[Federal Register Volume 62, Number 8 (Monday, January 13, 1997)]
[Notices]
[Pages 1726-1733]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-754]
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DEPARTMENT OF COMMERCE
[A-583-825]
Notice of Final Determination of Sales at Less Than Fair Value:
Melamine Institutional Dinnerware Products From Taiwan
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, NW.,
Washington, DC 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 Round Agreements Act (``URAA'').
Final Determination
We determine that melamine institutional dinnerware products
(``MIDPs'') from Taiwan 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 Taiwan (61 FR 43341,
August 22, 1996)), the following events have occurred:
In September and October 1996, we verified the questionnaire
responses of respondents Yu Cheer Industrial Co., Ltd. (Yu Cheer) and
Chen Hao Plastic Industrial Co., Ltd. (Chen Hao Taiwan). On November
23, 1996, the Department requested Chen Hao Taiwan 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 respondents submitted case briefs on
November 27, 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 POI is January 1, 1995, through December 31, 1995.
Facts Available
IKEA and Gallant
We did not receive a response to our questionnaire from either IKEA
Trading Far East Ltd. (IKEA) or Gallant Chemical Corporation (Gallant).
Section 776(a)(2) of the Act provides that if an interested party
withholds information that has been requested by the Department, fails
to provide such information in a timely manner and in the form
requested, significantly impedes a proceeding, or provides such
information but the information cannot be verified, the Department
shall use the facts otherwise available in reaching the applicable
determination. Because IKEA and Gallant failed to submit the
information that the Department specifically requested, we must base
our determinations for those companies on the facts available.
Section 776(b) of the Act provides that adverse inferences 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. IKEA's
and Gallant's failure to respond to our questionnaire demonstrates that
IKEA and Gallant have failed to cooperate to the best of their
abilities in this investigation. Accordingly, 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
[[Page 1727]]
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. The Statement of Administrative Action
accompanying the URAA, H.R. Doc. No. 316, 103d Cong., 2d Sess. (1994)
(hereinafter, the ``SAA''), states that the petition is ``secondary
information'' and that ``corroborate'' means to determine that the
information used has probative value. See SAA at 870.
In this proceeding, 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 both normal value and export
price in the petition on a market research report which utilized price
quotations from a manufacturer/exporter of MIDPs in Taiwan. The
petitioner also submitted a published price list of comparable
merchandise sold during the POI in Taiwan. The Department has
determined that the price list corroborates normal value used in the
petition.
The export price in the petition is consistent with export prices
reported by responding companies on the record of this investigation.
Therefore, we determine that further corroboration of the facts
available margin is unnecessary.
Fair Value Comparisons
To determine whether sales of the subject merchandise by Chen Hao
Taiwan and Yu Cheer 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
POI-wide weighted-average EPs to weighted-average NVs. 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, above, produced in Taiwan 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
In the preliminary determination, the Department determined that no
difference in level of trade existed between home market and U.S. sales
for either Chen Hao Taiwan and Yu Cheer. Our findings at verification
confirmed that Chen Hao Taiwan and Yu Cheer performed essentially the
same selling activities for each reported home market and U.S.
marketing stage. Accordingly, we determine that all price comparisons
are at the same level of trade and an adjustment pursuant to section
773(a)(7)(A) is unwarranted.
Export Price
We calculated EP, in accordance with subsections 772(a) and (c) of
the Act, where the subject merchandise was sold directly to the first
unaffiliated purchaser in the United States prior to importation and
where CEP was not otherwise warranted based on the facts of record.
We calculated EP for each respondent based on the same methodology
used in the preliminary determination, with the following exceptions:
Chen Hao Taiwan
We added an amount to U.S. sales denominated in U.S. dollars to
account for bank and currency conversion charges not included in Chen
Hao Taiwan's reporting, based on information developed at verification
(see Comment 13).
Yu Cheer
We made the following corrections, based on our verification
findings:
(a) Revised payment dates for certain U.S. sales, for purposes of
calculating imputed credit; (b) Corrected foreign inland freight; (c)
revised packing labor expense; and (d) corrected certain packing
material expenses.
In order to reflect the corrected payment dates for certain U.S.
sales, we recalculated credit for all U.S. sales, using verified
shipment and payment dates and Yu Cheer's reported interest rate. Yu
Cheer did not provide information to weight-average the different
packing material purchase prices observed at verification. Accordingly,
we applied the highest price observed at verification for these
materials as facts available. This approach was also consistent with Yu
Cheer's reporting methodology for some of the packing material
expenses.
