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Notice

Notice of Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination: Certain Malleable Iron Pipe Fittings From the People's Republic of China

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Start Preamble

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

EFFECTIVE DATE:

June 6, 2003.

Start Further Info

FOR FURTHER INFORMATION CONTACT:

Anya Naschak at (202) 482-6375, Ann Barnett-Dahl at (202) 482-3833, or Helen Kramer at (202) 482-0405; Antidumping and Countervailing Duty Enforcement Group III, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, N.W., Washington, D.C. 20230.

End Further Info End Preamble Start Supplemental Information

SUPPLEMENTARY INFORMATION:

Preliminary Determination:

We preliminarily determine that malleable iron pipe fittings (MPF) from the People's Republic of China (PRC) are being sold, or are likely to be sold, in the United States at less than fair value (LTFV), as provided in section 733 of the Act. The estimated margins of sales at LTFV are shown in the “Suspension of Liquidation” section of this notice.

Case History

This investigation was initiated on November 19, 2002, based on a petition filed by Ward Manufacturing and Anvil International (collectively, petitioners). See Notice of Initiation of Antidumping Duty Investigation: Certain Malleable Iron Pipe Fittings From the People's Republic of China, 67 FR 70579-81 (November 25, 2002) (Initiation Notice). In a letter dated January 2, 2003, the Department set aside a period for all interested parties to raise issues regarding product coverage. We received a request from Beijing Sai Lin Ke Hardware Co., Ltd (SLK) and LDR Industries, Inc. (LDR) (collectively SLK/LDR), for a scope exclusion. Petitioners had no objection to this request. See Memo to the File from Anya Naschak, dated April 1, 2003. No other comments were received. Since the initiation of the investigation, the following events have occurred.

On December 11, 2002, the Department requested information from the U.S. Embassy in the PRC to identify producers/exporters of the subject merchandise and received a response in December 2002. On December 23, 2002, Start Printed Page 33912the United States International Trade Commission (ITC) issued its affirmative preliminary determination that there is a reasonable indication that an industry in the United States is materially injured or threatened with material injury by reason of imports of MPF from the PRC. See Malleable Iron Pipe Fittings from the People's Republic of China, International Trade Commission, Investigation No. 731-TA-1021 (Preliminary), USITC Publication 3568 (ITC Preliminary Determination).

On December 16, 2002, the Department issued a letter requesting information on the quantity and value of shipments of subject merchandise to the United States during the period of investigation (POI) to the Chinese Ministry of Foreign Trade & Economic Cooperation with a letter requesting that it forward the questionnaire to all Chinese exporters of MPF who had shipments during the POI. We also sent courtesy copies of the quantity and value questionnaire to the following possible producers/exporters of subject merchandise identified in the petition and on the basis of U.S. Bureau of Customs and Border Protection (BCBP) information: Jinan Meide Casting Co., Ltd. (JMC), SLK, Langfang Pannext Pipe Fitting Co., Ltd. (LPFC), Simmons International, Ltd. (Simmons), Shantou ZhongXing Industry Co., Ltd. (formerly Shantou Zhongxing Economic & Trading Co., Ltd.) (Shantou), Shanghai Dongsheng Electric Import & Export Co., Ltd. (SDE), Brantingham Manufacturing (Brantingham), Shandong Maxwill Import and Export (Shandong), Chen Tai International Trading Co., Ltd. (CTIT), and Unique Industries (UI). On December 24, 2002, Chengde Malleable Iron General Factory (Chengde) requested to be considered a voluntary respondent in this investigation.

On December 27 and 30, 2002, the following Chinese producers/exporters of MPF submitted information on the quantity and value of their shipments of subject merchandise to the United States during the POI: JMC, SLK, Pannext Fittings Corporation (PFC) and LPFC (collectively, Pannext), and Simmons. On January 3, 2003, Chengde also submitted quantity and value information.

On January 8, 2003, we selected JMC, SLK, and Pannext as the mandatory respondents (see “Selection of Respondents” below). The Department issued its non-market economy (NME) antidumping questionnaire to JMC, SLK, and Pannext. In NME cases, Section A of the questionnaire requests general information concerning a company's corporate structure and business practices, the merchandise under investigation that it sells, and the manner in which it sells that merchandise in all of its markets. Section C requests a complete listing of U.S. sales. Section D requests information on the factors of production of the merchandise sold in or to the United States. Section E requests information on further manufacturing.

On January 27 and 29, 2003, Myland Industrial Co., Ltd. (Myland), and SCE Co., Ltd. (SCE), respectively requested to be considered voluntary respondents in this investigation. We received complete Section A responses from JMC, SLK, and Pannext (collectively, respondents) on January 30, 2003. We received a complete Section A response from Chengde on February 7, 2003, and from SCE on February 21, 2003. The Department received comments from petitioners on respondents' Section A questionnaire responses on February 7, 2003. On February 13, 2003, the Department issued supplemental Section A questionnaires to JMC, SLK, and Pannext. We received complete supplemental responses from JMC on February 24, 2003, from SLK on February 25, 2003, and from Pannext on March 3, 2003.

SCE and Chengde submitted their complete Sections C and D responses on February 21 and 24, 2003, respectively. JMC submitted its complete Sections C and D responses on February 24, 2003. Pannext submitted a complete Section C response on February 26, 2003, and a complete Section D response on March 3, 2003. SLK submitted its complete Sections C and D responses on March 4, 2003. Petitioners filed comments on JMC's submissions on March 5, 2003.

On March 18 and 19, 2003, the Department sent out supplemental Section C and D questionnaires to SLK, JMC, and Pannext. JMC and SLK submitted their complete supplemental responses on April 2, 2003. Pannext submitted its complete supplemental response on April 11, 2003. SLK submitted an additional supplemental response on April 14, 2003. Petitioners submitted comments on JMC's submissions on April 9, 2003. The Department sent an additional supplemental questionnaire to Pannext on April 23, 2003, and to JMC on April 25, 2003. On April 28, 2003, the Department received Pannext's complete additional supplemental response. On May 2, 2003, the Department received JMC's complete additional supplemental response. On May 7, 2003, the Department sent a letter to Pannext, JMC, and SLK, requesting that they revise certain of their data and resubmit these data electronically. The Department received a response on May 9, 2003, and May 12, 2003 from JMC, SLK, and Pannext.

