[Federal Register Volume 59, Number 19 (Friday, January 28, 1994)]
[Unknown Section]
[Page ]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-1967]
[Federal Register: January 28, 1994]
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DEPARTMENT OF COMMERCE
[A-557-807]
Final Determination of Sales at Less Than Fair Value: Welded
Stainless Steel Pipe From Malaysia
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: January 28, 1994.
FOR FURTHER INFORMATION CONTACT: Pamela Ward or Shawn Thompson, Office
of Antidumping Investigations, Import Administration, U.S. Department
of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC
20230; telephone (202) 482-1174 or (202) 482-3965, respectively.
FINAL DETERMINATION: We determine that welded stainless steel pipe
from Malaysia is being, or is likely to be, sold in the United States
at less than fair value, as provided in section 733 of the Tariff Act
of 1930, as amended (the Act). The estimated margins are shown in the
``Suspension of Liquidation'' section of this notice.
Case History
Since the publication of our affirmative preliminary determination
on September 7, 1993 (58 FR 47120), the following events have occurred.
On September 7, 1993, the sole respondent in this investigation,
Kanzen Tetsu Sdn. Bhd. (KT), requested a postponement of the final
determination. We granted this request, and on September 9, 1993, we
postponed the final determination until not later than January 21, 1994
(58 FR 48849, September 20, 1993).
On September 13, 1993, KT submitted a response to the Department's
cost of production (COP) questionnaire. On September 27, 1993, we
issued a supplemental COP questionnaire to KT. We received the response
to this questionnaire on October 25, 1993.
From November 8 through November 12, 1993, we conducted our
verification in Malaysia of KT's responses to the Department's sales
questionnaires.
On November 8, 1993, petitioners submitted a letter requesting that
the Department reject KT's October 25, 1993, COP response because KT
failed to report product-specific production costs, as requested in the
cost questionnaire.
On November 10, 1993, KT responded to petitioners' November 8,
1993, submission. Also on November 10 we informed KT that we had
determined that the cost of manufacture (COM) information contained in
the October 25, 1993, submission was not adequately product-specific to
meet the Department's requirements, and that, accordingly, we would not
verify that portion of the October 25, 1993, submission.
From November 22 through November 25, 1993, we conducted our
verification in Malaysia of KT's response to the Department's September
13, 1993, COP questionnaire.
Both petitioners and respondent filed case briefs on December 20,
1993, and rebuttal briefs on December 28, 1993.
On December 23, 1993, KT submitted revised sales, COP, constructed
value (CV), and concordance databases, correcting minor errors
discovered at verification. On January 5, 1994, petitioners submitted a
letter requesting that the Department reject this submission because it
contained revisions to KT's data which were unsupported by the record
of this investigation. On January 7, 1994, KT replaced its COP, CV, and
concordance databases in order to correct clerical errors made in its
December 23, 1993, submission. We reviewed this submission and
confirmed that it contained no new information.
Scope of Investigation
The product covered by this investigation is welded austenitic
stainless steel pipe of circular cross section (WSSP). WSSP is produced
according to standards and specifications set forth by the American
Society for Testing and Materials (ASTM). The designations for this
product include, but are not limited to, ASTM A-312, ASTM A-358, ASTM
A-409, and ASTM A-778. Welded pipes are generally used as conduits to
transmit liquids or gases. The major applications for WSSP are:
Digester lines; blow lines; pharmaceutical lines; petrochemical lines;
brewery process and transport lines; general food processing lines;
automotive lines; and paper processing machines.
This product is classified under the following Harmonized Tariff
Schedule of the United States (HTSUS) subheadings: 7306.40.1000,
7306.40.5005, 7306.40.5015, 7306.40.5045, 7306.40.5060, and
7306.40.5075. These subheadings are defined to encompass welded
stainless steel tube as well as WSSP; however, the only product subject
to this investigation is WSSP. 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 September 1, 1992, through
February 28, 1993.
Such or Similar Comparisons
We have determined that the product covered by this investigation
comprises a single category of ``such or similar'' merchandise. We made
similar merchandise comparisons on the basis of: (1) ASTM or equivalent
specification, (2) grade of steel, (3) nominal size, (4) hot or cold
finish, (5) wall thickness schedule, and (6) end finish, as described
in Appendix V of the questionnaire. We made adjustments for differences
in the physical characteristics of the merchandise, in accordance with
section 773(a)(4)(C) of the Act.
