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Expected Non-Market Economy Wages: Request for Comment on Calculation Methodology

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AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

ACTION:

Request for comments

SUMMARY:

The Department of Commerce (“Department”) has a long-standing practice of calculating expected non-market economy (“NME”) wages for use as surrogate values in antidumping proceedings involving NME countries. These expected NME wages are calculated annually in accordance with § 351.408(c)(3) of the Department's regulations. This notice describes the Department's methodology for the calculation of expected NME wages and provides the public with an opportunity to comment on this methodology in response to comments that have been submitted in several NME proceedings. For purposes of public comment, the Department has also calculated expected NME wages using currently available data for 2003 and the methodology described herein. This is a sample calculation based on 2003 data, and is subject to data updates and revisions.

DATES:

Comments must be submitted no later than thirty days after publication of this Notice.

ADDRESSES:

Written comments (original and six copies) should be sent to Joseph A. Spetrini, Acting Assistant Secretary for Import Administration, U.S. Department of Commerce, Central Records Unit, Room 1870, 14th Street and Pennsylvania Avenue N.W., Washington, DC 20230.

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FOR FURTHER INFORMATION CONTACT:

John D. A. LaRose, Assistant to the Senior Enforcement Coordinator, Office of China/NME Compliance or Shauna Lee-Alaia, Policy Analyst, Office of Policy, Import Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue N.W., Washington, DC 20230, (202) 482-3794 or (202) 482-2793.

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SUPPLEMENTARY INFORMATION:

Background

With regard to its calculation of expected NME wages, the Department stated in its November 17, 2004, Final Determination in the investigation of Wooden Bedroom Furniture from the People's Republic of China, that it would “invite comments from the general public on this matter in a proceeding separate from the {Furniture} investigation.” Final Determination of Sales at Less Than Fair Value: Wooden Bedroom Furniture From the People's Republic of China, 69 FR 67313 (November 17, 2004) and accompanying Issues and Decisions Memorandum at 180 (Cmt. 23).

The NME Wage Rate Methodology

The Department's regulations generally describe the methodology by which the Department calculates expected NME wages:

For labor, the Secretary will use regression-based wage rates reflective of the observed relationship between wages and national income in market economy countries. The Secretary will calculate the wage rate to be applied in nonmarket economy proceedings each year. The calculation will be based on current Start Printed Page 37762data, and will be made available to the public.

19 CFR 351.408(c)(3).

In accordance with § 351.408(c)(3), the Department annually calculates expected NME wages in two steps. First, the Department uses regression analysis1 to estimate a linear relationship between per-capita gross national income (“GNI”) and hourly wages in market economy (“ME”) countries. Second, the Department uses the results of the regression and NME GNI data to estimate hourly wage rates for NME countries.

There is usually a two-year interval between the current year and the most recent reporting year of the data required for this methodology due to the practices of the respective data sources. The Department bases its regression analysis on this most recent reporting year, which the Department refers to as the “Base Year.” For example, the Department relied upon data from 2001 to calculate expected NME wages in 2003, i.e., the “Base Year” for the 2003 calculation was 2001. In practice, the “Base Year,” i.e., the year upon which the regression data are based, is two years prior to the year in which the Department conducts its regression analysis.

1. Regression Analysis

The Department's regression analysis, which describes generally the relationship between wages and GNI, relies upon four separate data series: (A) country-specific wage data for 56 countries from Chapter 5B of the International Labour Organization's (“ILO”) Yearbook of Labour Statistics; (B) country-specific consumer price index (“CPI”) data from the International Financial Statistics of the International Monetary Fund (“IMF”); (C) exchange rate data from the IMF's International Financial Statistics; and (D) country-specific GNI data from the World Development Indicators of the World Bank (“WB”).

The wage rate data described above are converted to hourly wage rates and adjusted using CPI data to be representative of the current Base Year. The data are then converted to U.S. dollars using the appropriate exchange rate data. These adjusted wage rate data are ultimately regressed on GNI.

The following sections describe each data series and how it is used.

(A) Wage Data

For each of 56 countries, the Department chooses a single wage rate that represents a broad measure of wages for that country that is most contemporaneous with the Base Year.

To arrive at a single wage rate for each country from among the many wage rates included in the ILO database for each country, the Department prioritizes the following ILO data parameters2 in the following order:

1. “Sex,” i.e., male/female coverage;

2. “Sub-Classification,” i.e., coverage of different types of industry;

3. “Worker Coverage,” i.e., coverage of different types of workers, such as wage earners or salaried employees;

4. “Type of Data,” i.e., the unit of time for which the wage is reported, such as per hour or per month; and,

5. “Source ID,” i.e., a code for the source of the data.