On February 20, 2003, Myland filed its Section A response in a format that was inconsistent with the Department's regulation. On March 3, 2003, the Department returned Myland's Section A questionnaire response, and explained the filing requirements in detail. The Department granted Myland the opportunity to re-file its response in the proper format and extended Myland's Section A filing deadline to March 7, 2003. Myland submitted a revised Section A response on March 19, 2003. In addition, Myland submitted its Section C response on March 24, 2003, and its Section D response on March 26, 2003, which were originally due on February 28, 2003. The Department rejected Myland's Sections A, C, and D responses in accordance with 19 C.F.R. 351.302(d). Additionally, the Department informed Myland on April 14, 2003 that because Myland had not complied with the requests for information by the Department in a timely manner, they could not be considered a voluntary respondent. See 19 C.F.R. 351.204(d)(2); see also Letter from Abdelali Elouaradia to Myland Industrial Co., Ltd., dated April 14, 2003 (April 14th Letter). On April 18, 2003, Myland submitted a letter requesting to be allowed to resubmit its questionnaire responses. On May 6, 2003, the Department informed Myland that it would be unable to consider Myland's information for the reasons expressed in its April 14th Letter.

On January 29, 2003, the Department requested publicly available information for valuing the factors of production and comments on surrogate country selection. On February 28, 2003, Pannext submitted information concerning surrogate value of zinc to be used for valuing the factors of production. On March 26, 2003, SLK submitted information concerning the surrogate values of steel scrap and electricity for use in valuing the factors of production. On May 5, 2003, petitioners submitted information concerning surrogate values of steel scrap and financial ratios for use in valuing the factors of production.

On February 28, 2003, petitioners' submission alleged that there is a reasonable basis to believe or suspect critical circumstances exist with respect to the investigation of MPF from the PRC. The Department preliminarily determined that critical circumstances exist for JMC and SCE and for the PRC-wide entity, but not for Pannext, SLK, Myland, or Chengde. See Notice of Preliminary Determination of Critical Circumstances: Certain Malleable Iron Start Printed Page 33913Pipe Fittings from the People's Republic of China, 68 FR 19779 (April 22, 2003)

On March 21, 2003, pursuant to section 733(c)(1)(B) of the Act, the Department postponed the preliminary determination of this investigation until May 28, 2003. See Notice of Postponement of Preliminary Determination of Antidumping Duty Investigation: Certain Malleable Iron Pipe Fittings from the People's Republic of China, 68 FR 13896 (March 21, 2003).

Postponement of the Final Determination

Section 735(a)(2) of the Act provides that a final determination may be postponed until not later than 135 days after the date of the publication of the preliminary determination if, in the event of an affirmative preliminary determination, a request for such postponement is made by exporters who account for a significant proportion of exports of the subject merchandise, or in the event of a negative preliminary determination, a request for such postponement is made by the petitioners. The Department's regulations, at 19 C.F.R. 351.210(e)(2), require that requests by respondents for postponement of a final determination be accompanied by a request for an extension of the provisional measures from a four-month period to not more than six months.

On May 2, 2003, JMC requested that, in the event of an affirmative preliminary determination in this investigation, the Department postpone its final determination until 135 days after the publication of the preliminary determination. Pannext and SLK submitted requests for a postponement of the Department's final determination until 135 days after the publication of the preliminary determination on May 7, 2003, and May 6, 2003, respectively. JMC also included a request to extend the provisional measures to not more than six months after the publication of the preliminary determination. See JMC's letter to the Department, dated May 2, 2003. Accordingly, because we have made an affirmative preliminary determination, the requesting parties account for a significant proportion of exports of the subject merchandise, and no compelling reasons exist to deny the request, we have postponed the final determination until not later than 135 days after the date of the publication of the preliminary determination, and are extending the provisional measures accordingly, in accordance with section 735(a)(2) of the Act and section 351.210(e) of the Department's Regulations.

Period of Investigation

The POI is April 1, 2002, through September 30, 2002. This period corresponds to the two most recent fiscal quarters prior to the month of the filing of the petition (i.e., October 2003). See 19 C.F.R. 351.204(b)(1).

Scope of Investigation

For purposes of this investigation, the products covered are certain malleable iron pipe fittings, cast, other than grooved fittings, from the People's Republic of China. The merchandise is classified under item numbers 7307.19.90.30, 7307.19.90.60 and 7307.19.90.80 of the Harmonized Tariff Schedule (HTSUS).

Excluded from the scope of this investigation are metal compression couplings, which is imported under HTSUS number 7307.19.90.80. A metal compression coupling consists of a coupling body, two gaskets, and two compression nuts. These products range in diameter from ½ inch to 2 inches and are carried only in galvanized finish. HTSUS subheadings are provided for convenience and BCBP purposes. The written description of the scope of this proceeding is dispositive.

Selection of Respondents

Section 777A(c)(1) of the Act directs the Department to calculate individual dumping margins for each known exporter and producer of the subject merchandise. However, section 777A(c)(2) of the Act gives the Department discretion, when faced with a large number of exporters/producers, to limit its examination to a reasonable number of such companies if it is not practicable to examine all companies. Where it is not practicable to examine all known producers/exporters of subject merchandise, this provision permits the Department to investigate either: (1) a sample of exporters, producers, or types of products that is statistically valid based on the information available at the time of selection; or (2) exporters and producers accounting for the largest volume of the subject merchandise that can reasonably be examined. After consideration of the complexities expected to arise in this proceeding and the resources available to the Department, we determined that it was not practicable to examine the over 100 potential producers and/or exporters from the PRC. Instead, we found that, given our resources, we would be able to investigate three Chinese producers/exporters. The three selected mandatory respondents, JMC, SLK, and Pannext, were selected because they were the three largest exporters and because they accounted for over 60 percent of exports of the subject merchandise from the PRC during the POI, as determined by BCBP data and provided by the producers/exporters at the time we made our respondent selection. See Memorandum from Richard Weible to Joseph A. Spetrini Re: Selection of Respondents, January 8, 2003.

