As explained above, the Commerce Department can only use those prices that are above cost in determining normal value. If the Commerce Department is conducting a cost investigation, it will test each of the proposed home market or third country prices and exclude those transactions that fail this test.

The Commerce Department calculates the net home market or third country prices to be used for comparison to the cost. The Commerce Department subtracts from the gross price all of those adjustments that are not included in the cost (for example, movement charges). Any element included in the cost (such as interest expenses) is left in the price. Note that, because of this need to ensure that the price and cost figures are comparable, the net prices for the cost test are not necessarily the same as the net prices for comparison to the United States prices.

Once it has calculated the appropriate net prices, the Commerce Department follows these steps:

- First, the Commerce Department tests each of the prices of individual sales transactions, to see which ones are above and below the cost of the particular product.

- Second, it calculates the percentage of the transactions above cost, and the percentage below cost. These percentages are calculated on a model-by-model, or product-by-product basis.

- Third, it applies the 20% rule, on a narrow, model-specific basis.

- Fourth, if 20% or more of the transactions are below cost it excludes all those transactions of that model that are below cost from the calculation of the weighted average.

- Fifth, the Commerce Department calculates a weighted average price for each model, size, or type of the product; these weighted averages of the transactions that are above cost will form the basis of normal value.

When calculating trial dumping margins, a foreign company can go through the same steps and perform the same analysis.

Source: Business Guide to Trade Remedies in the United States: Anti-dumping, countervailing and safeguards legislation practices and procedures