[Federal Register Volume 64, Number 109 (Tuesday, June 8, 1999)]
[Notices]
[Pages 30592-30624]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-13681]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-583-831]
Notice of Final Determination of Sales at Less Than Fair Value:
Stainless Steel Sheet and Strip in Coils From Taiwan
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: June 8, 1999.
FOR FURTHER INFORMATION CONTACT: Doreen Chen (Tung Mung); Joanna
Gabryszewski (Chang Mien); Gideon Katz (YUSCO and Yieh Mau); or Michael
Panfeld (Ta Chen), Import Administration, International Trade
Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, NW, Washington, DC 20230; telephone: (202) 482-
0408; (202) 482-0780; (202) 482-5255; and (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's
regulations are to the regulations at 19 CFR part 351 (1998).
Final Determination
We determine that stainless steel sheet and strip in coils
(``SSSS'') from Taiwan are being sold in the United States at less than
fair value (``LTFV''), as provided in section 735 of the Act. The
estimated margins of sales at LTFV are shown in the ``Suspension of
Liquidation'' section of this notice. Additionally, as discussed below,
we have determined that the application of total adverse facts
available is warranted with respect to YUSCO and Ta Chen.
[[Page 30593]]
Case History
Since the amended preliminary determination (Notice of Amended
Preliminary Determination of Sales at Less Than Fair Value: Stainless
Steel Sheet and Strip from Taiwan, (Amended Preliminary Determination)
(64 FR 4070, January 27, 1999)) the following events have occurred. We
conducted a sales verification of Yieh United Steel Corporation's
(``YUSCO'') questionnaire response on January 18-22, 1999. We conducted
a sales and cost verification of Tung Mung Development Co., Ltd's
(``Tung Mung'') questionnaire response on January 25-29, 1999. We
conducted a sales and cost verification of Chang Mien Industries Co.,
Ltd.'s (``Chang Mien'') questionnaire response on February 2-6, 1999.
We conducted a sales verification of Yieh Mau Corporation's (``Yieh
Mau'') questionnaire response on February 8-9, 1999. Finally, we
conducted a verification of Ta Chen Stainless Pipe Co., Ltd.''s (``Ta
Chen Taiwan'') and Ta Chen International's (``TCI'') (collectively ``Ta
Chen'') middleman dumping questionnaire response on April 5-8,1999 in
Los Angeles and on April 12-16, 1999 in Taiwan. On April 12, 1999,
respondents YUSCO, Ta Chen, Chang Mien, and Tung Mung provided this
monthly shipment data for subject merchandise to the U.S. for 1996,
1997, and 1998.
Petitioners and respondents submitted case briefs on April 20,
1999. On April 22, 1999, petitioners (the only party requesting a
public hearing) withdrew their request for the public hearing.
Petitioners and respondents submitted rebuttal briefs on April 26,
1999.
On February 5, 1999, Ta Chen submitted a middleman dumping
questionnaire response. On February 17 and on March 3, 1999, Ta Chen
submitted additional information. On April 7, 1999, the Department
requested historical data from respondents regarding exports of subject
merchandise during the POI to the U.S. for the years 1996, 1997, and
1998. On April 20, 1999, the Department released a preliminary decision
on our middleman dumping investigation of Ta Chen. See Memorandum from
Michael Panfeld to the File entitled ``Ta Chen Stainless Pipe Co.,
Ltd.: Preliminary Middleman Dumping Analysis.'' In that memorandum, we
preliminarily found that Ta Chen did not engage in middleman dumping
with respect to purchases from YUSCO. However, we did preliminarily
find that Ta Chen engaged in middleman dumping with respect to
purchases from Tung Mung. On May 3, 1999, petitioners and respondents
submitted a second round of case briefs, focused on middleman dumping
issues. Petitioners and respondents submitted rebuttals for this second
case brief on May 7, 1999.
Scope of the Investigation
We have made minor corrections to the scope language excluding
certain stainless steel foil for automotive catalytic converters and
certain specialty stainless steel products in response to comments by
interested parties.
For purposes of this investigation, the products covered are
certain stainless steel sheet and strip 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 sheet and strip is a flat-rolled product in coils that is
greater than 9.5 mm in width and less than 4.75 mm in thickness, and
that is annealed or otherwise heat treated and pickled or otherwise
descaled. The subject sheet and strip may also be further processed
(e.g., cold-rolled, polished, aluminized, coated, etc.) provided that
it maintains the specific dimensions of sheet and strip following such
processing.
The merchandise subject to this investigation is classified in the
Harmonized Tariff Schedule of the United States (HTS) at subheadings:
7219.13.00.30, 7219.13.00.50, 7219.13.00.70, 7219.13.00.80,
7219.14.00.30, 7219.14.00.65, 7219.14.00.90, 7219.32.00.05,
7219.32.00.20, 7219.32.00.25, 7219.32.00.35, 7219.32.00.36,
7219.32.00.38, 7219.32.00.42, 7219.32.00.44, 7219.33.00.05,
7219.33.00.20, 7219.33.00.25, 7219.33.00.35, 7219.33.00.36,
7219.33.00.38, 7219.33.00.42, 7219.33.00.44, 7219.34.00.05,
7219.34.00.20, 7219.34.00.25, 7219.34.00.30, 7219.34.00.35,
7219.35.00.05, 7219.35.00.15, 7219.35.00.30, 7219.35.00.35,
7219.90.00.10, 7219.90.00.20, 7219.90.00.25, 7219.90.00.60,
7219.90.00.80, 7220.12.10.00, 7220.12.50.00, 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,
7220.20.70.05, 7220.20.70.10, 7220.20.70.15, 7220.20.70.60,
7220.20.70.80, 7220.20.80.00, 7220.20.90.30, 7220.20.90.60,
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 Department's written description of the merchandise under
investigation is dispositive.
Excluded from the scope of this investigation are the following:
(1) Sheet and strip that is not annealed or otherwise heat treated and
pickled or otherwise descaled, (2) sheet and strip that is cut to
length, (3) plate (i.e., flat-rolled stainless steel products of a
thickness of 4.75 mm or more), (4) flat wire (i.e., cold-rolled
sections, with a prepared edge, rectangular in shape, of a width of not
more than 9.5 mm), and (5) razor blade steel. Razor blade steel is a
flat-rolled product of stainless steel, not further worked than cold-
rolled (cold-reduced), in coils, of a width of not more than 23 mm and
a thickness of 0.266 mm or less, containing, by weight, 12.5 to 14.5
percent chromium, and certified at the time of entry to be used in the
manufacture of razor blades. See Chapter 72 of the HTS, ``Additional
U.S. Note'' 1(d).
In response to comments by interested parties, the Department has
determined that certain specialty stainless steel products are also
excluded from the scope of this investigation. These excluded products
are described below.
Flapper valve steel is defined as stainless steel strip in coils
containing, by weight, between 0.37 and 0.43 percent carbon, between
1.15 and 1.35 percent molybdenum, and between 0.20 and 0.80 percent
manganese. This steel also contains, by weight, phosphorus of 0.025
percent or less, silicon of between 0.20 and 0.50 percent, and sulfur
of 0.020 percent or less. The product is manufactured by means of
vacuum arc remelting, with inclusion controls for sulphide of no more
than 0.04 percent and for oxide of no more than 0.05 percent. Flapper
valve steel has a tensile strength of between 210 and 300 ksi, yield
strength of between 170 and 270 ksi, plus or minus 8 ksi, and a
hardness (Hv) of between 460 and 590. Flapper valve steel is most
commonly used to produce specialty flapper valves in compressors.
Also excluded is a product referred to as suspension foil, a
specialty steel product used in the manufacture of suspension
assemblies for computer disk drives. Suspension foil is described as
302/304 grade or 202 grade stainless steel of a thickness between 14
and 127 microns, with a thickness tolerance of plus-or-minus 2.01
microns, and surface glossiness of 200 to 700 percent Gs. Suspension
foil must be supplied in coil widths of not more than 407 mm, and with
a mass of 225 kg or less. Roll marks may only be visible on one side,
with no scratches of measurable depth. The material must exhibit
residual stresses
[[Page 30594]]
of 2 mm maximum deflection, and flatness of 1.6 mm over 685 mm length.
Certain stainless steel foil for automotive catalytic converters is
also excluded from the scope of this investigation. This stainless
steel strip in coils is a specialty foil with a thickness of between 20
and 110 microns used to produce a metallic substrate with a honeycomb
structure for use in automotive catalytic converters. The steel
contains, by weight, carbon of no more than 0.030 percent, silicon of
no more than 1.0 percent, manganese of no more than 1.0 percent,
chromium of between 19 and 22 percent, aluminum of no less than 5.0
percent, phosphorus of no more than 0.045 percent, sulfur of no more
than 0.03 percent, lanthanum of less than 0.002 or greater than 0.05
percent, and total rare earth elements of more than 0.06 percent, with
the balance iron.
Permanent magnet iron-chromium-cobalt alloy stainless strip is also
excluded from the scope of this investigation. This ductile stainless
steel strip contains, by weight, 26 to 30 percent chromium, and 7 to 10
percent cobalt, with the remainder of iron, in widths 228.6 mm or less,
and a thickness between 0.127 and 1.270 mm. It exhibits magnetic
remanence between 9,000 and 12,000 gauss, and a coercivity of between
50 and 300 oersteds. This product is most commonly used in electronic
sensors and is currently available under proprietary trade names such
as ``Arnokrome III.'' 1
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\1\ ``Arnokrome III'' is a trademark of the Arnold Engineering
Company.
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Certain electrical resistance alloy steel is also excluded from the
scope of this investigation. This product is defined as a non-magnetic
stainless steel manufactured to American Society of Testing and
Materials (``ASTM'') specification B344 and containing, by weight, 36
percent nickel, 18 percent chromium, and 46 percent iron, and is most
notable for its resistance to high temperature corrosion. It has a
melting point of 1390 degrees Celsius and displays a creep rupture
limit of 4 kilograms per square millimeter at 1000 degrees Celsius.
This steel is most commonly used in the production of heating ribbons
for circuit breakers and industrial furnaces, and in rheostats for
railway locomotives. The product is currently available under
proprietary trade names such as ``Gilphy 36.'' 2
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\2\ ``Gilphy 36'' is a trademark of Imphy, S.A.
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Certain martensitic precipitation-hardenable stainless steel is
also excluded from the scope of this investigation. This high-strength,
ductile stainless steel product is designated under the Unified
Numbering System (``UNS'') as S45500-grade steel, and contains, by
weight, 11 to 13 percent chromium, and 7 to 10 percent nickel. Carbon,
manganese, silicon and molybdenum each comprise, by weight, 0.05
percent or less, with phosphorus and sulfur each comprising, by weight,
0.03 percent or less. This steel has copper, niobium, and titanium
added to achieve aging, and will exhibit yield strengths as high as
1700 Mpa and ultimate tensile strengths as high as 1750 Mpa after
aging, with elongation percentages of 3 percent or less in 50 mm. It is
generally provided in thicknesses between 0.635 and 0.787 mm, and in
widths of 25.4 mm. This product is most commonly used in the
manufacture of television tubes and is currently available under
proprietary trade names such as ``Durphynox 17.'' 3
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\3\ ``Durphynox 17'' is a trademark of Imphy, S.A.
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Finally, three specialty stainless steels typically used in certain
industrial blades and surgical and medical instruments are also
excluded from the scope of this investigation. These include stainless
steel strip in coils used in the production of textile cutting tools
(e.g., carpet knives).4 This steel is similar to AISI grade
420 but containing, by weight, 0.5 to 0.7 percent of molybdenum. The
steel also contains, by weight, carbon of between 1.0 and 1.1 percent,
sulfur of 0.020 percent or less, and includes between 0.20 and 0.30
percent copper and between 0.20 and 0.50 percent cobalt. This steel is
sold under proprietary names such as ``GIN4 Mo.'' The second excluded
stainless steel strip in coils is similar to AISI 420-J2 and contains,
by weight, carbon of between 0.62 and 0.70 percent, silicon of between
0.20 and 0.50 percent, manganese of between 0.45 and 0.80 percent,
phosphorus of no more than 0.025 percent and sulfur of no more than
0.020 percent. This steel has a carbide density on average of 100
carbide particles per 100 square microns. An example of this product is
``GIN5'' steel. The third specialty steel has a chemical composition
similar to AISI 420 F, with carbon of between 0.37 and 0.43 percent,
molybdenum of between 1.15 and 1.35 percent, but lower manganese of
between 0.20 and 0.80 percent, phosphorus of no more than 0.025
percent, silicon of between 0.20 and 0.50 percent, and sulfur of no
more than 0.020 percent. This product is supplied with a hardness of
more than Hv 500 guaranteed after customer processing, and is supplied
as, for example, ``GIN6''.5
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\4\ This list of uses is illustrative and provided for
descriptive purposes only.
\5\ ``GIN4 Mo,'' ``GIN5'' and ``GIN6'' are the proprietary
grades of Hitachi Metals America, Ltd.
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Period of Investigation
The period of investigation (``POI'') is April 1, 1997 through
March 31, 1998.
Fair Value Comparisons
To determine whether sales of SSSS from Taiwan to the United States
were made at less than fair value, we compared the export price
(``EP'') to the normal value (``NV''), as described in the ``export
price'' section of this notice below. In accordance with section
777A(d)(1)(A)(i) of the Act, we calculated weighted-average EPs for
comparison to weighted-average NVs.
Transactions Investigated
Chang Mien
With respect to home market sales, we have determined that the date
of the order confirmation is the appropriate date of sale since it is
the date on which the terms are set and is not changed thereafter, i.e.
the date which ``established the material terms of sale.'' 19 CFR
401(i). For a further discussion of this issue, see the date of sale
discussion for Chang Mien further in the body of this Final
Determination, and in the Analysis of Chang Mien in the Final
Determination of Stainless Steel Sheet and Strip in Coils from Taiwan
Memorandum (``Analysis Memorandum: Chang Mien''), May 18, 1999.
For U.S. sales, we have determined that the date of invoice is the
appropriate date of sale since it is the date on which the terms of the
sale are set and is not changed thereafter. For a further discussion of
this issue, see the date of sale discussion for Chang Mien, further in
the body of this final, and in the Analysis Memorandum: Chang Mien.
Tung Mung
For Tung Mung's U.S. sales, we have used contract date as date of
sale. With respect to home market sales, we have determined that the
date of invoice is the appropriate date of sale since it is the date on
which the terms are set and is not changed thereafter, i.e. the date
which ``established the material terms of sale.'' 19 CFR 401(i). For a
further discussion of this issue, see Analysis of Tung Mung in the
Final Determination of Stainless Steel Sheet and Strip in Coils from
Taiwan Memorandum (``Analysis Memorandum: Tung Mung''), May 18, 1999.
For U.S. sales, as a result of verification, we have treated Tung
[[Page 30595]]
Mung's sales to Company X as sales through Ta Chen Taiwan in our
calculations. See Ta Chen Taiwan Verification Report dated April 28,
1999 and Analysis Memorandum: Tung Mung.
Product Comparisons
In accordance with section 771(16) of the Act, we considered all
products produced by respondents, covered by the description in the
``Scope of Investigation'' section above, and sold in the home market
during the POI, to be foreign like products for purposes of determining
appropriate product comparisons to U.S. sales. Where there were no
sales of identical merchandise in the home market to compare to U.S.
sales, we compared U.S. sales to the next most similar foreign like
product on the basis of the characteristics and reporting instructions
listed in the Department's August 3, 1998 questionnaire.
Level of Trade
In accordance with section 773(a)(1)(B)(i) of the Act, to the
extent practicable, we determine NV based on sales in the comparison
market at the same level of trade (``LOT'') as the EP or constructed
export price (``CEP'') transaction. The NV LOT is that of the starting
price sales in the comparison market or, when NV is based on CV, that
of the sales from which we derive selling, general and administrative
expenses (``SG&A'') and profit. For EP, the LOT is also the level of
the starting price sale, which is usually from the exporter to the
importer. For CEP, it is the level of the constructed sale from the
exporter to the importer.
To determine whether NV sales are at a different LOT than EP or CEP
sales, we examine stages in the marketing process and selling functions
along the chain of distribution between the producer and the
unaffiliated customer. If the comparison market sales are at a
different LOT, and the difference affects price comparability, as
manifested in a pattern of consistent price differences between the
sales on which NV is based and comparison market sales at the LOT of
the export transaction, we make a LOT adjustment under section
773(a)(7)(A) of the Act. Finally, for CEP sales, if the NV level is
more remote from the factory than the CEP level and there is no basis
for determining whether the differences in the levels between NV and
CEP sales affects price comparability, we adjust NV under section
773(a)(7)(B) of the Act (the CEP offset provision). See Notice of Final
Determination of Sales at Less Than Fair Value: Certain Cut-to-Length
Carbon Steel Plate from South Africa, 62 FR 61731 (November 19, 1997).
In this investigation, none of the respondents requested a LOT
adjustment. To ensure that no such adjustment was necessary, in
accordance with principles discussed above, we examined information
regarding the distribution systems in both the United States and Taiwan
markets, including the selling functions, classes of customers and
selling expenses for each respondent.
Tung Mung
Tung Mung claimed that there was only one LOT in the home market.
Tung Mung reported that in the home market it made sales to
distributors, service centers, and end-users through one channel of
distribution. Tung Mung offered freight and delivery arrangements and
warranty services to all customers in the home market. The Department
confirmed this information at verification (see Verification Report:
Stainless Steel Plate in Coils from Taiwan, Less than Fair Value
Investigation, p. 8). Based on our analysis, for the final
determination, we determine that Tung Mung had one LOT in its home
market.
In the U.S. market, Tung Mung reported that it sold at one LOT
through two channels of distribution: (1) A foreign distributor, and
(2) domestic trading companies. In the U.S. market, Tung Mung reported
only one LOT to customers. Tung Mung reported that it performed
identical selling functions in the United States and in the home
market. These selling functions include freight and delivery
arrangements and warranty services. The Department confirmed this
information at verification (see Tung Mung sales verification report,
p. 9). Therefore, for the final determination, we determine that there
is one LOT in the U.S. and that sales to these customers constitute the
same LOT in the home market and the United States. Therefore, a LOT
adjustment for Tung Mung is not appropriate.
Chang Mien
Chang Mien reported two LOTs in the home market and two channels of
distribution. Within both channels of distribution, the merchandise is
either shipped immediately to the customer or stored in Chang Mien's
warehouse. In the home market, Chang Mien stated that it performed
identical selling activities for both channels of distribution, such as
providing inventory maintenance, technical advice, warranty services,
delivery arrangements, and advertising. Although the selling activities
offered are identical for each of its customers, an additional selling
activity is performed for those sales which are stored in inventory.
However, we determine that sales on which inventory maintenance is
performed do not involve significantly greater resources than sales on
which inventory maintenance is not performed and, therefore, do not
constitute a separate LOT. The Department confirmed this information at
the verification (see Memorandum to the File through Rick Johnson from
Laurel LaCivita, Chang Mien Industries Co., Ltd., Home Market Sales,
United States Sales Verification Report; Stainless Steel Plate in Coils
from Taiwan, Less than Fair Value Investigation (``Chang Mien Sales
Verification Report''), pp. 4-5). With respect to the final
determination, the Department determines that Chang Mien's two claimed
LOTs constitute one LOT. For a further discussion of this issue, see
Analysis Memorandum: Chang Mien, pp. 7-8.
In the U.S. market, Chang Mien reported that it sold at one LOT,
through one channel of distribution, and to one type of customer
(trading company). For sales in the U.S. market, Chang Mien performed
the following activities: packing, delivery arrangements (i.e.,
transportation, brokerage and handling, and marine insurance),
advertising, and warranty services. Based on a comparison of the
selling activities performed in the United States market to the selling
activities in the home market, we conclude that there is not a
significant difference in the selling functions performed in both
markets. The Department confirmed this information at the verification
(see Chang Mien Sales Verification Report, pp. 4-5). Therefore, for the
final determination, we determine that there is one LOT in the U.S. and
that sales to these customers constitute the same LOT in the home
market and the United States. Therefore, a LOT adjustment for Chang
Mien is not appropriate.
Export Price
For all respondents (except Ta Chen and YUSCO--see ``Facts
Available'' section below), we based our calculation on EP, in
accordance with section 772(a) of the Act, because the subject
merchandise was sold by the producer or exporter directly to the first
unaffiliated purchaser in the United States prior to importation, and
CEP methodology was not otherwise indicated. Furthermore, we calculated
EP based on packed prices charged to the first unaffiliated customer in
the United States.
[[Page 30596]]
We made company-specific adjustments as follows:
Tung Mung
We made deductions from the starting price, where appropriate, for
the following movement expenses, in accordance with section
772(c)(2)(A) of the Act: foreign inland freight; containerization
expenses; brokerage and handling expenses; harbor duty fees, and bank
charges. Additionally, we added to the U.S. price an amount for duty
drawback pursuant to section 772(c)(1)(B) of the Act.
Chang Mien
We made deductions from the starting price, where appropriate, for
the following movement expenses, in accordance with section
772(c)(2)(A) of the Act: foreign inland freight; brokerage and
handling; ocean freight; and marine insurance. Additionally, we added
to the U.S. price an amount for duty drawback pursuant to section
772(c)(1)(B) of the Act.
