneration
benchmarks and surrogate values if interested parties claim that those
prices or values are distorted. In that regard, the PMS examples at
issue are consistent with the other examples of a PMS set forth in
Sec. 351.416(g). Commerce will not use distorted potential benchmark
prices or distorted potential surrogate values, and its refusal to use
distorted values in its methodologies and calculations is not a novel
concept. Further, Congress explicitly directed Commerce in section
773(e) of the Act to consider ``another calculation methodology'' if it
determines that a PMS exists ``such that the cost of materials and
fabrication or other processing of any kind does not accurately reflect
the cost of production in the ordinary course of trade.'' Again, it is
standard practice for Commerce to consider arguments based on real-
world factors that can affect the cost of production, and to reject the
use of prices or costs which Commerce has determined to be distorted or
potentially distorted.
What would, in fact, be inappropriate would be for Commerce to
knowingly ignore real-world factors that distort or potentially distort
costs placed on the record. One of the commenters expressed concerns
that Commerce is trying to incorporate ``social dumping'' \72\ into its
AD analysis through these regulations. However, Commerce's intent
through these regulations is not to consider foreign government
policies into its calculations to effectuate change in those policies,
but instead to focus on one overarching analysis relevant to its
calculations: whether the record reflects that certain prices or costs
at issue were, more likely than not, distorted by identified weak,
ineffective, or nonexistent protections. Commerce has a great deal of
experience in analyzing if prices or costs are distorted, and it is in
accordance with that expertise that Commerce is issuing these
regulations.
---------------------------------------------------------------------------
\72\ ``Social dumping'' is defined as ``the practice of allowing
employers to lower wages and reduce employees' benefits in order to
attract and retain employment and investment.'' See Collins
Dictionary, ``Social Dumping,'' retrieved November 8, 2023, <a href="https://www.collinsdictionary.com/us/dictionary/english/social-dumping">https://www.collinsdictionary.com/us/dictionary/english/social-dumping</a>.
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Accordingly, there is no validity to the concerns that Commerce is
trying to be a ``judge, jury and executioner'' on the property rights
(including intellectual property), human rights, labor rights, and
environmental protections administered and enforced by other countries,
nor that it is trying to act as ``global rights police'' through these
regulatory changes, nor that it is trying to push certain United States
``policy preferences.'' As Commerce recognized in the Proposed Rule,
every country retains discretion to pursue its own priorities,
including the implementation and enforcement of certain laws, policies
and standards for the public welfare.\73\ If Commerce determines that a
company were able to produce its merchandise for prices cheaper than
foreign competitors because it followed no workplace safety laws and
used forced or child labor, it would be both logical and reasonable for
Commerce to reject potential surrogate values derived from sales of
that merchandise in a non-market economy AD proceeding. On the other
hand, it would be illogical and unreasonable to ignore arguments and
record information that shows that those surrogate values are distorted
for fear of generalized claims that Commerce is trying to impose itself
as a global judge or policeman over other countries'
[[Page 20785]]
social-, environmental-, and property-welfare priorities. Such claims
are inconsistent with what the agency explained in the Proposed Rule
and are inconsistent with the regulatory modifications being proposed.
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\73\ See Proposed Rule, 88 FR 29858.
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Governments may implement and enforce their property (including
intellectual property), human rights, labor, and environmental laws and
protections as they believe appropriate, just as Commerce may continue
to apply its AD and CVD laws in a manner that rejects the use of
distorted prices and costs when it determines such a rejection is
supported by record information. Further, just as governments might
determine to take certain actions and provide certain subsidies to
certain industries, even though other authorities might reasonably
determine to countervail those subsidies, the same holds true when
governments determine to not take certain actions that require
compliance costs of producers within their borders. When governments
decide not to enact environmental restrictions on a factory's pollution
to protect the soil, water, air, or wildlife, or not to enforce
existing laws under which that factory would normally be required to
undertake costs to implement those protections, it is both logical and
reasonable that other countries may consider the impact such decisions
have on the costs of production for that factory in their AD
calculations. This is not, despite the criticisms of some of the
commenters, a judgment on the social welfare policies, priorities, and
laws of different countries. Instead, it is a recognition of economic
reality--the lack of enforcement of certain protections granted in
other countries, or the nonexistence of those protections under law
entirely, can have a notable impact on a company's or industry's costs
of production.
In sum, the proposed amendments to the AD and CVD regulations in
this regard are intended to allow for interested parties to raise
issues and supply information on the record about foreign government
inaction on implementing or enforcing certain articulated protections
and for Commerce to consider that inaction in its analysis and
calculations. Accordingly, Commerce rejects claims that it is
restricted by law from considering arguments and facts on the record
that certain prices or costs are distorted as a result of weak,
ineffective, or nonexistent protections in other countries.
