[Federal Register Volume 64, Number 61 (Wednesday, March 31, 1999)]
[Notices]
[Pages 15493-15508]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-7538]
-----------------------------------------------------------------------
DEPARTMENT OF COMMERCE
International Trade Administration
[A-583-830]
Notice of Final Determination of Sales at Less Than Fair Value:
Stainless Steel Plate in Coils From Taiwan
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: March 31, 1999.
FOR FURTHER INFORMATION CONTACT: Gideon Katz or Michael Panfeld, Import
Administration, International Trade Administration, U.S. Department of
Commerce, 14th Street and Constitution Avenue, NW, Washington, DC
20230; telephone: (202) 482-5255 or (202) 482-0172, 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
(April 1998).
Final Determination
We determine that stainless steel plate in coils (``SSPC'') from
Taiwan is 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 amended preliminary determination (Notice of Amended
Preliminary Determination of Sales at Less Than Fair Value: Stainless
Steel Plate in Coils from Taiwan, (Amended Preliminary Determination)
(63 FR 66785, December 3, 1998), the following events have occurred: We
conducted a cost verification of YUSCO's questionnaire response from
November 30-December 4, 1998, and a sales verification of YUSCO from
December 14-17, 1998. We also conducted verifications at Ta Chen
Stainless Pipe, Co. from December 18-21, 1998 and Ta Chen International
from January 12-15, 1999.
Petitioners and respondents submitted case briefs on February 8,
1999. On February 11, 1999, petitioners (the only party requesting a
public hearing) withdrew their request for the public hearing.
Petitioners and respondents submitted rebuttal briefs on February 16,
1999.
Scope of Investigation
For purposes of this investigation, the product covered is certain
stainless steel plate in coils. Stainless steel is an alloy steel
containing, by weight, 1.2 percent or less of carbon and 10.5 percent
or more of chromium, with or without other elements. The subject plate
products are flat-rolled products, 254 mm or over in width and 4.75 mm
or more in thickness, in coils, and annealed or otherwise heat treated
and pickled or otherwise descaled. The subject plate may also be
further processed (e.g., cold-rolled, polished, etc.) provided that it
maintains the specified dimensions of plate following such processing.
Excluded from the scope of this investigation are the following: (1)
Plate not in coils, (2) plate that is not annealed or otherwise heat
treated and pickled or otherwise descaled, (3) sheet and strip, and (4)
flat bars. The merchandise subject to this investigation is currently
classifiable in the Harmonized Tariff Schedule of the United States
(HTS) at subheadings: 7219.11.00.30, 7219.11.00.60, 7219.12.00.05,
7219.12.00.20, 7219.12.00.25, 7219.12.00.50, 7219.12.00.55,
7219.12.00.65, 7219.12.00.70, 7219.12.00.80, 7219.31.00.10,
7219.90.00.10, 7219.90.00.20, 7219.90.00.25, 7219.90.00.60,
7219.90.00.80, 7220.11.00.00, 7220.20.10.10, 7220.20.10.15,
7220.20.10.60, 7220.20.10.80, 7220.20.60.05, 7220.20.60.10,
7220.20.60.15, 7220.20.60.60, 7220.20.60.80, 7220.90.00.10,
7220.90.00.15, 7220.90.00.60, and 7220.90.00.80. Although the HTS
subheadings are provided for convenience and Customs purposes, the
written description of the merchandise under investigation is
dispositive.
Period of Investigation
The period of investigation (``POI'') is January 1, 1997, through
December 31, 1997.
Verification
As provided in section 782(i) of the Act, we verified the sales and
cost information submitted by the respondents for use in our final
determination. We used standard verification procedures, including
examination of relevant accounting and production records and original
source documents provided by respondents.
Facts Available
We determine that the use of facts available is appropriate for
YUSCO in accordance with section 776(a) of the Act, because it failed
to report all of its home market sales made during the POI.
Where necessary information is missing from the record, the
Department may apply facts available under section 776 of the Act.
Further, where that information is missing because a respondent has
failed to cooperate to the best of its ability, section 776(b) of the
Act authorizes the Department to use facts available that are adverse
to the interests of that respondent, which may include information
derived from the petition, the final determination, a previous
administrative review, or other information placed on the record. As
described below in detail in Comment 1, YUSCO did not act to the best
of its ability in the reporting of its home market sales. We have
chosen the highest of the calculated petition margins for Taiwan of
8.02 percent as total adverse facts available.
Middleman Dumping
1. Dumping Calculation
As a result of further analysis and comments raised by interested
parties, we have changed our middleman dumping methodology. As in our
Amended Preliminary Determination, for the final determination, we have
determined whether a substantial portion of Ta Chen's U.S. sales were
below acquisition costs by comparing the total value of stainless steel
plate sold below acquisition cost to the total value of all stainless
steel plate sales made by Ta Chen during the POI. We first identified
sales below acquisition cost by comparing Ta Chen's resale price for
stainless steel plate sold during
[[Page 15494]]
the POI to its total acquisition cost for this merchandise. We used
YUSCO's invoice price to Ta Chen as the basis for determining
acquisition cost. However, unlike our Amended Preliminary
Determination, we added to this cost an appropriate portion of Ta
Chen's interest expense and general and administrative expenses (G&A)
to obtain the total acquisition cost. We based the U.S. resale prices
on Ta Chen's sales to unaffiliated customers in the United States. From
that starting price we have continued to deduct further processing
costs, discounts, movement expenses (freight, insurance, U.S. duties,
and brokerage and handling fees), and the actual selling expenses
incurred by Ta Chen (commissions, warehousing charges, bank charges,
and indirect selling expenses), where applicable, as in our Amended
Preliminary Determination. We then compared that price, after
deductions, to the total acquisition cost. Based on this comparison,
44.53 percent of Ta Chen's resales to the United States were at prices
below total acquisition cost. Therefore, we determine that Ta Chen made
a substantial portion of its sales below total acquisition cost. As a
result of this determination, we have examined whether Ta Chen's U.S.
prices were substantially below its acquisition costs from YUSCO to
determine whether Ta Chen engaged in middleman dumping during the POI.
See Comment 9.
As we stated in the Amended Preliminary Determination, Congress has
left to the Department the discretion to devise a methodology which
would accurately capture middleman dumping. See S. Rep. No. 249, 96th
Cong., 1st Sess. at 94 (1979) (``Senate Report''). To determine the
magnitude of the losses incurred by Ta Chen in selling YUSCO's subject
merchandise to the United States during the POI, we divided the amount
of losses by the total sales value of all sales.
In the Amended Preliminary Determination, we calculated the amount
of losses by comparing a weight-averaged adjusted U.S. price to the
individual acquisition cost by model. We now believe this to be in
error. Therefore, for the final determination, we are comparing a
weighted-average adjusted U.S. price (as described above) to a
weighted-average total acquisition cost (i.e., invoice price plus an
appropriate portion of Ta Chen's interest and G&A expenses). A weighted
average to weighted average comparison is consistent with our
methodology for calculating a margin in a less-than-fair-value
investigation. See section 777A(d)(1)(A)(i).
Therefore, for the final determination, we multiplied the
difference between the weighted-average adjusted U.S. price and the
weighted-average total acquisition cost by the respective quantity of
each U.S. model to determine the ``amount of losses.'' Based upon this
calculation, we have determined that Ta Chen's losses on U.S. sales of
subject merchandise during the POI are 2.18 percent, which we deem to
be substantial. See Comment 11. Therefore, we find that Ta Chen engaged
in middleman dumping during the POI.
2. Cash Deposit Rate
Where a producer sells through an unaffiliated trading company and
has knowledge that the merchandise is intended for the United States,
we normally focus only on the producer's sales to the trading company
to determine the margin of dumping. However, as we stated in our
Amended Preliminary Determination, a producer may sell to an
unaffiliated reseller, such as a trading company which in turn sells
the producer's merchandise at prices below the trading company's
acquisition costs, thereby engaging in middleman dumping. Where we find
middleman dumping in an investigation, as here, we must calculate a
cash deposit rate that reflects that middleman dumping, as well as any
dumping which occurs from the producer to the trading company.
Therefore, we have assigned a cash deposit rate of 10.20 percent to
sales produced by YUSCO and sold to the United States through Ta Chen.
This reflects YUSCO's margin on U.S. sales to Ta Chen as well as the
middleman dumping by Ta Chen. See 19 CFR 351.106. Any sale of subject
merchandise by YUSCO other than through Ta Chen will be subject to a
deposit at the rate determined for YUSCO alone.
Interested Party Comments: YUSCO
Comment 1: Petitioners contend that a group of YUSCO's ``indirect
export sales'' (which we call ``scenario two'' sales) are, in reality,
unreported home market sales. Petitioners note that these sales differ
from export sales in four respects: (1) These sales are not packed in
the manner usually required for export; (2) these sales are shipped to
the customer's warehouse in Taiwan; (3) these sales do not have a
completed shipping number (unlike direct export sales); and (4) these
sales are subject to domestic value-added tax (VAT) (unlike direct
export sales). Moreover, petitioners maintain that YUSCO was unable to
support its claim of knowledge that the merchandise was exported.
Petitioners assert that without such proof and in light of the evidence
gathered at verification, the Department should include these sales in
YUSCO's home market database. Petitioners further argue that the
Department should not allow any deductions from the gross unit price
because these sales were unreported and YUSCO has not made a timely
claim for adjustments.
YUSCO argues that the Department should treat YUSCO's scenario two
sales as third country sales. The determining factor, according to
YUSCO, is the extent of the producer's knowledge of the final
destination of these sales at the time of sale. Respondent explains
that the Department and the courts have, in similar cases, considered
sales to home market customers as export sales when the producer knew
at the time of sale that the merchandise would be exported. Respondent
cites to several cases to illustrate its point, including Certain Hot-
Rolled Carbon Steel Flat Products from Korea, 58 FR 37176 (July 9,
1993) (finding that a sale to a home market customer was an export sale
where the customer had knowledge of export, but no specific knowledge
of the customer's further manufacturing).
YUSCO claims that the Department verified that YUSCO did indeed
know at the time of the sale that the scenario two sales were for
export to third countries. YUSCO argues that the Department verified
that YUSCO used information provided by customers at the time of order
to assign order numbers, the prefix of which always begins with ``U''
(for export) and a country code, effectively labeling these sales as
export sales, and that YUSCO's customers for scenario two sales handled
Taiwan custom clearance, further demonstrating exportation.
YUSCO claims that contrary to petitioners' assertion, every
government uniform invoice (``GUI'') for scenario two sales has a
shipping number followed by an asterisk, and that the asterisk is
additional evidence that shows specific knowledge that the SSPC was
destined for export. With regard to petitioners' claim that scenario
two sales do not require any special export packing, YUSCO claims that
nothing on the verified record indicates that packing specifications
for scenario two sales were different from the packing specifications
for direct export sales.
YUSCO argues that its collection of VAT from scenario two
customers, and place of delivery of scenario two sales, are both
irrelevant to the determination of the ultimate market for these sales,
because, while it is YUSCO's responsibility to collect VAT from a
[[Page 15495]]
Taiwan company, in the end there is actually no VAT paid because the
customer obtains a refund from the government. YUSCO cites Antifriction
Bearings (Other than Tapered Roller Bearings) an Parts Thereof from
France, et al, 60 FR 10900 (February 28, 1995), a case in which the
Department determined that with regard to indirect export sales, the
collection of VAT by the respondent is ``not a determinant of the
ultimate destination of the merchandise.''
