[Federal Register Volume 64, Number 249 (Wednesday, December 29, 1999)]
[Notices]
[Pages 73164-73176]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-33232]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-560-805]
Notice of Final Determination of Sales at Less Than Fair Value:
Certain Cut-to-Length Carbon-Quality Steel Plate Products from
Indonesia
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: December 29, 1999.
FOR FURTHER INFORMATION CONTACT: Barbara Wojcik-Betancourt or Brian C.
Smith, Import Administration, International Trade Administration, U.S.
Department of Commerce, 14th Street and Constitution Avenue, N.W.,
Washington, D.C. 20230; telephone: (202) 482-0629 or (202) 482-1766,
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''). In addition, unless otherwise indicated, all citations to
the Department of Commerce (``Department'') regulations are to the
regulations at 19 CFR Part 351 (1999).
Final Determination: We determine that certain cut-to-length
carbon-quality steel plate products (``CTL Plate'') from Indonesia are
being sold in the United States at less than fair value (``LTFV''), as
provided in section 735 of the Act. The estimated margins are shown in
the ``Suspension of Liquidation'' section of this notice.
Case History
Since the preliminary determination (Notice of Preliminary
Determination of Sales at Less Than Fair Value: Certain Cut-To-Length
Carbon Quality Steel Plate Products from Indonesia, 64 FR 41206 (July
29, 1999)) (Preliminary Determination), the following events have
occurred:
On July 23, 1999, the Department received Krakatau's response to
the Department's July 8, 1999, supplemental questionnaire. Even though
the Department received Krakatau's response three days after the
questionnaire response deadline, Department officials examined the data
to determine whether Krakatau fully responded to the Department's
questionnaire. On July 28, 1999, the Department informed Krakatau that
it was not going to proceed with verification of Krakatau's response
because it did not adequately address the sales-related and cost-
related questions. Also, on July 28, 1999, the petitioners 1
alleged ministerial errors in the preliminary determination. On July
29, and 30, 1999, Krakatau submitted letters objecting to the
Department's decision not to conduct verification.
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\1\ The petitioners are Bethlehem Steel Corporation, Gulf States
Steel, Inc., IPSCO Steel Inc., Tuscaloosa Steel Corporation, the
United Steelworkers of America, and the U.S. Steel Group (a unit of
USX Corporation).
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On August 4, 1999, PT Gunawan Dianjaya Steel (``Gunawan'') and PT
Jaya Pari Steel Corporation (``Jaya Pari'') submitted a proposal for a
suspension agreement to the Department. Department officials
subsequently met with counsel for Gunawan/Jaya Pari and an official
from the Indonesian government to discuss the likelihood of a
suspension agreement (see Memorandum to the File from Wendy Frankel,
Special Assistant to the Deputy Assistant Secretary, dated August 27,
1999). In that meeting, Department officials indicated that a
suspension agreement in this case was unlikely because the proposed
agreement did not meet the requisite conditions.
From August 10 through 19, 1999, we conducted verification of
Gunawan/Jaya Pari's sales and cost responses to the antidumping
questionnaire. On August 17, 1999, the Department issued the amended
preliminary determination, correcting certain ministerial errors, and
postponed the final determination until no later than 135 days after
publication of the preliminary determination (see Notice of Amendment
of the Preliminary Determination of Sales at Less Than Fair Value:
Certain Cut-To-Length Carbon-Quality Steel Plate Products from
Indonesia, 64 FR 46341, August 25, 1999) (``Amended Prelim'').
On August 24, 1999, Krakatau requested a hearing. In response to
numerous improperly filed letters sent by Krakatau between August 12
and 24, 1999, the Department issued a letter to Krakatau on August 25,
1999, explaining the procedures for submitting case and rebuttal briefs
and extending the deadlines for submitting such documents.
During September and October 1999, we issued our verification
reports for Gunawan/Jaya Pari. The petitioners and Gunawan/Jaya Pari
submitted case briefs on October 19, 1999, and rebuttal briefs on
October 25, 1999. The Department received Krakatau's case brief on
October 14, 1999, and rebuttal brief on October 25, 1999. On October
27, 1999, the Department held a public hearing.
On November 22, 1999, the petitioners alleged that one of the
respondents either had not reported certain U.S. sales made during the
period of investigation (``POI'') or had not reported price reductions
for certain U.S. sales made during the POI. Because we do not have
sufficient information on the record to substantiate this allegation,
and because this allegation was made at a very late stage of the
proceeding, we did not consider it for purposes of this final
determination. However, if an antidumping duty order is ultimately
issued in this case, we will
[[Page 73165]]
examine carefully all sales of this company in any future review.
Scope of Investigation
For purposes of this investigation, the products covered by the
scope of this investigation are certain hot-rolled carbon-quality
steel: (1) universal mill plates (i.e., flat-rolled products rolled on
four faces or in a closed box pass, of a width exceeding 150 mm but not
exceeding 1250 mm, and of a nominal or actual thickness of not less
than 4 mm, which are cut-to-length (not in coils) and without patterns
in relief), of iron or non-alloy-quality steel; and (2) flat-rolled
products, hot-rolled, of a nominal or actual thickness of 4.75 mm or
more and of a width which exceeds 150 mm and measures at least twice
the thickness, and which are cut-to-length (not in coils). Steel
products to be included in this scope are of rectangular, square,
circular or other shape and of rectangular or non-rectangular cross-
section where such non-rectangular cross-section is achieved subsequent
to the rolling process (i.e., products which have been ``worked after
rolling'')--for example, products which have been beveled or rounded at
the edges. Steel products that meet the noted physical characteristics
that are painted, varnished or coated with plastic or other non-
metallic substances are included within this scope. Also, specifically
included in this scope are high strength, low alloy (``HSLA'') steels.
HSLA steels are recognized as steels with micro-alloying levels of
elements such as chromium, copper, niobium, titanium, vanadium, and
molybdenum. Steel products to be included in this scope, regardless of
Harmonized Tariff Schedule of the United States (``HTSUS'')
definitions, are products in which: (1) iron predominates, by weight,
over each of the other contained elements, (2) the carbon content is
two percent or less, by weight, and (3) none of the elements listed
below is equal to or exceeds the quantity, by weight, respectively
indicated: 1.80 percent of manganese, or 1.50 percent of silicon, or
1.00 percent of copper, or 0.50 percent of aluminum, or 1.25 percent of
chromium, or 0.30 percent of cobalt, or 0.40 percent of lead, or 1.25
percent of nickel, or 0.30 percent of tungsten, or 0.10 percent of
molybdenum, or 0.10 percent of niobium, or 0.41 percent of titanium, or
0.15 percent of vanadium, or 0.15 percent zirconium. All products that
meet the written physical description, and in which the chemistry
quantities do not equal or exceed any one of the levels listed above,
are within the scope of this investigation unless otherwise
specifically excluded. The following products are specifically excluded
from this investigation: (1) products clad, plated, or coated with
metal, whether or not painted, varnished or coated with plastic or
other non-metallic substances; (2) SAE grades (formerly AISI grades) of
series 2300 and above; (3) products made to ASTM A710 and A736 or their
proprietary equivalents; (4) abrasion-resistant steels (i.e., USS AR
400, USS AR 500); (5) products made to ASTM A202, A225, A514 grade S,
A517 grade S, or their proprietary equivalents; (6) ball bearing
steels; (7) tool steels; and (8) silicon manganese steel or silicon
electric steel.
The merchandise subject to this investigation is classified in the
HTSUS under subheadings: 7208.40.3030, 7208.40.3060, 7208.51.0030,
7208.51.0045, 7208.51.0060, 7208.52.0000, 7208.53.0000, 7208.90.0000,
7210.70.3000, 7210.90.9000, 7211.13.0000, 7211.14.0030, 7211.14.0045,
7211.90.0000, 7212.40.1000, 7212.40.5000, 7212.50.0000, 7225.40.3050,
7225.40.7000, 7225.50.6000, 7225.99.0090, 7226.91.5000, 7226.91.7000,
7226.91.8000, 7226.99.0000.
Although the HTSUS subheadings are provided for convenience and
Customs purposes, the written description of the merchandise under
investigation is dispositive.
Period of Investigation
The POI is January 1, through December 31, 1998.
Facts Available
Because we did not receive an adequate questionnaire response from
Krakatau, we could not conduct verification and, therefore, could not
use its data for the final determination. For the reasons explained in
detail below, we have applied to Krakatau an adverse facts available
margin, the highest margin alleged in the petition (52.42 percent), for
purposes of the final determination.
1. Application of Facts Available
Section 776(a) 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 or in the form or manner
requested, significantly impedes a proceeding under the antidumping
statute, or provides information which cannot be verified, the
Department shall use, subject to sections 782(c)(1), (d) and (e), facts
otherwise available in reaching the applicable determination.