In response to the concerns that Commerce is not an expert in labor
law, environmental law, human rights law, intellectual property law, or
property law in general, the agency is not holding itself out as an
expert in these areas. However, Commerce is the U.S. Government agency
with an expertise in analyzing costs of production in an AD analysis
and has a long-established practice of selecting surrogate values in
non-market economy cases and benchmark prices in less than adequate
remuneration CVD cases. One commenter expressed concerns that Commerce
was ``not equipped'' to consider the impact of weak, ineffective, or
nonexistent protections on costs and prices, but Commerce has decades
of experience of analyzing cost and price distortions. Accordingly, the
agency disagrees with that assessment of Commerce's knowledge,
experience, and abilities. The test Commerce applies in each of these
cases is one of price or cost distortion--not one of compliance with
international laws, agreements, or standards. Commerce needs to
consider only whether evidence on the record suggests that prices or
costs are lower than they would otherwise be as a result of weak,
ineffective, or nonexistent protections. If the answer to that question
is ``yes,'' a cost might not be appropriate to use as a surrogate
value, a price might not be appropriate to use as a benchmark for a
less than adequate remuneration case, and the reported cost of an input
might not be appropriate to use in Commerce's cost of production
calculations.
Furthermore, we disagree with the claim that Commerce must define
what ``weak'' or ``ineffective'' property (including intellectual
property), human rights, labor, and environmental standards are, in
every case, in these regulations. In fact, such decisions are fact-
specific and made on a case-by-case basis. In addition, Commerce does
not agree that it should consider or codify certain international
standards or sources for its analysis in each case for the same reason.
Indeed, trying to incorporate certain international standards,
specifically, into the regulations for this purpose could inhibit
rather than support an outcome appropriate with the facts and
circumstances in a specific case. For example, if the evidence on the
record reflected that laws in a given country meet certain
international standards, but the record also reflects that certain
government authorities have never required a factory or industry to
abide by those laws, thereby allowing certain factories or industries
to avoid compliance costs and produce and sell their merchandise for
lower prices, then a regulation setting forth international benchmarks
would not only be of little value, but also prevent the agency from
reviewing both the law and the facts as they apply to a business or
industry in that foreign country. This is not to say in certain cases,
with certain allegations, Commerce might not benefit from considering
an international standard, or other laws in the foreign country itself,
or even laws and standards in other countries, as part of its
determination whether certain protections are weak or ineffective. Just
as Commerce considers all of the information placed before it in other
cases involving surrogate values and determinations of benchmarks in
less than adequate remuneration cases, Commerce would conduct the same
type of analysis in determining if protections are weak or ineffective,
including in analyzing a PMS allegation under Sec. 351.416(g)(10).
Finally, we also disagree that Commerce should extend its analysis
to evaluate whether property (including intellectual property), human
rights, labor, and environmental protections are ``arbitrary.''
Regardless of the intention of a protection, if a producer was required
to pay a patent-owner for the rights to use certain technology, for
example, and that protection was enforced by the government, then
Commerce would not find that government inaction existed, nor that any
distortions resulted from such inaction. Even if the protections were
only temporary during the production period subject to examination, as
explained above, it is not Commerce's intention to judge why
protections exist, but only to determine if those protections were weak
or ineffective during that period of investigation or review and if the
costs of production were distorted because of those weak or ineffective
protections. Accordingly, we have not incorporated the suggestion to
include ``arbitrary'' as a factor for these proposed regulatory
revisions.
B. Commerce will analyze weak or ineffective protections by
entities entrusted or directed by the government to provide such
protections.
In addition to more general allegations and concerns involving
Commerce's proposals to amend its regulations to address the cost and
price distortions potentially arising from weak, ineffective, or
nonexistent property (including intellectual property), human rights,
labor, and environmental protections, Commerce received many individual
questions and concerns. For example, two commenters requested that
Commerce acknowledge that if an entity was entrusted or directed by the
government, but is not
[[Page 20786]]
a public body or government entity itself, with the responsibility of
providing some or all of the listed protections, then Commerce would
still conduct the same analysis it would apply if the government itself
was responsible for providing those protections, including within the
context of a PMS analysis under Sec. 351.416(g)(10).
Commerce's Response:
Commerce agrees with the premise that, no matter if the entity that
is supposed to provide a protection is a government-controlled entity
or is a private entity entrusted or directed by the government to
provide a protection, the agency's analysis will be the same in
determining if the protections at issue are weak or ineffective. As the
examples in Sec. 351.416(g) are only examples, Commerce determined
that it was not necessary to add further language about entrustment and
direction into that regulation; however, we agree that the crux of our
analysis is not the authority failing to grant an effective protection,
but rather the fact that the protection itself is ineffective and the
result is distorted prices or costs.
