81 FR 15641 - Modification of Regulations Regarding Price Adjustments in Antidumping Duty Proceedings
DEPARTMENT OF COMMERCE Federal Register Volume 81, Issue 57 (March 24, 2016)
Federal Register Volume 81, Issue 57 (March 24, 2016)
| Page Range | 15641-15646 | |
| FR Document | 2016-06698 |
[Federal Register Volume 81, Number 57 (Thursday, March 24, 2016)] [Rules and Regulations] [Pages 15641-15646] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-06698] ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF COMMERCE International Trade Administration 19 CFR Part 351 [Docket No. 140929814-6136-02] RIN 0625-AB02 Modification of Regulations Regarding Price Adjustments in Antidumping Duty Proceedings AGENCY: Enforcement and Compliance, International Trade Administration, Department of Commerce. ACTION: Final rule. ----------------------------------------------------------------------- SUMMARY: The Department of Commerce (the Department) is modifying its regulations pertaining to price adjustments in antidumping duty proceedings. These modifications clarify that the Department does not intend to accept a price adjustment that is made after the time of sale unless the interested party demonstrates, to the satisfaction of the Department, its entitlement to such an adjustment. The Department has further adopted in this final rule a non-exhaustive list of factors that it may consider in determining whether to accept a price adjustment that is made after the time of sale. DATES: Effective date: April 25, 2016. Applicability date: This rule will apply to all proceedings initiated on or after April 25, 2016. FOR FURTHER INFORMATION CONTACT: Jessica Link at (202) 482-1411, James Ahrens at (202) 482-3558, or Melissa Skinner at (202) 482-0461. SUPPLEMENTARY INFORMATION: Background Section 731 of the Tariff Act of 1930, as amended (the Act) provides that when a company is selling foreign merchandise into the United States at less than fair value, and material injury or threat of material injury is found by the International Trade Commission, the Department shall impose an antidumping duty. An antidumping duty analysis involves a comparison of the company's sales price in the United States (known as the export price or constructed export price) with the price or cost in the foreign market (known as the normal value). See 19 CFR 351.401(a). See also section 772 of the Act (defining export price and constructed export price) and section 773 of the Act (defining normal value). The prices used to establish export price, constructed export price, and normal value involve certain adjustments. See, e.g., 19 CFR 351.401(b). In its May 19, 1997 final rulemaking, the Department promulgated regulatory provisions governing the use of price adjustments in the calculation of export price, constructed export price, and normal value in antidumping duty proceedings. Antidumping Duties; Countervailing Duties; Final Rule, 62 FR 27296 (May 19, 1997) (``1997 Final Rule''). In particular, the Department promulgated the current regulation at 19 CFR 351.102(b)(38), which provides a definition of ``price adjustment.'' In providing this definition, the Department stated that ``[t]his term is intended to describe a category of changes to a price, such as discounts, rebates and post-sale price adjustments, that affect the net outlay of funds by the purchaser.'' 1997 Final Rule, 62 FR at 27300. The Department also enacted 19 CFR 351.401(c) that explains how the Department will use a price net of price [[Page 15642]] adjustments. In the 1997 Final Rule, the Department explained that 19 CFR 351.401(c) was intended to ``restate[] the Department's practice with respect to price adjustments, such as discounts and rebates.'' Id., 62 FR at 27344. The Department also addressed the following comment received on the 1997 Final Rule's proposed rulemaking, regarding whether ``after the fact'' price adjustments, that were not contemplated at the time of sale, would be accepted under 19 CFR 351.401(c): One commenter suggested that, at least for purposes of normal value, the regulations should clarify that the only rebates Commerce will consider are ones that were contemplated at the time of sale. This commenter argued that foreign producers should not be allowed to eliminate dumping margins by providing ``rebates'' only after the existence of margins becomes apparent. The Department has not adopted this suggestion at this time. We do not disagree with the proposition that exporters or producers will not be allowed to eliminate dumping margins by providing price adjustments ``after the fact.'' However, as discussed above, the Department's treatment of price adjustments in general has been the subject of considerable confusion. In resolving this confusion, we intend to proceed cautiously and incrementally. The regulatory revisions contained in these final rules constitute a first step at clarifying our treatment of price adjustments. We will consider adding other regulatory refinements at a later date. Id., 62 FR at 27344. Since enacting these regulations, the Department has consistently applied its practice of not granting price adjustments where the terms and conditions were not established and known to the customer at the time of sale (sometimes referred to as determining the ``legitimacy'' of a price adjustment) because of the potential for manipulation of the dumping margins through so-called ``after-the- fact'', or post-sale, adjustments. See, e.g., Certain Oil Country Tubular Goods From Taiwan: Final Determination of Sales at Less Than Fair Value, 79 FR 41979 (July 18, 2014) and accompanying Issues and Decision Memorandum, Cmt. 3; Lightweight Thermal Paper From Germany: Notice of Final Results of the First Antidumping Duty Administrative Review, 76 FR 22078 (April 20, 2011) (Lightweight Thermal Paper from Germany) and accompanying Issues and Decision Memorandum, Cmt. 3; Canned Pineapple Fruit from Thailand: Final Results and Partial Rescission of Antidumping Duty Administrative Review, 71 FR 70948 (Dec. 7, 2006) and accompanying Issues and Decision Memorandum, Cmt. 1; Ball Bearings and Parts Thereof from France, Germany, Italy, Japan, and the United Kingdom: Final Results of Antidumping Duty Administrative Reviews, 71 FR 40064 (July 14, 2006) and accompanying Issues and Decision Memorandum, Cmt. 19. On March 25, 2014, the Court of International Trade issued Papierfabrik August Koehler AG v. United States, 971 F. Supp. 2d 1246 (Ct. Int'l Trade 2014) (Koehler AG), remanding the Department's decision in Lightweight Thermal Paper from Germany, noted above. The Court ordered the Department to reconsider Papierfabrik August Koehler AG's rebate program. The Court disagreed with the Department's determination that the regulations permitted it to disregard certain price adjustments, the terms and conditions of which were not established or known to the customer at the time of sale, stating that ``the regulations set forth a broad definition of price adjustment encompassing `any change in the price charged for . . . the foreign like product' that `are reflected in the purchaser's net outlay.' '' 971 F. Supp. 2d at 1251-52 (quoting 19 CFR 351.102(b)(38)) (emphasis added by Court). In accordance with the Court's order, on remand, under protest, the Department granted an adjustment for the rebates at issue. See Final Results of Redetermination Pursuant to Court Remand, Lightweight Thermal Paper from Germany, Papierfabrik August Koehler AG v. United States, Court No.11-00147, Slip Op.14-31 (Ct. Int'l Trade March 25, 2014), dated June 20, 2014. On December 31, 2014, the Department published a proposed modification of its regulations, 19 CFR 351.102(b)(38) and 19 CFR 351.401(c), which concern price adjustments in antidumping duty proceedings. See Modification of Regulations Regarding Price Adjustments in Antidumping Duty Proceedings, 79 FR 78742 (December 31, 2014) (Proposed Rule). The Proposed Rule explained the Department's proposal, in light of the Court of International Trade's decision in Koehler AG, to clarify that the Department generally will not consider a price adjustment that reduces or eliminates dumping margins unless the party claiming such price adjustment demonstrates that the terms and conditions of the adjustment were established and known to the customer at the time of sale. The Department received numerous comments on the Proposed Rule and has addressed these comments below. The Proposed Rule, comments received, and this final rule can be accessed using the Federal eRulemaking portal at http://www.Regulations.gov under Docket Number ITA-2014-0001. After analyzing