[Federal Register Volume 62, Number 8 (Monday, January 13, 1997)]
[Notices]
[Pages 1719-1726]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-753]
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DEPARTMENT OF COMMERCE
[A-560-801]
Notice of Final Determination of Sales at Less Than Fair Value:
Melamine Institutional Dinnerware Products From Indonesia
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: January 13, 1997.
FOR FURTHER INFORMATION CONTACT: Everett Kelly or David J. Goldberger,
Import Administration, International Trade Administration, U.S.
Department of Commerce, 14th Street and Constitution Avenue, N.W.,
Washington, D.C. 20230; telephone: (202) 482-4194 or (202) 482-4136,
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 Indonesia 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 (Notice
of Preliminary Determination and Postponement of Final Determination:
Melamine Institutional Dinnerware Products from Indonesia (61 FR 43333,
August 22, 1996), the following events have occurred:
In September 1996, we verified the questionnaire responses of P. T.
Multi Raya Indah Abadi (Multiraya). On November 22, 1996, the
Department requested Multiraya to submit new computer tapes to include
data corrections identified through verification. This information was
submitted on December 5, 1996.
Petitioner, the American Melamine Institutional Tableware
Association (``AMITA'), and Multiraya submitted case briefs on November
26, 1996, and rebuttal briefs on December 3, 1996. The Department held
a public hearing for this investigation on December 5, 1996.
Scope of 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'') is January 1, 1995, through
December 31, 1995.
Fair Value Comparisons
A. P.T. Mayer Crocodile
We did not receive a response to our questionnaire from P.T. Mayer
Crocodile, an exporter of the subject merchandise during the POI.
Because P.T. Mayer Crocodile failed to submit information that the
Department specifically requested, we must base our determination for
that company on the facts available in accordance with section 776 of
the Act. Section 776(b) provides that an adverse inference may be used
against a party that has failed to cooperate by not acting to the best
of its ability to comply with a request for information. Because P.T.
Mayer Crocodile has failed to respond, the Department has determined
that, in selecting from among the facts otherwise available, an adverse
inference is warranted.
Section 776(c) of the Act provides that where the Department
selects from among the facts otherwise available and relies on
``secondary information,'' the Department shall, to the extent
practicable, corroborate that information from independent sources
reasonably at the Department's disposal. See The
[[Page 1720]]
Statement of Administrative Action accompanying the URAA, H.R. Doc. No.
316, 103d Cong., 2d Sess at 870 (1994) (``SAA'').
In this proceeding, we considered the petition as the most
appropriate information on the record to form the basis for a dumping
calculation for this uncooperative respondent. In accordance with
section 776(c) of the Act, we attempted to corroborate the data
contained in the petition. Specifically, the petitioner based both the
export price and normal value in the petition on Multiraya's ex-factory
prices for nine-inch plates obtained from a market research report. We
compared the petitioner's submitted price data to actual prices
reported in Multiraya's questionnaire response for products of the same
size and shape. We found the Multiraya normal value data from the
market research report appears to be consistent with the normal value
data reported in Multiraya's questionnaire response. Thus, we consider
the normal value data in the petition to have been corroborated and
will therefore utilize such data in our margin calculation for P.T.
Mayer Crocodile.
We did not, however, consider the export price from the petition to
be corroborated because the Multiraya export price data in the market
research report was substantially different from the data reported by
Multiraya in its questionnaire response which was confirmed through
verification. Therefore, we have not used the export price in the
petition. In selecting from among the facts otherwise available with
regard to export price, we have used the lowest ex-factory export price
reported by Multiraya for a nine-inch plate. We found this information
to be sufficiently adverse to effectuate the purpose of the statute,
and we also note that the number of EP sales to select from was small.
We compared that export price to the ex-factory normal value used in
the petition in order to calculate a margin for P. T. Mayer Crocodile.
B. Multiraya
To determine whether Multiraya's sales of the subject merchandise
to the United States were made at less than fair value, we compared the
Export Price (``EP'') to the Normal Value (``NV''), as described in the
``Export Price'' and ``Normal Value'' sections of this notice. As set
forth in section 773(a)(1)(B)(i) of the Act, we calculated NV based on
sales at the same level of trade as the U.S. sale. In accordance with
section 777A(d)(1)(A)(i), we compared the weighted-average EP to the
weighted-average NV during the POI. In determining averaging groups for
comparison purposes, we considered the appropriateness of such factors
as physical characteristics.