C. The factual information deadlines of Sec. 351.301(c)(3) apply
to some of these regulatory revisions.
One commenter requested that Commerce clarify that the deadlines
covering submissions of factual information to value factors of
production under Sec. 351.408(c) and measure the adequacy of
remuneration under Sec. 351.511(a)(2) found in Sec. 351.301(c)(3)
apply equally to proposed Sec. Sec. 351.408(d) and 351.511(a)(2)(v).
Commerce's Response:
Commerce confirms that factual information deadlines covering
submissions of factual information to value factors of production under
Sec. 351.408(c) and measure the adequacy of remuneration under Sec.
351.511(a)(2) found in Sec. 351.301(c)(3) apply equally to Sec. Sec.
351.408(d) and 351.511(a)(2)(v). To be clear, Sec. 351.408(d) does not
stand alone, but rather exists in addition to the surrogate value
methodology described in Sec. 351.408(c), which is the reason
paragraph (d) starts with the statement, ``Notwithstanding the factors
considered under paragraph (c) of this section . . . .'' Accordingly,
the deadlines applicable to Sec. 351.408(c) apply equally to Sec.
351.408(d).
D. Commerce may reject prices which are distorted but not
aberrational.
One commenter suggested that, with respect to Sec. Sec. 351.408
and 351.511, Commerce should clarify that prices or costs do not need
to be ``aberrational'' to be disregarded under the proposed government
inaction provisions.
Commerce's Response:
Commerce confirms that prices and costs may be distorted, but need
not be aberrational, for the agency to reject the use of a surrogate
value or benchmark for a less than adequate remuneration analysis. In
general, aberrational sales or costs are normally outliers--values
which are so high or so low, that they may not even appear to be
market-driven. Commerce would not normally consider aberrational sales
or costs in a surrogate value or less than adequate remuneration
analysis. However, for purposes of selecting a surrogate value or
determining the appropriate benchmark to measure the adequacy of
remuneration, prices or costs can be distorted by multiple factors
(e.g., weak, ineffective, or nonexistent protections) without being
considered aberrational. If the record contains potential surrogate
values or benchmark prices which Commerce determines are not distorted
and are from an economically comparable country that produces
comparable merchandise, then in choosing a surrogate, it will normally
prefer the non-distorted prices or costs over the distorted prices or
costs. That analysis need not require a finding that prices or costs
are aberrational in any way.
E. The revised regulations are consistent with the United States's
WTO obligations.
Some commenters expressed concerns that Commerce's consideration of
the impact of foreign government inaction on costs or prices
incorporates concepts not embodied in the relevant WTO agreements and
allows Commerce to manipulate its trade remedy laws in an effort to
force property (including intellectual property), human rights, labor,
and environmental standards on other WTO members. They commented that
the Agreement on Implementation of Article VI of the General Agreement
on Tariffs and Trade (AD Agreement) does not permit such
considerations, pointing to a dispute Panel decision in European Union-
Antidumping Measures on Biodiesel from Argentina, in which the dispute
Panel concluded that a dumping analysis is not intended to cover
certain distortions arising out of government actions or
circumstances.\74\ They also suggested that other international and WTO
agreements cover such matters satisfactorily.
---------------------------------------------------------------------------
\74\ See Report of the Panel, European Union--Anti-Dumping
Measures on Biodiesel from Argentina, WT/DS473/R, (May 23, 2016)
(European Union-Antidumping Measures on Biodiesel from Argentina),
at para. 7.240.
---------------------------------------------------------------------------
Commerce's Response:
Commerce's AD statute and regulations are in full compliance with
the United States' WTO obligations. Commerce is permitted under U.S.
law and the AD Agreement to consider factors that may objectively
distort costs of production. There is no obligation for WTO members
enshrined in any of the WTO Agreements to ignore price or cost
distortions caused by another government's decision to ignore or permit
a company to pollute, use slave labor, or discriminate in violation of
a country's own laws, or in absence of laws altogether, and therefore,
benefit from cheaper production costs. As we indicated above, Commerce
is codifying its consideration of the appropriate surrogate values,
benchmark prices, or input cost in an PMS analysis. These
considerations are not intended to impose any standards on any country.
Indeed, in the context of a surrogate value (which involves using
values from other countries for a non-market economy analysis) and less
than adequate remuneration analysis (which involves using prices from
other countries to determine an appropriate benchmark value), the
rejection of certain surrogates or benchmarks will have no bearing on
the countries from which those prices or costs originate in any way.
Thus, it is hard to see how such an analysis could ``punish'' the
source countries, as stated by some in their comments. Further, for
both a surrogate value and PMS analysis, Commerce's analysis under
Sec. Sec. 351.408 and 351.416 will normally be limited only to
``significant'' inputs, reflecting that Commerce's analysis will be a
targeted analysis focused only on certain alleged ``weak, ineffective,
or nonexistent'' protections and their impact on certain costs of
production, and no more.