Section 782(c)(1) of the Act provides that, if an interested party
promptly notifies the Department that it is unable to submit the
information requested in the requested form and manner, together with a
full explanation and suggested alternative forms in which such party is
able to submit the information, the Department shall take into
consideration the ability of the party to submit the information in the
requested form and manner and may modify such requirements to the
extent necessary to avoid imposing an unreasonable burden on that
party.
Section 782(d) of the Act provides that, if the Department
determines that a response to a request for information does not comply
with the request, the Department will inform the person submitting the
response of the nature of the deficiency and shall, to the extent
practicable, provide that person the opportunity to remedy or explain
the deficiency. If that person submits further information that
continues to be unsatisfactory, or this information is not submitted
within the applicable time limits, the Department may, subject to
section 782(e), disregard all or part of the original and subsequent
responses, as appropriate.
Pursuant to section 782(e) of the Act, notwithstanding the
Department's determination that the submitted information is
``deficient'' under section 782(d) of the Act, the Department shall not
decline to consider such information if all of the following
requirements are satisfied: (1) The information is submitted by the
established deadline; (2) the information can be verified; (3) the
information is not so incomplete that it cannot serve as a reliable
basis for reaching the applicable determination; (4) the interested
party has demonstrated that it acted to the best of its ability; and
(5) the information can be used without undue difficulties.
In this investigation, Krakatau failed to provide the information
necessary to properly calculate a dumping margin, in the form and
manner requested by the Department. As explained below, in response to
Krakatau's request for assistance under section 782(c)(1), the
Department attempted to assist Krakatau under section 782(c)(2) in
understanding the Department's reporting requirements by visiting its
facilities to respond to its questions and issuing it various
supplemental questionnaires and instructional letters prior to the
preliminary determination. We also provided Krakatau with an
opportunity to supplement its questionnaire response after the
preliminary determination in order to
[[Page 73166]]
address numerous deficiencies and omissions of data which rendered its
previous response inadequate for use in the preliminary determination.
Krakatau's supplemental response continued to contain numerous
deficiencies and omissions of data, and did not provide alternative
methodologies, which prevented the Department from conducting
verification and using its data in the final determination. Thus,
pursuant to sections 776(a)(2)(A) and (B) of the Act, and having
satisfied the requirements under sections 782(c)(2), (d) and (e), the
Department must apply facts otherwise available in this case.
2. Selection of Facts Available
Section 776(b) of the Act provides that adverse inferences may be
used in selecting from the facts available if a party has failed to
cooperate by not acting to the best of its ability to comply with a
request for information. Section 776(b) also authorizes the Department
to use as adverse facts available information derived from the
petition, the final determination from the LTFV investigation, a
previous administrative review, or any other information placed on the
record. Section 776(c) of the Act requires the Department to
corroborate, to the extent practicable, secondary information used as
facts available. Secondary information is defined as ``information
derived from the petition that gave rise to the investigation or
review, the final determination concerning the subject merchandise, or
any previous review under section 751 concerning the subject
merchandise.'' See the Statement of Administrative Action (``SAA'') at
870.
In this case, Krakatau, a pro se company, had requested the
Department's assistance in responding to the questionnaire under
section 782(c) of the Act. In response to Krakatau's request for
assistance, the Department helped Krakatau to understand the reporting
requirements. The Department's assistance in this regard included
sending staff to Krakatau's facilities in Jakarta, Indonesia, to
clarify and elaborate on the Department's reporting requirements
contained in the questionnaire and numerous subsequent Departmental
letters instructing Krakatau of the Department's reporting requirements
in general and informing it of its reporting deficiencies in
particular. Krakatau was provided numerous opportunities and extensions
of time to fully respond to the Department's questionnaire (see
Preliminary Determination at 64 FR 41207, 41209). However, despite the
assistance offered by the Department's staff, Krakatau failed to
provide a questionnaire response that addressed the most important
deficiencies identified by the Department in its May 27 and July 8,
1999, supplemental questionnaires. Moreover, Krakatau failed to provide
a reasonable explanation for its failure to comply with these standard
requests for information. Accordingly, the Department finds that
Krakatau did not act to the best of its ability to provide the
information requested, despite the extensive assistance provided by the
Department. Therefore, we have used an adverse inference in selecting
the facts available to determine Krakatau's final margin.
In the preliminary determination, recognizing Krakatau's effort to
comply with the Department's information requests and in light of its
claimed reporting difficulties up until that time, the Department
assigned Krakatau the simple average of the margins contained in the
petition under section 776(b) of the Act, which the Department
corroborated, to the extent practicable, from independent sources
reasonably at its disposal under section 776(c) of the Act (see
Preliminary Determination at 64 FR 41209, and Memorandum to the File
regarding the Facts Available Rate and Corroboration of Secondary
Information dated July 19, 1999). However, for the final determination,
we have determined it is more appropriate to assign Krakatau the
highest margin in the petition, 52.42 percent, which is also higher
than the rate calculated for the only other respondent in this
investigation, because Krakatau did not provide an adequate response
that the Department could verify and use in the final determination,
despite the numerous opportunities and extensive assistance afforded to
it by the Department as explained above. (See Krakatau Comment 1 in the
``Interested Party Comments'' section of this notice for further
discussion.) We continue to find this margin corroborated for the
reasons discussed in the preliminary determination.
Fair Value Comparisons
We made our fair value comparisons in the manner described in the
preliminary determination (see Preliminary Determination at 64 FR
41209). Gunawan/Jaya Pari argued that the Department should use two
averaging periods in its margin calculations to account for the effect
of low inflation during the second half of the POI. We continued to
find that Indonesia experienced significant inflation throughout the
POI, as measured by the Wholesale Price Index, published in the
September 1998--September 1999 issues of International Monetary Fund's
(``IMF's'') International Financial Statistics (see Memorandum from the
Team to the File, ``Inflation Data Used and Statistical Analysis
Performed for Determining Whether High Inflation Was Present During the
Period of Investigation,'' dated December 13, 1999). For the reasons
discussed in detail in Comment 1 of the ``Gunawan/Jaya Pari Interested
Party Comments'' section of this notice below, we continued to use
monthly averages within one averaging period for purposes of this final
determination
Product Comparisons
We made our product comparisons using the same methodology as in
the preliminary determination (see Preliminary Determination at 64 FR
41209).
Level of Trade
Consistent with our preliminary determination, we continue to find
that no level of trade (``LOT'') adjustment under section 773(a)(7)(A)
of the Act is warranted because the U.S. sales and home market sales
made by Gunawan and Jaya Pari were at the same LOT (see Preliminary
Determination at 64 FR 41210).
Export Price
As in the preliminary determination, for both Gunawan and Jaya
Pari, we used export price (``EP'') methodology, in accordance with
section 772(a) of the Act, because the merchandise was sold directly to
the first unaffiliated purchaser in the United States prior to
importation and constructed export price (``CEP'') methodology was not
otherwise indicated.
Gunawan/Jaya Pari
We calculated EP using the same methodology as in the preliminary
determination, with the following exceptions:
Based on our verification findings, we made the following revisions
to Gunawan's U.S. sales database: (1) for some sales, we deducted an
amount from EP for Indonesian port handling charges and loading
charges; (2) we revised the reported U.S. inland freight expenses from
the factory to the port of exportation to reflect actual expenses for
all sales; (3) we corrected an amount reported for a quantity discount
noted for one sales invoice; and (4) we corrected an amount reported
for bank charges noted for a different sales invoice (see September 16,
1999,
[[Page 73167]]
Gunawan verification report for further discussion).
Based on our verification findings, we made the following revisions
to Jaya Pari's U.S. sales database: (1) we revised the reported U.S.
inland freight expenses from the factory to the port of exportation to
reflect actual expenses for all sales; (2) and we corrected the
reported advertising expenses because Jaya Pari used an incorrect
allocation factor (see September 23, 1999, Jaya Pari verification
report for further discussion).
Normal Value
After testing home market viability and whether home market sales
were made at prices below the cost of production (``COP''), we
calculated normal value (``NV'') as noted in the ``Price-to-Price
Comparisons'' and ``Price-to-CV Comparisons'' sections of this notice.
As noted in the preliminary determination, we did not conduct an arm's-
length test on affiliated party transactions because we continued to
find that Gunawan and Jaya Pari met the criteria for collapsing
affiliated companies. Therefore, we continued to treat Gunawan and Jaya
Pari as a single entity for purposes of our analysis (see Preliminary
Determination at 64 FR 41209-41210).
1. Cost of Production Analysis
As discussed in the preliminary determination, we conducted an
investigation to determine whether Gunawan/Jaya Pari made sales of the
foreign like product in the home market during the POI at prices below
the COP within the meaning of section 773(b)(1) of the Act. We
calculated COP based on the same methodology used in the preliminary
determination on a model-specific basis, except where we modified the
margin calculation program to reflect certain adjustments and updated
cost data based on verification findings (see Final Calculation
Memorandum, dated December 13, 1999). Specifically, we relied on the
respondents' COP and CV amounts except as follows:
A. We adjusted the reported nominal monthly depreciation expense
figures to reflect each month's currency levels.