Normal Value
Cost of Production Analysis
In the preliminary determination, based on the petitioner's
allegation, the Department found reasonable grounds to believe or
suspect that Chen Hao Taiwan sales in the home market were made at
prices below the cost of producing the merchandise. As a result, the
Department initiated an investigation to determine whether Chen Hao
Taiwan made home market sales during the POI at prices below their
respective cost of production within the meaning of section 773(b) of
the Act.
Before making any fair value comparisons, we conducted the cost of
production (COP) analysis described below.
A. Calculation of COP
We calculated the COP based on the sum of Chen Hao Taiwan's 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 financial expenses to exclude foreign exchange gains
(see Comment 10), and to include the interest expense associated with
loans from affiliated parties (see Comment 9). We also adjusted factory
overhead to include an amount for pension expenses (see Comment 11).
B. Test of Home Market Prices
We used Chen Hao Taiwan'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
were not at prices which
[[Page 1728]]
permit recovery of all costs within a reasonable period of time. On a
model-specific basis, we compared the COP to the home market prices,
less any applicable movement charges and direct selling expenses. We
did not deduct indirect selling expenses from the home market price
because these expenses were included in the G&A portion of COP.
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, 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
Chen Hao Taiwan 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 Chen Hao Taiwan 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.
In this case, we found that some models had no above-cost sales
available for matching purposes. Accordingly, export prices that would
have been compared to home market prices for these models were instead
compared to constructed value (CV).
D. Calculation of CV
In accordance with section 773(e) of the Act, we calculated CV
based on the sum of a respondent's cost of materials, fabrication,
selling, general, and administrative expenses (``SG&A''), profit and
U.S. packing costs as reported in the U.S. sales databases. In
accordance with section 773(e)(2)(A) of the Act, we based SG&A and
profit on the amounts incurred and realized by Chen Hao Taiwan in
connection with the production and sale of the foreign like product in
the ordinary course of trade for consumption in the foreign country.
Where appropriate, we calculated Chen Hao Taiwan's CV based on the
methodology described in the calculation of COP above. We made the same
adjustments to Chen Hao Taiwan's reported CV as we described above for
COP.
Price to Price Comparisons
Adjustments to Normal Value
We based normal value on the same methodology used in the
preliminary determination, with the following exceptions:
Chen Hao Taiwan
For one of several packing materials used by Chen Hao Taiwan, we
found a slight discrepancy between the reported consumption and costs,
and the verified consumption and costs. This discrepancy, however,
affects only a small part of the overall packing material cost and
would have an ad valorem effect of less than .33 percent. Consistent
with 19 CFR 353.59(a), which permits the Department to disregard
insignificant adjustments, we have not adjusted the reported packing
materials cost in our fair value comparisons for Chen Hao Taiwan.
Yu Cheer
We revised packing labor and certain packing material expenses,
based on verification findings. Yu Cheer did not provide information to
weight-average the different packing material purchase prices observed
at verification. Accordingly, we applied the highest price observed at
verification for these materials as facts available. This approach was
also consistent with Yu Cheer's reporting methodology for some of the
packing material expenses.
Price to CV Comparisons
Where we compared Chen Hao Taiwan's CV to Chen Hao Taiwan's 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.
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, 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 New Taiwan dollar 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 the 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
Comment 1: Scope of Investigation
Respondents argue that the scope of investigation should be revised
to exclude melamine dinnerware that
[[Page 1729]]
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: Acceptance of Chen Hao Taiwan Questionnaire Responses
Petitioner argues that the Department should reject Chen Hao
Taiwan's questionnaire responses because the extensive, fundamental
changes to the responses submitted during the course of the
investigation render its data unreliable. In particular, petitioner
objects to Chen Hao Taiwan's submission of allegedly ``minor
corrections'' at the beginning of verification and submitted for the
record on October 8, 1996. Petitioner claims that this information is
untimely under 19 CFR 353.31 as it contains new information, which may
not be accepted at verification, and should therefore be (wholly or, at
a minimum, partially) rejected for use in the final determination
following the precedent in Final Results of Administrative Review:
Titanium Sponge from the Russian Federation (61 FR 58525, November 15,
1996) (Titanium Sponge). Further, petitioner claims it was deprived of
its ability to comment on this data prior to verification.