Non-Market Economy Country Status

The Department has treated the PRC as an NME country in all past antidumping investigations. See Notice of Final Determination of Sales at Less Than Fair Value: Certain Circular Welded Carbon-Quality Steel Pipe From the People's Republic of China, 67 FR 36570, 36571 (May 24, 2002); and Notice of Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination: Structural Steel Beams From the People's Republic of China, 66 FR 67197, 67198-99 (December 28, 2001); and Notice of Final Determination of Sales at Less Than Fair Value Certain: Folding Metal Tables and Chairs From the People's Republic of China, 67 FR 20090, 20091 (April 24, 2002). A designation as an NME remains in effect until it is revoked by the Department (see Section 771(18)(C) of the Act). The respondents in this investigation have not requested a revocation of the PRC's NME status. We have, therefore, preliminarily determined to continue treating the PRC as an NME country.

When the Department is investigating imports from an NME, section 773(c)(1) of the Act directs us to base the normal value (NV) on the NME producer's factors of production (FOP). Section 773(c)(4) provides that when valuing FOP, the Department shall utilize FOP from a comparable market economy that is a significant producer of comparable merchandise. The sources of individual factor prices are discussed under the “Normal Value” section, below.

Furthermore, no interested party has requested that the MPF industry in the PRC be treated as a market-oriented industry and no information has been provided that would lead to such a determination. Therefore, we have not treated the MPF industry in the PRC as a market-oriented industry in this investigation.

Separate Rates

In proceedings involving NME countries, the Department begins with a rebuttable presumption that all companies within the country are subject to government control and thus should be assessed a single antidumping duty deposit rate. It is the Department's Start Printed Page 33914policy to assign all exporters of merchandise subject to investigation in an NME country this single rate, unless an exporter can demonstrate that it is sufficiently independent so as to be entitled to a separate rate. The five companies that have submitted Section A responses have provided the requested company-specific separate rates information and have stated that, for each company, there is no element of government ownership or control. All five companies have requested a separate company-specific rate.[1]

JMC reported that it is a Sino-U.S. equity joint venture between Jinan Malleable Iron Corporation and South Hudson Inc., established under Chinese law as a limited liability corporation. JMC is privately owned by individual shareholders and controlled by a board of directors. JMC states that it does not have any relationship with the central, provincial, or local governments in the PRC. JMC further states that there are no government controls on the export activities of JMC.

SLK reported that it is wholly-owned by LDR, a U.S. company, and controlled by its managers and owners. SLK stated that they have no relationship with any other producers or exporters of subject merchandise, and that there are no government controls on the export activities of SLK. SLK further states that they it is not owned or controlled by a provincial or local government. Because SLK is wholly foreign-owned, a separate rate analysis is not necessary.

Pannext reported that it is a subsidiary of Pantex Computer Inc. (PCI), a company incorporated in Texas, United States and is controlled by its two-person board of directors, one of whom is the owner of PCI, and the other is the general manager of Pannext. Pannext stated that all exports of the subject merchandise were produced by Pannext. Pannext claimed that Pannext and its affiliates have no corporate relationship with any level of the PRC government. Because Pannext is wholly foreign-owned, a separate rate analysis is not necessary.

Chengde reported that it is an employee-owned enterprise. Chengde further states that Chengde is under the direct control of its general manager who makes all business decisions, and that Chengde is independent of any national, provincial, or local government, including ministries or offices of those governments with respect to exports of the subject merchandise to the United States.

SCE reported that SCE operates in a market economy and operates beyond the jurisdiction of the NME government of the PRC. SCE states that it has no relationship with national, provincial and local governments, and that there are no controls on the export activities of SCE.

Based on these claims, we considered whether each respondent is eligible for a separate rate. The Department's separate rate test to determine whether the exporters are independent from government control is not concerned, in general, with macroeconomic/border-type controls, e.g., export licenses, quotas, and minimum export prices, particularly if these controls are imposed to prevent dumping. The test focuses, rather, on controls over the investment, pricing, and output decision-making process at the individual firm level. See, e.g., Certain Cut-to-Length Carbon Steel Plate from Ukraine: Final Determination of Sales at Less than Fair Value, 62 FR 61754, 61757 (November 19, 1997); Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, from the People's Republic of China: Final Results of Antidumping Duty Administrative Review, 62 FR 61276, 61279 (November 17, 1997); and Honey from the People's Republic of China: Preliminary Determination of Sales at Less than Fair Value, 60 FR 14725, 14726 (March 20, 1995).

To establish whether a firm is sufficiently independent from government control of its export activities to be entitled to a separate rate, the Department analyzes each entity exporting the subject merchandise under a test arising out of the Final Determination of Sales at Less Than Fair Value: Sparklers from the People's Republic of China, 56 FR 20588 (May 6, 1991) and amplified in the Final Determination of Sales at Less Than Fair Value: Silicon Carbide from the People's Republic of China, 59 FR 22585, 22586-87 (May 2, 1994) (Silicon Carbide). Under the separate rates criteria, the Department assigns separate rates in NME cases only if respondents can demonstrate the absence of both de jure and de facto governmental control over export activities. See id.

1. Absence of De Jure Control

The Department considers the following de jure criteria in determining whether an individual company may be granted a separate rate: (1) an absence of restrictive stipulations associated with an individual exporter's business and export licenses; (2) any legislative enactments decentralizing control of companies; and (3) any other formal measures by the government decentralizing control of companies. JMC, SLK, Pannext, SCE, and Chengde have placed on the record a number of documents to demonstrate absence of de jure control, including the “Foreign Trade Law of the People's Republic of China” and the “Company Law of the People's Republic of China.” In addition, in previous cases, the Department has analyzed the “Company Law of the People's Republic of China” and found that it establishes an absence of de jure control. See, e.g., Notice of Preliminary Determination of Sales at Less Than Fair Value: Certain Partial-Extension Steel Drawer Slides with Rollers from the People's Republic of China, 60 FR 29571, 29573 (June 5, 1995). We have no information in this proceeding that would cause us to reconsider this determination. Therefore, based on the foregoing, we have preliminarily found an absence of de jure control for JMC, SLK, Pannext, SCE, and Chengde.

