[Federal Register Volume 60, Number 51 (Thursday, March 16, 1995)]
[Notices]
[Pages 14263-14270]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-6523]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-549-810]
Notice of Final Determination of Sales at Less Than Fair Value
and Final Negative Critical Circumstances Determination: Disposable
Pocket Lighters From Thailand
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: March 16, 1995.
FOR FURTHER INFORMATION CONTACT: David Boyland or Susan Strumbel,
Office of Countervailing Investigations, Import Administration,
International Trade Administration, U.S. Department of Commerce, 14th
Street and Constitution Avenue, NW, Washington, D.C. 20230; telephone
(202) 482-4198 and 482-1442, respectively.
Final Determination
We determine that disposable pocket lighters from Thailand are
being, or are [[Page 14264]] likely to be, sold in the United States at
less than fair value, as provided in section 733 of the Tariff Act of
1930 (the ``Act''), as amended. The estimated margins of sales at less
than fair value are shown in the ``Suspension of Liquidation'' section
of this notice.
Case History
Since the October 24, 1994 preliminary determination (59 FR 53414
(October 24, 1994)), the following events have occurred:
Between October 24 and October 28, 1994, we conducted verification
of the questionnaire responses. On October 31, 1994, petitioner
requested a public hearing. Respondent requested that the Department
postpone its final determination in this investigation on November 2,
1994. On November 16, 1994, the Department published its notice of
postponement of the final determination (59 FR 59211).
On February 1, 1995, petitioner filed a critical circumstances
allegation. The Department issued a preliminary negative critical
circumstances determination on March 3, 1994.
On February 13 and February 21, 1995, petitioner and respondent
filed case and rebuttal briefs, respectively. On February 28, 1995, the
Department held a public hearing.
Scope of the Investigation
The products covered by this investigation are disposable pocket
lighters, whether or not refillable, whose fuel is butane, isobutane,
propane, or other liquified hydrocarbon, or a mixture containing any of
these, whose vapor pressure at 75 degrees Fahrenheit (24 degrees
Celsius) exceeds a gage pressure of 15 pounds per square inch. Non-
refillable pocket lighters are imported under subheading 9613.10.0000
of the Harmonized Tariff Schedule of the United States (``HTSUS'').
Refillable, disposable pocket lighters would be imported under
subheading 9613.20.0000. Although the HTSUS subheadings are provided
for convenience and Customs purposes, our written descriptions of the
scope of these proceedings are dispositive.
Period of Investigation
The period of investigation (``POI'') is December 1, 1993 through
May 31, 1994.
Critical Circumstances
Petitioner alleged that critical circumstances exist with respect
to imports of disposable lighters from Thailand. In our determination
on March 3, 1995, pursuant to section 733(e)(1) of the Act and 19 CFR
353.16, we analyzed the allegations using the Department's standard
methodology.
On March 6, 1995, both petitioner and respondent submitted comments
with regard to the Department's preliminary negative critical
circumstances determination. In addition to submitting general
comments, petitioner also provided Port Import and Export Reporting
Services (``P.I.E.R.S.'') data (see, Exhibit C of petitioner's March 6,
1995 submission) in order to show that Thai Merry's shipments have
dropped off dramatically since the Department's preliminary affirmative
determination of sales at less than fair value (``LTFV''). According to
petitioner, the decline in imports of subject merchandise from Thailand
subsequent to the post-petition period indicates that critical
circumstances exist.
With respect to the additional information supplied by petitioner,
we note that the Department's analysis of critical circumstances
compared data covering December 1, 1993 through April 30, 1994 (the
``pre-petition period'') with data covering May 1, 1994 through
September 30, 1994 (the ``post-petition period''). As noted in the
preliminary negative critical circumstances determination, the
Department considered the post-petition period to be the first day of
the month of initiation through the period immediately prior to the
preliminary determination of sales at LTFV. While the data submitted by
petitioner show that shipments have declined subsequent to the
Department's preliminary LTFV determination, our analysis, and the
critical circumstances allegation itself, is based on respondent's
actions prior to the preliminary LTFV determination. Accordingly, while
we have examined the additional information provided by petitioner, it
does not alter our original analysis (see, February 27, 1995 Memorandum
to Susan H. Kuhbach, Director, Office of Countervailing Investigations
from David R. Boyland, Case Analyst, Office of Countervailing
Investigations). In the absence of information that would alter our
original analysis, we determine that critical circumstances do not
exist.
Class or Kind of Merchandise
The Department considers standard and child-resistant lighters to
be one class or kind of merchandise (see, Interested Party Comments,
Comment 1).
Product Comparisons
We have continued to treat standard lighters sold in the home
market as similar to child-resistant lighters, and identical to
standard lighters sold in the United States (see, Interested Party
Comments, Comment 2). For the U.S. sales compared to home market sales
of similar merchandise, we made an adjustment, pursuant to 19 CFR
353.57, for physical differences in merchandise.