Chen Hao Taiwan responds that, by focusing on the absolute number
of corrections made, petitioner ignores the fact that the changes were
made to ensure that the most complete and accurate responses were
submitted for the record and properly verified. According to Chen Hao
Taiwan, its revisions corrected typographical and data entry errors;
the corrections related to misreported items, rather than unreported
items. Chen Hao Taiwan adds that this situation is different from
Titanium Sponge, where the rejected submission related to previously
unreported items of which the Department was not alerted, while in this
proceeding, Chen Hao Taiwan properly advised the Department of its
corrections. Chen Hao Taiwan states that it responded to the best of
its ability in this proceeding and, thus, there is no basis to apply
facts available.
DOC Position. We disagree with petitioner's description of Chen Hao
Taiwan's October 8 submission as an extensive and entirely new cost
submission. Chen Hao Taiwan corrected elements of its labor and factory
overhead data, which resulted in revised figures for these components
of its COP and CV calculations. Although the labor and overhead
expenses for some specific products changed substantially, the effect
on the total COP and CV was relatively insignificant. Chen Hao Taiwan
did not revise its methodology for calculating these expenses. The
corrections submitted by Chen Hao Taiwan prior to verification did not
include new methodologies or expense claims; there was no new area of
the response in which the petitioner did not have the opportunity to
comment. In short, the corrections submitted by Chen Hao Taiwan were
typical of the minor corrections routinely accepted by the Department
at the commencement of verification.
We agree with Chen Hao Taiwan that the submission of these
corrections is not comparable with the Titanium Sponge example, where
the Department, rather than the respondent, identified the information
in the course of verification, and the information discovered was a new
issue, not previously discussed in the proceeding. Chen Hao Taiwan
fully apprised the Department of all revisions at the commencement of
verification. Its revisions corrected data already on the record and
did not introduce new issues not previously reported on the record.
Accordingly, we determine that resorting to facts available is
unwarranted in this particular case. The Department's use of facts
available is subject to section 782(d) of the Act. Under section
782(d), the Department may disregard all or part of a respondent's
questionnaire responses when the response is not satisfactory or it is
not submitted in a timely manner. The Department has determined that
neither of these conditions apply. The Department was able to verify
the response, thus rendering it satisfactory, and the types of
revisions submitted by Chen Hao Taiwan met the deadline for such
changes. Under section 782(e), the Department shall not decline to
consider information that is 1) timely, 2) verifiable, 3) sufficiently
complete that it serves as a reliable basis for a determination, 4)
demonstrated to be provided based on the best of the respondent's
ability, and 5) can be used without undue difficulties. In general,
Chen Hao Taiwan has met these conditions.
Accordingly, we find no basis to reject Chen Hao Taiwan's response,
and thus, no basis to rely on the facts otherwise available for our
final determination.
Comment 3: Yield Rate
Petitioner claims that Chen Hao Taiwan improperly reported overall
yield information for its COP and CV data when it had more accurate,
product-specific data available. Petitioner alleges that the
verification exhibits establish that Chen Hao Taiwan maintains product-
specific yield information and, therefore, could have reported its
costs on this basis, rather than an overall yield figure applied to all
of its products. Petitioner claims that by reporting overall yield
figures, Chen Hao Taiwan may be attempting to mask dumping margins
generated by sharply different yields among products, which is the
experience of the U.S. industry. Since Chen Hao Taiwan allegedly chose
instead to report less accurate production data, petitioner contends
that the Department should reject Chen Hao Taiwan's data as submitted
and adjust the yield rate by applying the reported yield factor to each
additional production step that each product undergoes.
Chen Hao Taiwan disputes petitioner's analysis of its production
records and states that the Department verified that Chen Hao Taiwan
does not
[[Page 1730]]
maintain records in its normal course of business that would permit it
to report product-specific yield. Chen Hao Taiwan maintains that the
verification exhibit cited by petitioner does not support petitioner's
contention that Chen Hao Taiwan was able to report product-specific
yield data. Chen Hao Taiwan argues that while petitioner may maintain
product-specific yield information, it does not mean that the
Department must also assume that respondent must also maintain the same
information. Chen Hao Taiwan asserts that the Department cannot
penalize a respondent with facts available for failure to provide
information which does not exist.