Fair Value Comparisons
To determine whether sales of WSSP from Malaysia to the United
States were made at less than fair value, we compared the United States
price (USP) to the foreign market value (FMV), as specified in the
``United States Price'' and ``Foreign Market Value'' sections of this
notice.
United States Price
We based USP on purchase price, in accordance with section 772(b)
of the Act, because the subject merchandise was sold to unrelated
purchasers in the United States prior to importation and because
exporter's sales price methodology was not otherwise indicated.
After correcting the data used in our calculations for errors and
omissions found at verification, we calculated purchase price based on
packed F.O.B. prices to unrelated customers. In accordance with section
772(d)(2)(A) of the Act, we made deductions, where appropriate, for
foreign inland freight, foreign brokerage and handling, ocean freight,
marine insurance, and containerization expenses. Regarding marine
insurance, KT paid an insurance premium plus a commission to one of its
marine insurance suppliers. At verification, we found that KT had
inconsistently reported its marine insurance expense for this supplier
(i.e., KT included the commission in one observation yet excluded it in
another observation). KT explained that this commission was an
intracompany service fee which its parent company charged KT for
holding the group policy with the insurance company. However, KT could
not substantiate at verification that it had properly excluded this
commission. As a result, we resorted to the use of best information
available (BIA), in accordance with section 776(c) of the Act. As BIA,
we have made an adverse assumption and increased the amount reported
for marine insurance to account for this commission for all
transactions (except those we found at verification to be correct) by
the amount of the commission.
Foreign Market Value
In order to determine whether there were sufficient sales of WSSP
in the home market to serve as a viable basis for calculating FMV, we
compared the volume of home market sales of WSSP to the volume of third
country sales of the same product, in accordance with section
773(a)(1)(B) of the Act. KT had a viable home market with respect to
sales of WSSP during the POI.
As stated in our preliminary determination, the Department
initiated an investigation under section 773(b) of the Act to determine
whether KT made home market sales at less than their COP.
If over 90 percent of respondent's sales of a given model were at
prices above the COP, we did not disregard any below-cost sales because
we determined that the below-cost sales were not made in substantial
quantities. If between ten and 90 percent of the sales of a given model
were made at prices below the COP, and such sales were made over an
extended period of time, we discarded only the below-cost sales. Where
we found that more than 90 percent of respondent's sales were at prices
below the COP, and such sales were over an extended period of time, we
disregarded all sales of that model and calculated FMV based on CV. No
evidence was presented to indicate that below-COP prices would permit
recovery of all costs within a reasonable period of time in the normal
course of trade.
In order to determine that below-cost sales were made over an
extended period of time, we performed the following analysis on a
model-specific basis: (1) If respondent sold a model in only one month
of the POI and there were sales in that month below the COP, or (2) if
respondent sold a model during two months or more of the POI and there
were sales below the COP during two or more of those months, then
below-cost sales were considered to have been made over an extended
period of time.
In order to determine whether home market prices were below the
COP, we calculated the COP based on the sum of the respondent's cost of
materials, fabrication, and general expenses. We corrected the reported
COP and CV data for errors and omissions found at verification. We
relied on the submitted COP and CV data, except in the following
instances where the costs were not appropriately quantified or valued:
1. We increased KT's general and administrative expenses (G&A) to
(1) account for G&A incurred by KT's parent company because KT was
unable to demonstrate that it had included these expenses in its
reported G&A, (2) account for the amortization of pre-operating
expenses which were not included in the submission, and (3) adjust for
a clerical error found at verification. (See, Comment 5 in the
``Interested Party Comments'' section of this notice.)
2. We increased KT's cost of materials to offset the gain on
foreign exchange reported by KT that was related to the acquisition of
machinery used to produce non-subject merchandise. (See, Comment 8.)
In accordance with section 773(e)(1)(B)(i) of the Act, we included
in CV the greater of respondent's reported general expenses, adjusted
as detailed above, or the statutory minimum of ten percent of the COM.
For profit, we used the actual profit on home market sales because this
amount was greater than the statutory minimum of eight percent of COM
and general expenses. See, section 773(e)(1)(B)(ii) of the Act.
In cases where we made price-to CV comparisons, we made
circumstances-of-sale adjustments, where appropriate, for bank charges
and credit expenses. Regarding credit expenses, KT calculated both home
market and U.S. credit expenses using its respective average short-term
interest rates in Malaysian Ringitts during the POI. We recalculated
home market credit expenses using the consolidated short-term interest
rate of KT and its parent company, which was based upon KT and its
parent company's borrowings denominated in Malaysian Ringitts. In
addition, KT failed to deduct discounts from the gross unit price in
its home market credit calculation. We made the appropriate deductions
in our recalculation.