Level of Trade
For the preliminary determination, respondent argued that, since
Thai Merry sells to large national distributors in the United States,
the home market sales used for comparison purposes should be limited to
those sales made to the single national distributor in the home market.
The Department, in its preliminary determination, stated that the
information submitted by the respondent did not justify distinguishing
between the national distributor in the home market and other
distributors.
Although the Department gave respondent the opportunity to provide
additional information to substantiate its claim that there is a
distinct national distributor level of trade in the home market,
respondent declined to do so. Moreover, at verification, we learned
that respondent's division of customers into either the retail level of
trade or the distributor level of trade was based solely on the volume
of lighters purchased by home market customers.
The Department analyzes levels of trade based on the differences in
functions performed by the seller or differences in the category of
customer. In this case, however, respondent based its level of trade
claim solely on differences in quantities purchased. Therefore, we have
not performed a level of trade analysis.
We note, however, that there are substantial differences in
quantities ordered by U.S. and home market customers. Moreover, within
the home market, sales are made in a wide range of quantities and with
larger quantities being sold at lower prices. In accordance with 19 CFR
353.55, we have identified the largest home market transactions and
have compared those with sales to the United States.
Fair Value Comparisons
To determine whether Thai Merry's sales for export 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.
We made revisions to Thai Merry's reported data, where appropriate,
based on verification findings. [[Page 14265]]
United States Price
Because Thai Merry's U.S. sales of disposable pocket lighters were
made to unrelated purchasers prior to importation into the United
States, and the exporter's sales price methodology was not indicated by
other circumstances, in accordance with section 772(b) of the Act, we
based USP on the purchase price (``PP'') sales methodology. We
calculated Thai Merry's PP sales based on packed, CIF prices to
unrelated customers in the United States.
We made deductions to the U.S. price, where appropriate, for
foreign inland freight, foreign brokerage/handling expenses, marine
insurance, and ocean freight. In calculating the imputed U.S. credit
expense, we used the borrowing rate in the United States on short-term
dollar-denominated loans (see, Interested Party Comments, Comment 11).
For a further discussion of the Department's treatment of U.S. credit
expense, please see Memorandum to Barbara R. Stafford, Deputy Assistant
Secretary, Investigations from Susan H. Kuhbach, Director, Office of
Countervailing Investigations, (September 26, 1994) on file in room B-
099 of the U.S. Department of Commerce.
In accordance with Section 772(d)(1)(B) of the Act, we made an
addition to the U.S. price for the amount of import duties imposed but
not collected on inputs. We also made an adjustment to U.S. price for
VAT taxes paid on the comparison sales in Thailand, in accordance with
our practice, pursuant to the Court of International Trade (``CIT'')
decision in Federal-Mogul, et al versus United States, 834 F. Sup.
1993. See, Preliminary Antidumping Duty Determination and Postponement
of Final Determination; Color Negative Photographic Paper and Chemical
Components Thereof from Japan, 59 FR 16177, 16179 (April 6, 1994), for
an explanation of this tax methodology.
Foreign Market Value
In order to determine whether there was a sufficient volume of
sales in the home market to serve as a viable basis for calculating
FMV, we compared the volume of home market sales of subject merchandise
to the volume of third country sales of subject merchandise, in
accordance with section 773(a)(1)(B) of the Act. As a result, we
determined that the home market was viable.
We calculated FMV based on delivered prices, inclusive of packing,
to customers in the home market. From the delivered price, we deducted
home market packing and added U.S. packing costs.
Pursuant to section 773(a)(4)(B) of the Act and 19 CFR
353.56(a)(2), we made circumstance-of-sale-adjustments for differences
in movement charges between shipments to the United States and
shipments in the home market. We also made circumstance-of-sale-
adjustments for differences in advertising expenses, and direct selling
expenses, including payments made by Thai Merry to a third party. With
respect to the home market credit expense, we have attributed this
expense to only those home market sales identified as ``credit sales.''
Additionally, we note that respondent provided a value-based allocation
for advertising expense in its home market sales listing. We have
substituted respondent's value-based allocation with a per unit
advertising expense for the final determination.
Currency Conversion
We made currency conversions based on the official exchange rates
in effect on the dates of the U.S. sales as certified by the Federal
Reserve Bank of New York.
Verification
As provided in section 776(b) of the Act, we verified information
provided by the respondent using standard verification procedures,
including the examination of relevant sales, cost and financial
records, and selection of original source documentation used in making
our final determination.
Interested Party Comments
Comment 1: Respondent argues that since standard lighters can no
longer be imported into the United States because of a Consumer Product
Safety Commission (``CPSC'') regulation which came into effect after
the POI, standard lighters and child-resistant lighters should be
considered two separate classes or kinds of merchandise. In support of
its arguments, respondent has outlined differences between standard and
child-resistant lighters relevant to the Diversified Products criteria
(see, Diversified Product Corporation versus United States, 582 F.
