81 FR 58419 - Modification of Regulations Regarding Basis for Normal Value

DEPARTMENT OF COMMERCE
International Trade Administration

Federal Register Volume 81, Issue 165 (August 25, 2016)

The Department of Commerce (``the Department'') proposes to modify the regulations pertaining to the use of constructed value or third country sales for purposes of determining normal value, where the exporting country does not constitute a viable market, and is seeking comments from parties. This modification, if adopted, will specify that, where the exporting country does not constitute a viable market, the Department normally will calculate normal value based upon constructed value. This modification would invert the preexisting order of preference that, where the exporting country does not constitute a viable market, the Department normally calculates normal value based on sales in a viable third country. The Department proposes this modification in light of certain advantages of constructed value over third country sales, such as availability of cost of production information and comparability to U.S. prices.

[Federal Register Volume 81, Number 165 (Thursday, August 25, 2016)]
[Proposed Rules]
[Pages 58419-58421]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-20417]


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DEPARTMENT OF COMMERCE

International Trade Administration

19 CFR Part 351

[Docket Number 160815742-6742-01]
RIN 0625-AB08


Modification of Regulations Regarding Basis for Normal Value

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

ACTION: Proposed rule and request for comments.

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SUMMARY: The Department of Commerce (``the Department'') proposes to 
modify the regulations pertaining to the use of constructed value or 
third country sales for purposes of determining normal value, where the 
exporting country does not constitute a viable market, and is seeking 
comments from parties. This modification, if adopted, will specify 
that, where the exporting country does not constitute a viable market, 
the Department normally will calculate normal value based upon 
constructed value. This modification would invert the preexisting order 
of preference that, where the exporting country does not constitute a 
viable market, the Department normally calculates normal value based on 
sales in a viable third country. The Department proposes this 
modification in light of certain advantages of constructed value over 
third country sales, such as availability of cost of production 
information and comparability to U.S. prices.

DATES: To be assured of consideration, written comments must be 
received no later than September 26, 2016.

ADDRESSES: All comments must be submitted through the Federal 
eRulemaking Portal at http://www.regulations.gov, Docket No. ITA-2016-
0009, unless the commenter does not have access to the internet. 
Commenters that do not have access to the internet may submit the 
original and one electronic copy on CD-ROM of each set of comments by 
mail or hand delivery/courier. All comments should be addressed to Paul 
Piquado, Assistant Secretary for Enforcement & Compliance, Room 1870, 
Department of Commerce, 14th Street and Constitution Ave. NW., 
Washington, DC 20230. Comments submitted to the Department will be 
uploaded to the eRulemaking Portal at www.Regulations.gov.
    The Department will consider all comments received before the close 
of the comment period. All comments responding to this notice will be a 
matter of public record and will be available on the Federal 
eRulemaking Portal at www.Regulations.gov. The Department will not 
accept comments accompanied by a request that part or all of the 
material be treated confidentially because of its business proprietary 
nature or for any other reason.
    Any questions concerning file formatting, document conversion, 
access on the Internet, or other electronic filing issues should be 
addressed to Moustapha Sylla, Enforcement and Compliance, at (202) 482-
4685 or email address: [email protected].

FOR FURTHER INFORMATION CONTACT: Zachary Simmons at (202) 482-4044 or 
Abdelali Elouaradia at (202) 482-1374.

SUPPLEMENTARY INFORMATION: 

