ITA Revises NME Labor Cost Methodology for AD Proceedings

The International Trade Administration has announced that it is revising the interim¹ methodology it has been using to value the cost of labor in non-market economy (NME) countries in antidumping proceedings to use a single surrogate-country approach based on different labor cost data.

(ITA sources state that the following countries are considered to be NMEs: China, Vietnam, Armenia, Azerbaijan, Belarus, Georgia, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, and Uzbekistan.)

Will Now Use Labor Costs in Single Surrogate Country and Different ILO Data

After considering comments regarding its interim methodology, ITA has determined that a single² surrogate-country approach, rather than a multiple country approach is best. In addition, it has decided to use International Labor Organization (ILO) Yearbook Chapter 6A as its primary source of labor cost data in NME AD proceedings, instead of ILO Chapter 5B data.

Will Use Revised Method for NME AD Proceedings Initiated on/after June 21

ITA sources confirm that they will use the revised methodology for NME AD proceedings initiated on or after June 21, 2011.

Will Decide Ongoing Proceedings on Case-by-Case Basis

For ongoing NME AD proceedings, ITA expects to consider on a case-by-case basis whether it is feasible to implement the new labor methodology within statutory deadlines.

Using Single Surrogate Allows for Uniform Valuation of Factors of Production

Based on both a May 2010 Federal Circuit’s decision (Dorbest)¹ and a Court of International Trade April 2011 decision (ShandongRongxin),³ ITA finds that relying on data from multiple countries to calculate the wage rate is no longer the best approach for calculating the labor value.

It now finds that using the data on industry-specific wages from the single² surrogate country is the best approach for valuing the labor input in NME AD duty proceedings. ITA says this approach is fully consistent with how it values all other factors of production (FOP), and it results in the use of a uniform basis for FOP valuation -- a single surrogate.

Chapter 6A Data Better Accounts for All Direct and Indirect Labor Cost

ITA notes concerns that the ILO Chapter 5B labor data it used in its interim methodology allowed for undercounting of the NME producer’s labor costs and was not easily adjustable. ITA has therefore decided to change to the use of Chapter 6A data, which better accounts for all direct and indirect labor costs.

(ITA adds that to address comments by China’s Ministry of Commerce (MOFCOM) and the Vietnam Association of Seafood Exporters and Producers (VASEP) that the use of ILO Chapter 6A data would result in overstating labor costs, ITA will adjust the surrogate financial ratios when the available record information -- in the form of itemized indirect labor costs -- demonstrates that labor costs are overstated.)

(See notice for description of the specific steps ITA will take when using its revised methodology.)

¹Prior to a May 2010 Court of Appeals for the Federal Circuit (CAFC) ruling (Dorbest Ltd.), the ITA states it calculated wages using a regression analysis that captured the worldwide relationship between per capita Gross National Income (GNI) and hourly wage rates in manufacturing pursuant to 19 CFR 351.408(c)(3). Due to the variability in wage rates among economically comparable Market Economies (MEs), ITA used to include wage data from as many countries as possible that were also economically comparable to the NME and significant producers of comparable merchandise, within the meaning of section 773(c)(4) of the Act.

However, the CAFC invalidated ITA’s method of valuing wages. (See ITT’s Online Archives or 05/19/10 news, 10051935, for BP summary.)

Therefore, in July 2010, ITA adopted an interim wage calculation methodology that averaged wages across countries that are both economically comparable and significant producers of merchandise comparable to the subject merchandise. In October 2010, ITA modified this interim methodology to limit the averaging to industry-specific wage rates. ITA notes that its interim method used data from Chapter 5B of the ILO Yearbook of Labor Statistics as its primary source of labor cost data. ITA sources state that it used this interim “hybrid” method while it went about seeking comments on its methodology.

²ITA uses the term single and primary country interchangeably.

³In Shandong Rongxin Import & Export Co., Ltd. v. United States, the CIT found ITA’s sole reliance on exports alone to define “significant producers” impermissible and unsupported.

(See ITT’s Online Archives or 02/22/11 news, 11022213, for BP summary of the request for comments on its wage rate methodology in NME AD proceedings.)

(FR Pub 06/21/11)