Regarding U.S. credit expenses, we recalculated KT's U.S. interest
rate using the amounts of all U.S. dollar-denominated loans stated in
U.S. dollars. (See, Comment 13.) We also recalculated the payment
period for each transaction as the time between the date of shipment
from KT's factory and the date of payment by the U.S. customer. (See,
Comment 14.) We then recalculated U.S. credit expenses using the
revised interest rate and payment period.
In cases where we made price-to price-comparisons, we compared U.S.
sales to home market sales made at the same level of trade, where
possible, in accordance with 19 CFR 353.58 (1993). In addition, we
disregarded home market sales of odd-length merchandise because we
determined that these sales were made outside the ordinary course of
trade. We also disregarded certain sales to end user customers, because
we found at verification that the dates of sale for these transactions
were outside the POI.
We adjusted the reported home market data for errors and omissions
found at verification. We then calculated FMV based on packed F.O.B.
prices charged to unrelated customers in the home market. We made
deductions, where appropriate, for discounts and rebates. We also made
deductions, where appropriate, for inland freight. We deducted home
market packing costs and added U.S. packing costs, in accordance with
section 773(a)(1) of the Act.
Pursuant to 19 CFR 353.56(a)(1) and 19 CFR 353.56(a)(2), we made
circumstance-of-sale adjustments, where appropriate, for differences in
bank charges and credit expenses, adjusted as described above.
Currency Conversion
Because certified exchange rates from the Federal Reserve were not
available, we made currency conversions based on the official monthly
exchange rates in effect on the dates of the U.S. sales as certified by
the International Monetary Fund.
Verification
As provided in section 776(b) of the Act, we verified information
provided the respondent by using standard verification procedures,
including the examination of relevant sales and financial records, and
selection of original source documentation containing relevant sales
information.
Critical Circumstances
Petitioners allege that ``critical circumstances'' exist with
respect to imports of WSSP from Malaysia. Section 735(a)(3) of the Act
provides that critical circumstances exist if we determine that there
is a reasonable basis to believe or suspect that:
(A)(i) There is a history of dumping in the United States or
elsewhere of the class or kind of merchandise which is the subject of
the investigation, or
(ii) The person by whom, or for whose account, the merchandise was
imported knew or should have known that the exporter was selling the
merchandise which is the subject of the investigation at less than its
fair value, and
(B) There have been massive imports of the class or kind of
merchandise which is the subject of the investigation over a relatively
short period.
Regarding a history of dumping, petitioners have argued that the
existence of U.S. antidumping orders on WSSP from Taiwan and Korea is
sufficient for the Department to find a history of dumping in this
case. However, the Department's practice in this area is to consider
only those orders on subject merchandise from the country under
investigation as sufficient evidence of a history of dumping.
Consequently, because there have been no antidumping orders on WSSP
from Malaysia, we find no history of dumping.
In determining whether any importer had knowledge of dumping, we
normally consider margins of 25 percent or more sufficient to impute
knowledge of dumping under section 735(e)(1)(A) of the Act when USP is
based on purchase price. Because the final dumping margin for KT is
less than 25 percent, we do not impute importer knowledge of sales at
less than fair value, under section 735(a)(3)(A)(ii) of the Act. Since
the criteria necessary to find the existence of critical circumstances
under section 735(a)(3)(A) are not present, we do not need to determine
whether imports of subject merchandise have been massive over a
relatively short period, in accordance with section 735(a)(3)(B) of the
Act.
Accordingly, we determine that critical circumstances do not exist
with respect to imports of WSSP from Malaysia.
Interested Party Comments
Comment 1: Petitioners argue that KT was unable to substantiate its
cost data at verification. As a result, petitioners contend that these
data are unusable and the Department is required to reject KT's cost
data completely and base the final determination on BIA. Petitioners
maintain that, under the statute and the Department's regulations, the
Department must use BIA to set antidumping duty margins whenever a
respondent ``refuses or is unable to produce information requested in a
timely manner and in the form required, or otherwise significantly
impedes an investigation'' (see, section 776(b) of the Act).
Petitioners further assert that the Department must also use BIA if it
is ``unable to verify the accuracy of the information submitted'' by a
respondent (see, section 776(c) of the Act).
