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6198 Federal Register / Vol. 62, No. 28 / Tuesday, February 11, 1997 / Noticesthat the use of market-oriented importprices combined with the use of Indianimport statistics for scrap yieldsdistortive or inconsistent results; inrespondents’’ view, both represent‘‘market-oriented’’ prices. GuizhouMachinery et al. claim that theDepartment has used different sourcesto obtain surrogate values for inputmaterials in many cases and that theDepartment should not abandon its useof market-oriented import prices or alterits calculations in the final results.Department’s PositionAlthough we agree with respondentsthat we do not need to value all factorsof production in a single surrogatecountry, we agree with Petitioner thatwe should not use purchases of steelfrom PRC trading companies in thisreview. Our established policy allowsfor the valuation of inputs in NME casesbased on market prices paid by themanufacturer for inputs purchased froma market-economy source because thoseprices reflect commercial reality. SeeSaccharin at 58822–23. Therefore,where the manufacturer obtained theinput from the trading company—a PRCsource rather than a market-economysource—and paid for the input in PRCcurrency, we determine that the pricespaid by the producers for these inputsdo not reflect market prices. In suchsituations, the price paid by the tradingcompany is not the relevant inquiry. Wenote that Guizhou Machinery et al.misread Coumarin. In that case, as inthis case, we did not use purchases frommarket-economy suppliers but insteadapplied surrogate values becauseproducers obtained the input from aPRC trading company. See Coumarin at66900. See also TRBs IV–VI at 65533.Comment 7Shanghai argues that the Departmentshould calculate all of Shanghai’srelevant steel costs on the basis of steelpurchases Shanghai made directly frommarket-economy countries during thePOR. For certain components Shanghaiused PRC-sourced steel as well as steelpurchased from market-economycountries during the POR. Shanghaiargues that the Department’s use of aweighted-average of PRC-sourced andimported steel was improper and thatthe Department should have basedShanghai’s constructed steel valuessolely on the verified costs ofShanghai’s market-economy-sourcedsteel imports. Actual market costsincurred during the POR for the exacttype and grade of steel used for theproduction of subject merchandise are,Shanghai contends, the best evidence ofthe market cost of steel. Shanghai citesS. Rep. No. 93–1298, 93d Cong., 2dSess. 174 (1974), in support of its viewthat surrogate values are meant to beapplied only when market-based valuesare unavailable. Shanghai claims thatthe surrogate methodology is meant asa way to ascertain what the prices orcosts of an NME producer would be ifset by the market.Citing Ceiling Fans (at 55274),Shanghai states that its actual cost forthe imported steel are the most reliableand accurate data for determining thevalue of steel inputs. Not using theseverified costs would, Shanghai argues,defeat the statutory intent andundermine the accuracy, fairness andpredictability of the FMV calculations.Petitioner argues that, contrary toShanghai’s assertion, the Departmentshould disregard import prices becausethose prices are subject to statecontrolledinfluences and, therefore, areunreliable. Petitioner suggests that theDepartment should rely on the Indianprices to value all of Shanghai’s steelusage. Petitioner argues that steel is nottraded freely in China and most bearingproducers must purchase their importedinputs through state-controlled tradingcompanies. Petitioner claims theseimports are incorporated directly intothe state-controlled system and, becausethey are indistinguishable from otherChinese domestic prices and areinherently suspect, they must bedisregarded in the final results.Whereas Shanghai argues that importprices should be used for all its steelinputs, Petitioner, citing 19 CFR 353.52,says that such argument disregards thestatutory requirement that, when normalvaluation cannot be used because ofstate-controlled-economy influences,the Department is to base the value onits FOP methodology, deriving valuesfor each factor from prices or costs in asurrogate country. Petitioner contendsthat the Department should use, for thefinal results, prices of imported steelonly for acquisitions that are shown tobe free of state-controlled influences.Petitioner further contends that, in thisreview, no such acquisitions exist and,therefore, the Department should useIndian surrogate values to value all steelinputs in this review.Department’s PositionWe agree with Shanghai with respectto steel sourced directly from marketeconomysuppliers. Accuracy isenhanced when the NME producer’sactual costs can be used. We verifiedthat a portion of Shanghai’s steel inputsduring the POR were sourced frommarket-economy countries and werepaid for in a market-economy currency.Shanghai’s imports were purchaseddirectly from the market-economysupplier and did not involve PRC-basedtrading companies. See VerificationReport at 4. Therefore, we have notcalculated weighted-average steel costsbased on PRC-sourced and importedsteel for Shanghai for these final results.Comment 8Petitioner claims that, if theDepartment uses the value of steelimported into the PRC, there are noavailable scrap values directly related torespondents’ steel-acquisition costs.Petitioner notes that the net cost of rawmaterials inputs is based on the steelcost minus a value for scrap credit andargues that applying a value to the steelfrom one source and scrap credit froma different source is inherentlydistortive. Petitioner claims that thecourts have ruled this practice to beunsupported, citing Timken. Petitionernotes that the Department addressed theissue on remand by using a singlesource to value both materials andscrap, a flat ratio of scrap equal to 20percent of the value of the steel input.Petitioner states that the same principleshould apply to this review, i.e., inorder to avoid inherent distortionswhere the Department values steel andscrap using different sources, the Indianscrap value should be applied as apercentage rather than as an absoluteamount.Guizhou Machinery et al. contendthat, contrary to Petitioner’s argument,the CIT and the CAFC did not rule inTimken that the Department cannot usedifferent sources to obtain surrogatevalues for the various CV componentsbut, rather, that the Department cannotuse surrogate value data which yielddistorted results and which areinconsistent with other record evidence.Guizhou Machinery et al. argue thatPetitioner has not shown that the use ofmarket-oriented import prices for steelwith the use of Indian import statisticsfor scrap credit yields distorted resultsor that it is inconsistent with otherinformation on the administrativerecord for this review. GuizhouMachinery et al also contest Petitioner’sclaim that the use of two differentsources to value steel and scrap is‘‘inherently distorted’’ and point outthat in many cases the Department hasused different sources to value inputmaterials and scrap.Shanghai states that the Departmentmay exercise its discretion to identifythe best available information even ifderived from different sources and thatthe Department’s ‘‘mix-and-match’’methodology is supported by thestatute, citing Lasko Metal Products Inc.v. United States, No. 93–1242 (Fed. Cir.