Import Administration, Withdrawal of Regulations Governing the Treatment of Subcontractors ("Tolling" Operations)

The Import Administration issued an interim final rule for the purpose of withdrawing its regulation governing the treatment of tollers or subcontractors for purposes of determining export price, constructed export price, fair value, and normal value in antidumping duty proceedings. The interim final rule is effective on March 28, 2008. Although the amendment made by this Interim Final Rule is effective on March 28, 2008, Import Administration seeks public comments. To be assured of consideration, written comments must be received not later than April 28, 2008.

Background

The Department promulgated the regulation governing the treatment of tollers or subcontractors in antidumping duty proceedings on May 19, 1997 ("Antidumping Duties; Countervailing Duties; Final Rule") (62 FR 27296, 27411 (May 19, 1997)). The Department regulation, 19 CFR 351.401(h), was intended to ensure, in calculating a dumping margin on merchandise determined to be within the scope of an antidumping order, that the Department's analysis is focused on the party setting the price of subject merchandise when the manufacture of such merchandise is subcontracted to another company. However, the regulation has been interpreted by the Court of International Trade as having the unintended effect of bestowing the status of "foreign manufacturer" or "producer" upon parties in the United States that otherwise would have assumed the status of purchasers of subject merchandise. See USEC Inc. v. United States , 281 F. Supp. 2d 1334 (2003), aff'd on other grounds Eurodif v. United States, 411 F.3d 1355, 1364 (Fed. Cir. 2005). This interpretation could restrict the Department's exercise of its discretion and could require the Department to identify the incorrect entity as the seller of subject merchandise, which would adversely affect the Department's antidumping determinations.

If a party that customarily assumes the status of a "purchaser" is bestowed with the status of "foreign manufacturer" or "producer", the proper application of the law is thwarted in a variety of ways. First, in some cases, the Department may have no basis upon which to make antidumping duty determinations because the customers who obtain the status of "foreign producer" make no sales of subject merchandise, but instead consume the merchandise themselves. In such cases, the Department would be unable to calculate a dumping margin. In other cases, the Department's determination of the margin of dumping could be distorted or miscalculated because the incorrect U.S. sales were identified as the relevant sales under the regulation. Second, the right to appeal Department antidumping determinations is a right limited to interested parties as defined under 19 U.S.C. 1677(9). Purchasers of subject merchandise do not qualify as interested parties under the provision. Purchasers who have obtained the status of "foreign producers" under the regulation, however, become interested parties in error, and are afforded the right to appeal Department antidumping determinations where no such right was intended under the law.

These effects are contrary to the Department's intention in promulgating the regulation, and inconsistent with the Department's statutory mandate to provide relief to domestic industries suffering material injury from unfairly traded imports. The Department has a statutory duty under the Tariff Act of 1930, as amended, to determine instances of dumping by examining the price at which the merchandise is first sold in the United States . The regulation at issue, as recently interpreted, confounds the Department's ability to make such a determination. Because the regulation is applicable to on-going antidumping investigations and administrative reviews, and because the application of the regulation can act to deny relief to domestic industries suffering material injury from unfairly traded imports, immediate revocation is necessary to ensure the proper and efficient operation of the antidumping law and to provide the relief intended by Congress.

The Department is not replacing this regulation with a new regulation. Instead, the Department is returning to a case-by-case adjudication, until additional experience allows the Department to gain greater understanding of the problem.

Parties are invited to comment on the Department's withdrawal of the regulation governing the treatment of tollers or subcontractors in antidumping duty proceedings. Parties should submit to the address under the ADDRESSES heading, a signed original and two copies of each set of comments including reasons for any recommendation, along with a cover letter identifying the commenter's name and address. To be assured of consideration, written comments must be received not later than April 28, 2008.