Department's Position
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(d) and (e) of the Act, facts otherwise available in reaching the
applicable determination. Thus, pursuant to 776(a), the Department is
required to apply, subject to section 782(d), facts otherwise
available. Pursuant to section 782(e), the Department shall not decline
to consider such information if all of the following requirements are
met: (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.
We find, based on the evidence set out below, that by not reporting
a large portion of the home market database (so-called scenario two
sales), YUSCO withheld information that had been requested by the
Department (i.e., all home market sales of the foreign like product)
and did not act to the best of its ability in providing this
information. Because the Department discovered the existence of these
sales only at verification, this information was not provided in a
timely manner (i.e., in response to Section B of the Department's
questionnaire). Furthermore, YUSCO's withholding of crucial information
which the Department needed to calculate an accurate normal value
significantly impeded the Department's investigation. Moreover, the
Department cannot consider the information presented at verification
because : (1) The information was not submitted by the established
deadline; (2) the information discovered at verification is so
incomplete that it cannot serve as a reliable basis for reaching the
applicable determination; and (3) the information cannot be used
without undue difficulties. As a result, we must rely on the facts
otherwise available. Where the Department determines that an interested
party has failed to cooperate by not acting to the best of its ability
to comply with a request for information, section 776(b) of the Act
provides that the Department may use an adverse inference in selecting
from the facts available. See, e.g., Roller Chain, Other Than Bicycle,
From Japan; Final Results and Partial Recission of Antidumping Duty
Administrative Review, 63 FR 63671 (Nov. 16, 1998); Certain Welded
Carbon Steel Pipes and Tubes From Thailand: Final Results of
Antidumping Duty Administrative Review, 62 FR 53808, 53819-20 (Oct. 16,
1997). We have determined, as described below, that YUSCO failed to
cooperate within the meaning of Section 776(b) and have applied as
facts available the highest petition margin, 8.02%. See e.g., Notice of
Final Determination of Sales at Less than Fair Value: Certain Preserved
Mushrooms from Chile, 63 FR 56613, 56620 (October 22, 1998); Notice of
Final Determination of Sales at Less Than Fair Value: Stainless Steel
Wire Rod from Spain, 63 FR 40391, 40396 (July 29, 1998) (applying
adverse facts available when certain requested information is withheld
by an interested party in its questionnaire response, but discovered at
verification). See Facts Available Memorandum from Rick Johnson to
Edward Yang, March 19, 1999 for full discussion.
Total Facts Available
Section 773(a)(1)(B) of the Act requires that, in determining
normal value, the Department use all sales of the foreign like product
sold for consumption in the exporting country, provided the sales are
in the usual commercial quantities, made in the ordinary course of
trade and, to the extent practical, at the same level of trade as the
export price or constructed export price sale. Our questionnaire
requires that where the home market is viable, respondents report all
sales of the foreign like product sold in the home market. See
Questionnaire at B-1.
The Department's antidumping questionnaire issued to YUSCO, at B-1,
notes that Section B of the questionnaire ``provides instructions for
reporting your sales of the foreign like product in your home market or
a third-country market.'' Foreign like product, in turn, is defined in
the glossary to the antidumping questionnaire as referring ``to
merchandise that is sold in the foreign market and that is identical or
similar to the subject merchandise. When used in the questionnaire,
foreign like product means all merchandise that is sold in the foreign
market and that fits within the description of merchandise provided in
Appendix III to the questionnaire. (Section 771(16) of the Act).''
Therefore, it is clear from the instructions in the questionnaire that
respondent is required to report all sales of subject merchandise in
the foreign market. Furthermore, in explaining how to report customer
codes for home market sales, the questionnaire states that, ``{i}f
known, identify customers that export some or all of their purchases of
the foreign like product. Explain how you determined which sales were
for consumption in the foreign market.'' See Questionnaire at page B-8.
This instruction clearly places an obligation upon a respondent and
contemplates, in accordance with the section 773(a)(1)(B) of the
statute, that sales for consumption in the home market be reported as
home market sales. Moreover, the questionnaire specifically asked
respondent to identify customers that export and explain how it
determined what sales were for home market consumption.
The record establishes that YUSCO failed to report a substantial
portion of sales consumed by home market customers. Moreover, YUSCO
failed to identify these customers and explain how it determined what
sales to report. As a result, the Department was unaware of the
existence of these so-called scenario two sales until verification. See
Verification Report at 6. At verification, we found that YUSCO
erroneously considered a substantial portion of its sales as third
country export sales, even though they were sales to unaffiliated home
market customers. See Verification Report at 6-7.
Further, we learned for the first time at verification that in
determining that these scenario two sales were for export, YUSCO relied
solely upon its internal classifications. Under YUSCO's system, sales
with order numbers starting with ``D'' are home market sales and order
numbers starting with ``U'' are destined for export. However,
verification revealed that at least some portion of sales classified
under ``U'' were consumed in the home market. YUSCO merely relied upon
customers' statements that a product would be exported, without taking
into account whether the customer would consume the SSPC by using it to
produce non-
[[Page 15496]]
subject merchandise prior to export. YUSCO's internal classifications
were therefore insufficient and unreliable in this regard.
We found at verification that one group of these scenario two
sales, classified by YUSCO as ``UZ sales,'' accounted for a substantial
portion of all scenario two sales. We found that all the customers
which made up this subgroup of UZ sales were pipe manufacturers located
in the home market. See Verification Report at 7 and Exhibit 7.
Therefore, it is clear that YUSCO knew or had reason to know that the
sales of SSPC to these pipe customers would be used in Taiwan to
manufacture non-subject merchandise (i.e., consumed in Taiwan). See
Verification Report at 7. The other scenario two sales (also
substantial in number), which were coded by YUSCO with a ``U'' at the
beginning of the order numbers, were also sales made to companies in
Taiwan. See Verification Report at 6-7. YUSCO provided no information
about these customers, except for one customer, which YUSCO stated
generally further manufactures SSPC into sheet, i.e., non-subject
merchandise, before export. See September 4, 1998 YUSCO supplemental
questionnaire response. Therefore, from what information was provided,
YUSCO knew that at least some ``U'' sales of SSPC were consumed in the
home market by Taiwan manufacturers of downstream products. Although we
took as exhibits sales listings of UZ sales and other ``U'' sales, and
while they provided information as to gross unit prices and quantity,
YUSCO did not provide us with sufficient product or customer
information to allow us to determine if the merchandise sold was
exported or further manufactured into non-subject merchandise in
Taiwan. See Verification Exhibits 7 and 8.
YUSCO argues that the so-called scenario two sales were ``indirect
export sales'' ultimately destined for export to third countries by
YUSCO's Taiwanese customers. Because, according to YUSCO, at the time
of sale YUSCO had knowledge that these sales were ultimately for export
to third countries, YUSCO claims that it was correct in not reporting
these sales as home market sales, even though sales were made to home
market customers and shipped within the home market. As noted above,
the Department's questionnaire requires that all sales of the foreign
like product in the home market be reported (except as specifically
provided for in the questionnaire which do not obtain here) and places
an obligation on the respondent to identify customers that export and
explain how it determined sales were for consumption in the home
market.
As noted above, under section 773(a)(1)(B), normal value is based
on sales of the like product for consumption in the home market. Thus,
sales should be excluded from the home market database only if a
respondent knew or had reason to know that merchandise was not sold for
home consumption. See INA Walzlager Schaeffler Kg v. United States, 957
F. Supp. 251 (CIT 1997). Therefore, only if YUSCO could demonstrate
that it knew or had reason to know that merchandise subject to
investigation was not sold for consumption in the home market under
section 773(a)(1)(B) might it have been appropriate for YUSCO to omit
these so-called scenario two sales as home market sales. In this case,
substantial evidence establishes that this was not the case. It is
without question that merchandise sold in the home market, even if
ultimately destined for export, is consumed in the home market in
producing non-subject merchandise prior to exportation. See, e.g.,
Certain Hot-Rolled Carbon Steel Flat Products From Korea, 58 FR 37176
(July 9, 1993)(Comment 9); Dynamic Random Access Memory Semiconductors
of One Megabit and Above From the Republic of Korea, 58 FR 15467 (March
23, 1993). Therefore, YUSCO should have reported as home market sales
at least the portion of the scenario two sales (UZ sales) that were
consumed in the home market, regardless of whether the non-subject
merchandise made by these customers from YUSCO's merchandise was later
exported, because YUSCO knew or had reason to know that its pipe
customers would consume the SSPC in Taiwan to manufacture pipe.
With regard to the remaining high percentage of the non-reported
``U'' sales, it was incumbent upon YUSCO to demonstrate that it knew or
had reason to know that such sales to Taiwan customers were not
destined for home consumption. Because the Department first learned of
these sales during verification, it was compelled to review very
limited information. See Verification Report at 6. There was no
information concerning the customers involved in these ``U'' sales from
which we could determine if such customers were merely Taiwanese
resellers of SSPC for export or producers which had used YUSCO's
merchandise to manufacture non-subject merchandise in Taiwan. YUSCO had
no sales contracts or commercial invoices for ``U'' sales to
demonstrate its claim. The only evidence to which YUSCO could point to
establish that these sales were destined for export was YUSCO's
internal classifications, which categorized the sales as export sales.
See Verification Report at 7. Although YUSCO's invoices did have an
asterisk in the shipping number which we were told signified ``indirect
export'', as stated, all sales were made to Taiwan customers, and
YUSCO's classifications did not sufficiently describe the types of
customers. See Verification Report at 7. Thus, from such
classifications, one cannot distinguish whether the customer is a
manufacturer (e.g. pipe producer) or a mere reseller. Moreover, no
evidence at verification revealed that YUSCO packed such sales for
export. See Verification Report at 7. Again, these same internal forms
also characterized the other portion of the scenario two sales, ``UZ''
sales (which, as stated, were in and of themselves a substantial
percentage of home market sales), as destined for export, while
verification revealed that UZ sales were for consumption in the home
market in producing non-subject merchandise (pipe) prior to export. See
Verification Report at 7.
Because YUSCO's classification was inadequate, by relying on it
YUSCO failed to comply to the best of its ability with the Department's
instructions. Moreover, what information it did possess regarding its
Taiwan customers indicates that its merchandise was consumed in the
home market. Therefore, YUSCO should have reported such sales to the
Department in its questionnaire response. Because of its failure to
report a substantial portion of its home market sales to the
Department, which the Department did not learn until verification, it
was too late for the Department to verify and use these sales in
determining normal value. The information available to the Department
at verification only included gross prices and quantity; the
merchandise sold was not sufficiently described to permit model-
matching to U.S. sales (although the Department took a computer
diskette containing information about physical characteristics of the
scenario two sales at verification, the information was incomplete, not
verified, and in any event could not be utilized without undue
difficulty by the Department because it would have to be input
manually). Therefore, we determine that the information is so
incomplete that it cannot serve as a reliable basis for reaching our
determination of normal value.
We note that petitioners' argument regarding VAT is not valid since
although YUSCO collects VAT from Taiwan companies involved in indirect
[[Page 15497]]
exports, its customers are reimbursed by the Taiwan government upon
exporting the merchandise.
