[Federal Register Volume 62, Number 8 (Monday, January 13, 1997)]
[Notices]
[Pages 1708-1719]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-752]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-570-844]
Notice of Final Determination of Sales at Less Than Fair Value:
Melamine Institutional Dinnerware Products From the People's Republic
of China
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: January 13, 1997.
FOR FURTHER INFORMATION CONTACT: David J. Goldberger, Katherine
Johnson, or Everett Kelly, Import Administration, International Trade
Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202)
482-4136, (202) 482-4929, or (202) 482-4194, respectively.
The Applicable Statute
Unless otherwise indicated, all citations to the Tariff Act of
1930, as amended (``the Act'') are references to the provisions
effective January 1, 1995, the effective date of the amendments made to
the Act by the Uruguay Rounds Agreements Act (``URAA'').
Final Determination
We determine that melamine institutional dinnerware products
(``MIDPs'') from the People's Republic of China (``PRC'') are being, or
are likely to be, sold in the United States at less than fair value
(``LTFV''), as provided in section 735 of the Act.
Case History
Since the preliminary determination in this investigation
(Preliminary Determination and Postponement of Final Determination:
Melamine Institutional Dinnerware Products from the PRC (61 FR 43337,
August 22, 1996)), the following events have occurred:
On August 22, 1996, Chen Hao Xiamen alleged that the Department
made a ministerial error in its preliminary determination. The
Department found that there was an error made in the preliminary
determination; however, this error did not result in a change of at
least five absolute percentage points in, but no less than 25 percent
of, the weighted-average dumping margin calculated in the preliminary
determination. Accordingly, no revision to the preliminary
determination was made. (See Memorandum from the MIDP/PRC Team to Louis
Apple dated September 16, 1996.)
In September through November 1996, we verified the questionnaire
responses of the following participating respondents and, where
applicable, their affiliates: Chen Hao (Xiamen) Plastic Industrial Co.
Ltd. (``Chen Hao Xiamen''), Dongguan Wan Chao Melamine Products Co.,
Ltd., (``Dongguan''), Gin Harvest Melamine (Heyuan) Enterprises Co.
Ltd. (``Gin Harvest''), Sam Choan Plastic Co. Ltd. (``Sam Choan''), and
Tar-Hong Melamine Xiamen Co. Ltd. (``Tar Hong'').
Additional published information (PI) on surrogate values was
submitted by petitioner and respondents on November 21, 1996. On
November 22, 1996, the Department requested that Chen Hao Xiamen,
Dongguan, Sam Choan, and Tar Hong submit new computer tapes to include
data corrections identified through verification. This information was
submitted on December 3 through 6, 1996.
Petitioner, the American Melamine Institutional Tableware
Association (``AMITA''), and the respondents submitted case briefs on
November 26, 1996, and rebuttal briefs on December 4, 1996. The
Department held a public hearing for this investigation on December 6,
1996.
[[Page 1709]]
Scope of the Investigation
This investigation covers all items of dinnerware (e.g., plates,
cups, saucers, bowls, creamers, gravy boats, serving dishes, platters,
and trays) that contain at least 50 percent melamine by weight and have
a minimum wall thickness of 0.08 inch. This merchandise is classifiable
under subheadings 3924.10.20, 3924.10.30, and 3924.10.50 of the
Harmonized Tariff Schedule of the United States (``HTSUS''). Excluded
from the scope of investigation are flatware products (e.g., knives,
forks, and spoons).
Although the HTSUS subheadings are provided for convenience and
customs purposes, our written description of the scope of this
investigation is dispositive.
Period of Investigation
The period of investigation (POI) for all participating companies
is January 1, 1995, through December 31, 1995.
Separate Rates
Of the five responding exporters in this investigation, three--Gin
Harvest, Tar Hong Xiamen, and Chen Hao Xiamen (1) are wholly foreign-
owned and (2) make all sales to the United States of merchandise
produced by their company through Taiwan parent companies. Thus, we
consider the Taiwan-based parent to be the respondent exporter in the
proceeding. No separate rates analysis is required for these exporters.
(See, e.g., Final Determination of Sales at Less Than Fair Value:
Disposable Pocket Lighters from the People's Republic of China (60 FR
22359, 22361, May 5, 1995)).
Sam Choan is wholly foreign owned but its sales to the United
States are made from its facilities in the PRC. For this respondent, a
separate rates analysis is necessary to determine whether it is
independent from PRC government control over its export activities.
To establish whether a firm is sufficiently independent from
government control to be entitled to a separate rate, the Department
analyzes each exporting entity under a test arising out of the Final
Determination of Sales at Less Than Fair Value: Sparklers from the
People's Republic of China (56 FR 20588, May 6, 1991) and amplified in
Final Determination of Sales at Less Than Fair Value: Silicon Carbide
from the People's Republic of China (59 FR 22585, May 2, 1994) (Silicon
Carbide). Under the separate rates criteria, the Department assigns
separate rates in nonmarket economy cases only if respondents can
demonstrate the absence of both de jure and de facto governmental
control over export activities.
1. Absence of De Jure Control
Respondents have submitted for the record the 1994 Foreign Trade
Law of the PRC, enacted by the State Council of the central government
of the PRC, which demonstrates absence of de jure control over the
import and export of goods from the PRC by ``foreign trade operators.''
The term ``foreign trade operators'' refers to legal persons and other
organizations engaged in foreign trade activities in accordance with
the provisions of the 1994 law. The companies also reported that MIDPs
are not included on any list of products that may be subject to central
government export constraints.
In prior cases, the Department has analyzed the provisions of the
law that the respondents have submitted in this case and found that
they establish an absence of de jure control (see Final Determination
of Sales at Less Than Fair Value: Bicycles from the People's Republic
of China (61 FR 19026, April 30, 1996) (Bicycles)). We have no new
information in this proceeding which would cause us to reconsider this
determination.
However, as in previous cases, there is some evidence that the PRC
central government enactments have not been implemented uniformly among
different sectors and/or jurisdictions in the PRC. (See Silicon Carbide
and Final Determination of Sales at Less Than Fair Value: Furfuryl
Alcohol from the People's Republic of China (60 FR 22544, May 8, 1995)
(Furfuryl Alcohol)). Therefore, the Department has determined that an
analysis of de facto control is critical in determining whether
respondents are, in fact, subject to a degree of governmental control
which would preclude the Department from assigning separate rates.
2. Absence of De Facto Control
The Department typically considers four factors in evaluating
whether each respondent is subject to de facto governmental control of
its export functions: (1) whether the export prices are set by or
subject to the approval of a governmental authority; (2) whether the
respondent has authority to negotiate and sign contracts and other
agreements; (3) whether the respondent has autonomy from the government
in making decisions regarding the selection of management; and (4)
whether the respondent retains the proceeds of its export sales and
makes independent decisions regarding disposition of profits or
financing of losses (see Silicon Carbide and Furfuryl Alcohol).
Each company asserted, and we verified, the following: (1) it
establishes its own export prices; (2) it negotiates contracts, without
guidance from any governmental entities or organizations; (3) it makes
its own personnel decisions; and (4) it retains the proceeds of its
export sales, uses profits according to its business needs and has the
authority to sell its assets and to obtain loans. In addition,
questionnaire responses on the record indicate that pricing was
company-specific during the POI, which does not suggest coordination
among or common control of exporters. During verification proceedings,
Department officials viewed such evidence as sales documents, company
correspondence, and bank statements. This information supports a
finding that there is a de facto absence of governmental control of
export functions. Consequently, we have determined that Dongguan and
Sam Choan have met the criteria for the application of separate rates.
PRC-Wide Rate
Because some companies did not respond to the questionnaire, we are
applying a single antidumping deposit rate--the PRC-wide rate--to all
exporters in the PRC (except the five participating exporters) based on
our presumption that those companies are under common control by the
PRC government. See, e.g., Bicycles.
