Import Administration, International Trade Administration, Department of Commerce.
Notice of preliminary results of antidumping duty administrative review.
In response to a request by the Viraj Group, Limited (“Viraj Group”), respondent, the Department of Commerce (“the Department”) is conducting an administrative review of the antidumping duty order on stainless steel wire rod (“SSWR”) from India. The period of review (“POR”) is December 1, 1999, through November 30, 2000.
We have preliminarily determined that the Viraj Group has made sales below normal value (“NV”). If these preliminary results are adopted in our final results of this administrative review, we will instruct the U.S. Start Printed Page 866Customs Service to assess antidumping duties. We invite interested parties to comment on these preliminary results. Parties who submit arguments in this segment of the proceeding are requested to submit with the argument: (1) A statement of the issue, and (2) a brief summary of the argument.
January 8, 2002.Start Further Info
FOR FURTHER INFORMATION CONTACT:
Catherine Bertrand, AD/CVD Enforcement Group III, Office 9, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-3207.End Further Info End Preamble Start Supplemental Information
The Applicable Statute
Unless otherwise indicated, all citations to the statute are references to the provisions effective January 1, 1995, the effective date of the amendments made to the Tariff Act of 1930 (“the Act”) by the Uruguay Round Agreements Act. In addition, unless otherwise indicated, all references to the Department's regulations are to the provisions codified at 19 CFR part 351 (2001).
On October 20, 1993, the Department published in the Federal Register the antidumping duty order on certain stainless steel wire rod from India (58 FR 54110). On December 20, 2000, the Department published in the Federal Register a notice of opportunity to request an administrative review of this antidumping duty order (65 FR 79802).
On December 27, 2000, the Viraj Group requested an administrative review of the antidumping duty order on certain stainless steel wire rods from India. In accordance with 19 CFR 351.221(b), we published a notice of initiation of the review of the Viraj Group on January 31, 2001 (66 FR 8378).
On January 31, 2001, the Department issued a questionnaire to the Viraj Group. The Department initiated a cost of production inquiry and requested that the Viraj Group respond to section D of the questionnaire in addition to sections A, B and C. The Viraj Group submitted its Section A questionnaire response on February 28, 2001, and re-submitted it on March 6, 2001, in the correct format pursuant to the Department's request. On April 17, 2001, the Viraj Group submitted its Sections B, C and D questionnaire responses. The Department, however, considered the Section D response to be insufficient and requested that Viraj Group re-submit its Section D questionnaire response, which it did on August 13, 2001. The Department issued supplemental questionnaires to the Viraj Group and received responses on June 20, 2001, July 9, 2001, August 24, 2001, November 13, 2001, November 28, 2001. Petitioners submitted comments on the record on May 3, 2001, October 10, 2001, and November 28, 2001.
On July 23, 2001, due to the reasons set forth in the Extension of Time Limit for the Preliminary Results of Antidumping Administrative Review: Certain Stainless Steel Wire Rod From India, 66 FR 38257, the Department extended the due date for the preliminary results. In accordance with section 751(a)(3)(A) of the Act, the Department extended the due date for the notice of preliminary results the maximum 120 days allowable, from the original due date of September 2, 2001, to December 31, 2001. The Department is conducting this review in accordance with section 751 of the Act.
As provided in section 782(i) of the Act, we verified sales and cost information provided by the Viraj Group from December 3-12, 2001, using standard verification procedures, including an examination of relevant sales, cost, and financial records, and selection of original documentation containing relevant information. Our verification results are outlined in the public version of the verification report and are on file in the Department's Central Records Unit located in Room B-099 of the main Department of Commerce Building, 14th Street and Constitution Avenue, NW., Washington, DC.
Period of Review
The period of review is December 1, 1999 through November 30, 2000.
Scope of the Review
The merchandise under review is certain stainless steel wire rod (SSWR) which are hot-rolled or hot-rolled annealed and/or pickled rounds, squares, octagons, hexagons or other shapes, in coils. SSWR are made of alloy steels containing, by weight, 1.2 percent or less of carbon and 10.5 percent or more of chromium, with or without other elements. These products are only manufactured by hot-rolling and are normally sold in coiled form, and are of solid cross section. The majority of SSWR sold in the United States are round in cross-section shape, annealed and pickled. The most common size is 5.5 millimeters in diameter.