Normal Value
After testing home market viability and whether home market sales
were at below-cost prices, we calculated NV as noted in the ``Price-to-
Price Comparisons'' and ``Price-to-CV Comparison'' sections of this
notice.
1. Home Market Viability
As discussed in the preliminary determination, we determined that
the home market was viable for YUSCO, Tung Mung, and Chang Mien. No
party has contested this decision. For the final determination, we have
based NV on home market sales.
2. Cost of Production Analysis
Based on the cost allegation submitted by petitioners in the
petition, the Department found reasonable grounds to believe or suspect
that respondents had made sales in the home market at prices below the
cost of producing (``COP'') the merchandise, in accordance with section
773(b)(2)(A) of the Act. As a result, the Department initiated an
investigation to determine whether respondents made home market sales
during the POI at prices below their respective COPs within the meaning
of section 773(b) of the Act. See Initiation of Antidumping
Investigation: Stainless Sheet and Strip In Coils From France, Germany,
Italy, Japan, Mexico, South Korea, Taiwan, and the United Kingdom,
(``Initiation Notice'') 63 FR 37521 (July 13, 1998).
We conducted the COP analysis described below.
A. Calculation of COP
In accordance with section 773(b)(3) of the Act, we calculated COP
based on the sum of the cost of materials and fabrication for the
foreign like product, plus amounts for home market SG&A, interest
expenses, and packing costs. We relied on the COP data submitted by
each respondent in its cost questionnaire response. Additionally, we
made the following adjustments based on our verification findings: (1)
We made an adjustment to Tung Mung's G&A expenses to account for power
expenses; and 2) for Chang Mien, we revised costs for three CONNUMs, as
discussed further in Comment 8.
B. Test of Home Market Prices
We compared the weighted-average COP for each respondent, adjusted
where appropriate (see above), to home market sales of the foreign like
product as required under section 773(b) of the Act. In determining
whether to disregard home market sales made at prices less than the
COP, we examined whether (1) within an extended period of time, such
sales were made in substantial quantities, and (2) such sales were made
at prices which permitted the recovery of all costs within a reasonable
period of time in the normal course of trade. On a product-specific
basis, we compared the COP to home market prices, less any applicable
movement charges and direct and indirect selling expenses.
C. Results of the COP Test
Pursuant to section 773(b)(2)(C)(i) of the Act, where less than 20
percent of respondent's sales of a given product were at prices less
than the COP, we did not disregard any below-cost sales of that product
because we determined that the below-cost sales were not made in
``substantial quantities.'' Where 20 percent or more of a respondent's
sales of a given product during the POI were at prices less than the
COP, we determined such sales to have been made in ``substantial
quantities,'' pursuant to section 773(b)(2)(C)(i), within an extended
period of time in accordance with section 773(b)(2)(B) of the Act. In
such cases, because we compared prices to weighted-average COPs for the
POI, we also determined that such sales were not made at prices which
would permit recovery of all costs within a reasonable period of time,
in accordance with section 773(b)(2)(D) of the Act. Therefore, we
disregarded the below-cost sales. Where all sales of a specific product
were at prices below the COP, we disregarded all sales of that product.
D. Calculation of CV
In accordance with section 773(e)(1) of the Act, we calculated CV
based on the sum of respondent's cost of materials, fabrication, SG&A,
interest expenses, profit and U.S. packing costs. In accordance with
section 773(e)(2)(A) of the Act, we based SG&A and profit on the
amounts incurred and realized by respondent in connection with the
production and sale of the foreign like product in the ordinary course
of trade for consumption in Taiwan.
Price-to-Price Comparisons
We performed price-to-price comparisons where there were sales of
comparable merchandise in the home market that did not fail the cost
test. We disregarded sales to affiliated customers that failed the
arm's-length test. We made adjustments, where appropriate, for physical
differences in the merchandise in accordance with section
773(a)(6)(c)(ii) of the Act.
Tung Mung
For Tung Mung's home market sales of products that were above COP,
we based NV on prices to home market customers. We made a deduction for
inland freight and two post-sale price adjustments (these adjustments
were reported as a quantity discount and other discounts) pursuant to
section 351.401(c) of the Department's regulations. We calculated NV
based on prices to unaffiliated home market customers. In addition, we
made circumstance-of-sale (``COS'') adjustments for differences in
direct selling expenses (i.e., credit and warranty expenses), where
appropriate. In accordance with section 773(a)(6), we deducted home
market packing costs and added U.S. packing costs. Based on the results
of verification, we made an adjustment to indirect expenses. See Tung
Mung Sales Verification Report at p. 14 and Analysis Memorandum: Tung
Mung, p. 6.
Chang Mien
For Chang Mien's home market sales of products that were above the
COP, we based NV on prices to unaffiliated home market customers. We
made a deduction for inland freight. In its December 4, 1998
submission, petitioners argued that the Department should deny Chang
Mien's reported home market credit expense and reclassify Chang Mien's
claimed advertising expenses as indirect selling expenses. For the
preliminary determination, the Department accepted Chang Mien's home
market credit expenses and classified Chang Mien's advertising expenses
in both the U.S. and home market as direct selling
[[Page 30597]]
expenses. However, based on findings made at verification, we have
reclassified Chang Mien's claimed advertising expenses as indirect
selling expenses for the final determination. See Analysis Memorandum:
Chang Mien at 4. For a further discussion of this issue, see Comment 11
``Advertising Expenses'' below. Furthermore, based on a pre-verified
correction, we have adjusted Chang Mien's reported advertising
expenses. Additionally, for the Final Determination, we will only make
adjustments for warranty expenses associated with POI sales and have,
therefore, excluded one of the two warranty expenses claimed by Chang
Mien. See Comment 12 ``Warranty Expenses'' below. We made COS
adjustments for direct selling expenses (i.e., credit, warranty and
bank charges), where appropriate. In accordance with section 773(a)(6)
of the Act, we deducted home market packing costs and added U.S.
packing costs.
Price-to-CV Comparisons
In accordance with section 773(a)(4) of the Act, we based NV on CV
if we were unable to find a home market match of similar merchandise.
We made adjustments to CV in accordance with section 773(a)(8) of the
Act. For these EP comparisons, for Tung Mung, we made COS adjustments
by deducting home market direct selling expenses and adding U.S. direct
selling expenses.
Currency Conversion
We made currency conversions into U.S. dollars in accordance with
section 773A(a) of the Act based on the exchange rates in effect on the
dates of the U.S. sales, as certified by the Federal Reserve Bank.
Critical Circumstances
On October 30, 1998, petitioners alleged that there is a reasonable
basis to believe or suspect that critical circumstances exist with
respect to imports of SSSS from Taiwan. Section 735(a)(3) of the Act
provides that if a petitioner alleges critical circumstances, the
Department will determine on the basis of the information available to
the Department, whether:
(A)(i) there is a history of dumping and material injury by
reason of dumped imports in the United States or elsewhere of the
subject merchandise; or (ii) the person by whom, or for whose
account, the merchandise was imported knew or should have known that
the exporter was selling the subject merchandise at less than its
fair value and that there would be material injury by reason of such
sales; and (B) there have been massive imports of the subject
merchandise over a relatively short period.
To determine that there is a history of dumping of the subject
merchandise, the Department normally considers an existing antidumping
duty order on SSSS in the United States or elsewhere to be sufficient.
Petitioners did not provide any information indicating a history of
dumping of SSSS from Taiwan. Furthermore, we investigated the existence
of antidumping duty orders on SSSS from Taiwan in the United States or
elsewhere, and did not find any. On April 7, 1999, we requested
respondents to submit historical data on exports of subject merchandise
to the United States for 1996, 1997 and 1998. On April 12, 1999, YUSCO,
Chang Mien, Tung Mung, and Ta Chen submitted the historical data on
U.S. exports as requested.
In determining whether an importer knew or should have known that
the exporter was selling subject merchandise at less than fair value
and thereby causing material injury, the Department normally considers
estimated dumping margins of 25 percent or greater for EP sales to
impute knowledge of dumping and of resultant material injury. In this
regard, we note that the ITC preliminarily determined that the domestic
industry is materially injured or threatened with material injury by
reason of imports from Taiwan. See Notice: International Trade
Commission, 63 FR 41864 (August 5, 1999). In this investigation, with
the exception of YUSCO, we have not established estimated dumping
margins of 25 percent or greater. Based on these facts, we determine
that, with the exception of YUSCO, the first criterion for ascertaining
whether critical circumstances exist is not satisfied. Therefore, we
determine that there is no basis to find that critical circumstances
exist with respect to exports of SSSS from Taiwan by all respondents
except YUSCO (see, e.g., Notice of Preliminary Determination of Sales
at Less Than Fair Value and Postponement of Final Determination:
Collated Roofing Nails From Korea, 62 FR 25895, 25898 (May 12, 1997)).
Because the dumping margins for all companies except YUSCO are below
the 25 percent threshold, we have not analyzed the shipment data for
these respondents to examine whether imports of SSSS have been massive
over a relatively short period.
For YUSCO, we compared shipment data for the periods December 1997
through May 1998 and June through November 1998 (the post-petition
period), and found that YUSCO did not have massive shipments of SSSS to
the United States in the post-petition period. Therefore, we find that
critical circumstances do not exist. For a more detailed discussion of
this analysis, see Analysis Memorandum--YUSCO from Rick Johnson to
Edward Yang, May 19, 1999.
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 procedures, including examination of
relevant sales, accounting, and production records and original source
documents provided by respondents.
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 section 776(a) of the Act, 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.
YUSCO
We find, based on the evidence set out below in the ``total facts
available'' section of the notice, that by not reporting a large
portion of the home market database, 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 the requested information. Accordingly, the Department used
facts available with an adverse inference, as provided for in section
776(b) of the Act. Since these sales were not reported to the
Department, this information was clearly not provided in a timely
manner (i.e., in response to Section B of the Department's
questionnaire). Furthermore, YUSCO's withholding of
[[Page 30598]]
crucial information which the Department needed to calculate an
accurate normal value significantly impeded the Department's
investigation. As a result, we must rely on the facts otherwise
available.
Ta Chen
We also determine, in accordance with section 776(a) of the Act,
that the use of facts available as the basis for the weighted-average
dumping margin is appropriate for Ta Chen because, despite the
Department's attempts to verify necessary information provided by Ta
Chen, the Department could not verify the information as required under
section 782(i) of the Act. Furthermore, section 782(e) of the Act
authorizes the Department to decline to consider information that is
submitted by an interested party that is necessary to the determination
under certain circumstances, such as when such information is so
incomplete that it cannot serve as a reliable basis for reaching the
applicable determination or when such information cannot be verified.
As discussed below in Comment 23, we determine that information
provided by Ta Chen in this investigation could not be verified.
Total Facts Available
YUSCO
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.
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 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 possibly consumed by home market customers. On pages 3
and 4 of its November 18, 1998 supplemental questionnaire response,
YUSCO stated that:
The majority of YUSCO's home market customers are further
manufacturers. These further manufacturers produce different types
of SSSS and/or non-subject merchandise from YUSCO's SSSS, and sell
to their customers in the home market, U.S., and third countries. As
stated above, YUSCO states that it does not know which YUSCO's SSSS
was further manufactured into different types of SSSS or into non-
subject merchandise. Nor does YUSCO claim to know which YUSCO's SSSS
was finally destined to either the home market, the United States,
or third countries.
We confirmed this during verification by interviewing 12 members of
YUSCO's sales department via a written questionnaire. The questions
concerned the employees' role, knowledge of its customers, and
knowledge of further-processing. See Facts Available Decision
Memorandum--YUSCO for a full discussion, as well as Exhibit 7 of the
YUSCO sales verification report.
Prior to verification YUSCO submitted a list of ``UZ sales'' which
were sales made to home market further manufacturers. These customers
informed YUSCO that the processed SSSS would be exported, but did not
specify whether the exported product would still be subject
merchandise. YUSCO claims that these sales should not be used in
calculating YUSCO's dumping margin because YUSCO knew that its SSSS
would be finally exported to third countries. Consistent with Notice of
Final Determination of Sales at Less than Fair Value: Stainless Steel
Plate in Coils From Taiwan, 64 FR 15493 (March 31, 1999), however,
these sales must be included in a normal value calculation for YUSCO
because YUSCO has not demonstrated that it knew that the SSSS from
these sales was not consumed in the home market. YUSCO thus erroneously
considered a substantial portion of its sales as third country export
sales, even though they were sales to unaffiliated home market
customers. Likewise, YUSCO also did not report a large number of
indirect export sales, coded ``U*.'' These sales were made to Taiwan
customers who possibly further manufactured the SSSS and then exported
it to third countries. Although YUSCO reported the total quantity and
value of these sales, it did not submit a U* sales listing and it did
not provide evidence that this merchandise was exported as subject
merchandise.
Although YUSCO has provided information regarding total value and
quantity of its home market sales, it has not explained why it did not
report a large number of sales to home market customers who possibly
further manufactured SSSS into non-subject merchandise before export.
Nor has it reported the individual sales transaction data necessary to
conduct the dumping analysis.
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 may 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, 263H (CIT 1997). Therefore, if YUSCO had demonstrated
that it knew or had reason to know that its sales of subject
merchandise in the home market were not for consumption in the home
market, it may have been appropriate for YUSCO to omit these sales from
its home market sales. In this case, as described above, YUSCO has
admitted that a large portion of its sales are further processed prior
to exportation. It is without question that if merchandise sold in the
home market, even if ultimately destined for export, was consumed in
the home market in producing non-subject merchandise prior to
exportation, then it should be reported as part of the home market
sales database. 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
[[Page 30599]]
of Korea, 58 FR 15467 (March 23, 1993). Therefore, YUSCO should have
reported these sales as home market sales.
Moreover, substantial evidence reveals that YUSCO's reliance on its
internal coding system for sales reporting purposes contains an
additional flaw: namely, this system is not used in accordance with
YUSCO's own stated guidelines. Specifically, the Department found, in
SSPC from Taiwan, that a product which, according to YUSCO's
description, should have been coded as a ``UAS'' sale to the United
States (irrespective of the Department's ultimate determination that,
for our purposes, this sale was properly considered to be a home market
sale), was in fact coded as a domestic sale (see Comment 1 and 2 of
SSPC from Taiwan). The Department notes that the same system was used
for the purposes of reporting sales in the instant investigation (see
YUSCO sales verification exhibit 3, and pages 4 and 6 from YUSCO's
verification report dated January 28, 1999 in SSPC from Taiwan, which
has been placed on the record of this investigation). Therefore,
further doubt is cast upon the reliability of YUSCO's reporting
methodology.
Because YUSCO's reliance on this internal classification of home
market and third country sales for reporting sales to the Department
was inadequate, by relying on it YUSCO failed to comply to the best of
its ability with the Department's instructions. Additionally, although
YUSCO did submit its UZ sales listing late in our investigation, this
information is grossly incomplete and thus unusable for our dumping
calculation purposes. Furthermore, because it was submitted on January
11, 1999, we had no opportunity to issue supplemental questionnaires
regarding these sales. The UZ sales listing is missing key information,
such as product characteristics, CONNUMs, customer codes, relevant
dates, and a number of adjustments. This information is thus so
incomplete that it cannot serve as a reliable basis for reaching our
determination of normal value. Finally, because this UZ sales
information was so incomplete and was submitted too late for the
Department to seek additional information regarding these sales, we
find that the submission of these sales cannot reasonably be construed
as evidence that YUSCO was attempting to cooperate to the best of its
ability.
Ta Chen
Generally, and in the process of verification, the Department's
analysis of the completeness of a respondent's U.S. sales database is
essential because the database is used to calculate the anti-dumping
duties. An incomplete U.S. sales database is normally sufficient to
render a company's response inadequate for the purpose of calculating a
dumping margin. See, e.g., Persico Pizzamiglio, S.A. v. United States,
Slip Op. 94-61 (CIT 1994) (Persico) (upholding the Department's use of
best information available for a respondent who was unable to
demonstrate the completeness of its U.S. sales at verification).
Despite our efforts at verification, we were unable to verify
information which is necessary and must be verified in order for us to
make a determination under section 731 of the Act. Specifically, we
were unable to verify the data Ta Chen provided concerning its
purchases and subsequent U.S. sales of subject merchandise produced by
YUSCO and Tung Mung. Most significantly, we found that Ta Chen was
unprepared to demonstrate that the appropriate universe of purchases
and U.S. resales were reported, that further-manufacturing activities
in Taiwan were not related to subsequent U.S. sales, and that it had
reported all expenses related to its purchases. As we have indicated
above, incompleteness of the U.S. sales database is a critical flaw and
is a factor which, by itself, forms an adequate basis for our
determination to use facts available.
Thus, we have determined that although Ta Chen provided information
we requested which was necessary for us to perform our analysis, the
information could not be verified as required by section 782(i) of the
Act. Thus, in accordance with section 782(e)(2) of the Act, we have
declined to consider information submitted by Ta Chen because it could
not be verified. Because we were unable to verify necessary
information, we were unable to employ our normal middleman dumping
analysis. Under section 776(a) of the Act, we are required, in reaching
our determination, to use total facts available because we could not
verify Ta Chen's data. Thus, for Ta Chen, we have determined that it is
appropriate to select from the facts otherwise available to the
Department.
Adverse Facts Available
YUSCO
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 (November 16, 1998); Certain Welded Carbon Steel
Pipes and Tubes From Thailand: Final Results of Antidumping Duty
Administrative Review, 62 FR 53808, 53819-20 (October 16, 1997). We
have determined that YUSCO failed to cooperate to the best of its
ability within the meaning of section 776(b) because YUSCO failed to
follow the Department's instructions to report all home market sales.
Section 776(b) of the Act authorizes the Department to use as
adverse facts available information derived from the petition. Section
776(c) of the Act 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. We determined that the price to price comparisons and price
to CV comparisons constituted sufficient evidence of dumping to justify
initiation. See Initiation Notice at 37527 (estimated margins for
Taiwan ranged from 8.23 percent to 77.08 percent).
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 regarding price to price comparisons.
See Facts Available Memorandum--YUSCO. Therefore, we have chosen the
highest petition margin (based on price-to-price comparisons) for
Taiwan of 21.10 percent as the basis
[[Page 30600]]
for using total adverse facts available. See comment 2, below, for a
full discussion of the overall facts available margin.
Ta Chen
We examined whether Ta Chen had acted to the best of its ability in
responding to our requests for information, such as U.S. sales data. We
took into consideration the fact that, as an experienced respondent in
other investigations and orders, its ability to comply with our
requests for information could be distinguished from, for example, the
ability of a less experienced company. Thus, Ta Chen can reasonably be
expected to know which types of essential data we request in each
investigation or review, and to be conversant with the form and manner
in which we require submission of the data.
In addition to taking into account the experience of a respondent,
the Department may find it appropriate to examine whether the
respondent has control of the data which the Department is unable to
verify or rely upon. The record reflects that Ta Chen was in control of
the data which was vital to our dumping calculations and which we were
unable to verify or rely upon. See Facts Available Decision
Memorandum--Ta Chen from Rick Johnson to Edward Yang, dated May 19,
1999 (``Facts Available Decision Memorandum-Ta Chen'').
An additional factor we have considered is the extent to which Ta
Chen might have benefitted from its own lack of cooperation. The SAA
states that ``where a party has not cooperated, [the Department] may
employ adverse inferences about the missing information to ensure that
the party does not obtain a more favorable result by failing to
cooperate than if it had cooperated fully.'' Id. at 870. In accordance
with our policy, we considered the overall effect of Ta Chen's errors.
In this case, we have determined that the use of the flawed response
would have yielded a more favorable margin for Ta Chen. See Facts
Available Decision Memorandum--Ta Chen.
In light of Ta Chen's familiarity with the Department's practices,
its control of the necessary data, and the potential benefits it may
have received, we have determined that Ta Chen failed to act to the
best of its ability in providing the data we requested. Therefore, in
accordance with section 776(b) of the Act, we have, on the basis of the
record in this case, determined that it is appropriate for us to make
the adverse inference authorized under that subsection of the statute.
Accordingly, for this final determination, we base Ta Chen's margin on
adverse facts available.
In selecting a margin which would appropriately reflect our
decision to use adverse facts available for Ta Chen, we examined the
rates applicable to this case throughout the course of the proceeding.
As adverse facts available, we have selected a rate of 15.34 percent
for Ta Chen's resales of Tung Mung's and YUSCO's product, which
reflects the highest rate in Stainless Steel Sheet and Strip in Coils
from Taiwan: Whether to Initiate a Middleman Dumping Investigation
(``Middleman Initiation Memo'') dated December 3, 1998. As we discuss
in Comment 2 below, we have used this rate in calculating an overall
weighted-average margin for Tung Mung and YUSCO.
As indicated above, section 776(c) of the Act requires the
Department to corroborate secondary information used as facts available
to the extent practicable. Because the facts available applied to Ta
Chen for this investigation is secondary information within the meaning
of section 776(c) of the Act, we have, in accordance with section
776(c), corroborated this information with independent sources.