Supp. 887 CIT 1983). These differences are summarized as follows: (1)
The differences in physical characteristics are minor. However, the
fact that child-resistant lighters can be legally imported, while
standard lighters cannot, makes these differences significant,
according to respondent; (2) with respect to ultimate use, respondent
notes that the types of lighters are in fact different since the child-
resistant lighter is intended to be used only by persons mature enough
to understand the danger associated with the lighter; (3) as regards,
expectation of the ultimate purchaser, respondent argues that, while
both types of lighters can produce flames with which to light
something, the child-resistant lighter is expected to be safer; (4)
with respect to channels of trade, respondent notes that once the
inventories of standard lighters imported prior to July 12, 1994 have
been sold, the channels of trade of the two types of lighters will be
distinct because only one will exist legally (child-resistant) while
the other will not (standard); (5) as regards advertising and display,
respondent argues that child-resistant lighters are marketed as not
only disposable lighters, but child-proof products which marketing
officials promote as such. Additionally, according to respondent, the
CPSC regulation requires that the two types of lighters be displayed
differently and that once inventories of standard lighters are sold,
they will not be displayed or advertised anywhere; (6) with respect to
cost, respondent notes that the cost of producing the child-resistant
lighters is legally significant because the additional cost allows the
lighters to be exported to the United States. Also, with respect to
cost, respondent argues that the price of standard and child-resistant
lighters are sharply different.
Petitioner argues that both standard and child-resistant lighters
will be sold in competition with one another until the large stockpiled
supply of standard lighters imported prior to the CPSC ban is
exhausted. Petitioner argues that both lighters are functionally
equivalent, their physical characteristics are almost identical, the
ultimate use and expectation of the consumer is the same, and that
child-resistant and standard lighters are sold through the same
channels of distribution, with the same advertising and display.
Additionally, petitioner points out that the difference in price
between the standard and child-resistant lighter is distorted because
standard lighters are being dumped, as admitted in respondent's case
brief. Finally, petitioner states that the cost differences between the
two types of lighters is insufficient to support a class or kind
distinction.
DOC Position: Regarding the class or kind issue, the Department has
determined that there is only one class or kind of merchandise.
As regards physical characteristics, all parties agree, and the
record supports, that there is no distinct difference between standard
and child-resistant lighters. With respect to cost, the
[[Page 14266]] Department has already determined that it can match
child-resistant lighters sold in the United States to standard lighters
sold in the home market with a difference in merchandise adjustment
(``difmer'') (i.e., the difference in variable costs between the child-
resistant lighter and the standard lighter does not exceed 20 percent
of the total cost of manufacturing of the child-resistant lighter).
Therefore, we find that the difference in cost is not significant
enough to support a class or kind distinction. With respect to ultimate
use, and expectations of the ultimate purchaser, we note that, while
child-resistant lighters have a safety feature and the standard lighter
does not, the primary function of standard and child-resistant lighters
is the same. Additionally, the expectations of the consumer with regard
to the utility of child-resistant lighters and standard lighters are
the same. Also, regardless of the CPSC ban, standard and child-
resistant lighters are sold through the same channels of trade.
Finally, while we note that the advertising and display of standard and
child-resistant lighters may be marginally different because of the
child-safety feature, the differences in advertising and display are
minor and do not outweigh the fact that no differences are evident in
the other Diversified Products criteria, as noted above.
Respondent also argues that the import restriction distinction
between the two types of lighters is a ``clear dividing line,'' as that
term is used by the Department in Final Affirmative Less Than Fair
Value Determination: Sulfur Dyes, Including Vat Sulfur Dyes, from the
U.K. (``Sulfur Dyes From the U.K.'') 58 FR 3253 (January 8, 1993)). In
Sulfur Dyes From the U.K., the Department stated that ``when examining
differences in physical characteristics in the context of class or kind
analysis, the Department looks for 'clear dividing lines' between
product groups, not merely the presence or absence of physical
differences.'' (58 FR at 3254). According to respondent, because
standard lighters may no longer be imported, the Diversified Products
factors vis-a-vis child-resistant lighters are all diametrically
different.
Except for the import restriction associated with standard
lighters, respondent has provided no compelling reason to divide these
products into separate classes or kinds of merchandise. While
indicating that a ``clear dividing line'' is necessary to make a class
or kind distinction, the Department went on to state in Sulfur Dyes
from the U.K. that multiple classes or kinds did not exist because the
Department did not find ``clearly defined differences in any of the
Diversified Products criteria.'' In the instant case, the differences
presented by respondent to support its Diversified Products analysis,
as discussed above, are not compelling. Therefore, we continue to find
standard and child-resistant lighters to be one class or kind of
merchandise.
With respect to using an average-to-average methodology, we note
that, except in the most extraordinary circumstances, the Department's
long-standing practice is to compare individual U.S. transactions with
a weighted average FMV (see, 19 CFR 353.44(a)).