The SSWR subject to this review are currently classifiable under subheadings 7221.00.0005, 7221.00.0015, 7221.00.0030, 7221.00.0045, and 7221.00.0075 of the Harmonized Tariff Schedule of the United States (HTSUS). Although the HTSUS subheadings are provided for convenience and customs purposes, the written description of the merchandise under review is dispositive of whether or not the merchandise is covered by the review.
The Viraj Group is composed of the following four companies: Viraj Forgings, Ltd. (“VFL”); Viraj Alloys, Ltd. (“VAL”); Viraj Impoexpo, Ltd. (“VIL”); and Viraj USA, Inc. (“Viraj USA”), which was incorporated during the POR on May 22, 2000. The Department has preliminarily determined that these four companies are affiliated for the purposes of this administrative review, and that the three producing companies, VAL, VIL, and VFL, should be collapsed and considered one entity pursuant to section 771(33) of the Act and section 351.401(f) of the Department's regulations. See Memorandum from Edward C. Yang to Joseph A. Spetrini: 1999-2000 Administrative Review of Stainless Steel Wire Rod From India; Collapsing Memorandum of the Viraj Group, Limited, dated December 31, 2001.
The Department has found the four companies affiliated based on the evidence on the record which states that Mr. Chhatwal and Mr. Kochhar are the directors for all four companies and they jointly run all four companies, and their decisions are made for the interest of the group as a whole. Furthermore, the stock of VAL, VFL and VIL is mainly held by Mr. Chhatwal, Mr. Kochhar, and their relatives. Collectively, this group holds more than 40% of the shares in VIL, VAL, and VFL. Also, VFL owns 100% of Viraj USA.
We find that the three producing companies (VAL, VIL, and VFL) should be collapsed because the evidence on the record indicates that VAL, VFL and VIL each use production facilities for similar or identical merchandise that would not require substantial retooling of any facility in order to restructure manufacturing priorities. For sales to the home market, VAL makes billets and then sends them to an unaffiliated subcontractor for rolling into wire rod. The subcontractor returns the black wire rod to VAL who sells it in the home market as subject merchandise. For sales to the U.S. market, VIL and VFL purchase the billets from VAL and send them to the same sub-contractor that VAL uses for rolling into wire rod. The subcontractor returns the black wire rod Start Printed Page 867which is then annealed at VFL's facilities, pickled at VIL's facilities, packed and then exported. Consequently, VAL, VFL and VIL are all considered “producers” of this wire rod for purposes of this review. Given that VAL, VIL and VFL all produced wire rod during the POR, no substantial retooling would be needed to restructure priorities among the three companies. Moreover, the companies are under common control and ownership, they use the same production facilities for producing wire rod, and the operations of the companies are intertwined. Therefore, the companies are capable, through their sales and production operations, of manipulating prices or affecting production decisions.
The Department has analyzed the issue of whether the Viraj Group was affiliated with its U.S. customer, Kurt Orban Partners (“KOP”), for a portion of the POR, May 22, 2000 through November 30, 2000. At the Department's request, KOP submitted information on the record of this proceeding on November 5, 2001, and November 28, 2001. The evidence on the record indicates that KOP's Vice President and later President, Matt Orban, was also the Vice President of Viraj USA. The record indicates that his duties as Viraj USA's Vice President were clerical in nature. Specifically his duties included signing customs documents with power of attorney and signing bank papers on behalf of Viraj USA. The record indicates Matt Orban also answered correspondence with customs brokers and shipping companies on behalf of Viraj USA. At KOP, Mr. Orban had primary responsibility for the general administration, sales, purchasing, supplier relations, and information technology. Both the Viraj Group and KOP deny that Matt Orban had any control over Viraj USA's sales and pricing decisions. See Viraj Group's June 20, 2001 submission at 6. There is no information on the record that indicates Matt Orban did have control over Viraj USA; therefore, the Department preliminarily determines that the Viraj Group and KOP are not affiliated for purposes of this administrative review.
Normal Value Comparisons
To determine whether the Viraj Group's sales of subject merchandise from India to the United States were made at less than normal value, we compared the export price (“EP”) and constructed export price (“CEP”), as appropriate, to the normal value (“NV”), as described in the “Export Price/Constructed Export Price” and “Normal Value” sections of this notice, below. In accordance with section 777A(d)(2) of the Act, we calculated monthly weighted-average prices for NV and compared these to individual EP and CEP transactions.