In accordance with section 776(c) of the Act, to the extent
practicable, we examined the key elements of the middleman dumping
calculations on which the middleman dumping petition was based and
compared these sources to Ta Chen's reported data. Based on this
analysis, we are satisfied that this information has probative value.
See Facts Available Decision Memorandum--Ta Chen. Thus, we have
determined that information and inferences which we have applied are
reasonable to use under the circumstances of this determination, in
accordance with the SAA at 869. Furthermore, there is no reliable
evidence on the record indicating that this selected margin is not
appropriate as adverse facts available.
Interested Party Comments
General Issues
Comment 1: Currency Fluctuations
Petitioners argue that the Department should calculate final
dumping margins for all respondents using three separate averaging
periods to account for alleged severe currency fluctuations which
occurred during the POI. Petitioners charge that there were sudden and
dramatic drops in the value of the New Taiwan dollar relative to the
U.S. dollar (from an annualized 9.83 percent drop in the first six
months of the period of investigation to an annualized 70.60 percent
drop in the last quarter of 1997). Therefore, to account for these
sudden currency fluctuations, petitioners urge the Department to
calculate three separate weighted-average price comparisons for each
product under investigation; one for the first six months of the POI,
another for the October 1997 through December 1997 period, and a third
for the January 1998 through March 1998 period. Petitioners argue that
the failure to account for the ``severe'' exchange rate fluctuations
during the POI through the use of three separate periods will result in
the dilution of pre-existing dumping margins resulting solely from
exchange rate changes and independent of any pricing changes by
respondents.
Petitioners maintain the use of multiple averaging periods to
account for exchange rate fluctuations is consistent with what
petitioners claim to be the two goals of the antidumping law: (1) to
provide relief to domestic industries facing unfair competition, and
(2) to make fair comparisons. See Smith-Corona Group v. United States,
713 F.2d 1568, 1575-76 (Fed. Cir. 1983) and Koyo Seiko Co. v. United
States, 20 F.3d 1156, 1158-59 (Fed. Cir. 1994) (``Koyo Seiko'').
Petitioners allege that unless the Department calculates separate
margins for three periods, the macroeconomic conditions unrelated to
each respondent's competitive pricing policies will unfairly and
inappropriately mask Taiwan respondents' true margins of dumping.
Petitioners assert that in several recent antidumping investigations,
the Department recognized that a rapid currency devaluation may mask
dumping margins and that multiple averaging periods are appropriate.
See, e.g., Final Determination of Sales at Less Than Fair Value;
Stainless Steel Plate in Coils from Korea (``SSPC From Korea''), 64 FR
15443, 15452 (March 31, 1999) and Final Determination of Sales at Less
Than Fair Value: Emulsion Styrene-Butadiene Rubber from the Republic of
Korea (``ESBR from Korea''), 64 FR 14865, 14868 (March 29, 1999).
Petitioners note that the Department has specifically addressed in its
regulations the appropriate use of multiple averaging periods to avoid
the possibility of distortion in the dumping calculation. See Preamble
to Antidumping and Countervailing Duties; Final Rule, 62 FR 27296,
27377 (May 19, 1997) (``Preamble'') (stating that [Commerce] should
address depreciating currencies more fully in its regulations); and 19
CFR 351.414(d)(3) (stating that Commerce may use shorter
[[Page 30601]]
averaging periods ``when normal values, export prices, or constructed
export prices differ significantly over the course of the period of
investigation...''). Petitioners assert that to achieve ``fairness,''
which is the goal of the dumping law, the Department must consider
sudden currency devaluations in calculating dumping margins.
Petitioners argue that given the significant degree of devaluation of
the Taiwan dollar that occurred in the last quarter of 1997,
calculating a single POI weighted-average price for each product is
inappropriate.
Petitioners argue that the statute and the SAA authorize the
Department to rely on modified averaging comparisons where time affects
sales comparability. Petitioners assert that the Notice of Proposed
Rulemaking and Requests for Public Comment, 61 FR 7308, 7349 (February
27, 1996) (``Notice of Proposed Rulemaking''), state that the
Department will normally calculate an average-to-average comparison by
weight-averaging sales during the entire period of investigation.
Petitioners argue that the Department may resort to shorter time
periods where the normal values, export prices, or constructed export
prices for sales included in an averaging group differ significantly
over the course of the POI. Petitioners allege that NV differs
significantly and dramatically over the course of the POI when exchange
rates are taken into account.
Petitioners cite to the Department's reasoning in Notice of Final
Determination of Sales at Less Than Fair Value: Polyvinyl Alcohol from
Taiwan (``PVA from Taiwan''), 61 FR 14064, 14069 (March 29, 1996),
where the Department acknowledged that time affects price
comparability, and relied on two averaging periods to calculate dumping
margins. Petitioners note that although PVA from Taiwan involved an
affirmative change in home market selling practices by respondent, the
Department held that the change in selling practices enhanced the
effect of time on price comparability ``because the respondent entered
into long-term contracts that dramatically reduced NV in the last six
weeks of the POI.'' Id. Petitioners argue that the need for separate
averaging periods is even stronger in this investigation than in PVA
from Taiwan, because the steep decline in NV results from the
Department's calculation methodology, not from some independent action
by respondents. Id.
Petitioners argue that the ``precipitous'' drop at the last quarter
of 1997 has a strong effect on the dumping calculations since
respondents' costs for raw materials would be affected by the New
Taiwan dollar's decline. Petitioners contend that if separate costs
were available for three periods, it would be almost certain that all
post-decline NV's would be below respondents' costs and that dumping
would be found based on a comparison of respondents' U.S. prices to
their actual ``constructed value'' for that same period. Petitioners
assert that respondents are more likely to be further reducing U.S.
prices in response to the Taiwan currency devaluations, whereas under
the Department's current methodology, no dumping would be found for
this period.
Petitioners argue that the Department often departs from ordinary
comparison methodology to account for extraordinary events. Petitioners
argue that the courts have recognized that dumping margins should not
be ``artificially'' created simply because of unforeseen changes in the
exchange rate, citing, e.g., Melamine Chem., Inc. v. United States, 732
F.2d 924, 929-932 (Fed. Cir. 1984). In addition, petitioners argue that
dumping margins should not be eliminated artificially because of
unanticipated changes in the exchange rate, given that the goal of the
antidumping law is to protect the domestic industry from unfair trade
practices, citing Koyo Seiko at 1158. In so arguing, petitioners cite
to past Department decisions where the Department made adjustments to
cost to account for extraordinary events that occurred during the
period of investigation or review (Floral Trade Council v. United
States, 16 CIT 1014, 106-17 (1992); Notice of Final Determination of
Sales at Less Than Fair Value: Large Newspaper Presses and Components
Thereof, Whether Assembled or Unassembled from Japan, 61 FR 38139,
38153 (July 23, 1996); Final Determination of Sales at Less Than Fair
Value: Fresh Kiwi Fruit from New Zealand, 57 FR 13695, 13697 (April 17,
1992)). Petitioners assert that the Department consistently has
recognized and attempted to minimize the effect of severe currency
devaluations in dumping calculations, citing Final Determination of
Sales at Less Than Fair Value: Industrial Nitrocellulose from Brazil,
55 FR 23120 (June 6, 1990) (to account for hyperinflation, the
Department calculated a separate foreign market value for each price
period); Certain Fresh Cut Flowers from Columbia; Final Results and
Partial Rescission of Antidumping Duty Administrative Review, 62 FR
53297 (October 14, 1997) (holding that calculations should be revised
to account for the ``devaluation of the Columbian currency'').
Petitioners contend that the Notice of Proposed Rulemaking (at 7349)
states that the Department may resort to shorter time periods where
normal values included in the averaging group differ significantly over
the POI.
Petitioners argue that the Department also acknowledges that
standard weight-averaging procedures are inappropriate under
extraordinary circumstances by adopting special procedures for exchange
rate conversions where foreign currencies appreciate vis-a-vis the
dollar. Petitioners assert that 19 CFR 351.415 permits respondents time
to adjust their pricing practices so that appreciating currencies do
not ``create'' dumping margins. Petitioners argue that likewise,
depreciating foreign currencies should not be used to reduce or
eliminate margins of dumping. Petitioners argue that if a respondent is
dumping at a time of stable inflation and currency valuation, dumping
should not be eliminated because of an extraordinary devaluation of the
foreign currency that otherwise has no impact on the respondent's
pricing practices. Petitioners argue that respondents did not take any
affirmative steps in the latter part of the period of investigation to
eliminate or minimize its dumping. Petitioners claim that but for the
rapid and unexpected devaluation of the Taiwan dollar, respondents'
level of dumping would have been the same. Therefore, petitioners
argue, the Department has not only the authority, but also the
obligation, to rely on an alternative method to calculate the dumping
margins to ensure a fair result.
YUSCO argues that the Department should reject petitioners' request
to calculate dumping margins using three separate averaging periods.
YUSCO argues that petitioners' arguments are based on a ``tortured''
calculation of the exchange rate and on inapposite determinations in
ESBR from Korea and SSPC from Korea. YUSCO asserts that petitioners
grossly exaggerate the New Taiwan dollar fluctuation.
YUSCO argues that contrary to petitioners' findings, the New Taiwan
dollar exchange rates in the last three months in 1997 are within
normal currency fluctuations addressed by the Department's standard
rules for currency conversions. YUSCO asserts that section 351.415(c)
of the Department's regulations state that the Department will ``ignore
fluctuations in exchange rates.'' YUSCO claims that the New Taiwan
dollar fluctuated only 12.6 percent in the last three months of 1997.
Respondent argues that petitioners relied on a misleading calculation
of a
[[Page 30602]]
yearly change in the New Taiwan dollar exchange rate that never
occurred. Specifically, YUSCO claims that petitioners' ``annualized''
change of 70.6 percent is fictitious and alleges that petitioners
inflated the denominator of their percentage calculation and
``irrationally'' extrapolated an inflated one quarter rate change over
a year in which no such sustained change occurred.
YUSCO also claims that the Department did not use separate
averaging periods when moderate currency fluctuation occurred in prior
proceedings. In so arguing, YUSCO cites Engineered Process Gas Turbo-
Compressor Systems, Whether Assembled or Unassembled and Whether
Complete or Incomplete, from Japan (``EPGTC from Japan''), 62 FR 24394
(May 5, 1997), where the Department did not use separate averaging
periods even though the Japanese yen fluctuated over 25 percent during
the period of investigation. YUSCO argues that the Department's
determinations in the South Korean cases petitioners have cited are not
applicable to the instant case. YUSCO asserts that in SSPC from Korea,
the Department determined that normal value, in U.S. dollar terms, in
the last two months differed significantly from normal value in the
earlier period due to a significant change in the exchange rate. In
SSPC from Korea, the Department found that ``the won's value decreased
by more than 40 percent in relation to the dollar in the last two
months of 1997.'' YUSCO argues that, in contrast, the New Taiwan dollar
fluctuated only 4.88 percent in the last two months of 1997, and less
than 13 percent in the last three months of 1997. Finally, YUSCO argues
that neither the New Taiwan dollar nor the Taiwan economy has ever
faced the currency crisis similar to the one that South Korea faced in
1998.
Chang Mien also argues that petitioners have exaggerated the
exchange rate fluctuations by annualizing their percentage change.
Chang Mien assert that on a month-to-month basis, or annually, rather
than ``annualizing'' individual numbers, the exchange rate between the
New Taiwan dollar and the U.S. dollar changed approximately 15 percent
using the Department's own data. Thus, Chang Mien argues, a change in
the exchange rate on a month-to-month basis rather than on an
annualized basis reveals that the change was less than ``sudden and
dramatic.'' Chang Mien alleges that, with the exception of the two
months from November to December 1997, the change in exchange rate was
small and not sustained. Chang Mien claims that in the last two months
of the POI, the New Taiwan dollar began a recovery, appreciating
against the U.S. dollar.
Chang Mien disagrees with petitioners' argument that the instant
situation is comparable to the cases of SSPC from Korea and ESBR from
Korea. As noted by YUSCO, Chang Mien also contends that in the above
Korean cases, the Department found more than a 40 percent change in the
exchange rate in the POI. Moreover, Chang Mien asserts that in SSPC
from Korea, the Department found not only that there was a precipitous
drop in the Korean won/U.S. dollar exchange rate, but also that this
drop continued through the end of the POI, without quick rebound.
According to Chang Mien, in contrast to the won, the New Taiwan dollar
fell only 15 percent in the POI and also rebounded significantly in the
last two months of the POI.
Chang Mien asserts that petitioners' reading of the Preamble to the
Department's regulations is misplaced. Chang Mien argues that the
Preamble instead reads that ``the Department did not change its policy
regarding the use of the exchange rates.'' Id. Chang Mien contends that
among the areas the Department did not revise includes the use of
either the actual exchange rate on a particular day or the use of a
rolling eight-week average if the daily exchange rate varies by more
than 2.25 percent from the rolling average. Chang Mien claims that this
provision of using the rolling average for moderate fluctuations
effectively takes care of any exchange rate fluctuations affecting
dumping calculations, such as the fluctuations found in this case.
Chang Mien disagrees with petitioners' interpretation that the
provision under 19 CFR 351.414(d)(3) allows the use of shorter
averaging periods, ``when normal values, export prices, or constructed
export prices differ significantly over the course of the period of
investigation * * *'' Chang Mien argues that this provision has no
relevance to using multiple averaging periods due to rapid currency
fluctuations. Chang Mien claims that the provision instead relates
solely with averaging all home market sales, for example, and comparing
them to an average of all U.S. sales. Further, Chang Mien argues that
the Court of Appeals for the Federal Circuit has ruled that a
respondent cannot be held responsible for actions beyond its control,
citing Melamine Chemicals, Inc. v. United States, 732 F.2d 924 (Fed.
Cir. 1984).
Chang Mien argues that the Department should disregard petitioners'
suggestion to use multiple averaging periods to account for currency
fluctuations for the following policy reasons. First, Chang Mien
contends that using this methodology would be prejudicial to
respondents because it would provide no certainty on how to ensure that
future sales comply with the antidumping duty statute with regard to
currency fluctuations. Second, Chang Mien argues that multiple
averaging periods would result in artificial dumping margins based
solely on changes in the exchange rates. Third, Chang Mien claims that
neither petitioners nor the Department have established clear
guidelines on what constitutes either a severe, abnormal fluctuation or
sufficient rebound from a severe currency devaluation. Finally, Chang
Mien asserts this treatment of exchange rate fluctuations suggested by
petitioners would have a ``nightmarish'' effect on future cases that
would similarly be affected by exchange rate fluctuations.
Chang Mien asserts that it is the exchange rate, not price, which
has fluctuated. Chang Mien contends it does not have any control over
the exchange rates, nor have petitioners alleged that Chang Mien
significantly changed its business practices or pricing policy as a
result of the exchange rate fluctuations. Chang Mien objects to
petitioners' allegation that the fluctuation of exchange rates in the
instant case is an ``extraordinary event'' sufficient enough to warrant
using multiple averaging periods to calculate dumping margin. Chang
Mien argues that currency fluctuations in the instant case cannot be
equated with the hyperinflation seen in Brazil and in other antidumping
cases, citing Industrial Nitrocellulose from Brazil; Final Results of
Antidumping Duty Administrative Review, 55 FR 23120 (June 6, 1990).
Finally, Chang Mien asserts that if the Department were to use
multiple averaging periods, three calculations for the cost of
production for each period also must be used in the margin calculation.
Chang Mien argues that petitioners raised the issue of exchange rate
fluctuations only in their case brief, making it impossible for
respondents to submit cost of production data for each period within
the time limits of this proceeding.
Similar to YUSCO and Chang Mien, Tung Mung argues that the exchange
rate changes during the POI were not significant enough to warrant
dividing the period into three periods. Tung Mung argues that
petitioners' assertion that Tung Mung's costs for raw materials would
have ``skyrocketed'' as a result of the declining New Taiwan
[[Page 30603]]
dollar overlooks the fact that much of Tung Mung's raw materials are
obtained from domestic and imported sources. Tung Mung objects to
petitioners' argument that Tung Mung failed to take ``affirmative
steps'' during a period when the New Taiwan dollar was declining, given
that the decline of a foreign currency in relation to the U.S. dollar
reduces any dumping margin that might have existed or increases the
safety margin.
Department's Position: We disagree with petitioners and have
continued to use POI averages and our exchange rate model in this final
determination. While we agree in principle with petitioners that we may
use averaging periods of less than the POI when normal value, export
price, or constructed export price varies significantly over the POI
under 19 CFR 351.414(d)(3), we do not find that normal value or export
price varied significantly over the POI due to exchange rate
fluctuations for any of the respondents.
In cases where there is a precipitous drop in the foreign
currency's value during the POI, we may find it appropriate to use
multiple averaging periods to avoid the possibility of a distortion in
the dumping calculation caused by exchange rate fluctuations. See,
e.g., SSPC from Korea, where the Department used two averaging periods
to calculate the dumping margin because there was a precipitous drop in
the won in relation to the dollar (more than 40 percent in a two month
period). However, in the instant case, changes in the exchange rate
were moderate. Using exchange rate data from the Federal Reserve, we
found that the value of the New Taiwan dollar relative to the U.S.
dollar declined steadily over the POI and the overall decline in the
value of the New Taiwan dollar relative to the U.S. dollar was less
than 20 percent over the POI. Given these facts, we find no basis to
conclude that the change in the value of the New Taiwan dollar over the
POI was so significant that it warranted the use of multiple price
averaging periods.
Comment 2: Independent Rates
Channel-specific dumping rates are inappropriate and without basis,
petitioners contend, because the focus of the statute, the Department's
regulatory regime, and both administrative and judicial precedent is on
obtaining a single, weighted-average dumping rate for each foreign
producer or exporter. Petitioners contend that multiple channels
through which a foreign producer or exporter chooses to ship sales to
the United States do not entitle them to channel-specific dumping
rates.
Petitioners contend that there is no statutory basis for assigning
a channel-specific rate. Petitioners, citing to sections 777A(c)(1) and
731(1) of the Act, argue that Congress has charged the Department with
ascertaining the extent to which subject merchandise is dumped in the
United States and assigning a single, weighted-average dumping rate to
each producer or exporter under investigation. Petitioners state that
there is no language in the statute to the effect that a producer is to
receive a channel-specific dumping rate. In contrast, petitioners
assert, the statute contemplates what, at best, might be called a
``unitary'' rate, reflecting all the given producer's sales to the
United States regardless of routing and distribution.
Petitioners argue that given the circumstances in the instant case
and the Department's discussion of its current regulations, the
Department should impose a single, weighted-average dumping rate for
each investigated producer. Petitioners cite the Department's
discussion in Antidumping Duties: Countervailing Duties, 62 FR 27296,
27303 (May 19, 1997) (``Final Rule'') with regard to regulation
351.107:
The Department also believes it is not appropriate to establish
combination rates in an AD investigation or review of a producer;
i.e., where a producer sells to an exporter with knowledge of
exportation to the United States. In these situations, the
establishment of separate rates for a producer in combination with
each of the exporters through which it sells to the United States
could lead to manipulation by the producer. Furthermore, the
Department recognizes that in many industries it is not uncommon for
a producer to sell some amount of merchandise purchased from other
producers. In such situations, the Department generally intends to
establish a single rate for such a respondent based on its status as
a producer, although unusual circumstances may warrant the
application of a combination rate.
Petitioners state that both YUSCO and Tung Mung have acknowledged that
they knew the subject merchandise was to be resold by the middleman or
trading company to the United States, citing YUSCO's and Tung Mung's
September 8, 1998 responses at A-12 and A-8, respectively. Moreover,
petitioners allege that there are no unusual circumstances presented in
the instant investigation that would justify recourse to a combination
rate alongside a separate rate for YUSCO and Tung Mung.
Petitioners maintain that relevant precedent further reinforces the
conclusion that a single, weighted-average dumping rate should be
assigned to each producer and exporter of the subject merchandise.
Petitioners maintain that the decision of SSPC from Taiwan with regard
to separate dumping rates for each producer should not be followed, as
it is at variance with the Department's express policy and precedent,
citing Ferrovanadium and Nitride Vanadium from the Russian Federation:
Notice of Final Results of Antidumping Duty Administrative Review,
(``Ferrovanadium from Russia'') 62 FR 65656, 65659 (December 15, 1997);
Final Negative Countervailing Duty Determination: Stainless Steel Plate
in Coils from the Republic of Korea, (``CVD SSPC from Korea'') 64 FR
15530, 15532 (March 31, 1999); and Certain Pasta from Italy: Results of
New Shipper Antidumping Duty Administrative Reviews, (``Certain Pasta
from Italy'') 64 FR 852853 (January 6, 1999) and 63 FR 53641, 53642-43
(October 6, 1998). Petitioners state that the Department's findings in
Certain Pasta from Italy differ from the instant case only in that
Corex, in its role as a trading company, was not involved in a
middleman dumping investigation.