We also note that the circumstances of this case are different from
those articulated in Certain Cut-To-Length Carbon Steel Flat Products
from Korea, 58 FR 37176, 183 (July 9, 1993), which YUSCO cites for
support in deeming the scenario two sales as export sales. The crucial
distinction is that, in that proceeding, the respondent had timely
reported the sales at issue to the Department. Thus, the Department was
able to collect information, later verified, which established that the
sales at issue were home market sales because the respondent did not
know or have reason to know at the time of sale that its merchandise
was destined for export. The present case, to the contrary, involves a
large number of unreported sales which the Department was unaware of
until verification, and so was unable to verify the nature of the sales
to determine whether to use the sales in calculating normal value.
Moreover, what the Department did uncover at verification indicated
that YUSCO was aware that, at a minimum, a substantial portion of
scenario two sales (``UZ'' sales) were for consumption in producing
non-subject merchandise by YUSCO's Taiwan customers.
Adverse Facts Available
Section 776(b) of the Act authorizes the Department to use as
adverse facts available information derived from the petition. Section
776(c) provides that, when the Department relies on secondary
information, such as the petition, as facts available, it must, to the
extent practicable, corroborate that information from independent
sources that are reasonably at its disposal. The SAA clarifies that
``corroborate'' means that the Department will satisfy itself that the
secondary information to be used has probative value (see SAA at 870).
The SAA also states that independent sources used to corroborate may
include, for example, published price lists, official import statistics
and customs data, and information obtained from interested parties
during the particular investigation (see SAA at 870).
At the outset of this investigation, the Department examined the
accuracy and adequacy of the price to price information in the
petition. While we rejected the petition margins based on cost, we
determined that the price to price comparisons constituted sufficient
evidence of dumping to justify initiation. See Antidumping
Investigation Initiation Checklist; Stainless Steel Plate in Coils from
Belgium, Canada, Italy, South Africa, South Korea and Taiwan, pages 14-
16 (estimated margins for Taiwan ranged from .29% to 8.02%); see also
petitioners' submission dated April 17, 1998 (amendment to petition
regarding price information).
In order to determine the probative value of the petition margins
for use as adverse facts available for the purposes of this
determination, we have examined evidence supporting the petition
calculations. In accordance with section 776(c) of the Act, to the
extent practicable, we examined the key elements of the U.S. price and
normal value calculations on which the petition margin was based and
compared the sources used in the petition to YUSCO's reported sales
databases. Based on this analysis, we have successfully corroborated
the information in the petition. See Facts Available Memorandum.
Therefore, we have chosen the highest of the calculated petition
margins for Taiwan of 8.02 percent as total adverse facts available.
Comment 2: YUSCO argues that even if the Department makes an
affirmative finding on middleman dumping by Ta Chen, the Department
should assign and calculate an independent dumping margin for YUSCO
based on the one reported U.S. sale made through a company in Taiwan
other than Ta Chen. Ta Chen makes the same assertion. YUSCO claims that
the Department verified that the sale in question was, in fact, a U.S.
sale and that this sale was not made through Ta Chen. According to
YUSCO, its order acceptance sheet for this sale shows its limited
knowledge of the Taiwan company's further processing, as well as its
knowledge that the merchandise would ultimately be sold to a U.S.
customer. YUSCO argues that its lack of specific knowledge about its
customer's further processing does not meet the Department's standard
for ``consumption'' of SSPC in the home market.
YUSCO cites several instances in which it claims that the
Department has considered a sale to a local customer as a U.S. sale
where the respondent ``is aware at the time of sale that the
merchandise is ultimately destined for the United States'': Fresh
Atlantic Salmon from Chile, 63 FR 31411 (June 9, 1998); Dynamic Random
Access Memory Semiconductors of One Megabit or Above from the Republic
of Korea, 63 FR 50867 (September 23, 1998); Yue Pak, Ltd. v. United
States, Slip. Op. 96-65 at 9 (CIT), aff'd. 1997 U.S. App. LEXIS 5425
(Fed. Cir. 1997); Peer Bearing Co. v. United States, 800 F. Supp. 959,
964 (CIT 1992).
YUSCO also cites the final determination in the LTFV investigations
of Certain Hot-Rolled Carbon Steel Flat Products, Certain Cold-Rolled
Carbon Steel Flat Products, Certain Corrosion-Resistant Carbon Steel
Flat Products, and Certain Cut-to-Length Carbon Steel Plate from Korea
(58 FR 37176 (July 9, 1993)) to support its argument that the
Department considers a sale to a local customer as an export sale where
the respondent has specific knowledge that the merchandise would be
exported, but had no specific knowledge regarding the customer's
further manufacturing. YUSCO distinguishes these circumstances from
those addressed in the preliminary determination in the LTFV
investigation of Stainless Steel Sheet and Strip in Coils from Korea,
(64 FR 137 (January 4, 1999)), in which sales to a further
manufacturer/exporter in Korea were deemed home market sales because
the respondent had specific knowledge that the subject merchandise
would be further manufactured into non-subject merchandise prior to
exportation. YUSCO concludes that since Ta Chen was not involved in
this U.S. sale, the Department should assign and calculate an
independent dumping margin rate for YUSCO based on this sale.
Petitioners argue that sales to home market customers that are
further manufactured prior to export are reportable home market sales.
In this case, continue petitioners, the sale in question should be
considered a home market sale since YUSCO knew at the time of sale that
the merchandise would be further manufactured in Taiwan into non-
subject merchandise and then sold to the United States. Petitioners
cite the preliminary determination in Stainless Steel Sheet and Strip
in Coils from Korea (64 FR 137) in which the Department included as
home market sales those sales of subject merchandise to Korean
companies that respondent knew would further manufacture the subject
merchandise into non-subject merchandise for export. Petitioners also
point to two of YUSCO's submissions in which YUSCO stated that it knew
at the time of sale that the SSPC would be consumed prior to
exportation. See YUSCO's September 22, 1998 letter to the Department
and YUSCO's September 4, 1998 supplemental questionnaire response.
Petitioners also claim that the sale in question should be
classified as a home market sale because YUSCO considered it a domestic
sale in its normal course of business, it did not require special
export packing, it was shipped to a customer in Taiwan prior to export,
it
[[Page 15498]]
did not have a complete shipping number in the Government Uniform
Invoice (``GUI''), and the sale was subject to a value-added tax (VAT).
Petitioners also refer to a Department memorandum to the file dated
November 25, 1998 which states that evidence established that YUSCO
knew that the SSPC would be further manufactured into non-subject
merchandise.
Petitioners conclude that, even if the Department continues to
classify this sale as a U.S. sale, it should disregard this sale for
the final determination since it is an ``outlier'' sale, and thus not
representative of YUSCO's normal selling behavior. Petitioners cite
several cases in which the Department ruled similarly; including Ipsco,
Inc. v. United States, 714 F. Supp. 1211, 1216 (CIT 1989); Silicon
Metal from Brazil: Notice of Final Results of Antidumping Duty
Administrative Review, 64 FR 6305 (February 9, 1999); and Tapered
Roller Bearings, and Parts Thereof, Finished and Unfinished, from
Japan; Final Results of Antidumping Duty Administrative Review, 57 FR
4960 (February 11, 1992).
Department's Position: The accurate determination of which sales
should be classified as home market sales and used to calculate normal
value, and which sales should be classified as U.S. sales and used to
calculate export price, is central to accurately determining
antidumping margins. In determining whether a sale made prior to
importation to a customer outside the United States should be
considered a U.S. sale, section 772(a) requires that respondent know
that subject merchandise, purchased by an unaffiliated reseller, is
destined for exportation to the United States. Because the statute does
not address how the Department is to determine if a respondent knew
whether home market sales of subject merchandise were destined for the
U.S. market, the Department has discretion in making this
determination. It has been the Department's practice to examine the
evidence on a case-by-case basis to determine whether the respondent
knew or had reason to know that its sales of subject merchandise to an
unaffiliated company in the home market were destined for export to the
United States. See, Ina Walzlager v. United States, 957 F. Supp. 251
(CIT 1997)(standard for determining knowledge under section 773(a) is
imputed knowledge, not actual knowledge); Yue Pak v. United States,
Slip Op. 96-65 at 9 (CIT) (upholding the Department's interpretation of
``for exportation to the United States'' to mean that the reseller or
manufacturer from whom the merchandise was purchased knew or should
have known at the time of sale that the merchandise was being exported
to the United States).
Based on the record evidence, it is clear that YUSCO knew or had
reason to know that its sale of subject merchandise to a certain
customer was not for export to the United States because it would be
further manufactured in Taiwan into non-subject merchandise. The non-
subject merchandise was then to be exported to the United States. See
September 4, 1998 Supplemental Questionnaire Response, September 22,
1998 letter to the Department, and October 19, 1998 letter to the
Department in which YUSCO states that it had general knowledge and an
understanding that the SSPC would be used to manufacture non-subject
merchandise prior to export to the United States. Therefore the sale in
question is in fact a home market sale. See Memorandum to Edward Yang:
Stainless Steel Plate In Coils from Taiwan; YUSCO Sales, November 25,
1998. Nevertheless, as we have applied total adverse facts available to
YUSCO (see Comment 1), the classification of this sale as either U.S.
or home market is irrelevant to the calculation of YUSCO's margin.
Comment 3: YUSCO states that the Department should calculate
YUSCO's dumping margins incorporating its corrections to minor errors
that it submitted at the commencement of both cost and sales
verification. Petitioners state that the Department should include an
unreported discount for one YUSCO U.S. sale, as noted in the
verification report.
Department's Position: We agree with both YUSCO and petitioners.
However, we have not made these corrections for the final
determination, since we have applied total adverse facts available to
YUSCO, as described in Comment 1.
Comment 4: Petitioners claim that during YUSCO's cost verification
YUSCO failed to quantify differences between the reported and booked
costs of manufacture. Although YUSCO offered ``three contributing
factors,'' state petitioners, YUSCO was unable to quantify the amounts
related to each of the claimed reconciling items. Petitioners claim
that the Department must thus adjust the reported total manufacturing
costs (``TOTCOMs'') to reflect the unreconciled difference.
YUSCO contends that the Department should reject petitioners'
argument to increase YUSCO's TOTCOM since all elements of YUSCO's
production costs were verified to have been included in YUSCO's
calculation of TOTCOM by control number (``CONNUM''). YUSCO argues that
the difference between the reported TOTCOM and the booked TOTCOM is a
result of the exclusion of beginning work-in-process prices from the
reported TOTCOM, and from the allocation of processing costs by
processing time for the purpose of this investigation, and these
adjustments have been quantified in the verified record. Furthermore,
YUSCO claims that during verification it was not asked to quantify the
difference between the reported and booked TOTCOMs by item, so it is
not fair to say that the company was unable to quantify the difference
by item.
Department's Position: We agree with petitioners that the
unreconciled difference found between the costs in the accounting
records and the reported costs should be included in the revised
reported costs. As articulated in Certain Cut-to-Length Carbon Steel
Plate From Mexico: Final Results of Antidumping Duty Administrative
Review, 64 FR 77, 78 (January 4, 1999) (Comment 1), the Department must
assess the reasonableness of a respondent's cost allocation methodology
according to section 773(f)(1)(A) of the Act. Before this can be done,
however, the Department must ensure that the aggregate amount of costs
incurred to produce the subject merchandise was properly reflected in
the reported costs. In order to accomplish this, a reconciliation of
the respondent's submitted COP and CV data to the company's audited
financial statements, when such statements are available, is performed.