We compared the aggregate volume of the Viraj Group's home market sales of the foreign like product and U.S. sales of the subject merchandise to determine whether the volume of the foreign like product the Viraj Group sold in India was sufficient, pursuant to section 773(a)(1) of the Act, to form a basis for NV. Because the Viraj Group's volume of home market sales of the foreign like product was greater than five percent of its U.S. sales of subject merchandise, in accordance with section 773(a)(1)(B)(i) of the Act, we have based the determination of NV upon the Viraj Group's home market sales of the foreign like product. Thus, we based NV on the prices at which the foreign like product was first sold for consumption in India in the usual commercial quantities, in the ordinary course of trade, and, to the extent possible, at the same level of trade (“LOT”) as the CEP or EP sales, as appropriate.
In accordance with section 771(16) of the Act, we considered all products covered by the Scope of the Review section above, which were produced and sold by the Viraj Group in the home market during the POR, to be foreign like products for purposes of determining appropriate comparisons to U.S. sales. Where there were no sales of identical merchandise in the home market to compare to U.S. sales, we compared U.S. sales to the next most similar foreign like product on the basis of the characteristics and reporting instructions listed in the Department's questionnaire.
We have preliminarily determined to consider grade 304L and grade 304LER as the same for purposes of the model match program. The Viraj Group submitted information on the record which claimed that these two grades should not be treated the same. However, after analyzing this data, we conclude that there is insufficient evidence on the record to support a determination that grades 304L and 304LER should be treated differently. Specifically, the evidence on the record is insufficient because the physical characteristics for each grade are not significantly different from one another. For example, in the grade specifications provided on the record by the Viraj Group, the grades 304L and 304LER have the same specifications for carbon, silicon, magnesium, phosphorus, and sulfur. Additionally, the ranges for chromium and nickel for 304LER are a subset of the ranges of those elements for grade 304L. The Department preliminarily determines that the specifications for these grades do not differ significantly. It is the Department's practice not to create additional categories unless the physical characteristics are significantly different from an existing known category. See e.g., Certain Cold-Rolled Carbon Steel Flat Products From Korea: Final Results of Antidumping Duty Administrative Review, 63 FR 781 (January 7, 1998). Therefore, we did not create an additional grade category for grade 304LER for purposes of these preliminary results.
Export Price and Constructed Export Price
In accordance with section 772(a) of the Act, EP is the price at which the subject merchandise is first sold (or agreed to be sold) before the date of importation by the producer or exporter of the subject merchandise outside of the United States to an unaffiliated purchaser in the United States or to an unaffiliated purchaser for exportation to the United States. In accordance with section 772(b) of the Act, constructed export price CEP is the price at which the subject merchandise is first sold (or agreed to be sold) in the United States before or after the date of importation by or for the account of the producer or exporter of such merchandise or by a seller affiliated with the producer or exporter, to a purchaser not affiliated with the producer or exporter, as adjusted under subsections (c) and (d).
For purposes of this review, the Viraj Group has classified certain sales as EP sales and certain sales as CEP sales. Based on the information on the record, we are using export price as defined in section 772(a) of the Act for sales before May 22, 2000, and CEP for sales on or after May 22, 2000, because that is the date on which the U.S. re-seller, Viraj USA, was incorporated.
The Viraj Group has classified those sales made by VIL and VFL to the unaffiliated U.S. customer as EP sales. The Viraj Group reported that these sales are shipped directly from the factory in India to the U.S. customer. The Department calculated EP for the appropriate sales based on packed, delivered prices to customers in the United States. We made deductions, where appropriate, from the starting price for following movement expenses: Start Printed Page 868marine insurance, international freight, inland freight, U.S. customs duties, and brokerage and handling in accordance with section 772(c)(2) of the Act.
The Viraj Group has classified those sales made by VIL and VFL through Viraj USA, an affiliated reseller that is 100% owned by VFL, as CEP sales. VIL and VFL make the shipment from India on a CIF basis to Viraj USA. Viraj USA clears the goods through customs and pays the customs duty. Then Viraj USA sells the good to the U.S. customer by issuing an invoice to the customer. The customer makes payment to Viraj USA.