Petitioners argue that the Department has recognized the need of
assigning producers a single, weighted-average dumping rate, regardless
of channels used to sell merchandise to the United States, to prevent
margin manipulation and avoidance of antidumping duties, citing the
Final Rule at 27303. Petitioners contend that the use of channel-
specific dumping rates, as requested by respondents, would encourage
respondents to resort to middleman dumping. Petitioners maintain that a
foreign producer and an unaffiliated middleman could easily engage in
price manipulation such that respondents could avoid antidumping duties
by having the producer sell to the middleman at non-dumped prices and
rely upon the middleman to carry out the dumping in the resale that
usually is not analyzed by the Department. Moreover, if the producer is
excluded from the order by virtue of its own separate rate, petitioners
argue that the producer will be free to accomplish dumping on its own.
Petitioners maintain that it is this reasoning that causes the
Department to capture the total amount of dumping through an additional
analysis of the middleman's dumping. In keeping with this purpose,
petitioners surmise, the Department should assign a single, weighted-
average dumping rate because the total dumping by these two parties has
benefitted the subject merchandise imported into the United States.
Thus,
[[Page 30604]]
even absent an affiliation between the producer and the middleman
within the meaning of section 771(33) of the Act, petitioners argue
that the producer and the middleman are ``rightly perceived by the
Department as having effectively worked in tandem'' in dumping the
subject merchandise.
Petitioners also cite Sweaters Wholly or in Chief Weight of Man-
made Fiber from Taiwan: Final Results of Changed Circumstances
Antidumping Duty Administrative Review, (``Sweaters'') 58 FR 32544,
32645 (June 11, 1993) as punctuating the notion that the Department
will assign a single, weighted-average dumping rate to each producer,
no matter whether the producer's product has gone through a trading
company like Jia Farn or directly to the United States. In Sweaters,
the Department stated that:
The CIT agreed with the Department that the subject of
antidumping orders is merchandise, not companies, and that only
merchandise manufactured by Jia Farn was excluded from the order * *
*''
Petitioners argue that Sweaters buttresses the Department's authority
to act forcefully within the bounds of the statute to preclude
circumvention of antidumping duties. Therefore, petitioners submit that
the Department should use a single, weighted-average dumping rate on
YUSCO and Tung Mung to prevent possible circumvention of antidumping
duties.
YUSCO states that the record does not support a middleman dumping
finding in this investigation, but in case the Department does find
middleman dumping, YUSCO should be assigned an independent dumping
margin. YUSCO, in explaining its reasoning for an independent rate,
states that the record establishes that YUSCO is an independent
producer and exporter of SSSS, as it made direct sales to U.S.
customers during the POI, and that according to section 777A of the
Act, the Department ``shall determine the individual weighted average
dumping margin for each known exporter and producer of the subject
merchandise'' unless such individual rate determination is not
``practicable.'' Therefore, YUSCO contends that it is entitled to an
independent deposit rate. Furthermore, since the Department verified
YUSCO's sales and cost information, the Department should, according to
YUSCO, have no undue difficulties in calculating this margin. According
to YUSCO, the Department's decision in Fuel Ethanol from Brazil
supports this argument since in that case the Department assigned an
independent deposit rate to a manufacturer based on its sales to the
United States other than through a trading company.
YUSCO argues that the Department should disregard petitioners'
arguments and assign an independent rate to YUSCO based only on dumping
margins produced from YUSCO's sales other than through Ta Chen.
First, YUSCO argues that petitioners' arguments are contrary to the
Department's practice and regulations. YUSCO states that petitioners'
``knowledge'' standard does not apply to cases when ``unusual
circumstances may warrant the application of a combination rate,'' as
stated in the preamble. YUSCO argues that since the Department and
petitioners have both admitted that middleman dumping is unusual,
knowledge of destination should be irrelevant to the determination of a
middleman dumping deposit rate.
Second, YUSCO disagrees that combination rates offer respondents a
possibility to circumvent antidumping duties, and that, according to
the preamble, combination rates are issued in order to prevent
circumvention.
Third, YUSCO asserts that petitioners incorrectly state that the
Department's knowledge test as stated in the preamble supersedes Fuel
Ethanol from Brazil. YUSCO states that the Department set a standard
regarding middleman dumping as an exception to the knowledge test in
Fuel Ethanol from Brazil and that SSPC from Taiwan changes Fuel Ethanol
only regarding combination rate methodology. According to YUSCO, all
other aspects of Fuel Ethanol, including the calculation of a
producer's independent rate, are still applicable. YUSCO states that
the Department correctly assigned both a combination rate and
independent rate to YUSCO in SSPC from Taiwan.
Finally, YUSCO states that all four cases that petitioners quote
are irrelevant to this investigation. Ferrovanadium from Russia does
not apply because it is a non-market economy case. CVD SSPC from Korea
is also irrelevant, argues YUSCO, since the Department stated that
combination rates would serve no purpose in that specific case. YUSCO
also argues that Certain Pasta from Italy is irrelevant, because
petitioners incorrectly claim that the Department did not assign a
combination rate to a trading company. In fact, YUSCO notes that the
trading company was in fact a producer, and the Department specifically
noted the importance of assigning a combination rate to a producer and
exporter. Finally, YUSCO argues that Sweaters from Taiwan is irrelevant
because the issue in that case was not, as petitioners state, possible
circumvention of antidumping duties by a producer; rather, the issue
was over whether a company should be considered a producer, an issue
which YUSCO maintains is irrelevant to the case at hand.
YUSCO also argues that petitioners' single rate methodology would
unreasonably and unfairly punish YUSCO and its U.S. customers since
nothing on the record shows that any of these parties were involved in
Ta Chen's selling practices. Furthermore, as in Fuel Ethanol from
Brazil and SSPC from Taiwan, YUSCO claims that the Department should
not double-count dumping margins generated from sales to Ta Chen when
calculating a separate rate for YUSCO, since the margins for sales to
Ta Chen will be incorporated into the YUSCO/Ta Chen combination cash
deposit rate. YUSCO claims that not double-counting advances fairness
and administrative efficiency in determining importer-specific
assessment rates.
Tung Mung argues that, if the Department does affirm its middleman
dumping finding, the Department should issue a separate rate for Tung
Mung. Tung Mung argues that in middleman dumping cases the Department
has consistently issued separate rates to the producers, citing SSPC
from Taiwan (assigning two cash deposit rates, one to apply to sales
made by the producer through the middleman, the other to apply to any
sale of subject merchandise by the producer other than through the
middleman). Tung Mung argues that assigning a separate rate for Tung
Mung is fair and appropriate because the producer should not be
penalized in making future sales to the United States as a result of
pricing activities by the unaffiliated middleman that are, by
definition, completely outside the producer's knowledge or control.
Tung Mung argues that it should be able to continue to make direct
sales to the United States without the importer being burdened with
cash deposits that resulted from Ta Chen's activities. Tung Mung also
requests that the Department confirm its decision that direct sales
from Tung Mung to TCI, Ta Chen Taiwan's U.S. affiliate, are not subject
to the middleman dumping analysis and therefore that such sales in the
future would not be subject to any middleman dumping rate that the
Department might issue in its final determination.
Tung Mung disagrees with petitioners' proposal to issue a single
rate and argues that petitioners' reasoning is ``fatally'' flawed. Tung
Mung asserts that the cases relied upon
[[Page 30605]]
by petitioners involved middleman sales but no middleman dumping. Tung
Mung agrees with petitioners' request to issue a single rate to a
producer, regardless of which channel it is selling to the United
States. Tung Mung finds this policy appropriate where the producer
alone has been found to be dumping, and not the middleman. However,
Tung Mung challenges petitioners' assertions that the Department has
changed its policy of giving a separate rate to the producer in
middleman dumping cases, and instead now applies a single, weighted
average margin, noting that in SSPC from Taiwan, the Department gave
one rate to the producer--based in its sales to the middleman--and
another rate to the producer/middleman combination. Tung Mung asserts
that petitioners failed to explain how manipulation by the respondents
is possible in the instant case. Tung Mung distinguishes the instant
case from CVD SSPC from Korea, where the producer in question was
selling through five different trading companies. Here, Tung Mung
argues, there would only be two rates for each producer--one applying
to its sales to the United States through Ta Chen, the other to the
remainder of its sales. Thus, Tung Mung argues there would be no
opportunity for manipulation.
Tung Mung finds implausible petitioners' claim that the producer
and middleman can work in tandem in dumping the subject merchandise in
the United States. Tung Mung argues that this assertion made by
petitioners has no basis in fact and contradicts the Department's
practice of giving separate rates to the producer and the middleman in
middleman dumping cases. Tung Mung argues that petitioners even admit
the implausibility of price manipulation by the middleman and the
respondent producer, because by having the middleman carry out the
dumping in the resale, the middleman would incur substantial losses.
Thus, Tung Mung argues that the middleman could not engage in such a
pricing strategy for any length of time.
In conclusion, Tung Mung submits that the Department should find a
separate rate for Tung Mung based on direct sales to the United States.
Further, Tung Mung argues that if that rate is de minimis, Tung Mung
should be excluded from the order with respect to future sales to the
United States that do not go through Ta Chen.
Ta Chen argues that, as the Department determined in SSPC from
Taiwan, any middleman dumping margin should only apply to sales made by
Ta Chen Taiwan. According to Ta Chen, TCI, like any other U.S.
corporation, should be permitted to purchase directly from a Taiwan
manufacturer at that manufacturer's own dumping rate.
Department's Position: We agree with petitioners that separate
channel-specific rates are not appropriate in this case. Accordingly,
we have determined one rate for Tung Mung merchandise, whether or not
exported by Ta Chen, and one rate for YUSCO merchandise, whether or not
exported by Ta Chen.
In light of the arguments raised by interested parties in this
proceeding, we have reviewed our findings in SSPC from Taiwan. In
making that final determination, we notified the U.S. Customs Service
that, for entries of subject merchandise produced by YUSCO and shipped
to the United States through Ta Chen, the cash deposit rate would be
10.20 percent and, for all other entries of subject merchandise
produced by YUSCO, the cash deposit rate would be 8.02 percent.
However, in that determination, YUSCO sold the subject merchandise to
the United States only through Ta Chen and the dumping margin on that
channel was above de minimis, such that we were not faced with the same
factual situation in the instant case.
In the instant case, the factual situation is different. For
example, both Tung Mung and YUSCO had a small volume of sales to the
United States not subject to our current middleman investigation.
Moreover, in the Preliminary Determination, we determined that on an
overall basis, neither Tung Mung nor YUSCO had estimated dumping
margins that exceeded the de minimis level such that the possibility of
exclusion existed for these firms. However, this preliminary finding
did not include an analysis of middleman dumping. Thus, we recognize
that, in this final determination, we are examining this issue for the
first time since Fuel Ethanol from Brazil.
Since our finding in Fuel Ethanol from Brazil, the Department has
adopted new regulations regarding so-called ``combination'' or
``channel'' rates. Specifically, section 351.107 of the Department's
regulations was added, codifying our ability to issue channel rates in
certain circumstances. The preamble to these regulations, which
discusses our position on issuing channel rates in different factual
scenarios (see Preamble at 27302-3), notes that we do not generally
find it appropriate to determine channel rates when investigating
producers.
After analyzing all interested party comments, we determine that it
is appropriate to consider the full range of dumping when reaching a
determination under sections 733(a) or 735(a) of the Act. This is
particularly important given the number of sales of subject merchandise
produced by YUSCO and Tung Mung which are made through Ta Chen, and
given (in the case of Tung Mung) the identity of the customer(s) in the
United States to which Tung Mung made its direct sales. See Analysis
Memorandum: Tung Mung, Attachment 3. and Facts Available Memorandum--
YUSCO at page 1. Under these circumstances, it is inappropriate to
determine an independent margin for purposes of determining whether
sales are made at LTFV under section 735(a)(1) or in determining
eligibility for exclusion under section 735(a)(4) of the Act. However,
we have taken into consideration the dumping margins attributable to
both channels in determining the weighted-average dumping margins.
Therefore, for the final determination, we calculated an overall
weighted-average margin (taking into account YUSCO's and Tung Mung's
sales to Ta Chen and other customers, and the middleman dumping of
YUSCO and Tung Mung merchandise attributable to Ta Chen) as provided
for under section 735(c)(1)(B)(i) of the Act. We used this overall
margin for determining whether SSSS from Taiwan is being sold in the
United States at LTFV, as provided in section 735(a)(1) of the Act. We
also compared the overall weighted-average margin to our de minimis
benchmark to determine eligibility for exclusion, as provided in
section 735(a)(4) of the Act.
In order to calculate the overall weighted-average margin, we used
the following methodology. For YUSCO, we first calculated a rate for
those sales made by YUSCO and Yieh Mau to Ta Chen by summing YUSCO's
facts available rate and Ta Chen's facts available rate (the sum of
which equals 36.44 percent). See discussion of these rates in the
``Facts Available'' section above. We also calculated the total weight
of these sales. Similarly, we calculated the weight of sales made by
YUSCO and Yieh Mau to all other customers, and we applied the adverse
facts available rate of 21.10 percent to these sales. Finally, we
weight averaged these two rates by the total sales volume. The overall
margin is 34.95 percent. For further detail, see Analysis Memorandum--
YUSCO.
For Tung Mung, we first calculated a rate for those sales made by
Tung Mung to Ta Chen by summing Tung Mung's
[[Page 30606]]
rate and Ta Chen's facts available rate (the sum of which equals 15.40
percent). Then, we calculated the margin for other Tung Mung sales,
which was zero. Finally, we weight averaged these two rates by the
total value. The overall margin is 14.95 percent. For further detail,
see Analysis Memorandum--Tung Mung.
Comment 3: All-Others Rate
Tang Eng and Chia Far argue that, where the Department makes all
exporters mandatory respondents but does not calculate a margin for all
respondents, the Department should calculate the ``all-others'' rate
for the non-selected respondents as the average of the calculated
dumping margins, including any de minimis margins and excluding any
margins based entirely on facts otherwise available. Tang Eng and Chia
Far assert that this treatment is provided for in the URAA and follows
Departmental practice. Respondents cite Notice of Preliminary
Determination of Sales at Less than Fair Value: Honey from the People's
Republic of China, (``Honey'') 60 FR 14725, 14729 (March 20, 1995) and
Certain Fresh Cut Flowers From Colombia: Preliminary Results of
Antidumping Duty Administrative Review, (``Flowers XI'') 64 FR 8059,
8060-62 (February 18, 1999) as examples of the Department's prior
treatment of non-selected respondents.
Petitioners contend that the ``all-others'' rate assigned to Tang
Eng and Chia Far should exclude any de minimis margins. Petitioner's
contend that the statute's language is unambivalent in its direction to
calculate the ``all-others'' rate exclusive of de minimis margins and
margins based on facts otherwise available. Petitioners cite Flowers
XI, et al, as examples of Departmental precedent in keeping with this
statutory requirement.
Department's Position: We agree with respondents in part. Section
735(c)(5)(A) of the Act directs us to calculate the ``all-others'' rate
exclusive of de minimis margins and those margins determined entirely
on facts otherwise available. Moreover, under this section, the ``all-
others'' rate is established during the less-than-fair-value
investigation and does not change in subsequent administrative reviews
conducted under section 751. However, section 735(c)(5)(B) of the Act
provides for an exception in instances where all margins are either de
minimis or based on facts otherwise available.
In the instant case, all margins are either de minimis or based on
facts otherwise available. Hence, we are not limited to the methodology
prescribed in section 735(c)(5)(A) of the Act. Therefore, for this
final determination, we have calculated the ``all-others'' rate based
on a simple average of the corroborated price-to-price comparisons
alleged in the petition, as indicated in our Initiation Notice.
We disagree with respondents' interpretation of Honey and Flowers
XI. Flowers XI involves a review conducted under section 751 of the Act
and did not result in a recalculation of the ``all-others'' rate.
Rather, Flowers XI describes how the Department established a margin
for those respondents for which a review was initiated, but were not
selected for individual review under section 777A(c)(2)(A). Honey is
not controlling because that investigation was governed by the Act
prior to the URAA. Moreover, in that determination we did not include
de minimis margins in our calculation of the all-others rate.
Company-Specific Issues
YUSCO/Yieh Mau
Comment 4: Affiliated Party Transactions
Petitioners argue that the Department should reclassify YUSCO's
sales to Yieh Mau as affiliated home market sales and include them in
the Department's arm's-length test of YUSCO's home market sales.
Petitioners also state that, in the preliminary determination, the
Department did not conduct an arm's-length test on YUSCO's sales to
Yieh Mau because it determined that according to the evidence on the
record, Yieh Mau was not affiliated with YUSCO. Petitioners claim that,
as discovered at verification, this decision is improper.
During verification, petitioners argue, the Department confirmed
that an affiliation exists between YUSCO and Yieh Mau within the
meaning of section 771(33) of the Tariff Act, since the Department
found that the same family owns large percentages of both companies and
is involved in their management, thus making the two companies
``commonly controlled.'' In addition, petitioners state that an equity
interest exists between these two firms and that YUSCO has consistently
referred to Yieh Mau as an affiliated party.
Petitioners continue by citing the Final Determination of Sales at
Less Than Fair Value: Stainless Steel Plate from Belgium (``Plate from
Belgium'') 64 FR 15476 (March 31, 1999), in which, according to
petitioners, the Department determined that two companies were
affiliated because they were under common control by another company.
Petitioners draw a parallel inference with respect to YUSCO's and Yieh
Mau's common familial control.
YUSCO states that even if the Department determines that YUSCO and
Yieh Mau are affiliated, the Department should use YUSCO's sales to
Yieh Mau in calculating YUSCO's dumping margin and not use Yieh Mau's
sales, because YUSCO made its sales to Yieh Mau, not through Yieh Mau
to other customers.
Department's Position: We agree with petitioners that YUSCO and
Yieh Mau are properly considered affiliated parties under the statute.
Section 771(33)(A) of the Act states that persons shall be considered
affiliated if they are ``members of a family, including brothers and
sisters (whether by the whole or half blood), spouse, ancestors, and
lineal descendants.'' Section 351.102(b) of the Department's
regulations state that, in considering whether control over another
person exists, the Secretary will consider, among other things,
corporate or family groupings. At verification we found a significant
degree of ownership by the same family. We also found that this same
family is involved in the management of both companies. See YUSCO SSSS
Sales Verification Report, dated April 12, 1999.
Given these circumstances, we determine that YUSCO and Yieh Mau are
affiliated persons under section 771(33)(A) of the Act. Therefore, due
to our above-described determination to use total adverse facts
available for YUSCO, we also determine that Yieh Mau shall be subject
to this decision as well.
Comment 5: Verification Corrections
Petitioners argue that the Department should disallow Yieh Mau's
claimed adjustment for home market credit expenses and inventory
carrying costs since the Department was unable to verify Yieh Mau's
short-term interest rate. Petitioners contend that Yieh Mau did not
provide the information that was required by the Department, although
Yieh Mau possessed documents containing this information and could have
retrieved these from storage. Therefore, petitioners argue, Yieh Mau
failed to cooperate to the best of its ability and the Department may,
according to Section 776(b) of the Tariff Act, use facts available with
an adverse inference. Furthermore, petitioners cite the SAA, stating
that the Department ``* * * may employ adverse inferences about the
missing information to ensure that the party does not obtain a more
favorable result by failing to cooperate than if it had cooperated
fully.''
[[Page 30607]]
YUSCO did not comment on this issue.
Department's Position: We agree, in principle, with petitioners,
that the use of adverse facts available would be warranted under these
circumstances. However, due to our decision to apply total adverse
facts available to YUSCO, this issue is moot.
Comment 6: Overall Cost Reconciliation
YUSCO argues that the Department should not adjust its reported
costs by the difference between total reported COM and the total COM in
its accounting system. YUSCO states that the Department verified all of
its cost data for the POI and did not find discrepancies between
reported COP and CV data and the material cost, direct labor, and
overhead cost in its accounting records. Respondent asserts that it
provided information necessary to quantify the differences between the
amounts in the accounting records and reported TOTCOMs. YUSCO maintains
that it quantified the differences between the accounting system and
reported COMs for: raw material input costs for affiliated
transactions; usage of processing time instead of production quantity
as the allocation factor for production costs after the hot rolling
stage; and recalculation of YUSCO's average material cost based on cost
of goods used during the POI instead of only inputs purchased during
the year.
Respondent contends that petitioners did not argue the validity of
the difference resulting from reporting costs for the POI verses for
the fiscal year. Therefore, YUSCO argues that if the Department adjusts
for the other reconciling items, it should exclude this particular
difference from the adjustment.
YUSCO argues that the Department's practice is not to adjust
reported costs for explained differences between amounts in the
accounting system and reported costs. YUSCO notes that the Department
has not adjusted differences in the past which were ``adequately
explained,'' citing Certain Corrosion-Resistant Carbon Steel Flat
Products and Certain Cut-to-Length Carbon Steel Plate From Canada:
Final Results of Antidumping Duty Administrative Reviews, 63 FR 12725,
12736 (March 16, 1998) (Comment 13).
Petitioners argue that the difference the Department found between
YUSCO's reported total cost of manufacturing and the amount in its
accounting records is an unreconciled difference and it should be added
to the reported costs. Petitioners state that while respondent
explained the difference as being generated by the three items noted
above, YUSCO did not quantify the amount of each item. Therefore,
petitioners conclude that the difference is unreconciled.