B. We adjusted the reported costs based on the corrections provided
by Gunawan and Jaya Pari at the first day of verification.
C. We revised Jaya Pari's reported per-unit variable and fixed
overhead to include the company's year-end audit adjustments.
D. We recalculated the yield adjustment factor applied to direct
labor, variable and fixed overhead by dividing the rupiah/kilogram cost
by the yield adjustment factor, rather than multiplying by the yield
adjustment factor.
E. For those months in which Jaya Pari had no production, we
allocated the factory overhead and labor costs incurred to the months
where production occurred.
F. For months in which Gunawan and Jaya Pari had no purchases of
slabs, as a surrogate cost, we used the most recent previous month's
average purchase price indexed for inflation. However, we used
Gunawan's average purchase price for slab in January 1998 as a
surrogate for Jaya Pari's January 1998 slab costs.
G. We revised the scrap offset by indexing the monthly scrap sales
revenue before calculating an annual average, and then calculated the
scrap offset for each month by indexing the annual average back to each
month.
H. We revised Jaya Pari and Gunawan's reported general and
administrative (``G&A'') expense and interest expense by indexing each
month's nominal G&A expense, interest expense, and cost of sales figure
for inflation. We excluded the interest on accounts receivable included
in ``other income'' as an offset in the G&A expense calculation.
I. We recalculated Gunawan and Jaya Pari's total indexed foreign
exchange gains attributable to accounts payable as a percentage of the
indexed cost of sales and multiplied this percentage by the total cost
of manufacturing (``COM'') of each product control number.
J. We corrected the error made in calculating total COM based on
the petitioners' comments on page 23 of their case brief.
K. We corrected our calculation of the indexed, weight-averaged
costs based on the petitioners' comments on pages 23 and 24 of their
case brief.
L. We revised Gunawan's reported conversion costs to account for
cost differences associated with rolling products of different
thicknesses. In making this adjustment, we have applied adverse facts
available to Gunawan's reported conversion costs, as explained in
detail below.
Gunawan allocated monthly conversion costs to all products based on
total production quantities each month. This assignment of conversion
costs does not allow for the accurate accounting of cost differences
between products. For example, products with different thicknesses
require different amounts of processing (i.e., reduction). Critical to
the Department's calculation of a dumping margin is the establishment
of proper comparisons between prices of similar products sold in
Indonesia and the United States. Without accurate difference-in-
merchandise (``DIFMER'') cost data for the various products, the
Department cannot properly account for the differences in physical
characteristics and associated price differences between products sold
in Indonesia and the United States. Additionally, without costs that
accurately account for cost differences associated with physical
differences (e.g., differences in thickness) for each product sold in
Indonesia, we cannot conduct a meaningful cost test to evaluate whether
products have been sold in Indonesia at less than the COP.
Gunawan responded to Sections B, C and D of the antidumping duty
questionnaire on April 26, 1999. On May 21, 1999, the Department issued
a supplemental questionnaire requesting further clarification of
Gunawan's method of allocating conversion costs. The Department
received Gunawan's response to the supplemental questionnaire on June
14, 1999, in which Gunawan indicated that it could not provide more
product-specific costs. At verification, we found that there were
differences in the amount of reduction required to produce a given
thickness of plate. Therefore, we believe that Gunawan could have
developed a way of differentiating costs based on the reduction
necessary to produce the various thicknesses of plate.
Because Gunawan did not submit the conversion cost data as
requested, we have determined that it did not act to the best of its
ability. Therefore, application of adverse facts available is warranted
in accordance with section 776(b) of the Act (see standard for the
application of facts available set forth above in ``Facts Available''
section of this notice). However, because the company was otherwise
cooperative, we have not drawn the most adverse inference. (See e.g.,
Krupp Stahl AG v. U.S., 822 F. Supp. 789, 793 (Ct. Int'l Trade 1993),
which referenced a Court of Appeals' opinion sanctioning the
Department's practice to take into account the level of respondents'
cooperation; and Notice of Final Determination of Sales at Less Than
Fair Value: Steel Wire Rod from Germany, 63 FR 8953, 8955 (February 23,
1998).) Specifically, we have relied on the reported control-number-
specific direct material costs and variable overhead costs. However,
for the fixed overhead costs, we identified the largest expense
(depreciation) and allocated the portion attributable to rolling based
on reduction time. We first calculated the average reduction required
to produce
[[Page 73168]]
all thicknesses of plate and then compared the average reduction to
each thickness reported. We found that one thickness of plate required
more reduction on average than all other plates produced. We calculated
the percentage difference between the average reduction and the
reduction required to produce this thickness of plate and increased the
depreciation expense attributable to rolling by this percentage.
Pursuant to section 773(b)(2)(C), where less than 20 percent of the
respondents' sales of a given product were made at prices below the
COP, we did not disregard any below-cost sales of that product because
we determined that the below-cost sales were not made in ``substantial
quantities.'' Where 20 percent or more of the respondents' sales of a
given product were made at prices below the COP, we disregarded the
below-cost sales because such sales were found to be made within an
extended period of time in ``substantial quantities'' in accordance
with sections 773(b)(2)(B) and (C) of the Act, and because the below
cost sales of the product were at prices which would not permit
recovery of all costs within a reasonable period of time, in accordance
with section 773(b)(2)(D) of the Act.
We found that, for certain grades of CTL plate, more than 20
percent of Gunawan/Jaya Pari's home market sales within an extended
period of time were at prices less than the COP. Further, the prices
did not provide for the recovery of costs within a reasonable period of
time. We therefore excluded these sales and used the remaining sales as
the basis for determining NV if such sales existed, in accordance with
section 773(b)(1) of the Act. For those U.S. sales of CTL plate for
which there were no comparable home market sales in the ordinary course
of trade, we compared EPs to CV, in accordance with section 773(a)(4)
of the Act.
2. Calculation of CV
We calculated CV using the same methodology as in the preliminary
determination, except where we made certain adjustments, as discussed
above, and updated cost data based on verification findings and revised
our calculation of CV profit based on the petitioners' comments on
pages 23 and 24 of their case brief (see ``Cost of Production
Analysis'' section of this notice and Final Calculation Memorandum,
dated December 13, 1999 for further discussion).
Price-to-Price Comparisons
For price-to-price comparisons, we calculated NV based on the same
methodology used in the preliminary determination, with the following
exceptions based on verification findings: (1) we corrected the amount
reported for commissions for certain Gunawan home market sales; (2) we
determined that Gunawan's reported early payment discounts are, in
fact, billing adjustments and deducted these reported amounts, where
applicable, from the gross unit price; (3) we corrected the amounts
reported for advertising expenses for all of Jaya Pari's home market
sales; and (4) for one Jaya Pari sales invoice, we corrected the amount
reported for inland freight from the plant to the customer (see
September 16, 1999, Gunawan verification report, September 23, 1999,
Jaya Pari verification report, and Comment 2 in the ``Interested Party
Comments'' section of this notice for further discussion).
Price-to-CV Comparisons
For price-to-CV comparisons, we applied the same general
methodology used in the preliminary determination (see Preliminary
Determination at 64 FR 41212).
Critical Circumstances
Section 735(a)(3) of the Act provides that if a petitioner alleges
critical circumstances, the Department will determine whether there is
a reasonable basis to believe or suspect that:
(A)(i) there is a history of dumping and material injury by reason
of dumped imports in the United States or elsewhere of the subject
merchandise, 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 subject merchandise at less than its fair value and
that there would be material injury by reason of such sales, and (B)
there have been massive imports of the subject merchandise over a
relatively short period.
As noted in the preliminary critical circumstances determination,
we are not aware of any existing antidumping order in any country on
CTL plate from Indonesia. Therefore, we examined whether there was
importer knowledge. In determining whether an importer knew or should
have known that the exporter was selling the subject merchandise at
less than its fair value and thereby causing material injury, the
Department normally considers margins of 25 percent or more for EP
sales (and margins of 15 percent or more for CEP sales) sufficient to
impute knowledge of dumping (see Notice of Final Determinations of
Sales at Less Than Fair Value: Brake Drums and Brake Rotors from the
People's Republic of China, 62 FR 9160 (February 28, 1997); and Notice
of Final Determination of Sales at Less Than Fair Value: Stainless
Steel Sheet and Strip in Coils from Japan, 64 FR 30574 (June 8, 1999)
(Stainless Steel Sheet and Strip in Coils from Japan)). All respondents
in this proceeding have made EP sales to the United States.