Based on the evidence on the record, the Department preliminarily determines that VIL and VFL's U.S. sales through Viraj USA were made “in the United States” within the meaning of section 772(b) of the Act, and thus have been appropriately classified by the Viraj Group as CEP transactions.
We calculated CEP, in accordance with section 772(b) of the Act, based on the packed CIF prices to the first unaffiliated customer in the United States. We made deductions for movement expenses in accordance with section 772(c)(2)(A) of the Act; these included, where appropriate, brokerage and handling, inland freight, international freight, U.S. customs duties, marine insurance, customs clearance and delivery arrangements. In accordance with section 772(d)(1) of the Act, we deducted those selling expenses associated with economic activities occurring in the United States, including direct selling expenses (bank charges and credit expenses) and indirect selling expenses. As explained in the “Duty Drawback” section below, we are not making any adjustments for duty drawback for EP or CEP sales.
1. Comparison Market Viability
The Viraj Group reported the home market sales of VAL, as well as the largest third country market sales of VIL and VFL, who did not make any home market sales during the POR. Since we have preliminarily determined to collapse the companies of the Viraj Group, we used the home market sales of VAL as the basis of normal value.
After testing home market viability, as discussed in the “Transactions Reviewed” section, supra, and after determining whether home market sales were at below-cost prices, in the “Cost of Production Analysis,” infra, we calculated NV as noted in the “Price-to-Price Comparisons” and “Price-to-Constructed Value (“CV”) Comparisons” sections of this notice.
2. Cost of Production Analysis
Because the Department disregarded certain Viraj Group sales made in the home market at prices below the cost of producing the subject merchandise in the most recently completed segment of this proceeding and excluded such sales from normal value, the Department determined that there are reasonable grounds to believe or suspect that the Viraj Group made sales in the home market at prices below the cost of producing the merchandise in this review. See Stainless Steel Wire Rod From India; Final Results of Antidumping Duty Administrative Review, 65 FR 31302 (May 17, 2000), and section 773(b)(2)(A)(ii) of the Act. As a result, the Department initiated a cost of production inquiry in this case on January 31, 2001, to determine whether the Viraj Group made home market sales during the POR at prices below their respective COPs within the meaning of section 773(b) of the Act.
3. Calculation of COP
In accordance with section 773(b)(3) of the Act, we calculated COP based on the sum of the Viraj Group's cost of materials and fabrication for the foreign like product, plus amounts for home market selling, general and administrative expenses (“SG&A”), including interest expenses, and packing costs. We used home market sales and COP information provided by the Viraj Group in its questionnaire responses.
4. Test of Home Market Prices
We compared the weighted-average COP for the POR to the Viraj Group's home market sales of the foreign like product as required under section 773(b) of the Act. In determining whether to disregard home market sales made at prices less than the COP, we examined whether such sales: (1) Were made within an extended period of time in substantial quantities; and (2) were not made at prices which permitted the recovery of all costs within a reasonable period of time.
5. Results of the COP Test
Pursuant to section 773(b)(2)(C) of the Act, where less than 20 percent of the Viraj Group's sales of a given product were at prices less than the COP, we did not disregard any below-cost sales of that product because the below-cost sales were not made in “substantial quantities.” Where 20 percent or more of the Viraj Group's sales of a given product were at prices less than the COP, we determined such sales to have been made in “substantial quantities.” The extended period of time for this analysis is the POR. See section 773(b)(2)(B) of the Act and 19 CFR 351.406(b). Because each individual price was compared to the weighted-average COP for the cost reporting period, any sales that were below cost were also at prices which did not permit cost recovery within a reasonable period of time. See section 773(b)(2)(D). We compared the COP for subject merchandise to the reported home market prices less any applicable movement charges. Based on this test, we disregarded below-cost sales.
Calculation of Constructed Value
We calculated CV in accordance with section 773(e)(1) of the Act based on the sum of respondent's cost of materials, fabrication, SG&A, including interest expenses, and profit. We calculated the COP included in the calculation of CV as noted above, in the “Calculation of COP” section of the notice. In accordance with section 773(e)(2)(A) of the Act and 19 CFR 351.405(b)(1), we based SG&A and profit on the amounts incurred and realized by the respondent in connection with the production and sale of the foreign like product, in the ordinary course of trade, for consumption in the foreign country.