Facts Available
Pursuant to sections 776 (a) and (b) of the Act, we have based the
PRC-wide rate on facts available, using adverse inferences, because the
non-responding companies have failed to cooperate to the best of their
ability. Section 776(a)(2) of the Act provides that ``if an interested
party or any other person--(A) withholds information that has been
requested by the administering authority, (B) fails to provide such
information by the deadlines for the submission of the information or
in the form and manner requested, subject to subsections (c)(1) and (e)
of section 782, (C) significantly impedes a proceeding under this
title, or (D) provides such information but the information cannot be
verified as provided in section 782(i)--the administering authority * *
* shall, subject to section 782(d), use the facts otherwise available
in reaching the applicable determination under this title.''
In addition, section 776(b) of the Act provides that, if the
Department finds that an interested party ``has failed to cooperate by
not acting to the best of its
[[Page 1710]]
ability to comply with a request for information,'' the Department may
use information that is adverse to the interests of that party as the
facts otherwise available. The statute also provides that such an
adverse inference may be based on secondary information, including
information drawn from the petition.
Section 776(c) of the Act provides that where the Department relies
on ``secondary information,'' the Department shall, to the extent
practicable, corroborate that information from independent sources
reasonably at the Department's disposal. The SAA, accompanying the
URAA, clarifies that the petition is ``secondary information.'' See,
SAA at 870. The SAA also clarifies that ``corroborate'' means to
determine that the information used has probative value. Id. However,
where corroboration is not practicable, the Department may use
uncorroborated information.
The exporters that did not respond in any form to the Department's
questionnaire have not cooperated at all. Further, absent a response,
we must presume government control of these and all other PRC companies
for which we cannot make a separate rates determination. Accordingly,
consistent with section 776(b)(1) of the Act, we have applied, as total
facts available the margin alleged in the petition, as adjusted by the
Department. We considered the petition as the most appropriate
information on the record to form the basis for a dumping calculation
for these uncooperative respondents. In accordance with section 776(c)
of the Act, we sought to corroborate the data contained in the
petition.
The petitioner based its allegation of U.S. price on catalog prices
of one of the respondents. The factors used in the petition are based
on petitioner's own production experience. The factors in the petition
consistent with the factors reported by responding companies on the
record of this investigation. The surrogate values used by petitioner
are based on publicly available information. Therefore, we detemine
that further corroboration of the facts available margin is
unnecessary.
We also applied adverse facts available to Dongguan based on the
fact that we were unable to verify its response. See Comment 20 in the
``Interested Party Comments'' section of this notice, below.
Fair Value Comparisons
To determine whether respondents' sales of the subject merchandise
to the United States were made at less than fair value, we compared the
export price (EP) to the NV, as described in the ``Export Price'' and
``Normal Value'' sections of this notice. In accordance with section
777A(d)(1)(A)(i), we compared weighted-average EPs for the POI to the
factors of production.
Export Price and Constructed Export Price
For Chen Hao Xiamen, Gin Harvest, Sam Choan, and Tar Hong, when the
subject merchandise was sold directly to the first unaffiliated
purchaser in the United States prior to importation and when
constructed export price (``CEP'') methodology was not otherwise
indicated, we calculated the price of the subject merchandise in the
United States in accordance with section 772(a) of the Act. In
addition, for Tar Hong, where sales to the first unaffiliated purchaser
took place after importation into the United States, we based the price
in the United States on CEP, in accordance with section 772(b) of the
Act.
We excluded from our analysis all sales of products with a minimum
thickness of less than 0.08 inch to the extent mistakenly or
erroneously reported by the exporter in its sales listing. For Tar
Hong, we also excluded all sales of three-piece sets where the combined
thickness of the three items was less than 0.24 inch because we were
unable to determine piece-specific prices and characteristics for such
sets. See Comment 10, below.
We corrected respondents' data for errors and omissions found at
verification. In addition, we made company-specific adjustments as
follows:
1. Chen Hao Xiamen
The calculation of EP for purposes of the final determination did
not differ from our preliminary calculations.
2. Dongguan
We based Dongguan's final dumping margin on adverse facts
available. See Comment 20.
3. Gin Harvest
We calculated EP in accordance with our preliminary calculations,
except for the following changes based on verification findings: (1) we
excluded sales of one product which we found to be outside the scope of
investigation; (2) we corrected the reported movement expenses for one
sale; and (3) we corrected for all sales the reported distance from the
factory to the port for calculating the surrogate value for foreign
inland freight.
4. Sam Choan
We calculated EP in accordance with our preliminary calculations,
except that we corrected the reported market-economy brokerage expense
for sales to one customer based on verification findings.
5. Tar Hong Xiamen
We calculated EP and CEP in accordance with our preliminary
calculations, except as follows, based on information derived at
verification.
We recalculated discounts by applying the reported discount
percentage to the gross unit price of the sale. We also recalculated
marine insurance by applying a percentage based on value, rather than
based on volume as reported, since this expense was incurred on a value
basis.
For CEP sales, we reallocated movement expenses and added an amount
for unreported U.S. brokerage expenses. We reallocated and corrected
indirect selling expenses, all freight expenses not reported elsewhere
(see Comment 15), and other expenses not reported elsewhere (see
Comment 18). In this reallocation, we recalculated by dividing the
combined POI expenses of Tar Hong's two U.S. affiliates, by the sum of
the POI sales values from these entities. We also recalculated reported
credit based on corrections to reported payment dates.
Normal Value
A. Factors of Production
In accordance with section 773(c) of the Act, we compared the NV
calculated according to the factors of production methodology, except
as noted below for Chen Hao Xiamen. Where an input was sourced from a
market economy and paid for in market economy currency, we used the
actual price paid for the input to calculate the factors-based NV in
accordance our practice. See Lasko Metal Products v. United States, 437
F. 3d 1442, 1443 (Fed. Cir.1994) (``Lasko''). For all producers, we
recalculated the values for materials purchased from market economies,
based on our verification findings. We excluded Taiwan VAT assessed on
Taiwan material purchases (see Comment 3).
Furthermore, for Tar Hong, we added PRC brokerage for market-
economy inputs. For Gin Harvest and Sam Choan, the equivalent charges
are included in the reported movement expenses as Hong Kong brokerage.
In addition, for Tar Hong and Gin Harvest we added freight from the
port to the factory for inputs purchased from market economies.
[[Page 1711]]
In instances where inputs were sourced domestically, we valued the
factors using published publicly available information from Indonesia.
Reported unit factor quantities were multiplied by Indonesian values.
From the available Indonesian surrogate values we selected the
surrogate values based on the quality and contemporaneity of data. As
appropriate, we adjusted input prices to make them delivered prices.
For those values not contemporaneous with the POI, we adjusted for
inflation using wholesale price indices published in the International
Monetary Fund's International Financial Statistics. For a complete
analysis of surrogate values, see the Valuation Memorandum: Preliminary
Antidumping Duty Determination of Melamine Institutional Dinnerware
Product from the People's Republic of China (PRC) dated August 14, 1996
(Preliminary Valuation Memorandum), and the Valuation Memorandum: Final
Antidumping Duty Determination of Melamine Institutional Dinnerware
Products (MIDP) from the People's Republic of China (PRC) dated
December 20, 1996 (Final Valuation Memorandum).
We added amounts for overhead, general expenses, interest and
profit, based on the experience of P.T. Multi Raya Indah Abadi
(Multiraya), an MIDP producer in Indonesia (see, also, Comment 2), as
well as for packing expenses incident to placing the merchandise in
condition packed and ready for shipment to the United States. We have
recalculated the percentages for overhead, selling, general and
administrative (SG&A), and interest expenses using the detailed public
version of Multiraya's financial statement placed on the record of this
investigation by the respondents. In our recalculations, as detailed in
the December 20, 1996 Final Valuation Memorandum, we have eliminated
the source of possible double counting for electricity alleged by
respondents in their case brief. For Tar Hong, we calculated a value
for the cost of transporting material purchases from the PRC port to
the factory using the surrogate value for truck freight. Based on
verification results, we revised calculations for Gin Harvest, as
follows. We revised the value of freight for certain material inputs to
correct the reported distance from the supplier to the factory. We also
revised reported electricity consumption and reported packing material
consumption for certain products. For Sam Choan, because freight data
for diesel fuel was not reported, we applied facts available based on
the furthest distance to a supplier cited in the response.