YUSCO did not complete this reconciliation because it did not identify
and quantify all differences shown on the reconciliation. As stated in
Certain Cut-to-Length Carbon Steel Plate From Mexico, ``[i]n situations
where the respondent's total reported costs differ from the amounts
reported in its financial statements, the overall cost reconciliation
assists the Department in identifying and quantifying those differences
in order to determine whether it was reasonable for the respondent to
exclude certain costs for purposes of reporting COP and CV.'' As to
YUSCO's argument that it was never asked to identify and quantify the
unreconciled differences in its cost reconciliation, the Department
requested YUSCO to quantify differences between its accounting records
and reported costs in step III.D. of the cost verification agenda.
While we agree with petitioners that the unreconciled difference found
between the costs in the accounting records and the reported costs
should be included in
[[Page 15499]]
the revised reported costs, based on our decision to apply total
adverse facts available, this issue is moot.
Comment 5: Petitioners argue that the Department should include
exchange gains and losses associated with notes payable instruments in
YUSCO's net interest expense. According to petitioners, the Department
discovered at the cost verification that YUSCO had excluded these
exchange gains and losses from its financial expense rate, and that
since net exchange losses related to notes payable is a cost incurred
by the company as a whole for financing purposes, it should be included
in the net interest expense calculation. Petitioners also assert that
this result is consistent with the Department's cost questionnaire.
Respondents did not comment on this issue.
Department's Position: The Department agrees with petitioners that
the current portion of the net exchange loss related to notes payable
should be included in the financial expense rate calculation. As
explained in Notice of Final Determination of Sales at Less Than Fair
Value: Fresh Atlantic Salmon from Chile, 63 FR 31430 (June 9, 1998)
(Comment 24), the Department includes in the cost of production the
amortized portion of foreign exchange losses resulting from loans. For
this final determination, we would have amortized the net exchange
losses generated from debt over the current maturities of the debt and
included the amortized portion in YUSCO's financial expenses. However,
based on our decision to apply total adverse facts available, this
issue is moot.
Interested Party Comments Re: Ta Chen
Comment 6: Ta Chen contends that the transactions involving the
subject merchandise do not fall within the ambit of any middleman
dumping provision because: (1) The transactions involve a direct sale
between a Taiwanese manufacturer and an unaffiliated U.S. buyer and (2)
the Department cannot determine that middleman dumping is occurring
because there is no middleman.
Ta Chen explains that Ta Chen is merely a processor of paperwork
and a communications link and is acting as an agent of TCI, Ta Chen's
U.S. affiliate. Ta Chen claims that TCI initiates all purchase requests
from YUSCO and uses Ta Chen as a facilitator due to language barriers
and time zone differences. Ta Chen further claims that there is a
straight pass-through of the purchase price from YUSCO to TCI such that
TCI incurs both the risk and the profit or loss on the sale.
Ta Chen states that the Department must recognize and follow
commercial law in its administration of the antidumping laws. See NSK
v. United States, 115 F. 3d 965 (Fed.Cir. 1997). Ta Chen claims that,
under commercial law, a four-pronged test exists for determining
whether an intermediary is acting as an agent or as a buyer. The test
analyzes: (1) Whether the intermediary could or did provide
instructions to the seller; (2) whether the intermediary was free to
sell the items at any price it desired; (3) whether the intermediary
could or did select its own customers; and (4) whether the intermediary
could or did order the merchandise and have it delivered for its own
inventory. Ta Chen claims that the Department generally follows this
analysis in determining whether sales through a U.S. subsidiary should
be treated as EP or CEP transactions. See Stainless Steel Wire Rod from
Spain, 63 FR 40391, 40395. Ta Chen maintains that if the intermediary
cannot perform these tasks and if there is a simultaneous passage of
title and risk of loss from the seller to the intermediary to the
buyer, then the intermediary is acting as an agent. Ta Chen states that
an analysis of the record will show that the answers to these questions
are negative and thus, Ta Chen is acting as an agent. Moreover, Ta Chen
claims that based on the terms of sale from YUSCO to Ta Chen and from
Ta Chen to TCI, there is a simultaneous transfer of title from YUSCO to
TCI. In addition, Ta Chen claims that the terms of payment from TCI to
Ta Chen are such that TCI assumes all risk of loss, and that
furthermore, petitioners point to these same facts in their case brief.
Thus, Ta Chen concludes that Ta Chen is acting as an agent of TCI.
Ta Chen states that the Tariff Act of 1930 allows only for dumping
margin calculations with regard to producers and exporters. Ta Chen
states that it is the Department's practice to treat manufacturers who
have knowledge that the merchandise was exported to the United States
as exporters, citing AFBs from France, 57 FR 28360 (Comment 18)(1992).
According to Ta Chen, the record shows that the manufacturer, YUSCO,
had such knowledge and therefore, would be treated as the exporter
under the Department's normal practice. However, Ta Chen notes that the
above practice has one exception, namely, middleman dumping.
Ta Chen argues that middleman dumping is a narrowly defined
exception and does not apply in this case. Ta Chen points to the
legislative history of the Trade Agreements Act of 1979 as evidence
that middleman dumping is limited to the issues involved in Voss
International v. United States, (Voss) C.D. 4801 (May 7, 1979), citing
S. Rep. 249, 96th Cong., 1st Sess. 93-94 (``Senate Report'')(July 17,
1979). Ta Chen argues that the authority to perform a middleman dumping
analysis, borne out of the legislative history, does not operate as a
broader grant of authority beyond the issues presented in Voss and the
issues in Voss are not present in the instant case, citing PQ Corp. v.
United States, 652 F. Supp. 724, 734, 11 CIT 53 (1987), because YUSCO
did not make a sale to Ta Chen. Therefore, Ta Chen concludes, the
Department does not have the authority to investigate Ta Chen nor does
it have the authority to use TCI's U.S. resale prices in the
calculation of a dumping margin.
Notwithstanding this conclusion, Ta Chen argues that if the
Department wishes to take on a broader view of its ability to
investigate middleman dumping, in the instant case there is no sale to
a middleman outside the United States who then makes the first sale to
the United States. Ta Chen again cites to the Senate Report at 93-94:
Regulations should be issued, consistent with present practice,
under which sales from the foreign producer to middlemen and any
sales between middleman before sale to the first unrelated U.S.
purchaser are examined to avoid below cost sales by the middlemen.
(Emphasis added in Ta Chen brief)
Ta Chen asserts that this sentiment is repeated in the Statement of
Administrative Action of the Trade Agreements Act of 1979, H. Doc. No.
153 (Pt.II), 96th Cong., 1st Sess. At 412, in the Department's
determination in Fuel Ethanol from Brazil; Final Determination of Sales
at Less Than Fair Value, (Fuel Ethanol) 51 FR 5572, 5577 (Feb. 14,
1986), and in the Department's own Antidumping Manual. Ta Chen claims
that YUSCO sells directly to TCI, an unaffiliated U.S. customer, and
therefore, there is no middleman.
Ta Chen argues that the Department has not considered a U.S.
distributor which buys from a foreign manufacturer to be an
``exporter'' on the basis that the U.S. distributor is foreign-owned.
Ta Chen states that to conclude otherwise would be contradictory
because the U.S. distributor is clearly an ``importer.'' Ta Chen points
to the Department's statements in its middleman dumping initiation
memorandum in the investigation of Stainless Steel Sheet and Strip in
Coils from Taiwan, as suggesting that TCI could be subject to a
middleman dumping investigation by virtue of the collapsing doctrine.
Ta
[[Page 15500]]
Chen argues that if the Department applied the collapsing doctrine in
this manner, it would render moot all EP/CEP analyses of sales between
a foreign parent and its U.S. subsidiary. Because this is clearly not
the case, Ta Chen argues that the collapsing analysis does not apply to
a U.S. importer and its foreign-owned parent. Rather, Ta Chen states
that the collapsing doctrine applies to situations where two producers,
with their own production facilities, are considered to be one entity
for purposes of issuing a duty margin. Finally, Ta Chen argues that to
discriminate against U.S. corporations that are foreign-owned would be
bad policy and contrary to free trade policies.
Petitioners argue that the Department should take into account Ta
Chen's dumping of YUSCO's SSPC since the Department has the authority
to consider and include in its dumping calculations price
discrimination by a middleman who can be located anywhere in the world.
Petitioner claims that the Department should follow standard procedures
as employed in Mitsui & Co. v. United States, Court No. 90-12-00633 at
9-10 and in Fuel Ethanol, and compare the foreign manufacturer's net
U.S. price to its normal value, compare the middleman's net U.S. price
to its normal value, and then sum the dumping margins.
Petitioners cite the legislative history of section 772 of the
Tariff Act of 1930, H.R. Rep. No. 317, 96th Cong., 1st Sess. 75 (1979);
and the Senate Report to illustrate that Congress gave the Department
the authority to investigate resales by middlemen. Petitioners further
cite the Statement of Administrative Action of the Trade Agreements Act
of 1979, H. Doc. No. 153 (Pt. II), 96th Cong., 1st Sess. 412 (1979)
reprinted in 1979 U.S.C.C.A.N. at 682. They argue that this Statement
reiterated that resales by middlemen are to be examined as possible
below-cost sales, regardless of the location of the middleman.
Furthermore, petitioners claim that Ta Chen is incorrect in
asserting that the Department should not consider Ta Chen's resales of
YUSCO's SSPC to Ta Chen's unaffiliated U.S. customers. Petitioners
point to the Trade Agreements Act of 1979, accompanying legislative
history, and Voss, and claim that the legislative history at H.R. Rep.
No. 317, supra at 75 and the Senate Report at 94 explicitly state that
sales involving middlemen are to be examined to avoid below cost sales
by middlemen. When middlemen sell above their costs, the courts and the
legislative history state, according to petitioners, that the
producer's price to the first unrelated middleman may be used as a
purchase price, as found in Sharp Corp. v. United States, 63 F.3d 1097,
1093-94 (Fed. Cir. 1995); Smith Corona Group v. United States, 713 F.2d
1568, 1572 (Fed. Cir. 1983); PQ Corp. v. United States, 652 F. Supp.
724, 735 (CIT 1987), and H.R. Rep. No. 317, supra at 75; and the Senate
Report at 94. In these cases, according to petitioners, sales to
middlemen were not to be examined when any sales involving them
appeared to be below cost. Petitioners claim the Department's decision
in Fuel Ethanol was consistent with these authorities and precedents.
Petitioners hold that for these reasons, Ta Chen is in this case a
middleman, not YUSCO's first unaffiliated U.S. customer as Ta Chen
claims, and that the Department should reject Ta Chen's contentions
that the middleman dumping provision is inapplicable here.
Alternatively, if the Department concludes that middleman dumping
refers solely to middlemen outside of the United States, petitioners
argue that the Department should still find that Ta Chen acted as a
middleman for YUSCO and ascribe middleman dumping accordingly.
Petitioners believe that, contrary to Ta Chen's claim that YUSCO sold
its SSPC directly to TCI, the record shows that YUSCO's sales were to
Ta Chen, which then resold the SSPC to TCI. See Petitioner's Rebuttal
Brief at 15-17 (proprietary version). Petitioners claim that the
verified record shows that Ta Chen was intimately involved in the
purchase and intra-company resale to TCI of YUSCO's product, and that
the verification report did not conclude that TCI buys plate from
YUSCO, but merely states that Ta Chen officials claimed such during
verification.
Petitioners claim that the three-pronged test which Ta Chen
discusses and bases on AK Steel Corp. v. United States, Slip Op. 98-159
at 15 (Nov. 23, 1998), is not applicable here. They argue that this
test is used merely to classify sales as CEP or EP, and that in either
instance, the Department uses sales to unaffiliated U.S. customers. In
this case, according to petitioners, the Department can determine
whether a middleman has dumped only by examining each middleman resale
leading to the ultimate sale to the unaffiliated U.S. customer.
