ITA Seeks Additional Comments on Granting Market-Economy Status to Individual Respondents in AD Proceedings Involving China, Etc.

The ITA is now requesting further comment on a potential MOE test. Comments must be submitted by November 26, 2007.

Two Competing Views Identified in Comments from May 2007 Notice

The ITA states that the comments it received from its May 2007 notice identify the following two broad competing views on which the ITA now seeks more information:

Proponents' arguments. The first argument is that various parties have argued that there may be prices within China that are sufficiently market-based that they can be used in the calculation of normal value, notwithstanding China's overall status as a NME. These parties argue that the ITA has the legal authority to introduce a MOE test and introducing such a test would recognize the reform efforts that China has undertaken since the ITA adopted its current NME methodology.

(The ITA states it agrees that to the extent that market-based prices exist in China that might be useable in the AD calculation, it would be appropriate to find a way to identify them through an MOE test.)

Opponents' arguments. However, other parties argue that the ITA has no legal authority to introduce a MOE test and that any MOE test that attempted to identify market-based prices within an NME would be very difficult to administer, particularly since prices within an economy are interconnected. That is, even if the ITA could identify which companies manage their operations on a market basis, these firms would still operate in a broader NME environment.

In particular, firms' input prices could be affected by non-market considerations. Such a distortion of an otherwise ''market-oriented'' firm's acquisition prices could happen either directly, if these firms purchase inputs from non-profit maximizing sources, or indirectly, if macroeconomic NME distortions relating to land or capital affect the relevant input market.

These parties further argue that it would be impossible to parse out the numerous distortions that could affect each input price, unless perhaps the ITA and parties conducted a laborious analysis of each input price. However, anything less than a full analysis, these parties argue, would rapidly undermine China's overall NME status.

Comments Should Address Legal Basis of MOE Test, Feasibility, Etc.

In submitting comments, the ITA asks parties to further consider whether there is a legal basis for a MOE test and the administrative feasibility in proposing how the ITA could identify an MOE operating within a broader NME environment.

The ITA also asks parties to consider to what extent, and under what conditions, the ITA should rely on an MOE's prices and costs, particularly for those inputs that are inextricably linked to the broader operating economic environment, i.e., labor, land and capital. (The ITA states that while an enterprise may be market-oriented, the cost of certain inputs obtained in the broader economy may necessarily be determined on a non-market basis.)

Given such a situation in China, the ITA requests parties to consider administrative feasibility in proposing the extent and conditions under which a finding of an MOE might be limited. For example, how appropriate and feasible would it be to consider using a respondent's own prices and costs within China in conjunction with certain surrogate prices and costs in the ITA's AD duty calculations?

-written comments are due by November 26, 2007. The ITA states that comments received after this date will be considered, if possible, but their consideration cannot be assured.

(See ITT's Online Archives or 07/27/07 news, 07072725, for BP summary of the ITA's request for comments on surrogate country selection in AD proceedings involving NMEs.)

ITA contact - Lawrence Norton (202) 482-1579

ITA notice (FR Pub 10/25/07) available at http://a257.g.akamaitech.net/7/257/2422/01jan20071800/edocket.access.gpo.gov/2007/pdf/E7-21053.pdf