According to petitioners, the problems that the Department
discovered during verification are significant and pervasive. (See,
Comment 2 through Comment 8 for the specific issues raised by
petitioners.) Petitioners contend that, because of the serious nature
of the deficiencies in KT's cost data, the Department cannot, and
should not, develop an alternative basis for constructing KT's
production costs. Rather, petitioners argue that the Department should
resort to total BIA. In selecting the BIA rate, petitioners assert that
the Department should use the highest rate possible, which is the
highest margin contained in the petition.
KT argues that the Department is authorized to use BIA if a party
``refuses or is unable to produce information requested in a timely
manner and in the form required,'' or if a party ``significantly
impedes an investigation.'' KT asserts that, in order for these
conditions to be satisfied, the Department must have requested the
information and the respondent must have either failed to supply the
information or have been unable to comply with the request.
Furthermore, KT argues that, even where the Department has requested
information, it is not authorized to use BIA unless it has provided
respondent with a warning and an opportunity to correct any
deficiencies. KT asserts that, since it (1) provided all of the
information requested by the Department, (2) in no way impeded this
investigation, and (3) did not have an opportunity to correct perceived
deficiencies, there is no basis for the Department to resort to any
form of BIA.
KT claims that if the Department determines that it is appropriate
to use BIA for purposes of the final determination, it should use a
non-punitive, partial BIA, to reallocate KT's fabrication costs. (See,
Comment 3, below.) According to KT, since KT has fully cooperated with
the Department throughout this investigation, there is no reason for
the Department to completely disregard KT's entire cost submission.
DOC Position: We agree with KT. The Department has determined that
KT reported the majority of its production cost with no material
problems. (See, cost verification report, dated December 9, 1993.)
Because we have determined the KT's cost submission is reliable, there
is no reason to completely disregard KT's entire cost submission. (See,
comments below for a discussion regarding specific issues of validity.)
Comment 2: KT contends that the Department should accept the
material costs reported in its September 13, 1993, response. KT argues
that the Department verified that KT accurately reported in this
response its actual production quantities and actual material costs
incurred during the POI. According to KT, since the submitted product-
specific material costs are the result of actual material expenses
divided by actual production quantities, there is no basis for
suspecting that the reported per unit material costs are incorrect. KT
also maintains that its calculation of steel coil costs on a grade-by-
grade basis is appropriate because the cost of the coil did not vary
based on gauge.
Additionally, KT maintains that, contrary to petitioners'
assertions, product-specific material costs reported in its September
13 submission are different from product-specific material costs
reported in its October 25 submission for a legitimate reason--because
the methodologies used in each submission were different.
Finally, KT notes that although the weighted-average material
expenses decreased slightly between the September and October
responses, the percentage of the five most frequently sold home-market
products that were sold at prices below the cost of production remained
exactly the same, regardless of which response's material costs are
used. Thus, KT maintains that the difference between the two
submissions in material expenses does not materially affect the margin
calculation.
According to petitioners, since KT did not submit actual costs on a
product-specific basis, acceptance of its cost data would be improper
and inconsistent with the Department's normal practice. Thus,
petitioners contend that KT's cost submission should be rejected.
Moreover, petitioners claim that the calculation methodologies used
to prepare KT's September and October responses were virtually
identical. According to petitioners, for both the September and October
responses, KT calculated its material costs by multiplying the average
per-kilogram material cost by the nominal weight of the pipe.
Petitioners assert that the nominal weights used for these calculations
were identical because KT stated that the nominal weight of the pipe
was determined according to ASTM A-312 specifications. Thus,
petitioners contend that differences in the materials costs could only
arise if KT used different average per kilogram materials costs for its
September and October responses. Petitioners maintain that these per
kilogram materials costs are different for no apparent reason and are
therefore suspect.
Petitioners contend that KT is incorrect in its assertion that the
difference in the material costs reported in the two cost responses is
immaterial to whether home market sales were made at prices below KT's
cost of production. According to petitioners, KT's analysis mistakenly
assumes that the understatement of its costs can be corrected by merely
using the costs in KT's unverified October response. Consequently,
petitioners argue that the Department should reject both of KT's cost
responses and use BIA to establish KT's final dumping margin.
DOC Position: We agree with KT. The Department verified that KT
accurately reported its actual material expenses incurred during the
POI. Although the Department noted at verification that KT did not
break out material costs between specific dimensions of pipe within a
particular grade for the verified submission, the record indicates that
the company incurred the same per kilogram cost for differing gauges of
coil within a particular grade of steel.