and carefully considering all of the comments that the Department received in response to the Proposed Rule, the Department has adopted the modification with certain changes, and is amending its regulations accordingly. Explanation of Regulatory Provision and Final Modification The Department is modifying two of its regulations relating to price adjustments in antidumping duty proceedings: the definition of the term ``price adjustment'' in 19 CFR 351.102(b)(38), and the Department's explanation of its use of prices net of price adjustments in 19 CFR 351.401(c). In the Proposed Rule, the Department proposed minor refinements to the definition of price adjustment in 19 CFR 351.102(b)(38). In this final rule, and in light of a party's comment, as discussed in further detail below, the Department is modifying 19 CFR 351.102(b)(38) to refine the definition of price adjustment. In particular, we are including language in 19 CFR 351.102(b)(38) to clarify that a price adjustment is not limited to discounts or rebates, but encompasses other adjustments as well. Prior to the Proposed Rule, 19 CFR 351.401(c) provided an explanation of the Department's use of prices net of price adjustment in calculating export price (or constructed exported price) and normal value (where price is used as the basis for normal value). In the Proposed Rule, the Department proposed to modify 19 CFR 351.401(c), in light of the Court of International Trade's decision on Koehler AG, in two respects. First, in the first sentence of 19 CFR 351.401(c), the Department proposed language indicating that it would normally use a price that is net of any price adjustment. Second, the Department proposed to add a second sentence to 19 CFR 351.401(c) that clarified the Department generally would not consider a price adjustment that reduces or eliminates a dumping margin unless the party claiming such price adjustment demonstrates that the terms and conditions of the adjustment were established and known to the customer at the time of sale. In the final rule, as discussed below, in light of comments received from interested parties, the Department is modifying 19 CFR 351.401(c) to clarify that the Department does not intend to accept a price adjustment that is made after the time of sale unless the interested party demonstrates, to the satisfaction of the Department, its entitlement to such an adjustment. The Department has further provided in this [[Page 15643]] final rule, as discussed in further detail below, a non-exhaustive list of factors which it may consider in determining whether to accept price adjustments that are made after the time of sale, also referred to as ``after-the-fact'' or ``post-sale'' adjustments. Response to Comments on the Proposed Rule The Department received numerous comments on its Proposed Rule. Below is a summary of the comments, grouped by issue category, followed by the Department's response. 1. Whether Any Changes to 19 CFR 351.102(b)(38) and 19 CFR 351.401(c) Are Necessary Several commenters argue that the Proposed Rule is the appropriate response to Koehler AG and is necessary to maintain the integrity of the Department's proceedings and to prevent the manipulation of dumping margins through ``after-the-fact'' adjustments. These commenters argue that in Koehler AG, the Court improperly found that the plain language of the current regulations precludes the disallowance of any post-sale price adjustments. Without the Proposed Rule, these commenters argue that foreign producers and exporters would have every incentive to calculate the U.S. price reduction necessary to eliminate dumping, and then lower their prices accordingly through retroactive rebates to customers in the home or third-country market, thereby reducing or eliminating the dumping margins and undermining the integrity of the Department's proceedings. One commenter argues that the Proposed Rule is unnecessary because the Department has provided no evidence of respondents utilizing manipulative post-sale price adjustments and that existing regulations are sufficient to maintain the integrity of the Department's proceedings because, under 19 CFR 351.401(b)(1), the Department can already deny a price adjustment if it determines that the adjustment is not bona fide. This commenter further argues that the Proposed Rule unduly burdens respondents operating in industries where many discounts and rebates are agreed to on an ad hoc basis without documentation over the course of multiple transactions many months before the Department's proceedings. Response: The Department finds that the proposed changes will help protect the integrity of our proceedings and are an appropriate response to Koehler AG, which hinders the Department's ability to address after-the-fact rebates which present the potential for manipulation of dumping margins. In Koehler AG the Court of International Trade held that the Department did not have the discretion under 19 CFR 351.102(b)(38) and 19 CFR 351.401(c)--as currently written--to address such manipulative after-the-fact rebates. See 971 F. Supp. 2d at 1251-52. The Proposed Rule, and the further modifications adopted in this final rule, codify the Department's intent and discretion to prevent certain post-sale price adjustments, like those at issue in Koehler AG, and therefore are appropriate to protect the integrity of our proceedings. We believe that these further modifications, discussed below, should address any concerns that the Proposed Rule was unduly burdensome and does not account for actual business practices. 2. Whether the Proposed Rule Is Consistent With the Statute and U.S. International Obligations Several commenters state that the Proposed Rule is consistent with the Department's general statutory authority to impose antidumping duties pursuant to section 731 of the Act. One commenter argues that the Proposed Rule is inconsistent with section 773(a)(6)(C)(iii) of the Act. This commenter argues that a discount or rebate, regardless of when it is established and known to the customer, is a circumstance of sale which falls within the statute's instruction that normal value shall be increased or decreased by the amount of any difference between export price (or constructed export price) and normal value established to the Department's satisfaction to be due to differences in the circumstances of sale. This commenter notes that the statute does not include a requirement that the customer have knowledge of the adjustment prior to the sale. This same commenter argues that the Proposed Rule is inconsistent with Article 2.4 of the Antidumping (AD) Agreement, which provides that due allowance shall be made for differences that affect price comparability, including differences in conditions and terms of sale. This commenter notes the opinion of Dispute Settlement Body (DSB) of the World Trade Organization (WTO) in United States--Stainless Steel (Korea) that a condition or term of sale within the meaning of Article 2.4 is a condition or term that reasonably can be anticipated and accounted for at the time of sale. An additional commenter argues that any regulation that would necessarily disallow an adjustment only if it reduced or eliminated dumping margins could be construed as violating the ``fair comparison'' requirement of Article 2.4 of the AD Agreement. Response: The Department disagrees with the commenter's argument that the Department's proposed modifications to 19 CFR 351.102(b)(38) and 19 CFR 351.401(c) are inconsistent with the statute. As an initial matter, the commenter argues that these modifications are inconsistent with section 773(a)(6)(C)(iii) of the Act, which states that normal value shall be increased or decreased by the amount of any difference between export price (or constructed export price) and normal value established to the Department's satisfaction to be due to differences in the circumstances of sale. However, the statutory basis for the price adjustments addressed in 19 CFR 351.102(b)(38) and 19 CFR 351.401(c) is not section 773(a)(6)(C)(iii) of the Act, but rather, is found in sections 772(a) and 773(a)(1)(B)(i), which provide that in determining export price or normal value the Department begins with the price at which the subject merchandise or foreign like product is first sold--in other words, the basic ``starting price'' provisions. See 1997 Final Rule, 62 FR at 27344 (``[The] use of a net price is consistent with the view that discounts, rebates and similar price adjustments are not expenses, but instead are items taken into account to derive the price paid by the purchaser.'') This is confirmed by the Department's