B. Multinational Corporation Provision
For Chen Hao Xiamen, petitioner alleged that section 773(d)(3) of
the Act, the special rule for multinational corporations, should be
applied to Chen Hao Xiamen's NV. We have determined that the record
evidence for Chen Hao Xiamen supports a finding that the first two
criteria of the MNC provision have been met. In order to determine if
the third criterion was satisified, we calculated NV for Taiwan-
produced merchandise (affiliated party NV) in addition to calculating
NV using the factors of production methodology, described above, to
determine whether affiliated party NV exceeded PRC NV.
We note that there are several ways in which the third criterion
may be applied in this case. In the preliminary determination, we found
that the affiliated party NV (price or COP, as appropriate) exceeded
the PRC NV for a substantial majority (by quantity) of the U.S. sales.
An alternative approach is to match each Taiwan transaction with its
most comparable PRC NV. For each Taiwan transaction, the PRC NV and the
Taiwan price are compared to each other; if the Taiwan price exceeds
the PRC NV for a preponderance of Taiwan sales (by quantity), all
comparisons of EP to NV are made using Taiwan sales as NV. Yet another
approach is to determine the number of models where the Taiwan NV is
higher than the NV based on the factors of production. Whichever
approach to apply the third criterion of the MNC provision is used,
however, the result in each case would be to use the Taiwan NV. In any
event, whether or not the MNC provision applies, the result would be
the same--a de minimis or zero margin for Chen Hao Xiamen.
In applying Taiwan NV, we compared Taiwan sales to Chen Hao
Xiamen's U.S. sales in the same manner as discussed in our preliminary
determination, except that we adjusted COP in the following manner: a)
we revised the financial expense to exclude foreign exchange gains, and
to include the interest expense associated with loans from affiliated
parties; and b) we adjusted factory overhead expenses to include an
amount for pension expenses. These changes are discussed in detail in
the final determination notice in the companion Taiwan investigation.
With regard to the calculation of Chen Hao Xiamen's factors of
production, at verification, we found that Chen Hao Xiamen did not
account for a rebate in its reported cost of melamine powder purchased
from a Taiwan supplier. We do not have sufficient information on the
record to accurately allocate this rebate to Chen Hao Xiamen's costs,
since neither Chen Hao Xiamen nor Chen Hao Taiwan identified the total
amount of purchases from this supplier that were eligible for this
rebate, and transferred to Chen Hao Xiamen, as discussed in the
Department's verification report of Chen Hao Taiwan. Consequently, we
have not adjusted Chen Hao Xiamen's melamine powder costs for the
rebate.
In addition, we added PRC brokerage and freight from the port to
the factory for market-economy inputs. We also calculated a value for
the cost of transporting material purchases from the PRC port to the
factory using the surrogage value for truck freight. Finally, we
revised the reported consumption of packing materials for certain
products, based on our findings at verification.
For comparisons of Chen Hao Xiamen's EP to NV based on Taiwan
prices, we made circumstance of sale adjustments for differences in
imputed credit, bank charges incurred on U.S. sales, and royalty
expenses incurred in Taiwan on Taiwan sales. As Chen Hao Xiamen did not
report credit expenses and bank charges in its sales response, we
calculated these expenses using payment information obtained during
verification. Chen Hao Taiwan, the parent company, reported in its
public questionnaire response that it did not borrow in U.S. dollars
and thus used the average short-term interest in the United States
during the POI of 8.83 percent, as reported in International Financial
Statistics, published by the International Monetary Fund, to calculate
imputed credit for its U.S. sales. We applied this same rate to
calculate credit expenses for Chen Hao Xiamen's U.S. sales.
Verification
As provided in section 782(i) of the Act, we verified the
information submitted by respondents for use in our final
determination. We used standard verification procedures, including
examination of relevant accounting and production records and original
source documents provided by respondents.
Interested Party Comments
General Comments
Comment 1: Scope of Investigation
Respondents argue that the scope of investigation should be revised
to exclude melamine dinnerware that exceeds a thickness of 0.08 inch
and is intended for retail markets when such products are accompanied
by
[[Page 1712]]
appropriate certifications presented upon importation to the United
States.
Petitioner objects to respondents'' scope revision proposal
because, it believes, it has no legal or factual basis and would result
in an order that would be very difficult to administer. Petitioner
further contends that antidumping orders based on importer
certifications of use, such as the proposal advocated by respondents,
are difficult to administer and should be avoided where possible.
Petitioner argues that if respondents want to produce merchandise for
the retail market that presents no scope issue, respondents can produce
merchandise of a thinner wall thickness that falls outside of the
scope.
DOC Position. We agree with petitioner. Petitioner has specifically
identified which merchandise is to be covered by this proceeding, and
the scope reflects petitioner's definition. As we stated in Final
Determination of Sales at Less Than Fair Value: Carbon and Alloy Steel
Wire Rod from Brazil (59 FR 5984, February 9, 1994), [p]etitioners'
scope definition is afforded great weight because petitioners can best
determine from what products they require relief. The Department
generally does not alter the petitioner's scope definition except to
clarify ambiguities in the language or address administrability
problems. These circumstances are not present here.
The petitioner has used a thickness of more than 0.08 inch, not end
use, to define melamine ``institutional'' dinnerware. The physical
description in the petition is clear, administrable and not overly
broad. Thus, we agree with petitioner that there is no basis for
redefining the scope based on intended channel of distribution or end
use, as respondents propose.
Comment 2: Calculation of Profit, Overhead, SG&A, and Interest
Petitioner proposes that the Department use a surrogate profit
figure based on sales made in the ordinary course of trade by
Indonesian producer, Multiraya, the respondent in the concurrent MIDP
from Indonesia investigation. Petitioner characterizes the profit
figure used at the preliminary determination (i.e., as derived from
Multiraya's 1995 financial statement) as inappropriate because it
covers non-subject merchandise, below-cost sales, and dumped export
sales--all of which petitioner contends should not be included in the
profit calculation.
Petitioner argues that the current law is very clear in that, when
available, profit for a constructed value (CV) calculation is home
market profit. Petitioner asserts that the Department's consistent
practice has been to use either the former statutory minimum of eight
percent or else a domestic, rather than an export, profit value.
Respondents argue that the Department should use the public
summaries of Multiraya's 1995 financial statement to calculate
surrogate overhead, SG&A, interest expense, and profit. According to
respondents, Multiraya exports merchandise that is virtually identical
to that exported from the PRC; therefore, Multiraya's company-wide
profit rate is pertinent to the valuation of PRC merchandise. To the
extent that the Department uses Multiraya's company-wide costs to
calculate constructed value in the Indonesian proceeding, respondents
contend that it should also base surrogate profit on company-wide
Multiraya data.
In addition, respondents argue that petitioner's profit calculation
is contrary to the Department's practice of basing NV in NME cases on
export data. Respondents contend that the Department's practice is
meant to ensure that product disparities like those reflected in
petitioner's profit calculation do not undermine the accuracy of the
CV. Moreover, respondents claim that there is a disparity between the
products sold by Multiraya in the home market and the products exported
by the PRC companies; the vast majority of products exported by the PRC
respondents were decorated and glazed, unlike Multiraya's home market
sales, which were virtually all undecorated and unglazed. Therefore,
the respondents argue that the Department should use the company-wide
profit from Multiraya's public version financial statement to calculate
the applicable surrogate profit percentage.
DOC Position. We agree with petitioner and have used as surrogate
profit a percentage derived from Multiraya's public version
questionnaire response. In this investigation, we are faced with the
unusual situation of having on the record both a public financial
statement from the surrogate country as well as the public version
questionnaire responses of the Indonesian respondent in the concurrent
investigation. The Department's preference is to use the most product-
specific information possible from the surrogate market to calculate
surrogate profit. Insofar as publicly ranged data may be imprecise, it
would be speculative to rely on such data as an accurate measure of
whether sales are below cost and outside the ordinary course of trade.