2. Absence of De Facto Control

The Department typically considers four factors in evaluating whether each respondent is subject to de facto governmental control of its export functions: (1) whether the export prices are set by or are subject to the approval of a governmental agency; (2) whether the respondent has authority to negotiate and sign contracts and other agreements; (3) whether the respondent has autonomy from the government in making decisions regarding the selection of management; and (4) whether the respondent retains the proceeds of its export sales and makes independent decisions regarding disposition of profits or financing of losses. As stated in previous cases, there is some evidence that certain enactments of the PRC central government have not been implemented uniformly among different sectors and/or jurisdictions in the PRC. See Silicon Carbide 59 FR at 22587. Therefore, the Department has determined that an analysis of de facto control is critical in determining whether respondents are, in fact, subject to a degree of governmental control that would preclude the Department from assigning separate rates.

All respondents asserted the following: (1) they establish their own export prices; (2) they negotiate contracts without guidance from any governmental entities or organizations; (3) they make their own personnel decisions; and (4) they retain the proceeds of their export sales, using Start Printed Page 33915profits according to their business needs. Additionally, none of the respondents' questionnaire responses suggest pricing is coordinated among exporters. Furthermore, our analysis of the respondents' questionnaire responses reveals no other information indicating government control. Based on the information provided, we preliminary determine that there is an absence of de facto governmental control of the respondents' export functions. Consequently, we preliminarily determine that JMC, SLK, Pannext, Chengde, and SCE have met the criteria for the application of a separate rate.

The People's Republic of China-Wide Rate

All exporters were given the opportunity to respond to the Department's questionnaire. As explained above, we received timely Section A responses from JMC, SLK, Pannext, Chengde, and SCE.[2] Our review of U.S. import statistics from the PRC, however, reveals that JMC, SLK, Pannext, Chengde, and SCE did not account for all imports of subject merchandise into the United States from the PRC, even after adjusting for the merchandise of Chinese origin Myland said it had imported into the United States. For this reason, we preliminarily determine that some PRC exporters of MPF failed to respond to our questionnaire. Consequently, we are applying a single antidumping rate the PRC-wide rate to all other exporters in the PRC based on our presumption that those respondents who failed to demonstrate entitlement to a separate rate constitute a single enterprise under common control by the Chinese government. See, e.g., Final Determination of Sales at Less Than Fair Value: Synthetic Indigo from the People's Republic of China, 65 FR 25706, 25707 (May 3, 2000) (Synthetic Indigo). The PRC-wide rate applies to all entries of subject merchandise except for entries from JMC, SLK, Pannext, Chengde, and SCE.

Use of Facts Otherwise Available

Section 776(a) of the Act provides that, if an interested party withholds information that has been requested by the Department, fails to provide such information in a timely manner or in the form or manner requested, significantly impedes a proceeding under the antidumping statute, or provides information which cannot be verified, the Department shall use, subject to sections 782(d) and (e) of the Act, facts otherwise available in reaching the applicable determination. Pursuant to section 782(e) of the Act, the Department shall not decline to consider submitted information if that information is necessary to the determination but does not meet all of the requirements established by the Department provided that all of the following requirements are met: (1) the information is submitted by the established deadline; (2) the information can be verified; (3) the information is not so incomplete that it cannot serve as a reliable basis for reaching the applicable determination; (4) the interested party has demonstrated that it acted to the best of its ability; and (5) the information can be used without undue difficulties.

Section 776(a)(2)(B) of the Act permits the Department to use facts available when a party does not provide the Department with information by the established deadline or in the form and manner requested by the Department. In addition, section 776(b) of the Act provides that, if the Department finds that an interested party “has failed to cooperate by not acting to the best of its ability to comply with a request for information,” the Department may use information that is adverse to the interests of that party as facts otherwise available.

Adverse inferences are appropriate “to ensure that the party does not obtain a more favorable result by failing to cooperate than if it had cooperated fully.” See Statement of Administrative Action (SAA) accompanying the URAA, H.R. Doc. No. 316, 103d Cong., 2d Session at 870 (1994). Furthermore, “affirmative evidence of bad faith on the part of the respondent is not required before the Department may make an adverse inference.” See Antidumping Countervailing Duties; Final Rule, 62 FR 27296, 27340 (May 19, 1997).

PRC-Wide Rate

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In the case of the single PRC enterprise, as explained above, some exporters of the single enterprise failed to respond to the Department's request for information. Pursuant to section 776(a) of the Act, in reaching our preliminary determination, we have used total adverse facts available for the PRC-wide rate because certain entities did not respond. Also, because some exporters of the single enterprise failed to respond to the Department's requests for information, the Department has found that the single enterprise failed to cooperate to the best of its ability. Therefore, pursuant to section 776(b) of the Act, the Department preliminarily finds that, in selecting from among the facts available, an adverse inference is appropriate.

An adverse inference may include reliance on information derived from the petition, the final determination in the investigation, any previous review, or any other information placed on the record. See section 776(b) of the Act. However, section 776(c) of the Act provides that, when the Department relies on secondary information rather than on information obtained in the course of an investigation or review, the Department shall, to the extent practicable, corroborate that information from independent sources that are reasonably at its disposal. Independent sources may include published price lists, official import statistics and customs data, and information obtained from interested parties during the particular investigation or review. See SAA at 870 and 19 C.F.R. 351.308(d). “Corroborate” means that the Department will satisfy itself that the secondary information to be used has probative value. Id. To corroborate secondary information, the Department will, to the extent practicable, examine the reliability and relevance of the information used. See Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, from Japan, and Tapered Roller Bearings, Four Inches or Less in Outside Diameter, and Components Thereof, from Japan; Preliminary Results of Antidumping Duty Administrative Reviews and Partial Termination of Administrative Reviews, 61 FR 57391, 57392 (November 6, 1996).

For our preliminary determination, as adverse facts available, we have used as the PRC-wide rate the recalculated dumping margin from the petition (see below). In the petition, the petitioners based export price (EP) on Chinese price quotes publicly available in the United States. See http://www.smithcooper.com/​products.htm#Malleable. For the NV calculation, the petitioners based the factors of production, as defined by section 773(c)(3) of the Act (raw materials, labor, energy, and representative capital costs), on the quantities of inputs used by the petitioners.

With regard to the EP calculation in the petition, the information relied upon in this case was based on the publicly available Chinese price quotes. Therefore, we find that the U.S. price from the petition margin is sufficiently corroborated. To corroborate the petitioners' NV calculations, we Start Printed Page 33916compared the petitioners' factor consumption data to that data on the record of this investigation. As discussed in a separate memorandum to the file, we found that the factors consumption data in the petition were reasonable and of probative value. See Memorandum to the File Regarding Total Facts Available Corroboration Memorandum for the PRC-Wide Rate, dated May 28, 2003. The values for the factors of production in the petition were based on publicly available information for comparable inputs. Therefore, we find that these Indian surrogate values are sufficiently corroborated.