(i) Physical Characteristics
In accordance with section 771(16) of the Act, we considered all
products covered by the description in the ``Scope of Investigation''
section of this notice, produced in Indonesia by Multiraya and sold in
the home market during the POI, to be foreign like products for
purposes of determining appropriate product comparisons to U.S. sales.
Where there were no sales of identical merchandise in the home market
to compare to U.S. sales, we compared U.S. sales to the next most
similar foreign like product on the basis of the characteristics listed
in the Department's antidumping questionnaire. In making the product
comparisons, we relied on the following criteria (listed in order of
preference): shape type (i.e., flat, e.g., plates, trays, saucers,
etc.; or container, e.g., bowls, cups, etc.), specific shape, diameter
(where applicable), length (where applicable), capacity (where
applicable), thickness, design (i.e., whether or not a design is
stamped into the piece), and glazing (i.e., where a design is present,
whether or not it is also glazed).
(ii) Level of Trade
Multiraya did not claim a difference in level of trade. Our
findings at verification confirmed that Multiraya performed essentially
the same selling activities for each reported home market and U.S.
marketing stage. Accordingly, we find that no level of trade
differences exists between any sales in either the home market or U.S.
market. Therefore, all price comparisons are at the same level of trade
and an adjustment pursuant to section 773(a)(7)(A) is unwarranted.
Export Price
In accordance with subsections 772(a) and (c) of the Act, we
calculated EP for Multiraya where the subject merchandise was sold
directly to the first unaffiliated purchaser in the United States prior
to importation and use of constructed export price (``CEP'') was not
otherwise warranted based on the facts of record (See Comment 17).
Normal Value
Cost of Production Analysis
As discussed in the preliminary determination, based on the
petitioner's allegations, the Department found reasonable grounds to
believe or suspect that Multiraya made sales in the home market at
prices below the cost of producing the subject merchandise. As a
result, the Department initiated an investigation to determine whether
Multiraya made home market sales during the POI at prices below the
cost of production (COP) within the meaning of section 773(b) of the
Act.
Before making any fair value comparisons, we conducted the COP
analysis described below.
A. Calculation of COP
We calculated the COP based on the sum of Multiraya's reported cost
of materials and fabrication for the foreign like product, plus amounts
for home market selling, general and administrative expenses (``SG&A'')
and packing costs in accordance with section 773(b)(3) of the Act.
We adjusted Multiraya's raw material costs to include the change in
the work-in-process inventory (see Comment 4).
B. Test of Home Market Prices
We used Multiraya's adjusted weighted-average COP for the POI. We
compared the weighted-average COP figures to home market sales of the
foreign like product as required under section 773(b) of the Act, in
order to determine whether these sales had been made at below-cost
prices within an extended period of time, in substantial quantities,
and not at prices which permit recovery of all costs within a
reasonable period of time. On a product-specific basis, we compared the
COP to the home market prices, less any applicable movement charges and
direct selling expenses. As in our preliminary determination, we did
not deduct indirect selling expenses from the home market price because
these expenses were included in the G&A portion of COP. We recalculated
the total material costs by including work-in-process (see Comment 4).
C. Results of COP Test
Pursuant to section 773(b)(2)(C) of the Act, where less than 20
percent of a respondent's home market sales for a model are at prices
less than the COP, we do not disregard any below-cost sales of that
model because we determine that the below-cost sales were not made
within an extended period of time in ``substantial quantities.'' Where
20 percent or more of a respondent's home market sales of a given model
during the POI are at prices less than COP, we disregard the below-cost
sales because they are (1) made within an extended period of time in
substantial quantities in accordance with sections 773(b)(2) (B) and
(C) of the Act, and (2) based on comparisons of prices to weighted-
average COPs for the POI,
[[Page 1721]]
were at prices which would not permit the recovery of all costs within
a reasonable period of time in accordance with section
773(b)(2)(D) of the Act. The results of our cost test for Multiraya
indicated that for certain home market models less than 20 percent of
the sales of the model were at prices below COP. We therefore retained
all sales of the model in our analysis and used them as the basis for
determining NV. Our cost test for Multiraya also indicated that within
an extended period of time (one year, in accordance with section
773(b)(2)(B) of the Act), for certain home market models more than 20
percent of the home market sales were sold at prices below COP. In
accordance with section 773(b)(1) of the Act, we therefore excluded
these below-cost sales from our analysis and used the remaining above-
cost sales as the basis for determining NV.