We find that a comparison of the methodologies used in September
and October responses is irrelevant because we only verified the
methodology used in the September response. Prior to verification, we
determined that the costs contained in the October submission were not
adequately product-specific to meet the Department's requirements;
therefore, we informed KT that we would not verify the COM portion of
that response. Rather, the Department verified the material costs used
in the September submission.
Because the methodologies used to compile the data in the two
submissions were different, the costs reported in the submissions also
differed. Therefore, the fact that the September data differed from the
October data does not provide sufficient grounds to reject these costs.
Because we verified the reasonableness of the September costs, we have
accepted them for purposes of the final determination.
Comment 3: Petitioners argue that the Department should reject the
cost of production data contained in KT's original cost submission
because the Department was unable to verify the reported fabrication
costs. Specifically: (1) The fabrication costs reported by KT in its
September 13, 1993, submission were allocated to cost centers based on
budgeted usage rates which could not be reconciled to KT's actual POI
experience; (2) KT's methodology of allocating fabrication costs
between industrial and ornamental pipe yields a result which is
inconsistent with its reported production process steps; and (3) total
manufacturing costs for industrial pipe were allocated to each subject
product based on the weight of production rather than machine time.
Petitioners note that, to the extent the Department resorted to
weight-based allocations in a previous case involving WSSP (see, Final
Determination of Sales at Less than Fair Value: Certain Welded
Stainless Steel Pipe from Taiwan (58 FR 53705, November 12, 1992) (WSSP
from Taiwan)), that case represents an aberration from the Department's
usual practice and is clearly distinguishable from the facts in the
present case. Petitioners maintain that in WSSP from Taiwan the
Department accepted the Taiwanese respondent's allocation because it
concluded that the allocation ``did not materially affect the cost
calculation because labor and overhead represented a small part of
total cost of production.'' In this case, however, petitioners contend
that KT's submitted data demonstrate that fabrication costs can hardly
be considered immaterial in relation to the submitted total cost of
production.
Thus, petitioners contend that KT's reliance on WSSP from Taiwan as
a basis for claiming that weight-based allocations are acceptable is
misplaced. Alternatively, petitioners assert that the Department
accepts allocation methodologies based on weight only when a respondent
affirmatively shows that such allocations make sense in light of the
specific fabrication process for the product under investigation and
when allocations based on machine time cannot be performed. According
to petitioners, neither criterion has been satisfied by KT, and thus
the Department should reject KT's weight-based allocations in favor of
BIA.
KT disagrees, claiming that the cost verification report clearly
indicates that KT accurately reported all direct labor and factory
overhead expenses incurred during the POI. Thus, KT contends that
petitioners' claim that the Department was unable to verify KT's
fabrication costs should be dismissed out of hand.
KT states that it allocated fabrication costs between industrial
and ornamental pipe production based on the actual staffing for factory
laborers, the actual usage of production equipment, the company's
actual production experience and, for variable overhead expenses,
budgeted usage rates. According to KT, the difference between
fabrication expenses per kilogram for industrial and ornamental pipe
reflects the fact that KT produces more industrial pipe than ornamental
pipe.
Additionally, KT claims that the Department should accept its
submission methodology of allocating fabrication costs on the basis of
weight for three reasons. First, the methodology conforms with the way
in which KT calculates the cost of goods sold in the normal course of
business, and there is no evidence on the record that allocating
fabrication expenses on the basis of weight is in fact distortive.
Second, during the POI, KT did not track the information needed to
allocate fabrication costs on the basis of machine time. Third, the
Department has accepted weight-based allocations of these costs in past
cases involving stainless steel pipe. Accordingly, KT argues that the
Department should accept its allocation of fabrication expenses for
purposes of the final determination.
DOC Position: At verification, we determined that KT accurately
reported its aggregate fabrication costs during the POI. Therefore, we
disagree with petitioners that KT's fabrication costs should be
dismissed for purposes of the final determination.
In cases where machinery or processes were dedicated to the
production of specific product types (e.g., WSSP), KT assigned costs
directly to these products without allocation. For example, KT assigned
depreciation expenses on machinery dedicated to the production of WSSP
directly to WSSP. Only in cases where KT incurred fabrication costs
common to the production of both subject and non-subject merchandise
did KT allocate these costs.