As support for the importance of reconciling the costs, petitioners
point to Certain Cut-to-Length Carbon Steel Plate from Mexico: Final
Results of Antidumping Duty Administrative Review, (``CTL'') 64 FR 77,
78 (January 4, 1999) (Comment 1), where the Department explained the
role and significance of the cost reconciliation. Petitioners further
point to the Notice of Final Determination of Sales at Less Than Fair
Value: Stainless Steel Plate in Coils from Taiwan, (``SSPC from
Taiwan'') 64 FR 15493, 15498 (March 31, 1999), where the Department
determined that the unreconciled difference between amounts in the
accounting records and reported costs should be included in reported
costs. Petitioners argue that the same determination should be made for
this investigation.
Petitioners contend that YUSCO's analysis of the unreconciled
difference is flawed. First, petitioners argue that YUSCO's calculated
change in the work-in-process (``WIP'') account is not only related to
subject merchandise but all WIP in the company and therefore could be
overstated. Second, petitioners argue that the respondent erred in
calculating the difference in costs due to the application of the major
input rule for affiliated input purchases. Petitioners note that the
difference calculated for the major input rule adjustments should only
include slab costs and not overhead costs. Petitioners argued the same
for YUSCO's difference in allocation methodology for the adjustment
figure: namely, that the difference should only include slab costs.
Petitioners conclude that once these errors in YUSCO's analysis are
corrected, the original unreconciled difference remains. Therefore,
petitioners conclude that the Department should adjust YUSCO's costs to
include the total unreconciled difference between its costs in its
accounting system and reported costs of manufacturing.
Department's Position: We agree with petitioners that any
unreconciled understatement of YUSCO's reported costs should be added
to the cost of manufacturing for COP and CV purposes. As articulated in
CTL, 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 at verification because it did not identify and quantify
all differences shown on the reconciliation. As stated in CTL, ``[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 demonstrated in SSPC from Taiwan, we found that the
reported costs should have been adjusted for the unreconciled portion
of the difference between respondent's costs from its accounting system
and reported costs of manufacturing. While YUSCO attempted to quantify
the reconciliation differences in the brief, based on the verification
exhibits, some portions remain unreconciled. However, due to our
decision to apply total adverse facts available to YUSCO, this issue is
moot.
Comment 7: Exchange Gains and Losses
Petitioners argue that YUSCO's net exchange loss related to notes
payable for the POI should have been included in the financial expense
rate calculation. According to petitioners, net exchange losses for
notes payable are costs incurred by the company as a whole for
financing purposes. Petitioners point to SSPC from Taiwan, where the
Department determined that the current portion of the net exchange loss
related to debt should be included in the financial expense rate
calculation.
YUSCO did not comment on this issue.
Department's Position: We agree in principle 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.
However, due to our decision to apply total adverse facts available to
YUSCO, this issue is moot.
[[Page 30608]]
Chang Mien
Comment 8: Conversion Costs
Petitioners state that, at verification, the Department discovered
that Chang Mien failed to include any coils that were processed more
than once in its rolling mill in Chang Mien's machine time analysis.
Therefore, petitioners contend, respondent understated the cost of
production for three CONNUMs and a certain number of coils. Petitioners
argue that by not providing the Department with data regarding the
coils in question, Chang Mien did not provide the information that was
required by the Department. Thus, the Department was not able to
determine the correct cost of production. Petitioners maintain that,
pursuant to section 776(a)(2)(D) of the Act, if a respondent provides
information but the information cannot be verified, the Department
should resort to the use of fact otherwise available in reaching its
final determination. Further, petitioners state that if the Department
finds that a party has failed to cooperate by not acting to the best of
its ability, the Department ``* * * may use an inference that is
adverse to the interests of that party in selecting the facts otherwise
available,'' citing section 776, 1677e(b) of the Act. Petitioners also
argue that in determining the appropriate measure of adverse facts
available, the SAA instructs the Department that it ``* * * may employ
adverse inferences about the missing information to ensure that the
party does not obtain a more favorable result by failing to cooperate
than if it had cooperated fully,'' citing the SAA at 870. Petitioners
contend that since respondent knew that multiple passes resulted in
additional costs for producing these products but failed to report
these additional costs, the Department should find that Chang Mien
failed to cooperate to the best of its ability and, therefore, use an
adverse inference in selecting facts otherwise available for this final
determination. Furthermore, petitioners argue that the Department
should apply the highest cost of production to the three CONNUMs so
that respondent does not benefit from its lack of cooperation.
In its rebuttal, petitioners contend that the Department should not
accept any post-facto argument provided by respondent. Petitioners
assert that, given that it was the Department which discovered Chang
Mien's omission during verification, the Department should find that
Chang Mien failed to cooperate to the best of its ability and resort to
the use of fact otherwise available in reaching its final
determination.
Respondent argues that the Department should not increase the costs
of labor and overhead for these coils which were processed through two
passes but for which Chang Mien included cost of production data for
only one pass. Respondent maintains that it did not fail to cooperate
to the best of its ability, as petitioners assert. Instead, respondent
continues, not reporting the second pass of the 23 coils was an
oversight and for which it subsequently provided documentation during
the verification. Respondent further contends that, given that these 23
coils represent a very small percent of all production of subject
merchandise during the period of review, the Department can ignore,
under section 19 CFR 351.413 of the Department Regulations, any change
to the relevant CONNUMs if it believes that there will be no change to
the dumping margin. Furthermore, respondent argues, one of the three
CONNUMs in question was not sold in the U.S. and was not used by the
Department in its calculations for the preliminary determination of
this case.
Additionally, respondent asserts that the additional underreported
costs for the small quantity of coils in question will not result in it
obtaining a more favorable dumping margin in the Department's final
determination. Respondent suggests that if, however, the Department
concludes that it should account for any labor and overhead costs
associated with a second pass on these coils, the Department should use
its suggested methodology, which, respondent asserts, the Department
verified and is contained in the Verification of Cost of Production of
Chang Mien Report as Exhibit C-11, page 1, item 1. Respondent contends
that the cold-rolling arrangement specified in the report is similar
for this particular coil to that mentioned in the Verification of Cost
of Production of Chang Mien Report, a pass from 3.00 mm to 1.50 mm and
then from 1.50 mm to 0.40 mm. Respondent indicates that this exhibit
details the ``working hours'' and ``productivity factor'' for the two
passes for this coil and that by taking the data from the Verification
Exhibit C-9, one can calculate the cost for each relevant cost field
for one-pass and two-pass operations for all production of this
particular CONNUM. Respondent argues that the Department should only
add the difference between the two in its calculations. Respondent
contends that the Department should apply this factor to all production
of this particular CONNUM and all three CONNUMs in question.
Respondent reiterates, in its rebuttal, that the omission of the
additional coils for the second pass was an inadvertent mistake on the
part of Chang Mien and argues that the verified data should be used to
correct it in the final determination. Furthermore, respondent notes
that petitioners did not provide a case precedent to support their
theory that the Department should treat a minor data problem by
disregarding the entire cost data submission for the three CONNUMs at
issue and substituting the highest figures for the entire cost of
product for these CONNUMs.
Department's Position: Although petitioners are correct in noting
that it was the Department which discovered the under-reported costs
for the second pass of the 23 coils, we agree with respondent that the
Department should simply recalculate the under-reported production
costs based on the information gathered at verification. We disagree
with petitioners that Chang Mien's COP data failed to be verified, and
we believe that the percentage of coils affected by the respondents'
omission is insignificant. First, for the three CONNUMs affected by
this under-reporting, the 23 coils do not greatly impact the calculated
costs, given the relative proportion of the weight of these coils to
total weight of all coils used for the COP calculation. See Analysis
Memo: Chang Mien at page 1. Second, on the issue of COP, we do not
believe that Chang Mien has failed to cooperate by not acting to the
best of its ability. Chang Mien cooperated fully with the Department
verifiers upon the discovery of the under-reported costs during
verification by providing the raw data for the coils and an excerpt
from the computer sales listing showing the list of observation numbers
and CONNUMHs of the coils that received a double pass during the
verification. Finally, it is the Department's long-standing practice to
accept certain omissions from the record during verifications if the
Department believes they are unintentional and minor in magnitude.
For the above reasons, the Department has recalculated respondent's
cost of production, without the use of facts available, by including
the costs associated with the double pass of the 23 coils. The
Department has calculated the costs using the methodology suggested by
respondent and using the data which we confirmed at verification. See
Analysis Memo--Chang Mien.
[[Page 30609]]
Comment 9: Date of Sale
Petitioners argue that the Department should use the order date for
the home market and U.S. dates of sale, as opposed to the Department's
decision in the preliminary determination to use date of invoice as the
date of Chang Mien's U.S. sales. Petitioners maintain that based on the
Department's verification of Chang Mien, the date of order confirmation
is the appropriate date of sale for both home market and U.S. market.
Petitioners contend that the Department's regulations state that the
Department will defer to the date of invoice as the date of sale unless
the record demonstrates that the material terms of sale for home market
sales are established at a different date. See Antidumping Duties;
Countervailing Duties; Final Rule, 62 FR 27296, 27349 (May 19, 1997).
Petitioners further contend that in the preliminary determination, the
Department correctly decided to depart from its preference of the date
of invoice with regard to Chang Mien's home market sales given that
Chang Mien usually had no price change or change in quantity for those
sales between order confirmation date and shipping. Petitioners
submitted that the same factual pattern exists for Chang Mien's U.S.
sales and, therefore, petitioners argue, the order of confirmation date
should serve as the date of sale for Chang Mien's U.S. sales as well.
Therefore, petitioners argue that the order confirmation date most
closely reflects commercial reality and the time when the material
terms of sale are agreed upon for Chang Mien's sales.
Respondent argues that it routinely produces either too much or too
little steel for each U.S. order. Because this occurs in the normal
course of trade, respondent asserts that the Department should continue
its practice of using the invoice date as the date of sale rather than
the order date. Respondent argues that the Department's stated policy
regarding date of sale (``* * * the Secretary normally will use the
date of invoice'' (19 CFR 351.401(i)) is pertinent to the respondent's
date of sale scenario and contends that the Department should,
therefore, enforce its policy with regard to the respondent. Respondent
also cites the Department's decision regarding date of sale in SSPC
from Korea, in which the Department stated:
We do not treat an initial agreement as establishing the
material terms of sale between buyer and seller when changes to such
an agreement are common even if, for a particular sale, the terms
did not actually change.
Moreover, respondent asserts that the Department acknowledged in
that case that it will uphold its standard of using the invoice date as
date of sale as long as the material terms ``are subject to change''
(Id.). Respondent states that it provided the Department with an
exhibit (Exhibit 61, November 27, 1998) comparing quantity ordered with
quantity actually delivered and asserts that nothing in the
verification reports refutes any of the data provided in the exhibit.
Respondent points out that the Department did not attempt to verify any
of the sales reported in that exhibit to determine whether they were
beyond the tolerances called for in the orders. Had the Department
verified this exhibit, respondent argues, it would have been clear that
changes to the orders were neither infrequent nor abnormal. Had the
Department verified all of the information available on the record,
respondent asserts the Department would know that the high level of
frequency of changes between quantity ordered and quantity actually
delivered is a normal business practice for the respondent. Therefore,
respondent concludes, the Department should not change its methodology
with regard to date of sale in this case and should therefore, use the
invoice date as the date of sale, rather than the order date, for sales
to the United States.
Department's Position: We agree in part with respondent and
petitioners. In the preliminary determination, the Department relied
upon the date of the order confirmation as the date of sale for Chang
Mien's home market transactions. According to Chang Mien's November 27,
1998 supplemental response regarding home market date of sale, ``there
usually is no price change or change in quantity between order
confirmation date (day 0) and shipping [invoice date] (day 1-3).'' See
Chang Mien's November 27, 1998 supplemental response at 8. This was
confirmed at verification. See Chang Mien Sales Verification Report at
5 (``We did not find material changes in the quantity and value terms
from the order and invoice''). Therefore, with regard to home market
sales, we agree with petitioners and will continue to use the date of
order confirmation as the date of purchase for this final
determination.
With regard to sales to the United States, the Department
preliminarily determined that the invoice date was the appropriate date
of sale. The Department based its decision in part on Chang Mien's
November 27, 1998 supplemental response, in which the Department relied
on respondent's assertion that ``[in] approximately 94.5 percent of the
sales there was a change between the quantity from the date of
confirmation and the invoice date.'' See Preliminary Determination of
Sales at Less Than Fair Value and Postponement of the Final
Determination: Stainless Steel Sheet and Strip in Coils from Taiwan, 64
FR 101 (January 27, 1999). We disagree with respondent that the
Department did not attempt to verify any of the sales reported in that
exhibit to determine whether they were beyond the tolerances called for
in the orders. During verification, the Department confirmed Chang
Mien's basic methodology for reporting date of sale as described in
their questionnaire response. The Department examined eight different
sales contracts to the United States during the POI. These sales were
part of the same universe of the sales contained in Chang Mien's
November 27, 1998 supplemental response. No discrepancies were
discovered. Given that Chang Mien successfully passed the sales
verification, there is no record evidence to conclude that the
Department should find the information submitted in response to the
Department's request regarding date of sale to be unreliable. The
Department does not agree with respondent that, for 94.5 percent of the
sales, there was a change between the quantity from the date of
confirmation and the invoice date. We have analyzed those sales that
changed in quantity from the order of confirmation to the invoice date
in excess of the variation of plus or minus 10 percent of the
quantities delivered, as stated in Chang Mien's contracts, and found
that the number of changes is significant and thus, the date of sale
should continue to be the invoice date. See Chang Mien Sales
Verification Report at 5 and Analysis Memorandum: Chang Mien.
Additionally, in the Department's decision regarding date of sale in
SSPC from Korea, the Department determined that the date of sale was
the invoice date, or when the final terms of sales were established, in
keeping with the Department's regulatory preference for using the
invoice date of sale absent evidence ``that a different date better
reflects the date on which the exporter or producer establishes the
material terms of sale.'' See 19 CFR 351.401(i). Therefore, in keeping
with previous Department decisions and with the Department's policy, we
agree with respondent and have used, for this final determination, the
invoice date for sales transactions to the United States.
Comment 10: Surface Finishes
Petitioners argue that Chang Mien's claims that there is a
difference between
[[Page 30610]]
surface finishes in their product description as defined between
surface finish code 9 (hot-rolled, annealed and pickled, grinding) and
code 1 (hot-rolled, annealed and pickled) should not be honored.
Petitioners contend that, based on Chang Mien's own description of code
1 and code 9, the Department should consolidate codes 1 and 9 into a
single finish code, because the grinding in the initial phase of
production does not affect the ultimate finish of the merchandise.
Furthermore, petitioners argue that the Department should consolidate
finish code 10 (cold-rolled, not annealed and pickled) with code 3
(cold-rolled). Petitioners state that Chang Mien's description of the
code 10 finish ``refers to material which has not completed production
because, there were so many defects, that it already has been
classified as non-prime material.'' See Supplemental Questionnaire
Response of Chang Mien Industries, Co., Ltd., dated November 27, 1998
at 7. This description, petitioners assert, indicates that code 10 is
cold-rolled material that Chang Mien has defined as non-prime
merchandise, and petitioners argue that the designation of non-prime
merchandise is not relevant in the finish characteristic. Therefore,
petitioner concludes, the Department should consolidate the finish code
10 with finish code 3 in the final determination.
Respondent indicates that at verification, Chang Mien demonstrated
to the Department that finishes 1 and 9 should not be consolidated
because there were physical differences between the two. The
differences, respondent states, were readily apparent from a visual
inspection and explained in detail to the cost verifier. Respondent
further contends that for the same reasons, code finishes 3 and 10
should not be combined. In addition, respondent argues, since finish 10
is not a completely produced product, the mechanical properties are
different from finish 3 products. Lastly, respondent argues, that it
would not make sense to combine a second quality sheet product, which
has not completed the production process because they have so many
defects, to first quality finished product. For this reason, respondent
contends, finish 10 should not be compared to U.S. sales, as it is an
unfinished product, and should be ignored.
Department's Position: With regard to Chang Mien's finish codes 1
and 9, we agree with petitioners and are continuing to treat these two
codes as one combined group. For the application in the margin
calculation of this decision, see Analysis Memorandum: Chang Mien.
First, we note that finish codes 1 and 9 are nearly identical, as both
products are hot-rolled, annealed and pickled. Furthermore, regardless
of whether there is some difference in the physical appearance between
products which have been subject to grinding (a matter about which
there is no determinative record evidence), there is no record evidence
to conclude that any alleged difference in physical appearance affects
the product's end-use, or that such a difference is reflected in
relatively higher production costs or prices. In any event, as we note
below in Comment 14, in general, our model match criteria does not
consider the number of processing steps undertaken for each coil.
Moreover, we note that respondent did not raise this issue on the
record when the Department requested public comments on its proposed
product concordance.
With regard to finish codes 3 and 10, we find no reason to deviate
from the Department's preliminary determination, in which we treated
these two categories as separate codes. Unlike in the case of grinding,
the Department generally recognizes that annealing and pickling are
processing steps which significantly alter the physical appearance of a
product, and generally affects product end-use, cost, and sales price.
With regard to the definition of the merchandise as prime or non-prime,
we note that in this case, this distinction is largely irrelevant to
our analysis. That is, if the merchandise were indeed secondary, it
would be separated from prime merchandise in our model match analysis,
minimizing the impact of any decision to collapse the two codes (given
that, as a rule, secondary merchandise, which is sold at reduced
prices, fails the Department's cost test). However, in fact we dispute
respondent's categorization of code 10 finish products as second
quality sheet, as respondent itself has classified many sales of code
10 as prime merchandise. See Analysis Memorandum: Chang Mien pp. 6-7.
Therefore, the record does not support Chang Mien's assertion that this
merchandise is second quality.
Comment 11: Advertising Expenses
Petitioners argue that Chang Mien's claimed direct advertising
expenses should be denied as a direct selling expense and reclassified
as indirect selling expenses. Petitioners state that during
verification, the Department examined various advertising expenses, and
petitioners argue that Chang Mien could not demonstrate that it
incurred direct advertising expenses on behalf of its customers.
Petitioners further argue that the Department's questionnaire
specifically states that in order to qualify for direct advertising
expenses, respondent must have assumed advertising expenses on behalf
of its customer, citing the Department's Questionnaire at p. B-28.
Petitioners contend that the verified documents indicate that the
claimed advertising expenses were general information on the company or
products produced by the company, and hence Chang Mien did not
demonstrate that it incurred advertising expenses to advertise to its
customer's customers, citing Chang Mien's Questionnaire response to
sections B-D at 26. Therefore, petitioners assert, for the final
determination, the Department should deny Chang Mien's home market and
U.S. market claim for direct advertising expenses and reclassify these
expenses as indirect selling expenses.
Respondent states that the primary purpose of the advertising
expense in periodicals and via the sample books for distribution to
U.S. and home market customers is to assist its customers, who are
distributors, to obtain new customers. Respondent further asserts that
virtually all U.S. customers are distributors and not end-users and
that they already buy from Chang Mien. These forms of advertising,
respondent states, assist current customers to obtain new customers and
show potential customers, via the sample book, the quality of Chang
Mien's products. The same, respondent asserts, is true in the home
market. Respondent states that advertising in periodicals also directly
discusses the subject merchandise and is directed to the potential
customers who would contact a distributor of Chang Mien steel. Given
that the Department's verification team found no discrepancies when
they inspected the advertising, respondent argues, the claimed
advertising expenses should remain as a direct expense in the
Department's final determination.
Department's Position: We agree with petitioners. We reviewed Chang
Mien's claimed advertising expenses at verification and found that most
of these promotional expenses were not incurred in marketing to Chang
Mien's customers/end-users. See Sales Verification Report: Chang Mien
at 11-12. Contrary to Chang Mien's assertion that it incurs advertising
expenses on behalf of its customers/end-users, at verification Chang
Mien indicated that they did not know whether distributors (Chang
Mien's domestic customers) gave the sample book to the distributors'
customers. Id. The Department examined various advertising documents,
including advertising in the
[[Page 30611]]
Taiwan Import Export Company List, advertising in the local newspaper,
advertising in the Metal Bulletin Magazine, brochure advertising, and
the Stainless Steel Sample Book. See Chang Mien Sales Verification
Report at 11, 12. Based on this review, we found that these
advertisements were more general in nature and offered a variety of
information on the company or products produced by the company.
Moreover, Chang Mien did not demonstrate to the Department that the
claimed direct advertising expenses were incurred to advertise to its
customer's customers. In Final Determination of Sales at Less Than Fair
Value: Stainless Steel Plate in Coils from South Africa, 64 FR 15459 at
43 (March 31, 1999), the Department concluded that print advertising
expenses which are general in nature and ``intended to promote either
the benefits of stainless steel generally, or Columbus's image as a
reliable supplier of high-quality stainless steel'' do not represent
expenses incurred by the respondent on behalf of its customers that can
be claimed as a COS adjustment. Therefore, we conclude that Chang
Mien's print advertising expenses are aimed primarily at its customers.
As such, these expenses do not represent expenses assumed by Chang Mien
on behalf of its customers, and do not merit treatment as a direct
expense.
