[Federal Register Volume 76, Number 34 (Friday, February 18, 2011)]
[Notices]
[Pages 9544-9547]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-3743]
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DEPARTMENT OF COMMERCE
International Trade Administration
Antidumping Methodologies in Proceedings Involving Non-Market
Economies: Valuing the Factor of Production: Labor; Request for Comment
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Request for comments.
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SUMMARY: The Department of Commerce (``the Department'') requests
public comment on the means by which it can best capture the cost of
labor in its wage rate methodology in antidumping proceedings involving
non-market economy (``NME'') countries. As part of this process, the
Department invites comments on the interim methodology for determining
a surrogate value for wage rates that is currently being applied in
antidumping proceedings for companies in NME countries.
DATES: To be assured of consideration, comments must be received no
later than March 21, 2011.
FOR FURTHER INFORMATION CONTACT: Christopher Mutz, (202) 482-0235,
Office of Policy, Import Administration, Julia Hancock, (202) 482-1394,
Office of Antidumping and Countervailing Duty Operations, Import
Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, NW., Washington, DC 20230.
SUPPLEMENTARY INFORMATION:
Background
Section 733(c) of the Tariff Act of 1930, as amended (``the Act''),
provides that the Department will value the factors of production
(``FOPs'') in NME cases using the best available information regarding
the value of such factors in a market economy (``ME'') country or
countries considered to be appropriate by the administering authority.
The Act requires that when valuing the FOPs, the Department utilize, to
the extent possible, the prices or costs of factors of production in
one or more ME countries that are (1) at a comparable level of economic
development and (2) significant producers of comparable merchandise.
See section 733(c)(4) of the Act.
Previously, the Department calculated wages using a regression
analysis that captured the worldwide relationship between per capita
Gross National Income (``GNI'') and hourly wage rates in manufacturing
pursuant to 19 CFR 351.408(c)(3). See Antidumping Methodologies: Market
Economy Inputs, Expected Non-Market Economy Wages, Duty Drawback; and
Request for Comments (``Antidumping Methodologies Notice''), 71 FR
61716 (October 19, 2006). On May 14, 2010, the Court of Appeals for the
Federal Circuit (``CAFC''), in Dorbest Ltd. v. United States, 604 F. 3d
1363, 1372 (Fed. Cir. 2010) (``Dorbest I''), invalidated 19 CFR
351.408(c)(3). Subsequently, the Department issued a remand
redetermination in the Dorbest litigation, and on February 9, 2011, the
Court of International Trade (``CIT'') affirmed in part, and remanded
in part, the Department's wage rate methodology applied in that
redetermination. See Dorbest Ltd. v. United States, Slip Op. 11-14 (CIT
Feb. 9, 2011) (``Dorbest II''). As a consequence of the CAFC's ruling
in Dorbest I, the Department is no longer relying on the wage rate
methodology described in its regulations. Since July 2010, the
Department has applied an interim wage rate methodology that derives a
surrogate wage rate from countries that are both economically
comparable and significant producers of merchandise comparable to the
merchandise subject to the antidumping duty proceeding.\1\ In October
2010, the Department modified its calculations to apply a simple-
average of industry-specific wage rates from those countries.\2\
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\1\ See Certain Woven Electric Blankets From the People's
Republic of China (``PRC''): Final Determination of Sales at Less
Than Fair Value (``Blankets from the PRC''), 75 FR 38459 (July 2,
2010) and accompanying Issues and Decision Memorandum at Comment 13.
\2\ Between July 2010 and October 2010, the Department
implemented an interim wage rate methodology that reflected a simple
average of national wage rates from countries found to meet both
criteria under section 733(c)(4) of the Act. Industry-specific data,
if available, is now the presumptive surrogate data used in the
Department's calculations. See Certain New Pneumatic Off-the-Road-
Tires from the People's Republic of China: Preliminary Results of
the Antidumping Duty Administrative Review, 75 FR 64259 (October 19,
2010) (``Tires from the PRC''); see also Certain Activated Carbon
from the People's Republic of China: Final Results and Partial
Rescission of Second Antidumping Duty Administrative Review, 75 FR
70208 (November 18, 2010) and accompanying Issues and Decision
Memorandum at Comment 4f (``Activated Carbon Final'').