The Department's final margin for Gunawan and Jaya Pari exceeds 25
percent (see ``Suspension of Liquidation'' section below). Therefore,
we continue to determine that importers knew or should have known that
Gunawan and Jaya Pari made sales of the subject merchandise at prices
below fair value. As to the knowledge of injury from such dumped
imports, in the present case, the International Trade Commission
(``ITC'') preliminarily determined that there is reasonable indication
that the U.S. CTL plate industry is experiencing present material
injury. Therefore, we continue to find that the ``importer knowledge of
dumping and material injury'' criterion is met with respect to CTL
plate from Indonesia.
Because we have found that the first statutory criterion is met
with regard to Gunawan and Jaya Pari, we must consider the second
statutory criterion: whether imports of the merchandise have been
massive over a relatively short period. According to 19 CFR 351.206(h),
we consider the following to determine whether imports have been
massive over a relatively short period of time: (1) volume and value of
the imports; (2) seasonal trends (if applicable); and (3) the share of
domestic consumption accounted for by the imports.
When examining volume and value data, the Department typically
compares the export volume for equal periods immediately preceding and
following the filing of the petition. Under 19 CFR 351.206(h), unless
the imports in the comparison period have increased by at least 15
percent over the imports during the base period, we will not consider
the imports to have been ``massive.'' The Department examines shipment
information submitted by the respondent or import statistics when
respondent-specific shipment information is not available.
To determine whether imports of subject merchandise have been
massive over a relatively short period, we compared Gunawan/Jaya Pari's
export volume for the four months subsequent to the filing of the
petition (March-June 1999) to that during the four months prior to the
filing of the petition (November 1998-February 1999). These
[[Page 73169]]
periods were selected based on the Department's practice of using the
longest period for which information is available from the month that
the petition was submitted through the date of the preliminary
determination.
Based on our analysis, we find that the increase in imports was not
greater than 15 percent with respect to Gunawan/Jaya Pari, as our
verification findings indicate that these companies had no exports of
subject merchandise to the United States during the period March-June
1999 (see July 9, 1999, submission; page nine of September 16, 1999,
Gunawan verification report; and page eight of September 23, 1999, Jaya
Pari verification report). Therefore, we do not find critical
circumstances with respect to Gunawan/Jaya Pari.
Because the margin we have assigned to Krakatau is 52.42 percent,
and thus exceeds 25 percent, we have imputed knowledge of dumping to
Krakatau. However, information on the record sufficiently establishes
that Krakatau's exports of subject merchandise to the United States
have not increased massively since the filing of the petition. U.S.
Customs import data indicate that Gunawan/Jaya Pari accounted for the
vast majority of imports of subject merchandise into the United States
during the POI. Moreover, since the filing of the petition, U.S.
Customs import data do not indicate evidence of massive imports of
subject merchandise from Indonesia (see July 19, 1999, Memorandum to
the File Regarding Import Statistics Used for Preliminary Critical
Circumstances Determination). Thus, we continue to determine that no
critical circumstances exist for Krakatau.
Because the margin for all other Indonesian exporters/producers of
the subject merchandise is 42.36 percent (i.e., Gunawan/Jaya Pari's
margin), and thus exceeds 25 percent, we have imputed knowledge of
dumping to ``All Others.'' However, we considered that the increase in
imports was not greater than 15 percent with respect to Gunawan/Jaya
Pari. We also considered U.S. Customs data on overall imports from
Indonesia of the products at issue. Based on our review of Gunawan/Jaya
Pari's shipment data and the U.S. Customs import data, we find that
imports from all non-investigated exporters (i.e., ``all others'') were
also not massive during the relevant comparison periods. Given these
factors, the Department determines that there are no critical
circumstances with regard to ``all other'' imports of CTL Plate from
Indonesia (see Stainless Steel Sheet and Strip in Coils from Japan at
64 FR 30585).
Currency Conversion
As in the preliminary determination, we made currency conversions
into U.S. dollars based on the exchange rates in effect on the dates of
the U.S. sales as certified by the Federal Reserve Bank, in accordance
with section 773A of the Act.
Verification
As provided in section 782(i) of the Act, we verified the
information submitted by Gunawan/Jaya Pari 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 Gunawan/Jaya Pari.
Interested Party Comments
Gunawan/Jaya Pari Comments
Comment 1: Application of the High-Inflation Methodology to the POI
The respondents contend that the Department should divide the POI
into two separate parts when accounting for the effect of inflation on
the COP in order to make a fair comparison between home market costs
and home market prices and between home market sales and U.S. sales.
Specifically, the respondents state that the IMF wholesale price
indices indicate that the Indonesian economy was experiencing
hyperinflation only in the first six months of the POI, based on
applying the Department's monthly and annual high inflation benchmarks
of five and 50 percent, respectively. In support of their position, the
respondents cite to the Preliminary Results of Antidumping Duty
Administrative Review and Extension of Final Results of Administrative
Review: Gray Portland Cement and Clinker from Mexico, 64 FR 48778,
48783 (September 8, 1999) (Cement). The respondents further note that
the inflation rate in Indonesia declined significantly during the
fourth quarter of the POI and continued to decline after the POI. The
respondents also point out that section 777A(d)(1)(A) of the Act and
section 351.414(d)(3) of the Department's regulations grant the
Department the authority to use averaging periods less than the POI
when NV, EP (or CEP) varies significantly over the POI, and that the
Department has exercised its authority in prior antidumping duty cases
to apply shorter weighted-average periods to investigations involving a
country experiencing high inflation. In support of this position, the
respondents cite to numerous cases where the Department split the POI
or period of review (``POR'') for various reasons (see, e.g.,
Preliminary Results of Antidumping Duty Administrative Review: Certain
Pasta from Turkey, 64 FR 43157, 43158 (August 9, 1999) (Pasta); Final
Determination of Sales at Less Than Fair Value: Certain Preserved
Mushrooms from Chile, 63 FR 56613, 56620 (October 22, 1998)
(Mushrooms); Final Results of Antidumping Duty Administrative Review:
Certain Fresh Cut Flowers from Colombia, 62 FR 53287, 53299 (October
14, 1997) (Flowers from Colombia); Final Determination of Sales at Less
Than Fair Value: Fresh Cut Roses from Colombia, 60 FR 6980, 6993
(February 6, 1995) (Roses); and Final Determination of Sales at Less
Than Fair Value: Salmon from Chile, 63 FR 31432 (June 9, 1998)
(Salmon)). Furthermore, the respondents state that the Department has
recognized in prior antidumping duty cases that it should not apply the
high inflation methodology to the period in which no high inflation
exists, and as a result, the Department has separated the POI into
high-inflation and non-high-inflation periods. In addition, the
respondents claim that the Department has stated in previous high
inflation cases that the monthly averaging method is not dispositive
when examining the entire POI to determine high inflation. In support
of these positions, the respondents cite to the Final Determination of
Sales at Less Than Fair Value: Certain Fresh Cut Flowers from Peru, 52
FR 7000, 7002 (March 6, 1987) (Flowers from Peru); Final Results of
Antidumping Duty Administrative Review: Ferrosilicon from Brazil, 61 FR
59407, 59408 (November 22, 1996) (Ferrosilicon); and Final Results of
Antidumping Duty Administrative Review: Certain Welded Carbon Steel
Pipe and Tube from Turkey, 62 FR 51629, 51630 (October 2, 1997) (Pipe
and Tube from Turkey). Therefore, the respondents claim that the
Department has recognized in the past that under certain circumstances,
the appropriate high inflation period may not be the entire POI, which
applies in this case, as well. Finally, the respondents claim that the
Department has in practice determined shorter-than-POI, weighted-
average periods to avoid distortive effects on dumping margins. In
support of this claim, the respondents cite to the Final Determination
of Sales at Less Than Fair Value: Stainless Steel Sheet and Strip in
Coils from the Republic of Korea, 64 FR 30664, 30676 (June 8, 1999)
(Steel Sheet and Strip); Final Determination of Sales at Less Than Fair
Value: Static Random Access Memory Semiconductors from Taiwan,
[[Page 73170]]
63 FR 8909, 8925 (February 23, 1998) (SRAMs); Final Determination of
Sales at Less Than Fair Value: Dynamic Random Access Memory
Semiconductors of One Megabit and Above from the Republic of Korea, 58
FR 15467, 15476 (March 23, 1993) (DRAMS); and Final Determination of
Sales at Less Than Fair Value: Erasable Programable Read Only Memories
from Japan, 51 FR 39680, 39682 (October 30, 1986) (EPROMs from Japan).
The petitioners contend that Indonesia did experience high
inflation during the second half of the POI, and that even if it had
not, the Department's normal practice is to apply its high inflation
methodology to the entire POI, not just to a particular segment of that
period. The petitioners also maintain that the calculation performed by
the respondents to determine whether high inflation existed in the
second half of the POI is flawed because it did not include July 1998's
inflation figure, nor did it take into account the compounding effects
of inflation.