Finally, we disagree that other WTO Agreements address Commerce's
concerns in this regard in any way. These modifications to the trade
remedy regulations address distortions in costs or prices caused by
weak, ineffective, or nonexistent protections, and other WTO Agreements
do not address such cost or price distortions.
F. Commerce need not reward more stringent protections by foreign
governments.
Two commenters requested that when Commerce conducts its surrogate
value analysis, if it finds that a potential surrogate value has
stronger environmental or other such protections than other potential
surrogate values, Commerce should ``make an allowance'' for that--
essentially improving chances for use of that surrogate value over
others. They make the same suggestion
[[Page 20787]]
for potential benchmark prices. Likewise, they suggested an offset to
an input cost in a PMS analysis to reflect strong social welfare
protections. They comment that doing so would be consistent with the
United States' support of renewable energy and climate change reduction
programs in other capacities.
Commerce's Response:
Commerce declines to elevate the use of certain potential surrogate
values or benchmark prices over others based on, for example, their
effective protection of the environment, in this rule. One of
Commerce's ultimate goals in this exercise is to select surrogate
values which are comparable to the factors of production reported by
the non-market economy. If a value is distorted, that may remove it
from consideration. However, Commerce is under no obligation to provide
offsetting extra credit based on excellent environmental, labor, human
rights, or property rights (including intellectual property)
protections. The same is equally true in selecting benchmark prices and
determining if the costs of an input as reported are reasonable.
Indeed, if anything Commerce believes that such an adjustment to those
values could create distortions rather than avoid them.
G. External concerns do not impact these regulations.
Some parties commented that United States businesses are actively
working to raise standards and protections in other countries, and they
suggested that these regulations should be withdrawn because other
countries might become frustrated and stymie those efforts. Other
parties stated that various environmental programs in other countries
meet the same goals as Commerce supposedly intends in these
regulations, and thus Commerce should not counteract those programs
when given the opportunity, consistent with the proposed regulations.
Commerce's Response:
As noted above, Commerce's concerns in issuing these regulations
are to use surrogate values and benchmark prices not distorted by weak,
ineffective, or nonexistent property (including intellectual property),
human rights, labor, or environmental protections. Likewise, it is also
Commerce's intention to not use input prices distorted by a PMS. The
efforts by outside parties and governments to strengthen such
protections in other countries are not at issue in these regulations,
and therefore, do not affect the content of these regulations.
H. Commerce will not codify additional procedures suggested by
certain commenters.
Certain commenters requested that in determining the existence of
foreign government inaction in Sec. Sec. 351.408, 351.511, and
351.416(g)(10) and (11), Commerce should directly address the burden of
proof in the regulation, describe how much the foreign government will
be required to participate, address how Commerce will consider
information on the record, and indicate if it intends to verify claims
of government inaction.
Commerce's Response:
When selecting a surrogate value or benchmark price, an interested
party alleging price or cost distortions has an obligation to place
information on the record to substantiate its claims. Likewise, the
same holds true if a party argues the existence of a PMS or if
government inaction is at issue. We see no need to add further detail
on the need for parties to provide Commerce with arguments and
information on the record.
With respect to how Commerce will consider such information, again,
it will weigh all of the information before it and make a determination
as to the appropriate surrogate value or benchmark price or determine
if a PMS exists.
Finally, under the statute, verification is only required in
investigations. However, Commerce may determine that verification is
warranted in other segments of a proceeding. Accordingly, Commerce has
determined not to codify a verification requirement in the regulation,
recognizing that in some situations, the government inaction and its
effect on prices or costs is evident, and little more is needed on the
record, while in others, the agency may need to gather more
information, and perhaps even conduct a verification, to fully
understand the objective facts of the alleged situation.
I. Commerce will not include additional, alternative language
suggested by commenters in the regulation.
Two commenters requested that Commerce should ``clarify'' in
Sec. Sec. 351.408 and 351.511 that interested parties are only
required to show that government inaction relating to a significant
input, or a labor input, existed and that there were ``depressed or
suppressed prices'' for that input--not that parties must actually
prove that the government inaction caused the depressed or suppressed
prices. They suggested that Commerce should specify in the regulations
that interested parties need only provide information available to
them, and that rather than demonstrating that an ``impact'' on prices
exists, as set forth in the proposed Sec. 351.511(a)(2)(v), Commerce
should use language about prices being ``suppressed or depressed.''
They also commented that Commerce should revise its language to only
require that an interested party submit the information which is ``best
available'' to them in making an allegation of distortions--not
``sufficient information'' as is currently set forth also in Sec.
351.511(a)(2)(v). Likewise, another commenter suggested that Commerce
should be flexible with interested parties and allow them to submit
reports and other third-party information that may not be
contemporaneous, but still supports their claims.