First, the Department looks to the parameter for gender. For the “Sex” parameter, the Department always chooses data that cover both men and women.3

Second, for the “Sub-Classification” parameter, the Department chooses in each instance data that cover all reported industries in a given country (indicated in the database by a value of “Total” for the “Sub-Classification” parameter).

When a wage rate that meets these two criteria (for “Sex” and “Sub-Classification”) is not available for the Base Year, the Department will use the most recently available data within five years of the Base Year, thereby considering a total of six years of data. For example, when the Base Year was 2001, the Department used the data reported for the most recent year between the years of 1996 and 2001.

The Department does not choose wage rate data that do not meet the requirements for “Sex” and “Sub-Classification” described above. If there is more than one record in the ILO database that meets those requirements, the Department looks to the remaining parameters. Once the Department's requirements for these two parameters are satisfied, the Department then prioritizes data that are closest to the Base Year within the remaining ILO parameters discussed below.

For example, for the third parameter, the Department generally prioritizes “wage earners,” “employees” and “total employment,” in that order for the parameter “Worker Coverage.” However, the Department would choose more contemporaneous “employees” data over less contemporaneous “wage earner” data.

Fourth, when the values for all other parameters are equal, the Department prioritizes data reported on an hourly basis over that reported on a monthly or weekly basis for the parameter “Type of Data.”

Fifth, if necessary, the Department prioritizes data with a “Source ID” value of “1” over “2” or “3.”

Finally, it is the Department's normal practice to eliminate aberrational values (i.e., values that vary in either direction in the extreme from year to year) from the wage rate dataset.

The ILO data that are not reported on an hourly basis are converted to an hourly basis based on the premise that there are 44 working hours per week and 192 working hours per month.

(B) CPI Data

Once hourly figures have been calculated based on the wage rate data discussed above, the wages are adjusted to the Base Year on the basis of the Consumer Price Index for each country, as reported by the IMF's International Financial Statistics. This adjustment is made for any wage rate data not reported for the Base Year.

(C) Exchange Rate Data

These inflation-adjusted wage data, which are denominated in the national currency of their country, are then converted to U.S. dollars using Base Year period-average exchange rates reported by the IMF's International Financial Statistics.

Thus, using (A) wage data, (B) CPI data and (C) exchange rate data, discussed above, the Department arrives at hourly wages, denominated in U.S. dollars and adjusted for inflation for each of the 56 countries for which all the above data are available.

(D) GNI Data

The Department uses Base Year GNI data for each of the 56 countries in the Department's analysis, as reported by the WB. GNI data are denominated in U.S. dollars current for the Base Year. The WB defines GNI per capita as gross national product (“GNP”) per capita, which is “the dollar value of a country's final output of goods and services in a year divided by its population.” The WB further explains that this measure “reflects the average income of a country's citizens.” See http://www.worldbank.org/​depweb/​english/​modules/​glossary.html.

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The Department conducts its regression analysis4 using the Base Year wages per hour in U.S. dollars discussed above and Base Year GNI per capita in U.S. dollars to arrive at the following equation: Wagei = Y-intercept + X-coefficient * GNI. The X-coefficient describes the slope of the line estimated by the regression analysis, while the Y-intercept is the point on the Y-axis where the regression line intercepts the Y-axis. The results of this regression analysis describe generally the relationship between hourly wages and GNI.

2. Application of Regression Results to NME GNI Data

The Department applies the NME Base Year GNI to the equation presented above to arrive at an estimated wage rate for the NME. This is done for each NME.

Example of Methodology Applied to Base Year 2003 Data

Following the criteria and methodology discussed above, and using the data available to the Department as of June 15, 2005, the Department has calculated sample expected NME wages.

The Dominican Republic, Algeria and Kenya, three of the 56 countries, have been excluded from the Department's regression analysis because ILO wage rate data were not available for these countries in the instant dataset.

As noted in the ILO database, the wage rates for Turkey and Korea, two of the 56 countries, are denominated in units of 1,000 of their respective national currency, and have been converted accordingly.

While the ILO database indicates that wage rate data for Greece and the Netherlands, two of the 56 countries, are denominated in euros, the notes to the ILO database indicate that these wage rates are denominated in drachmas and guilders, respectively.5 Because appropriate exchange rates were not available in the International Financial Statistics for Greece and the Netherlands, the Department relied on the exchange rate information that it regularly obtains from Dow Jones B.I.S. and the Federal Reserve and posts on the Import Administration web site for these countries. Thus, the Department has calculated the annual 2003 average exchange rates for Greek drachmas and Dutch guilders, which were 0.00328 U.S. dollars per drachma and 0.51859 U.S. dollars per guilder.