DOC Position: We agree with the petitioners. Based on the
respondents' request, we have examined the issue of whether the
Department should apply its high-inflation methodology based on whether
Indonesia experienced high inflation throughout the POI. As a matter of
practice, when the Department uses its high-inflation methodology, we
index the costs reported in each POI month, even if inflation was
absent during certain portions of the period for which the costs were
reported (i.e., the POI), and make sales comparisons on a monthly
average basis, rather than on a POI average basis, in order to minimize
the effects of inflation on our analysis.
The reason for this methodology is that in order to calculate a
weighted-average cost for the POI, all monthly costs during the POI
must be restated on an equivalent currency value basis using inflation
indices during that period. The POI weighted-average cost is then
restated to the currency value of each respective POI month in order to
minimize the distortive impact of inflation. The Department's high-
inflation methodology does not increase actual costs, but rather,
allows the Department to calculate the weighted-average period cost
from monthly data that is stated in different currency levels. See
Final Results of Antidumping Duty Administrative Review: Certain Welded
Carbon Steel Pipe and Tube from Turkey, 63 FR 35190 (June 29, 1998)
Although the Department's past practice has been to treat an
economy as hyperinflationary if the annual inflation rate is greater
than 50 percent, since Pipe and Tube from Turkey the Department has
modified its practice and used a 25 percent per annum inflation rate as
a general guide for assessing the impact of inflation on an economy and
for determining whether an economy experienced high inflation rather
than hyperinflation during the POI or POR (see Preliminary
Determination of Sales at Less Than Fair Value: Stainless Steel Sheet
and Strip in Coils from South Korea, 64 FR 137, 139 (January 4, 1999)).
The Department's use of this benchmark was illustrated in Cement where
the Department found that a 16 percent Mexican annual inflation rate
did not warrant application of the Department's high-inflation
methodology (see Cement at 64 FR 48778). In Pipe and Tube from Turkey,
where the POR extended from May 1, 1993, through April 30, 1994, the
Department indicated that it separately examined the inflation rate
during two segments of the POR because each segment covered portions of
different years and we had to determine what the annual inflation rate
was during the POR. In this context, the Department applied its then
existing benchmark of 50 percent to determine whether high inflation
existed in either 1993 or 1994. The Department did not restrict its
examination of the issue to quarters within a year, but instead
examined the two years in their entirety, which overlapped the POR and
the months in the POR as a whole, in order to determine whether Turkey
should be treated as hyperinflationary during the POR. Moreover, in
Pipe and Tube from Turkey, the Department expressed a clear preference
not to break the POR into discrete periods for high-inflation analysis,
and stated that its finding in Flowers from Peru, made over 10 years
ago, where the Department split the POI in its application of inflation
methodology, was not a reflection of the Department's more recent
practice in conducting inflation analysis. Rather, the Department
stated a desire to examine the high-inflation issue by examining and
considering the entire review period. The respondents in this case
claim that a decline in the inflation rate in the fourth quarter of
1998 and a continuing decline in the inflation rate during the first
quarter of 1999 are compelling reasons for departing from this
methodology. The Department disagrees that it should perform its high-
inflation analysis on a quarterly basis or consider the impact of
inflation during periods extending past a POI or POR.
Though the facts in our case are different from those present in
Ferrosilicon, where the Department determined not to apply its high-
inflation methodology, the methodology employed in the present case is
consistent with the one in Ferrosilicon in that the existence or
absence of high inflation during the relevant portion of the review or
investigatory period was the single most important contributing factor
in determining whether to apply the high-inflation methodology to the
POI or POR as a whole. Moreover, the approach taken in Ferrosilicon for
examining whether high inflation existed during the POR as a whole
(i.e., focusing on the annualized rate of inflation over the entire POR
or POI rather than quarters or abbreviated time periods) is also
consistent with Pipe and Tube from Turkey, which, as noted above, is
more relevant to our particular situation (see Ferrosilicon at 59408).
Unlike in Flowers from Colombia, Mushrooms, Salmon and Roses, the
issue in our case is not whether to adjust or exclude certain cost
items which have a significant impact on home market prices without
applying our high-inflation methodology. In the present case, our
current practice of applying an annualized benchmark to determine the
existence of high inflation during the POI shows that Indonesia
experienced high inflation during the entire POI at a level which
requires the use of the Department's high-inflation methodology (see,
Memorandum from the Team to the File, ``Inflation Data Used and
Statistical Analysis Performed for Determining Whether High Inflation
Was Present During the Period of Investigation,'' dated December 13,
1999). No individual adjustments are necessary beyond those warranted
by the application of the Department's high-inflation methodology.
Accordingly, we have continued to apply our high inflation methodology
to the entire POI.
Since we have determined that inflation existed throughout the POI,
there is no need to consider splitting the POI into two averaging
periods under 19 CFR 351.414(d)(3).
The effect of currency devaluations resulting from the Asian
financial crisis of 1997, as opposed to the existence or absence of
inflation, was the principal reason for splitting up the POI in the
more Korean case involving Steel Sheet and Strip. In that case, the
Department determined that the precipitous drop in the value of the
home market currency caused significant differences in home market
prices and, thus, warranted the POI split. As for the recent Taiwanese
case involving SRAMs, the Department did use shorter averaging periods
to avoid distortive effects due to declining costs and prices. The
Department did
[[Page 73171]]
not, however, apply different methodologies to different parts of the
POI. Finally, as is the case with the Department's outdated
inflationary analysis and decision made in Flowers from Peru, decisions
made by the Department in EPROMs from Japan are also not a reflection
of the Department's current practice with respect to the inflation
issue. Accordingly, the Department has continued to apply its high-
inflation methodology over the entire POI in this case.
Comment 2: Home Market Early Payment Discount
The petitioners contend that the Department should disallow
Gunawan's early payment discount because it constitutes a post-sale
price adjustment that is not part of Gunawan's normal business
practice. Specifically, the petitioners maintain that information in
Gunawan's response indicates that Gunawan grants the discount in
question to its home market customers on a discretionary basis, and
that the discount percentage is not specified on documentation, or
linked to the quantity or value of the sale. Rather, the petitioners
allege that the discount is set by Gunawan's sales department on an ad
hoc basis since the customer is unaware at the time of sale of any
terms or conditions it must meet to receive the discount. Finally, the
petitioners contend that the Department should disallow this adjustment
to NV because Gunawan failed to demonstrate at verification that the
discount was part of its normal business practice. In support of their
position, the petitioners cite to numerous cases where the Department
granted a post-sale price adjustment if it reflected the respondent's
normal business practice. See, e.g., Final Results of Antidumping Duty
Administrative Review: Certain Corrosion-Resistant Carbon Steel Flat
Products from Japan, 64 FR 12951, 12958 (March 16, 1999); Final Results
of Antidumping Duty Administrative Review: Gray Portland Cement and
Clinker from Mexico, 64 FR 13148, 13167 (March 17, 1999); Final Results
of Antidumping Duty Administrative Review: Antifriction Bearings and
Parts Thereof from France, 63 FR 33320, 33327 (June 18, 1998) and 60 FR
10900, 10930 (February 28, 1995); and the Final Results of Antidumping
Duty Administrative Review: Certain Corrosion-Resistant Steel Flat
Products and Certain Cut-to-Length Carbon Steel Plate from Canada, 61
FR 13815, 13823 (March 28, 1996).
Gunawan maintains that the Department should continue to allow
Gunawan's early payment discount because the Department verified that
the ad hoc method by which Gunawan grants the discount is its normal
business practice. Gunawan also states that the Department examined at
verification Gunawan's policy for granting this discount and its
reporting of this discount in the sales listing, and found no
discrepancies in its reported discount programs. With regard to the
administrative cases relied upon by the petitioners, Gunawan points out
that this proceeding is an investigation and that the likelihood that
it can manipulate its dumping margin by granting the discount in the
future is not germane to a LTFV proceeding.
DOC Position: We agree in part with Gunawan. After reviewing data
referenced in the Gunawan sales verification report (i.e., verification
exhibit 30), we note that the record evidence indicates the post-sale
adjustment, referred to as an ``early payment discount'' by both
Gunawan and the petitioners, is actually a billing adjustment
associated with defective merchandise sold in the home market. Based on
the invoices examined at verification, the Department found that the
disputed amounts were noted on credit memos which were issued after the
sale invoices were sent to home market customers, and that the credits
were mostly associated with claims of defective merchandise which was
not returned to Gunawan. Therefore, we are treating the amounts at
issue as billing adjustments and deducting them, where applicable, from
the gross unit price. Finally, the above-referenced administrative
cases relied upon by the petitioners have no applicability in this case
because, unlike those cases where the issue was whether a respondent
granted rebates in its normal course of business, the issue in this
proceeding is whether to make a deduction to Gunawan's home market
price based on credit memos noting returns of defective merchandise
which Gunawan issues to its customers in the normal course of business.