Commerce's Response:
Commerce will not modify the language in either Sec. 351.408 or
Sec. 351.511 as requested. First, we do not agree that ``best
available information'' is the correct standard for an allegation under
these regulations. If an interested party believes that government
inaction exists, and may have an impact on prices or costs, but does
not provide sufficient information to support such an allegation on the
record, Commerce will not pursue the issue further. An allegation of
cost or price distortions caused by weak, ineffective, or nonexistent
protections must be accompanied by sufficient information for Commerce
to determine that the allegation is reasonable. A mere allegation with
little supporting information will not suffice, even if that is the
only information available to the interested party making the
allegation.
With respect to the types and quality of documents Commerce might
accept for these allegations, we have also decided not to codify such
requirements at this time because, again, these are decisions made on a
case-by-case basis. Additionally, Commerce must maintain its own
flexibility in determining if the evidence of alleged government
inaction and distorted benchmark prices and surrogate values is
acceptable and sufficient to warrant further Commerce action. Instead,
for both Sec. 351.408(d)(1)(i) and (ii), we have added the words ``the
Secretary determines'' to clarify that it is Commerce, and not the
alleging parties, who will determine if the evidence is sufficient on
the record to support the alleged claim. Further, for Sec.
351.511(a)(2)(v) we have rearranged some of the text to make it clearer
that this provision pertains specifically to the Secretary's authority
to exclude
[[Page 20788]]
certain proposed benchmark prices from its analysis.
With respect to the need to use the phrase ``suppressed or
depressed'' prices or costs rather than the term ``impact'' in Sec.
351.511 or ``appropriate'' in Sec. 351.408, though we agree that
Commerce is primarily concerned about prices or costs being lowered by
distortions caused by government inaction, and therefore, in most if
not all cases under these provisions, Commerce will be focused on
``suppressed or depressed prices,'' we cannot ignore the fact that
artificially higher prices can be just as distortive as suppressed or
depressed prices. In accordance with its regulations, Commerce rejects
potential surrogate values and benchmark prices when they are distorted
and not just when they are suppressed or depressed. Accordingly, it
would be illogical for Commerce to use a surrogate value or benchmark
price which it determines is over-inflated for a reason(s) based on
record evidence and to revise the regulatory language to permit the
usage of distorted high prices. Accordingly, we are not making the
suggested revisions.
J. Commerce will not further refine the term ``limited number'' or
remove the restriction to ``significant inputs'' in Sec. 351.408(d).
Proposed Sec. 351.408(d) limited the surrogate values that
Commerce will consider disregarding based on an allegation of foreign
government inaction to only ``significant inputs or labor'' and when
the proposed surrogate value is ``derived from one country or an
average of values from a limited number of countries.'' \75\ In the
Proposed Rule, Commerce explained that such limitations are appropriate
because it anticipated that such an analysis could be resource
intensive.\76\ Commerce explained that it anticipated that the phrase
``limited number'' would ``normally involve averaged values that are
sourced from no more than three countries.'' \77\
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\75\ See Proposed Rule, 88 FR 29874.
\76\ Id., 88 FR 29861.
\77\ Id., at n.41.
---------------------------------------------------------------------------
One commenter suggested that Commerce should more broadly define
the term ``limited number'' to not preclude a scenario where there may
be averaged values from dozens of countries, but where a significant
percentage of the value is derived from a limited number of countries.
Other commenters requested that Commerce should not limit its analysis
in a PMS allegation to ``significant inputs'' only, and their
suggestions equally apply to the same restriction placed in Sec.
351.408(d).
Commerce's Response:
We have determined not to remove the restriction of applying this
provision only to ``significant inputs or labor,'' nor will we remove
the restriction in the PMS regulation. In both provisions, an analysis
of the circumstance at issue (i.e., government inaction resulting in
weak, ineffective, or nonexistent protections) would require an
analysis of the facts and the law. Furthermore, it would require in
both provisions an analysis of the costs at issue and determination as
to whether they are distorted or likely distorted. We do not anticipate
that it would be reasonable for Commerce to conduct such an analysis
for all potential surrogate values in a given case. Accordingly, we are
not removing the restrictions set forth in the proposed regulation.
With respect to the definition of ``a limited number,'' we have not
codified that term because we think that it should be left to Commerce
on a case-by-case basis to determine how many countries may be at issue
in an allegation, the nature of the alleged government inactions, and
if an average of values will include countries with both government
inaction allegations and no government inaction allegations. It is
still Commerce's understanding that even three countries might be more
than a ``limited number'' if the allegations of government inaction
pertain to all three. Accordingly, we have made no change in this
regard for purposes of the final rule.
K. Commerce will not issue a regulation in the final rule that
countervails government inaction with respect to property (including
intellectual property), human rights, labor, and environmental
protections.