treatment of the price adjustments described in 19 CFR 351.401(c) as something other than a circumstance of sale adjustment. Compare 19 CFR 351.401(c) (addressing use of price net of price adjustments) with 19 CFR 351.410 (addressing circumstances of sale adjustments which specifically cover direct selling expenses and assumed expenses between the seller and the buyer). We disagree with the commenter's contention that the Proposed Rule was nevertheless inconsistent with the statute, which requires the Department to make adjustments for differences which affect price comparability, as well as the Department's obligation under U.S. law to calculate dumping margins as accurately as possible. As several commenters recognized, and as discussed in further detail below, the Department has a longstanding practice of denying certain post-sale price adjustments where there exists a potential for manipulation of the dumping margins, and the courts have affirmed this practice as consistent with the statute. See Koenig & Bauer-Albert AG v. United States, 15 F. Supp. 2d 834, 840 (Ct. Int'l Trade 1998) (``Commerce's decision to reject price amendments that [[Page 15644]] present the potential for price manipulation was a permissible interpretation of the statute.''); Mitsubishi Elec. Corp. v. United States, 700 F. Supp. 538, 555 (Ct. Int'l Trade 1988) (``The ITA has been vested with authority to administer the antidumping laws in accordance with the legislative intent. To this end, the ITA has a certain amount of discretion [to act] . . . with the purpose in mind of preventing the intentional evasion or circumvention of the antidumping duty law.''), aff'd 898 F.2d 1577 (1990). The Proposed Rule, in proposing certain modifications to 19 CFR 351.102(b)(38) and 19 CFR 351.401(c), was intended to codify the Department's intent to prevent such potentially manipulative post-sale price adjustments. As discussed below, in this final rule the Department has made further modifications to these regulations to clarify that the Department does not intend to accept a price adjustment that is made after the time of sale unless the interested party demonstrates, to the satisfaction of the Department, its entitlement to such an adjustment. These final modifications continue to be consistent with the Department's statutory authority, in setting the ``starting price'' of normal value or export price, and prevent the potential manipulation of dumping margins through certain post-sale price adjustments. Finally, the Department disagrees with those commenters that argue that the Proposed Rule was inconsistent with the United States' WTO obligations. To the contrary, the Department finds that the Proposed Rule was consistent with U.S. law, which is consistent with our obligations under the AD Agreement. In any case, the relevant language which one commenter objected to with respect to specifically disallowing adjustments which reduce or eliminate dumping margins does not appear in the final rule. 3. Whether the Proposed Rule Is Consistent With the Department's Practice Several commenters argue that the Proposed Rule codifies the Department's longstanding practice of disallowing price adjustments that reduce or eliminate dumping margins where the terms and conditions of the adjustment were not established and known to the customer at the time of sale. Several of these commenters argue that the Proposed Rule is consistent with other aspects of the Department's practice based on the principle that the Department's proceedings should be free from outcome-driven manipulation and that dumping margins should reflect the respondent's pricing behavior in the ordinary course of business. One commenter argues that the Proposed Rule in its current form is overly broad and, if adopted, threatens to eliminate certain legitimate post-sale price adjustments that were previously granted by the Department. This commenter argues that the Department's practice has allowed for at least three categories of post-sale price adjustments that the Proposed Rule would preclude: (1) Price protection adjustments whereby a buyer seeks a price adjustment to sell a commodity downstream when commodity prices are rapidly changing; (2) post-invoice consumer rebates that offer the buyer a rebate at the time it sells the product to an end user, where such rebates often are not fixed at the time of the first sale; and (3) quality-upon-receipt discounts, which are common for perishable goods. Response: We find that the Proposed Rule was intended to codify the Department's intent and discretion to prevent certain post-sale price adjustments. However, in light of certain comments, we recognize that the proposed modifications to 19 CFR 351.401(c) could have the unintended effect of limiting the Department's discretion to accept certain post-sale price adjustments which the Department has previously accepted. Therefore, as discussed below, we have made further modifications to 19 CFR 351.401(c) to ensure that the Department maintains its intended discretion. 4. Whether the Department Should Implement Any Changes to the Proposed Rule Several commenters argue that the Department should adopt the Proposed Rule in its entirety, as it is an appropriate and necessary codification of the Department's established practice of disallowing certain post-sale price adjustments. One commenter argues that the Department should clarify that the Proposed Rule is not intended to limit the Department's discretion to address post-sale price adjustments other than rebates or discounts, such as billings adjustments. This commenter observes that whereas prior to this modification 19 CFR 351.102(b)(38) listed discounts, rebates, and post-sale price adjustments as examples of changes in price that could qualify as price adjustments, the Proposed Rule does not include the term ``post-sale price adjustments.'' This same commenter suggests that the Department consider a set of factors in determining whether to grant a price adjustment normally under its regulations. This commenter suggests that the Department could consider the following: (1) How common such post-sale price adjustments are for the industry; (2) the timing of the adjustment; (3) the number of such adjustments in the proceeding; (4) whether the reported changes reflect both increases and decreases to the originally negotiated prices in the relevant markets; (5) whether there is commercial documentation maintained in the ordinary course of business demonstrating that the price changes were negotiated by the parties and resulted in a change in the purchaser's net outlay and a change in the producer's net revenues; and (6) any other factors tending to reflect on the legitimacy of the claimed adjustment. Other commenters argue that the Proposed Rule in its current form is inconsistent with normal business practices in many industries investigated by the Department. One commenter proposes modifying 19 CFR 351.401(c) to allow for a price adjustment if the party seeking the adjustment can demonstrate that the adjustment at issue is within the party's standard business practice that existed prior to the initiation of the proceeding. Response: With respect to the proposed changes to 19 CFR 351.102(b)(38) in the Proposed Rule, these modifications were not intended to foreclose other types of price adjustments, such as billing adjustments and post-sale decreases to home market prices or increases to U.S. prices. Nonetheless, in light of a party's comment, the Department is modifying 19 CFR 351.102(b)(38) to refine the definition of price adjustment and to clarify that a price adjustment is not just limited to discounts or rebates, but encompasses other adjustments as well. With respect to 19 CFR 351.401(c), in light of concerns that the modifications in the Proposed Rule may have the unintended consequence of being overly restrictive and limiting the Department's discretion to accept certain post-sale price adjustments which it has previously accepted, the Department is modifying 19 CFR 351.401(c) to clarify that the Department generally will not accept a price adjustment that is made after the time of sale unless the interested party demonstrates, to the satisfaction of the Department, its entitlement to such an adjustment. In determining whether a party has demonstrated its entitlement to such an adjustment, the Department may consider: (1) Whether the terms and conditions of the adjustment were [[Page 15645]] established and/or known to the customer at the time of sale, and whether this can be demonstrated through documentation; (2) how common such post-sale price