As to respondent's point that an average-to-average methodology
will be required under the new antidumping law, we note that this final
determination is being made pursuant to the previous law, which does
not require an average-to-average comparison. Finally, with respect to
applying a zero margin to child-resistant lighters, we note that the
Department applies a dumping margin on the basis of a class or kind of
merchandise, not on a product-specific basis (see, section 731 of the
Tariff Act of 1930, as amended).
Comment 2: Petitioner objects to the Department's preliminary
determination that child-resistant lighters can be compared to home
market sales of standard lighters. Petitioner argues that, based on the
differences in the cost of manufacture and commercial value, standard
and child-resistant lighters should not be considered ``similar.''
According to petitioner, information that it submitted shows that the
two types of lighters are not ``approximately equal in commercial
value.'' Thus, petitioner argues that the requirements of 19 U.S.C.
1677(16)(B)(iii) have not been met. Instead, the Department improperly
relied solely on the physical characteristics of the merchandise in
making its preliminary determination. Furthermore, petitioner argues
that the commercial value aspect of 19 U.S.C. 1677(16)(b)(iii) is
designed for cases such as the instant one in which the differences in
overall cost and commercial value result from the mandatory child-
safety requirements. Such differences are attributable to capital
expenditures for research and development. Petitioner argues that the
Department should at least factor in the high cost of developing the
safety mechanism when making its such or similar analysis.
Respondent argues that there is no support for using cost in
determining whether the two lighters can be considered similar, except
to the extent that the Department will generally not compare products
where the difmer exceeds 20 percent of the cost of manufacturing of the
U.S. product. Moreover, respondent argues that the Department's
preliminary determination was consistent with past cases and the CIT's
ruling in United Engineering and Forging versus United States, 779 F.
Sup. 1375, 1381 (1991)).
DOC Position: We agree with respondent. The Department places
little weight on the commercial value criterion in determining what
constitutes such or similar merchandise (see, Final Results of
Administrative Review: Certain Forged Steel Crankshafts from the United
Kingdom , 56 FR 5975 (February 14, 1991)), and Final Determination of
Sales at Less Than Fair Value: Certain Portable Electric Typewriters
From Singapore, 58 FR 43334 (August 16, 1993)). Instead, the Department
focuses on the similarity of the physical characteristics, as evidenced
in the Department's such or similar determination in this
investigation. The Department's position in this regard has been upheld
by the CIT in United Engineering.
In this case, child-resistant and standard lighters closely
resemble each other in terms of their physical characteristics.
Moreover, while the commercial value of the two products (as reflected
in their prices) differed, the difference was not large (in absolute
terms) and decreased over time. Therefore, we have continued to find
that child-resistant lighters are similar to standard lighters.
Except for our general practice of limiting difmers to those which
do not exceed 20 percent of the cost of manufacturing the good sold in
the United States, we do not consider cost in determining what
constitutes similar merchandise. We note that the alleged research and
development costs referred to by petitioner would not be included in
the difmer, which includes only variable manufacturing costs.
Comment 3: Petitioner argues that Thai Merry gives quantity
discounts, which eliminates the need for a level of trade adjustment.
Petitioner also argues that Thai Merry has been unable to determine
which home market customers are retailers and which home market
customers are distributors, and instead has simply relied on volume
sold to distinguish between these levels. Additionally, petitioner
notes that Thai Merry has been unable to substantiate its claim that
the distributor level of trade should be sub-divided into distinct
levels of trade. Thus, according to petitioner, all of Thai Merry's
home [[Page 14267]] market sales should be found to be made at the same
level of trade.
Respondent argues that petitioner is incorrect in stating that Thai
Merry was unable to identify which customers were retailers or
distributors. Respondent argues that the threshold it provided for
dividing its customers into the two groups was conservative, i.e., this
threshold eliminates home market customers from the Department's LTFV
comparison that are clearly not distributors. Additionally, some of
those home market customers identified as distributors were in all
likelihood retailers. Respondent argues that use of a threshold was
necessary given the difficulty in identifying the exact level of trade
of every home market customer. Finally, respondent argues that the
Department is required to make comparisons at the same level of trade
(see, 19 CFR 353.58) and there is a significant dividing line between
the quantities purchased by the retail customers in the home market and
the quantities purchased by the large national distributors in the
United States. Therefore, the Department should rely on sales to home
market distributors, as defined by respondent, in making its
comparisons to U.S. sales.
DOC Position: While this issue has been framed in the context of
level of trade, the Department finds that the appropriate approach is
to identify home market sales that are in quantities comparable to U.S.
sales. We note that there is no home market customer who orders in
quantities approaching the average quantities ordered by U.S.
customers. Nevertheless, we examined the data and found that average
transaction prices varied with quantity. Therefore, we have selected
for comparison purposes large quantity home market transactions (see,
March 8, 1995 Memorandum to Barbara R. Stafford, Deputy Assistant
Secretary, Investigations from David Boyland, Case Analyst, Office of
Countervailing Investigations).
Comment 4: Petitioner argues that the Department's verification
report indicates that the U.S. price changed between the purchase order
date and the invoice date. As such, petitioner argues that the invoice
date should be considered the date of sale.