Comment 12: Home Market Warranty Claims
Petitioners argue that Chang Mien has double counted its claimed
warranty expenses by counting (1) claims on subject merchandise where
the sale and the warranty claim occurred during the period of
investigation and (2) claims that were incurred during the period of
investigation for sales prior to the period. See Chang Mien
Questionnaire response to sections B-D at 27. Petitioners assert that
not only has respondent claimed an adjustment for non-POI sales, it
also has claimed both types of warranty expenses for some sales. The
Department, petitioners argue, should only accept warranty claims
incurred on POI sales and deny the warranty claims on non-POI sales.
Respondent states that the Department has a long-standing policy of
using all direct, variable warranty expenses incurred in the POI when
calculating this cost. It further states that the Department is fully
aware that warranty claims may be made for merchandise long after it is
sold and, respondent asserts, the Department has consistently used all
warranty costs incurred in the POI, regardless of sales dates, in its
calculations. Respondent cites the Department's decision in Certain
Cold-Rolled Carbon Steel Flat Products From the Netherlands: Final
Results of Antidumping Duty Administrative Review, 63 FR 13204, 13205
(March 18, 1998), in which the Department stated:
As noted in AFBs 1997, the Department has long recognized that
warranty expenses cannot be reported on a transaction specific basis
and an allocation is necessary * * * Accordingly, for the final
results of this review, we have calculated warranty expenses as a
separate direct variable expense * * * We allocated the expense to
the metric tonnage sold.
Respondent asserts that to be consistent with the above stated
decision, and based on the verified findings by the Department, that
the Department should deduct all actual, variable warranty expenses
incurred in the POI in its final determination of this case.
Department's Position: We agree with petitioners. Chang Mien has
provided transaction-specific warranty claims, and thus an allocation
of POI warranty expenses to POI sales is not warranted. The allocation
of warranty expenses applies to situations where it is not possible to
tie POR/POI warranty expense to POR/POI sales. The Department has
recognized that in certain situations, warranty expenses cannot be
reported on a transaction-specific basis, due to time lags between the
warranty expenses incurred and sales associated with the warranty.
Therefore, where warranty expenses cannot be reported on a transaction-
specific basis, an allocation of POR/POI warranty expenses to POR/POI
sales is deemed necessary. See Antifriction Bearings (Other Than
Tapered Roller Bearings) and Parts Thereof From France, et. al.; Final
Results of Antidumping Duty Administrative Review, 62 FR 2081, 2095
(January 15, 1997). Here, respondent provided transaction-specific
warranty expenses, which were revised at verification. We verified
documentation supporting that the warranty expense reported in the
field WARR2H is associated with a non-POI sale. Therefore, because we
have transaction-specific information with regard to warranty expenses,
we only made adjustments for POI warranty expenses associated with POI
sales.
Comment 13: Financial Expenses
Petitioners state that at verification, the Department found that
Chang Mien recalculated its financial expense ratio to ``exclude non-
financial items,'' thereby changing its financial expense ratio from
its reported ratio in the September 24, 1998 submission. See Cost
Verification Report: Chang Mien, at 2. Petitioners argue that for the
final determination, the Department should recalculate Chang Mien's
financial expense ratio to reflect all financial items. Petitioners
further assert that the Department should consider interest expenses,
losses on foreign exchange rate, loss on inventory valuation, and other
losses. Id. Additionally, petitioners argue, interest income,
investment income, miscellaneous income, rental income, and gains and
losses on land value, should be excluded because they are either (1)
not short-term interest income or (2) are not related to the production
or sale of the merchandise and are more like investments.
In its rebuttal brief, Chang Mien contends that petitioners are
incorrect in their arguments regarding the financial expense ratio.
Respondent states that at verification, the Department found, in
Verification Exhibit C-8, that items 7101 (interest income) and 7102
(investment income) are short-term and related to production.
Therefore, Chang Mien argues, they should not be excluded from the
calculations. Additionally, respondent asserts, the Department did not
find any discrepancies with this reported data. Chang Mien maintains
that given that it had already excluded miscellaneous income, rental
income, and gains and losses on land value in its revised data, no
further changes should be made to these items. Furthermore, respondent
argues that if this information were excluded again, it would result in
double counting this data. Chang Mien concludes by stating that the
changes noted by the Department in its verification report should be
used in the Department analysis for the final determination because (1)
this information was verified and, (2) the reported figures in the
verified information are calculated in accordance with Taiwanese
Generally Accepted Accounting Principle (GAAP).
Department's Position: We agree with petitioners. During the cost
verification, Chang Mien submitted corrections to its financial expense
to exclude non-fianancial items. We have reviewed these items and
concluded that most were inappropriately excluded from financial
expenses. Therefore, we have revised our calculations to include all
financial expenses. To obtain the revised financial expense ratio, we
deducted short term income and the loss and sale of fixed assests from
total non-operating expenses. See Final Analysis Memo: Chang Mien, pp.
4-5.
[[Page 30612]]
Tung Mung
Comment 14: Model Match
Tung Mung argues that the Department improperly treated certain
types of coil as identical merchandise, by overlooking important
distinctions in physical characteristics between the coil types at
issue. Tung Mung asserts that the Department's selection of matching
criteria to define identical merchandise must be based on ``meaningful
physical characteristics,'' and may consider both price differences in
the marketplace and cost in order to identify such ``meaningful
physical characteristics.'' Emulsion Styrenene-Butadiene Rubber from
Mexico; Final Determination of Sales at Less Than Fair Value, (``ESBR
from Mexico''), 64 FR 14872, 14875 (March 28, 1999). Tung Mung
maintains that the differences between the two types of coil at issue
are ``meaningful'' enough to warrant treatment as separate products.
Tung Mung argues that the types of coils at issue differ
significantly in terms of quality, use and price. First, Tung Mung
claims that one type of sheet at issue develops unsightly lines, known
as ``Luder's Lines,'' when drawn or stretched, and is therefore not
used in applications where the sheet is visible in the final product.
Second, Tung Mung argues that this type of coil is less expensive to
produce and sold for a lower price. Tung Mung asserts that the
difference in cost of producing the two products at issue was verified
by the Department and results from the difference in the number of
times the sheet goes through the mill, citing the Verification Report
at p. 18. In addition, Tung Mung asserts that Tung Mung's sales tape
shows that the two products sell for different prices. Therefore, Tung
Mung argues that it was improper for the Department to treat the two
products as identical and requests that the Department treat these two
types of coil as separate products in the final determination.
Petitioners did not comment on this issue.
Department's Position: We disagree with Tung Mung and did not treat
the coils at issue separately based on Tung Mung's reported finishes.
As stated by respondent, the coils at issue differ by the number of
processing steps undertaken for each coil. In general, our model match
criteria do not consider the number of processing steps undertaken for
each coil. Rather, it focuses on physical differences between products.
However, it is important to note that products undergoing different
processing steps will generally not match in any event, based on the
model matching criteria which the Department has established for this
investigation. Indeed, in this case, treating the coils at issue
separately has no practical effect since the coils do not match based
on other physical characteristics (which, it should be noted, rank
higher in the Department's product concordance). See Questionnaire,
Appendix V. Therefore, for the final determination, we did not treat
the products in question separately.
Comment 15: Normal Value
Petitioners argue that the Department should use all six price
components in the home market in calculating normal values as the
Department did in the preliminary determination. Tung Mung indicated
that it uses a combination of up to six tiers of prices to establish
the price for a single coil. See September 24, 1998 Questionnaire
Response at p. B-1. Petitioners note that Tung Mung stated in its
response that its home market prices for one coil can consist of up to
six price components. Petitioners also note that Tung Mung urged that
the Department limit the normal value to only the first three price
categories of the coil price and not consider the other three price
categories which pertain to tail-end and untrimmed edges. Petitioners
object to Tung Mung's suggestion in its Questionnaire Response (see
September 24, 1998 Questionnaire Response at B-2) to consider only the
first three price categories of the coil for determining normal value,
by arguing that tail-end and untrimmed edges are integral sections of a
home market coil, and therefore prices for these parts of the coil
should be considered in calculating normal values to be compared with
U.S. sales. In addition, petitioners argue that home market warranty
expenses should also be calculated based on the weight of all six price
components of the home market coil rather than only the three price
components suggested by Tung Mung. We also continue to calculate
warranty expenses based on all six price categories of the coils.
Tung Mung did not comment on this issue.
Department's Position: We agree with petitioners and have continued
to use the actual selling price of the coils as reflected in the
invoice to the customer in calculating normal value. Respondent has
indicated that the invoice price represents the weighted-average of all
six price categories of the coils. See September 24, 1998 Questionnaire
Response at p. B-2.
Comment 16: U.S. Warranty Expenses
Petitioners argue that Tung Mung's U.S. warranty expenses should be
adjusted to include warranty expenses for U.S. sales which occurred
during the POI but pertained to products sold prior to the POI.
Petitioners argue that the adjustment is justified under the holding of
Tapered Roller Bearings and Parts Thereof, Finished and Unfinished,
from Japan and Tapered Roller Bearings, Four Inches or Less in Outside
Diameter, and Components Thereof, from Japan: Final Results of
Antidumping Duty Administrative Review and Termination in Part
(``Tapered Roller Bearings from Japan''), 62 FR 11825, 11839 (March 13,
1997). Petitioners maintain that the Department has long recognized
that there is usually a time lag between the initial sale and any
subsequent warranty claim because customers may not discover damaged
goods until a later time. Id. Petitioners assert that the Department
has held that where warranty expenses generally cannot be reported on a
transaction-specific basis due to the time lag between the warranty
claim and initial sale, an allocation of warranty expenses is
necessary. Id. Therefore, petitioners argue that warranty expenses for
U.S. sales should include warranty expenses occurring during the POI,
even if they pertain to products sold outside of the POI.
Tung Mung argues that its single aberrational warranty claim made
with respect to 1996 sales to the United States should not be used as a
surrogate for warranty expense incurred on 1997 sales. Tung Mung
contends that the Department accepts variable warranty expenses
incurred during the POI as a ``surrogate'' for expenses actually
incurred on sales during the POI, ``provided such expenses reasonably
reflect the firm's historical experience with respect to warranty
claims,'' citing Notice of Final Determination of Sales at Less than
Fair Value: Foam Extruded PVC and Polystyrene Framing Stock from the
United Kingdom, 61 FR 51411, 51418 (October 2, 1996). Tung Mung
maintains that the Department does not use this methodology where to do
so would produce distorted results, citing Color Television Receivers
from Korea; Final Results of the Antidumping Duty Administrative
Review, 53 FR 24975 (July 1, 1988).
Tung Mung asserts that to base warranty claims paid in 1997 on 1996
sales would distort the calculation of the warranty adjustment. Tung
Mung argues that more than ninety percent of the total amount of the
warranty
[[Page 30613]]
expense at issue was due to a single claim. Tung Mung claims that the
total amount of warranty claims paid in 1997 with respect to U.S. sales
was aberrational compared to Tung Mung's general warranty experience.
According to Tung Mung, the amount on the single claim was three times
the amount paid by Tung Mung with respect to all home market warranty
claims, despite the fact that home market sales during the POI were ten
times as high as U.S. sales. Tung Mung asserts that there is no
difference between the products sold to various markets which would
account for such a huge swing. In fact, Tung Mung claims that the only
difference would be whether or not the coils are trimmed, which Tung
Mung claims has no bearing on the size or quantity of warranty claims.
In addition, Tung Mung alleges that there is no difference in Tung
Mung's warranty policy with respect to different markets. In sum, Tung
Mung argues that the aberrational claim is not reflective of Tung
Mung's normal experience and should not be used in the calculation of
the warranty adjustment.
Tung Mung argues that the Department frequently uses actual
warranty experience with respect to sales during the POI in cases
involving steel, rather than the surrogate method. Tung Mung claims
that in general, because steel is further processed quickly, warranty
claims are made within a few months of sale. Tung Mung contends that
since generally there is no significant lag in claims for merchandise
such as steel, there is no reason for the Department to use the
surrogate method. Tung Mung claims that, at verification, Tung Mung
demonstrated that no claims had been made with respect to the coils
sold to the U.S. market, many months after the close of the period of
investigation.
Department's Position: We disagree with petitioners. Tung Mung
provided warranty claim information on a transaction-specific basis;
thus, an allocation of POI warranty expenses to POI sales is not
warranted. The allocation of warranty expenses applies to situations
where it is not possible to tie POR/POI warranty expense to POR/POI
sales. The Department has recognized that in certain situations,
warranty expenses cannot be reported on a transaction-specific basis,
due to time lags between the warranty expenses incurred and sales
associated with the warranty. Therefore, where warranty expenses cannot
be reported on a transaction-specific basis, an allocation of POR/POI
warranty expenses to POR/POI sales is deemed necessary. Antifriction
Bearings (Other than Tapered Roller Bearings) and Parts Thereof From
France, et. al.; Final Results of Antidumping Duty Administrative
Review, 62 FR 2081, 2095 (January 15, 1997). Here, respondent stated
that it reported warranty claims on a transaction-specific basis and
this fact was confirmed at verification. See Questionnaire Response at
p. B-31; Verification Exhibit 8. We verified documentation supporting
the fact that the warranty expense at issue is associated with a non-
POI sale. We also examined documentation showing that there were no
warranty expenses associated U.S. POI-sales were incurred in 1997 and
1998. See Verification Exhibit 8. Therefore, because we have
transaction-specific information with regard to warranty expenses, we
only made adjustments for POI warranty expenses associated with POI
sales.
Comment 17: Duty Drawback
Petitioners argue that Tung Mung failed to provide sufficient
evidence demonstrating that it meets the two prong test required for
duty drawback adjustments; therefore, the Department should reject Tung
Mung's claims for duty drawback adjustments. Petitioners note that it
is the Department's practice to allow an upward adjustment to U.S.
price for duty drawback only if the respondent meets the following
requirements: (1) That there is a link between the import duty and the
rebate granted; and (2) that the respondent has sufficient imports of
raw materials used in the production of the final exported product to
account for the drawback received on the export product, citing Certain
Welded Carbon Steel Pipe and Tube from Turkey: Final Results of
Antidumping Duty Administrative Review, 61 FR 69077 (December 31, 1996)
(``Pipe and Tube from Turkey''); Oil Country Tubular Goods from Korea:
Final Results of Antidumping Duty Administrative Review, 64 FR 13169,
13172 (March 17, 1999). Petitioners assert that the Department has
rejected duty drawback adjustment claims in their entirety where
respondent failed to satisfy either part of Department's two-part test.
Petitioners assert that the Department has denied a duty drawback
adjustment to U.S. price where it is found that the respondent's duty
drawback was based on the FOB sales prices of its finished goods for
export and exceeded substantially the amount of customs duties it paid
to import raw materials directly, citing Stainless Steel Round Wire
from India; Final Determination of Sales at Less than Fair Value, 64 FR
17319, 17320 (April 9, 1999). Petitioners argue that the Department has
made it clear that the respondent must document a direct link between
duties paid and rebates received and that there are sufficient imports
of raw materials to account for the drawback claim, citing Pipe and
Tube from Turkey at 69078. Petitioners claim that Tung Mung has not
sufficiently documented its claimed adjustment for duty drawback and
therefore adjustments for duty drawback should be denied.
In both its case and rebuttal briefs, Tung Mung argues that it has
satisfied the two-prong test for allowing a duty drawback adjustment,
thus the Department should make an adjustment for the entire duty
drawback adjustment claimed by Tung Mung. Tung Mung argues that the
two-prong test for duty drawback adjustments does not require that each
individual drawback payment be physically matched to imported raw
materials. Furthermore, Tung Mung maintains that the Department
recognizes the fungibility of material, as does U.S. law in the U.S.
duty drawback program, citing 19 U.S.C. section 1313(b).
Tung Mung claims that it has fulfilled the requirements of the two-
prong test for duty drawback adjustments. Tung Mung asserts that at
verification it demonstrated the direct link between the import duty
and the drawback, by providing examples of the documentation required
to obtain duty drawback, including the drawback application form which
is required to list the specific importation(s) with respect to which
the drawback is claimed. In addition, Tung Mung claims that the Taiwan
Ministry of Finance verifies each duty drawback application to ensure
that the amount is not excessive.
Tung Mung argues that if it is determined that Tung Mung is not
entitled to a duty drawback adjustment, the Department should treat the
duty drawback payment as an offset to cost since as demonstrated at
verification, duty drawbacks reduced Tung Mung's cost of production.
Tung Mung cites Solid Urea from Germany; Final Results of Antidumping
Duty Administrative Review, 62 FR 61271 (November 17, 1997), which held
that an adjustment cost with respect to government benefits received
was appropriate where the benefits are linked to specific costs. Tung
Mung argues that the instant case is distinguishable from Stainless
Steel Round Wire from India, where the government payment at issue was
not related to the amount of import duty paid, but instead was based on
the selling price of the finished goods. Tung Mung finds that case
different from the
[[Page 30614]]
instant case in that the Department specifically found that the
benefits received by respondent substantially exceeded the amount of
import duties paid. Tung Mung asserts that at verification it
demonstrated that duty drawback payments are recorded in its cost
accounting records, which demonstrates that the duty drawback payments
are associated with raw material costs.
Department's Position: We disagree with petitioners' argument that
Tung Mung's reported duty drawback adjustment should be disallowed. At
verification, Tung Mung provided adequate information to support its
claimed duty drawback adjustment. Specifically, at verification, we
examined documentation for selected sales showing a direct link between
duties paid and rebates received and that there are sufficient imports
of raw materials to account for the drawback claim. See Verification
Exhibit 4. At verification Tung Mung demonstrated that the sales tied
to the duty drawback adjustment, and furthermore, that the expenses
traced to Tung Mung's accounting ledgers. See Verification Exhibit 4.
Moreover, we examined duty drawback applications which showed the
quantities imported and quantities on which drawbacks were paid. Id. We
noted that petitioners have made no specific allegations that the
quantities appearing in the verification exhibit are insufficient.
Therefore, since Tung Mung has sufficiently demonstrated that it meets
the two-prong test for duty drawback adjustments, we will accept the
claimed adjustments. Certain Welded Carbon Steel Pipe and Tube from
Turkey: Final Results of Antidumping Duty Administrative Review, 61 FR
69077, 69078 (Dec. 31, 1996).
Comment 18: U.S. Price
Petitioners argue that Tung Mung failed to report gross unit price
for U.S. sales in the currency in which the transaction was incurred,
which petitioners claim is contrary to the Department's longstanding
practice. In addition, petitioners allege that the reporting of these
sales in New Taiwan dollars causes distortions to the gross unit price
and the margin calculation. Petitioners charge that Tung Mung's
reporting of gross unit price has an expansive effect, affecting
multiple variables such as gross unit price, total value, bank charges,
credit expenses, indirect selling expenses, and domestic inventory
carrying costs. Petitioners assert that the Department's questionnaire
instructs respondents to report all revenues and expenses in the
currency in which the transaction was incurred; moreover, petitioners
argue that this method of reporting is in accordance with the
Department's longstanding practice, citing Stainless Steel Wire Rod
from Korea; Final Determination of Sales at Less than Fair Value
(``Wire Rod from Korea''), 63 FR 40404, 40413 (July 29, 1998).
Petitioners argue that Tung Mung has not demonstrated that it meets
the exceptions to the requirement of reporting expenses and revenues in
the currency in which the transaction was incurred. Petitioners note
that in Steel Wire Rod from Canada; Final Determination of Sales at
Less Than Fair Value (``Steel Wire Rod from Canada''), 63 FR 9182, 9185
(February 24, 1998) the Department permitted respondent to report
certain freight expenses in Canadian dollars because (1) respondent
provided advance notification to the Department that it could not
report the currency, in which the freight expense was incurred and (2)
the Department verified that respondent used a daily rate when these
expenses were recorded in its accounting records. Petitioners assert
that Tung Mung has not met either of these requirements. Rather,
petitioners assert that Tung Mung stated that it records the sales
amount using the customer's exchange rate. Petitioners find Tung Mung's
statement confusing, given that U.S. transactions were paid in U.S.
dollars because there would be no need to note an exchange rate on its
payment. Moreover, petitioners assert that Tung Mung would not have
been burdened to report sales in the appropriate currency, since it
only involved a few number of transactions.
Petitioners cite Certain Corrosion Resistant Carbon Steel Flat
Products and Certain Cut-to-Length Carbon Steel from Canada; Final
Results of Antidumping Duty Administrative Review (``Certain Corrosion
Resistant Carbon Steel from Canada''), 63 FR 12726, 12727 (March 16,
1998) as another case in which the Department made an exception to the
requirement of reporting an expense in which the transaction was
incurred. In Certain Corrosion Resistant Carbon Steel from Canada, the
Department allowed respondent to report expenses in the currency in
which the transaction was not incurred because the Department found
that the exchange rate has been stable during the period of review.
Petitioners argue that the circumstances of Certain Corrosion Resistant
Carbon Steel from Canada are contrary to that of the instant case
because the exchange rate for New Taiwan dollars has been unstable
during the POI. Therefore, petitioners assert that Tung Mung failed to
cooperate to the best of its ability by not reporting gross unit price
in the currency in which it was incurred. Consequently, petitioners
submit that the Department should apply partial adverse facts available
and apply Tung Mung's highest non-aberrant dumping margin to Tung
Mung's U.S. direct sales.