adjustments are for the company and/or industry; (3) the timing of the adjustment; (4) the number of such adjustments in the proceeding; and (5) any other factors tending to reflect on the legitimacy of the claimed adjustment. The Department may consider any one or a combination of these factors in making its determination, which will be made on a case-by-case basis and in light of the evidence and arguments on each record. As demonstrated above, the Department is expressly referencing in this final rule certain of the factors suggested by one commenter. Other factors which are not expressly adopted here might fall under the last category we identify, i.e., ``any other factors tending to reflect on the legitimacy of the claimed adjustment.'' We have not adopted the one commenter's suggestion, either in the regulation itself, or in this final rule, to accept post-sale price adjustments if a company can demonstrate that the adjustment at issue is part of its standard business practice that existed prior to the initiation of the proceeding. We believe that the list we have identified above provides adequate factors for the Department to consider in determining whether a company has demonstrated its entitlement to an adjustment. We also note that the timing of the adjustment is one of those criteria. However, we believe that allowing a company to simply show that certain adjustments are part of its standard business practice might permit certain adjustments, such as those at issue in Koehler AG, that have the potential to manipulate the dumping margins. As discussed above, it is the Department's intention to codify its discretion to reject those types of adjustments. 5. Effective Date of Final Rule One commenter agrees with the Department's proposal in the Proposed Rule to set the effective date of the final rule to apply to proceedings initiated on or after 30 days following the publication of the final rule. This commenter states that the proposed effective date is appropriate, and that it would be unfair to apply the final rule to shipments that took place prior to publication of the final rule. Response: The Department agrees that it is appropriate that the final rule be effective for proceedings which are initiated on or after 30 days following the date of publication of the final rule. We note that the final rule will therefore apply to entries of merchandise that took place prior to publication of the final rule. However, we believe this does not result in unfairness as the regulations, both in their current form and in this final rulemaking, merely guide the Department on what adjustments to make to export price or constructed export price and normal value under certain factual scenarios in the course of an antidumping duty proceeding. The final rule therefore impacts the way in which the Department makes certain calculations in antidumping duty proceedings, and no entities would be required to undertake additional compliance measures or expenditures on entries that have already taken place. Changes From the Proposed Rule In the final rule, the Department has added further refinements to the definition of price adjustment in 19 CFR 351.102(b)(38) to clarify that a price adjustment is not limited to discounts or rebates, but encompasses other adjustments as well. The Department has also made certain modifications to the new second sentence of 19 CFR 351.401(c) to clarify that the Department does not intend to accept a price adjustment that is made after the time of sale unless the interested party demonstrates, to the satisfaction of the Department, its entitlement to such an adjustment. Classifications Executive Order 12866 It has been determined that this rule is not significant for purposes of Executive Order 12866. Paperwork Reduction Act This rule contains no new collection of information subject to the Paperwork Reduction Act, 44 U.S.C. Chapter 35. Executive Order 13132 This rule does not contain policies with federalism implications as that term is defined in section 1(a) of Executive Order 13132, dated August 4, 1999 (64 FR 43255 (August 10, 1999)). Regulatory Flexibility Act In accordance with the Regulatory Flexibility Act, 5 U.S.C. 601 et seq., the Chief Counsel for Regulation at the Department of Commerce has certified to the Chief Counsel for Advocacy, Small Business Administration, that this final rule would not have a significant economic impact on a substantial number of small entities. The factual basis for this certification was published with the Proposed Rule and is not repeated here. No comments were received regarding the economic impact of this rule. As a result, the conclusion in the certification memorandum for the Proposed Rule remains unchanged and a final regulatory flexibility analysis is not required and one has not been prepared. List of Subjects in 19 CFR Part 351 Administrative practice and procedure, Antidumping, Business and industry, Cheese, Confidential business information, Countervailing duties, Freedom of information, Investigations, Reporting and recordkeeping requirements. Dated: March 17, 2016. Paul Piquado, Assistant Secretary for Enforcement and Compliance. For the reasons stated, 19 CFR part 351 is amended as follows: PART 351--ANTIDUMPING AND COUNTERVAILING DUTIES 0 1. The authority citation for 19 CFR part 351 continues to read as follows: Authority: 5 U.S.C. 301; 19 U.S.C. 1202 note; 19 U.S.C. 1303 note; 19 U.S.C. 1671 et seq.; and 19 U.S.C. 3538. 0 2. In Sec. 351.102, revise paragraph (b)(38) to read as follows: Sec. 351.102 Definitions. * * * * * (b) * * * (38) Price adjustment. ``Price adjustment'' means a change in the price charged for subject merchandise or the foreign like product, such as a discount, rebate, or other adjustment, including, under certain circumstances, a change that is made after the time of sale (see Sec. 351.401(c)), that is reflected in the purchaser's net outlay. * * * * * 0 3. In Sec. 351.401, revise paragraph (c) to read as follows: Sec. 351.401 In general. * * * * * (c) Use of price net of price adjustments. In calculating export price, constructed export price, and normal value (where normal value is based on price), the Secretary normally will use a price that is net of price adjustments, as defined in Sec. 351.102(b), that are reasonably attributable to the subject merchandise or the foreign like product (whichever is applicable). The Secretary will not accept a price adjustment that is made after the time of sale unless the interested party demonstrates, to the [[Page 15646]] satisfaction of the Secretary, its entitlement to such an adjustment. * * * * * [FR Doc. 2016-06698 Filed 3-23-16; 8:45 am] BILLING CODE 3510-DS-P
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COMMENTERS
Abbreviation Commenter
EEI ........................................................... Edison Electric Institute.
Idaho Power ............................................ Idaho Power Company.
ITC ........................................................... International Transmission Company.
Luminant .................................................. Luminant Generation Company LLC.
NERC ....................................................... North American Electric Reliability Corporation.
NAGF ....................................................... North American Generator Forum.
Tri-State ................................................... Tri-State Generation and Transmission Association, Inc.
[FR Doc. 2016–06508 Filed 3–23–16; 8:45 am] Department has further adopted in this Act (defining export price and
BILLING CODE 6717–01–P final rule a non-exhaustive list of factors constructed export price) and section
that it may consider in determining 773 of the Act (defining normal value).
whether to accept a price adjustment The prices used to establish export
DEPARTMENT OF COMMERCE that is made after the time of sale. price, constructed export price, and
DATES: Effective date: April 25, 2016. normal value involve certain
International Trade Administration Applicability date: This rule will apply adjustments. See, e.g., 19 CFR
to all proceedings initiated on or after 351.401(b). In its May 19, 1997 final
19 CFR Part 351 April 25, 2016. rulemaking, the Department
[Docket No. 140929814–6136–02] FOR FURTHER INFORMATION CONTACT: promulgated regulatory provisions
Jessica Link at (202) 482–1411, James governing the use of price adjustments
RIN 0625–AB02 Ahrens at (202) 482–3558, or Melissa in the calculation of export price,
Skinner at (202) 482–0461. constructed export price, and normal
Modification of Regulations Regarding value in antidumping duty proceedings.