We recognize that KT's basis for the allocation of these costs to
the subject merchandise used budgeted estimates which KT was unable to
reconcile to its actual production experience during the POI. However,
we found at verification that KT did not maintain the level of detailed
records in its normal accounting system that permitted such a
reconciliation. Moreover, the Department determined that these
estimates are reasonable based on visual inspection of the production
process and analysis of KT's documentation. Contrary to petitioners'
assertions, during the POI KT did not maintain its records at a
sufficient level of detail to perform a more product-specific
allocation (e.g., records of machine time, etc.). Accordingly, we find
that KT's allocation methodology is reasonable, in light of the
specific circumstances of this case. Thus, we have accepted the use of
KT's methodology in this case for purposes of the final determination.
Comment 4: Petitioners argue that KT calculated its production
costs on the basis of theoretical production weights that overstate the
weight of finished production, thus artificially lowering its submitted
per unit production costs. Therefore, petitioners contend that the cost
data in KT's September 13, 1993, submission is unusable and should be
rejected by the Department.
KT contends that the use of theoretical weights does not affect the
accuracy of its submitted production costs. According to KT, since KT
used the same conversion factor for its calculation to convert (1) pipe
production stated in feet to production stated in kilograms, and (2)
production cost per kilogram to a production cost per foot, the
conversion factors are uniformly over- or under-stated by the same
amount.
DOC Position: We agree with KT. KT's calculation of theoretical
production weights overstates the actual weight of production during
the POI. However, as information on the record indicates, this same
theoretical production weight was used to convert the production costs
from a per kilogram cost to a per foot cost. Thus, the effect of
overstating the weight of production is offset by the use of the same
formula in converting the per kilogram cost back to a per foot cost.
Accordingly, no adjustment is deemed necessary.
Comment 5: KT contends that it properly reported all expenses
associated with management and financial services provided to KT by its
parent as part of its submitted G&A. KT states that fees for these
services are charged directly to KT and are reflected in the management
fee amount KT's parent company received from its subsidiaries in FY
1993. According to KT, because all management fees that are properly
allocable to KT are already charged directly to the company, there is
no basis for charging any additional amount to KT.
Petitioners contend that KT understated its submitted G&A by not
including a portion of its parent company's expenses incurred during
1992. Petitioners argue that, since KT's parent is principally an
investment holding company, all G&A incurred by the parent directly
relate to its investment holdings. Petitioners maintain that KT's claim
that all management fees and financial services provided by its parent
company to KT are accounted for in its submission is unverified and
unsupported. According to petitioners, the Department has no way of
knowing if KT's management fees were correctly calculated and reported.
Additionally, petitioners claim that the Department should increase
KT's submitted G&A by the omitted amortization of pre-operating
expenses as noted at verification.
DOC Position: We agree with petitioners. In cases where a parent
company is an investment holding company, it is the Department's
practice to allocate a portion of G&A expenses incurred by the parent
company to the respondent under the theory that the parent's G&A
expenses are incurred on behalf of the parent's investment holdings.
(See, e.g., Final Determination of Sales at Less Than Fair Value:
Ferrosilicon from Venezuela (58 FR 27524, May 10, 1993).) Since there
is no verified information on the record to support KT's claim that all
G&A expenses incurred by KT's parent for the benefit of KT were already
charged to KT and included in the submitted G&A calculation, we
adjusted KT's G&A to include a proportional amount of its parent's
administrative costs based on KT's parent's stock ownership of KT.
Additionally, we revised KT's G&A expense computation to include the
omitted amortization of pre-operating expenses as recorded on the
company's financial statements, as well as to correct for a clerical
error found at verification.
Comment 6: Petitioners claim that the production yields reported by
KT are inaccurate and unrealistic and cannot be relied upon by the
Department for its final determination.
KT argues that production yields are irrelevant because the costs
used for the final determination are KT's actual material expenses, not
standard costs. Thus, KT maintains that whether or not the production
yield used under the standard cost system is accurate is irrelevant to
the Department's analysis.
DOC Position: The apparent unrealistic production yields appear to
be generated from KT's usage of theoretical production weights. Since
this same theoretical weight was used to convert production costs from
a unit of weight basis to a unit of length basis, the effect of the
apparent unrealistic yield rate is offset. (See, Comment 4, above.)
Therefore, no adjustment was deemed necessary for the final
determination.
Comment 7: Petitioners contend that the stainless steel coil costs
KT used in its original response were not consistent with information
on the coil invoices obtained by the Department at verification and,
moreover, were inconsistent with the coil costs reported by KT in its
second cost questionnaire response. Petitioners argue that the
Department, therefore, should reject the stainless steel coil costs
reported by KT.