D. Calculation of Constructed Value (CV)
In accordance with section 773(e) of the Act, we calculated CV
based on the sum of Multiraya's cost of materials, fabrication,
selling, general, and administrative expenses (``SG&A''), and profit,
plus U.S. packing costs as reported in the U.S. sales database. In
accordance with section 773(e)(2)(A) of the Act, we based SG&A and
profit on the amounts incurred and realized by the respondent in
connection with the production and sale of the foreign like product in
the ordinary course of trade, for consumption in the foreign country.
We calculated Multiraya's CV based on the methodology described above
for the calculation of COP.
Price to Price Comparisons
Where we compared CV to export prices, we deducted from CV the
weighted-average home market direct selling expenses and added the
weighted-average U.S. product-specific direct selling expenses (where
appropriate) in accordance with section 773(a)(8) of the Act. We
calculated price-based normal value using the same methodology used in
the preliminary determination, with the following exceptions: (1) We
disallowed Multiraya's warranty claim as a circumstance of sale
warranty claim adjustment (see, Comment 8) and 2) We recalculated home
market credit to reflect verification findings (see Comment 7).
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 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,
see Change in Policy Regarding Currency 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 Indonesian
rupiah did not undergo a sustained movement, nor were there currency
fluctuations during the POI.
Verification
As provided in section 782(i) of the Act, we verified the
information submitted by Multiraya 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
Comment 1: Scope of Investigation
Respondents argue that the scope of this 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 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: Alleged Underreporting of U.S. Sales
Petitioner states that information on Multiraya's U.S. invoices
reviewed at verification demonstrates that Multiraya seriously
underreported its U.S. sales because the data taken from the invoices
establishes that the product weight reported by Multiraya is less than
that found on the actual invoices. Further, petitioner claims Multiraya
compounded its underreporting of U.S sales by not providing the
Department with an explanation during the verification to validate the
weight discrepancy. Therefore, petitioner asserts the Department should
rely on adverse facts available for the final margin calculation for
Multiraya. However, if the Department were to determine that facts
available should not be applied to Multiraya, petitioner suggests that
at a minimum, the Department should apply partial facts available and
treat the unreported quantities as ``free merchandise.''
Multiraya argues that it did not underreport any U.S. sales, and
that petitioner's arguments claiming Multiraya has underreported its
U.S. sales is based on petitioner's misunderstanding of the information
on the record. Multiraya adds that the
[[Page 1722]]
Department verified that it did not ship anything to the U.S. other
than the subject merchandise in the quantities listed. Therefore,
Multiraya argues that petitioner's claim that it has ``ghost'' or
``free'' merchandise is false. Finally, Multiraya argues that the
differences in weight do not constitute underreporting of its sales to
the United States.
DOC Position
We verified that Multiraya sold subject merchandise by the number
of pieces and not by weight, and that Multiraya keeps track of its
sales by the number of pieces sold. Multiraya's sales reporting was
based on the quantity sold, not on the weight of the merchandise. For
purposes of responding to the Department's questionnaire, Multiraya
reported actual weights, which we verified. Thus, the discrepancies in
the weight actually reported to the Department and the ``standard''
weights which were listed on the U.S. invoices for purposes of duty
drawback payments to the Indonesian government are not evidence of any
misrepresentation on Multiraya's part. Therefore, we disagree with
petitioner's allegation that, since the standard weight and the actual
weight differed, Multiraya actually shipped additional ``free
merchandise'' to the U.S. Accordingly, we have used Multiraya's
response for our final determination.
Comment 3: Product Characteristics
Petitioner states that, based on the Department's verification of
Multiraya's sales data, Multiraya's reporting of product
characteristics (i.e., shape, capacity, weight and thickness) is
replete with errors. As a result, petitioner argues that the errors
make it impossible for the Department to accurately use home market
sales data to identify the proper comparisons to U.S. sales. Therefore,
petitioner claims that the Department should rely on the facts
available for Multiraya's final margin calculation.
Multiraya argues that, although certain product characteristics
were misreported for some products (i.e., capacity and thickness), the
Department did not find any discrepancies in more determinative
characteristics such as length, width, and diameter. Multiraya argues
that such misreporting will have an insignificant effect on model
matching.