Respondent argues that the Department's verification report is
misleading because, while the invoice date is Thai Merry's first record
of the sale price, previously submitted information shows that the
price and quantity are recorded at the time of the purchase order.
Additionally, respondent argues that the ``revisions'' referred to in
the verification report were prospective changes in price, as opposed
to price changes to orders already made.
DOC Position: The verification report states that ``during our
examination of U.S. sales completeness...the standard and child-safety
lighter per-unit prices were applied consistently throughout the POI
with several upward price revisions occurring in the latter half of the
POI.'' ``Revisions,'' in the context of the verification report,
referred to assumed increases in the negotiated price, as opposed to a
change in price between the purchase order date and the invoice date.
The verification report also states that the first ``written''
record generated by Thai Merry of the negotiated price is the invoice.
While respondent has cited to a Purchasing and Payment Records
spreadsheet maintained by U.S. customers, this information does not by
itself prove when the purchase price was first recorded. The
spreadsheet includes Thai Merry's invoice number and hence was
generated sometime after Thai Merry's invoice information, including
unit price, was available to the U.S. customer. Therefore, it is not
correct to say, as respondent claims, that this information proves the
price was recorded at the time of the purchase order.
Given the fact that respondent's price negotiations with its U.S.
customers were unrecorded, it was not possible to ``verify'' that the
purchase order date was the date on which both price and quantity were
fixed. The information provided by respondent indicates that it is
reasonable to assume that the price was established prior to the
purchase order and that the purchase order established the quantity.
However, as the Department noted in Certain Stainless Steel Butt-Weld
Pipe and Tube Fittings From Japan; Final Results of Antidumping Duty
Administrative Review, 59 FR 12240, 12241 (March 16, 1994)), the date
of sale is evidenced by the ``first document which systematically
records agreement as to price and quantities * * * [m]oreover the
invoice date represents an accurate, reasonable, consistent methodology
to determine the date of sale.'' In this case, the appropriate date of
sale is the invoice date because it is the first written record
generated by Thai Merry of both price and quantity. Additionally, this
date was subject to verification during our examination of the U.S.
sales listing.
Comment 5: With respect to certain sales at the end of the POI,
respondent argues that a fire at one of Thai Merry's facilities made it
impossible to fill the entire May 15, 1994 purchase order. According to
a May 26, 1994 letter from the U.S. customer to Thai Merry, the
customer notified Thai Merry of a certain volume of lighters that would
be accepted for shipment. Respondent argues that the amount of child-
resistant lighters ultimately shipped pursuant to both the May 15, 1994
purchase orders and the June 15, 1994 purchase orders matched the
volume accepted by the U.S. customer in the May 26, 1994 letter to Thai
Merry. Accordingly, since these shipments were accepted during the POI
(i.e., May 26, 1994), the sales reflected in the June 15, 1994 purchase
orders should be considered POI sales. In response to the Department's
verification report, which indicates that the unfilled portion of the
May 15, 1994 purchase order was not accounted for in the subsequent
June 15, 1994 purchase orders, respondent argues that this is due to
the fact that standard lighters ordered on May 15, 1994, could not be
re-ordered because of the pending CPSC ban.
Petitioner argues that respondent's explanation should be rejected
because (1) the terms of the purchase could be changed up to the
invoice date, (2) there is no clearly established connection between
the June 15 and May 15 purchase orders, and (3) the May 26, 1994 letter
discusses a forthcoming purchase order which was not found to exist.
DOC Position: As noted in Comment 5, the Department is considering
the invoice date to be the date of sale. Accordingly, only those sales
invoiced during the POI will be considered POI sales for purposes of
the final determination.
Comment 6: Petitioner argues that sales by Thai Merry Hong Kong
(``TMHK'') to the United States should be included in the Department's
LTFV comparison. Petitioner notes that the factors the Department
considers when determining if the sales of two parties should be
collapsed include: (1) whether the companies are closely intertwined;
(2) whether transactions take place between the companies; (3) whether
the companies have similar types of production equipment, such that it
would be unnecessary to retool either plant's facilities before
implementing a decision to restructure either company's manufacturing
facilities; and (4) whether the companies involved are capable, through
their sales and production operations, of manipulating prices or
affecting production decisions (see, Final Determination of Sales at
Less Than Fair Value: Certain Granite Products from Italy, 53 FR 27187
(July 19, 1988)). Petitioner argues that the
[[Page 14268]] longstanding business relationship and the continued use
of the Thai Merry name indicate that the relationship between the two
companies did not end subsequent to Thai Merry's gradual sale of its
ownership interest in TMHK. Petitioner argues that the relatedness
issue is only one prong in the test used by the Department in
determining whether to collapse sales. When the preceding factors are
combined with the fact that the two companies are capable of price
manipulation, it is clear that TMHK's sales to the United States should
be included in the calculation of FMV. Petitioner argues that this
potential to manipulate prices is the primary factor in determining
whether TMHK's sales should be included in FMV and that the facts in
this case show that there was price manipulation.