Accordingly, for the purpose of deriving a surrogate profit percentage,
we have used all sales in the public version, rather than excluding
allegedly below cost sales.
Comment 3: Tax Paid on Melamine Purchased From Taiwan
Petitioner argues that the Department should affirm its practice in
the preliminary determination and include the tax paid by the PRC
respondents on purchases of melamine powder from Taiwan in the
valuation of material costs. Petitioner asserts that the respondents
pay the Taiwan value added tax (VAT) to unaffiliated suppliers either
directly or through affiliated companies in Taiwan, and that the tax
imposes a net cost because the PRC companies are not collecting the VAT
from their customers. Consequently, petitioner contends that the tax
should be included in the material cost calculation. Petitioner claims
that even if the Taiwan government rebates to the respondent's
affiliate any such tax collected, it does not mean that the purchaser
benefits from the rebate.
Respondents argue that the Department should exclude from the
market-economy prices of material inputs the Taiwan VAT that was paid
upon purchase, but rebated or credited upon export from Taiwan to the
PRC. Respondents assert that the Department verified that Taiwan VAT
paid on materials purchased from Taiwan suppliers is credited to the
purchasers'' VAT liability account. As a result, respondents claim that
they receive a benefit equal to the amount of VAT paid. Thus, VAT is
effectively not paid on these exports.
DOC Position. We agree with respondents. At verification, we
confirmed that Taiwan VAT on melamine powder paid by the Taiwan
companies is offset by the VAT owed by the PRC purchaser (respondent).
This offset is equivalent to a rebate since the PRC purchaser receives
a credit against the VAT owed and does not have to pay a VAT amount (as
VAT owed is equal to the amount of VAT paid). The net effect is that
the respondent incurs a cost for melamine powder exclusive of VAT.
Accordingly, we have not added VAT from the market economy to the value
of these inputs.
Comment 4: Use of Taiwan Prices for Melamine Powder Purchased from PRC
Suppliers
Petitioner argues that the Department should not use Taiwan prices
for all melamine powder purchased by PRC producers if the producer has
obtained
[[Page 1713]]
some of its melamine powder from the PRC. Petitioner claims that it is
not enough to provide that the market-economy price may be disregarded
``where the amount purchased from a market economy supplier is
insignificant'' (Antidumping Duties; Countervailing Duties; Notice of
Proposed Rulemaking, 61 FR 7,309, 7,345 (February 27, 1996)). According
to petitioner, it should be the other way around--only if the amount
purchased within the non-market economy is insignificant will it be
appropriate to use the price actually paid to market economy suppliers
of the input to represent the overall cost of that factor of
production. Or, at a minimum, petitioner argues, the overall value of
the factor in question should be a weighted average of the surrogate
value and the market-economy price.
Respondents argue that petitioner offers no reasonable
justification as to why the Department should not use prices paid to
market economy suppliers to value melamine powder purchased from a PRC
supplier. Respondents state the Department's practice is to use the
price paid to a market economy supplier (See e.g. Bicycles) and that
this practice has been upheld by the Federal Circuit. Lasko Metal
Products, Inc. v. United States, 43 F.3d 11442 (Fed. Cir. 1994).
DOC Position. We agree with respondents. When melamine powder was
purchased from a market economy, we used the prices paid to market
economy suppliers to value this input, even though the producer did not
purchase 100 percent of the melamine powder from a market economy. We
believe that the market economy price is the most appropriate basis for
determining the value of melamine powder purchased from PRC suppliers.
Comment 5: Labor Rate Calculation
Petitioner argues that the Department's labor rate calculation
should reflect at most 50 weeks of work time, as opposed to the 52-week
work year that was used in the preliminary determination, because
Attachment 4 of the August 14, 1996, Preliminary Valuation Memorandum
notes that employers in Indonesia are required to provide paid annual
leave of at least two weeks per annum.
Respondents argue that just because Indonesian employers are
required to give two weeks paid leave per year does not mean that
workers actually take two weeks leave, but simply reflects the fact
that Indonesian workers have the option of taking this time while
receiving full pay. Respondents therefore argue that no adjustment is
necessary to the labor rate because the Department cannot assume that
the amount of leave allowed by employers is actually taken by workers.
DOC Position. We agree with respondents that our labor rate
calculation is correct. We used monthly labor rates from the 1995 issue
of Indonesia: A Brief Guide for Investors, which already include paid
leave and other benefits, as detailed in the Preliminary Valuation
Memorandum. We subsequently derived an hourly rate from the monthly
rates, which already includes some benefits. Accordingly, we believe
that it would be speculative to adjust the rate as reported for any
potentially used vacation days.
Comment 6: Inflation of Costs Denominated in U.S. Dollars
Petitioner argues that the Department made an error in its
preliminary determination by not inflating costs denominated in U.S.
dollars, particularly those for cardboard and containerization.
Petitioner contends that the costs in question are internal Indonesian
costs which which would have been incurred in rupiahs, even if they
happened to have been expressed in 1993 U.S. dollars. Petitioner claims
that the changes in the rupiah/dollar exchange rate have not reflected
the considerable inflation in Indonesia in recent years, so it is not
appropriate to leave these adjustments at their original dollar
amounts.
Respondents argue that, contrary to petitioner's suggestion, no
adjustment or conversion of figures denominated in U.S. dollars is
necessary. Respondents argue that the Department has rejected similar
requests in other NME cases. In this case, according to respondents,
the value and prices denominated in U.S. dollars are subject to the
risks and opportunity costs associated with the U.S. dollars, and are
not affected by Indonesian inflation. Respondents contend that
petitioner's exchange rate inflation adjustments and exchange rate
conversions would bring in numerous factors that would distort the
factor value.
DOC Position. With regard to the figures for cardboard and
containerization, we agree with respondents that no adjustment or
conversion of figures denominated in U.S. dollars is necessary. In
accordance with Department practice with regard to NMEs, surrogate
values reported in U.S. dollars are not adjusted for inflation. See
Final Results of Antidumping Duty Administrative Review: Tapered Roller
Bearings and Parts Thereof, Finished and Unfinished from the Republic
of Hungary (56 FR 41819, August 23, 1991) and Final Determination of
Sales at Less Than Fair Value: Ferrovanadium and Nitrided Vanadium from
the Russian Federation (60 FR 27957, 27963, May 26, 1995). See
Valuation Memorandum: Preliminary Antidumping Duty Determination of
Ferrovanadium from Russia dated December 27, 1994.
Comment 7: Duty on Melamine Powder
Petitioner believes that the Department should increase the cost of
melamine powder imported into the PRC by the PRC duty rate applicable
to such imports. Petitioner argues that import duties are as much a
feature of non-market economies as they are of market economies, and
that the proper rate in this case is the PRC duty rate. Petitioner
argues that inclusion of the PRC duty rate is necessary to reflect the
producer's actual cost for the imported input.
Respondents argue that the Department normally disregards such
rates since it deems all NME costs to be unreliable. Respondents
further argue that the Department cannot accept the valuation of PRC
import duties yet disregard all other PRC values and expenses.
DOC Position. We agree with respondents that we normally disregard
such a duty because it is a PRC cost denominated in RMB. See Final
Determination of Sales at Less Than Fair Value: Oscillating Fans and
Ceiling Fans from the People's Republic of China (56 FR 55271, October
25, 1991). Accordingly, we have not increased the cost of melamine
imported into the PRC by this duty rate.
Comment 8: Consumption and Yield Information
Petitioner argues that verification revealed Tar Hong's reported
consumption of both melamine powder and LG powder to be grossly
unreliable. Petitioner states that if the Department does not reject
the factor consumption data entirely, then an appropriate adjustment
would be to increase the melamine powder consumption for all Tar Hong
products by the largest percentage amount which the Department found to
be understated. Petitioner argues that this adjustment is conservative,
given that four of the five samples described in the verification
report were understated.