DOC Position
We agree with petitioner's allegation that Multiraya misreported
certain product characteristics such as the weight and thickness of the
product. However, we have concluded that these errors are minor with
regard to both the product matching criteria and the extent of the
incorrect reporting. We have corrected those errors accordingly. We
determined that Multiraya misreported the thickness of some of its
products because of the point of measurement used for reporting to the
Department. We did not specify in the Department's questionnaire where
the appropriate point of measurement would be, hence there were
differences between the Department's measurement at verification and
Multiraya's measurement. We have also determined that the more
determinative product characteristics were, in fact, reported correctly
(see Memorandum from MIDP Team to Louis Apple, Acting Office Director,
August 12, 1996). Therefore, we have rejected petitioner's argument
that facts available are required as a result of the differences in
Multiraya product matching characteristics.
Comment 4: Work-in-Process Inventory (WIP)
Petitioner claims that Multiraya underreported its material costs
by excluding the costs of WIP inventory and points to Multiraya's own
submission indicating that WIP decreased from the beginning of the year
to year-end. Petitioner states that Multiraya reported only those
inputs withdrawn from raw material inventory during the POI, but that
the change in Multiraya's WIP inventory should also have been included
as part of the material costs. Since opening WIP is much greater than
closing WIP, petitioner claims that Multiraya's exclusion of the change
in WIP significantly distorted the costs. As a result of Multiraya's
deficient response, and the inability of the Department to verify the
data completely, petitioner claims that the Department should apply
total facts available for Multiraya's final margin calculation.
Multiraya argues that the Department performed numerous tests on
its production costs at verification and found no information to
indicate that Multiraya had under-reported its costs due to changes in
WIP or any other factor. Moreover, Multiraya argues that WIP is
irrelevant unless raw material costs fluctuate during the year, and the
Department verified that Multiraya's cost of raw materials did not
fluctuate during that time period.
DOC Position
We agree with petitioner that Multiraya's reported production costs
are understated; however, we disagree with petitioner's suggestion that
the remedy for this error is to apply total facts available. Multiraya
reported its per-unit costs based on the cost incurred during the
period (without considering the WIP balances), allocated over the total
amount of finished goods produced. Because Multiraya failed to include
the change in WIP (which represents the costs of semi-finished goods
that were completed during the period) the reported costs are
understated. We have corrected for this understatement by allocating
the net change in WIP balances to all of the goods produced. This
allocation was accomplished by determining the percentage relationship
between the change in WIP and the reported material cost.
Further, we disagree with Multiraya's assertion that the change in
WIP is only significant when the price of raw materials is fluctuating,
because the change in WIP represents costs incurred to produce the
units recorded as finished goods in this period, thus the amount can be
significant.
Comment 5: Transaction and Product-Specific Yields
Petitioner contends that verification revealed that Multiraya could
have calculated product-specific yields for home market sales based on
stock cards and sales invoices. By Multiraya maintaining its claim that
it could not calculate more specific yields and thus using an average
yield, it has in effect minimized its dumping margin. Consequently,
petitioner argues that this is another reason for the Department should
apply total facts available.
Multiraya states that it did not maintain production records in its
normal course of business that would have enabled it to calculate
product-specific yields. Multiraya contends that petitioner has
misunderstood Multiraya's accounting system. Multiraya explains that,
because it tracks its consumption of imported melamine powder for
purposes of supporting duty drawback claims with the Indonesian
government, it can link the purchase of imported melamine powder
specifically to the production of melamine dinnerware sold for export.
In so far as, Multiraya does not receive a duty drawback refund for
domestic melamine, it had no reason to track yields for products that
use domestic melamine powder. Thus, Multiraya states that it cannot
link the purchase of domestic melamine powder to specific production
and sale of melamine dinnerware products. As a result, Multiraya
asserts that would be unable to calculate product-specific or batch-
specific production yields for products
[[Page 1723]]
manufactured from domestic melamine powder. Accordingly, Multiraya
contends that it is unfair for the Department to apply facts available
for failure to provide information on product-specific yields that
cannot be derived from its records.
DOC Position
The Department's preference is to use product-specific cost data,
which includes product specific yield results, for calculating COP and
CV. The Department uses the most specific and reasonable allocation
methodology possible given the available data (see Final Determination
at Sales Less Than Fair Value: Welded Stainless Steel Pipe From
Malaysia, 59 FR 4023, 4027, January 28, 1994). In this instance,
Multiraya reported its costs based on overall yield information because
it claimed that its records do not permit it to calculate cost data on
a more specific basis. Our verification revealed nothing to contradict
Multiraya's claim that it does not maintain product-specific yield data
in its normal course of business. The accounting records petitioner
identified could arguably be used to calculate an average yield for
each specific order. Nevertheless, compiling and aggregating this data
would not provide product-specific yield information as petitioner
claims. Instead, this calculation would result in average yield data,
which would be no more specific than the information provided by
Multiraya. Accordingly, we have accepted Multiraya's average yield rate
calculation which we tested at verification.