Petitioners further argue that even if this test were to be used, it
would result in the Department's finding that Ta Chen was substantially
involved in the purchase and resale of SSPC because its role in the
sales process was similar to that of a selling agent in Industrial
Nitrocellulose from the United Kingdom, who was deemed to be
substantially involved in the sales process because its duties included
sales solicitation and price negotiation.
Department's Position: We disagree with Ta Chen that it is not the
middleman for resales of YUSCO's merchandise into the U.S. market.
Evidence plainly establishes that for the purposes of conducting a
middleman dumping investigation, there were sales of subject
merchandise between YUSCO and Ta Chen which, in turn, Ta Chen resold
into the United States through its U.S. affiliate, TCI. We find the
activity engaged in by Ta Chen as that of a classic middleman and
therefore subject to our scrutiny.
Where a producer sells its merchandise to an unaffiliated
middleman, it has been the Department's long-standing practice normally
to select as the U.S. price the price between the foreign producer and
the unaffiliated middleman, provided that the foreign producer knew or
had reason to know that its merchandise was destined for export to the
United States. See Antifriction Bearings From France, 57 FR 28360
(1992) (Comment 18). However, if the middleman is reselling below cost,
the sale between the producer and the middleman may not be an
appropriate basis for establishing the total margin of any dumping that
may have occurred. The legislative history to the 1979 Act makes clear
that Congress recognized that middlemen may also be engaged in dumping
and acknowledged that the Department had authority to investigate
``sales from a foreign producer to middlemen and any sales between
middlemen before sale to the first unrelated U.S. purchaser * * * to
avoid below cost sales by the middlemen.'' See H.R. Rep. No. 317, 96th
Cong., 1st Sess. 75 (1979); and the Senate Report. Therefore, there is
no question that the Department has the authority to depart from its
normal practice, where circumstances warrant, and investigate whether
dumping is being masked or understated by middlemen. See Fuel Ethanol
(the legislative history of the 1979 Act sustained the Treasury
Department's practice of using the price between the manufacturer and
unrelated trading company for exports to the U.S. when the manufacturer
knew the destination at the time of sale to the exporter, but was not
intended to bar us from looking at all facets of the transaction).
Where the Department determines that a substantial portion of the
middleman's resales in the United States was made at below the
middleman's total acquisition costs and the middleman incurred
substantial losses on those resales, middleman dumping has occurred and
[[Page 15501]]
the margin calculation is adjusted accordingly, i.e., we look to the
middleman's first sale to an unaffiliated customer. See Amended
Preliminary Determination; Fuel Ethanol; and Comments 9 and 13.
Ta Chen acknowledges that the Department has the authority to
conduct middleman dumping investigations but offers various arguments
against applying middleman dumping to Ta Chen. Ta Chen mainly argues
that if there was not a sale between YUSCO and Ta Chen, but Ta Chen
merely acted as a selling agent for its wholly-owned U.S. affiliate,
TCI, there can be no middleman and thus no middleman dumping.
Here, the verified evidence establishes that YUSCO made sales to Ta
Chen, not directly to TCI. Contrary to Ta Chen's assertions otherwise,
Ta Chen did take legal title to the merchandise. Even though YUSCO
shipped the merchandise fob to TCI at a port in Taiwan, a purchaser
need not take physical possession of merchandise to have legal title.
Here, Ta Chen negotiated the sale with YUSCO, signed a sales contract
with YUSCO, was invoiced by YUSCO, paid YUSCO for the merchandise in
Taiwan dollars, paid bank charges on payments to YUSCO, entered these
sales into Ta Chen's books, signed the export declaration, invoiced
TCI, and undertook various other activities involved in exporting and
transporting the merchandise. See Ta Chen's Verification report at 3,
and YUSCO's Verification Report at 3 and Exhibit 11 (both reports dated
January 28, 1999); see also Petitioners' Rebuttal Brief (proprietary
version) at 15-17 (dated Feb. 16, 1999). Thus, the evidence is
sufficient to establish that Ta Chen was acting as a middleman within
the meaning of the antidumping law.
Further, trading companies such as Ta Chen have typically been the
focus of the Department's investigation into middleman dumping
allegations because most often trading companies engage in the
``successive resales from the foreign producer to the first unrelated
U.S. buyer,'' thus prompting our scrutiny. See, e.g., Electrolytic
Manganese Dioxide From Japan, 58 FR 28551 (May 14, 1993); Fuel Ethanol;
PC Strand From Japan: Final Results of Redetermination Pursuant to
Court Remand, Court. No. 90-12-00633 (August 5, 1994); see also
Consolidated International Automotive, Inc. v. United States, 809 F.
Supp. 125, 130 (CIT 1992).
We also disagree that we should examine Ta Chen's role in the
transaction chain by applying the criteria we normally use to determine
if U.S. sales are EP or CEP sales. The EP/CEP analysis is used to
determine if the selling activities of parties in the United States are
more than ancillary to the transaction, in which case CEP methodology
is warranted to take into account the selling expenses incurred in the
United States when calculating the dumping margin. In contrast, the
middleman dumping analysis is used to determine whether a transaction
with a middleman is masking or understating any dumping. Regardless of
whether Ta Chen calls itself an agent, it is a middleman and an
appropriate subject of a middleman dumping inquiry. YUSCO invoiced Ta
Chen for the merchandise and it was subsequently resold to an
unaffiliated purchaser at less than the acquisition cost. This is
precisely the type of situation cited by Congress when it addressed the
middleman dumping concern. See H.R. Rep. No. 317 at 75. (Voss also
involved the sale of subject merchandise by a producer to an
unaffiliated trading company in the exporting country, which was then
exported to the middleman's wholly-owned U.S. affiliate for resale to
an unrelated U.S. customer). Therefore, Ta Chen's assertion that the
Department's authority is limited to the issues presented by Voss is
misplaced, because the issues in the instant case mirror those in Voss.
YUSCO sold its merchandise to Ta Chen which, as the middleman, in turn
sold it to the first unaffiliated U.S. customer through TCI.
Finally, given that we find that Ta Chen is a middleman, the
question Ta Chen raises regarding the geographical location of the
middleman is moot, since Ta Chen is located in the exporting country
and hence clearly within the ambit of a middleman dumping
investigation. See e.g., Antidumping Manual, Chapter 7 at 5 (if the
Department receives a documented allegation that the trading company
located in the exporting country or a third country is reselling to the
United States at prices which do not permit the recovery of its total
acquisition costs, we will initiate a middleman dumping investigation).
Comment 7: Ta Chen states that this middleman dumping investigation
was unlawfully initiated. Ta Chen states that the Department's
standards for initiating such an investigation requires timely and
convincing evidence of middleman dumping, citing e.g., Certain Forged
Steel Crankshafts From Japan, 52 FR 36984, 36985, Consolidated Int'l
Automotive v. U.S., F. Supp. 125, 129-30 (CIT 1992), and Mitsui & Co.,
Ltd. v. U.S., 18 CIT 185 (1994). Further, Ta Chen states that the
petitioners have an obligation to submit such evidence that is
reasonably available to them, citing Electrolytic Manganese Dioxide
From Japan, 58 FR 28551 and Certain Stainless Steel Cooking Ware From
Korea, 51 FR 24563-64. Ta Chen argues that there was no convincing
evidence of actual middleman dumping nor did petitioners submit
evidence reasonably available to them on the subject and thus, the
Department's standards have not been met.
Ta Chen contends that the record does not establish that the
alleged lost sale was due to a sale of Taiwanese-origin product. Ta
Chen asserts that in petitioner's September 21, 1998 submission,
petitioners acknowledged that the alleged lost sale possibly due to a
sale of both (or, as respondents believe petitioners' statement
implies, either) Taiwanese and Korean product. Ta Chen also argues that
the product alleged to have been sold to Company X was T04L \3/16\ to
\1/2\ inch plate. However, respondent argues that petitioners misstated
this specification in its middleman dumping allegation as 0.1875 to
0.3125 inch product. See, e.g., paragraph 5 of Exhibit 1 of
petitioner's August 25, 1998 submission and petitioner's August 11,
1998 submission at 10. Regardless, Ta Chen argues that its sole
Taiwanese supplier, YUSCO, does not produce or sell a product above \1/
4\ inch plate. Thus, Ta Chen argues that the alleged sale could not
have been a sale of Taiwanese product. Thus, Ta Chen concludes, the
convincing evidence standard has not been met.
Ta Chen also states that the Department initiated this middleman
investigation based on a claim by petitioners that Ta Chen actually
sold subject merchandise to Company X in October 1997. Ta Chen argues
that both petitioners and the Department had available to them the
knowledge that there was no such sale. Ta Chen states that this same
``lost sale'' was previously alleged in petitioner's March 31, 1998
antidumping petition to both the Department and the International Trade
Commission (ITC). Ta Chen stated that the petition also included a
contact name and phone number at Company X. Ta Chen claims that it made
no sales whatsoever to Company X in October 1997 or at any other time.
Moreover, Ta Chen suggests that a review of its sales listing will show
that in October 1997, its lowest sales price was well above both the
alleged price to company X and petitioner's alleged acquisition costs.
Finally, Ta Chen states that the ITC contacted Company X regarding the
alleged ``lost sale'' and that Company X denied the sale took place. Ta
Chen
[[Page 15502]]
argues that because the results of the ITC's phone call were known to
petitioners before it used this ``lost sale'' in its request to
initiate a middleman dumping investigation, counsel for petitioners
submitted a false representation to the Department.
Moreover, Ta Chen claims that petitioners did not satisfy their
requirement to utilize sources readily available to them. Ta Chen
states that the petitioners made only a single attempt to contact
Company X themselves but were unsuccessful in attempting to reach a
certain contact at Company X. Ta Chen asserts that it had subsequent
contact with this individual and was aware of that individual's ready
availability to speak with petitioners. However, respondent argues that
petitioners never attempted to call back this individual. Thus, Ta Chen
argues, petitioners did not make use of the sources readily available
to them.
Petitioners argue that they met the Departmental requirement of
``timely and convincing evidence that the trading company is in fact
dumping.'' See Petitioners' Rebuttal Brief at page 27. Moreover,
petitioners assert that evidence may be only that which is reasonably
available to Commerce. On these accounts, petitioners defend their
submissions as consistent with the standard required by the Department.
Petitioners also assert that their evidence was advanced in good faith
as the best information reasonably available to petitioners that
pointed toward middleman dumping by Ta Chen, and furthermore, that Ta
Chen has not shown this information to be false. Petitioners conclude
that the reasonableness of the evidence provided is borne out by the
fact that the Department indeed found middleman dumping in its Amended
Preliminary Determination.
Department's Position: We disagree with Ta Chen that our initiation
of a middleman dumping investigation was illegal and should be
rescinded. As stated, Congress plainly intended for the Department to
have the authority to both investigate middlemen and to avoid below
cost sales by middlemen. See Senate Report at 412, (``successive
resales from the foreign producer to the first unrelated U.S. buyer are
examined to avoid sales by middlemen below their costs''). Through its
administrative practice, the Department has developed a reasonable
standard for analyzing allegations of middleman dumping.