Similarly, petitioner claims that verification establishes that Gin
Harvest maintains product specific yield information, yet it reported
an overall yield figure which it applied to all of its products.
Petitioner further argues that, because Gin Harvest produces and sells
very different products to the United
[[Page 1714]]
States, these products necessarily have dramatically different product-
specific yields. This sharply differing yield result is fully
consistent with the yield information provided by the domestic industry
in this investigation, according to petitioner. Petitioner argues that
the Department should not accept the overall yield data supplied by Gin
Harvest because the issue of product-specific yields has been raised
numerous times in this investigation, yet Gin Harvest ignored its more
accurate data and submitted less accurate data in order to obtain a
lower margin. Finally, petitioner claims that if the Department accepts
Gin Harvest's yield data, it should apply the overall yield to each
heat treatment step used to produce each transaction listed in the U.S.
sales database.
Tar Hong asserts that the Department verified its melamine powder
and LG powder consumption allocation methodology and found no
discrepancies. Tar Hong further claims that petitioner attacks the
reliability of its melamine powder and LG powder allocations because of
the production sampling performed at the verification in Xiamen.
Although the Department's product sampling showed that per-unit,
product-specific consumption was greater than that reported in some
instances, according to Tar Hong, many variables (such as air
temperature and moisture content on the day of production and the
varying amounts of powder actually put into the mold by the individual
workers) affect this production process so that the per-unit
consumption figure will not be exactly the same for each production
run. Accordingly, Tar Hong argues that the Department should ignore
petitioner's request to increase the melamine powder consumption for
all products and instead use the figures reported by Tar Hong.
Gin Harvest argues that it and other respondents are unable to
report material consumption on a product-specific basis. Gin Harvest
claims that although the Department noted that Gin Harvest has some
production process records that would permit a calculation of product-
specific material consumption, it also noted that such records are not
maintained for any extended period of time by respondents in the normal
course of business. Gin Harvest argues that it should not be punished
for failing to provide data that it does not have.
DOC Position. The Department's preference is to use product-
specific data. Where such information does not exist, the Department
will use the most specific and reasonable information available (See,
Final Determination of Sales at Less Than Fair Value: Welded Stainless
Steel Pipe from Malaysia (59 FR 4023, 4027, January 28, 1994). With
regard to consumption, petitioner's argument relies on a selective
reading of the Tar Hong verification report. Although our initial
sampling, based solely on material withdrawn from inventory, indicated
potential under-reporting, a second, more comprehensive sampling, which
also accounted for materials returned to inventory, showed no
consistent pattern of under-or over-reporting (See Tar Hong
verification report at pages 24-25.) Although the documents used in our
sampling could be used to calculate product-specific yields, the only
documents we reviewed were contemporaneous with verification, not the
POI. Verification revealed no indication that Tar Hong retained records
at this level of detail (records showing materials withdrawn and
returned to inventory) for more than a week. Therefore, while our
sampling showed some variations between products, there is no
information on the record to indicate that Tar Hong's overall
production factor methodology is distortive. In the absence of any
other, more specific allocation methodology available to Tar Hong, we
have accepted its consumption factor reporting.
With regard to Gin Harvest's yield data, it reported an overall
yield figure because it claimed that its records do not permit it to
calculate product-specific yield data. Our verification revealed
nothing to contradict the claim that Gin Harvest does not maintain
product-specific yield data in its normal course of business.
Further, petitioner's proposed adjustment methodology of applying
the yield percentage at every production stage encountered is
inconsistent with the Department's verification findings regarding the
manner in which the PRC respondents, including Gin Harvest, calculate
yield. Petitioner's methodology incorrectly assumes that, at each step
(i.e., heat treatment, decoration, and glazing), the producer inspects
the product and discards semi-finished products which do not meet
specifications. However, as described in the respondents' questionnaire
responses, it is not until all production steps have been completed
that the respondents discard off-specification merchandise. That is,
the overall yield figure is calculated based on production results
after all production steps are completed. There is no information on
the record to identify the actual yields at each step of production
based on the POI production records maintained by Gin Harvest. Applying
this overall yield to each production step would effectively double-or
triple-count the rejection rate and thus unduly increase Gin Harvest's
consumption factors. Gin Harvest's allocation was reasonable based on
the records available to it. Accordingly, we have made no adjustment to
its reported material consumption factors.
Company-Specific Comments
Tar Hong
Comment 9: Reporting of CEP and EP Sales
Petitioner believes that Tar Hong incorrectly reported certain CEP
sales as EP sales. Petitioner argues that the burden of proof is on
respondent to satisfy the Department's four-prong test regarding the
classification of U.S. sales as cited in the Department of Commerce,
Antidumping Manual, Chapter 7 at page 3 (revised 8/91). Petitioner
contends that in this case, Tar Hong has not even addressed two of the
Department's four criteria. Petitioner argues that at verification, the
Department found that the U.S. entities play a central role in these
sales, which resemble reported CEP sales in all aspects, except that
they are not introduced into U.S. inventory. According to petitioner,
Tar Hong's U.S. affiliates have the authority to set the price and the
quantity of the potentially dumped merchandise. Petitioner also
disagrees with Tar Hong's contention that the role of the U.S.
affiliates is less than that of the U.S. affiliates in the first
administrative review of Certain Corrosion-Resistant Carbon Steel Flat
Products from Korea: Final Results of Antidumping Duty Administrative
Review, 61 FR 18547, 18551 (April 26, 1996) (Carbon Steel). Petitioner
argues that the Korean firms in Carbon Steel had full control of the
U.S. sales, and the U.S. affiliates were merely paper processors, as
evidenced by the information placed on the record by the Korean firms
indicating that the U.S. affiliates had no power to negotiate or
approve sales. Consequently, petitioner argues that the Tar Hong sales
in question should be treated as CEP transactions.
Tar Hong argues that it properly classified certain sales as EP
sales in accordance with the Department's three-factor test, as stated
in Carbon Steel. First, Tar Hong claims that it has demonstrated that
the sales transaction occurs prior to importation into the United
States. Secondly, Tar Hong states that direct shipment from Tar Hong
Xiamen to the unrelated U.S. customers is a normal commercial
distribution
[[Page 1715]]
channel used for these U.S. customers. Lastly, Tar Hong asserts that
the U.S. affiliates perform limited liaison functions serving primarily
as processors of sales-related documentation and communication links
with the unrelated buyers. Accordingly, Tar Hong claims that the
functions performed by its U.S. affiliates are consistent with selling
functions that the Department has determined in other cases to be of a
kind that would normally be undertaken by the exporter (see Carbon
Steel).
DOC Position. We agree with respondents that these sales are
properly treated as EP sales. Based on the record evidence, Tar Hong's
U.S. affiliates are merely processors of sales-related documentation
and a communication link with the unrelated customers. Although these
entities play an important role in Tar Hong's sales and distribution
process, that role is limited to sales documentation processing and
communication links. We find no compelling evidence in Tar Hong's
responses or in our verification findings to treat these sales as CEP
sales. Consistent with our approach in such cases as Final
Determination of Sales at Less Than Fair Value: Coated Groundwood Paper
from Finland (56 FR 56363, November 4, 1991), we have treated these
sales as EP sales.
Comment 10: Transactions Involving Dinnerware Sets
Petitioner states that Tar Hong improperly included non-subject
merchandise in its reported sales when it added the thicknesses of the
individual pieces of a set (plate, bowl, and cup) together to determine
whether the dinnerware set was subject merchandise. Similarly,
petitioner argues, pricing for dinnerware sets as well as the factors
of production was reported on a combined basis using the plate in the
dinnerware set as the identified product. Petitioner argues that this
grouping of data for sets was contrary to the instructions in the
questionnaire and prevents an item-by-item fair value comparison.
Petitioner asserts that if the Department uses this data, it should
apply the highest margin for any other transaction to all transactions
involving sets as facts available.