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Request for Comment on International Labor Organization (``ILO'')
Chapter 6A Data
As part of the on-going process of evaluating options for
determining labor values, the Department is considering methodologies
that will best capture all labor costs. Currently, the Department uses
earnings or wage data as reported in ``Chapter 5B: Wages in
Manufacturing'' of the International Labor Organization (``ILO'')
Yearbook of
[[Page 9545]]
Labor Statistics. Chapter 5B captures the pre-tax monetary remuneration
received by the employee.
Chapter 5B data includes two types of compensation: (1) Direct
wages and salaries (``wages''), as well as (2) earnings data, which
include wages plus bonuses and gratuities (``earnings''). The
Department prefers ``earnings'' data, when available, since it more
accurately reflects the full remuneration received by workers. See
Antidumping Methodologies Notice, 71 FR at 61721.
The ILO defines Chapter 5B wage rate data to include:
Basic wages, cost-of-living allowances and other guaranteed and
regularly paid allowances, but exclude overtime payments, bonuses
and gratuities, family allowances and other social security payments
made by employers. Ex gratia payments in kind, supplementary to
normal wage rates, are also excluded.\3\
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\3\ See http://laborsta.ilo.org/applv8/data/c5e.html (emphasis
added).
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The ILO defines Chapter 5B earnings data to include:
Remuneration in cash and in kind paid to employees, as a rule at
regular intervals, for time worked or work done together with
remuneration for time not worked, such as for annual vacation, other
paid leave or holidays. Earnings exclude employers' contributions in
respect of their employees paid to social security and pension
schemes and also the benefits received by employees under these
schemes. Earnings also exclude severance and termination pay.\4\
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\4\ Id (emphasis added).
The ILO Chapter 5B data that the Department currently uses in its
interim, simple-average industry-specific wage rate methodology for
valuing labor is comprehensive (i.e., this dataset includes annual
earnings and wage data reported by most countries in the world).
Additionally, the ILO Chapter 5B data is reported both on a national
and an industry-specific level for each reporting country.
Under the current interim wage rate methodology, the Department
assumes that indirect labor costs (i.e., employer expenses for social
benefits, pensions and training, etc.) are included in the calculated
surrogate financial ratios (i.e., factory overhead (``OH''), selling,
general and administrative (``SG&A'') expenses, and profit) for the NME
producer. When the OH and SG&A line items are disaggregated, the
Department has a practice of adjusting the surrogate financial ratios
for OH, SG&A, and profit by categorizing all identifiable labor costs
not included in the ILO's definition of Chapter 5B data as overhead
expenses.\5\ However, when OH and SG&A are aggregated, the Department
is unable to determine whether adjustments are needed to account for
all of the indirect labor-related costs.
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\5\ See Folding Metal Tables and Chairs from the People's
Republic of China: Final Results of Antidumping Duty Administrative
Review, 71 FR 2905 (January 18, 2006) and accompanying Issues and
Decision Memorandum, at Comment 1.
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Due to concerns that reliance on data from Chapter 5B of the ILO
may under-count the NME producer's labor costs, the Department is
considering alternative data sources for valuing labor to ensure all
labor costs incurred by the NME producer are accounted for in the
normal value (``NV'') calculation. The Department proposes relying on
labor and wage data that include all costs incurred by the producer
related to labor including wages, benefits, housing, training, etc. One
example of such a data source is ``Chapter 6A: Labor Cost in
Manufacturing'' from the ILO Yearbook of Labour Statistics.
The ILO defines Chapter 6A data to include:
The cost incurred by the employer in the employment of labour.
The statistical concept of labour cost comprises remuneration for
work performed, payments in respect of time paid for but not worked,
bonuses and gratuities, the cost of food, drink and other payments
in kind, cost of workers' housing borne by employers, employers'
social security expenditures, cost to the employer for vocational
training, welfare services and miscellaneous items, such as
transport of workers, work clothes and recruitment, together with
taxes regarded as labour cost * * *.\6\
\6\ See http://laborsta.ilo.org/applv8/data/c6e.html.