Comment 6: Land Rental
Petitioner claims that Multiraya failed to disclose until
verification that it leased land from an affiliated party for use in
its dinnerware business, and that Multiraya was unable to demonstrate
the arm's length pricing of the land rent. Citing Indonesian financial
statistics for support its contention that the rent expense is too low,
petitioner argues that this lease amount must be adjusted to reflect
the true cost of Multiraya's lease and cites
Multiraya argues that rental payments as affiliated party
transactions are merely another form of capital contribution by
shareholders and the Department's practice is to ignore such
intracompany transfers, regardless of whether they relate to sales or
production. Multiraya explains that the land was owned by a company
official or ``shareholder'' who contributed the land to Multiraya for a
fixed payment. Thus, according to Multiraya, the rent the shareholder
receives is equivalent to a dividend or profit sharing amount.
DOC Position
We verified that Multiraya reported the land rental expense that
was reflected in its financial statements. We analyzed the amount of
the recorded expense in relation to the total costs and the overhead
expense and noted that the reported amount is immaterial. Further the
effect of adjusting the recorded amount by the inflation rate
experienced from 1991 until the POI, as requested by the petitioner, is
also immaterial as petitioner has not shown any substantial link
between inflation in Indonesia and the land rental costs. Accordingly,
we have accepted the land rental amount as the figure recorded in the
financial statement.
Comment 7: Home Market Credit Expenses
Petitioner states that Multiraya overstated its home market credit
expenses for most reported transactions. Petitioner argues that the
Department should either recalculate or disallow entirely the claimed
credit expense.
Multiraya argues that the overstatement of home market credit
expense is directly related to a computer programming error and should
not warrant applying facts available. Multiraya requests that the
Department use verified information for its final margin calculation.
DOC Position
We agree with petitioner that Multiraya's home market credit
expenses were overstated, and we also agree that it is appropriate to
recalculate these expenses to correct the error. At verification, the
Department found that, aside from a computer error, the reported credit
expenses were accurate. This computer error does not warrant the
application of facts available. In response to the Department's
request, Multiraya has resubmitted corrected payment dates. Hence, we
have recalculated the home market credit expense using the corrected
information submitted by Multiraya.
Comment 8: Home Market Warranty Expense
Petitioner claims that Multiraya improperly allocated home market
warranty expenses over all sales, instead of on a more specific basis.
According to petitioner, verification demonstrated that Multiraya could
have calculated this expense on a customer-specific basis. Accordingly,
petitioner contends the Department should treat the claimed warranty
amount as an indirect selling expense rather than a direct selling
expense.
Multiraya argues that the Department's practice with respect to
warranty expenses does not require a respondent to report a sale-by-
sale breakdown of direct warranty expenses. Contrary to petitioner's
claim, Multiraya argues that verification proved its warranty expenses
are directly related to the subject merchandise because the expenses
were incurred for melamine institutional dinnerware products. In
addition, Multiraya argues that given its accounting records, an
overall allocation methodology was the only feasible method available
for it to calculate its warranty expense. Multiraya argues that a
customer-specific methodology would not provide any greater accuracy
than an overall warranty expense methodology.
DOC Position
It is the burden of the respondent to demonstrate it is entitled to
an adjustment under the Act. At verification, Multiraya was unable to
provide any documentation to support its claim for warranty expenses.
Rather, the claimed warranty expenses had been derived from Multiraya's
best estimate and not based on actual results. Because Multiraya was
unable to meet its burden, we are calculating normal value without
adjustment for home market warranty expenses.
Comment 9: Home Market Inland Freight
Petitioner claims that Multiraya's reported home market freight
expense claim could not be verified and contained many discrepancies.
Specifically that Multiraya's reported freight expenses was deficient
because it did not reflect: (1) Use of diesel fuel, rather than
gasoline as reported, (2) lack of documentation to support an
allocation methodology of how it determined the freight per
transaction, and (3) inclusion of non subject-merchandise.
Multiraya argues that its reported home market freight expenses
were verified. As such, Multiraya states that it has reported its home
market inland freight expense to the best of its ability, and
recommends that the Department not apply facts available to its final
margin calculation.