KT argues that petitioners' claim that KT reported inconsistent
stainless steel costs is incorrect. KT asserts that petitioners are
basing this claim on a comparison of non-comparable figures.
Specifically, KT states that the figures taken from Exhibit 16 of its
original cost response are net of all adjustments for work in process,
exchange gains, and scrap expense and revenue, whereas the figures in
the second response include these expenses.
DOC Position: We disagree with petitioners. The Department verified
the accuracy of the coil costs contained only in the first submission.
(See, the ``Case History'' section of this notice for further
discussion.) Thus, any differences between the first and second
responses are irrelevant. Moreover, it is not relevant that the
weighted-average material costs reported in the first submission differ
from selected invoices included as exhibits to the cost verification
report. Specifically, the weighted-average prices are based on the
entire population of invoices which comprise KT's raw material
requisition values, while the invoices included as verification
exhibits are only a selected portion of them. To the extent that the
individual values are not identical, they should differ from the
average value.
Comment 8: Petitioners argue that the exhibits to the cost
verification report demonstrate that an exchange rate gain claimed by
KT as an offset to foreign exchange losses does not relate to the
merchandise under investigation and, accordingly, should not be
included in KT's submitted cost of manufacturing.
DOC Position: We agree. Accordingly, we have not allowed an offset
for this gain for purposes of the final determination.
Comment 9: Petitioners contend that the Department cannot rely on
KT's second cost submission because it contains unverified data. Thus,
petitioners maintain that the Department's conclusion in the cost
verification report that material costs in the first submission are
lower than material costs reported in the second cost submission does
not, and should not, lend any credibility to the data in the first
submission. According to petitioners, both submissions are flawed and
should be rejected in their entirety.
DOC Position: We agree with petitioners that the material cost data
contained in KT's second submission was not verified and should not be
relied upon by the Department. Therefore, no conclusions were drawn as
a result of comparing material costs contained in both the first and
second submissions.
Comment 10: KT argues that the Department should accept its
reported value for work in process. KT asserts that, although its
opening and closing work in process for the POI are valued at standard
cost, without any adjustment for the variance during the period, it is
mathematically impossible for this to result in an understatement of
KT's costs because KT had a negative variance for FY 1993.
DOC Position: We agree. Since KT had a negative variance during the
relevant periods, the effect of valuing work-in-process at standard
cost would be to overstate its costs. Therefore, no adjustment is
deemed necessary.
Comment 11: KT reported an average home market packing labor
expense for the POI based on the packing labor expenses incurred during
each month of the period. Petitioners contend that the Department
should use the monthly packing labor expenses in calculating KT's home
market packing expenses instead of the POI average. Petitioners assert
that the Department's longstanding policy is to use data that are as
sales-specific as possible. According to petitioners, in this case the
most specific data available are the monthly costs.
KT argues that using monthly packing labor costs would distort KT's
per unit packing expenses. KT maintains that it is appropriate to
spread packing labor expenses over the sales quantities during the
entire six-month POI because of fluctuations in monthly sales volumes.
KT asserts that this methodology yields a more representative per unit
expense for the POI because packing labor is a fixed cost.
DOC Position: We agree with KT. Normally, the Department prefers
respondents to report transaction-specific expenses under the theory
that individual prices are set to cover individual (i.e., transaction-
specific) costs. In this case, however, the costs are not transaction-
specific. Moreover, because KT's packing labor expenses are fixed, they
do not vary by sales volume. Therefore, fluctuations in the monthly
sales volumes create differences in the monthly average expense
amounts. Because these fluctuations in sales expenses are not
translated into changes in the per unit prices, they distort the margin
calculation. We agree with KT that using the POI-average minimizes the
effect of these fluctuations.
Therefore, we find that the POI average is more representative of
KT's per unit packing labor costs. Accordingly, we have accepted this
average for purposes of the final determination.
Comment 12: KT argues that the Department should affirm its
preliminary determination that critical circumstances do not exist with
respect to KT's exports of subject merchandise to the United States. KT
maintains that there is no history of dumping of subject merchandise
imported from Malaysia. In addition, KT claims that its exports were
not massive.
DOC Position: We agree. See, the Critical Circumstances section of
this notice for further discussion.
Comment 13: Both KT and petitioners contend that the Department
should calculate KT's short-term interest rate on U.S. dollar-
denominated loans using the interest expenses incurred and the
principal outstanding denominated in U.S. dollars rather than U.S.
dollar-amounts converted to Malaysian Ringitts. KT notes that
calculating the interest rate in this way eliminates from the
calculation the effect of exchange rate fluctuations.