Background

    In general terms, section 731 of the Tariff Act of 1930, as amended 
(the Act), provides that when a company is selling foreign merchandise 
in the United States at less than fair value, and the International 
Trade Commission determines that an industry is materially injured or 
threatened with material injury by reason of such sales or imports, the 
Department shall impose an antidumping duty. Furthermore, section 751 
of the Act provides that the Department shall periodically review and 
determine, upon request, the amount of any antidumping duty. Pursuant 
to section 773(a) of the Act, the Department's analysis involves a 
comparison between a company's sales price to, or in, the United States 
(defined either as export price or constructed export price) with the 
normal value. See 19 CFR 351.401(a); see also section 772 of the Act 
(defining export price and constructed export price); section 773 of 
the Act (defining normal value). Although in most circumstances, sales 
in the exporting country provide the most appropriate basis for normal 
value, section 773 of the Act also permits the use of third country 
sales or constructed value as the basis for normal value. See also 19 
CFR 351.404(a).
    The Department's regulations identify circumstances in which it may 
rely upon another basis for normal value. The Department may use a 
basis other than sales in the exporting country where, pursuant to 19 
CFR 351.404(b), the Department determines that the exporting country 
does not constitute a viable market. 19 CFR 351.404(c). In addition, 
the Department may use a basis other than sales in the exporting 
country where a proper comparison between sales in the exporting 
country and sales in the United States is not possible. 19 CFR 
351.404(c)(2)(i).\1\
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    \1\ The Department has exercised this discretion in the past. 
See, e.g., Large Newspaper Printing Presses and Components Thereof, 
Whether Assembled or Unassembled, from Japan, 65 FR 62700, 62702 
(Dep't of Commerce Oct. 19, 2000) (prelim. results) (basing normal 
value on constructed value because ``the unique, custom-built nature 
of each LNPP sold does not permit proper price-to-price 
comparisons'') unchanged in Large Newspaper Printing Presses and 
Components Thereof, Whether Assembled or Unassembled, from Japan, 66 
FR 11555 (Dep't of Commerce Feb. 26, 2001) (final results).
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    In those circumstances where the Department determines that sales 
in the exporting country do not permit an appropriate comparison to 
United States sales, ``[t]he Secretary normally will calculate normal 
value based on sales to a third country rather than on constructed 
value if adequate information is available and verifiable . . .'' 19 
CFR 351.404(f). Thus, although Sec.  404(f) of the Department's 
regulations contemplates both sales in a third country and constructed 
value as bases to calculate normal value, it establishes an order of 
preference in which the Department ``normally'' will use sales in a 
third country. Section 404(f) establishes sales in a third country as 
the preferred basis to calculate normal value where (1) there are no 
sales of the foreign like product in the exporting country, (2) there 
are insufficient sales of the foreign like product in the exporting 
country and thus the market is not viable, or (3) the Department has 
otherwise determined it cannot use such sales for purposes of 
determining normal value pursuant to section 773(a)(1)(B)(i) of the 
Act.
    However, the Department has identified some factors in favor of 
inverting the current order of preference to use, normally, constructed 
value rather than sales in a third country. First, the proposed 
preference for constructed value accords with the

[[Page 58420]]

TPEA, which amended section 773(b)(2) of the Act, regarding the 
importance of the cost of production in the Department's analysis of 
unfair trading behavior. Specifically, the TPEA amended section 
773(b)(2) of the Act to require that the Department request cost 
information from individually examined respondent companies in 
antidumping proceedings. See Trade Preferences Extension Act of 2015, 
Public Law 114-27, 129 Stat. 362 (2015). As a consequence, the 
Department, in all segments of its antidumping duty proceedings for 
which the complete initial questionnaire was not issued as of August 6, 
2015, now requires that parties provide cost of production information, 
which is necessary information for the use of constructed value. See 
Dates of Application of Amendments to the Antidumping and 
Countervailing Duty Laws Made by the Trade Preferences Extension Act of 
2015, 80 FR 46793, 46794 (August 6, 2015). Therefore, obtaining 
constructed value information will not generally impose an additional 
burden upon the Department or respondent parties. By comparison, the 
Department would not necessarily already have requested the information 
necessary to calculate normal value based upon sales in a third 
country.
    Second, constructed value normally may be preferable to sales in a 
third country because it provides a more appropriate comparison to U.S. 
prices. Based upon the Department's experience, third country sales 
sometimes involve products that are similar, but not identical, to the 
products sold in the United States. See 19 CFR 351.404(e). However, as 
delineated under sections 773(e) and (f) of the Act, constructed value 
reflects the costs associated with the production and sale of the 
merchandise.
    Given the foregoing considerations, the Department is issuing this 
proposed rule to modify the regulations at issue pursuant to 
Administrative Procedure Act (5 U.S.C. 553) notice and comment 
procedures; the Department invites comments from all parties.