DOC Position
The Department's preference is that, wherever possible, freight
adjustments should be reported on a sale-by-sale basis, rather than an
overall basis (see, e.g., Final Results of Antidumping Duty
Administrative Review: Replacement
[[Page 1724]]
Parts for Self-Propelled Bituminous Paving Equipment from Canada 56 FR
47451, 47455, September 19, 1991). If a respondent does not maintain
its records to enable freight expense reporting at this level, then our
preference is to apply an allocation methodology at the most specific
level permitted by a respondent's records, unless a respondent can
demonstrate that doing so is overly burdensome or that its alternative
methodology is representative and non-distortive of transaction-
specific sales. Multiraya allocated all home market freight by weight
over all home market sales inclusive of subject and non-subject
merchandise. Verification did not contradict Multiraya's claim that it
is unable to report freight expenses on a transaction-specific basis.
The non-subject merchandise included in the freight allocation is all
melamine products not covered by the scope of this investigation. In so
far as we find that expense allocation of melamine product weight, it
is a reasonable approach to account for the inclusion of non-subject
merchandise in the reported freight expenses. We have accepted a
Multiraya's methodology as representative and non-distortive of
transaction-specific sales information (see Final Determination of
Sales at Less than Fair Value: Oil Country Tubular Goods from Korea, 60
FR 33561, June 28, 1995).
Comment 10: Understating of U.S. Credit Expenses
Petitioner claims that Multiraya improperly calculated reported
credit on U.S. sales by reporting shipment date as the date of ocean
shipment, rather than as the date of factory shipment. To correct this
error, petitioner argues that the Department should recalculate credit
using invoice date as shipment date.
Multiraya responds that it correctly reported the shipment date for
this expense based on the date from the bill of lading because it is on
that date that the merchandise left the factory.
DOC Position
We have accepted Multiraya's reported credit expense, because at
verification we found no evidence to indicate any differences between
the date of factory shipment and the bill of lading date, i.e.,
shipment date.
Comment 11: U.S. Dollar Interest Rate vs Rupiah Interest Rate
Petitioner states that, although Multiraya invoices its U.S.
customer in U.S. dollars, it ultimately receives payment in Indonesian
rupiahs because the bank converts the customer's payment. As a result,
petitioner claims that Multiraya's opportunity cost is incurred in
rupiah, not dollars. Therefore, petitioner argues that the Department
should apply a rupiah interest rate to calculate U.S. credit expenses.
Multiraya argues that the Department properly applied a U.S. dollar
rate to the calculation of U.S. credit expenses. Multiraya states that
the fact that it ultimately receives payment for its dollar-denominated
sales in rupiahs is not determinative. However, Multiraya states that
it invoices its customers in U.S. dollars, and its customers pay in
U.S. dollars via letter of credit. Therefore, its opportunity costs are
properly associated with U.S. dollars.
DOC Position
We agree with Multiraya's claim that based on the facts in this
investigation the opportunity cost experienced by Multiraya was in U.S.
dollars. The Department's policy is to calculate imputed credit costs
using a weighted average short term borrowing which reflects the
currency in which the sale was invoiced. Consistent with the
Department's practice we have determined no credit cost adjustments are
warranted. (See, e.g., Final Determination at Sales Less Than Fair
Value: Pasta from Turkey, 61 FR 30309, 30324 (June 14, 1996)).
Comment 12: Duty Drawback Claim
Petitioner claims that Multiraya improperly included as an offset
to costs, drawbacks on duties paid prior to the POI. Petitioner argues
that the Department should deny Multiraya's duty drawback claim
entirely. Petitioner argues that Multiraya's duty amount should be
lowered because: (1) Multiraya did not include duties associated with
opening WIP, ( 2) Multiraya recorded material costs inclusive of
duties, and (3) Multiraya's WIP that was incorporated in materials was
not included in reported material costs. Finally, petitioner states
that Multiraya did not demonstrate a tie between the quantity of
imported melamine powder on which the duty was paid and the quantity of
exports of imported melamine upon which the drawback was received. For
the above-mentioned reasons, petitioner argues that the Department
should reject Multiraya's claim for a duty drawback in its final margin
calculation.
Multiraya argues that it reported its duty drawback refund based on
duties paid before the POI in an effort to reflect actual refunds
received during the POI. Further, Multiraya argues that petitioner's
claim with regard to unreported duty on the change in WIP is irrelevant
to the reported duty drawback amount because the Department requires a
respondent to report duty drawback claims on the same basis as it
receives duty drawback refunds. Multiraya states that the absence of
WIP costs and quantities from its calculation of reported costs is not
beneficial to its final margin calculation. Multiraya states that, at
verification, the Department confirmed that all imported melamine was
indeed used in exported melamine production during the POI.