2003 WB GNI data were not available for Zimbabwe, one of the 56 countries. Consequently, Zimbabwe has been excluded from the Department's regression analysis.

Following the data compilation and regression methodology described above, and using GNI and wage data for Base Year 2003, the regression results are: Wagei = 0.410466 + 0.000515 * GNI. The r-square, which is a measure of the statistical validity of a regression analysis,[6] is 0.91632 for the Department's regression analysis,7 indicating a statistically valid analysis.

Application of these regression results to 2003 NME GNI data yields the following sample 2005 schedule of expected NME wages for antidumping (“AD”) purposes:

Country2003 GNIExpected NME Wage
Armenia$950$0.90
Azerbaijan$820$0.83
Belarus$1,600$1.23
Estonia†$5,380$3.18
Georgia$770$0.81
Kazakhstan†$1,780$1.33
Kyrgyz Republic$340$0.59
Lithuania†$4,500$2.73
Moldova$590$0.71
China$1,100$0.98
Romania†$2,260$1.57
Russian Federation†$2,610$1.75
Tajikistan$210$0.52
Turkmenistan$1,120$0.99
Ukraine$970$0.91
Uzbekistan$420$0.63
Vietnam‡$480$0.66
†Applicable only to review periods that pre-date the effective date of graduation to market-economy status (Estonia (01/01/03); Lithuania (01/01/03); Romania (01/01/03); and Russia (04/01/02); Kazakhstan (10/01/01)).
‡On November 8, 2002, the Department determined that Vietnam will be treated as a non-market economy country for purposes of antidumping duty and countervailing proceedings (see Notice of Final Antidumping Duty Determination of Sales at Less Than Fair Value and Affirmative Critical Circumstances: Certain Frozen Fish Fillets from the Socialist Republic of Vietnam, 68 FR 37116, June 23, 2003).

In order to facilitate a full opportunity for comment, and because the underlying data is voluminous, the results and underlying data for this sample calculation have been posted on the Import Administration website (http://ia.ita.doc.gov), but will not be used for AD purposes.

Comments

Persons wishing to comment on the Department's methodology described above for the calculation of expected NME wages should file a signed original and six copies of each set of comments by the date specified above. The Department will consider all comments received before the close of the comment period. Comments received after the end of the comment period will be considered, if possible, but their consideration cannot be assured. The Department will not accept comments accompanied by a request that a part or all of the material be treated confidentially because of its business proprietary nature or for any other reason. The Department will return such comments and materials to the persons submitting the comments and will not consider them in development of any Start Printed Page 37764changes to its practice. All comments responding to this notice will be a matter of public record and will be available for public inspection and copying at Import Administration's Central Records Unit, Room B-099, between the hours of 8:30 a.m. and 5 p.m. on business days. The Department requires that comments be submitted in written form. The Department recommends submission of comments in electronic form to accompany the required paper copies. Comments filed in electronic form should be submitted either by e-mail to the Webmaster below, or on CD-ROM, as comments submitted on diskettes are likely to be damaged by postal radiation treatment.

Comments received in electronic form will be made available to the public in Portable Document Format (PDF) on the Internet at the Import Administration website at the following address: http://ia.ita.doc.gov/​.

Any questions concerning file formatting, document conversion, access on the Internet, or other electronic filing issues should be addressed to Andrew Lee Beller, Import Administration Webmaster, at (202) 482-0866, e-mail address: webmaster-support@ita.doc.gov.

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Dated: June 23, 2005.

Joseph A. Spetrini,

Acting Assistant Secretary for Import Administration.

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Footnotes

1.  Ordinary least squares regression.

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2.  Each data point in the ILO database is accompanied by values for each of a number of parameters that describe the characteristics of the data. These parameters include those enumerated above, and also include two other parameters: “Source,” i.e., the original survey source of the data and “Classification,” i.e., the industrial classification.

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3.  The Department does not consider values of “Indices, Men and Women” for this parameter.

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4.  Linear, ordinary least squares regression.

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5.  This correction has been made in previous years, and addresses an apparent discrepancy when using the euro exchange rate.

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6.  Linear, ordinary least squares regression.

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7.  Linear, ordinary least squares regression.

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[FR Doc. 05-12862 Filed 6-29-05; 8:45 am]

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