The ILO Chapter 6A data include all costs related to labor including
wages, benefits, housing, training, etc.\7\ To the extent that Chapter
6A data includes some of the expenses that may already be captured in
the surrogate financial ratios, there is a possibility that the use of
Chapter 6A data may overstate the cost of labor in certain cases. The
Department's ability to identify and adjust for such individual labor
costs is fact-specific in nature and subject to the available
information on the record of the specific proceeding. See Antidumping
Methodologies Notice, 71 FR at 61721. There will be some cases where
information is available to make such adjustments, but there will be
other cases where the Department cannot make such an adjustment due to
a lack of available data. However, if the Department does not use an
all inclusive data source, such as the ILO Chapter 6A data, the NME
producer's total labor cost will be understated in cases where the
surrogate financial statements do not include certain indirect labor
costs that are also excluded from ILO Chapter 5B data.
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\7\ See Antidumping Methodologies Notice, 71 FR at 61721.
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The Department further notes its preference for data from as many
countries as possible when considering alternative data sources for
valuing labor, such as the ILO Chapter 6A data. Although information
from a single surrogate country can reliably be used to value other
FOPs, wage data from a single surrogate country does not normally
constitute the best available information for purposes of valuing the
labor input due to the variability that exists across wages from
countries with similar GNI.\8\ As a result, we do not find reliance on
wage data from a single country to be preferable where data from
multiple countries are available for the Department to use.\9\ Although
the Department discounted the use of the ILO Chapter 6A data in 2006
because very few market economy countries reported labor data, this may
no longer be the case.\10\ As of January 2011, sixty-six market economy
countries reported ILO Chapter 6A data at the national level. Though it
is improbable that all of these countries would be considered
economically comparable to the country subject to an investigation or
review, sixty-six is not an insignificant number of initial countries.
The Department also notes that some market economy countries report
industry-specific data under ILO Chapter 6A, which is in keeping with
the Department's current, interim practice of relying on industry-
specific data within the existing ILO source where available. The
Department is aware that there may be data constraints using industry-
specific data classified under ILO Chapter 6A because fewer market
economy countries that are found to be economically comparable to a
subject country report industry-specific under ILO Chapter 6A than
under ILO Chapter 5B. Accordingly, in determining whether to source
wage data from alternative data sources, such as ILO Chapter 6A, the
Department will need to evaluate how to address situations where there
are significant data constraints in light of its current preference for
data from multiple countries at the industry-specific level.
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\8\ See e.g., International Labor Organization, Global Wage
Report: 2009 Update, (2009) at 5, 7, 10. http://www.ilo.org/wcmsp5/groups/public/-dgreports/-dcomm/documents/publication/wcms-116500.pdf.
\9\ Both the statute and our regulations recognize the need to
source factor data from more than one country where appropriate. See
Sections 773(c)(1) and (c)(4) of the Act and 19 CFR 351.408(c)(2).
\10\ See Antidumping Methodologies Notice, 71 FR at 61721.
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[[Page 9546]]
The Department invites parties to comment on these methodological
issues described above.
Request for Comment on Interim Industry-Specific Wage Rate Methodology
As discussed above, the Department's interim methodology for
valuing labor in NME antidumping proceedings utilizes a simple-average
industry-specific wage rate calculated with data reported in Chapter 5B
of the ILO Yearbook of Labour Statistics. Under this interim
methodology, the Department calculates an hourly wage rate by averaging
industry-specific earnings and/or wages in countries that are
economically comparable to the subject country and are significant
producers of the comparable merchandise, pursuant to section 773(c)(4)
of the Act. The following steps explain the current interim industry-
specific methodology.