DOC Position. We agree with Chen Hao Taiwan. The Department's
preference is to use product specific cost data, including product-
specific yield results, for calculating COP and CV. The Department uses
the most specific and reasonable allocation methods available, given a
respondent's normal record keeping system (see Final Determination of
Sales at Less than Fair Value: Welded Stainless Steel Pipe from
Malaysia, 59 FR 4023, 4027, January 28, 1994). In this instance, Chen
Hao Taiwan 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 Chen Hao Taiwan's claim that it does not maintain product-
specific yield data in its normal course of business. We also verified
that Chen Hao Taiwan was not able to calculate yields for the POI on a
more specific basis than the yield rate which was reported. The
accounting records identified by petitioner could arguably be used to
calculate an average yield for each specific order; however, Chen Hao
Taiwan does not retain production batch records in its normal course of
business beyond a short period of time. The examples from the
verification are from the time of verification, October 1996--well
beyond the POI. Moreover, Chen Hao Taiwan's financial accounting
documents, including inventory and production ledgers, do not track
production information on a product-specific basis. For these reasons,
we have accepted Chen Hao Taiwan's reported average yield rate
calculation, which was adequately analyzed at verification.
Comment 4: Home Market Freight Expenses
Petitioner claims that Chen Hao Taiwan improperly allocated home
market freight expenses across all products and all customers during
the POI. Petitioner states that, based on information contained in the
verification report, Chen Hao Taiwan should be able to report freight
expenses on a customer-specific basis. Petitioner asserts that Chen Hao
Taiwan's allocation methodology masks differences in freight expenses
that may result in a larger freight expense deduction for subject
merchandise sales than if freight expenses had been reported on a more
specific basis. Therefore, petitioner contends that the Department
should deny Chen Hao Taiwan's claimed freight adjustment.
Chen Hao Taiwan argues that verification indicated that Chen Hao
Taiwan's freight expense records did not permit reporting on a more
specific basis.
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 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. Chen Hao Taiwan allocated all home market
freight expenses incurred on subject merchandise by weight over all
home market sales, as demonstrated in the sample calculation submitted
in the July 19, 1996, supplemental questionnaire response. However, as
we noted in our verification report, ``we observed that Chen Hao may be
able to total the amount charged to each customer during the POI, and
divide that amount by the total shipments to that customer.'' This
method is preferable to the method used by Chen Hao Taiwan.
Nevertheless, we note that Chen Hao Taiwan allocated home market
freight expenses between subject and non-subject merchandise using a
weight-based methodology, in compliance with the Department's
supplemental questionnaire request. The Department did not specifically
request Chen Hao Taiwan to provide a customer-specific allocation.
Although Chen Hao Taiwan had the means to allocate home market freight
expenses on a more specific basis, its failure to do so does not
mandate the application of adverse facts available in this case because
Chen Hao Taiwan has been responsive to the Department's requests. The
principal advantage of a customer-specific freight allocation would be
to take into account the freight distance to the customer, since
distance is a component of the expense incurred by Chen Hao Taiwan.
Given the distribution of Chen Hao Taiwan's home market customers, as
identified in the verification report, and the location of Chen Hao
Taiwan's principal home market MIDP customer, we find that Chen Hao
Taiwan's reported home market freight methodology is sufficient. In
similar circumstances, we have accepted a respondent's methodology if
it is 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). Chen
Hao Taiwan's methodology meets these criteria. Consequently, we have
accepted Chen Hao Taiwan's reported home market freight expenses.
Comment 5: Allocation of Melamine Powder Rebate
Petitioner argues that Chen Hao Taiwan improperly allocated
melamine powder rebates between its internal consumption and the
material transferred to Chen Hao Xiamen. Petitioner claims that by
assigning the entire amount of the rebate to melamine powder used for
Taiwan consumption, Chen Hao Taiwan undervalued its raw material costs.
Petitioner contends that Chen Hao Taiwan's melamine powder costs for
COP and CV calculations should be recalculated to remove the amount of
the rebate attributable to Chen Hao Xiamen transfers.
Chen Hao Taiwan responds that petitioner is incorrect and that, in
fact, the Department verified that the melamine powder rebates were
allocated equally over all melamine powder purchases.