Tar Hong contends that the Department has data necessary to
calculate piece-specific margins for Tar Hong's set sales and factors
because the Department verified that Tar Hong reported the data for
sales of products sold in sets on the same basis it reported the data
for the factors of production for these products.
DOC Position. We agree with Tar Hong and have appropriately
adjusted our calculations to ensure a proper comparison. We excluded
all sales of sets where the combined thickness is less than 0.24 inch.
We have considered all pieces of a set to be subject merchandise when
measurements are equal or greater than 0.24 inch.
Comment 11: Unit Price Reporting
Petitioner contends that, in addition to the errors identified by
the Department concerning Tar Hong's reporting of U.S. unit prices on a
per-piece, rather than on a per-dozen, basis for many sales, there is
reason to believe that there are additional errors of this type which
were not individually identified by the Department. Accordingly,
petitioner asserts that the Department should compare the margin in the
final determination for Tar Hong's sales of pieces with the margin
calculated on the sale of dozens or cases, and if the margins for the
piece sales are lower than the margins for dozens and cases, then, as
facts available, the piece calculations should be disregarded and the
sales of dozens or cases should be relied upon for the final
determination.
Tar Hong argues that the errors found in its unit reporting do not
merit application of facts available. Tar Hong contends that the
Department verified that no other sales reported contained such errors.
DOC Position. We examined this issue at verification and are
satisfied that the record is complete and accurate with respect to the
reported quantities and per-unit prices of U.S. sales. Accordingly, we
used the corrected information in our calculations for the final
determination.
Comment 12: Production Quantity Data
Petitioner claims that the production quantity data submitted by
Tar Hong on two prior occasions is grossly inaccurate, and that Tar
Hong's shifting stance regarding the amount of merchandise produced
during 1995 confirms that its most recent submission on October 23,
1996, is not reliable. Petitioner argues that the total production
quantity is a figure that is fundamental to the integrity of the
submission, and that Tar Hong's repeated corrections leave no
reasonable basis to believe that its latest number is accurate.
Accordingly, petitioner argues, the figure should be rejected.
Tar Hong claims that the Department verified its production
quantities and confirmed the accuracy of its data.
DOC Position. We agree with Tar Hong. We have accepted Tar Hong's
explanation for the discrepancies and have verified its response in
this regard. Section 782(e) of the Act states that the Department shall
not decline to consider information that does not meet all of its
requirements if:
(1) The information is submitted by the deadline established for
its submission, (2) the information can be verified, (3) the
information is not so incomplete that it cannot serve as a reliable
basis for reaching the applicable determination, (4) the interested
party has demonstrated that it acted to the best of its ability in
providing the information and meeting the requirements established by
the Department with respect to the information, and (5) the information
can be used without undue difficulties.
Tar Hong's information meets all of these requirements.
Accordingly, we have no basis to conclude that the earlier responses
distorted the Department's analysis or otherwise impeded this
proceeding.
Comment 13: Total Sales Value
Petitioner states that Tar Hong has dramatically overstated the
unit price on a number of U.S. sales transactions. Petitioner contends
that if the Department concludes that the application of general facts
available for Tar Hong is inappropriate (see Comment 19 below), it must
adjust for this exaggeration of submitted prices by assuming that
affected sales are of products with margins, and deducting the amount
that the CEP and EP sales values were overstated from total U.S. price.
Tar Hong claims that any discrepancy in its U.S. sales value
reconciliation is due to petitioner's miscalculation of Tar Hong's
sales values. Tar Hong adds that petitioner offers no explanation of
its calculation, and suggests that petitioner's calculation failed to
properly account for sales sold in units of cases or dozens.
DOC Position. We agree with Tar Hong. Petitioner misinterpreted the
information in a verification exhibit. The document does not include
the EP sales booked in Taiwan; it applies only to the sales booked in
the United States. Moreover, the exhibit cited by petitioner is not the
only document the Department used to confirm Tar Hong's sales
reporting, as discussed in the verification report. Based on the sum of
our verification findings, we found no discrepancies in the total
volume and value of sales reported.
Comment 14: Ocean Freight
Petitioner argues that Tar Hong incorrectly assumed that all ocean
[[Page 1716]]
freight shipments were made in full container loads and that, the
reported volumes of the master pack cartons, which are the basis for
the movement charge allocations, are wrong. Petitioner claims that
although Tar Hong provided revised information for the master pack
cartons at verification, this information was not verified and
therefore cannot be used. Petitioner argues that for purposes of the
final determination, the container load error must be corrected and
that, for the master carton error, either the Department should use
general facts available or the highest unit freight reported for each
freight adjustment affected by the errors.
Tar Hong contends that the Department should accept its revised
allocation because the Department found that Tar Hong's volume-based
methodology to recalculate international freight was supported by its
records.
DOC Position. With regard to Tar Hong's ocean freight shipments, we
found that the majority were in fact made in full container loads. Per
our instructions, Tar Hong has reallocated EP ocean freight to account
for our verification findings. We have also reallocated CEP ocean
freight expenses based on our verification findings. In both
situations, we consider the allocations to be proper.
Furthermore, although we did not specifically verify the revised
information submitted at verification with regard to the volumes of the
master pack cartons, the remainder of Tar Hong's response was verified,
and the revised information is consistent with Tar Hong's verified
information. Accordingly, we have accepted Tar Hong's information for
the purpose of recalculating CEP movement expenses.
Comment 15: U.S. Warehouse to Customer Freight
Petitioner contends that Tar Hong's statements that it does not
incur freight charges from the U.S. warehouse to the customer are
unsupported. Petitioner claims that the verification report notes that
Tar Hong's invoices report terms of CEP sales as ``delivered''.
Petitioner therefore asserts that all freight expenses from Tar Hong's
financial statements should be allocated to CEP sales.
Tar Hong claims that the Department verified that, notwithstanding
the printed ``Delivered'' term on Tar Hong's invoice, Tar Hong's CEP
customers either come to Tar Hong's warehouse and pick up their
purchased products, or make their own freight arrangements. Tar Hong
asserts that the Department verified that, for the few deliveries that
it made using its own vehicles, its allocation methodology was
reasonable.
DOC Position. We have accepted Tar Hong's explanation, but have
recalculated and reclassified freight expenses based on our
verification findings. Tar Hong's methodology allocated freight
expenses to all CEP sales as a movement expense. That is, Tar Hong made
no attempt to identify which particular sales may have actually
incurred warehouse to customer freight. Since Tar Hong did not, and
could not, allocate this expense only to those sales which incurred the
expense, we determine that it is appropriate to treat all movement
expenses not otherwise accounted for (i.e., warehouse to customer
expenses) as indirect selling expenses. In our recalculation of
indirect selling expenses, we have also included an amount for freight
expenses identified in the financial statements, but not included in
Tar Hong's calculation. (See Comment 18 below.) In this manner, we have
included all expenses related to freight.
Comment 16: Packing Weights
Petitioner argues that it is clear from the verification report
that Tar Hong's packing weights are unreliable. Petitioner contends
that the Department should increase the packing costs by the largest
percentage of under reporting found at verification or, at the least,
increase these weights by an average of the under reporting of the five
samples.
Tar Hong argues that packing costs are reliable and require no
further adjustment because the measured weights of the packing
materials were within acceptable tolerances.
DOC Position. We agree with Tar Hong. We verified that the packing
weights were within acceptable tolerances.
Comment 17: Unreported Returns and Claims
Petitioner states that where verification exhibits show evidence of
returns and claims for Tar Hong that were not reported as U.S. warranty
expenses or allowances, at a minimum, the Department should apply
information from the verification and adjust total U.S. price
accordingly.
Tar Hong claims that petitioner's discovery of alleged unreported
returns and claims relate to nonsubject merchandise. Accordingly, no
adjustment by the Department is necessary.
DOC Position. We agree with Tar Hong. We found no evidence at
verification of warranty claims for the subject merchandise. Tar Hong's
explanation is consistent with our findings.