Price Adjustments in Antidumping SUPPLEMENTARY INFORMATION:
Antidumping Duties; Countervailing
Duty Proceedings Background Duties; Final Rule, 62 FR 27296 (May
AGENCY: Enforcement and Compliance, Section 731 of the Tariff Act of 1930, 19, 1997) (‘‘1997 Final Rule’’). In
International Trade Administration, as amended (the Act) provides that particular, the Department promulgated
Department of Commerce. when a company is selling foreign the current regulation at 19 CFR
ACTION: Final rule. merchandise into the United States at 351.102(b)(38), which provides a
less than fair value, and material injury definition of ‘‘price adjustment.’’ In
SUMMARY: The Department of Commerce or threat of material injury is found by providing this definition, the
(the Department) is modifying its the International Trade Commission, the Department stated that ‘‘[t]his term is
regulations pertaining to price Department shall impose an intended to describe a category of
adjustments in antidumping duty antidumping duty. An antidumping changes to a price, such as discounts,
proceedings. These modifications clarify duty analysis involves a comparison of rebates and post-sale price adjustments,
asabaliauskas on DSK3SPTVN1PROD with RULES
that the Department does not intend to the company’s sales price in the United that affect the net outlay of funds by the
accept a price adjustment that is made States (known as the export price or purchaser.’’ 1997 Final Rule, 62 FR at
after the time of sale unless the constructed export price) with the price 27300.
interested party demonstrates, to the or cost in the foreign market (known as The Department also enacted 19 CFR
satisfaction of the Department, its the normal value). See 19 CFR 351.401(c) that explains how the
entitlement to such an adjustment. The 351.401(a). See also section 772 of the Department will use a price net of price
61 18 CFR 380.4(a)(2)(ii) (2015).
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adjustments. In the 1997 Final Rule, the Germany, Italy, Japan, and the United www.Regulations.gov under Docket
Department explained that 19 CFR Kingdom: Final Results of Antidumping Number ITA–2014–0001. After
351.401(c) was intended to ‘‘restate[] the Duty Administrative Reviews, 71 FR analyzing and carefully considering all
Department’s practice with respect to 40064 (July 14, 2006) and accompanying of the comments that the Department
price adjustments, such as discounts Issues and Decision Memorandum, Cmt. received in response to the Proposed
and rebates.’’ Id., 62 FR at 27344. 19. Rule, the Department has adopted the
The Department also addressed the On March 25, 2014, the Court of modification with certain changes, and
following comment received on the International Trade issued Papierfabrik is amending its regulations accordingly.
1997 Final Rule’s proposed rulemaking, August Koehler AG v. United States, 971
F. Supp. 2d 1246 (Ct. Int’l Trade 2014) Explanation of Regulatory Provision
regarding whether ‘‘after the fact’’ price and Final Modification
adjustments, that were not (Koehler AG), remanding the
contemplated at the time of sale, would Department’s decision in Lightweight The Department is modifying two of
be accepted under 19 CFR 351.401(c): Thermal Paper from Germany, noted its regulations relating to price
above. The Court ordered the adjustments in antidumping duty
One commenter suggested that, at least for
Department to reconsider Papierfabrik proceedings: the definition of the term
purposes of normal value, the regulations
should clarify that the only rebates August Koehler AG’s rebate program. ‘‘price adjustment’’ in 19 CFR
Commerce will consider are ones that were The Court disagreed with the 351.102(b)(38), and the Department’s
contemplated at the time of sale. This Department’s determination that the explanation of its use of prices net of
commenter argued that foreign producers regulations permitted it to disregard price adjustments in 19 CFR 351.401(c).
should not be allowed to eliminate dumping certain price adjustments, the terms and In the Proposed Rule, the Department
margins by providing ‘‘rebates’’ only after the conditions of which were not proposed minor refinements to the
existence of margins becomes apparent. established or known to the customer at definition of price adjustment in 19 CFR
The Department has not adopted this the time of sale, stating that ‘‘the 351.102(b)(38). In this final rule, and in
suggestion at this time. We do not disagree light of a party’s comment, as discussed
regulations set forth a broad definition
with the proposition that exporters or in further detail below, the Department
producers will not be allowed to eliminate of price adjustment encompassing ‘any
dumping margins by providing price change in the price charged for . . . the is modifying 19 CFR 351.102(b)(38) to
adjustments ‘‘after the fact.’’ However, as foreign like product’ that ‘are reflected refine the definition of price adjustment.
discussed above, the Department’s treatment in the purchaser’s net outlay.’ ’’ 971 F. In particular, we are including language
of price adjustments in general has been the Supp. 2d at 1251–52 (quoting 19 CFR in 19 CFR 351.102(b)(38) to clarify that
subject of considerable confusion. In 351.102(b)(38)) (emphasis added by a price adjustment is not limited to
resolving this confusion, we intend to Court). In accordance with the Court’s discounts or rebates, but encompasses
proceed cautiously and incrementally. The order, on remand, under protest, the other adjustments as well.
regulatory revisions contained in these final Department granted an adjustment for Prior to the Proposed Rule, 19 CFR
rules constitute a first step at clarifying our 351.401(c) provided an explanation of
the rebates at issue. See Final Results of
treatment of price adjustments. We will the Department’s use of prices net of
consider adding other regulatory refinements Redetermination Pursuant to Court
Remand, Lightweight Thermal Paper price adjustment in calculating export
at a later date.
from Germany, Papierfabrik August price (or constructed exported price)
Id., 62 FR at 27344. Since enacting these Koehler AG v. United States, Court and normal value (where price is used
regulations, the Department has No.11–00147, Slip Op.14–31 (Ct. Int’l as the basis for normal value). In the
consistently applied its practice of not Trade March 25, 2014), dated June 20, Proposed Rule, the Department
granting price adjustments where the 2014. proposed to modify 19 CFR 351.401(c),
terms and conditions were not On December 31, 2014, the in light of the Court of International
established and known to the customer Department published a proposed Trade’s decision on Koehler AG, in two
at the time of sale (sometimes referred modification of its regulations, 19 CFR respects. First, in the first sentence of 19
to as determining the ‘‘legitimacy’’ of a 351.102(b)(38) and 19 CFR 351.401(c), CFR 351.401(c), the Department
price adjustment) because of the which concern price adjustments in proposed language indicating that it
potential for manipulation of the antidumping duty proceedings. See would normally use a price that is net
dumping margins through so-called Modification of Regulations Regarding of any price adjustment. Second, the
‘‘after-the-fact’’, or post-sale, Price Adjustments in Antidumping Duty Department proposed to add a second
adjustments. See, e.g., Certain Oil Proceedings, 79 FR 78742 (December 31, sentence to 19 CFR 351.401(c) that
Country Tubular Goods From Taiwan: 2014) (Proposed Rule). The Proposed clarified the Department generally
Final Determination of Sales at Less Rule explained the Department’s would not consider a price adjustment
Than Fair Value, 79 FR 41979 (July 18, proposal, in light of the Court of that reduces or eliminates a dumping
2014) and accompanying Issues and International Trade’s decision in margin unless the party claiming such
Decision Memorandum, Cmt. 3; Koehler AG, to clarify that the price adjustment demonstrates that the
Lightweight Thermal Paper From Department generally will not consider terms and conditions of the adjustment
Germany: Notice of Final Results of the a price adjustment that reduces or were established and known to the
First Antidumping Duty Administrative eliminates dumping margins unless the customer at the time of sale.