Respondent argues that section 771(13) of the Tariff Act of 1930,
19 U.S.C. 1677(13), governs the determination of ``related parties.''
Under this section of the statute, the Department has established a
test under which parties will not be considered related unless
ownership is greater than five percent. Respondent argues that since
Thai Merry has no ownership interest in TMHK, as shown at verification,
the two parties are not related. Respondent also argues that the
evidence provided by petitioner for collapsing the two parties is
unconvincing because: (1) The similarity in names between Thai Merry
and TMHK is merely cosmetic, and in fact TMHK has changed its name, (2)
buyers and sellers typically have frequent business transactions, and
(3) the price TMHK charged Thai Merry's U.S. customer is not unusual
because unrelated parties often sell similar products for similar
prices.
DOC Position: We note that the Department only collapses sales
under section 773(13) of the statute if the parties are related. Since
Thai Merry has no ownership interest in TMHK, the Department has not
considered TMHK's sales to the United States for purposes of
calculating the margin.
Comment 7: Petitioner argues that because of the nature of payments
by Thai Merry to Thai Merry America (``TMA'') (i.e., a specific amount
based on each U.S. sale), and because of the type of assistance being
provided by TMA (i.e., production consulting, research and
development), the payments to TMA should be treated as a direct selling
expense. Petitioner argues that the payments to TMA were, in part, for
research and development for the child safety lighter. Thus, the
payments to TMA were tied to the sale of a specific product line.
According to petitioner, the other assistance provided by TMA, for
example, production management, can also be tied directly to the sale
of child-resistant and standard lighters because, in the absence of
this assistance and the costs associated with them, these products
would not have been manufactured. Finally, petitioner argues that it is
precisely because these payments are directly tied to U.S. sales that a
circumstance-of-sale adjustment is necessary.
Respondent argues that the TMA payments, as characterized by
petitioner, indicate that these payments were related to production, as
opposed to sales. While these payments resemble commissions, they are
actually G&A expenses that do not qualify for a circumstance of sale
adjustment.
DOC Position: Before determining how to treat this payment, we
examined the payment arrangement between Thai Merry and TMA. Under this
arrangement Thai Merry's ultimate payment to TMA is based on total U.S.
sales. The services provided by TMA consist of production consulting,
research and development, and market research. Because the payments to
TMA are not connected with sales activity in the United States, we do
not view them as commissions. However, since the payments to TMA are
based on each U.S. sale, and calculated as a percentage of each U.S.
sale, we consider these payments to be a direct U.S. selling expense.
As a consequence, for purposes of the final determination, we have
added these payments to FMV.
Comment 8: Respondent argues that the incentive bonuses paid to
home market salesmen were not commissions. According to respondent,
this is because these payments are not tied to the number or value of
sales. Respondent argues that this is evidenced by the fact that
Chamber (the home market selling arm of Thai Merry) does not keep
records of sales per salesperson. Additionally, respondent notes that
there is no correlation between the amount of incentive bonus paid and
the value of sales during the previous month; i.e., if the bonus was in
fact a commission based on the value of sales, one would expect that
when the value of sales dropped the subsequent amount of incentive
bonuses paid would also drop. This was not the case.
DOC Position: Based on our review of the information, we see no
correlation between home market sales and the ``incentive bonuses''
paid to Chamber's salesmen. The absence of an observable correlation or
relationship between sales and incentive bonuses supports respondent's
claim that these payments are not commissions. Therefore, for the final
determination, we have determined that these payments are not
commissions.
Comment 9: Petitioner argues that for the final determination the
Department should apply the credit expense to only those home market
sales identified as ``credit sales.''
DOC Position: We agree and have made this correction.
Comment 10: Petitioner argues that the home market freight expense
should have been allocated on a weight or per-unit basis, instead of
using a value-based factor. Given customary freight rate structures, it
is unreasonable, according to petitioner, to allocate freight expenses
based on the value of subject merchandise. Finally, given respondent's
refusal to cooperate in providing a non-value-based freight amount, as
well the Department's preference for not including depreciation as part
of the freight expense, the Department should use the per-unit freight
cost incurred by Thai Merry on direct sales shipped in the home market,
as best information available (``BIA'').
Respondent argues that it was not possible to provide a weight-
based or per-unit cost for home market inland freight because home
market deliveries include subject and non-subject merchandise. Hence,
there is no common denominator with which to perform an allocation of
cost. Additionally, a weight-based calculation is not possible because
records are not kept with respect to total weight shipped. Respondent
also argues that there have been cases in which the Department has
accepted a value-based allocation (see, Antifriction Bearing (Other
than Tapered Roller Bearings) and Parts Thereof from France, Germany,
Italy, Japan, Romania, Singapore, Sweden, Thailand and the United
Kingdom, 58 FR 39729 (July 26, 1993)).