Comment 18: Unreported Movement Charges
According to petitioner, the financial statements of Tar Hong's
U.S. affiliates indicate that there are certain expenses that were
incurred by respondent, but not reported as selling expenses or
movement charges. Petitioner contends that the Department should
account for these expenses by applying the total of these amounts
directly against the margins.
Tar Hong states that the Department verified that the allegedly
unreported charges were not direct selling expenses or movement
charges, as petitioner claims. Accordingly, no adjustment to the margin
calculation is warranted.
DOC Position. We agree with petitioner that these expenses should
be accounted for. However, we disagree with petitioner's contention
that the amount of the expenses should be applied directly against the
margins. Petitioner offers no basis to consider this approach and there
is no precedent for applying it here. Instead, we have included these
expenses as part of our recalculation of indirect selling expenses. As
discussed above at Comment 15, we have treated Tar Hong's unreported
warehouse-to-customer expenses as indirect selling expenses. The
additional expenses identified by petitioner appear properly classified
in this instance as indirect selling expenses as well.
Comment 19: Use of Facts Available for Tar Hong
Petitioner argues that Tar Hong's EP and CEP prices are grossly
overstated through a series of reporting errors or misstatements,
including those addressed above. Accordingly, petitioner contends, the
Department cannot reasonably conclude that the U.S. sales data base is
reliable. Further, petitioner contends that Tar Hong's NV data is also
unreliable because, despite numerous changes, Tar Hong's total
production figure is inaccurate, its treatment of sets makes a proper
factors analysis impossible, and the weights of the reported products
as well as the packing materials are systematically understated.
Moreover, petitioner claims that the corrections submitted at
verification should be rejected because an entirely new factors
database was submitted and petitioner did not have a meaningful
opportunity to comment on the new data. Petitioner concludes that the
Department should use facts available because Tar Hong's data is
unreliable and no acceptable means of correction exists.
[[Page 1717]]
Tar Hong argues that the Department was able to verify all
corrections to source documents and the reason for the corrections.
Furthermore, according to Tar Hong, there is no evidence that Tar Hong
failed to cooperate with the Department by not acting to the best of
its ability to comply with requests for information. Tar Hong believes
that in those situations where there are discrepancies, the Department
should weigh the record evidence to determine what type of change, if
any, would be the most probative of the issue under consideration.
DOC Position. We do not agree with petitioner's assertion that Tar
Hong's data is unreliable and no acceptable means of correction exists.
Moreover, we do not agree with petitioner that Tar Hong's revised
factors database contains entirely new data. As discussed in our
responses above, we have rejected many of petitioner's claims with
regard to Tar Hong's data. The remaining errors are minimal and do not
undermine the integrity of the response. Thus, consistent with our
approach in such cases as Ferrosilicon from Brazil: Final Results of
Antidumping Duty Administrative Review, 61 FR 59407 (November 22,
1996), the use of facts available is not warranted in this instance.
Dongguan
Comment 20: Facts Available
Petitioner argues that the seriousness of the defects in Dongguan's
response is evident in that the Department was unable to verify its
U.S. sales. Petitioner claims that the verification report records the
Department's efforts on this critical issue, and confirms the suspect
nature of the data. For example, petitioner cites the Department's
finding in the verification report that no confirmation of sales of the
subject merchandise to the corporate tax statement was possible.
Furthermore, petitioner argues that the Department was unable to
complete a sales quantity document trace and that Dongguan's sales
records contained duplicate invoices. Petitioner further contends that
a failed verification is basically the same as a failure to respond at
all and facts available must be used.
Dongguan argues that, although the Department was unable to tie the
sales beyond the general ledger, it also noted that it did not observe
any apparent inconsistencies in the sales reporting, as revised through
verification. Dongguan claims that all other aspects of the accounting
system were verified as accurate and reliable. Dongguan also claims
that, although the Department was unable to tie sales to the corporate
income tax statement, it was able to verify the general integrity and
reliability of the sales reporting data from the invoices to the
response and to its accounting system. Dongguan asserts that the
Department was also able to verify that non-melamine sales income
reported in the accounting system was posted accurately and reliably in
the corporate tax system. Accordingly, Dongguan believes that the
Department need not apply facts available, given the overall
reliability of the accounting system.
DOC Position.We agree with petitioner. Dongguan's failure to
reconcile its sales response beyond the general ledger, coupled with
the absence of reliable alternative support documentation, such as
verifiable sequential invoice records, leaves no basis to accept the
integrity of the sales response and constitutes a verification failure
under Section 776(a)(2)(D) of the Act. A complete verification failure
also renders a response unusable under section 782(e) of the statute. A
verification failure of this magnitude demonstrates Dongguan's
``failure to cooperate by not acting to the best of its ability to
comply with our requests for information.'' Accordingly, for the above-
mentioned reasons, and consistent with Pasta from Turkey, 61 FR 30309,
30312 (June 14, 1996), we based Dongguan's final dumping margin on
adverse facts available. In addition, because this margin is based on
facts available, all other issues raised by the parties concerning
Dongguan are moot.
Sam Choan
Comment 21: Reporting Errors
Petitioner states that the verification report identifies a large
number of sales transactions of nonsubject merchandise that were
included in the preliminary determination. Petitioner further contends
that the difficulties experienced by the Department in verifying Sam
Choan's product weights undermine the reliability of the response and
that Sam Choan's response should be rejected because none of these
transactions were accurately reported. If the Department decides to use
Sam Choan's data, petitioner asserts that the weights for certain
product codes must be increased, consistent with the verification
findings.
Sam Choan argues that its revised sales listing reflects the
weights and thicknesses verified by the Department. Sam Choan further
states that the Department should exclude any merchandise that does not
fall within the scope of investigation.
DOC Position. We have used the weights, as corrected per our
verification, in our final determination. We find no basis to conclude
that errors in the weight reporting affect the overall integrity of the
response. As described in Ferrosilicon from Brazil: Final Results of
Antidumping Duty Administrative Review, 61 FR 59407 (November 22,
1996), these errors are not substantial and thus do not affect the
integrity of the response.
With regard to the reporting of out-of-scope merchandise, we have
excluded this merchandise for purposes of the final determination.
Chen Hao Xiamen
Comment 22: Application of the Multinational Corporation Provision
Chen Hao Xiamen argues that the Department's application of the MNC
rule in this case is not supported by the statute because the
Department has failed to demonstrate that the special and unique
circumstances required for application of the MNC rule are present in
this investigation. Furthermore, according to Chen Hao Xiamen, its
reported factors of production have been verified and accurate
surrogate country information exists to value the factors of
production. In addition, Chen Hao Xiamen argues that the Department's
application of the MNC provision arbitrarily assumes that a ``proper
comparison'' based on the factors of production and surrogate valuation
is impossible for Chen Hao Xiamen, but is possible for all other
respondents. Accordingly, for purposes of the final determination, Chen
Hao Xiamen believes that the Department should not apply the MNC rule
to Chen Hao Xiamen and instead should apply the surrogate country data
to value its factors of production.
Petitioner objects to respondents' claim that the MNC provision
does not apply to the Chen Hao respondents. Petitioner argues that
respondents misstate the law when they claim that the MNC provision
applies only when a comparison based on the factors of production and
surrogate valuation is not possible. According to petitioner, there is
no requirement that it be impossible to determine NV in the exporting
country. Moreover, petitioner argues that the very close cooperation
between the Chen Hao companies, confirmed at verification, makes a
compelling case for application of the MNC to prevent the use of the
the PRC company as an export platform. Finally, petitioner believes
that given the very substantial changes it believes should be made to
the factors analysis, the NV for
[[Page 1718]]
the PRC may exceed that of Taiwan. However, if the NV for Taiwan
remains higher, as was the case in the preliminary determination, the
petitioner urges that the Department once again apply the MNC
provision.
DOC Position. The MNC rule applies when the criteria of section
773(d) of the Act are met, regardless of whether a comparison based on
factors is otherwise possible. For Chen Hao Xiamen, we have determined
that the record evidence supports a finding that the first criterion of
the MNC provision (ownership of the production facilities in the
exporting country by an entity with production facilities located in
another country) has been met. The second criterion of the MNC
provision (concerning viability of the PRC market) has been met, per
se, because Chen Hao Xiamen, the PRC exporter, did not make any sales
at all in the PRC market during the POI.
