It generally appears that this change will make it easier for the ITA to calculate higher AD duty rates on goods from NME countries such as mainland China and Vietnam. In AD proceedings involving NME countries, the ITA calculates normal value by valuing the NME producer's factors of production, to the extent possible, using prices from a market economy that is at a comparable level of economic development and is also a significant producer of comparable merchandise.
When an NME producer purchases inputs from market economy suppliers and pays for those purchases in a market economy currency, the ITA normally uses the weighted-average price paid by the NME producer for these inputs to value the input in question. When a portion of the input is purchased from a market economy supplier and the remainder from an NME supplier, the ITA will normally use the price paid for the input sourced from market economy supplier to value all of the input provided that the volume of the market economy input as a share of total purchases from all sources exceeds 33 percent.
If that threshold is not met the ITA weight-averages the market economy purchase price and an appropriate surrogate value, using as weights the relative quantities of the input imported and purchased from domestic sources.
The ITA has now decided to increase from 33 percent to 85 percent the share of total purchases of the input (both foreign and domestic) that must be made from market economy suppliers from one or more market economy countries during a particular period of investigation or administrative review in order for the weighted-average purchase price paid to the market economy supplier to be used to value all of the input.
When the 85 percent threshold is not met the ITA will weight-average the market economy purchase price(s) and an appropriate surrogate value using the respective quantities of the input sourced from market economy and NME suppliers. The ITA has also added a requirement that the market economy input at issue actually be produced in one or more market economy countries, not just sold through them, to address concerns that the pricing of an NME-produced input by a market economy supplier (or reseller) can be distorted by NME cost or supply factors.
Several commenters questioned the ITA's decision to raise the 33 percent threshold to 85 percent. One commenter, for example, argued that there does not appear to be a reason for this change when the agency had been using it for years. The ITA responded that, upon review of its past practice, it determined that when a company's purchases from market economy suppliers represent only 33 percent of its total purchases that amount does not constitute a sufficient quantity to be representative of the input prices that the company would pay to source all of its purchases from market economy suppliers.
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