For those product comparisons for which there were sales at prices above the COP, we based NV on the home market prices to the home market customers. We made adjustments, where appropriate, for physical differences in the merchandise in accordance with section 773(a)(6)(C)(ii) of the Act. We calculated NV based on prices to unaffiliated home market customers. We made circumstances of sale adjustments for credit expenses, as appropriate.
In accordance with section 773(a)(4) of the Act, we base NV on CV if we are unable to find suitable home market sales of the foreign like product. For price-to-CV comparisons, we made adjustments to CV in accordance with section 773(a)(8) of the Act.
Level of Trade
In accordance with section 773(a)(1)(B) of the Act, to the extent practicable, we determine NV based on sales in the comparison market at the same level of trade (“LOT”) as the EP or CEP transaction. The NV LOT is that of the starting-price sales in the comparison market or, when NV is based on CV, that of the sales from which we derive SG&A expenses and profit. For EP, the LOT is also the level Start Printed Page 869of the starting-price sale, which is usually from the exporter to the importer. For CEP, it is the level of the constructed sale from the exporter to the affiliated importer. See 19 CFR 351.412(c)(1).
To determine whether NV sales are at a different LOT than EP or CEP sales, we examine stages in the marketing process and selling functions along the chain of distribution between the producer and the unaffiliated customer. Substantial differences in selling activities are a necessary, but not sufficient condition for determining that there is a difference in the stage of marketing. 19 CFR 351.412(c)(2). If the comparison market sales are at a different LOT, and the difference affects price comparability, as manifested in a pattern of consistent price differences between the sales on which NV is based and comparison-market sales at the LOT of the export transaction, we make a LOT adjustment under section 773(a)(7)(A) of the Act. Finally, for CEP sales, if the NV level is more remote from the factory than the CEP level and there is no basis for determining whether the differences in the levels between NV and CEP sales affect price comparability, we adjust NV under section 773(A)(7)(B) of the Act (the CEP offset provision). See Notice of Final Determination of Sales at Less Than Fair Value: Certain Carbon Steel Plate from South Africa, 62 FR 61731 (November 19, 1997).
In the home market, the Viraj Group reported one level of trade. The Viraj Group sold through one channel of distribution in the home market: directly to unaffiliated customers (trading companies and actual users). The Viraj Group claimed one level of trade in its U.S. market. The Viraj Group sold through two channels of distribution in the U.S. market: (1) directly to unaffiliated customers in the United States prior to May 22, 2000, the date of incorporation of Viraj USA; and (2) directly from the mill through Viraj USA to unaffiliated customers after May 22, 2000.
For sales in the home market channel, the Viraj Group reported that all of its sales are sold ex-factory. The selling functions performed by the Viraj Group include business promotion (e.g., salesmen travel, entertainment, and product testing), extension of credit, price negotiation, and order processing. Because there is only one sales channel in the home market, and because identical selling functions are performed for all home market sales, we preliminarily determine that there is one LOT in the home market.
We reviewed the selling functions and services performed by the Viraj Group in the U.S. market, as represented by the Viraj Group in its responses. The Viraj Group indicated that the selling functions performed by the Viraj Group were the same for EP sales and CEP sales (i.e., sales to Viraj USA). Viraj USA was incorporated on May 22, 2000, and after that time, Viraj USA handled customs clearance, but there was no change in the selling functions of the Viraj Group. We find that the differences in the degree of selling functions performed (i.e., price negotiation and provision of freight) to be minor. Therefore, we preliminarily determine that there is one LOT in the U.S. market.
The selling functions of the Viraj Group are very minimal for both the home market and the U.S. market. The Viraj Group does not incur warranty expenses, technical service expenses, royalties, or advertising expenses for either market, and only provides freight services for EP transactions. Accordingly, we preliminarily determine that sales in the home market and in the U.S. market were made at the same LOT and have not made a LOT adjustment.