DOC Position. We agree with Chen Hao Taiwan. We verified that Chen
Hao Taiwan properly allocated the melamine powder rebate over all its
purchases during the POI and thus the per-unit melamine powder cost for
Chen Hao Taiwan's COP and CV calculations properly accounts for the
rebate. However, as we stated in the Chen Hao Taiwan verification
report, ``[t]he values reported for Chen Hao Xiamen's melamine powder
consumption do not include an adjustment for the rebate.'' (Emphasis
added.) Chen Hao Taiwan's melamine powder costs are not in question.
Comment 6: Import Duties on Melamine Powder Costs
Petitioner contends that evidence on the record demonstrates that
Chen Hao
[[Page 1731]]
Taiwan incurred duties on some imported raw materials, but did not
report these duty amounts in its cost response. Petitioner thus argues
that the Department should assume that all raw materials are imported
and increase the costs of materials to include import duties and
related costs.
Chen Hao Taiwan states that the Department verified that Chen Hao
Taiwan correctly accounted for duties in reporting the unit prices of
melamine powder purchased during the POI and that petitioner's
allegation is incorrect. Chen Hao Taiwan further states that the
verification exhibits confirm that the reported costs include the
import duties paid on melamine powder purchased outside of Taiwan.
DOC Position. We agree with Chen Hao Taiwan. We verified that the
reported costs for these inputs included all applicable expenses,
including import duties. Support documentation for Chen Hao Taiwan's
melamine powder costs, such as the operating statement and journal
entries included in the verification exhibits, demonstrates that import
duties, when incurred, are part of the total cost reported to the
Department, and are included in the cost of materials used in our COP
and CV calculations.
Comment 7: Unreconciled Cost Differences
Petitioner claims that Chen Hao Taiwan's cost of manufacturing data
shows an unreconciled difference between the components of operating
costs and the total operating costs. Because Chen Hao Taiwan has not
provided an explanation for this discrepancy, petitioner argues that
the cost of manufacturing should be increased to reflect this
unreconciled cost difference.
Chen Hao Taiwan states that petitioner is incorrect because it
misread a portion of a verification exhibit and thus erroneously
arrived at its total. Accordingly, Chen Hao Taiwan states that its
operating costs reconcile and no adjustment is needed.
DOC Position. We agree with Chen Hao Taiwan. We verified that Chen
Hao Taiwan's operating costs reconciled, as indicated in the operating
statement and trial balance included in the verification exhibits, and
no adjustment is required. As Chen Hao Taiwan has noted, petitioner has
misread the verification exhibit in question and arrived at an
incorrect operating costs total.
Comment 8: Sales of Finished Goods in Cost of Materials Calculation
Based on its analysis of verification exhibits, petitioner claims
that Chen Hao Taiwan included purchases of finished goods that it re-
sold without further processing in its finished goods inventory, thus
including these items in calculating its yield rate. Petitioner asserts
that the yield rate used in COP and CV calculations must be adjusted to
remove the accounting for these finished goods.
Chen Hao Taiwan contends that petitioner misread the relevant
verification exhibit and that these items were not included in its cost
of manufacturing calculation. Accordingly, Chen Hao Taiwan maintains
that no adjustment is necessary.
DOC Position. We agree with Chen Hao Taiwan. We verified that the
resold items were properly excluded from the cost of manufacturing
calculation, as indicated in the cost of operations statement included
in the verification exhibits, and that no adjustment is required.
Comment 9: Arm's-Length Pricing of Loans
Petitioner claims that Chen Hao Taiwan failed to demonstrate that
interest free loans from affiliated parties are made at arm's length.
Accordingly, petitioner argues that Chen Hao Taiwan's financial
interest expense ratio for COP and CV calculations should be adjusted
by adding an estimated market value for these loans based on the
highest interest rate experienced by Chen Hao Taiwan.
Chen Hao Taiwan contends that these loans from related parties
served as capital infusion. According to Chen Hao Taiwan, the
transactions in question were additional investments from the owners of
Chen Hao Taiwan of their own money into the company, with these funds
labeled as ``loans'' for purposes of the financial statement. Chen Hao
Taiwan argues that the Department's practice is to disregard such
intracompany transfers, thus any resulting loan interest expense should
be disregarded in the final determination.