DOC Position
As discussed in Comment 4, we believe that the change in WIP should
be included in the total material costs, and we have adjusted the total
cost of melamine production to take this into account. However, we do
not agree with petitioner that Multiraya has not demonstrated that it
is entitled to a duty drawback. We verified Multiraya's duty drawback
process, its method of tracking total duties paid and weights and
quantities of production and determined it was appropriate.
Accordingly, there is no basis to deny Multiraya's duty drawback claim
(See Verification Report at page 11 and Cost Verification Exhibit 109).
Comment 13: Exclusion of Excise Tax From Material Costs
Petitioner argues that Multiraya's claim of an income tax credit
for excise taxes paid on exported melamine products is incorrect and
should not have been reported as duty drawback because said excise tax
is not supported by a link between imports and exports. In addition,
petitioner states that Cost Verification Exhibit 111 indicates that the
income tax is allocated over a large number of products, including
domestic products. Petitioner claims that there is no information on
the record to suggest that this tax credit is directly linked to export
or export quantities exclusively. Since the burden of proof to support
its claim is with Multiraya, petitioner argues the Department must deny
Multiraya's duty drawback claim for an income tax credit for paid
excise taxes.
Multiraya argues that Cost Verification Exhibit 109 clearly details
that import duties and value added tax paid on imported melamine powder
were eventually recovered via a tax credit on exported melamine
dinnerware products. Thus, Multiraya argues, the Department should
accept the duty drawback claim.
[[Page 1725]]
DOC Position
We agree with Multiraya. We verified that Multiraya's excise tax
was imposed on imported melamine powder (which was used to produce MIDP
for export) and was credited through the income tax return upon export
of the finished product. Accordingly, the claimed drawback amount was
properly classified (see Cost Verification Exhibit 111).
Comment 14: Foreign Inland Freight
Petitioner claims that Multiraya improperly reported a U.S. sale
without including the foreign inland freight expense incurred on that
sale based on the Department's verification information. Because of
this exclusion petitioner contends that the Department should apply
facts available and assign the highest amount of foreign inland freight
to this sale in the calculation of Multiraya's final margin.
Multiraya argues that it properly reported foreign inland freight
for all its U.S. sales. Multiraya contends that foreign inland freight
should not have been applied to the U.S. sale at issue because it in
fact was not shipped via ground transportation.
DOC Position
We agree with Multiraya. We verified that foreign inland freight
was properly applied to U.S. sales and, for the sale in question, we
find that foreign inland freight expenses were not incurred (see
Verification Exhibit 13 and 19).
Comment 15: U.S. Warranty Expenses
Petitioner contends that Multiraya failed to report warranty
expenses incurred on U.S. sales. Petitioner states that the
Department's verification of sales documents and customer files
revealed that although Multiraya did not have a formal warranty policy,
it allowed customers to return unsatisfactory merchandise, which is the
equivalent of a warranty expense. Consequently, petitioner contends
that the Department should apply facts available to Multiraya's final
margin calculation.
Multiraya responds that it did not incur any warranty expenses on
U.S. sales. Multiraya states that the Department verified that it did
not grant any warranty-related claims during the POI. In addition,
Multiraya contends that the Department's reconciliation of U.S. sales
to Multiraya's financial statements at verification proved that its
U.S. customer did not receive any credits toward its payment to
Multiraya.
DOC Position
Although the Department's verification report indicates that
Multiraya's customers are able to return unsatisfactory merchandise, at
verification we did not find any evidence to suggest that Multiraya is
contractually obligated to provide credit or any other redress for
unsatisfactory merchandise. Therefore we do not consider this informal
return policy to constitute a warranty obligation associated with
Multiraya's sales. Accordingly we determined that Multiraya does not
incur warranty expenses and application of facts available is not
warranted.
Comment 16: U.S. Containerization Costs
Petitioner states that Multiraya failed to report containerization
expenses on U.S. sales. Therefore, petitioner contends that the
Department should estimate the expense to be equal to labor costs for
packing or use the public record figure for Indonesian containerization
and include this amount in the final determination margin calculations.
Multiraya argues that the costs of containerization are included in
Multiraya's reported expenses.
DOC Position
We agree with Multiraya. We verified that costs associated with
containerization are included in Multiraya's packing expenses. (See
Verification Exhibit 17).