Comment 3: Depreciation Expenses
The petitioners state that the Department should adjust Gunawan's
depreciation expenses to account for the effects of inflation and to
permit a more appropriate matching of costs and prices based on
equivalent currency units. The petitioners argue that Gunawan's
reported depreciation expenses are based on the nominal value of
assets, since they were last revalued, and reflect neither the
inflation experienced in Indonesia since the last revaluation nor the
inflation experienced during the POI. The petitioners argue that the
Department should adjust the depreciation expenses for the effects of
inflation occurring prior to the POI, as well as for the effects of
inflation during the POI.
The respondents argue that the Department has already taken into
account the effects of inflation by indexing the total amount of
reported fixed overhead expenses (i.e., the account in which
depreciation expense was recorded) in its cost calculation and,
therefore, should not further index for inflation. According to
respondents, further indexing the monthly amount of depreciation
expense will result in double counting. The respondents argue that the
Department's long-standing practice is to rely on data from a
respondent's normal books and records if they are prepared in
accordance with the generally accepted accounting principles (``GAAP'')
of the exporting country.
DOC Position: We agree with the petitioners, in part. The
depreciation expense at issue is included in fixed overhead expense.
Because the depreciation expense reported for each month was based on
fixed assets values recorded in currency levels at the beginning of the
POI, it is not enough to index each monthly depreciation expense from
that month to the end of the period. Each monthly depreciation expense
must be indexed, on a monthly basis, to account for the full change in
currency value between the beginning and the end of the POI, before an
average COP for the period can be calculated. The reported monthly
depreciation expense figures are all stated in the currency level of
the first month of the POI and, therefore, must all be indexed for
inflation on a monthly basis over the full POI. In this case, the
monthly inflation rates during the POI were significant.
We disagree with the petitioners that the nominal monthly
depreciation expenses should be adjusted for inflation that occurred
prior to the POI. We note that one of the two collapsed respondents
revalued their assets during the last quarter of 1998 and the other
revalued its assets in 1996. Inflation in Indonesia since this pre-POI
revaluation has not been significant. Thus, we do not consider it
appropriate to adjust the pre-POI fixed asset valuations as recorded in
their normal books and records. For the final determination, we have
indexed the monthly depreciation expense to account for the high
inflation during, but not prior to, the POI.
[[Page 73172]]
Comment 4: First-Day Verification Corrections
The petitioners argue that the Department should, pursuant to 19
CFR 351.301(b), reject the undisclosed and untimely major modifications
contained in Gunawan's August 24, 1999 and Jaya Pari's September 1,
1999 submissions. The petitioners argue that it is the Department's
longstanding policy not to accept the submission of new information at
verification unless: (1) The need for that information was not evident
previously, (2) that information makes minor corrections to information
already on the record, or (3) that information corroborates, supports,
or clarifies information already on the record. According to the
petitioners, the corrections submitted by Gunawan and Jaya Pari on the
first day of verification significantly affect the financial expense
calculation and the foreign exchange gains and losses on accounts
payable. The petitioners claim that these ``major'' modifications
cannot be characterized as ``minor corrections'' and, therefore, should
be rejected as new information.
The respondents argue that the Department should reject the
petitioners' claim that the corrections submitted by Gunawan and Jaya
Pari at verification constitute an untimely submission of new factual
information. The respondents argue that these minor corrections were
made timely on the first day of verification and included worksheets
showing the effects of the corrections which the Department verified.
The respondents argue that the corrections were minor in nature and
significance, and were related only to exchange gains and losses, which
represent a minor part of the total reported costs. The respondents
argue that these corrections went in both positive and negative
directions, which in turn had an insignificant impact on the margin
calculation, and, therefore, the Department should include these
corrections in its calculation of the respondents' dumping margin in
the final determination.
DOC Position: We agree with the respondents that the corrections
presented on the first day of verification were minor and were of the
type typically identified by the respondents during preparation for
verification. These corrections were minor in that they affected only
specific accounts, did not change the reporting methodology, and
corroborated, supported, and clarified information already on the
record. Therefore, we have included the corrections for purposes of the
final determination.
Comment 5: Slab Costs
The petitioners argue that the Department should adjust the
respondents' reported slab costs. The petitioners argue that where
Gunawan and Jaya Pari had no purchases of slabs in a given month, the
Department should construct a current monthly cost by using the most
recent preceding month's cost, adjusted for the effects of inflation,
instead of the unadjusted slab costs reported by the respondents. In
addition, the petitioners disagree with the respondents' claim that all
slab costs were denominated in U.S. dollars. According to the
petitioners, it is not clear from the record how much of the slab
purchases were made in U.S. dollars or Indonesian rupiah. The
petitioners argue that as a surrogate for Jaya Pari's January 1998 mild
slab costs the Department should use Gunawan's January 1998 mild slab
purchases, because Gunawan's average January purchase price is more
representative of January slab costs than is the price reported by Jaya
Pari, a price from the previous year.
The respondents argue that the Department should not adjust the
purchase price of slab for inflation, but instead use the slab costs as
reported. The respondents are opposed to the petitioners' argument that
the respondents' reported slab costs for a month in which there were no
purchases should be adjusted by the Indonesian inflation indices. The
respondents argue that when they produce subject merchandise in a month
in which there are no purchases, they are consuming slab from
inventory, which was purchased in previous months. Therefore, they
argue that the cost of slab in any given month was equal to the slab
cost of the previous month, irrespective of inflation in Indonesia
because they did not incur any additional acquisition costs for these
slabs. Accordingly, the Department should not revalue the slab costs
for those months in which there were no purchases.
The respondents also argue that the Department should not use
Gunawan's January 1998 mild slab purchase price as a surrogate for Jaya
Pari's January 1998 mild slab costs as suggested by the petitioners.
The respondents state that they purchased all of their material inputs
in U.S. dollars from sources outside of Indonesia and there were no
significant price increases during the POI. The respondents argue that
because the acquisition cost of slabs in U.S. dollars is not affected
by Indonesian market conditions and is also not affected by inflation,
no adjustments should be made to the slab purchase price.
Lastly, the respondents argue that since the IMF's wholesale price
indices show that Indonesia has not had high inflation subsequent to
July 1998, the Department's high-inflation methodology should not be
applied to costs during the period from July through December 1998.
DOC Position: We agree with the petitioners that replacement cost
(i.e., the purchase price for the current month) should be used to
value slabs for Gunawan and Jaya Pari. Moreover, we agree that for
those months in which there were no slab purchases, the preceding
month's purchase price, adjusted for the effects of inflation, should
be used. In cases where the respondent experiences inflation in the
comparison market during the POI, the Department requires the
respondent to report current costs for the calculation of COP and CV.
This methodology entails valuing any materials used to produce the
subject merchandise at the average purchase price of those materials
during the month of consumption (i.e., the normal inventory value of
consumed raw materials is replaced by the average monthly purchase
price for those materials).
We disagree with the respondents that all purchases of slabs were
made in U.S. dollars. In fact, some purchases, and all of the
miscellaneous acquisition fees, were made in rupiah. Moreover, we
disagree that when slab purchases are made in U.S. dollars the book
value is not affected by inflation. This is because the U.S. dollar-
denominated purchase price is converted to rupiah in the month of
purchase. Since the company was experiencing high inflation during the
POI, its currency was losing value in relation to the U.S. dollar and,
therefore, in Indonesian rupiah terms the slabs were increasing in
price.
We also agree with the petitioners that it is more appropriate to
use Gunawan's weighted-average, per-unit purchase price in January 1998
for mild slab as a surrogate for Jaya Pari's January 1998 mild slab
costs. Gunawan's average January purchase price is more representative
of January slab costs than the price Jaya Pari paid months ago. Simply
indexing the price paid in the previous period would only account for
increases in the purchase price due to inflation, but would not reflect
other market-based pressures on slab prices. We note further that Jaya
Pari has been collapsed with Gunawan as a single respondent for margin
calculation purposes, and also that it purchased slab from Gunawan
during the POI. Therefore, we find that it is appropriate
[[Page 73173]]
to used Gunawan's slab cost as a surrogate for Jaya Pari's slab cost in
January 1998.
Finally, we disagree with the respondents' argument that the
Department's high-inflation methodology should not be applied to the
period from July through December 1998. First, we note that the IMF's
wholesale price indices show that Indonesia continued to experience
inflation through September 1998. Second, our practice is to use the
high-inflation methodology for the entire POI if a country experiences
a significant level of inflation throughout that period, as was the
case in Indonesia. The Department's high-inflation methodology does not
increase costs, but rather, allows the Department to calculate the
weighted-average period cost from monthly data that is stated in
different currency levels. Therefore, we have continued to apply the
high-inflation methodology in our calculation of the POI costs.