Tung Mung argues that petitioners' claim that the Department should
apply facts otherwise available to Tung Mung's U.S. Sales to a certain
customer should be rejected. Tung Mung asserts that petitioners are
mistaken in their claim that Tung Mung could not have invoiced its U.S.
customers in NT dollars. Tung Mung asserts that although Tung Mung
received payment in U.S. dollars, for each sale to the certain customer
it issued both a commercial invoice expressed in U.S. dollars and also
a Government Uniform Invoice in NT dollars, citing the Verification
Report at p. 9. Tung Mung claims that it was the NT dollar figure from
the Government Uniform Invoice that was entered into Tung Mung's books.
Tung Mung further argues that the Department cannot apply adverse facts
available because Tung Mung informed the Department that it had
received payment for the sales in U.S. dollars and the Department did
not ask it to change the information on the sales tape. Tung Mung
argues that the Department cannot apply adverse facts available unless
a respondent has specifically failed to cooperate with a request for
information, citing 19 CFR 351.308(a). Therefore, Tung Mung argues that
petitioners' suggestion that the Department use an adverse inference
with respect to these sales is misplaced.
Department's Position: We agree with petitioners that the
Department's standard questionnaire requires all parties to ``report
the sale price, discounts, rebates and all other revenues and expense
in the currencies in which they were earned or incurred.'' See
Questionnaire at B-20. The Department accepted respondent's method of
reporting these expenses for the preliminary determination. The
Department has in limited circumstances allowed exceptions to this
rule. See Corrosion Resistant Steel from Canada and Steel Wire Rod from
Canada. In Corrosion Resistant Steel, the Department allowed respondent
to report U.S. gross unit price in Canadian dollars based on the
reasoning that the Canadian dollar was stable and the Department
verified that respondent maintained expenses in Canadian dollars in its
accounting records. As discussed earlier in this notice in Comment 1,
we determined that the
[[Page 30615]]
New Taiwan dollar was relatively stable. Moreover, during our review of
U.S. sales traces, we verified that Tung Mung maintains its records in
its domestic currency, New Taiwan dollars (as with Corrosion Resistant
Steel from Canada) and found no discrepancies in Tung Mung's reporting
of sales. See Verification Report at p. 9 and Exhibit 2. Moreover, a
review of the sales traces reveals that the difference between the
exchange rate recorded on Tung Mung's GUI invoice and the Department's
exchange rate data is negligible. See Analysis Memorandum: Tung Mung at
p. 6. Therefore, we did not apply facts available to respondent's gross
unit price for not reporting the U.S. price in U.S. dollars.
Comment 19: U.S. Packing Expenses
Petitioners argue that the Department should apply partial adverse
facts available for variable and fixed overhead packing expenses.
Petitioners argue that Tung Mung has provided conflicting statements
regarding Tung Mung's inability to report variable and fixed overhead
packing expenses. Petitioners argue that Tung Mung was instructed twice
by the Department, in the questionnaire and in the supplemental
questionnaire, to report the unit cost of packing, including variable
and fixed overhead expenses, yet failed to do so, stating that ``it
would be extremely difficult and time consuming for Tung Mung to
segregate packing expenses in the manner requested,'' citing the
Supplemental Questionnaire at 23. However, petitioners note that Tung
Mung gave a different statement at verification where Tung Mung said
that it did not report packing overhead because ``it didn't think that
it was required to since packing was sub-contracted labor,'' citing the
Verification Report at p. 10. Petitioners charge that Tung Mung failed
to cooperate to the best of its ability since it was aware the
Department's requirement to report packing overhead expenses and failed
to provide a verifiable reason for its inability to report such
expenses. Petitioners therefore argues that Department should apply
partial adverse facts available to variable and fixed overhead expenses
associated with additional export packing.
Respondent argues that the Department should not add overhead
expense to packing costs and should reject petitioners' argument to
apply adverse facts available in adjusting Tung Mung's reported export
packing costs for overhead. Tung Mung asserts that it does not pay
benefits to the individuals who perform packing labor and regards these
individuals as independent contractors. For this reason, Tung Mung
believed that it was unnecessary to include overhead in packing costs.
Tung Mung claims that its statement made in its response that ``it
would be extremely difficult and time-consuming to separate packing
expenses in the manner requested by the Department'' did not refer to
the breakout of overhead expenses, but rather to the Department's
request that Tung Mung provide the basic cost of packing that is used
for all coils, whether sold domestically or exported. Tung Mung alleges
that any overhead attributable to expenses other than employee benefits
would be extremely small, given the fact that the area occupied by the
packing operations was ``tiny'' and the equipment used in packing
minimal.
Tung Mung asserts that it has been fully cooperative through the
course of this proceeding. Tung Mung argues against petitioners'
proposed ``facts available'' adjustment of applying the highest
calculated percentage difference between the reported material cost and
total cost of manufacturing, insisting that this would be distortive.
Specifically, Tung Mung claims that petitioners' proposed adjustment
includes costs that are not incurred in export packing and also double
counts certain expenses. Tung Mung claims that Tung Mung claims that
the full manufacturing conversion costs include direct labor costs, as
well as all personnel benefits for the manufacturing workers. Tung Mung
asserts that the full manufacturing conversion costs include
depreciation incurred on all of the manufacturing activities performed
at Tung Mung. Tung Mung also claims that packing is part of the final
production process. Tung Mung alleges that the Department routinely
ignores adjustment of small magnitude and that should the Department
determine an adjustment is warranted, the Department has all the data
on the record necessary to perform an adjustment.
Department's Position: We agree with petitioners and adjusted
packing expense to include packing overhead by adopting the adjustment
method proposed in petitioners' case brief on April 20, 1999. The
Department's Questionnaire requires that respondents include the cost
of labor, materials and overhead in packing unit cost. See
Questionnaire at p. B-27 and C-31. Although Tung Mung used
subcontracted labor for packing, Tung Mung admitted that packing
operations were performed at the premises of Tung Mung. Thus, it can be
inferred that Tung Mung incurred overhead expenses attributable to
packing other than personnel benefits. Tung Mung erroneously assumed
that there was no need to provide the overhead expenses. Furthermore,
Tung Mung failed to justify the claim that the collection of these
expenses is burdensome. Therefore, we agree with the petitioners that
the use of partial adverse facts available is appropriate in this case.
As to the use of the adjustment proposed by the petitioners, we believe
it is a reasonable approximation of the overhead component of the
packing cost. Tung Mung did not provide any alternative adjustment
method to correct for the unreported overhead expenses. We disagree
with Tung Mung that the record contains information that can be used
for this adjustment without undue difficulties on the part of the
Department. Therefore, for this final determination, we have
recalculated Tung Mung's reported U.S. packing expenses. See Analysis
Memorandum: Tung Mung, p. 5.
Comment 20: Direct Selling Expenses
Petitioners argue that Tung Mung failed to provide direct selling
expenses associated with visits to U.S. customer's customers.
Petitioners note that at verification, the sales manager for Tung Mung
made a statement indicating that he had visited the U.S. customer and
met with Tung Mung's customer's U.S. customers to discuss merchandise
quality. Petitioners argue that Tung Mung should have reported expenses
incurred for its customer's customer in its reported direct selling
expenses. Petitioners assert that since Tung Mung knew that it incurred
these expenses on behalf if its customer, the Department should find
that Tung Mung failed to cooperate to the best of its ability.
Therefore, citing section 776(a)(2)(A), petitioners argue that the
Department should apply partial adverse facts available and use Tung
Mung's Sales Department expenses reported in computer field DINDIRSU as
a U.S. direct selling expense.
Tung Mung argues that petitioners' claim that Tung Mung failed to
provide direct selling expenses with respect to a sales trip taken by
the company's sales manager to visit TCI's U.S. customers is unfounded.
Tung Mung argues that record facts do not demonstrate that the sales
manager's trip was taken during the period of investigation. Moreover,
Tung Mung asserts that total business expenses, which were reported in
the September 24, 1998 response and later confirmed at verification,
shows that total business expenses are ``hardly enough'' to support a
business trip to the United States. Tung Mung further
[[Page 30616]]
contends that the verification report makes no indication that the
expense at issue was incurred with respect to specific sales, which
would require the travel expenses to be treated as direct selling
expenses. Tung Mung asserts that the Department's regulation 351.410(c)
defines `direct selling expenses' as ``expenses * * * that result from,
and bear a direct relationship to, the particular sale in question.''
Tung Mung objects to petitioners' suggestion to apply adverse facts
available by treating Tung Mung's indirect expenses as direct selling
expenses for US sales because the details of Tung Mung's business trip
expenses incurred in connection with export are on the record. Tung
Mung argues that even if the Department was justified in applying
adverse facts available, the business trip expenses for export sales
reported on the record should be the maximum amount used.
Department's Position: We disagree with petitioners that there is
sufficient record evidence to infer that respondent withheld
information regarding direct selling expenses incurred on behalf of its
customers. The sales manager's statement (that he had visited the
customer at issue and met with Tung Mung's customer's U.S. customers to
discuss merchandise quality) at verification was not made in response
to questions relating to selling expenses, but related to the
verification team's questions regarding Tung Mung's knowledge of the
ultimate destination of home market sales. See Verification Report at
p. 8. There is no evidence to indicate that the sales manager's
statement was anything but general in nature or referred specifically
to an actual expense directly related to specific sales (whether or not
within the POI). As respondent notes, the Department's regulations
define `direct selling expenses' as ``expenses * * * that result from,
and bear a direct relationship to, the particular sale in question.''
See 19 CFR section 351.410(c). We do not have any evidence showing that
the statement made at verification directly relates to a particular
sale, and we verified that business trip expenses were adequately
accounted for, we will not adjust direct selling expenses alleged
travel expenses related to U.S. sales.
Comment 21: Year-End Adjustments
Petitioners argue that the Department should include all year-end
adjustments in the calculation of Tung Mung's cost of production and
constructed value. Petitioners assert that Tung Mung stated that it had
a net year-end adjustment. Petitioners argue that Tung Mung stated that
it did not include the year-end adjustment in its reported cost of
production, but considered the year-end adjustment in the denominator
of the general and administrative and financial expense calculation.
Petitioners allege that the result of Tung Mung's reporting is that
there is an ``apples-to-oranges'' comparison. Petitioners claim that
the percentages of general and administrative expenses and financial
expenses as a percentage of cost of sales have been lowered due to the
consideration of the year-end adjustment in the cost of goods sold, and
these percentages are being applied to an understated cost of
manufacture (due to the lack of consideration of the year-end
adjustment). Therefore, petitioners argue that the Department should
recalculate reported cost of manufacture to include the net year-end
adjustments.
Tung Mung did not comment on this issue.
Department's Position: We disagree with petitioners. At
verification, we determined that the year-end accruals and adjustments
at issue are minimal, accounting for a small percent increase in Tung
Mung's reported costs. See Verification Report at p. 13. In addition,
the effect of the year-end accruals and adjustments on reported costs
is offset by Tung Mung's over-reporting of costs, which was discovered
at verification. See Verification Report at p. 11. Since the year-end
adjustments at issue are minimal, we did not recalculate reported cost
of manufacture to include the net year-end adjustments, as proposed by
petitioners.
Comment 22: General and Administrative Expenses
Petitioners argue that the Department should recalculate Tung
Mung's general and administrative (``G&A'') expenses to reflect all of
Tung Mung's G&A expenses. Petitioners charge that Tung Mung based its
G&A expense ratio only on expenses within the stainless steel division.
Petitioners claim that Tung Mung's G&A ratio fails to account for
expenses from the parent group. Petitioners argue that the Department
twice requested information on how Tung Mung computed its company's G&A
expense ratio, and Tung Mung refused to provide the requested data.
Petitioners allege that Tung Mung's reported G&A ratio is artificially
low as evidenced by the fact that the G&A ratio is lower than the cost
of goods sold ratio (without elaborating further). Petitioners argue
that Tung Mung's claim that its parent, Tuntex Group did not incur any
G&A expenses on behalf of Tung Mung is both undocumented and dubious.
Specifically, they point out that it is unlikely that the Tuntex Group
did not incur any G&A expenses on behalf of Tung Mung, given that
Tuntex Group has a board of directors, a Tuntex Group chairman, the
Group Chairman's office, a Project Department, and a Chairman, all of
which overlook the Tuntex Group, including Tung Mung. Thus, petitioners
urge the Department to recalculate G&A expense to account for expenses
incurred on behalf of Tung Mung by the Tuntex Group. Petitioners argue
that the Department, at a minimum, should base G&A expenses on the cost
of goods sold ratio.
Tung Mung objects to petitioners' claim that Tung Mung's G&A
expenses were incorrectly reported. Tung Mung asserts that its
``parent'' group, Tuntex Group, is not a corporate entity, but rather
consists of several companies that are loosely affiliated through cross
shareholdings. Tung Mung maintains that the Department verified
financial statements and confirmed that Tung Mung is not consolidated
with the Tuntex Group. See Verification Report at p. 3. Tung Mung also
asserts that petitioners overlook the fact that Tung Mung reported that
it pays a portion of the salary of the Chairman and his support staff,
and that this expense is included in Tung Mung's G&A expenses, citing
the November 12, 1998 Supplemental Response at 35, n.36. Tung Mung
contends that this expense was confirmed at verification. Tung Mung
argues that petitioners' proposed ratio for G&A is incorrect because it
represents Tung Mung's reported corporate-wide figure for selling,
general and administrative expenses. Tung Mung argues that the
divisional G&A expense is more appropriate since Tung Mung's other
division is completely unrelated to subject merchandise.
Department's Position: We agree with respondent. At verification,
we confirmed that Tung Mung has included G&A expenses incurred with
respect to the Tuntex Group in its reported G&A. We reviewed this
calculation at verification and found it to be reflective of the actual
cost incurred for the types of services that the parent group
performed. We also confirmed at verification that the Tuntex Group is
not a corporate entity but rather group of loosely affiliated companies
with cross-shareholdings. As such, Tung Mung did not have consolidated
financial statements. See Verification Report at p 3. Therefore, for
the final determination, we did not recalculate Tung Mung's G&A to
include additional parent group expenses.
[[Page 30617]]
Ta Chen
Comment 23: Facts Available
Petitioners state that section 776(a)(2) of the Act provides that
if an interested party (1) withholds information that has been
requested by the Department, (2) fails to provide such information in a
timely manner or in the form or manner requested, (3) significantly
impedes a determination under the statute, or (4) provides such
information, but the information cannot be verified, the Department
shall, subject to sections 782(c)-(e) of the Act, use facts otherwise
available in reaching its determination. In this investigation,
petitioners argue, Ta Chen has tolled all of these provisions.
Petitioners cite three examples in the record that, petitioners
contend, are evidence that Ta Chen withheld information that was
requested by the Department. Petitioners first point to Ta Chen's
failure to provide requested output from computer programs used to
prepare the response and to test the completeness of Ta Chen's universe
of U.S. sales. Petitioners assert that, as a result, the Department was
unable to perform the completeness test of its reconciliation
procedure. Petitioners also point to Ta Chen's inability to prove that,
for sales allegedly made directly from a third party to TCI, payment
was made directly to that third party by TCI. Rather, petitioners point
to record evidence showing that TCI paid Ta Chen Taiwan and did not
respond to the Department's request for Ta Chen to prove otherwise.
Petitioners suggest that Ta Chen had ample time to respond given that
the payment was made a significant period of time before verification.
Finally, petitioners cite to Ta Chen's failure to disclose information
on so-called ``triangle trades'' including a description of this sales
process, the complete acquisition price, Ta Chen Taiwan's interest and
banking fees, and TCI's banking fees.
Petitioners contend that Ta Chen failed to provide information in a
timely manner or in the form required. Petitioners cite two instances
where the Department suspended verification until Ta Chen was able to
produce a general ledger and a subsidiary ledger. Petitioners note that
the Department had instructed Ta Chen to prepare these documents in
advance of verification. Petitioners also cite Ta Chen's failure to
produce a further-manufacturing agreement and its failure to support a
reconciliation between its general ledger and its invoice register.
Petitioners also note that Ta Chen failed to provide a full translation
of its most recent financial statements with regard to two affiliated
party transactions.
Petitioners contend that Ta Chen significantly impeded the
Department's investigation of middleman dumping. Petitioners cite Ta
Chen's multiple requests for extensions, delays by Ta Chen in
submitting its data, and the ultimate failure by Ta Chen to provide
reliable information as a basis for its conclusion that the Department
has been forced to severely limit its analysis period for the final
determination. Petitioners assert that the Department has exceeded its
normal practice by providing Ta Chen with opportunity after opportunity
to cooperate. However, according to petitioners, Ta Chen's behavior has
been uncooperative. Petitioners argue that the Department's
verifications disclosed that Ta Chen engaged in a pattern of
withholding factual information, submitting inaccurate and unverifiable
sales and cost data, submitting information in an untimely manner or
not in the form requested, and refusing to provide certain information
requested at verification. Petitioners contend that Ta Chen further
impeded the Department's investigation by submitting unexplained major
changes to its data in a March 3, 1999 submission. Petitioners describe
unexplained changes in the following fields: marine insurance, U.S.
duty expenses, Taiwanese bank charges, Los Angeles and other warehouse
expenses, transportation expenses, early payment discounts, supplier
invoice dates, customer code, sale terms, gauge, finish, and
constructed value information. Petitioners state that these unexplained
changes cast doubt on Ta Chen's willingness to cooperate. Petitioners
state that, singularly, these actions would warrant the application of
total adverse facts available. However, in total, the Department has no
other option but to assign a margin to Ta Chen based on total adverse
facts available. However, if the Department should attempt to calculate
a margin based on submitted data, petitioners argue that the Department
should reject Ta Chen's unexplained March 3, 1999 data changes.
Petitioners assert that Ta Chen provided information that could not
be verified and provide several examples of this type of information.
Petitioners point to the alleged direct sales from a third party to
TCI. Petitioners point to proprietary record evidence that, it
contends, supports the conclusion that the sale was made through Ta
Chen Taiwan and contradicts Ta Chen's claims that these were direct
sales. Petitioners also cite record evidence that TCI's invoicing
system and auditor's adjustments were not verified by the Department.
Other examples cited by petitioners include: Ta Chen's inability to
demonstrate that it did not further-manufacture SSSS that was
subsequently sold in or to the United States and that it could not
because it did not record the further-manufacturing activity in its
accounting system; Ta Chen's failure to demonstrate that merchandise
involved in a triangle trade was purchased from a vendor other than
YUSCO or Tung Mung; Ta Chen's inability to account for yield loss on
sales that were further-manufactured in the United States; Ta Chen's
failure to report charges incurred upon opening a letter of credit; and
Ta Chen's failure to inform the Department that there were additional
sales made after its ``self-selected'' cut-off date. Petitioners also
cite other examples of information that the Department ``was not able''
to verify.
Petitioners state that, by themselves, the deficiencies discovered
by the Department at verification would warrant the use of facts
available. In combination, they warrant the use of total adverse facts
available. Petitioners contend that these deficiencies are so material
and have such a significant impact that the Department should determine
that Ta Chen failed to act to the best of its ability in this
investigation and has been uncooperative. Petitioners argue that it is
not practicable to provide Ta Chen ``with an opportunity to remedy or
explain the deficiencies'' discovered at verification as called for
under section 782(d) of the Act because the deficiencies cut at the
basic core of Ta Chen's data. Therefore, the Department should
disregard Ta Chen's response and assign Ta Chen a margin based on facts
available under section 776(a) of the Act.
Petitioners argue that meeting any one of the provisions under
section 776(a) of the Act is, subject to sections 782 (c)-(e) of the
Act, grounds for the Department to disregard a respondent's response
and assign a margin based on facts available. Petitioners assert that,
for the reasons discussed above, the Department should determine that
all four provisions of section 776(a) have been met and that Ta Chen
has not acted to the best of its ability to cooperate with the
Department's investigation.
In this situation, petitioners contend, section 776(b) of the Act
authorizes the application of an adverse inference in choosing among
facts otherwise available. Petitioners state that the Statement of
Administrative Action (``SAA'') accompanying the URAA offers the
following guidance: the
[[Page 30618]]
Department ``may employ adverse inferences about the missing
information to ensure that the party does not obtain a more favorable
result by failing to cooperate than if it had fully cooperated''
(emphasis added). Petitioners state that, under section 776(b), the
Department has a range of options.
Petitioners believe that the most reasonable option is a margin
based on the highest estimated dumping margin listed in the Initiation
Notice, after adjusting for the actual dumping margins of Ta Chen's
supplier; such that the combined vendor/middleman margin will equal
77.08 percent. Petitioners do not believe that the Department should
choose the highest margins indicated in its middleman dumping
allegation if those alleged margins are lower than any calculated
margin based on Ta Chen's incomplete reporting, because to do so would
reward Ta Chen for failing to cooperate. Therefore, petitioners argue
that the Department should assign a margin to Ta Chen of 77.08 percent,
less its vendor's individual margin, for the final determination.