Two commenters suggested that Commerce should take the proposed
government inaction regulations and adapt them into the CVD law. They
commented that weak and ineffective government protections should be
countervailed as a subsidy which ultimately injures United States
industries.
Commerce's Response:
The purpose of these regulations is not to treat weak, ineffective,
or nonexistent government protections as a countervailable subsidy, but
instead to consider that the lack of protections has real-world impacts
on costs of production and prices, and reject the use of distorted
surrogate values, benchmark prices, or input costs if Commerce
determines that government inaction resulted in such distortions. We,
therefore, are not adopting this suggestion in the final rule.
L. Commerce has added text to Sec. 351.416(d)(3)(v) to clarify
that if Commerce looks to other countries to determine if certain
protections are weak, ineffective or nonexistent, Commerce will
normally consider countries that are economically comparable to analyze
the cost effects of government inaction.
Certain commenters expressed concerns with proposed Sec.
351.416(d)(2)(v), a provision which stated that Commerce may look to
information in other countries to determine if property (including
intellectual property), human rights, labor, or environmental
protections in the subject country are weak, ineffective, or
nonexistent. In doing so, the proposed provision stated that Commerce
may consider if those protections exist in those other countries and
are effectively enforced there.
One commenter suggested that the provision should be withdrawn
because it was unclear and not transparent as required by the WTO
Agreements. That commenter requested that Commerce should remove words
such as ``weak'' and ``ineffective,'' as they are too general and
provide Commerce with too much discretion. Further, the same commenter
suggested that because determinations of distortion are made on a case-
by-case basis, Commerce should not rely on its past analysis in other
cases under this provision to give it any guidance, as every government
action and inaction is unique and should be considered so in every
case.
Another commenter expressed concerns that nothing in United States
law permits Commerce to look to entirely different countries and
determine whether actual market prices would have been different if the
country under examination had, hypothetically, followed the policies
and practices of those different countries.
Commerce's Response:
Upon consideration of the general concerns about Commerce's
consideration of weak, ineffective, and nonexistent protections, as
well as the claims specific to this provision, Commerce has determined
that further clarification is necessary in the regulation. The proposed
Sec. 351.416(d)(2)(v) is now Sec. 351.416(d)(3)(v) and Commerce has
revised the regulation to include language which states: ``For purposes
of this paragraph (d)(3)(v), the Secretary will normally look to cost
effects on same or similar merchandise produced in economically
comparable countries
[[Page 20789]]
in analyzing the impact of such protections on the cost of
production.'' Commerce anticipated that an analysis under this
provision would cover same or similar merchandise, and would normally
be limited to economically comparable countries, but never stated that
in the Proposed Rule. Accordingly, we received concerns from various
parties that Commerce would look to the United States or similar
countries to determine ``acceptable'' property (including intellectual
property), human rights, labor, or environmental protections, even when
the country at issue is a developing country and in no way economically
comparable to the United States. Such an interpretation of that
provision was never the agency's intention.
For other alleged PMS allegations, Commerce does not intend to look
to the experience of other governments. However, Commerce continues to
find that if a country has wide-spread pollution, child labor, slavery,
or abuses of intellectual property or other property laws, it would be
illogical to compare labor values, for example, within the same country
to decide if a particular surrogate is distorted or useable.
Nonetheless, it would be equally illogical to look at values of
products in other countries that are not the same or similar to the
input or subject merchandise at issue. Furthermore, the experiences of
foreign governments may differ greatly, but if economies are
comparable, it is reasonable to believe that a comparison of property,
human rights, labor, and environmental protections on the cost of
production would be more appropriate than if the two economies were
vastly different. Commerce disagrees with the commenter who stated that
Commerce does not have the authority to use such an analysis to
consider if weak, ineffective, or nonexistent protections distorted
costs, but we do agree that in conducting such an analysis, Commerce
should be aware of both the similarities and the differences of the
subject country and the country being considered for comparison
purposes.
Accordingly, Commerce has retained the language covering this
provision in the Proposed Rule, but Commerce has added the
aforementioned sentence to provide greater clarity on how the analysis
under this provision would be conducted.
M. Commerce has added language to Sec. 351.408(d)(1)(i) and (ii)
to clarify that it is Commerce who determines if a value is derived
from a country that provides subsidies, that was subject to an AD
order, or is from a source with weak, ineffective, or nonexistent
protections.
In the proposed language for Sec. 351.408(d)(1)(i) and (ii), the
provisions stated that Commerce could reject the use of a potential
surrogate value if: (1) it was derived from a country that provides
broadly available export subsidies; (2) it was shown to be subsidized
in that country; (3) it was subject to an AD order; or (4) it was
derived from a facility, party, industry, intra-country region or a
country with certain weak, ineffective, or nonexistent protections.