First, in order to determine the economically comparable surrogate
countries from which to calculate a surrogate wage rate, the Department
reviews the Surrogate Country Memo issued in each proceeding. Early in
each case, the Department selects a number of countries for
consideration as the surrogate country for that case.\11\ To determine
which countries are at a level of economic development comparable to
that of the NME country in question, the Department places primary
emphasis on per capita GNI.\12\ The Department relies on GNI from the
most recent year available, currently 2008, to generate an initial
limited list of countries considered to be economically comparable to
the subject country.\13\ From this list of countries contained in the
Surrogate Country Memo, the Department identifies the country with the
highest GNI and the lowest GNI as ``bookends'' for economic
comparability.\14\ Relying on the World Bank's World Development
Report,\15\ the Department then identifies all countries with per
capita incomes from the same year that fall between the country with
the highest GNI, and the country with the lowest GNI (commonly referred
to as the ``bookend'' countries). This is the ``GNI band'' of countries
that the Department considers to be economically comparable to the
country in question for calculating wage rates.
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\11\ See Policy Bulletin 04.1: Non-Market Economy Surrogate
Country Selection Process, March 1, 2004 (``Policy Bulletin'').
\12\ It is Departmental practice, pursuant to 19 CFR 408, to use
per capita GNI, rather than per capita GDP, because while the two
measures are very similar, per capita GNI is reported across almost
all countries by an authoritative source (the World Bank), and
because the Department believes that the per capita GNI represents
the single best measure of a country's level of total income and,
thus, level of economic development. See Antidumping Methodologies
Notice, 71 FR 61716, 61716 at n. 2.
\13\ The Department notes that this initial list of countries is
part of a non-exhaustive list of countries that are at a level of
economic development comparable to the subject country.
\14\ Cf. Dorbest II, at *10-17. Parties are invited to address
this case in their comments.
\15\ Indicator: GNI per capita, Atlas Method (current US$) is
obtained from http://data.worldbank.org/indicator/.
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Second, regarding the ``significant producer'' prong of the
antidumping statute (section 773(c)(4)(B) of the Act), the Department
identifies all countries that had exports based on value data for
exports of comparable merchandise (i.e., exports of any goods, by
value, under the six-digit Harmonized Tariff Schedule (``HTS'')
categories contained in the scope of the investigation or review). The
Department obtains this export data for the last three years of
available data. After obtaining total exports by value of comparable
merchandise for all reporting countries, the Department filters the
dataset to include only countries that are listed within the ``GNI
band.'' If any of these countries had exports of the comparable
merchandise for the last three years, that country is considered to be
a significant producer.
Third, the Department selects the most appropriate industry-
specific wage data based on the scope of the investigation or review,
and the availability of industry-specific data.\16\ Industry-specific
wage/earning data is reported by countries to the ILO under the United
Nations' International Standard Classification of All Economic
Activities (ISIC).\17\ The Department determines the most appropriate
industry-specific wage rate/earning data for the subject industry by
examining the ISIC industry classifications and determining which
classification is most specific to the subject product for the most
recent revision (currently Rev. 4). If no wage data is available for
that industry, the examination moves to the next most recent revision,
(i.e., Rev. 3.1, Rev. 3, and Rev. 2, etc.).
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\16\ The CIT in Dorbest II affirmed the Department's decision to
use industry-specific data as ``reasonable and in compliance with
the statutory requirements '' set forth in Section 773(c)(4) of the
Act. Dorbest II, at *25-27.
\17\ The ISIC identifies different industry classifications. The
ISIC provides industry classifications by section (i.e., A--
Agriculture, hunting, and forestry), then at the two-digit division
level (i.e., 01--Agriculture, hunting, and related service
activities), then further sub-detail at the three-digit major group
level (i.e., 011--Growing of crops; market gardening; horticulture),
and sometimes a four-digit group level (i.e., 0111--Growing of
cereals and other crops, nec.). There are explanatory notes at the
two-digit division level, three-digit major group level, and four-
digit group level that provide a detailed list of the industries
covered in and excluded from each classification.
The ISIC also has different revisions of this classification
system: Rev. 2 (1968); Rev. 3 (1989); Rev. 3.1 (2002); and Rev. 4
(2008).