Review, 76 FR 22078 (April 20, 2011) party claiming such price adjustment In the final rule, as discussed below,
(Lightweight Thermal Paper from demonstrates that the terms and in light of comments received from
Germany) and accompanying Issues and conditions of the adjustment were interested parties, the Department is
asabaliauskas on DSK3SPTVN1PROD with RULES
Decision Memorandum, Cmt. 3; Canned established and known to the customer modifying 19 CFR 351.401(c) to clarify
Pineapple Fruit from Thailand: Final at the time of sale. that the Department does not intend to
Results and Partial Rescission of The Department received numerous accept a price adjustment that is made
Antidumping Duty Administrative comments on the Proposed Rule and has after the time of sale unless the
Review, 71 FR 70948 (Dec. 7, 2006) and addressed these comments below. The interested party demonstrates, to the
accompanying Issues and Decision Proposed Rule, comments received, and satisfaction of the Department, its
Memorandum, Cmt. 1; Ball Bearings this final rule can be accessed using the entitlement to such an adjustment. The
and Parts Thereof from France, Federal eRulemaking portal at http:// Department has further provided in this
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![Federal Register / Vol. 81, No. 57 / Thursday, March 24, 2016 / Rules and Regulations 15643
final rule, as discussed in further detail present the potential for manipulation the ‘‘fair comparison’’ requirement of
below, a non-exhaustive list of factors of dumping margins. In Koehler AG the Article 2.4 of the AD Agreement.
which it may consider in determining Court of International Trade held that Response: The Department disagrees
whether to accept price adjustments that the Department did not have the with the commenter’s argument that the
are made after the time of sale, also discretion under 19 CFR 351.102(b)(38) Department’s proposed modifications to
referred to as ‘‘after-the-fact’’ or ‘‘post- and 19 CFR 351.401(c)—as currently 19 CFR 351.102(b)(38) and 19 CFR
sale’’ adjustments. written—to address such manipulative 351.401(c) are inconsistent with the
after-the-fact rebates. See 971 F. Supp. statute. As an initial matter, the
Response to Comments on the Proposed commenter argues that these
2d at 1251–52. The Proposed Rule, and
Rule modifications are inconsistent with
the further modifications adopted in
The Department received numerous this final rule, codify the Department’s section 773(a)(6)(C)(iii) of the Act,
comments on its Proposed Rule. Below intent and discretion to prevent certain which states that normal value shall be
is a summary of the comments, grouped post-sale price adjustments, like those at increased or decreased by the amount of
by issue category, followed by the issue in Koehler AG, and therefore are any difference between export price (or
Department’s response. appropriate to protect the integrity of constructed export price) and normal
1. Whether Any Changes to 19 CFR our proceedings. We believe that these value established to the Department’s
351.102(b)(38) and 19 CFR 351.401(c) further modifications, discussed below, satisfaction to be due to differences in
Are Necessary should address any concerns that the the circumstances of sale. However, the
Proposed Rule was unduly burdensome statutory basis for the price adjustments
Several commenters argue that the and does not account for actual business addressed in 19 CFR 351.102(b)(38) and
Proposed Rule is the appropriate practices. 19 CFR 351.401(c) is not section
response to Koehler AG and is necessary 773(a)(6)(C)(iii) of the Act, but rather, is
to maintain the integrity of the 2. Whether the Proposed Rule Is found in sections 772(a) and
Department’s proceedings and to Consistent With the Statute and U.S. 773(a)(1)(B)(i), which provide that in
prevent the manipulation of dumping International Obligations determining export price or normal
margins through ‘‘after-the-fact’’ Several commenters state that the value the Department begins with the
adjustments. These commenters argue Proposed Rule is consistent with the price at which the subject merchandise
that in Koehler AG, the Court Department’s general statutory authority or foreign like product is first sold—in
improperly found that the plain to impose antidumping duties pursuant other words, the basic ‘‘starting price’’
language of the current regulations to section 731 of the Act. One provisions. See 1997 Final Rule, 62 FR
precludes the disallowance of any post- commenter argues that the Proposed at 27344 (‘‘[The] use of a net price is
sale price adjustments. Without the Rule is inconsistent with section consistent with the view that discounts,
Proposed Rule, these commenters argue 773(a)(6)(C)(iii) of the Act. This rebates and similar price adjustments
that foreign producers and exporters commenter argues that a discount or are not expenses, but instead are items
would have every incentive to calculate rebate, regardless of when it is taken into account to derive the price
the U.S. price reduction necessary to established and known to the customer, paid by the purchaser.’’) This is
eliminate dumping, and then lower is a circumstance of sale which falls confirmed by the Department’s
their prices accordingly through within the statute’s instruction that treatment of the price adjustments
retroactive rebates to customers in the normal value shall be increased or described in 19 CFR 351.401(c) as
home or third-country market, thereby decreased by the amount of any something other than a circumstance of
reducing or eliminating the dumping difference between export price (or sale adjustment. Compare 19 CFR
margins and undermining the integrity constructed export price) and normal 351.401(c) (addressing use of price net
of the Department’s proceedings. value established to the Department’s of price adjustments) with 19 CFR
One commenter argues that the satisfaction to be due to differences in 351.410 (addressing circumstances of
Proposed Rule is unnecessary because the circumstances of sale. This sale adjustments which specifically
the Department has provided no commenter notes that the statute does cover direct selling expenses and
evidence of respondents utilizing not include a requirement that the assumed expenses between the seller
manipulative post-sale price customer have knowledge of the and the buyer).