DOC Position: We agree with respondent. The Department verified
elements of respondent's value-based freight allocation. This
allocation incorporated expenses, including depreciation, which were
directly related to Chamber's transportation costs. The allocation
involved the appropriate costs and therefore appeared to be reasonable.
As such, we have continued to use a value-based factor for the final
determination.
Comment 11: Petitioner argues that, in this case, the use of a U.S.
interest rate to calculate the U.S. credit expense does not represent
``commercial reality.'' According to petitioner, since Thai Merry has
no loans in U.S. dollars and, therefore, finances all of its operations
[[Page 14269]] in Thai baht, the actual credit expense to Thai Merry is
a home market borrowing expense. Petitioner argues that, if the
Department must use a U.S. interest rate, it should at least impute a
credit expense based on a Thai interest rate for the ``time on the
water'' period between shipment date and payment date.
Respondent argues that, with respect to the U.S. credit expense
calculated at the preliminary determination, the Department correctly
interpreted LMI-LA Metalli Industriale, S.p.A. v. United States, 912 F.
2d. 455, 460 (Fed. Cir. 1990)) (``LMI''). Respondent argues that LMI
was not a fact-specific decision in which the respondent company's
dollar loans justified the use of a U.S. dollar interest rate. Rather,
according to respondent, the Court focused on the availability of a
lower borrowing rate. Respondent argues that the Department reasonably
found the borrowing rate to be based on the currency of sale at the
preliminary determination and should continue to use a dollar interest
rate for the final determination.
DOC Position: While Thai Merry had liabilities denominated solely
in baht, some of its assets (e.g., receivables pursuant to U.S. sales)
were denominated in dollars. As such, the cost to Thai Merry is the
cost it would incur in discounting a dollar receivable which would be
based on a dollar interest rate.
Because we believe that our original decision was correct and is
supported by LMI, we have continued to use a U.S. dollar interest rate
to calculate the U.S. credit expense.
Comment 12: Respondent argues that the methodology employed by the
Department at the preliminary determination, while consistent with the
decision in Federal-Mogul, et. al. v. United States, (``Federal
Mogul'') 834 F. Supp. 1391 (CIT)), is inconsistent with the expectation
of tax neutrality under GATT and ignores the methodology sanctioned by
a higher court, the U.S. Court of Appeals for the Federal Circuit (see,
Zenith Corp. v. United States, (``Zenith'') 988 F.2d 1573, 1583 n.4
(Fed. Cir, 1993) which stated that it was appropriate for the
Department to adjust U.S. price by the amount of VAT actually paid on
home market sales. Because the adjustments pursuant to Federal Mogul
exaggerate existing margins, the use of this methodology is in
violation of GATT. Respondent cites Article VI(1) and Article VI(4) of
the GATT and Article 2(6) of the Agreement on Implementation of Article
VI of the GATT, as unambiguously requiring that differences in the
level of indirect taxes shall not create/inflate dumping margins.
Petitioner argues that respondent's reliance on footnote 4 of Zenith is
incorrect because the Court of International Trade found that
``footnote 4 (of Zenith) is clearly at odds with Zenith and the
language of the statute and is dicta.'' Petitioner states that in
Avesta Sheffield, Inc. et. al. v. United States, Slip Op. 93-217 (CIT
Nov. 18, 1993) the court also found footnote 4 of Zenith to be dicta.
Additionally, with respect to respondent's argument that the
Department's VAT methodology is in conflict with Article VI(4) of GATT,
petitioner argues that under a proper interpretation of this article,
in which a multiplier effect only occurs in the presence of a dumping
margin, the Department's methodology fully comports with GATT.
DOC Position: We agree with petitioner. The VAT methodology used at
the preliminary determination has been used by the Department for all
recent antidumping determinations and is in accordance with both the
statute and the GATT. Accordingly, for the final determination we have
continued to use the VAT methodology used for the preliminary
determination (see, Preliminary Antidumping Duty Determination and
Postponement of Final Determination; Color Negative Photographic Paper
and Chemical Components Thereof from Japan, 59 FR 16177, 16179, (April
6, 1994)).
Comment 13: Petitioner states that it is not clear whether the
Department verified that all of Thai Merry's advertising expenses were
related to lighter sales. Additionally, it is also not clear, according
to petitioner, whether Thai Merry's general ledger distinguishes
between advertising for lighters and advertising for scouring pads.
Petitioner notes that only advertising expenses associated with the
sale of disposable lighters should be used to adjust the FMV.
Respondent argues that the Department examined Thai Merry's
advertising expense adjustment and found no indication that the company
incurs advertising expense for anything other than the sale of
lighters. Accordingly, the Department should utilize the verified
figure for home market advertising expenses in the final determination.
DOC Position: We agree with respondent. During our verification of
Thai Merry's advertising expenses, we noted no information indicating
that Thai Merry paid for any advertising other than advertising for
lighters. Accordingly, we have used the advertising expense, as
verified, for the final determination.