As a result of this calculation, the PRC-wide rate, for the preliminary determination, is 146.41 percent. Because this is a preliminary margin, the Department will consider all margins on the record at the time of the final determination for the purpose of determining the most appropriate final PRC-wide margin.

Surrogate Country

When the Department is investigating imports from an NME country, section 773(c)(1) of the Act directs it to base NV, in most circumstances, on the NME producer's factors of production, valued in a surrogate market economy country or countries considered to be appropriate by the Department. In accordance with section 773(c)(4) of the Act, the Department, in valuing the factors of production, shall utilize, to the extent possible, the prices or costs of factors of production in one or more market economy countries that are at a level of economic development comparable to the NME country and are significant producers of comparable merchandise. The sources of the surrogate factor values are discussed under the NV section below.

The Department has determined that India, Pakistan, Indonesia, Sri Lanka and the Philippines are countries comparable to the PRC in terms of economic development. See Memorandum from Jeffrey May to Abdelali Elouaradia: Antidumping Duty Investigation on Certain Malleable Iron Pipe Fittings from the People's Republic of China, dated January 13, 2003. Customarily, we select an appropriate surrogate based on the availability and reliability of data from these countries. For PRC cases, the primary surrogate has often been India if it is a significant producer of comparable merchandise. In this case, we have found that India is a significant producer of comparable merchandise.

We used India as the primary surrogate country and, accordingly, we have calculated NV using Indian prices to value the PRC producers' factors of production, when available and appropriate. See Surrogate Country Selection Memorandum to The File from Anya Naschak, Case Analyst, dated May 28, 2003, (Surrogate Country Memorandum). We have obtained and relied upon publicly available information wherever possible. See Factors of Production Valuation Memorandum for the Preliminary Determination to The File from Case Analysts, dated May 28, 2003 (Factor Valuation Memorandum).

In accordance with section 351.301(c)(3)(i) of the Department's regulations, for the final determination in an antidumping investigation, interested parties may submit publicly available information to value factors of production within 40 days after the date of publication of this preliminary determination.

Fair Value Comparison

To determine whether sales of MPF to the United States by JMC, SLK, and Pannext were made at less than fair value, we compared EP or constructed export price (CEP), as appropriate, and NV, as described in the “Export Price and Constructed Export Price” and “Normal Value” sections of this notice. In accordance with section 777A(d)(1)(A)(i) of the Act, we calculated weighted-average EPs or CEPs.

Export Price and Constructed Export Price

In accordance with section 772(a) of the Act, for respondent JMC we used EP because the subject merchandise was sold directly to unaffiliated customers in the United States prior to importation and because CEP was not otherwise indicated. As explained below, for respondents SLK and Pannext, we used CEP. In accordance with section 777A(d)(1)(A)(i) of the Act, we compared POI-wide weighted-average EPs or CEPs to the NVs.

We calculated EP based on prices to unaffiliated purchasers in the United States. For JMC we made deductions, where appropriate, for foreign inland freight, brokerage and handling, international freight, marine insurance, and other sales specific adjustments. See Proprietary Memorandum from Ann Barnett-Dahl to Abdelali Elouaradia: Preliminary Determination Analysis Memorandum for Jinan Meide Casting Co., Ltd., dated May 28, 2003 (JMC Analysis Memo). Because marine insurance was provided by an NME company, we based it on a surrogate rate from a publicly available price list for India. See Factor Valuation Memorandum.

SLK classified all of its sales of the subject merchandise in the United States as CEP sales in its questionnaire response. SLK made all of its U.S. sales of the subject merchandise to the first unaffiliated U.S. customer prior to importation by LDR, its U.S. affiliated reseller. We examined the facts surrounding the U.S. sales process.

LDR handled the sales of the subject merchandise in the United States during the POI. LDR conducted all sales negotiations without SLK's participation, received purchase orders from U.S. customers and sent order confirmations to these customers. LDR also issued all invoices and received payment from its U.S. customers. See Section A Questionnaire Response (January 29, 2003), and Section A Supplemental Questionnaire Response (February 25, 2003). Because LDR made all sales in the United States, the Department preliminarily determines that SLK's U.S. sales were made “in the United States” within the meaning of section 772(b) of the Act, and, thus, should be treated as CEP transactions.

We calculated weighted-average CEPs for SLK's U.S. sales made in the United States through its U.S. affiliate. We based CEP on the reported gross unit prices to unaffiliated purchasers in the United States. We made deductions, where appropriate, for discounts, rebates, marine insurance, international freight, U.S. duties, and for foreign inland freight from the plant to the port of exportation in accordance with section 772(c)(2)(A) of the Act. To calculate inland freight, we multiplied the reported distance from the plant to the port of exit by a surrogate truck freight rate from India. In accordance with section 772(d)(1) of the Act, we deducted from CEP direct and indirect selling expenses (i.e., advertising and imputed credit expenses, and indirect selling expenses and inventory carrying costs) that were associated with LDR's economic activities occurring in the United States. See Proprietary Memorandum from Helen Kramer to Abdelali Elouaradia: Preliminary Determination Analysis Memorandum for Beijing Sai Lin Ke Hardware Co., Ltd. and LDR Industries, dated May 28, 2003 (SLK Analysis Memo).

In its questionnaire response Pannext classified all of its sales of the subject merchandise in the United States as CEP sales. All of Pannext's U.S. sales of the subject merchandise to the first unaffiliated U.S. customer during the POI were made prior to importation through PFC, a U.S.-based affiliated Start Printed Page 33917reseller. We examined the facts surrounding the U.S. sales process.

The sale of subject merchandise by Pannext in the United States during the POI was handled by PFC. PFC received purchase orders from, and sent order confirmations to, U.S. customers. PFC also issued all invoices and received payment from Pannext's customers. See Section A Questionnaire Response (January 29, 2003), and Section A Supplemental Questionnaire Response (March 3, 2003).