The third criterion was also met because Taiwan NV exceeded NV
based on the factors of production. See ``B. Multinational Corporation
Provision'' section of this notice.
Comment 23: Melamine Consumption
Petitioner states that the verification confirmed that Chen Hao
Xiamen used a methodology that leads to an understatement of melamine
powder consumption. Petitioner argues that Chen Hao Xiamen's
methodology is in contrast to the other PRC respondents and should be
restated to include all POI consumption.
Petitioner further argues that the verification report makes clear
that Chen Hao Xiamen could have provided yields on a product-specific
basis but instead reported an average that hides the peaks and valleys
in yields. Petitioner claims that if the Department accepts Chen Hao
Xiamen's yield data, it should apply the overall yield to each heat
treatment step indicated for each transaction in the U.S. sales
database.
Chen Hao Xiamen argues that it accurately reported its melamine
powder consumption and petitioner has provided no reasonable basis as
to why restating melamine powder consumption from a batch-by-batch
basis to a total POI basis would be any more accurate than its current
reporting. Accordingly, Chen Hao Xiamen believes that the Department
should ignore petitioner's suggestion.
Chen Hao Xiamen further argues that it could not have provided
product-specific yields. It provided yields on a production batch
basis, which it claims is the most specific data available related to
material consumption. Chen Hao Xiamen further argues that it should not
be punished for failing to provide data that it does not have.
DOC Position. With regard to consumption, we agree with Chen Hao
Xiamen. Our verification results confirm the reliability of Chen Hao
Xiamen's data. Accordingly, we have used Chen Hao Xiamen's reported
consumption figures, as corrected through verification, in our
analysis.
Moreover, although the Department prefers product-specific yield
information, where such information does not exist, the Department will
use the most specific information available. In this instance, Chen Hao
Xiamen reported yields on a batch specific basis. Further, we have no
evidence on the record that the Chen Hao Xiamen's methodology is
distortive of its experience during the POI. Accordingly, we have
rejected petitioner's arguments and accepted Chen Hao Xiamen's reported
yield data, as verified by the Department.
Comment 24: Selling Expense Adjustment
Petitioner contends that, for comparisons of EP to NV based on
Taiwan sales or Taiwan CV, EP and NV must be adjusted for selling
expenses. Petitioner argues that the Department erred in not adjusting
for U.S. selling expenses when the basis for NV was Chen Hao Taiwan's
price or CV in comparing EP to NV for Chen Hao Xiamen. Although Chen
Hao Xiamen did not provide U.S. selling expense information, according
to petitioner, credit expense can be calculated from the verification
exhibits.
Chen Hao argues that the Department should not adjust Chen Hao
Xiamen's EP when the basis for NV is Chen Hao Taiwan's price or CV.
Chen Hao further argues that imputing selling expenses where the
Department never provided respondents with an opportunity to present
that information would be arbitrary and unfair.
DOC Position. We agree with petitioner that for comparisons of EP
to NV based on Taiwan sales or Taiwan CV, EP and NV must be adjusted
for selling expenses. See ``B. Multinational Corporation Provision''
section of this notice.
Comment 25: Product Weights
Petitioner asserts that because verification showed that for six
products sampled, the weight verified was greater than the weight
reported, Chen Hao Xiamen thus systematically under-reported its
product weights. Petitioner contends that to correct the data, the
Department should increase the reported product weights by two percent,
which is the degree of under reporting identified for one of the
products examined at verification.
Chen Hao Xiamen claims that it did not systematically under report
its product weights, as claimed by petitioner. Chen Hao Xiamen argues
that, given that products produced from the same production batch may
have different weights due to varying amounts of melamine input powder,
this degree of discrepancy between the reported and verified weights is
well within an acceptable tolerance of reliability.
DOC Position. We agree with Chen Hao Xiamen. We note that the
weighing of the subject merchandise is inherently somewhat imprecise,
and that the verified weights were within acceptable limits.
Currency Conversion
We made currency conversions into U.S. dollars based on the
official exchange rates in effect on the dates of the U.S. sales as
certified by the Federal Reserve Bank.
Section 773A(a) of the Act directs the Department to convert
foreign currencies based on the dollar exchange rate in effect on the
date of sale of the subject merchandise, except if it is established
that a currency transaction on forward markets is directly linked to an
export sale. When a company demonstrates that a sale on forward markets
is directly linked to a particular export sale in order to minimize its
exposure to exchange rate losses, the Department will use the rate of
exchange in the forward currency sale agreement.
Section 773A(a) also directs the Department to use a daily exchange
rate in order to convert foreign currencies into U.S. dollars unless
the daily rate involves a fluctuation. It is the Department's practice
to find that a fluctuation exists when the daily exchange rate differs
from the benchmark rate by 2.25 percent. The benchmark is defined as
the moving average of rates for the past 40 business days. When we
determine a fluctuation to have existed, we substitute the benchmark
rate for the daily rate, in accordance with established practice.
Further, section 773A(b) directs the Department to allow a 60-day
adjustment period when a currency has undergone a sustained movement. A
sustained movement has occurred when the weekly average of actual daily
rates exceeds the weekly average of benchmark rates by more than five
percent for eight consecutive weeks. (For an explanation of this
method, see Policy Bulletin 96-1: Currency
[[Page 1719]]
Conversions (61 FR 9434, March 8, 1996).) Such an adjustment period is
required only when a foreign currency is appreciating against the U.S.
dollar. The use of an adjustment period was not warranted in this case
because the New Taiwan dollar did not undergo a sustained movement, nor
were there currency fluctuations during the POI.
Continuation of Suspension of Liquidation
For Chen Hao Xiamen, Gin Harvest, and Sam Choan, we calculated a
zero or de minimis margin. Consistent with Pencils, merchandise that is
sold by these producers but manufactured by other producers will be
subject to the order, if issued. Entries of such merchandise will be
subject to the ``PRC-wide'' rate.
In accordance with section 733(d)(1) of the Act and 735(c)(1), we
are directing the Customs Service to continue to suspend liquidation of
all entries of MIDPS from the PRC, that are entered, or withdrawn from
warehouse for consumption, on or after the date of publication of this
notice in the Federal Register, except for entries of merchandise
manufactured by those producers receiving a zero or de minimis margin.
The Customs Service to require a cash deposit or posting of a bond
equal to the estimated amount by which the NV exceeds the EP as
indicated in the chart below. This suspension of liquidation will
remain in effect until further notice.
The weighted-average dumping margins are as follows:
------------------------------------------------------------------------
Weighted-average margin
Manufacturer/producer/exporter percentage
------------------------------------------------------------------------
Chen Hao Xiamen........................... 0.97 (de minimis).
Gin Harvest............................... 0.47 (de minimis).
Sam Choan................................. 0.04 (de minimis).
Tar Hong Xiamen........................... 2.74.
PRC-Wide Rate............................. 7.06.
------------------------------------------------------------------------
The PRC-Wide rate applies to all entries of subject merchandise
except for entries from exporters/factories that are identified
individually above.
ITC Notification
In accordance with section 735(d) of the Act, we have notified the
ITC of our determination. As our final determination is affirmative,
the ITC will determine, within 45 days, whether these imports are
causing material injury, or threat of material injury, to an industry
in the United States. If the ITC determines that material injury, or
threat of material injury, does not exist, the proceeding will be
terminated and all securities posted will be refunded or canceled. If
the ITC determines that such injury does exist, the Department will
issue an antidumping duty order directing Customs officials to assess
antidumping duties on all imports of the subject merchandise entered,
or withdrawn from warehouse, for consumption on or after the effective
date of the suspension of liquidation.
This determination is published pursuant to section 735(d) of the
Act.
Dated: January 6, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-752 Filed 1-10-97; 8:45 am]
BILLING CODE 3510-DS-P