Comment 6: G&A Expenses
The petitioners argue that the Department should exclude Gunawan's
``other income,'' resulting from interest on accounts receivable, as an
offset in the calculation of its G&A expense factor. The petitioners
argue that this interest on accounts receivable was from a company that
did not pay its invoices on time and is not related to Gunawan's
production operations.
The respondents argue that the Department should not exclude
interest income from accounts receivable, which was included in ``other
income,'' from the calculation of G&A expenses because it is directly
related to subject merchandise. Alternatively, the respondents argue
that this interest income should be deducted from the respondents'
indirect selling expenses.
DOC Position: We agree with the petitioners that the interest on
accounts receivable, which was included in ``other income,'' should not
be used as an offset in the G&A expense calculation. Interest income
earned on accounts receivable is treated as an adjustment to the
selling price. The Department's standard questionnaire directs a
respondent to report such interest income in a separate field on the
sales database in order to allow for the adjustment to the selling
price. Accordingly, we have disallowed this interest income on accounts
receivable as an offset to G&A expense. We do agree with the
respondents that the interest income should be deducted from the
respondents' indirect selling expenses and have done so for the final
margin calculation.
Comment 7: Scrap Sales
The petitioners argue that because of the high inflation
experienced in Indonesia, the Department should first index the monthly
scrap sales revenue before calculating an annual average.
The respondents agree that the Department should first index the
monthly amounts of scrap before calculating an average, but argue that
the indexing should be limited to data for the period from January
through June 1998.
DOC Position: We agree with the petitioners that because of the
high inflation experienced in Indonesia, we should first index the
monthly scrap sales revenue before calculating an annual average.
Gunawan calculated the scrap offset by dividing the total scrap sales
revenue for the year by the total quantity of plate produced during the
year. Since the monthly scrap sales revenue that was summarized to
obtain the total scrap sales revenue was in different currency levels,
we have first indexed the monthly amounts using the Wholesale Price
Index as reported in the International Financial Statistics before
calculating an annual average. We then calculated the scrap offset for
each month by indexing the annual average back to each month. Finally,
we disagree with the respondents concerning their argument that the
indexing should be limited to the period from January through June
1998, consistent with our decision to apply high-inflation methodology
to the entire POI. See DOC Position to Comment 1 above for further
discussion.
Comment 8: Foreign Exchange Loss on Accounts Payable
The respondents argue that the Department should not include the
exchange losses on accounts payable attributable to the purchase of
slab in the calculation of the COP. The respondents argue that, because
costs included in CV are eventually converted into U.S. dollars, the
Department should base slab purchase costs on the U.S. dollar-
denominated purchase price to avoid the conversion from U.S. dollars to
Indonesian rupiah and back to U.S. dollars which creates a loss that
does not exist in dollar terms. The respondents argue that the exchange
loss on accounts payable arose solely from different exchange rates
used between the date of recording purchases in their books and the
date of payment. The respondents also argue that the Department should
exclude this exchange loss since it was only a ``book'' loss which did
not add to the real COP.
In addition to the above argument, the respondents state that by
indexing the slab purchase price and then including the exchange loss
on accounts payable from the purchase of slab, the Department has
double counted costs in the calculation of the COP. The respondents
state that they are being made to record exchange losses in their books
due to the Indonesian rupiah depreciating against the U.S. dollar
which, in turn, was due to inflation in the Indonesian economy.
The petitioners argue that the Department should continue to
include the respondents' foreign exchange losses on accounts payable in
the calculation of COP and CV. They argue that the respondents must
convert their slab costs into Indonesian rupiah since their normal
books and records are maintained in Indonesian rupiah, and as a result
of doing so, they realize exchange gains and losses on accounts
payable. The petitioners state that these foreign exchange gains and
losses on accounts payable are a result of the Indonesian rupiah
depreciating between the time slab is purchased and the time payment is
made. The petitioners claim that this is a real economic loss, which is
recognized by the respondent and is recorded in their financial
accounting system. The petitioners argue that the conversion of these
Indonesian rupiah costs back into U.S. dollars for purposes of
calculating CV does not create the loss, it is simply a convention of
the dumping analysis. In addition, the petitioners argue that the
Department has consistently held that foreign exchange losses on
accounts payable must be included in costs. See Notice of Final
Determination of Sales at Less Than Fair Value: Steel Wire Rod From
Trinidad & Tobago, 63 FR 9177, 9182 (February 24, 1998) (Steel Wire
Rod).
DOC Position: We disagree with the respondents. Foreign exchange
losses realized in connection with accounts payable should be included
in the COP and CV calculations. See Notice of Final Determination of
Sales at Less Than Fair Value: Stainless Steel Round Wire from Korea,
64 FR 17342 (April 9, 1999) and Steel Wire Rod at 63 FR 9182. The
foreign exchange losses on accounts payable were a result of the
Indonesian rupiah depreciating between the time the slab was purchased
and the time the payment was made. In simple terms, when the payment is
made it takes more Indonesian rupiah than the original amount recorded
for the purchase. This is a real economic loss, which was recognized by
the respondents and was recorded in their financial accounting system.
The Department includes these losses in the COM because they are the
[[Page 73174]]
direct result of purchasing inputs for the manufacturing process. We
also disagree with the respondents' argument that if the slabs were
purchased in U.S. dollars and paid out of the company's U.S. dollar
reserves, there is no exchange loss. Even if the payment of slabs were
made from U.S. dollar reserves, there is still an exchange loss on the
payment of the slabs, because the originally agreed upon price in
rupiah terms has increased. We further note that any exchange gain on
U.S. dollar reserves would be included by the Department in the
calculation of financial expense.
Moreover, we disagree with the respondents' assertion that the
Department has double counted costs by both including the exchange
losses and indexing the monthly slab costs in its calculation of the
COP and CV. The indexing simply allows the Department to calculate an
average period cost from monthly amounts that are denominated in
different currency levels. The average cost is then restated in
currency levels for each month in which a sale took place. The
inclusion of the foreign exchange loss recognizes that the respondent
paid a higher amount for the slab than originally recorded.
Comment 9: Foreign Exchange Gains on Accounts Receivable
The respondents argue that the Department should include the
foreign exchange gains from accounts receivable as an offset to the
foreign exchange loss from accounts payable. The respondents argue
that, by excluding this offset amount, the Department departed from the
objectives and principles of GAAP, which is to ensure that each company
fairly presents its financial position, operating position and any
change to its financial position. The respondents state that in their
normal financial practices, the companies do not manage specific
accounts, but instead manage their net exposed position. Therefore, any
change in relative currency values will be offset with no cost to the
company. The respondents argue that if the gains on accounts receivable
were excluded, a distortion in the real financial position of the
company would occur because the cost of exchange losses actually
suffered would be overstated.
The petitioners argue that the Department should not include
foreign exchange gains from accounts receivable in the calculation of
the respondents' costs. They state that it is the Department's practice
to include foreign exchange gains and losses on financial assets and
liabilities in the COP and CV calculations, provided that the gains and
losses are related to the company's production operations. Since the
foreign exchange gains and losses incurred on accounts receivable are
related to sales operations, rather than to production, the petitioners
maintain these amounts should not be included in the calculation of COP
and CV. See Notice of Final Results of Antidumping Duty Administrative
Review: Canned Pineapple Fruit From Thailand, 63 FR 7392, 7401
(February 13, 1998) and Steel Wire Rod at 63 FR 9182.
DOC Position: We agree with the petitioners that foreign exchange
gains and losses arising from sales transactions should not be included
in the calculation of COP and CV. The Department's longstanding
practice is to exclude exchange gains and losses on accounts
receivable. See, e.g., Notice of Final Results of Antidumping Duty
Administrative Review: Circular Welded Non-Alloy Steel Pipe and Tube
from Mexico, 62 FR 37014,37026 (July 10, 1997) (Comment 31) (where the
Department did not include exchange gains and losses on accounts
receivables, because these gains and losses related to selling
activities rather than production activities); and Pipe and Tube from
Turkey at 62 FR 51629-01 (October 2, 1997). The Department normally
includes in its calculation of COP and CV foreign exchange gains and
losses resulting from transactions related to a company's manufacturing
operations (e.g., purchases of inputs). See, e.g., Final Determination
of Sales Less Than Fair Value: Polyethylene Tenephthalate Film, Sheet,
and Strip From the Republic of Korea, 56 FR 16305, 16313 (April 22,
1991). We do not consider foreign exchange gains and losses arising
from sales transactions to relate to manufacturing activities of a
company. Accordingly, for the final determination we included in COP
and CV exchange gains and losses arising from purchase transactions
(accounts payables) (see Comment 8), but disallowed exchange gains and
losses arising from sales transactions.