adjustments and that existing adjustment prior to the sale. We disagree with the commenter’s
regulations are sufficient to maintain the This same commenter argues that the contention that the Proposed Rule was
integrity of the Department’s Proposed Rule is inconsistent with nevertheless inconsistent with the
proceedings because, under 19 CFR Article 2.4 of the Antidumping (AD) statute, which requires the Department
351.401(b)(1), the Department can Agreement, which provides that due to make adjustments for differences
already deny a price adjustment if it allowance shall be made for differences which affect price comparability, as
determines that the adjustment is not that affect price comparability, well as the Department’s obligation
bona fide. This commenter further including differences in conditions and under U.S. law to calculate dumping
argues that the Proposed Rule unduly terms of sale. This commenter notes the margins as accurately as possible. As
burdens respondents operating in opinion of Dispute Settlement Body several commenters recognized, and as
industries where many discounts and (DSB) of the World Trade Organization discussed in further detail below, the
rebates are agreed to on an ad hoc basis (WTO) in United States—Stainless Steel Department has a longstanding practice
without documentation over the course (Korea) that a condition or term of sale of denying certain post-sale price
asabaliauskas on DSK3SPTVN1PROD with RULES
of multiple transactions many months within the meaning of Article 2.4 is a adjustments where there exists a
before the Department’s proceedings. condition or term that reasonably can be potential for manipulation of the
Response: The Department finds that anticipated and accounted for at the dumping margins, and the courts have
the proposed changes will help protect time of sale. An additional commenter affirmed this practice as consistent with
the integrity of our proceedings and are argues that any regulation that would the statute. See Koenig & Bauer-Albert
an appropriate response to Koehler AG, necessarily disallow an adjustment only AG v. United States, 15 F. Supp. 2d 834,
which hinders the Department’s ability if it reduced or eliminated dumping 840 (Ct. Int’l Trade 1998) (‘‘Commerce’s
to address after-the-fact rebates which margins could be construed as violating decision to reject price amendments that
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![15644 Federal Register / Vol. 81, No. 57 / Thursday, March 24, 2016 / Rules and Regulations
present the potential for price free from outcome-driven manipulation determining whether to grant a price
manipulation was a permissible and that dumping margins should adjustment normally under its
interpretation of the statute.’’); reflect the respondent’s pricing behaviorregulations. This commenter suggests
Mitsubishi Elec. Corp. v. United States, in the ordinary course of business. that the Department could consider the
700 F. Supp. 538, 555 (Ct. Int’l Trade One commenter argues that the following: (1) How common such post-
1988) (‘‘The ITA has been vested with Proposed Rule in its current form is sale price adjustments are for the
authority to administer the antidumping overly broad and, if adopted, threatens industry; (2) the timing of the
laws in accordance with the legislative to eliminate certain legitimate post-saleadjustment; (3) the number of such
intent. To this end, the ITA has a certain price adjustments that were previously adjustments in the proceeding; (4)
amount of discretion [to act] . . . with granted by the Department. This whether the reported changes reflect
the purpose in mind of preventing the commenter argues that the Department’s both increases and decreases to the
intentional evasion or circumvention of practice has allowed for at least three originally negotiated prices in the
the antidumping duty law.’’), aff’d 898 categories of post-sale price adjustmentsrelevant markets; (5) whether there is
F.2d 1577 (1990). that the Proposed Rule would preclude: commercial documentation maintained
The Proposed Rule, in proposing (1) Price protection adjustments in the ordinary course of business
certain modifications to 19 CFR whereby a buyer seeks a price demonstrating that the price changes
351.102(b)(38) and 19 CFR 351.401(c), adjustment to sell a commodity were negotiated by the parties and
was intended to codify the Department’s downstream when commodity prices resulted in a change in the purchaser’s
intent to prevent such potentially are rapidly changing; (2) post-invoice net outlay and a change in the
manipulative post-sale price consumer rebates that offer the buyer a producer’s net revenues; and (6) any
adjustments. As discussed below, in this rebate at the time it sells the product to
other factors tending to reflect on the
final rule the Department has made an end user, where such rebates often legitimacy of the claimed adjustment.
further modifications to these are not fixed at the time of the first sale;Other commenters argue that the
regulations to clarify that the and (3) quality-upon-receipt discounts, Proposed Rule in its current form is
Department does not intend to accept a which are common for perishable goods. inconsistent with normal business
price adjustment that is made after the Response: We find that the Proposed practices in many industries
time of sale unless the interested party Rule was intended to codify the investigated by the Department.
demonstrates, to the satisfaction of the Department’s intent and discretion to One commenter proposes modifying
Department, its entitlement to such an prevent certain post-sale price 19 CFR 351.401(c) to allow for a price
adjustment. These final modifications adjustments. However, in light of adjustment if the party seeking the
continue to be consistent with the certain comments, we recognize that the adjustment can demonstrate that the
Department’s statutory authority, in proposed modifications to 19 CFR adjustment at issue is within the party’s
setting the ‘‘starting price’’ of normal 351.401(c) could have the unintended standard business practice that existed
value or export price, and prevent the effect of limiting the Department’s prior to the initiation of the proceeding.
potential manipulation of dumping discretion to accept certain post-sale Response: With respect to the
margins through certain post-sale price price adjustments which the proposed changes to 19 CFR
adjustments. Department has previously accepted. 351.102(b)(38) in the Proposed Rule,
Finally, the Department disagrees Therefore, as discussed below, we have these modifications were not intended
with those commenters that argue that made further modifications to 19 CFR to foreclose other types of price
the Proposed Rule was inconsistent 351.401(c) to ensure that the adjustments, such as billing adjustments
with the United States’ WTO Department maintains its intended and post-sale decreases to home market
obligations. To the contrary, the discretion. prices or increases to U.S. prices.
Department finds that the Proposed Nonetheless, in light of a party’s
4. Whether the Department Should comment, the Department is modifying
Rule was consistent with U.S. law,
Implement Any Changes to the 19 CFR 351.102(b)(38) to refine the
which is consistent with our obligations
Proposed Rule definition of price adjustment and to
under the AD Agreement. In any case,
the relevant language which one Several commenters argue that the clarify that a price adjustment is not just
commenter objected to with respect to Department should adopt the Proposed limited to discounts or rebates, but
specifically disallowing adjustments Rule in its entirety, as it is an encompasses other adjustments as well.
which reduce or eliminate dumping appropriate and necessary codification With respect to 19 CFR 351.401(c), in
margins does not appear in the final of the Department’s established practice light of concerns that the modifications
rule. of disallowing certain post-sale price in the Proposed Rule may have the
adjustments. unintended consequence of being overly
3. Whether the Proposed Rule Is One commenter argues that the restrictive and limiting the Department’s
Consistent With the Department’s Department should clarify that the discretion to accept certain post-sale
Practice Proposed Rule is not intended to limit price adjustments which it has
Several commenters argue that the the Department’s discretion to address previously accepted, the Department is
Proposed Rule codifies the Department’s post-sale price adjustments other than modifying 19 CFR 351.401(c) to clarify
longstanding practice of disallowing rebates or discounts, such as billings that the Department generally will not
price adjustments that reduce or adjustments. This commenter observes accept a price adjustment that is made
eliminate dumping margins where the that whereas prior to this modification after the time of sale unless the
asabaliauskas on DSK3SPTVN1PROD with RULES
terms and conditions of the adjustment 19 CFR 351.102(b)(38) listed discounts, interested party demonstrates, to the
were not established and known to the rebates, and post-sale price adjustments satisfaction of the Department, its
customer at the time of sale. Several of as examples of changes in price that entitlement to such an adjustment.
these commenters argue that the could qualify as price adjustments, the In determining whether a party has
Proposed Rule is consistent with other Proposed Rule does not include the term demonstrated its entitlement to such an
aspects of the Department’s practice ‘‘post-sale price adjustments.’’ This adjustment, the Department may
based on the principle that the same commenter suggests that the consider: (1) Whether the terms and
Department’s proceedings should be Department consider a set of factors in conditions of the adjustment were
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![15646 Federal Register / Vol. 81, No. 57 / Thursday, March 24, 2016 / Rules and Regulations
satisfaction of the Secretary, its for Audits of LSC Recipients, the LSC supportive of the changes the LSC OIG
entitlement to such an adjustment. OIG intends that the Compliance proposed to the Compliance
* * * * * Supplement accurately reflects these Supplement for Audits of LSC
[FR Doc. 2016–06698 Filed 3–23–16; 8:45 am] regulatory revisions and updates, Recipients.