Because the contracts on which Pannext's U.S. sales were based were between PFC and its unaffiliated U.S. customers, and PFC invoiced and received payment from the unaffiliated U.S. customers, the Department preliminarily determines that Pannext's U.S. sales were made “in the United States” within the meaning of section 772(b) of the Act, and, thus, should be treated as CEP transactions. This is consistent with AK Steel Corp. v. United States, 226 F.3d 1361, 1374 (Fed. Cir. 2000).

We calculated weighted-average CEPs for Pannext's U.S. sales made in the United States through its U.S. affiliate. We based CEP on the reported gross unit prices to unaffiliated purchasers in the United States. We made deductions, where appropriate, for discounts, marine insurance, international freight, U.S. duties, and for foreign inland freight from the plant to the port of exportation in accordance with section 772(c)(2)(A) of the Act. Because marine insurance was provided by an NME company, we based it on a publicly available price list for India. See Factor Valuation Memorandum. To calculate inland freight, we multiplied the reported distance from the plant to the port of exit by a surrogate rail rate from India. In accordance with section 772(d)(1) of the Act, we deducted from CEP direct and indirect selling expenses (i.e., credit and indirect selling expenses) that were associated with Pannext's economic activities occurring in the United States. See Proprietary Memorandum from Anya Naschak to Abdelali Elouaradia: Preliminary Determination Analysis Memorandum for Langfang Pannext Pipe Fitting Co., Ltd. and Pannext Fittings Corporation, dated May 28, 2003 (Pannext Analysis Memo).

Normal Value

Section 773(c)(1) of the Act provides that the Department shall determine the NV using a factors-of-production methodology if: (1) the merchandise is exported from an NME country; and (2) the information does not permit the calculation of NV using home-market prices, third-country prices, or constructed value under section 773(a) of the Act.

Factors of production include: (1) hours of labor required; (2) quantities of raw materials employed; (3) amounts of energy and other utilities consumed; and (4) representative capital costs. We used factors of production, reported by respondents, for materials, energy, labor, by-products, and packing. See section 773(c)(3) of the Act.

The statute provides that in NME cases, the Department “shall determine the normal value of the subject merchandise on the basis of the value of the factors of production utilized in producing the merchandise.” See section 773(c)(1) of the Act. However, in the instant investigation, JMC, Pannext, and SLK have submitted information on the record that they do not keep records of the inputs of recycled scrap used in the manufacture of subject merchandise, which would be necessary to determine the quantity of recycled scrap used in producing one kilogram of subject merchandise as a factor of production. Further, respondents note that they do not record in the normal course of business the quantities of inputs required to produce each model of subject merchandise. Respondents note that they have reported their factors of production excluding the inputs of recycled scrap. Respondents have explained that their production line is a closed loop system, where in the ordinary course of business all scrap produced is simultaneously reintroduced into the production process. Therefore, it is the respondents' position that the Department should not include in its calculation a factor of production for recycled scrap because the offset would nullify any additional input quantity.

In an effort to determine the quantity of these inputs, the Department provided respondents with an opportunity to report recycled scrap as an input. First, the Department requested that all respondents adjust their reported factors of production by the control number (CONNUM)-specific yield loss ratios. Respondents have acted to the best of their ability to comply with this request. In their supplemental submissions, the respondents adjusted their factors of production to account for these yield loss ratios, and reported estimated yield loss ratios on a CONNUM-specific basis. However, respondents noted that they are only able to report estimated data, because these ratios are not inclusive of material lost due to spillage, slag, or evaporation in the melting process, and are based on a small number of tests, rather than on actual CONNUM-specific data.

Second, the Department requested, at least twice, that each respondent separately report the quantity of recycled scrap reintroduced into the production process in order to account for the material lost in the production process. See e.g., the Department's NME Questionnaire, dated January 8, 2003, at D-1, D-6, JMC Supplemental C and D Questionnaire, dated March 19, 2003, at page 7, Pannext Supplemental Section C and D Questionnaire, dated March 19, 2003 at pages 6-7, Pannext Second Supplemental C and D Questionnaire, dated April 23, 2003, at page 4, SLK Supplemental Section C and D Questionnaire, dated March 18, 2003, at page 6, and Memorandum from Ann Barnett-Dahl to the File, dated May 19, 2003. Respondents explained that they do not keep records on reintroduced scrap, and are therefore unable to provide the Department with the quantity of these inputs. See e.g., JMC's Section D Questionnaire response, dated February 24, 2003, at pages 23 25, JMC's Section D Supplemental response, dated April 2, 2003, at pages 18-19, Pannext's Section D Supplemental response, dated April 11, 2003, at pages 16-17, Pannext's Section D Second Supplemental response, dated April 28, 2003, at pages 4-5, SLK's Section D Supplemental response, dated April 14, 2003, at pages 5-6.

However, it is the Department's practice to require the reporting of all inputs in the production process in the calculation of constructed value. When a party is unable to provide the Department with the requested information, section782(c) of the Act requires a party to promptly notify the Department as to why it cannot comply with the Department's questionnaire. Section782(c) also requires parties to suggest alternative forms in which they are able to comply with the request. See China Steel Corporation and Yieh Loong v United States, Court No. 01-01040, Slip Op. 03-52 at 31-32 (May 14, 2003). In this investigation, the Department promptly requested that each respondent separately report the quantities of reintroduced scrap. Respondents have stated they are unable to provide the Department with the requested information, but they have not provided the Department with any alternate means of accounting for the unreported recycled scrap inputs. In lieu of an alternative provided by respondents, the Department must resort to partial facts available in the calculation of dumping margins in this case to account for the unreported input values.

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Section 776(a) of the Act provides that if an interested party withholds information that has been requested by the Department, fails to provide such information in a timely manner or in the form or manner requested, significantly impedes a proceeding under the antidumping statute, or provides information which cannot be verified, the Department shall use, subject to sections 782(d) and (e) of the Act, facts otherwise available in reaching the applicable determination. Specifically, section 776(a)(2)(B) of the Act permits the Department to use facts available when a party does not provide the Department with information by the established deadline or in the form and manner requested by the Department. In addition, section 776(b) of the Act provides that, if the Department finds that an interested party “has failed to cooperate by not acting to the best of its ability to comply with a request for information,” the Department may use information that is adverse to the interests of that party as facts otherwise available. The purpose of applying an adverse inference is “to ensure that the party does not obtain a more favorable result by failing to cooperate than if it had cooperated fully.” See Statement of Administrative Action (SAA) accompanying the URAA, H.R. Doc. No. 316, 103d Cong., 2d Session at 870 (1994).