In the previous administrative review (see Stainless Steel Wire Rod From India; Final Results of Antidumping Duty Administrative Review, 65 FR 31302, (May 17, 2000)), the Department denied the Viraj Group's request for an upward adjustment to the U.S. starting price based on duty drawback because the reported duty drawback was not directly linked to the amount of duty paid on imports used in the production of merchandise for export as required by the Department's two-part test, which states there must be: (1) a sufficient link between the import duty and the rebate, and (2) a sufficient amount of raw materials imported and used in the production of the final exported product. See Rajinder Pipes Ltd. v. U.S. (“Rajinder Pipes”), 70 F. Supp. 2d 1350, 1358. The Court of International Trade upheld the Department's decision to deny respondent an adjustment for duty drawback because there was not substantial evidence on the record to establish that part one of the Department's test had been met. See Viraj Group, Ltd. v. United States of America and Carpenter Technology, Corp., et al., Slip Op. 01-104 (CIT August 15, 2001).
Similarly, in the current review, the Department finds that the Viraj Group has not provided substantial evidence on the record to establish the necessary link between the import duty and the reported rebate for duty drawback. The Viraj Group has reported that it received duty drawback in the form of duty entitlement certificates which are issued by the Government of India to neutralize the incidence of basic custom duty on the import of raw materials used in the production of subject merchandise, but has failed to establish the necessary link between the import duty paid and the rebate given by the Government of India. As in the previous review, the Viraj Group was not able to demonstrate that the import duty paid and the duty drawback rebate were directly linked. Therefore, the Department is denying a duty drawback credit for the preliminary results of this review.
Preliminary Results of Review
As a result of our review, we preliminarily determine that the following weighted-average dumping margin exists for the Viraj Group for the period December 1, 1999, through November 30, 2000:
|Producer/manufacturer/exporter||Weighted-average margin (percent)|
|The Viraj Group, Limited||0.73|
The Department will disclose calculations performed in connection with these preliminary results of review within five days of the date of publication of this notice. Any interested party may request a hearing within 30 days of publication. Any hearing, if requested, will be held two days after the scheduled date for submission of rebuttal briefs. Issues raised in the hearing will be limited to those raised in the case briefs. Case briefs from interested parties may be submitted not later than 30 days after the date of publication of this notice in the Federal Register; rebuttal briefs may be submitted not later than five days thereafter. The Department will publish the final results of this administrative review, including its analysis of issues raised in any written comments or at a hearing, not later than 120 days after the date of publication of this notice.
Upon issuance of the final results of this review, the Department shall determine, and the U.S. Customs Service shall assess, antidumping duties on all appropriate entries. If these preliminary results are adopted in our final results, we will instruct the Customs Service not to assess antidumping duties on the merchandise subject to review. Upon completion of this review, the Department will issue appraisement instructions directly to the Customs Service. In accordance with 19 CFR 351.212(b), if applicable, we Start Printed Page 870will calculate an importer-specific ad valorem duty assessment rate based on the ratio of the total amount of antidumping duties calculated for the examined sales to the total customs value of the sales used to calculate those duties. This rate will be assessed uniformly on all entries of that particular importer made during the POR.
Furthermore, the following deposit requirements will be effective for all shipments of the subject merchandise entered, or withdrawn from warehouse, for consumption on or after the publication date of the final results of these administrative reviews, as provided by section 751(a)(1) of the Act: (1) For the Viraj Group, a deposit equal to the above margin will be required; (2) if the exporter is not a firm covered in this review, a prior review, or the original investigation, but the manufacturer is, the cash deposit rate will be the rate established for the most recent period for the manufacturer of the merchandise; and (3) the cash deposit rate for all other manufacturers or exporters will continue to be 48.80 percent, the “All Others” rate made effective by the original investigation.
These deposit requirements, when imposed, shall remain in effect until publication of the final results of the next administrative review.
This notice also serves as a preliminary reminder to importers of their responsibility under 19 CFR 351.402(f)(2) to file a certificate regarding the reimbursement of antidumping duties prior to liquidation of the relevant entries during this review period. Failure to comply with this requirement could result in the Secretary's presumption that reimbursement of antidumping duties occurred and the subsequent assessment of double antidumping duties.
This determination is issued and published in accordance with sections 751(a)(1) and 777(i)(1) of the Act.Start Signature
Dated: December 31, 2001.
Susan H. Kuhbach,
Acting Assistant Secretary for Import Administration.
[FR Doc. 02-435 Filed 1-7-02; 8:45 am]
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