2007 Calculation of Expected Non-Market Economy Wages

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

ACTION:

Finalization and Effective Date of 2007 Expected Non-Market Economy Wage Calculation.

SUMMARY:

On April 11, 2008, the Department of Commerce (“Department”) published the preliminary 2007 expected non-market economy (“NME”) wages (the “2007 calculation”), and provided the public with an opportunity to comment on potential clerical errors. See Expected Non-Market Economy Wages: Request for Comments on 2007 Calculation, 73 FR 19812 (April 11, 2008). The 2007 calculation was based on 2005 data and the methodology described in the Federal Register notice entitled Antidumping Methodologies: Market Economy Inputs, Expected Non-Market Economy Wages, Duty Drawback; and Request for Comments, 71 FR 61716, Oct. 19, 2006 (hereafter, the “Antidumping Methodologies notice”). The Department received two sets of comments in response to this notice and has made one change to its calculation, as described below, based on those comments. This notice constitutes the Department's announcement of the finalization and effective date of the 2007 calculation.

DATES:

These expected NME wage rates are finalized on the date of publication of this notice in the Federal Register and will be in effect for all antidumping proceedings for which the Department's final decision is due after the publication of this notice.

FOR FURTHER INFORMATION CONTACT:

Anthony Hill, Economist, Office of Policy, or Juanita Chen, Special Assistant to the Senior Enforcement Coordinator, China/ NME Group, Import Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 20230; telephone: (202) 482-1843 and (202) 482-1904, respectively.

SUPPLEMENTARY INFORMATION:

Comments

Two parties commented that the Department used the incorrect exchange rate for Madagascar when converting wages reported for that country into U.S. dollars. They pointed out that Madagascar has two currencies, the ariary and the Malagasy franc (“FMG”), and that the International Labour Organization (“ILO”) reported wage data for Madagascar in FMG. However, they noted, it seems as though the exchange rate used by the Department was an ariary rate per U.S. dollar. They also pointed out that the rate of ariary to FMG was 1 to 5. Parties provided a source that showed an FMG per U.S. dollar exchange rate and argued that the Department should use this exchange rate to convert the ILO wage data reported for Madagascar into U.S. dollars.

Two parties also argued that the Department should have excluded Indian and South Korean wage rates from the regression analysis because of subsidy programs in these countries. They contend that the Department's normal practice is to exclude surrogate data from countries with generally available subsidies and that India and South Korea are countries in which these subsidies are available.

One party argued that the Ordinary Least Squares (“OLS”) regression analysis used by the Department will inherently lead to inaccurate results when applying it to the dataset used in the expected NME wages calculation because the dataset exhibits heteroscedasticity. They argue that the Department should use a Generalized Least Squares regression to predict NME wages because this method would give more reliable results.

Department's Position

With respect to the use of the incorrect exchange rate in converting Madagascar's labor rate, the Department agrees that this is a clerical error and will change the 2007 calculation. The ILO wage data for Madagascar are reported in FMG per hour. The International Financial Statistics (“IFS”) exchange rate data do not specify the name of the currency; however, the IFS does say that the exchange rates are reported in units of the national currency per U.S. dollar. Moreover, the International Monetary Fund's 2007 Annual Report on Exchange Arrangements and Exchange Restrictions (“IMF Report”) states that, “The currency of Madagascar is the ariary.” Instead of converting the ILO wage data reported for Madagascar directly into U.S. dollars using the exchange rate suggested by the parties, the Department converted the Madagascar wage data from FMG to ariary, and then from ariary to US dollars, using the ariary/FMG rate in the IMF Report and the IFS ariary/dollar rate. The IMF Report notes that Madagascar's two currencies are convertible at the rate of 1 ariary per 5 FMG.

The suggestion that the wage rates from India and South Korea should be excluded from the expected NME wage rate analysis is a comment on the calculation methodology and not a clerical error. India and South Korea are countries for which the Department has reason to believe or suspect maintain generally available export subsidies; however, this practice has no bearing on the use of domestic prices, including labor rates, within these countries.

The argument that the Department should use a Generalized Least Squares regression instead of an Ordinary Least Squares regression is also a comment on the methodology and not a clerical error. The specific issue of heteroscedasticity has been recently addressed by the court, which concluded that, given (i) the inherent difficulties in identifying heteroscedasticity and (ii) the fact that the OLS estimators remain unbiased and consistent even in the face of heteroscedasticity, the Department's decision not to account for the possibility of heteroscedasticity was reasonable. See Dorbest Ltd., et al. v. United States, Slip Op. 2008-24 (CIT feb. 27, 2008) at 4-19.

Results

Following the data compilation and regression methodology described in the Antidumping Methodologies notice, and using Gross National Income and wage data for 2005, the regression results are: Wage = 0.2721729 + 0.0004477* GNI. The final expected NME wage rates, as calculated with the above mentioned change, are shown in Attachment 1.

Attachment 1

The World Bank did not publish a GNI for Turkmenistan.

The final results and underlying data for the 2007 calculation have been posted on the Import Administration Web site at (http://ia.ita.doc.gov).