Upon consideration of the language used in those proposed provisions,
Commerce concluded that the text at issue presumed that parties would
understand that it's Commerce who determines that one of those factors
applies. To provide clarification on this point in the final
regulations, Commerce has modified both paragraphs to note that
Commerce alone decides that the proposed surrogate value is derived
from such sources.
7. Commerce has substantially revised proposed Sec. 351.416, its
PMS regulation, in response to several comments.
On November 18, 2022, Commerce issued an advanced notice of
proposed rulemaking (PMS ANPR) in which it explained that the 2015 TPEA
amended section 773(e) of the Act to provide that if ``a particular
market situation exists such that the cost of materials and fabrication
or other processing of any kind does not accurately reflect the cost of
production in the ordinary course of trade,'' Commerce ``may use
another calculation methodology under this subtitle or any other
calculation methodology.'' \78\ Commerce recognized that the Act did
not define a PMS and did not identify the information which Commerce
should consider in determining if a market situation exists or is
particular. Commerce stated that it hoped to provide some clarity on
this issue in future regulations, which was why it was issuing the
advanced notice of proposed rulemaking.
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\78\ See PMS ANPR, 87 FR 69234 (citing section 773(e) of the
Act).
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In the PMS ANPR, Commerce referenced the limited legislative
history on the provision, in which it highlighted that a member of the
U.S. House of Representatives argued that the legislation would
``empower'' Commerce to be able to disregard prices or costs of inputs
that foreign producers purchased if Commerce concluded that those input
values were ``subsidized'' or ``otherwise outside the ordinary course
of trade.''\79\ Commerce also cited statements made on the U.S. Senate
floor by a U.S. Senator stating that the legislation would help stop
U.S. workers and manufacturers from ``being cheated'' by foreign
industries that were ``not playing fair'' and ``illegally subsidizing''
the production of certain products.'' \80\ Commerce accordingly invited
public comments on various factors it might consider in preparing a
regulation that would address ``the information which Commerce should
consider, or need not consider, in determining a PMS that distorts
costs of production.'' \81\ Commerce received 19 comments in response
from the public on this issue, from which it took many ideas
incorporated in the draft regulations, and others it addressed or
rejected in the preamble of the Proposed Rule.\82\
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\79\ Id., 87 FR 69235 (citing the Congressional Record--House,
H4666, H4690 (June 25, 2015)).
\80\ Id. (citing the Congressional Record--Senate, S2899, S2900
(May 14, 2015)).
\81\ Id.
\82\ See Proposed Rule, 88 FR 29861-67, 29875-77.
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Commerce received a significant amount of commentary on its
proposed Sec. 351.416 in the Proposed Rule, covering both sales and
cost-based PMS decisions. Commerce considered each comment and has
modified its proposed regulation in response to those comments.
Further, where Commerce disagreed with arguments made by the
commenters, it has addressed those comments below.
A. Commerce has the authority to issue its proposed PMS regulation.
Several commenters supported Commerce's authority to issue a
regulation that addresses both sales-based and cost-based PMS analyses
and thanked the agency for its attempts to provide clarity on the
issue, stating their belief that the proposed regulations would allow
for more effective implementation and enforcement of the cost-based PMS
provision in the Act. One commenter cited additional legislative
history for the concept that the amended trade laws were intended to
give Commerce ``flexibility in calculating a duty that is not based on
distorted pricing or costs'' in any situation ``when a PMS exists.''
\83\ One commenter expressed concerns that Commerce's proposed
regulations unnecessarily limit its authority to make cost-based PMS
determinations in listing sources of information which it may or may
not consider in a given case.
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\83\ See S. Rep. No. 114-45 (2015) (Senate Finance Committee
Report), at 37.