DOC Position. Although Chen Hao Taiwan may consider the
transactions in question to serve as equity capital infusions, its
audited financial statement classifies them as long-term loans. Other
than Chen Hao Taiwan's assertions,1, we have no basis on the
record to reclassify these amounts as equity. In such circumstances,
the Department considers the amounts to be long-term loans, consistent
with treatment in the respondent's financial statement (see, Final
Results of Administrative Review: Shop Towels from Bangladesh, 60 FR
48966, 48967, September 21, 1995, and Final Determination of Sales at
Less than Fair Value: Fresh Cut Roses from Ecuador, 60 FR 7019, 7039,
February 6, 1995). Accordingly, we have recalculated Chen Hao Taiwan's
interest expenses to include an interest expense based on the long-term
interest rate experienced by Chen Hao Taiwan during the POI, as
identified in the financial statement.
---------------------------------------------------------------------------
\1\ Chen Hao Taiwan has cited Final Results of Administrative
Review: Fresh Cut Flowers from Colombia (61 FR 42833, August 19,
1996) in support of its position; however this case is not on point.
In that instance, the item in question was interest income, whereas
here, the item is interest expense.
---------------------------------------------------------------------------
Comment 10: Exchange Gains in Financial Expenses
Petitioner contends that the financial expenses for Chen Hao
Taiwan's COP and CV calculations include foreign exchange gains on
export sales, which should be disallowed. Therefore, petitioner states
that the financial expenses should be increased accordingly.
Chen Hao Taiwan does not object to this adjustment but states that
the revised percentage identified in the verification report is
incorrect; thus a corrected adjustment should be used.
DOC Position. We agree with petitioner and have adjusted financial
expenses to exclude foreign exchange gains on export sales. We also
agree with Chen Hao Taiwan that the adjustment percentage identified in
the verification report contains a typographical error; we applied the
correct percentage in our recalculation.
Comment 11: Pension Allowance
Petitioner states that verification revealed that Chen Hao
improperly excluded a pension allowance in its costs.
Chen Hao Taiwan argues that, as the Department verified that no
actual accrual for the pension allowance was made during the POI, costs
should not be adjusted for a theoretically intended amount.
DOC Position. We agree with petitioner. We verified that Chen Hao
Taiwan contributed to its employee retirement fund in the two years
prior to the POI. It did not make the contribution during the POI and
could not provide any satisfactory explanation for this omission.
However, Chen Hao Taiwan reported that it made payments from the
retirement fund during the POI. Based on these facts, we consider that
Chen Hao Taiwan incurred an obligation for its pension plan during the
POI. Accordingly, we have included the pension expense in our COP and
CV calculations.
[[Page 1732]]
Comment 12: Certain Credit Expense Adjustments
Petitioner claims that Chen Hao Taiwan reported certain adjustments
to its credit expenses for some U.S. sales. Petitioner asserts that the
Department does not permit these adjustments and thus the credit
expense for these sales should be disallowed.
Chen Hao Taiwan argues that it properly made these credit
adjustments.
DOC Position. We agree with Chen Hao Taiwan. In such instances as
those identified by parties in the proprietary versions of their
submissions, the Department has added the imputed benefit to the price.
(See, e.g., Final Results of Antidumping Administrative Review:
Mechanical Transfer Presses from Japan (61 FR 52910, October 9, 1996),
where, at Comment 5, we stated that ``[b]ecause payment was made prior
to shipment, [respondent] should receive an imputed benefit for
credit.'')
Comment 13: Unreported U.S. Dollar Charges
Petitioner contends that, as identified in verification documents,
Chen Hao Taiwan did not report charges such as currency brokerage and
bank fees for U.S. sales denominated in U.S. dollars. Accordingly,
petitioner argues that a percentage based on the observed charges
should be added to all U.S. dollar sales.
Chen Hao Taiwan states that it has accounted for all charges and
fees. Citing the verification report, Chen Hao Taiwan asserts that the
Department verified that the sales value for all U.S. sales was
correctly reported, and no discrepancies apart from those identified in
the verification report were found.
DOC Position. We agree with petitioner that Chen Hao Taiwan did not
include certain bank fees incurred on U.S. dollar denominated sales in
its sales reporting. Based on the verification documents, we have
calculated a percentage for these charges and included the result as a
circumstance of sales adjustment.