In the instant investigation, the Department is not relying on adverse facts available, as respondents have supplied the Department with CONNUM-specific yield losses as requested. However, the information currently on record does not satisfy the statute with respect to the unreported inputs in the calculation of normal value. The respondents have said that they are unable to provide the Department with this information, and have not proposed an alternative methodology through which the Department could comply with its statutory obligation to value all inputs. Therefore, for this preliminary determination, the Department must rely on partial facts available for the value of recycled scrap. In its calculation of constructed value for this preliminary determination, the Department is therefore relying on information provided by the petitioners in its calculation of the unreported inputs. In their May 15, 2003, submission to the Department, petitioners provided worksheets demonstrating the unreported factors of production for metallic inputs using petitioners', JMC's, and Pannext's data. See Letter from Petitioners to the Department dated May 15, 2003 (Petitioners' May 15th Letter). Petitioners calculated an adjustment factor for the unreported metallic inputs based on the total quantity of inputs of purchased scrap and recycled scrap from the Petition, adjusting for respondent's reported yield losses and by-product adjustments for one type of subject merchandise. The Department does not have sufficient information to recalculate these input adjustments for the unreported metallic inputs on a CONNUM-specific basis. Therefore, for this preliminary determination, the Department is using an average of the adjustment ratios for JMC and Pannext as calculated in Petitioners' May 15th Letter at Exhibit 4, and increasing JMC, Pannext, and SLK's reported values for purchased steel scrap by this average, 56.83%.

Additionally, in certain instances JMC and Pannext have reported their factors of production for purchased metallic inputs as less than one kilogram of input to make one kilogram of output. It is the Department's position that it is unreasonable that JMC and Pannext have documented an output weight greater than the input weight. As neutral facts available, for JMC and Pannext, when the reported metallic input to produce one kilogram of output was less than one kilogram, we have used the POI-wide average quantity for steel scrap input as reported in their response. See e.g., Pannext's Section D Questionnaire Response, dated March 3, 2003, at Exhibit 7, and JMC's Section D Questionnaire Response, dated February 24, 2003, at Exhibit D-8-A. For a further analysis of the company-specific calculations, please see JMC Analysis Memo, Pannext Analysis Memo, and SLK Analysis Memo.

We valued the above input factors of production using publicly available published information as discussed in the “Surrogate Country” and “Factor Valuations” sections of this notice.

In accordance with 19 C.F.R. 351.408(c)(1), where a producer sources an input from a market economy and pays for it in market economy currency, the Department employs the actual price paid for the input to calculate the factors-based NV. See also Lasko Metal Products v. United States, 43 F. 3d 1442, 1445-1446 (Fed. Cir. 1994) (Lasko). However, though respondents JMC and Pannext reported that one of their material inputs used in the manufacture of certain types of subject merchandise were sourced from market economies and paid for in market economy currency, Pannext and JMC purchased this input from market economies that the Department considers to be potentially aberrational. The Department has determined that South Korea, Thailand, and Indonesia maintain broadly available, non-industry specific export subsidies which may benefit all exporters to all export markets. See Final Determination of Sales at Less Than Fair Value: Certain Automotive Replacement Glass Windshields From the People's Republic of China, 67 FR 6482 (February 12, 2002). Therefore, the Department has not used use the values of inputs from these countries from to calculate the surrogate values. See “Factor Valuation” section below.

Pannext reported a “self-produced” factor for water among its factors of production for inputs. We preliminarily determine to value water through use of surrogate valuation, rather than based on surrogate valuation of the factors going into the production of those inputs.

Factor Valuations

In accordance with section 773(c) of the Act, we calculated NV based on factors of production (FOP) reported by respondents for the POI. For JMC the Department has applied, as neutral facts available, an average of the FOP values reported by Pannext and SLK for the unreported input of resin coated sand used in the production of subject merchandise. A complete analysis of this issue is available in the JMC Analysis Memo. In the case of one respondent, a trading company, SLK, one of its suppliers failed to report a factor of production for resin coated sand. Therefore, for SLK the Department has applied, as neutral facts available, an average of the FOP values reported by Pannext and the values reported by the remaining four suppliers of SLK for resin coated sand. For SLK, the Department has also applied, as neutral facts available, and average of the FOP values reported by Pannext and JMC for the unreported inputs of limestone used in the production of subject merchandise. A complete analysis of this issue is available in the SLK Analysis Memo.

To calculate NV, the reported per-unit factor quantities were multiplied by publicly available Indian surrogate values (except as noted below). In selecting the surrogate values, we considered the quality, specificity, and contemporaneousness of the data. As appropriate, we adjusted input prices by including freight costs to make them delivered prices. For a detailed description of all surrogate values used for respondents, see Factor Valuation Memorandum.

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We added to Indian import surrogate values a surrogate freight cost using the shorter of the reported distance from the domestic producer to the factory or the distance from the nearest seaport to the factory. This adjustment is in accordance with the Court of Appeals for the Federal Circuit's decision in Sigma Corp. v. United States, 117 F. 3d 1401, 1407-1408 (Fed. Cir. 1997). For those Indian rupee values not contemporaneous with the POI, we adjusted for inflation using wholesale price indices published in the International Monetary Fund's International Financial Statistics.

We valued raw material inputs using the weighted-average unit import values derived from the Monthly Statistics of the Foreign Trade of India: Volume II, July 2002 (Indian Import Statistics) for the time period corresponding to the POI and, where viable contemporaneous data was not available, we have used Monthly Statistics of the Foreign Trade of India: Volume II, December 2001 (2001 Import Statistics), as used in Non-Malleable Cast Iron Pipe Fittings from the People's Republic of China: Final Determination of Sales at Less than Fair Value, 68 FR 7765, 7767 (February 18, 2003) (Non-Malleable Final), inflated to 2002 levels (see Factor Valuation Memorandum). For the raw material input of one input used in the production of certain types of subject merchandise purchased by Pannext and JMC from a market economy supplier, for the reasons stated above in the “Normal Value” section, the Department is valuing these inputs using Indian Import Statistics.