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Fourth, using the selected industry-specific wage rate data for the
countries that are economically comparable to the subject country and
significant producers of comparable merchandise, the Department chooses
an earnings/wage rate that is most contemporaneous with the period of
the subject proceeding. Various types of earnings/wages in that
industry-specific wage rate data are sorted by a set of filters to
arrive at the most appropriate single earnings/wage rate.\18\
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\18\ The Department filters the data based on ILO data
parameters in the following order:
1. ``Type of Data--I,'' i.e., reported under the categories
earnings or wages. We use earnings data if available and wages data
where earnings data are not available;
2. ``Sex,'' i.e., male/female coverage (we eliminate male only,
female only, and indices data);
3. ``Contemporaneity,'' i.e., the Department uses the most
recent earnings/wage rate data point available;
4. ``Worker Coverage,'' i.e., the Department selects from the
following categories in the following hierarchy: (1) Wage earners;
(2) employees; (3) salaried employees; and (4) total employment;
5. ``Type of Data--II,'' i.e., the unit of time for which the
wage is reported. The Department selects from the following
categories in the following hierarchy: (1) Per hour; (2) per day;
(3) per week; or (4) per month. Where data is not available on a
per-hour basis, the Department converts that data to an hourly basis
based on the premise that there are 8 working hours per day, 5.5
working days a week and 24 working days per month.
``Source ID,'' i.e., a code for the source of the data. The
Department prioritizes data with a ``Source ID'' value of ``no
value'' over ``1,'' ``2'' and ``3,'' in that order.
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Fifth, the Department inflates the selected single earnings or wage
rate for each country to the year that covers the majority of the
period of the proceeding using the relevant Consumer Price Index
(``CPI'').\19\ Next, the Department converts these inflation-adjusted
hourly earnings or wage rate data for each country, which are
denominated in each country's national currency, to U.S. dollars using
annual exchange rates \20\ as reported by the IMF's IFS for the year
that covers the majority of the period of investigation or review.
Finally, the Department calculates a simple-average,
[[Page 9547]]
industry-specific wage rate across the selected countries.
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\19\ The CPI for each country is obtained from the International
Monetary Fund (``IMF'')'s International Financial Statistics
(``IFS'') database, located at http://www.imfstatistics.org/imf.
\20\ The exchange rate for each country is obtained from the
IMF's IFS database by selecting: (1) ``Economic Concept View;'' (2)
``Country Exchange Rates;'' (3) ``National Currency Per US$ (Per
Avg);'' and (4) ``RF.ZF NC/US$, Period Average.''
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Since implementing this interim industry-specific wage rate
methodology, the Department has encountered a number of methodological
and practical challenges that must be considered in evaluating whether
this methodology should be adopted for the longer term. For example,
the Department normally prefers using multiple data points when
evaluating labor data, because of the large variance in wage rates, as
explained above. However, relying on industry-specific data necessarily
constrains the amount of available data. Additionally, the Department
notes that the interim method is a significant endeavor that requires
screening hundreds of data points in each case. Given the statutory
time constraints present in every proceeding, the Department will also
be evaluating this methodology in relation to its long-term
administrative feasibility. Based on the challenges described above by
the Department regarding the interim industry-specific wage rate
methodology, the Department invites comments by parties on these
issues.
Submission of Comments
To be assured of consideration, comments must be received no later
than March 21, 2011. All comments must be submitted through the Federal
eRulemaking Portal at http://www.regulations.gov, Docket No. ITA-2010-
0010, unless the commenter does not have access to the Internet.
Commenters that do not have access to the Internet may submit the
original and two copies of each set of comments by mail or hand
delivery/courier. All comments should be addressed to the Secretary of
Commerce, Attention: Christopher Mutz, Office of Policy, Room 1870,
Import Administration, U.S. Department of Commerce, 14th Street and
Constitution Ave., NW., Washington, DC 20230.
The Department will consider all comments received before the close
of the comment period. 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. All comments responding to this notice will be a matter
of public record and will be available for inspection at Import
Administration's Central Records Unit (Room 7046 of the Herbert C.
Hoover Building) and on the Department's Web site at http://www.trade.gov/ia/.
Any questions concerning file formatting, document conversion,
access on the Internet, or other electronic filing issues should be
addressed to Andrew Lee Beller, Import Administration Webmaster, at
(202) 482-0866, e-mail address: [email protected].
Dated: February 14, 2011.
Ronald K. Lorentzen,
Deputy Assistant Secretary for Import Administration.
[FR Doc. 2011-3743 Filed 2-17-11; 8:45 am]
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