Comment 14: Payment Period on U.S. Sales
Petitioner contends that, based on its analysis of a set of
verification exhibits, Chen Hao Taiwan incorrectly reported the payment
date on U.S. sales by reporting the date that it closed the account
receivable entry in its records, rather than the date the payment was
actually made. Accordingly, petitioner argues that the payment date for
all U.S. sales should be adjusted to reflect the actual payment period,
based on information obtained at verification.
Chen Hao Taiwan responds that petitioner misread the documents in
the sales verification exhibit, and that the payment situation
described by petitioner referred to Chen Hao Taiwan's payment to its
freight company, not payment from the U.S. customer. Accordingly, Chen
Hao Taiwan states that it has correctly reported its payment dates and
no adjustments are required.
DOC Position. We agree with Chen Hao Taiwan. The payment, accounts
receivable, and accounts payable documents included in the verification
exhibit for this transaction confirm that the payment identified by
petitioner does not apply to customer payment, but rather to the
freight expense paid to Chen Hao Taiwan's freight company.
Comment 15: Allocation of Home Market Royalty Expenses
Petitioner alleges that Chen Hao Taiwan misreported royalty
expenses incurred on certain home market sales because it had not
properly accounted for advances paid on royalty expenses owed.
Petitioner contends that the royalty advance payments should be treated
as indirect selling expenses for purposes of the COP test because these
expenses were fixed costs and were incurred regardless of the quantity
sold.
Chen Hao Taiwan states that the Department verified the actual
royalty amount paid and the actual amount of sales subject to royalty
during the POI. In addition, Chen Hao Taiwan states that the Department
verified that royalties applied only to certain products. Accordingly,
Chen Hao Taiwan contends that the Department should continue to treat
royalties as a direct expense and use the verified amount for royalty
amounts to calculate the actual per-unit royalty expense paid during
the POI.
DOC Position. The Department has normally treated royalty expenses
as direct expenses when a respondent incurs this expense upon the sale
of a product covered under a royalty agreement (see, e.g., Final
Results of Antidumping Duty Administrative Review: Industrial Belts and
Components and Parts Thereof, Whether Cured or Uncured, From Japan, 58
FR 30018, May 25, 1993). Consistent with the royalty agreement on the
record, Chen Hao Taiwan incurred a royalty expense liability for home
market sales of the specific type of merchandise covered under the
agreement, as discussed in the verification report. Chen Hao Taiwan
entered into the royalty agreement at the beginning of the POI. Under
the terms of the agreement, which are on the record, certain advance
payments were required during the POI. In order to comply with the
terms of the agreement, Chen Hao Taiwan paid these amounts even though
its sales of the covered products were not at the level at which it
would pay the same amount based on royalty percentages in the
agreement. However, the agreement states that future royalty expenses
incurred may be offset against this advance. Although we verified that
Chen Hao Taiwan does not account for these potential future offsets, we
verified that Chen Hao was in full compliance with the terms of the
agreement. It is clear that the royalty agreement only applies to
certain home market sales and that, after this initial ``startup''
period, its actual royalty expenses will tie directly to the covered
sales. Therefore, this expense is properly classified as a direct
expense.
Allocating POI expenses over POI sales is not appropriate because,
in effect, a portion of the POI expenses is attributable to future
sales. The most appropriate allocation of the expenses is to apply the
royalty percentage in the agreement, which is how Chen Hao Taiwan
reported the expenses, because it reflects the amount of the expense
incurred by a particular sale, after taking into account the eventual
offset of all advances. In this instance, we are allocating expenses
based on the expected eventual royalty expense liability.
Comment 16: Value Added Tax (VAT) on CV Material Costs
Petitioner argues that Chen Hao Taiwan failed to include a 5
percent VAT on its Taiwan material purchases, thus understating the
constructed value of each product. Therefore, petitioner contends that
CV materials costs should be increased to reflect the VAT.
Chen Hao Taiwan states that it followed the Department's
questionnaire instructions and properly reported its material costs
exclusive of VAT. Therefore, Chen Hao Taiwan maintains that CV
materials costs should not be increased by the VAT amount.