We valued electricity using the year 2002 Electricity Prices for Industry rate as reported by the International Energy Agency (IEA) in Key World Energy Statistics from the IEA. The source is the same as in Non-Malleable Final, but it is more contemporaneous.

We valued labor using the latest regression-based wage rate for the PRC found on Import Administration's Web page (http://ia.ita.doc.gov/​wages/​) as described in 19 C.F.R. 351.408(c)(3).

To value foreign inland truck freight costs, we relied upon per kilometer prices from The Financial Express, June 17, July 14, Sept. 1, and Oct. 6, 2002 (http://www.financialexpress.com). For JMC and Pannext we valued marine insurance based on publicly available price quotes from a marine insurance provider at http://www.rjgconsultants.com/​insurance.html, and we used the actual costs of those services provided to the respondents by market economy suppliers. For JMC we valued brokerage and handling based on a publicly summarized version of the average value for brokerage and handling expenses reported in Final Determination of Sales at Less Than Fair Value: Certain Circular Welded Carbon-Quality Steel Pipe from the People's Republic of China, 67 FR 36570 (May 24, 2002), and accompanying Factor Valuation Memorandum.

Because the Department did not find industry-specific data to calculate selling, general and administrative (SG&A) expenses, factory overhead, and profit, we used the “Finance of Large Public Limited Companies, 2000-01,” a sample of 964 large public limited companies in India that were reported in the April 2002 Reserve Bank of India Bulletin, as previously used in the Non-Malleable Final.

For a complete analysis of surrogate values used in the preliminary determination, see the Factor Valuation Memorandum.

Verification

As provided in section 782(i)(1) of the Act, we intend to verify all company information relied upon in making our final determination.

Rate for Cooperative Producers/Exporters That Were Not Selected

For those PRC producers/exporters who responded to our separate rates questionnaire but were not selected as mandatory respondents (i.e., Chengde and SCE), we have calculated a weighted-average margin based on the rates calculated for those producers/exporters that were selected as mandatory respondents. See, e.g., Notice of Final Determination of Sales at Less Than Fair Value: Freshwater Crawfish Tail Meat From the People's Republic of China, 62 FR 41347, 41350 (August 1, 1997).

Suspension of Liquidation

In accordance with section 733(d)(2)(A) of the Act, we are directing the BCBP to suspend liquidation of all imports of subject merchandise entered, or withdrawn from warehouse, for consumption as follows: for Pannext, SLK, Myland or Chengde, we will instruct BCBP to suspend liquidation on or after the date of publication of this notice in the Federal Register; for JMC, SCE and companies subject to the PRC-wide rate, we will instruct BCBP to suspend liquidation on or after the date which is 90 days prior to the date of publication of this notice in the Federal Register, due to the Preliminary Determination of Critical Circumstances. See Notice of Preliminary Determination of Critical Circumstances: Certain Malleable Iron Pipe Fittings from the People's Republic of China, 68 FR 19779 (April 22, 2003). We will instruct the BCBP to require a cash deposit or the posting of a bond equal to the weighted-average amount by which the NV exceeds the EP or CEP, as indicated below. These suspension-of-liquidation instructions will remain in effect until further notice.

We determine that the following percentage weighted-average margins exist for the POI:

Manufacturer/exporterWeighted-average margin (percent) --
Jinan Meide Casting Co., Ltd13.80
Beijing Sai Lin Ke Hardware Co., Ltd144.43
Langfang Pannext Pipe Fitting Co., Ltd4.96
Chengde Malleable Iron General Factory52.50
SCE Co., Ltd52.50
PRC-Wide Rate146.41

The PRC-wide rate applies to all entries of the subject merchandise except for entries from JMC, SLK, Pannext, Chengde, and SCE.

International Trade Commission Notification

In accordance with section 733(f) of the Act, we have notified the ITC of our determination of sales at LTFV. If our final determination is affirmative, the ITC will determine before the later of 120 days after the date of this preliminary determination or 45 days after our final determination whether the domestic industry in the United States is materially injured, or Start Printed Page 33920threatened with material injury, by reason of imports, or sales (or the likelihood of sales) for importation, of the subject merchandise.

Public Comment

Case briefs or other written comments may be submitted to the Assistant Secretary for Import Administration no later than ten days after the date of issuance of the verification reports, and rebuttal briefs, limited to issues raised in case briefs, no later than five days after the time limit for filing the case brief. See 19 C.F.R. 351.309(c)(1)(i); 19 C.F.R. 351.309(d)(1). A list of authorities used and an executive summary of issues should accompany any briefs submitted to the Department. This summary should be limited to five pages total, including footnotes. In accordance with section 774 of the Act, we will hold a public hearing, if requested, to afford interested parties an opportunity to comment on arguments raised in case or rebuttal briefs. Tentatively, any hearing will be held two days after the receipt of the rebuttal briefs at the U.S. Department of Commerce, 14th Street and Constitution Avenue, N.W., Washington, D.C. 20230, at a time and location to be determined. See 19 C.F.R. 351.310(d)(1). Parties should confirm by telephone the date, time, and location of the hearing two days before the scheduled date.

Interested parties who wish to request a hearing, or to participate if one is requested, must submit a written request to the Assistant Secretary for Import Administration, U.S. Department of Commerce, Room 1870, within 30 days of the date of publication of this notice. See 19 C.F.R. 351.310(c). Requests should contain: (1) the party's name, address, and telephone number; (2) the number of participants; and (3) a list of the issues to be discussed. At the hearing, each party may make an affirmative presentation only on issues raised in that party's case brief, and may make rebuttal presentations only on arguments included in that party's rebuttal brief. See 19 C.F.R. 351.310(c).

The Department will make its final determination no later than 135 days after the date of publication of this preliminary determination.

This determination is issued and published in accordance with sections 733(f) and 777(i)(1) of the Act.

Start Signature

Dated: May 28, 2003.

Joseph A. Spetrini,

Acting Assistant Secretary for Import Administration.

End Signature End Supplemental Information

Footnotes

1.  As noted above, Myland is not eligible for a separate rate because the Department has rejected its Section A response in accordance with 19 C.F.R. 351.302(d)

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2.  As previously stated, for the preliminary determination we have found that Myland did not respond to the Department's questionnaire in a timely manner.

Back to Citation

[FR Doc. 03-14343 Filed 6-5-03; 8:45 am]

BILLING CODE 3510-DS-S