Krakatau Comments
Comment 1: Application of Facts Available
Krakatau maintains that the Department's use of facts available in
its case violates Articles 2.2.1.1 and 6.8 of the Antidumping Duty
Agreement of the World Trade Organization because the Department could
have used its questionnaire response to arrive at a calculated margin
for Krakatau without undue difficulties. Krakatau further maintains
that the Department's insistence that Krakatau provide costs on a
control-number-specific basis based on its cost records and Krakatau's
inability to provide such costs are no justification for rejecting
Krakatau's response and applying facts available.
The petitioners maintain that the Department should assign Krakatau
the higher of the highest dumping margin alleged in the petition or
calculated in the final determination, rather than the simple average
of the dumping margins alleged in the petition, because Krakatau has
not provided an adequate questionnaire response. The petitioners argue
that if the Department assigns Krakatau the simple average of the
petition dumping margins, Krakatau might receive a lower rate than it
might otherwise have received if it had cooperated, thus rewarding
Krakatau for not providing complete and accurate information in a
timely manner.
DOC Position: We agree with the petitioners. We did not request
that Krakatau provide cost and sales information that other respondents
in numerous antidumping duty proceedings have not been able to provide,
without undue hardship, in response to the Department's antidumping
duty questionnaire. Furthermore, Krakatau was given significant
guidance and assistance by the Department throughout this
investigation, but was unable to provide the Department with an
adequate response that could be verified and used in the final
determination. Consequently, the Department has no choice but to
continue to resort to facts available with respect to Krakatau in the
final determination as explained in detail below.
We provided Krakatau with numerous opportunities and guidance
throughout this proceeding to enable it to submit its cost and sales
data on a control-number-specific basis, as requested by the
Department's questionnaire, for purposes of calculating a margin for
Krakatau based on its own data. Despite the Department's numerous
attempts to assist Krakatau, Krakatau failed to provide critical
information needed for calculating a margin, thereby rendering its
information severely deficient and unusable. Specifically, prior to the
preliminary determination, the Department issued Krakatau a number of
instructional letters, including a second supplemental questionnaire
which was explicit regarding the information the Department needed from
Krakatau in order to further consider its response for verification and
the final determination (see July 8, 1999, letter from the Department
to Krakatau). In the July 8, 1999, letter, the Department requested for
each sales control number, production costs and
[[Page 73175]]
sales expenses unique to the control number, along with worksheets
showing how Krakatau arrived at its calculations for the requested
costs and sales expenses. Moreover, we requested Krakatau to provide
the costs for each control number on a monthly basis since evidence
suggested that Indonesia experienced high inflation throughout the POI.
In addition, the July 8, 1999, letter provided Krakatau with step-by-
step instructions for submitting the requested information noted above.
The July 8, 1999, letter also stated that if Krakatau could not
establish a unique cost for each product, it must describe in detail
the reason it could not provide such information. In summary, this
letter was designed to assist Krakatau and give Krakatau one final
opportunity to comply with the Department's reporting requirements
because the Department was fully aware that Krakatau was a pro se
company and had requested assistance in a timely manner under section
782(c)(1) of the Act. Having received the Department's assistance in
this regard under section 782(c)(2) of the Act, the ultimate burden was
on Krakatau to supply the Department with the requested information.
In its response to the Department's July 8, 1999, letter, Krakatau
(1) did not report control-number-specific, monthly costs (critical for
making fair value comparisons); (2) did not provide the requested
worksheets necessary for determining whether it properly reported its
sales expenses on a per-unit basis; and (3) did not explain in detail
why it was not able to provide the sales and cost information the
Department routinely requests and receives from respondents in other
antidumping duty cases. Furthermore, Krakatau offered no alternative
methodologies for meeting the Department's request for information
given its alleged inability to provide such information in the manner
requested by the Department. Rather, Krakatau continued to report a
standard sales expense amount irrespective of the POI month for each
control number reported in its home market and U.S. sales listings
without showing or explaining its calculation methodology, and one
standard production cost for each POI month which did not differentiate
between control numbers. With these significant deficiencies still
present in Krakatau's July 23, 1999, supplemental response, we notified
Krakatau on July 27, 1999, that the Department was unable to conduct a
meaningful verification of its response and that the supplemental
information Krakatau submitted on July 23, along with the information
previously submitted on June 25, 1999, did not provide the Department
with an appropriate basis on which to calculate an antidumping duty
margin for Krakatau in the final determination (see July 27, 1999,
letter from the Department to Krakatau).
Because Krakatau did not provide an adequate response that the
Department could verify and use in the final determination, despite
numerous opportunities and assistance afforded to it by the Department,
the Department does not consider Krakatau to have cooperated to the
best of its ability in this proceeding. Therefore, the Department has
relied on adverse facts available in accordance with section 776(b) of
the Act in making its final determination with respect to Krakatau.
Accordingly, the Department has assigned Krakatau the highest dumping
margin alleged in the petition, which is higher than the margin
calculated for Gunawan/Jaya Pari. See also ``Facts Available'' section
of this notice.
Comment 2: Exclusion From Investigation
Krakatau claims that its negligible exports of subject merchandise
to the U.S. market during the POI could not possibly cause or threaten
material injury to the domestic industry. Therefore, Krakatau maintains
that the Department should not impose antidumping duties on Krakatau's
U.S. exports of the subject merchandise.
The petitioners did not comment on this issue.
DOC Position: We disagree with Krakatau. The ITC, not the
Department, determines whether imports of the subject merchandise from
Indonesia have caused or threaten material injury to the domestic
industry. Therefore, Krakatau's argument is not one in which the
Department has jurisdiction to address. The Department determines
whether dumping exists. If we find dumping and the ITC finds material
injury, we must impose antidumping duties.
Comment 3: Adequacy of Questionnaire Response
Krakatau claims that it did not know how to report its information
in the format requested by the Department's original and supplemental
questionnaires because it was unfamiliar with the requirements of the
U.S. antidumping duty law and because it could not afford the services
of a consultant to prepare its response due to the adverse impact of
the Indonesian economic crisis on its operations. Instead, Krakatau
points out that it used its own resources to respond to the
Department's questionnaires to the best of its ability. In addition,
Krakatau alleges that the Department's guidance was inadequate in terms
of assisting it in reporting its cost and sales information in the
format requested by the Department. Therefore, Krakatau maintains that
the Department should not resort to facts available with respect to
Krakatau because Krakatau was unable to provide the Department with
certain requested information (i.e., assigning product control numbers
and reporting control number-specific costs) for which Krakatau did not
maintain or record in its accounting records.
The petitioners did not comment on this issue.
DOC Position: We disagree with Krakatau. As discussed in the
Department's position to Comment 1, the Department provided Krakatau
with numerous opportunities to submit in a timely manner critical cost
and sales information in the format requested in the Department's
antidumping duty questionnaire. In the final supplemental questionnaire
the Department issued to Krakatau on July 8, 1999, the Department
provided Krakatau with the actual calculation steps it needed to follow
in order to report its sales expenses in the manner requested by the
antidumping duty questionnaire. Additionally, in the supplemental
questionnaire, the Department outlined for Krakatau how it could comply
with the Department's request to report monthly, control-number-
specific cost data based on Krakatau's description of its own cost
records. Krakatau failed to provide the requested information despite
the Department's assistance efforts. In addition to these detailed
explanations and guidelines, we took the unusual step of sending a
Department official to Jakarta to answer any questions Krakatau staff
had concerning the contents of the Department's questionnaires. Having
received this assistance, the burden was on Krakatau to provide the
requested information. It did not. Therefore, the Department has no
alternative but to resort to adverse facts available in Krakatau's
case. (See ``Comment 1 above and ``Facts Available'' section of this
notice for discussion of adverse facts available rate assigned to
Krakatau.)
Continuation of Suspension of Liquidation
In accordance with section 735(c)(1)(B) of the Act, we are
directing the Customs Service to continue to suspend liquidation of all
entries of subject merchandise that are entered, or withdrawn from
warehouse, for
[[Page 73176]]
consumption on or after the date of publication of the final
determination in the Federal Register. The Customs Service shall
continue to require a cash deposit or posting of a bond equal to the
estimated amount by which the normal value exceeds the U.S. price as
shown below. These suspension of liquidation instructions will remain
in effect until further notice. The weighted-average dumping margins
are as follows:
------------------------------------------------------------------------
Weighted-
average
Exporter/manufacturer margin
percentage
------------------------------------------------------------------------
Gunawan/Jaya Pari.......................................... 42.36
PT Krakatau Steel.......................................... 52.42
All Others................................................. 42.36
------------------------------------------------------------------------
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, within 45 days, determine whether these imports are
materially injuring, or threaten material injury to, the U.S. industry.
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 for consumption on or
after the effective date of the suspension of liquidation.
This determination is issued and published in accordance with
sections 735(d) and 777(i)(1) of the Act.
Dated: December 13, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-33232 Filed 12-28-99; 8:45 am]
BILLING CODE 3510-DS-P