Comment 15: Petitioner argues that sales of imprinted and non-
imprinted Aladdin lighters, as well as wrapped lighters, should be used
in the calculation of FMV without a difmer adjustment because the
physical differences between these lighters and standard lighters are
minor. According to petitioner, respondent's argument that wrapped and
imprinted lighters should not be used in the FMV calculation because
there are no U.S. sales of such lighters is dubious since respondent
has already argued that standard and child-resistant lighters are one
such or similar category.
Respondent argues that it is a basic tenet of the antidumping law
that U.S. sales should be matched to identical sales in the home market
or, if an identical product is unavailable, the most similar home
market product should be compared to the U.S. sale. At verification,
respondent was able to identify home market sales of imprinted and non-
imprinted Aladdin lighters, as well as wrapped lighters. Since
imprinted and wrapped lighters are neither identical nor most similar
to U.S. sales, they should be excluded from the Department's LTFV
comparison.
DOC Position: We agree with respondent. Petitioner seems to argue
that imprinted and wrapped lighters sold in the home market should be
matched to non-imprinted, non-wrapped lighters sold in the U.S. This is
in spite of the fact that merchandise which is identical to the
merchandise sold in the U.S. is being sold in the home market. While
imprinted and wrapped lighters are within the same such or similar
category, they are not identical or most similar to the merchandise
sold in the United States. Therefore, we have excluded imprinted and
wrapped lighters from the calculation of FMV for the final
determination.
Comment 16: Petitioner argues that the Department should find
critical circumstances to exist. According to petitioner, when May 1994
shipments are excluded (i.e., the period which the Department referred
to as a unique ``spike''), Thai Merry's post-petition shipments
increased by an amount that can still be considered massive under 19
CFR 353.16(f)(2). Petitioner argues that critical circumstance should
be found to exist since the Department focused on the effect of the
CPSC ban, and that removing this period for comparison purposes still
yields a post-petition period increase which is ``massive.''
Additionally, because it received notification of the Department's
preliminary negative critical [[Page 14270]] circumstances
determination after close of business (``COB'') on March 3, 1995 and
the deadline for submitting comments to the determination was March 6,
1995, petitioner indicates that it was not allotted ``sufficient time''
to comment on the Department's analysis.
Respondent states that, while the Department could have based its
negative preliminary critical circumstances determination on factors
other than the CPSC ban and its effect on shipments, the Department
correctly found that critical circumstances do not exist.
DOC Position: We first note that the Department's preliminary
negative critical circumstance determination was not based solely on
the effect of the CPSC ban on Thai Merry's shipments during the post-
petition period. In making the negative preliminary critical
circumstances determination, the Department stated that its decision
was ``[b]ased on (1) an evaluation of apparent domestic consumption
during the pre- and post-petition period, as calculated by petitioner,
(2) Thai Merry's share of domestic consumption during the pre- and
post-petition periods, (3) the shipment data provided by respondent as
compared to previous periods, and (4) consideration of the
circumstances surrounding the large increase in shipment in May 1994* *
*'' (see, page 7 of unpublished version of the Department's March 3,
1995 preliminary negative critical circumstances Federal Register
notice). Because no additional information has been provided by
petitioner that conflicts with our preliminary determination, we
continue to find that critical circumstances do not exist.
With regard to petitioner's claim that it did not have sufficient
time to analyze the Department's preliminary negative critical
circumstances determination, we note that petitioner did not request
additional information under administrative protective order (``APO'')
(i.e., the Department's February 27, 1995 analysis memo) with which to
make its analysis until late in the afternoon of March 6, 1995 (i.e.,
the deadline date). Additionally, we note that on March 6, 1995, the
Department offered petitioner an extension for filing comments on the
preliminary negative critical circumstances determination if requested.
Petitioner specifically declined to make an extension request (see,
March 7, 1995 memo to case file from David R. Boyland, Case Analyst,
Office of Countervailing Investigations).
Continuation of Suspension of Liquidation
We are directing the Customs Service to continue to suspend
liquidation of all entries of disposable lighters, that are entered, or
withdrawn from warehouse, for consumption on or after October 24, 1994,
the date of publication of our affirmative 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 of 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
Producer/manufacturer/exporter margin
percentage
------------------------------------------------------------------------
Thai Merry.................................................. 25.04
All Others.................................................. 25.04
------------------------------------------------------------------------
International Trade Commission (ITC) Notification
In accordance with section 735(d) of the Act, we have notified the
ITC of our determination. The ITC will now determine, within 45 days,
whether these imports are materially injuring, or threatening 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
cancelled. If the ITC determines that such injury does exist, the
Department will issue an antidumping order directing Customs officials
to assess antidumping duties on all imports of the subject merchandise
entered, or withdrawn from warehouse, for consumption on or after the
effective date of the suspension of liquidation.
Notification to Interested Parties
This notice also serves as the only reminder to parties 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: March 8, 1995.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 95-6523 Filed 3-15-95; 8:45 am]
BILLING CODE 3510-DS-P