Comment 17: U.S. Sales Treated as Affiliated Party Sales
Petitioner claims that information on the record indicates a close
supplier relationship between Multiraya and its sole U.S. customer.
Consequently, petitioner states Multiraya's failure to provide all the
information to the Department relevant to its affiliation is equivalent
to Multiraya submitting a seriously deficient response. Further,
petitioner states that the Department verified all U.S. sales are made
to one customer and would fall within the definition of affiliated
party set forth in Section 771(33) of the Tariff Act. In addition,
petitioner argues that there is clearly an exclusive seller/purchaser
relationship with respect to shipments of the subject merchandise from
Indonesia to the United States. As a result of Multiraya's failure to
provide the Department with the information required to calculate CEP
for its U.S. sales, petitioner suggests that the Department apply facts
available, as set forth in the petition, to the final margin
calculation for Multiraya.
Multiraya states there is not an affiliation with its sole U.S.
customer, as neither has the authority or is in the position to
exercise restraint or discretion over the other. Multiraya states that
Multiraya and its customer do not have an exclusive business
relationship, as Multiraya is not the only supplier of the subject
merchandise for the U.S. customer. Multiraya states that the Department
reviewed supporting documentation that demonstrated that Multiraya, in
fact, has sought new business and other customers. In addition,
Multiraya states that there is no corporate relationship between it and
its U.S. customer. Multiraya states that the Department reviewed its
corporate documentation and did not find any reference to the U.S.
customer's owners, directors, or managers.
DOC Position
We disagree that Multiraya's U.S. sales should be classified as CEP
sales because we do not find that the evidence establishes that the
sole U.S. importer and Multiraya are affiliated parties. Section
771(33)(G) of the Act provides, inter alia, that parties will be
considered affiliated when one controls the other. A person controls
another person if the person is ``legally or operationally in a
position to exercise restraint or direction over another person.'' SAA
at 838. The SAA further states that a company may be in a position to
exercise restraint or direction through, among other things, ``close
supplier relationships in which the supplier or buyer becomes reliant
upon the other.'' Id.
Pursuant to section 771(33) of the Act, we reviewed Multiraya's
relationship with its U.S. importer. The evidence indicates that there
is no corporate or family relationship between the two companies. The
Department requested Multiraya to provide evidence to support its
assertion that it was not under the control of its sole U.S. customer
and it freely negotiated its U.S. prices for the subject merchandise.
Multiraya submitted written documentation between Multiraya and this
U.S. customer which demonstrated that negotiations occurred between
Multiraya and its sole U.S. customer regarding melamine product prices,
and that Multiraya was not controlled by the customer in setting the
price of the subject merchandise (See Multiraya's June 7, 1996,
Supplemental Questionnaire Response at Exhibit 1 and 2). We verified
that the negotiated prices reflected the prices reported in Multiraya
U.S. sales listing. The evidence on the record also
[[Page 1726]]
demonstrates that Multiraya does not have an exclusive supplier
relationship with its U.S. customer as it attempted to solicit business
from other U.S. companies (See Multiraya's July 15, 1996, Supplemental
Questionnaire Response at Exhibit 3). Therefore, we have determined
that the evidence on the record supports the claim that Multiraya is
not affiliated with its U.S. customer.
Continuation of Suspension of Liquidation
In accordance with section 735(c) of the Act, we are directing the
Customs Service to continue to suspend liquidation of all entries of
MIDPs that are entered, or withdrawn from warehouse, for consumption on
or after August 22, 1996, the date of publication of our preliminary
determination in the Federal Register. We will instruct the Customs
Service to require a cash deposit or the posting of a bond equal to the
weighted-average amount by which the NV exceeds the export price, as
indicated in the chart below. This suspension of liquidation will
remain in effect until further notice.
------------------------------------------------------------------------
Weighted-
average
Exporter/manufacturer margin
percentage
------------------------------------------------------------------------
P. T. Mayer Crocodile...................................... 12.90
P. T. Multi Raya Indah Abah................................ 8.10
All Others................................................. 8.10
------------------------------------------------------------------------
Pursuant to section 733(d)(1)(A) and section 735(c)(5) of the Act,
the Department has not included zero, de minimis weighted-average
dumping margins, and margins determined entirely under section 776 of
the Act, in the calculation of the ``all others'' rate.
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. 97-753 Filed 1-10-97; 8:45 am]
BILLING CODE 3510-DS-P