As we stated in our memorandum initiating this middleman dumping
investigation, the standards for initiating a middleman dumping
allegation are similar to those of initiating a traditional antidumping
investigation, in that we must have evidence to suspect that middleman
dumping is occurring. See Memorandum for Joseph Spetrini: Stainless
Steel Plate in Coils From Taiwan: Whether To Initiate a Middleman
Dumping Investigation (Middleman Initiation Memo)(Aug. 25, 1998)(non-
proprietary version on file in Rm. B-099 at the Department of
Commerce). In analyzing whether to initiate we will evaluate
information, either direct or circumstantial, and will require that
petitioners provide supporting data on prices and costs which are
reasonably available to them and that this information is convincing.
See Consolidated International Automotive, Inc. v. United States, 809
F. Supp. 125, 130 (CIT 1992)(upholding the Department's refusal to
initiate a middleman dumping investigation where petitioner only
offered a theory, but no sufficient data); Preliminary Determination of
Sales at Less Than Fair Value; Stainless Steel Cooking Ware From the
Republic of Korea, 51 FR 24563 (July 7, 1986)(refusing to initiate
because no documents submitted contained pricing or cost data);
Electrolytic Manganese Dioxide (EMD) From Japan; Final Results of
Antidumping Administrative Review; 58 FR 28551 (May 14, 1993)(the
Department will not initiate on mere conjecture but requires convincing
evidence presented by petitioners). Here, petitioners provided both
timely price and cost information, reasonably available to them, which
was supported by affidavits and which the Department reviewed and found
credible and convincing. See Middleman Initiation Memo.
First, we disagree with Ta Chen's claim that the sale (which we
viewed as an offer, see below) described in petitioner's affidavit to
Company X was not of Taiwanese origin, and that the Department should
have recognized this as the case because the ``weekly report'' (sales
call report) attached to the affidavit described a product which was
not in the range of thickness produced by YUSCO, Ta Chen's supplier. We
looked at the grade, thickness, width and surface finish of the U.S.
sale referred to in the affidavit, compared its characteristics to
those of the three YUSCO reported control numbers (CONNUMS) which
petitioner had relied upon in their analysis and found two of YUSCO's
sales that were comparable. See Middleman Initiation Memo at 5.
Further, contrary to Ta Chen's assertions otherwise, the product
dimensions for the price quoted in the affidavit covered a product with
a thickness between .1875 and either .3125 or .50. Ta Chen admits that
YUSCO produced subject merchandise up to .25 inches in thickness. See
Ta Chen Case Brief at 31 (Feb. 9, 1999). Therefore, regardless of the
upper end of this product's thickness range, YUSCO produced product
within the ranges described in both the affidavit and the accompanying
weekly report. The affidavit clearly indicated that this alleged sale
took place within the POI, and thus the information submitted by
petitioners was also relevant to this investigation. As a result, the
Department had reasonable evidence from which to conclude that this was
merchandise produced by YUSCO.
Second, with regard to whether the sale alleged in the affidavit
occurred, Ta Chen argues that this sale was never made and, as a
result, the Department could have learned this had it contacted the
affiant directly. However, we initiated our middleman dumping
investigation on the basis that this was a price quote, but not
necessarily a sale. See Middleman Initiation Memo at 4. The affidavit
submitted by petitioners stated that the affiant believed there was a
sale by Ta Chen of subject merchandise on a date within the POI; it did
not say unequivocally that there was a completed sale. As in an
antidumping investigation, the Department has the authority to initiate
a middleman dumping investigation based upon an offer for sale. See
section 731(1) (``a class or kind of foreign merchandise is being or is
likely to be sold''); section 771(14) (``sold, or in the absence of
sales, offered for sale''). Ta Chen has not argued that the transaction
at issue was not an offer, but argues only that it was not a completed
sale.
Moreover, at the time of the investigation, there was no reason for
the Department to go beyond the affidavit and supporting weekly report
as submitted by petitioners to confirm whether there was an offer for
sale. As a matter of practice, when initiating an antidumping
investigation the Department regularly relies upon U.S. price quotes
(whether sales or offers) submitted in affidavits, provided the
affidavit supplies sufficient and credible information. Here, the
affidavit was submitted with a supporting call report by a U.S.
customer in the business of selling the domestic like product who was
generally familiar in the marketplace with Ta Chen and its 100 percent-
owned U.S. affiliate, TCI, and with their U.S. pricing.
Further, Ta Chen did not raise its concerns to the Department
regarding the alleged lost sale listed in the petition
[[Page 15503]]
for ITC purposes until after our initiation. See Letter from Ta Chen
dated September 14, 1998 (Ta Chen claims that it did not receive the
information it needed until after our initiation because it had not
applied for an APO earlier, but we note that its wholly-owned
affiliate, TCI, as the importer of record, is an interested party and
it is incumbent upon an interested party to timely avail itself of
access to proprietary information). However, there was no reason for
the Department to have reviewed that information when it initiated the
middleman dumping claim. The Department viewed this as an offer for
sale and therefore evidence of a lost sale would not have been
material. Additionally, as stated, there was no indication before the
Department that the affidavit was untrustworthy or lacked merit.
Finally, with regard to any information that petitioners may have
possessed through the ITC proceeding that the price quote at issue was
a lost sale prior to submitting it to the Department, we are not
permitted access to proprietary ITC information, and therefore we have
no means to arrive at the true state of the facts in this regard.
However, as discussed, even if there was not a sale, it does not
necessarily follow from Ta Chen's allegations that there was not an
offer for sale and Ta Chen has not argued otherwise. As a result, we
believe the middleman dumping investigation was properly initiated.
Comment 8: Ta Chen states that the bank charges reported under
CREDIT1U and CREDIT2U fields are associated with the movement of funds
between affiliated parties. Ta Chen argues that the Department does not
deduct these in a below cost of production analysis because these
charges are incurred as a result of internal business decisions. As
such, the Department should not consider these in its below acquisition
cost analysis.
Petitioners did not comment on this issue.
Department's Position: In the Department's Memorandum to Edward
Yang, Office Director: Analysis for the Amended Preliminary
Determination of Stainless Steel Plate from Taiwan: Middleman Dumping
Investigation, November 25, 1998, at 1, we agreed with petitioners'
allegation that a ministerial error had been made by failing to account
for bank fees incurred in Taiwan and the United States. As we stated in
the Amended Preliminary Determination, ``actual selling expenses should
be deducted in the middleman dumping analysis.'' See Mitsui & Co., Ltd.
v. United States, Slip-Op. 97-49 (April 1997)(Mitsui 1997).
While Ta Chen argues that these bank charges are for movement of
funds within Ta Chen, we note that these charges are incurred with
respect to sales of subject merchandise. As Ta Chen stated on page 20
of its November 23, 1998 supplemental response, the bank charge
incurred and paid in the United States has been calculated based on the
Ta Chen invoice by actual weight, and is a fixed amount which does not
vary with transaction value. For the bank charge incurred and paid in
Taiwan, Ta Chen stated that this bank charge varies with the value of
the transaction and thus is allocated over value.
The fact that these bank charges are costs that Ta Chen argues are
``associated with internal movement of funds between affiliated
parties'' does nothing to negate the fact that these are actual costs
incurred with respect to the sale of subject merchandise. These bank
charges were actually incurred and would not have been incurred but for
the fact that Ta Chen made U.S. sales of subject merchandise.
Therefore, they are properly considered as direct selling expenses, and
must be deducted from U.S. price in conducting our middleman dumping
analysis.
Comment 9: Ta Chen argues that the Department should not consider
Taiwanese-based selling expenses incurred prior to importation in its
final determination since Ta Chen is a pipe manufacturer and is not in
the coil business. Ta Chen bases its argument on the Department's
precedent in Fuel Ethanol. If, however, the Department chooses to use
Taiwanese general and administrative expenses, Ta Chen argues that the
Department could add the additional expenses presented at the start of
verification and could also increase this sum by the ratio of total
administration expenses to total selling departmental expenses. Ta Chen
points out that it is not unreasonable to believe that only two clerks
in Taiwan are involved in SSPC since there were only a small number of
invoices and the clerks acted merely as paper processors.
Petitioners argue that the Department should base Ta Chen's general
and administrative expenses (G&A) for constructed value on Ta Chen's
audited financial statement since this is required by the Department's
questionnaire. Petitioners claim that the G&A that Ta Chen calculated
is significantly understated because it only includes expenses
associated with two clerks involved in SSPC sales and does not include
expenses associated with Ta Chen's accounting, general management and
legal departments. Petitioners cite Mitsui 1997 as precedent for using
constructed value in calculating normal value (and therefore, applying
G &A) in a middleman dumping case. They continue by claiming that Ta
Chen incorrectly relied on a statement in Fuel Ethanol, and that in
Fuel Ethanol the Department did actually include the foreign G&A in the
constructed value used in calculating the middleman dumping margin.
Department's Position: As we stated in our Amended Preliminary
Determination, Congress has left to the Department the discretion to
devise a methodology which would accurately capture middleman dumping.
See Senate Report. In our Amended Preliminary Determination, to
determine if Ta Chen's U.S. sales prices were substantially below its
acquisition prices from YUSCO, we divided the amount of the losses by
the total sales value for all sales. In our Amended Preliminary
Determination, we calculated the amount of losses by taking the sum of
the invoice price from YUSCO to Ta Chen, minus the adjusted U.S. sales
price of each below cost sale. However, at that time we did not add any
additional costs incurred by Ta Chen in purchasing YUSCO's merchandise.
We now believe this was an error. Because Ta Chen incurred G&A expenses
(including interest expenses) on its purchases of YUSCO merchandise,
such costs must be added to the acquisition price (which is analogous
to an input cost) from YUSCO in order to calculate Ta Chen's total
acquisition costs regarding purchases of YUSCO's product. Only in this
way can we determine the magnitude of losses Ta Chen absorbed in
selling such merchandise in the United States and thus calculate the
full extent of middleman dumping. This comports with how the Department
determines whether sales are made below cost. See section 773(b)(3).
Our antidumping manual also indicates that middleman dumping occurs
where the middleman is not recovering its acquisition and selling
costs. See Antidumping Manual Chapter 7. Therefore, to the extent that
this methodology conflicts with our earlier approaches in Fuel Ethanol
and Mitsui 1997, our determination supersedes both.
In Fuel Ethanol, after determining that the middleman was selling
below acquisition cost by comparing its acquisition cost from unrelated
suppliers to U.S. resale prices to the first unaffiliated customers,
minus all costs and expenses incurred in selling the merchandise by the
middleman and its U.S. affiliate to the United States, we found all
home market sales by the middleman's parent to be below cost
[[Page 15504]]
and then calculated foreign market value based upon constructed value.
However, it is the middleman's acquisition cost for purchases of
subject merchandise and resales of that merchandise into the United
States that are under scrutiny. Thus, the proper comparison is between
the acquisition costs and the price of those resales. Comparing the
middleman's home market sales of the foreign like product from all
producers to U.S. resales is inappropriate. In Mitsui 1997, although we
indicated that to complete our analysis we would require additional
information about the middleman and its suppliers regarding sales,
expenses and cost information to calculate foreign market value, we did
not indicate that we would follow our approach in Fuel Ethanol in
calculating the magnitude of losses to determine middleman dumping. We
found that, based upon comparing the supplier's invoice price to the
U.S. resale prices, the trading company had not made a substantial
portion of resales at below acquisition cost.
Because we have Ta Chen's verified financial statements, we have Ta
Chen's total expenses for all sales and its total cost of all goods.