Proposed Modification

    The Department proposes to modify 19 CFR 351.404(f) and 19 CFR 
351.405(a) as indicated below. These modifications, if adopted, are 
intended to establish an order of preference in which, where the 
exporting country does not constitute a viable market, the Department 
normally will calculate normal value using constructed value. Although 
sales in a third country remain an appropriate basis for normal value 
in certain circumstances, constructed value would represent the 
approach ``normally'' used by the Department.

Proposed Effective Date

    The Department proposes to make this rulemaking effective for 
segments of antidumping duty proceedings initiated on or after 30 days 
following the date of publication of the final rule.

Comments

    The Department invites parties to comment on this proposed rule and 
the proposed effective date. Further, any party may submit comments 
expressing its disagreement with the Department's proposal and may 
propose an alternative approach.

Classifications

Executive Order 12866

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

Paperwork Reduction Act

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

Executive Order 13132

    This proposed 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

    The Chief Counsel for Regulation has certified to the Chief Counsel 
for Advocacy of the Small Business Administration under the provisions 
of the Regulatory Flexibility Act, 5 U.S.C. 605(b), that the proposed 
rule would not have a significant economic impact on a substantial 
number of small business entities.
    The entities upon which this rulemaking could have an impact 
include foreign exporters and producers, some of whom are affiliated 
with U.S. companies, and U.S. importers. Enforcement & Compliance 
currently does not have information on the number of entities that 
would be considered small under the Small Business Administration's 
size standards for small businesses in the relevant industries. 
However, some of these entities may be considered small entities under 
the appropriate industry size standards. Although this proposed rule 
may indirectly impact small entities that are parties to individual 
antidumping duty proceedings, it will not have a significant economic 
impact on any entities.
    The proposed action alters the Department's approach in instances 
where the exporting country does not constitute a viable market or, 
pursuant to 19 CFR 351.404(c)(2), the Department declines to calculate 
normal value on the basis of exporting country sales. In particular, it 
would direct the Department normally to rely upon constructed value, 
rather than sales in a third country, as the basis for normal value. 
However, if the proposed rule is implemented, no entities would be 
required to undertake additional compliance measures or expenditures. 
Specifically, section 773(b)(2) of the Act now requires that the 
Department request cost of production information from each examined 
respondent in every segment of an antidumping duty proceeding. As a 
result, for those individually examined respondents whose exporting 
country is not viable or where the Department cannot otherwise use the 
sales in the exporting country, the Department will already have 
required submission of the information necessary to calculate normal 
value based upon constructed value, thus obviating the need to request 
information on sales in a viable third country. Therefore, the proposed 
rule would not have a significant economic impact upon a substantial 
number of small business entities. For this reason, an Initial 
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: August 19, 2016.
Paul Piquado,
Assistant Secretary for Enforcement and Compliance.

    For the reasons stated, 19 CFR part 351 is proposed to be 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.  351.404, revise paragraph (f) to read as follows:

[[Page 58421]]

Sec.  351.404  Selection of the market to be used as the basis for 
normal value.

* * * * *
    (f) Constructed value and third country sales. The Secretary 
normally will calculate normal value based on constructed value (see 
section 773(a)(4) of the Act (Use of Constructed Value)) rather than on 
third country sales.
0
3. In Sec.  351.405, revise paragraph (a) to read as follows:


Sec.  351.405  Calculation of normal value based on constructed value.

    (a) Introduction. In certain circumstances, the Secretary may 
determine normal value by constructing a value based on the cost of 
manufacture, selling general and administrative expenses, and profit. 
The Secretary may use constructed value as the basis for normal value 
where: The exporting country is not viable; sales below the cost of 
production are disregarded; sales outside the ordinary course of trade, 
or sales the prices of which are otherwise unrepresentative, are 
disregarded; sales used to establish a fictitious market are 
disregarded; no contemporaneous sales of comparable merchandise are 
available; or in other circumstances where the Secretary determines 
that exporting country sales are inappropriate. (See section 773(e) and 
section 773(f) of the Act.) This section clarifies the meaning of 
certain terms relating to constructed value.
* * * * *
[FR Doc. 2016-20417 Filed 8-24-16; 8:45 am]
BILLING CODE 3510-DS-P