BILLING CODE 3510–DS–P including the corresponding changes to The LSC OIG proposed making the
suggested audit guidance provided to Compliance Supplement for Audits of
the IPAs. A summary of the proposed LSC Recipients effective for audits of
LEGAL SERVICES CORPORATION changes follows. fiscal years ending on or after December
The LSC OIG has included regulatory 31, 2015. Four commenters (PSLS,
45 CFR Chapter XVI requirements under 45 CFR part 1604 in NLADA, CLS, LTFI) expressed concern
the Compliance Supplement for Audits over retroactive application of the
Compliance Supplement for Audits of of LSC Recipients. The inclusion sets revised Compliance Supplement for
LSC Recipients forth the requirements dealing with the Audits of LSC Recipients which they
permissibility of recipient staff engaged believed would result in additional
AGENCY: Legal Services Corporation.
in the outside practice of law along with audit costs, delays in submission and
ACTION:Notice of final changes to suggested audit guidance for use by the
Compliance Supplement for Audits of impact the current audit process that
IPAs. may be underway. The LSC OIG will
LSC Recipients. The LSC OIG made major revisions to make the Compliance Supplement for
SUMMARY: The Legal Services several regulatory summaries to reflect Audits of LSC Recipients effective for
Corporation (‘‘LSC’’) Office of Inspector LSC’s revisions to its regulations. audits of fiscal years ending on or after
General (‘‘OIG’’) is updating its Revised summaries include those for 45 April 30, 2016.
Compliance Supplement for Audits of CFR parts 1609 (fee generating cases); As part of finalizing the Compliance
LSC Recipients for fiscal years ending 1611 (eligibility); 1614 (private attorney Supplement for Audits of LSC
April 30, 2016, and thereafter. The involvement); 1626 (restrictions on legal Recipients, typos were corrected and
revisions primarily affect certain assistance to aliens); and to a lesser formatting problems were resolved in
regulatory requirements to be audited extent, 1635 (timekeeping requirement). both the regulatory summaries and in
pursuant to LSC regulations. In The summaries now follow the existing the suggested audit procedures. One
law and LSC regulations. The suggested commenter (SCLAID) identified a
addition, the LSC OIG has included for
audit procedures for each of these formatting issue and typos in separate
audit certain regulatory requirements
sections have been revised and updated regulatory summaries that were all
which impact recipient staff’s
to incorporate and take into corrected.
involvement in the outside practice of
consideration the regulatory changes.
law. Finally, suggested audit procedures The LSC OIG revised the case III. Section-by-Section Discussion of
for several regulations have been sampling methodology by reducing Comments
updated and revised for clarification criteria utilized in the case selection
and simplification purposes. A. Proposed Inclusion of 45 CFR Part
process to clarify and simplify the
DATES: The Compliance Supplement for 1604—Outside Practice of Law
process.
Audits of LSC Recipients will be The LSC OIG updated and revised The LSC OIG proposed inclusion of
effective on April 25, 2016. suggested audit procedures for the 45 CFR part 1604 in the Compliance
FOR FURTHER INFORMATION CONTACT: regulations. The updates and revisions Supplement for Audits of LSC
Anthony M. Ramirez, Director of are intended for clarification and Recipients and provided a regulatory
Planning, Policy & Reporting, Legal simplification purposes and to provide summary of the applicable compliance
Services Corporation Office of Inspector added emphasis on internal controls. requirements.
General, 3333 K Street NW., Comment—Two commenters
Washington, DC 20007; (202) 295–1668 II. General Discussion of Comments (NLADA, CLS) expressed concern that
(phone), (202) 337–6616 (fax), or The LSC OIG received ten comments the regulatory summary did not fully
aramirez@oig.lsc.gov. during the public comment period. Four list all the permissible circumstances for
SUPPLEMENTARY INFORMATION: comments were submitted by LSC the outside practice of law, specifically
funded recipients: Prairie State Legal those contained in 45 CFR 1604.4(c)(2)
I. History of This Action Services (PSLS), Colorado Legal and (c)(3).
The purpose of the Compliance Services (CLS), Land of Lincoln Legal Response—The LSC OIG has revised
Supplement for Audits of LSC Assistance Foundation, Inc. (LOLLAF) the regulatory summary to include the
Recipients is to set forth the LSC and Legal Assistance Foundation of language contained in 45 CFR
regulatory requirements to be audited by Metropolitan Chicago (LAF). Three 1604.4(c)(2), (c)(3) and (c)(4).
the Independent Public Accountants comments were submitted by IPAs. One
(‘‘IPA’’) as part of the recipients’ annual comment was submitted by the Lawyers B. Proposed Regulatory Summary for 45
financial statement audit and to provide Trust Fund of Illinois (LTFI), separately CFR Part 1611—Financial Eligibility
suggested guidance to the IPAs in joined by LAF. One comment was The LSC OIG proposed revisions to
accomplishing this task. Pursuant to 45 submitted by the Standing Committee update the regulatory summary for 45
CFR part 1641, IPAs are subject to on Legal Aid & Indigent Defendants CFR part 1611 in order to follow the
suspension, removal, and/or debarment (SCLAID) of the American Bar current LSC regulation. The LSC OIG
asabaliauskas on DSK3SPTVN1PROD with RULES
for not following OIG audit guidance as Association. One comment was also proposed what it believed to be
set out in the Compliance Supplement submitted by the non-LSC funded non- clarifying language relating to Older
for Audits of LSC Recipients. Since the profit National Legal Aid and Defender Americans Act (OAA) funds.
last revision of the LSC OIG’s Association (NLADA) through its Civil Comment 1—Six commenters
Compliance Supplement for Audits of Policy Group and its Regulations and (including NLADA, PSLS, CLS,
LSC Recipients, LSC has significantly Policy Committee, which was also LOLLAF, LTFI, LAF) expressed
revised and updated several regulations. separately joined by LAF. All significant concern on the inclusion of
By revising the Compliance Supplement commenters appeared generally the language relating to the OAA funds,
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Document Created: 2016-03-24 00:57:23
Document Modified: 2016-03-24 00:57:23
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Rules and Regulations | |
| Action | Final rule. | |
| Contact | Jessica Link at (202) 482-1411, James Ahrens at (202) 482-3558, or Melissa Skinner at (202) 482-0461. | |
| FR Citation | 81 FR 15641 | |
| RIN Number | 0625-AB02 | |
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