Relying upon this data, we arrived at a percentage of G&A expenses
(including interest) for Ta Chen's purchases of YUSCO's merchandise
which we have used in our calculation to determine middleman dumping,
i.e., the magnitude of losses sustained by Ta Chen in selling YUSCO's
product into the United States. We do not agree with Ta Chen that it
merely undertook minimal activities on behalf of TCI and, therefore,
reject its call to add on G&A expenses only incurred for two clerks
(See Comment 6).
Finally, as discussed in a previous portion of this notice
(``Middleman Dumping'') we note that we are also changing the
methodology used to identify whether there was a substantial portion of
resales by Ta Chen sold below its acquisition costs to mirror the
methodology used to determine the magnitude of losses. In the Amended
Preliminary Determination, we compared the U.S. resale price (after
deductions as described) to the supplier's invoice price. However, as
discussed above, we now believe that the acquisition price alone does
not reflect all the costs associated with Ta Chen selling the foreign
producer's merchandise to the United States. Because Ta Chen also
incurred G&A and interest expenses, we will add such expenses to the
acquisition price to arrive at the total acquisition cost (acquisition
price plus associated G&A and interest costs) incurred by Ta Chen in
selling this merchandise. We will continue to compare the total value
of all sales below acquisition cost to the total value of all Ta Chen's
resales to determine if there were a substantial portion of resales
below acquisition cost. Our change in methodology results in a finding
that 44.53 percent of resales were sold below acquisition cost, which
we find is a substantial portion of Ta Chen's resales.
Comment 10: Ta Chen requests that the Department use YUSCO's
selling prices rather than Ta Chen's reported acquisition costs in the
final determination. Ta Chen makes this request based on a comparison
of these costs and prices noted in the verification report, which
revealed certain differences between YUSCO's selling price and Ta
Chen's reported acquisition cost.
Petitioners argue that the Department should disregard Ta Chen's
request for the Department to use YUSCO's reported selling prices to
TCI rather than TCI's reporting of such prices since at verification
the Department found no discrepancies with regard to Ta Chen's
constructed value methodology.
Department's Position: We agree with petitioners and are continuing
to use Ta Chen's reported acquisition prices. At verification, we found
a significant number of discrepancies in attempting to verify Ta Chen's
acquisition prices. However, because overall Ta Chen's reporting
represents a conservative approach, we will continue to use Ta Chen's
reported acquisition costs for this final determination.
Comment 11: Ta Chen argues that although the Department
preliminarily determined that Ta Chen sold subject merchandise in
substantial quantities and substantially below its cost of acquisition,
the Department never articulated the rationale or the standard it used
in determining what is substantial. Ta Chen contends that given a de
minimis level of two percent, and given that ``recognized authorities''
and ITC Commissioners have observed that margins are not considered
substantial until they exceed the 10 to 20 percent levels, a
determination by the Department that three percent represents a
substantial loss must be explained. Ta Chen also argues that since
trading companies ``typically'' operate at low margins, and because TCI
held the merchandise in inventory in the United States for a
substantial amount of time, a three percent loss is reasonable given a
(purported) 12 to 23 percent drop in the prices of subject merchandise
during the POI.
Petitioners argue that the Department should not set a fixed
numerical guideline to determine the existence of substantial losses
since each case has its own circumstances. Additionally, Ta Chen has
not demonstrated a meaningful correlation between the two percent de
minimis standard for dumping margins and the middleman dumping
criterion of substantial losses. Petitioners continue by claiming that
contrary to Ta Chen's claim, Ta Chen should not be allowed to sell at
below cost merely because it was following a downward market, and that
Ta Chen's selling prices actually contributed to this downward market.
Department's Position: We agree with petitioners. There can be no
single threshold which constitutes substantial losses with regard to
middleman dumping because each case involves a unique set of
circumstances. In this case, we find that 2.18 percent, as well as the
three percent calculated in the Amended Preliminary Determination,
constitutes substantial losses. As an initial matter, it is undisputed
by both parties that such losses are above de minimis. See 19 CFR
351.106. Secondly, we note that Ta Chen's assertion that trading
companies ``typically'' operate at low margins indicates that losses
which may, on an absolute basis, be at seemingly lower levels may still
be considered ``substantial''. Thirdly, it is our understanding that
SSPC is traded as a commodity. Therefore, it is price sensitive and
sales are thus often made or lost based on relatively small differences
in price. Hence, such a percentage likely is significant in this
industry.
Comment 12: Ta Chen requests that the Department clarify its
instructions to the U.S. Customs Service to indicate the full name of
Ta Chen Stainless Pipe, Ltd. because the Amended Preliminary
Determination stated that ``this investigation covers two respondents,
Yieh United Steel Corporation and Ta Chen Stainless Steel Pipe, Ltd.''
However, the Department has established a deposit rate for Yieh United/
Ta Chen.
Petitioners argue that the language should remain the same because
the reference to ``Ta Chen'' is inclusive of both Ta Chen Stainless
Pipe, Ltd. and TCI. Petitioners assert that this is appropriate given
that these two companies are affiliated and that section 772 of the
Tariff Act directs the Department to ``examine sales from the foreign
producer to middlemen (trading companies) and any sales between
middlemen before sale to the first unrelated U.S. purchaser to avoid
below cost sales by the middlemen.''
[[Page 15505]]
Department's Position: We disagree with petitioners. Although in
antidumping investigations we do assign channel-specific deposit rates
on occasion, these are producer-exporter specific rates. While we
believe that a rate including both YUSCO and Ta Chen is appropriate, as
discussed in other sections of this notice, we do not believe it is
appropriate to include TCI, because TCI is an importer and if it
imports from another producer or reseller, it should, as any other
importer, be subject to the cash deposit rate for that producer/
reseller or the all others rate. Moreover, the importer-specific rates
we calculate in an annual review are for purposes of assessing duties.
Since we do not order the final assessment of duties in an
investigation, this calculation does not apply. Therefore, for the
final determination, we will continue to assign a deposit rate to ``Ta
Chen'' with the understanding that this refers to only Ta Chen
Stainless Pipe Co., Ltd. We also note that any sales by Ta Chen of
subject merchandise produced by any party other than YUSCO will be
subject to the all others rate.
Comment 13: Petitioners argue that the Department should
recalculate Ta Chen's U.S. credit and U.S. inventory carrying expenses.
Petitioners contend that Ta Chen failed to account for compensating
balances required on its loans in Ta Chen's calculation of its short-
term interest rate. In addition, petitioners request that the
Department increase Ta Chen's credit expenses to account for the
interest expenses and bank charges discovered at verification.
Petitioners cite Mitsui 1997 as a precedent for calculating normal
value based on constructed value in a middleman dumping case.
Petitioners argue that the Department should calculate inventory
carrying costs for the time the merchandise is in transit from Ta
Chen's warehouse in Taiwan to the time of entry into TCI's inventory.
Petitioners assert that this cost must be deducted from U.S. price as
U.S. inventory carrying costs. This claim is based on Ta Chen's
statements that title of the merchandise passes instantaneously from
YUSCO to Ta Chen to TCI. Thus, the merchandise is in the inventory of
TCI during shipment.
Ta Chen requests that, for reasons indicated in Mitsui 1997, the
Department continue not to deduct imputed costs. Ta Chen claims that
the concern related to middleman dumping is only whether the middleman
is selling below cost, and thus any attempt to include constructed
value or other imputed costs would be unlawful. Thus, since the
interest expenses and inventory carrying costs (which are not even
incurred in the United States, but rather on the ocean) that
petitioners mention are only used in calculating imputed costs, Ta Chen
argues that petitioners' argument is irrelevant.
Department's Position: As in our Amended Preliminary Determination,
we have not included imputed credit expenses and inventory carrying
costs in calculating U.S. resale prices because, as we stated, these
expenses represent opportunity costs, not actual costs to the company.
See also Mitsui 1997. In addition, as set out in our Amended
Preliminary Determination, we will deduct from Ta Chen's U.S. resale
the actual expenses incurred in selling the product in the United
States. See Comment 9. We will not include imputed costs and expenses
because we continue to believe that middleman dumping involves sales
below the middleman's actual total acquisition costs and expenses and
therefore to include imputed costs and expenses would be inappropriate.
Similarly, because the focus of middleman dumping is solely on whether
the merchandise was sold to the first unaffiliated party in the United
States at prices below the middleman's total acquisition costs and
expenses, instead of using constructed value, in calculating a
middleman dumping margin, we have used a middleman acquisition price
which, as stated, is analogous to the input cost, and the middleman's
actual G&A and interest expenses. Taken together, these items encompass
all costs associated with purchasing the merchandise.
As discussed in other sections of this notice, we will add to Ta
Chen's acquisition price a portion of its total G&A expenses, including
interest (allocable to sales of subject merchandise), because these are
actual costs incurred by Ta Chen in purchasing YUSCO's merchandise. See
Comments 9 and 20. This is also consistent with constructing costs in
lieu of prices under section 773(b)(3), where only actual G&A including
interest is used (and will not, therefore, include profit, see Comments
9 and 20).
Comment 14: Petitioners argue that the Department should
recalculate Ta Chen's reported warehousing expenses to include building
depreciation expenses and total interest for land and buildings
associated with TCI's Los Angeles warehouse and then deduct these as
direct selling expenses. With regard to the interest for land and
building, petitioners' claim that this expense was calculated only for
the square footage specifically attributable to coil, but that the Los
Angeles warehouse expense was allocated over all merchandise.
Ta Chen states that the correct building depreciation expense for
coil shipments from the Los Angeles warehouse can be calculated by
multiplying the warehouse building mortgage interest rate by
petitioners' estimate of 1997 warehouse building depreciation and then
dividing by total pounds shipped.
Ta Chen points to the verification exhibits to show that, contrary
to petitioners' claims, the Los Angeles warehouse interest expense was
calculated correctly because both the mortgage interest and warehouse
expense were allocated over only coil shipments.
Department's Position: Regarding the inclusion of building
depreciation expenses, we agree with both Ta Chen and petitioners and
have recalculated TCI's warehousing expenses accordingly. We also agree
with Ta Chen with regard to the calculation of mortgage interest since,
as seen in the verification exhibits, both the interest expense and
warehouse expense were allocated over shipments of SSPC.
Comment 15: Petitioner claims that, in the final determination, we
should deduct expenses related to an unreported Chicago warehouse
discovered at verification.
Ta Chen argues that petitioners erroneously allocate the unreported
Chicago warehouse's charge to the amount stored at the reported
warehouse, and the fact that this one Chicago warehouse was not
reported actually results in over-reported Ta Chen warehouse expenses.
Department's Position: We agree with Ta Chen. Petitioners'
recalculation of per unit Chicago warehouse expenses does not account
for the quantity stored at the unreported warehouse. Based on an
exhibit taken at verification, we conclude that, in fact, Ta Chen's
reported warehousing expenses for its warehouse activities in Chicago
were conservative. We thus have not adjusted Ta Chen's warehousing
expenses.
Comment 16: Petitioners argue that Ta Chen failed to account for
all of its overhead expenses in calculating indirect selling expenses.
Petitioners cite such expenses as utilities, property taxes, and
security expenses as items which are general in nature. Petitioners
request that the Department recalculate Ta Chen's indirect selling
expenses as total selling expenses, including interest expenses, as a
percentage of sales.
Ta Chen acknowledges that perhaps it should have allocated, to
SSPC, expenses for charitable contributions,
[[Page 15506]]
postage & delivery, security, taxes & licenses, property taxes, and
utilities. Ta Chen also claims, however, that for the other indirect
expenses mentioned by petitioner there is no evidence that they are
related to sales of SSPC, as the verification findings show, and that
petitioners should have raised this argument before verification.