DOC Position. In accordance with section 773(e) the Department's
policy is to include in its calculation of CV internal taxes paid on
materials unless such taxes are remitted or refunded upon exportation
of the finished product into which the material is incorporated (see
e.g. Final Determination of Sales at Less Than Fair Value: Certain
Carbon Steel Butt-Weld Pipe Fittings from Thailand, 60 FR 10552,
February 27, 1995). In this case, we observed that Taiwan MIDP
companies are able to credit VAT paid
[[Page 1733]]
on inputs (whether used for domestically sold or exported MIDPs)
against what they owe to the Taiwan government as a result of VAT
collected on domestic sales. More importantly, however, where VAT owed
was less than VAT paid because exports out paced domestic sales, the
companies received from the government a refund of VAT paid on
materials incorporated into exported finished products. As discussed in
the Chen Hao Xiamen verification report in the concurrent MIDPs from
PRC investigation:
Chen Hao [Taiwan] paid VAT on its Taiwan purchases, which
included such items as melamine powder from the principal supplier.
Chen Hao also incurred a VAT liability on sales made in Taiwan.
Export sales were excluded from this liability, which included the
re-sale of the melamine powder to [an affiliated party]. . . . Chen
Hao [Taiwan] paid the difference of VAT collected from its Taiwan
sales and VAT paid on Taiwan purchases. (November 18, 1996,
verification report at pages 8-9, and included on this record in a
December 20, 1996, Memorandum to the File.)
Thus, VAT paid on materials incorporated into exported products is
refunded by reason of export and therefore is not appropriately
included in CV. Accordingly, we have not added VAT to the CV
calculation.
Comment 17: Matching of Certain Products
Petitioner claims that Chen Hao Taiwan assigned certain identical
products different control numbers used for model matching. In turn,
petitioner contends, the Department's model matching program improperly
treated these identical products as different products. Petitioner thus
argues that the Department should either revise its computer program to
ignore Chen Hao Taiwan's control numbers or re-code these products with
identical control numbers.
Chen Hao Taiwan responds that the control numbers in question
relate to physically different products because some differ in color
from the others. Thus, Chen Hao Taiwan contends that the Department
should continue to treat the products as different products with unique
control numbers.
DOC Position. Petitioner is incorrect with regard to its
description of the Department's model matching program. The program
does, in fact, ignore control numbers to determine identical or most
similar products. Color is not a matching criterion in this
investigation; thus, it is appropriate to treat these products, if
otherwise identical, as identical products for purposes of model
matching. In one instance cited by petitioner, we note that the
Department properly compared home market sales of both products in
question to the U.S. sales of this product. In the other instance cited
by petitioner, we did not match the U.S. sales to the second model
identified by petitioner because the difference in merchandise
adjustment for that comparison exceeded the Department's 20 percent
threshold.
Comment 18: Yu Cheer Credit Expenses
Petitioner contends that Yu Cheer incorrectly reported payment
dates on U.S. sales because, until verification, it did not indicate
that it had received payment for at least some sales on multiple dates.
Petitioner states that the record contains no explanation of the
multiple payment date procedure and no information on how often Yu
Cheer's customers use this payment approach. In addition, petitioner
alleges that Yu Cheer has also misreported shipment dates, used to
calculate credit expenses, because Yu Cheer stated at verification that
it sometimes revises shipping documents after shipment, thus calling
into question the reliability of its reported information. Therefore,
petitioner argues that the home market credit adjustment should be
rejected and the U.S. credit expense should be based on the longest
credit period for any reported sale as facts available.
Yu Cheer states that its payment and shipment dates were correctly
reported, as noted in the verification report. Further, Yu Cheer states
that the verification report indicates that the shipment revisions did
not affect Yu Cheer's reported shipment dates. Therefore, Yu Cheer
contends that the discrepancies cited by petitioner fail to provide any
reasonable basis for rejecting Yu Cheer's claimed credit expenses.
DOC Position. We agree with Yu Cheer. Yu Cheer properly reported
the elements of its imputed credit expenses and thus we have accepted
its claimed imputed credit expenses. As we stated in the verification
report, Yu Cheer's shipment revisions do not affect the reported
shipment dates. Where appropriate, we have recalculated the credit
expense using the corrected payment information obtained at
verification.
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--with the exception of those manufactured/exported by Yu Cheer--
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
------------------------------------------------------------------------
Chen Hao Taiwan............................................. 3.25
Yu Cheer.................................................... 0.00
IKEA........................................................ 53.13
Gallant..................................................... 53.13
All Others.................................................. 3.25
------------------------------------------------------------------------
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, or 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. 97-754 Filed 1-10-97; 8:45 am]
BILLING CODE 3510-DS-P