DOC Position: We agree. At verification, we noted that KT had
calculated its U.S. interest rate by converting U.S. dollar-denominated
loans and interest payments to Malaysian Ringitts. We recalculated its
interest rate based on the original currency of the loans and the
interest payments (i.e., U.S. dollars) and used this revised rate in
our U.S. credit calculation.
Comment 14: Respondent argues that the Department should calculate
KT's U.S. credit period using the date of invoice, rather than date of
shipment from the factory. Respondent states that the invoice date is
same as the bill of lading date and is the date on which the
merchandise is shipped from Malaysia. Respondent adds that because the
bill of lading date is the date on which the merchandise leaves KT's
possession, the Department would be overstating KT's credit expenses
for its U.S. sales if it used an earlier date. However, KT contends
that, should the Department find it necessary to use shipment dates,
the Department should use the shipment dates in its October 29, 1993,
submission. KT notes that these data were verified by the Department.
Petitioners argue that KT's proposed methodology of using bill of
lading date in its U.S. credit calculation should not be used by the
Department in the final determination. Petitioners assert that this
methodology is contrary to the Department's longstanding policy as
stated in the Preliminary Determination of Sale at Less than Fair
Value: Welded Stainless Steel Pipe from Malaysia, 58 FR 47,120
(September 7, 1993). Petitioners maintain that the Department should
use the shipment dates submitted by KT on October 29, 1993.
DOC Position: We agree with petitioners. As stated in our
preliminary determination, it is the Department's practice to calculate
credit expenses using the period between shipment of the merchandise
from the factory and payment. (See, e.g., Final Determination of Sales
at Less Than Fair Value: Ferrosilicon From Venezuela, 58 FR 27522 (May
10, 1993) and Final Determination of Sales at Less Than Fair Value:
Certain Hot-Rolled Lead and Bismuth Carbon Steel Products From the
United Kingdom, 58 FR 6207 (January 27, 1993).) Moreover, we note that
using the date of shipment from the factory does not overstate KT's
U.S. credit expense because, contrary to KT's assertion, KT's factory
shipment date generally follows the date of invoicing.
Comment 15: Petitioners argue that the Department should not make a
difference in merchandise (difmer) adjustment in any instance where
such an adjustment would lower KT's FMV. Petitioners base their
argument on the fact that the difmer adjustments are based on KT's cost
data which petitioners claim is unreliable.
Respondent maintains that the Department should make difmer
adjustments in cases where sales of non-identical merchandise are
compared.
DOC Position: We agree with respondent. Because the Department has
relied on KT's COP data, we have used this data to make our difmer
adjustments.
Continuation of Suspension of Liquidation
We are directing the Customs Service to continue to suspend
liquidation of all entries of WSSP that are entered, or withdrawn from
warehouse, for consumption on or after September 7, 1993, the date of
publication of our affirmative preliminary determination in the Federal
Register. The Customs Service shall require a cash deposit or the
posting of a bond equal to the estimated amount by which the FMV of the
merchandise subject to this investigation exceeds the USP as shown
below. This suspension of liquidation will remain in effect until
further notice. The weighted-average dumping margins are as follows:
------------------------------------------------------------------------
Weighted-
average Critical
Producer/manufacturer/exporter margin circumstances
percentage
------------------------------------------------------------------------
Kanzen Tetsu Sdn. Bhd....................... 9.13 No.
All Others.................................. 9.13 No.
------------------------------------------------------------------------
ITC Notification
In accordance with section 735(d) of the Act, we have notified the
International Trade Commission (ITC) of our determination. As our final
determination is affirmative, the ITC will determine whether these
imports are materially injuring, or threaten material injury to, the
U.S. industry within 45 days.
Notification to Interested Parties
This notice also serves as the only reminder to parties subject to
administrative protective order (APO) of their responsibility
concerning the return or destruction of proprietary information
disclosed under APO in accordance with 19 CFR 353.34(d). Failure to
comply is a violation of the APO.
This determination is published pursuant to section 735(d) of the
Act and 19 CFR 353.20(a)(4).
Dated: January 21, 1994.
Joseph A. Spetrini,
Acting Assistant Secretary for Import Administration.
[FR Doc. 94-1967 Filed 1-27-94; 8:45 am]
BILLING CODE 3510-DS-P