Department's Position: We agree with petitioners. In Exhibit 11 of
its November 23,1998 supplemental, Ta Chen reported both an overall
ratio of U.S. selling expenses for sales of all products and a ratio it
represented as appropriate to sales of stainless steel coils. In its
data submission, Ta Chen reported the latter. However, Ta Chen stated
that ``* * * it does not matter which figures are used, as far as the
final dumping margin.'' See, November 23, 1998 submission at 24.
While the Department reviewed a portion of TCI's reported indirect
selling expenses attributable to coil at verification, the nature of
any verification includes the employment of spot-checking techniques,
which are necessary given the extreme time constraints for a
verification. Therefore, while the Department will generally find an
item to be successfully ``verified'' based on successful spot-checks of
data, such a conclusion becomes open to rebuttal if compelling evidence
is presented after verification which calls into question any
calculation. In this respect, in its rebuttal brief, TCI now admits
that certain expenses had been erroneously excluded from its selling
expense allocation for stainless steel coil. Thus, by Ta Chen's own
admission, its calculation of indirect selling expenses for coils is
flawed. Therefore, for this final determination, we have used TCI's
overall operating costs as a percentage of sales as previously reported
in Exhibit 11 of Ta Chen's November 23, 1998 supplemental response.
This is in accordance with our normal practice. See Yieh United Steel
Corporation (YUSCO) and Ta Chen Stainless Pipe Co., Ltd. Analysis
Memorandum for the Final Determination of the Less-Than-Fair-Value
Investigation of Stainless Steel Plate in Coil from Taiwan (``Ta Chen
Final Analysis Memo''), March 19, 1999 at 3.
Comment 17: Petitioners argue that the Department should
recalculate one CONNUM's acquisition cost in Ta Chen's constructed
value worksheet to exclude the warranty claim since the payment of the
warranty claim could not be verified and YUSCO stated that it did not
accept any such warranty claim.
Ta Chen claims that this is irrelevant since the Department did not
use constructed value in its middleman dumping margin analysis.
Department's Position: We agree with petitioner and have
recalculated Ta Chen's acquisition price, accordingly. This so-called
warranty claim is actually an offset to Ta Chen's acquisition price and
is analogous to a billing adjustment on an input. Because we were
unable to verify this offset claim, we are calculating a weighted-
average acquisition price that excludes this offset.
Comment 18: Petitioners assert that although none were reported, Ta
Chen's interest expenses for the constructed value calculation should
be calculated by dividing the company's total net interest expense
divided by its cost of sales, as required by the Department's
questionnaire.
Ta Chen argues that an adjustment should not be made for Ta Chen's
interest expenses based on the fact that Ta Chen guarantees TCI's
loans. Ta Chen states that, as the record shows, Ta Chen never paid any
of TCI's interest expense on TCI's loans.
Department's Position: We agree with petitioners. As described
above (see Comment 6), Ta Chen plays an integral role in the purchase
and resale of SSPC and therefore its interest expenses must be taken
into account as part of total G&A expenses. See Comments 8, 13. As
petitioners suggest and as the questionnaire prescribes, we have
calculated Ta Chen's interest expenses by dividing the company's total
net interest expense divided by its cost of sales. See Ta Chen Final
Analysis Memo, at 2-3.
Comment 19: Petitioners state that the Department should correct Ta
Chen's errors found at verification. Petitioners also contend that Ta
Chen's latest submitted data is missing field INDIRS2U representing
U.S. warehousing expenses. Petitioners request that the Department
utilize all appropriate expenses in its final determination.
Ta Chen states that U.S. warehousing expenses were reported in
field DIRSEL2U and that field INDIRS2U was erroneously included in its
initial dataset.
Department's Position: We agree with petitioners and have corrected
Ta Chen's errors found at verification. These errors include
recalculation of U.S. repacking expenses, U.S. commissions,
international freight, credit expenses and U.S. indirect selling
expenses. However, we have not deducted the INDIRS2U field because the
record does not support a conclusion that this field represents U.S.
warehousing expenses or any other expense that has not already been
accounted for in this final determination. In fact, the Department
included the field INDIRS2U in its Amended Preliminary Determination
calculations, since this field was included in the database which the
Department used in its preliminary calculations. However, such
inclusion was in error, because this information constituted
unsolicited (as well as unexplained) new data (submitted October 14,
1998, in response to the Department's October 9, 1998 letter requesting
unrelated information). Indeed, we note that Ta Chen excluded this
field in its supplemental sales submission to the Department of
November 23, 1998. However, due to time constraints, we were unable to
use the November 23, 1998 database (i.e., an updated database which
excluded the field INDIRS2U) for the Amended Preliminary Determination.
See Ta Chen Final Analysis Memo, at 3.
Comment 20: Petitioners argue that the Department should correct
the ``ministerial errors'' found in the preliminary determination. One
such alleged error is that the Department did not use the correct
exchange rate in its analysis of whether Ta Chen engaged in middleman
dumping. Petitioners contend that in that part of its analysis, the
Department should have chosen, as the exchange rate, the date of
YUSCO's sale to Ta Chen rather than on the date of TCI's resale in the
United States. Petitioners support their argument by stating that the
focus in middleman dumping is on whether Ta Chen covered its cost of
acquisition with respect to the price paid by Ta Chen to YUSCO.
Furthermore, they point to the Amended Preliminary Determination in
which, the Department selected, as the exchange rate, the date of
YUSCO's sale to Ta Chen in calculating the dumping margin attributable
to YUSCO. Petitioners request that the Department consistently employ
the date of sale for the transactions between YUSCO and Ta Chen in
evaluating the extent of Ta Chen's middleman dumping.
Petitioners also argue that the Department did not correctly
calculate the overall dumping margin for YUSCO/Ta Chen since the margin
calculation on the sales between Ta Chen and its unaffiliated U.S.
customers inadvertently omitted U.S. credit expenses, U.S. inventory
carrying costs, CEP profit, inventory carrying costs incurred in Taiwan
for U.S. sales, and indirect selling expenses incurred in Taiwan for
U.S. sales. Additionally, claim petitioners, with regard to Ta
[[Page 15507]]
Chen's constructed value, the Department failed to include indirect
selling expenses, G&A, interest expenses, and constructed value profit.
Ta Chen argues that the Department should use the exchange rate on
the date TCI receives payment from its unaffiliated U.S. customer in
converting Taiwanese acquisition costs and expenses into U.S. dollars.
Ta Chen argues that use of this exchange rate would indicate the true
profitability of the transaction because the SSPC was actually
purchased from YUSCO in Taiwanese currency. To obtain the actual profit
or loss from the perspective of a Taiwanese trading company, one would
have to convert the U.S. dollars received and convert that to Taiwanese
dollars based on the existing exchange rate to determine if the resale
price was more than the acquisition price.
Department's Position: With respect to the appropriate exchange
rate, we disagree with both petitioners and Ta Chen and have continued
to apply the same currency conversion as that applied in our Amended
Preliminary Determination. In that determination, we selected the
exchange rate for converting the acquisition cost as the rate in effect
on the date of Ta Chen's resales (through its 100 percent-owned
affiliate, TCI) to its first unaffiliated U.S. customers. Using the
same exchange rate for both transactions is in keeping with the statute
and our normal practice of making an apples-to-apples comparison
between prices and costs. See section 773A and Mitsui 1997. When
calculating a constructed normal value, the Department uses the
exchange rate based upon the date of the U.S. sale. See section 773A.
In the case of middleman dumping, we are attempting to compare costs
with prices--the acquisition costs, including actual G&A and interest
expenses (see Comment 9)--with the resale price to the first
unaffiliated U.S. customer (minus actual movement and selling expenses
associated with selling the product in the United States). Therefore,
because we are comparing costs with prices it is appropriate to follow
our standard practice.
Moreover, it is only on the date of sale to the first unaffiliated
U.S. customer that the middleman, in this case Ta Chen, will know
whether or not it will recover its total acquisition costs on resale.
It cannot know this on the date it acquires the merchandise. Therefore,
because the basis of middleman dumping is to determine if the middleman
is selling below its acquisition costs, the date of sale to the first
unaffiliated U.S. customer is the appropriate date upon which to
convert Ta Chen's acquisition costs into U.S. dollars.
Although Ta Chen acknowledges that to ensure an apples-to-apples
comparison the Department must convert one side of the equation so that
both are in the same currency, Ta Chen's suggestion to use the exchange
rate on the date payment is received for the U.S. sale from the first
unaffiliated customer is without merit. The suggestion ignores the
statute, the regulations and our standard practice. In constructing a
normal value in lieu of actual prices, the Department does not use the
date of payment, but rather, as discussed, the date of the actual U.S.
sale to the first unaffiliated customer. See section 773A; 19 CFR 351.
415(a)(``in an antidumping proceeding, the Secretary will convert
foreign currencies into United States dollars using the rate of
exchange on the date of sale of subject merchandise'').
We also disagree with respect to petitioners suggestion to deduct
imputed selling expenses and CEP profit. Petitioners' argument that we
must make these deductions in order to correctly calculate an overall
dumping margin is misplaced because, although our calculations contain
parallels to a ``normal'' dumping calculation, here, we are not trying
to calculate a constructed normal value or an overall dumping margin.
Rather, we are determining the magnitude of losses incurred by Ta Chen
in selling the merchandise below its total acquisition cost. Likewise,
we will not add to the total acquisition cost the profits gained by Ta
Chen, as that would be contrary to the rationale for determining
middleman dumping, which is solely to determine the extent of the
losses the middleman is absorbing in selling merchandise from an
unaffiliated supplier into the United States (see Comment 9). Finally,
with respect to indirect selling expenses incurred in Taiwan, we note
that Ta Chen reported that it had none. Therefore, as we describe in
Comments 9 and 18, we are including G&A and interest expenses in
calculating Ta Chen's total acquisition costs.
Comment 21: Ta Chen infers that petitioners are arguing that the
Department should add YUSCO's and TCI's dumping margins together and
base TCI's dumping margin on constructed value, including profit, for
the final determination. Ta Chen argues that such a methodology leads
to the double counting of margins since it adds the difference between
normal value and the price paid by Ta Chen and the difference between
normal value and the price paid to the first unaffiliated U.S.
customer.
Department's Position: We disagree with Ta Chen and find that
adding YUSCO's margin to Ta Chen's margin accurately calculates the
extent of middleman dumping. Contrary to Ta Chen's claims, by adding
the margins, we are adding the difference between normal value and the
price paid by Ta Chen to the difference between Ta Chen's total
acquisition cost and the price paid to the first unaffiliated U.S.
customer. Doing so accounts for all transaction and all expenses,
resulting in an accurate middleman dumping margin.
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 consumption on or after the date of publication of the
amended preliminary determination in the Federal Register. The all
others rate reflects an average of the non-de minimis margins alleged
in the petition. 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
------------------------------------------------------------------------
YUSCO...................................................... 8.02
YUSCO/Ta Chen.............................................. 10.20
All Others................................................. 7.39
------------------------------------------------------------------------
ITC Notification
In accordance with section 735(d) of the Act, we have notified the
International Trade Commission (ITC) of our determination. As our final
determination is affirmative, the ITC will, 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
[[Page 15508]]
suspension of liquidation. This determination is issued and published
in accordance with sections 735(d) and 777(i)(1) of the Act.
Dated: March 19, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-7538 Filed 3-30-99; 8:45 am]
BILLING CODE 3510-DS-P