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Certain commenters expressed concerns, however, that Commerce may
not have the authority under the WTO AD Agreement, specifically under
Article 2.2.1.1 of the AD Agreement, to
[[Page 20790]]
address distorted costs through a PMS. Article 2.2.1.1 of the AD
Agreement states that ``costs shall normally be calculated on the basis
of records kept by the exporter or producer under investigation,
provided that such records are in accordance with the generally
accepted accounting principles of the exporting country and reasonably
reflect the costs associated with the production and sale of the
product under consideration.'' \84\ In a dispute brought before the
Appellate Body, the European Union determined that the cost of soybeans
in the production of biodiesel from Argentina was unreasonable because
the domestic prices of soybeans, the main raw material used by
biodiesel producers in Argentina, were found to be artificially lower
than international prices due to distortions created by the Argentine
export tax system.\85\ It therefore disregarded those costs in its AD
calculations. The Appellate Body concluded that this finding, alone,
was ``not, in itself, a sufficient basis under Article 2.2.1.1'' to
disregard those costs ``when constructing the normal value of
biodiesel.'' \86\ The Appellate Body stated that an investigating
authority was ``free to examine the reliability and accuracy of costs
recorded in the records'' of a producer to determine if all costs were
captured, were over-or-under-stated, or were not at arm's length,
thereby calling into question the reliability of the reported
costs.\87\ However, if the company's books and records reflected those
costs accurately, ``within acceptable limits,'' even if the costs
themselves were distorted by various factors, the Appellate Body
concluded that Article 2.2.1.1 did not permit investigating authorities
to reject the use of those costs as ``unreasonable.'' \88\ A subsequent
Panel adopted the Appellate Body's interpretation of Article 2.2.1.1 of
the AD Agreement and found that the European Union's rejection of
regulated natural gas input costs from Russia (which the European Union
concluded were far below market prices paid in the unregulated Russian
natural gas markets) in determining the costs to construct the normal
value of welded tubes and pipes from Russia was not in accordance with
Article 2.2.1.1, because the Appellate Body had concluded that the
``reasonably reflect the costs'' language pertains to the
reasonableness of a producer's records, and not the reasonableness of
the producer's costs themselves.\89\ The commenters pointed to these
cases and to Appellate Body and Panel conclusions in arguing that
Commerce's statute and proposed regulations were inconsistent with the
Appellate Body's interpretation of the AD Agreement. On that basis,
they suggested that Commerce should not issue a final PMS regulation
codifying and clarifying its cost-based PMS practice.
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\84\ See Article 2.2.1.1 of the AD Agreement.
\85\ See European Union--Anti-Dumping Measures on Biodiesel from
Argentina, WT/DS473/AB/R (October 6, 2016), at para. 6.54.
\86\ Id. at para. 6.55.
\87\ Id. at para. 6.41.
\88\ Id.
\89\ See European Union--Cost Adjustment Methodologies and
Certain Anti-Dumping Measures on Imports from Russia (Second
Complaint), WT/DS494/R (July 24, 2020), at paras. 7.229-7.253.
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Commerce's Response:
As a preliminary matter, Commerce is issuing its PMS regulations in
accordance with its statutory authority as the administrator and
enforcer of certain trade remedies codified in the Act. That includes
section 773(e) of the Act, which directs Commerce to use another
calculation methodology if it determines ``that a particular market
situation exists such that the cost of materials and fabrication or
other processing of any kind does not accurately reflect the cost of
production in the ordinary course of trade.'' To the extent that the
commenters believe that Commerce's proposed regulations are
inconsistent with the text of the AD Agreement, the Act itself is
consistent with U.S. obligations under the AD Agreement. As the
proposed regulations are in full compliance with the Act, we do not
believe this line of argument calls into question our ability to issue
regulations on the matter.
With respect to the United States' WTO obligations, Commerce
disagrees that the United States is prohibited by the AD Agreement from
considering and addressing costs of production distorted by only
certain government actions or inactions, but not others, in its AD
calculations. Commerce is permitted under U.S. law to consider factors
which may distort costs of production if record evidence indicates the
existence of such distortions. Likewise, Commerce is not prohibited by
the WTO Agreements to consider certain actions or inactions taken by
governments or other organizations that distort prices or costs in the
authorities' calculations through a PMS analysis. Neither the Act nor
the AD Agreement limit departures from the use of recorded costs in
determining normal value to circumstances where there is an inaccuracy
or unreasonable methodology or value used in determining the costs of
production recorded in the books and records of the subject producer.
Rather, as the TPEA makes clear, departures are warranted when the
costs themselves, however recorded, do not accurately reflect the cost
of production in the ordinary course of trade. The AD Agreement is
intended to help provide transparency and accuracy to AD calculations,
not to circumscribe the price and cost distortions which WTO members
should ignore or reject.
Finally, with respect to the concerns that Commerce has limited its
statutory authority through the proposed regulations, we do not believe
that the regulations curtail our authority. Instead, they notify the
public of the information that is normally relevant and significant to
our PMS determinations.
B. The Act permits Commerce to address a cost-based PMS without
also being required to address a sales-based PMS.
Three commenters took issue with Commerce's interpretation of the
Act in the Proposed Rule, as reflected in Sec. 351.416, that addresses
sales-based particular market situations separately from cost-based
particular market situations. Citing various CIT decisions, they
commented that it is not enough under the Act for Commerce to find that
the ``cost of materials and fabrication or other processing of any kind
does not accurately reflect the cost of production in the ordinary
course of trade,'' and that for Commerce to ``use another calculation
methodology'' under section 773(e) of the Act, Commerce is required to
reach further legal and factual conclusions that the perceived
distortion ``prevents a proper comparison'' to the U.S. price, under
sections 771(15)(C) and 77
[…truncated; see source link]Indexed from Federal Register on March 25, 2024.
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