Petitioners argue that Ta Chen itself was to blame for its
significant failures at verification. Petitioners point to the
verification outline's notice to Ta Chen that it should prepare
documentation in advance and that if it was not prepared, the
Department would move to another topic and might have to consider the
item unverified due to time constraints. Petitioners cite the above-
mentioned two instances were Ta Chen failed to prepare ledgers in
advance at the home market verification. Likewise, petitioners contend,
Ta Chen was not prepared to document auditor's adjustments at the U.S.
verification. Petitioners assert that this behavior continued and cites
several other instances in which Ta Chen was not prepared to support
its response at verification.
Petitioners dispute Ta Chen's claim that the so-called ``triangle
trade'' sales are ``canceled sales.'' Petitioners state that the
Department examined purchase orders, invoices, payment notices,
associated expenses, and supporting ledger entries for these sales.
Petitioners argue that the completion of a commercial transaction
cannot reasonably be referred to as a ``canceled sale.'' Regardless,
petitioners note, Ta Chen failed to disclose the ``triangle sales.''
Petitioners disagree with Ta Chen in its view that direct sales
made through Company X did not go through Ta Chen Taiwan. Petitioners
point to record evidence that Ta Chen Taiwan was involved in this
transaction. Moreover, petitioners point out that Ta Chen is basing its
claim on exhibits that refer to Company Y and not Company X, which
petitioners assert is a different company with a similar name.
Petitioners also disagree with Ta Chen's ``verification comments.''
For example, petitioners argue that: Ta Chen's reporting methodology
contradicted the Department's instructions in the questionnaire and
supplemental questionnaire; Ta Chen was required to report all of its
resales and should have provided a more reasonable database; Ta Chen
did not disclose or report a yield loss on further-manufactured sales;
Ta Chen was unprepared to completely trace merchandise that underwent
further-manufacturing in Taiwan; Ta Chen failed to provide proof of
payment for marine insurance; Ta Chen failed to report certain bank
charges; and Ta Chen failed to report all purchases in its Section D
database. In sum, petitioners argue, Ta Chen's behavior can be
characterized as (1) withholding information requested by the
Department; (2) failing to provide information in a timely manner; (3)
impeding the determination; and (4) providing unverifiable information.
Therefore, petitioners argue, the Department should apply the highest
margin published in the Initiation Notice for the final determination.
Ta Chen argues that it was cooperative. Ta Chen states that it
advised the Department at the outset that it would have difficulties in
answering the questionnaire in a short time period and requested a
simplified reporting requirement on December 10, 1998. Ta Chen contends
that its February 5, 1999 and February 17, 1999 responses contained the
equivalent level of information compared to its reporting in SSPC from
Taiwan. Ta Chen states that its March 3, 1999 submission was filed to
help expedite matters, address petitioners' concerns, and correct
errors. In Ta Chen's opinion, it believes that the Department found no
unexplained methodological changes between the March 3 and February 5,
1999 submissions at verification.
Ta Chen states that petitioners' claim that its March 3, 1999
submission contains unexplained changes misses the mark. Ta Chen claims
that the change to its reported Los Angeles warehousing expenses was de
minimis. Ta Chen claims that its reported U.S. transportation costs
were reported for Los Angeles warehouse sales that underwent further
manufacturing in accordance with its February 5, 1999 submission (at
pages 2 and 52). Ta Chen also disputes petitioners' claims with regards
to: U.S. warehousing charges, early payment discounts, supplier invoice
dates, customer codes, terms of sale, gauge, finish, and control
number.
Ta Chen argues that the Department's own verification outline and
procedure expressly permit a respondent to submit some new factual
information. Thus, Ta Chen disagrees with petitioners that the
Department lawfully advised Ta Chen that ``it would not accept any new
factual information from Ta Chen.'' Ta Chen contends that the
information presented at the start of verification was no more than
minor corrections/clarifications of its prior submissions. Moreover, Ta
Chen argues, given the peculiarities of the middleman investigation,
under section 351.301(b)(1) of the Department's regulations, Ta Chen
would have had to submit changes/clarifications in December 1998, which
was before its original questionnaire response was even due.
Ta Chen takes issue with petitioners' interpretation of the
verification results. For example, Ta Chen argues that all of its U.S.
sales are made by TCI and thus, completeness is largely an issue for
TCI not Ta Chen Taiwan. Ta Chen states that petitioners focus on a
particular completeness test, whereas Ta Chen believes that the
Department had already reconciled a bridge worksheet to the response
via another exercise. Ta Chen also argues that it was not required to
report ``triangle trade'' sales because, Ta Chen contends, ``triangle
trades'' were not sales per se because title never transferred to
Company X. Ta Chen argues that the terms of sale were ``FOB Los
Angeles'' and that the merchandise had already been reinvoiced back to
TCI before it reached the port. Thus, Ta Chen argues, title was never
transferred, citing Nissho Iwai American Corp. v. U.S., 982 F.2d 505
(Fed. Cir. 1992) (Nissho Iwai) and ``What Every Member of the Trade
Community Should Know About Bona Fide Sales and Sales for Exportation''
U.S. Customs Service, November 1996; et al. Moreover, Ta Chen argues
that there is a doctrine of transitory transactions in tax law which Ta
Chen believes would support the view that, at most, the ``triangle
trade'' represents a canceled sale. Ta Chen disagrees with
petitioners'' interpretation of record evidence for marine insurance
and ocean freight for sales made through Company X. Regardless, Ta Chen
argues, even if this evidence proves that Ta Chen Taiwan provided
insurance or facilitated shipping, the sale would still occur between
Company X and TCI and thus, does not subject it to a middleman
[[Page 30619]]
investigation. Ta Chen also comments on numerous other aspects of its
verifications, without argument.
Ta Chen argues that petitioners' suggested dumping margin, based on
the highest rate alleged in the petition, is unlawful. Ta Chen argues
that that rate was for manufacturers and, since middleman dumping
methodology is different from the Department's normal dumping analysis,
the petition rate is not applicable rendering its use unlawful and
contrary to Department precedent. Moreover, if the Department finds
that the verified dumping rates of all the manufacturers are below the
petition rate, then the petition rate is neither probative nor
corroborated. Rather, Ta Chen argues, it has been discredited and its
use is unlawful according to court precedent. Ta Chen also argues that
petitioners themselves have admitted that its alleged middleman dumping
rate is wrong. Ta Chen also notes that the allegation was based on a
price quote of a third party which, Ta Chen asserts, indicates that it
was a direct sale with no middleman involvement, and that the source of
the U.S. price quote for the middleman allegation was not disclosed.
Thus, Ta Chen argues, the alleged middleman dumping margin was not
probative or corroborated and fails to meet the statutory requirements.
Department's Position: We agree with petitioners in part. In this
case, as noted above (see ``Facts Available''), we have determined to
use facts available because we were unable to verify Ta Chen's
response. Furthermore, in using facts available, we are employing an
inference adverse to the interests of Ta Chen because we have
determined that Ta Chen has failed to act to the best of its ability in
responding to our requests for necessary information (see ``Adverse
Facts Available'' above). Given the circumstances in this case, we
disagree with petitioners that rates derived from our Initiation Memo
would apply to a middleman situation because those estimates are based
on our normal dumping methodology, whereas here, Ta Chen would have
been subject to our middleman dumping methodology as defined in SSPC
from Taiwan. Thus, for this final determination, as adverse facts
available, we have selected a rate of 15.34 percent for Ta Chen's
resales of Tung Mung's and YUSCO's merchandise, which reflects the
highest rate from our Middleman Initiation Memo.
In this case, the inability to verify the completeness of Ta Chen's
databases, particularly the U.S. sales database, is crucial and is a
factor which, by itself, forms an adequate basis for our determination
to use facts available. However, our attempted verifications yielded
additional flaws in Ta Chen's response, providing further bases for our
decision to employ facts available. For example, we found that Ta Chen
did not report a particular type of sales process called ``triangle
trading,'' or report its associated expenses and that Ta Chen could not
support its claim that a sale to TCI was not YUSCO's or Tung Mung's
merchandise. Ta Chen could not demonstrate that merchandise further-
manufactured in Taiwan was not shipped to the United States as subject
merchandise. For a complete listing of all flaws, see Facts Available
Decision Memorandum--Ta Chen. In this regard, we note that Ta Chen's
assertions regarding the verification findings are unsupported by
record evidence, and as such remain mere assertions. Because of the
gravity and the magnitude of the flaws in Ta Chen's response, we have
determined that Ta Chen's information is unverifiable, and that there
is no record evidence demonstrating that errors in Ta Chen's reporting
of certain of its U.S. sales are limited and correctable. Thus, as
explained above, we must use facts available in determining a margin
for Ta Chen, as required under section 776(a) of the Act.
We also agree with petitioners that an adverse inference is
warranted in determining a margin for Ta Chen because, as required
under section 776(b), we find that Ta Chen has not acted to the best of
its ability in responding to our requests for information. As noted
above, Ta Chen has participated in numerous reviews and verifications
in other antidumping proceedings and is aware of the type of
information we require. However, despite Ta Chen's specific
understanding of verification procedures, based not only on information
provided in the verification outline, but also through their successful
completion of verification in SSPC from Taiwan a mere four months prior
to these verifications, Ta Chen has failed to substantiate at
verification a fundamental element of its response: a complete purchase
and sales reconciliation. We also find that, at verification, Ta Chen
failed to produce, in a timely manner, documentation that was within
its control, such as general and subsidiary ledgers, because this
documentation was requested in our verification outlines (see
Antidumping Duty Investigation of Stainless Steel Sheet and Strip in
Coils from Taiwan; Ta Chen's Sales Verification Outline (``Verification
Outline'' dated March 30 and April 5, 1999) . Ta Chen's comments
regarding ``triangle trade'' sales and other verification findings are
not persuasive that Ta Chen has failed to act to the best of its
ability in responding to our requests for necessary information. Ta
Chen's argument that ``triangle trade'' sales are not really ``sales''
and therefore it need not report them is incorrect. Ta Chen's reliance
on tax law and U.S. Customs rulings is misplaced, because we are
concerned with determining if Ta Chen sold merchandise at a price below
its total acquisition costs. Our determinations are subject to Title
VII of the Act rather than the Internal Revenue Code or U.S. Customs
Bulletins and thus, Ta Chen should have reported these transactions.
Furthermore, we note that Ta Chen made numerous other errors in its
response that worked in its favor. See Facts Available Decision
Memorandum--Ta Chen.
As we have indicated above, in accordance with our policy, we
considered the overall effect of the errors to ensure that Ta Chen does
not obtain a more favorable result by failing to cooperate than if it
had cooperated fully. Thus, an additional factor we have considered is
the extent to which Ta Chen might have benefitted from failing to
cooperate fully if we had not made our determination on the basis of
facts available. See SAA at 870. In this case, we have determined that
the use of the flawed response would have yielded a more favorable
margin for Ta Chen. See Facts Available Decision Memorandum--Ta Chen.
Thus, for this final determination, we have applied adverse facts
available to Ta Chen in accordance with section 776(b) of the Act.
Comment 24: Indirect Selling Expenses
Petitioners argue that the methodology preliminarily employed by
the Department to compute the middleman dumping margin has not captured
the full amount of dumping. In the event that the Department does not
use total adverse facts available, petitioners request that the
Department make several changes to its methodology.
Petitioners believe that the Department's methodology understates
the extent of the losses incurred by Ta Chen on its resales. First,
petitioners argue that the Department should include TCI's total
operating and financing expenses, and not Ta Chen's ``incorrectly''
reported indirect selling expenses, as part of Ta Chen's net U.S.
price. Petitioners claim that Ta Chen's reported indirect selling
expenses do not include a number of expenses that are general in
nature. Further,
[[Page 30620]]
petitioners maintain that verification proved that TCI's reported
indirect selling expenses were distortive and understated. Petitioners
cite SSPC from Taiwan, in which TCI ``admitted'' that it had
erroneously excluded certain expenses from its indirect selling
expenses and the Department recalculated TCI's indirect selling
expenses based on the overall operating costs of TCI as a percentage of
sales. Additionally, petitioners argue that the Department should deny
Ta Chen's claimed interest income offset because Ta Chen has not
demonstrated that this interest income was short-term in nature.
Petitioners claim that the Department not only asked Ta Chen to
allocate total G&A over total cost of sales, but also pointed out
severe deficiencies in Ta Chen's response and asked Ta Chen for
complete responses. Petitioners also argue that Ta Chen should have
revised its G&A figures in accordance with the final determination in
SSPC from Taiwan. Nevertheless, according to petitioners, the record is
clear with respect to Ta Chen Taiwan's sales, accounting, general
management, and legal departments' involvement in SSSS sales to TCI,
and therefore the Department must recalculate Ta Chen Taiwan's G&A
expenses by allocating total G&A over total cost of sales.
Ta Chen argues that the dumping margin calculation should be based
on the Ta Chen Taiwan G&A figures for coil only, as reported in Ta
Chen's questionnaire response. If the Department does not do so,
however, it should at least remove attorney fees for dumping work from
Ta Chen's G&A costs. Ta Chen argues that it was not given an
opportunity to revise its initial reporting of Ta Chen Taiwan interest
costs and G&A. It cites Ferro Union, Inc. & Asoma Corp. v. U.S., Slip
Op. 99-27 at 41 & 44 (CIT March 23, 1999) in which the court held that
the Department cannot expect a respondent to foresee the interpretation
of a new term or methodology which is undergoing development, and that
before resorting to facts available, the party must have a chance to
remedy deficient submissions.
Department's Position: Based on our decision to apply total adverse
facts available, this issue is moot.
Comment 25: Total Acquisition Cost and U.S. Price
The Department, according to petitioners, must revise its middleman
dumping calculations for Ta Chen by comparing a normal value with an
appropriately adjusted U.S. resale price as required by the statute.
Petitioners claim that the legislative history of section 772 of the
Act recognizes the Department's discretion to analyze each middleman
resale so that dumping would not be masked. Petitioners further argue
that the Trade Agreements Act of 1979 overturned the ruling in Voss
International Corp. v. United States (``Voss'') in which the court
rejected the administering authority's practice of setting purchase
price as the producer's price to an unrelated middleman when the
producer is aware that the middleman will resell the subject
merchandise to the United States. Petitioners continue that Congress,
according to H.R. Rep. No. 317, supra, at 75; S. Rep. No. 249, supra,
at 94, (``Senate Report'') thus did not grant discretion to the
Department to equate middleman dumping with the amount by which the
middleman's adjusted resale price falls below the middleman's total
acquisition cost. Rather, Congress ruled that the price between a
producer and an unaffiliated middleman will serve as the basis for
purchase price as long as the producer knows that the merchandise is
intended for resale in the United States, and that the Department must
take into account any middleman dumping along with dumping by the
producer. Petitioners claim that the Department confirmed this in Fuel
Ethanol from Brazil.
Petitioners argue that once the Department confirms that a
middleman has made a substantial amount of its resales at prices
substantially below its total acquisition costs, the Department must
employ a statutorily defined normal value and U.S. price to compute the
extent of the middleman's dumping. Petitioners state that Ta Chen's
dumping margin must be calculated by comparing Ta Chen's constructed
value with its net U.S. price, and that middleman dumping is not equal
to the difference between Ta Chen's total acquisition cost and resale
price. Petitioners express the need for a foreign referent market to
provide a benchmark for a respondent's activity in the U.S. market, as
prescribed in section 777A of the Act. Petitioners also argue that the
Department's reliance on section 773 of the Act is not justified in
measuring the amount of dumping by the middleman, since this section
deals with the calculation of the cost of production of a respondent's
home market sales, not the respondent's U.S. sales. Moreover, this
section defines ``normal value'' with reference to home market prices
or constructed value, and therefore, argue petitioners, a middleman's
total acquisition costs for U.S. resales cannot satisfy this definition
of normal value.
Furthermore, petitioners claim that the Department failed to
calculate a proper U.S. price for Ta Chen based on constructed export
price in its preliminary middleman dumping analysis because the
Department failed to consider U.S. credit expenses, U.S. inventory
carrying costs, in-transit inventory carrying costs, and CEP profit, as
prescribed in section 772 of the Act. Petitioners further note that
values for most of these expenses are not on the record and that this
is another reason for the Department to resort to total adverse facts
available.
Petitioners claim that the methodology directed by the statute for
computing middleman dumping is essentially the methodology followed by
the Department in computing dumping when transshipment is involved, and
cite the Notice of Final Determination of Sales at Less Than Fair
Value: Sulphur Dyes, Including Sulphur Vat Dyes, from India 58 FR 11835
(March 1, 1993) to illustrate their point.
Ta Chen argues that middleman dumping may not be lawfully
calculated on the basis of constructed value since, according to
legislative history, the Antidumping Manual, and court precedent,
middleman dumping is selling below acquisition cost and related selling
expenses, citing SSPC from Taiwan, Fuel Ethanol from Brazil; Final
Determination of Sales at Less Than Fair Value, 51 FR 5572, 5573 & 5577
(February 14, 1986); Steel Wire Strand for Prestressed Concrete from
Japan; Notice of Final Court Decision and Amended Final Results of
Antidumping Duty Administrative Review, 62 FR 60688 (November 12,
1997); Certain Forged Steel Crankshafts from Japan; Final Determination
of Sales Note Less Than Fair Value, 52 FR 36984 (October 2, 1987); and
Mitsui v. U.S., (``Mitsui'') 18 CIT 185 (CIT March 11, 1994). Moreover,
Ta Chen argues that petitioners' arguments contradict one another as
petitioners cite authority to that effect that, at most, middleman
dumping can only be based on the middleman's actual expenses and
whether the middleman is selling below actual cost. Department's
Position: Based on our decision to apply total adverse facts available,
this issue is moot.
Comment 26: Ministerial Errors
Petitioners claim that the Department should correct several
ministerial errors in the preliminary determination calculations.
First, petitioners argue that the U.S. further manufacturing variable
should not be converted to a character variable because, as such, these
expenses were not deducted from the
[[Page 30621]]
U.S. gross unit price. Secondly, petitioners argue that the Department
should format the control number field to ten digits so that the
``edge'' product characteristic can be considered. Thirdly, petitioners
maintain that missing values for L.A. warehousing expenses should be
set to zero. Finally, petitioners assert that the Department should
base its final determination on the February 5 data file, with the
exception of those changes in the March 3 data file that have been
explained by Ta Chen.
Ta Chen did not comment on these issues.
Department's Position: Based on our decision to apply total adverse
facts available, this issue is moot.
Comment 27: Exchange Rate
Ta Chen argues that the focus of a middleman dumping investigation
is whether a middleman makes an actual profit or loss on the
transactions, and thus, as stated in Fuel Ethanol from Brazil, the
Department must use a proper exchange rate to make such a conclusion.
Ta Chen claims that the Department should use the exchange rate for the
date TCI receives payment from the U.S. customer since that rate
indicates the actual profit or loss on the transaction from the
perspective of a Taiwan trading company. Furthermore, Ta Chen argues
that since the Department's regulations do not address the issue of
middleman dumping, the Department should not use the rate from TCI's
U.S. sale simply because the regulations say to do so.
Petitioners did not comment on this issue.
Department's Position: Based on our decision to apply total adverse
facts available, this issue is moot.
Comment 28: Bank Charges
Ta Chen claims that there should be no adjustment for bank charges
in the CREDIT1U and CREDIT2U data fields since they are associated with
internal movement of funds received from customer payments between
affiliated Ta Chen entities.
Petitioners did not comment on this issue.
Department's Position: Based on our decision to apply total adverse
facts available, this issue is moot.
Comment 29: Interest Costs
Ta Chen claims that it would be double counting to include both
TCI's and Ta Chen Taiwan's interest costs, since all of Ta Chen
Taiwan's interest costs with regard to coil are passed through to TCI
and affect TCI's debt burden. If, however, the Department does include
Ta Chen Taiwan interest costs, Ta Chen argues that the Department
should reduce those costs for short-term interest income.
Petitioners claim that the Department should calculate Ta Chen
Taiwan's interest expenses for the constructed value calculation based
on Ta Chen's Taiwan's financial statement because Ta Chen Taiwan was
intimately involved in the purchase and resale of SSSS. Petitioners
claim that the Department's allocation of Ta Chen Taiwan's total
interest expenses over Ta Chen Taiwan's total cost of sales would be
consistent with SSPC from Taiwan and the questionnaire instructions.
Department's Position: Based on our decision to apply total adverse
facts available, this issue is moot.
Comment 30: Substantial Margins
Ta Chen states that the preliminary decision offers no rationale
concerning why a 2.68 percent channel rate should be considered
substantially below cost, given that two percent is considered de
minimis under the current standard for dumping margins. Moreover, as in
the SSPC from Taiwan decision, any dumping margin should only apply to
Ta Chen Taiwan since TCI, a U.S. company, should be permitted to
purchase direct from a Taiwan manufacturer at the manufacturer's own
dumping rate.
Tung Mung also argues that the rate found by the Department for
middleman dumping, 2.61 percent, is not ``substantial.'' Tung Mung
argues that it would be inappropriate to find that an entity that is
not involved in the substance of the transaction, but is merely acting
as a communications channel, is engaged in dumping. Tung Mung asserts
that, in any event, a margin of 2.61 percent cannot be considered
``substantial'' within the meaning of the statute. Tung Mung argues
that under the holding of Fuel Ethanol from Brazil, the Department must
find that a substantial portion of the middleman's sales are at prices
``substantially'' below its acquisition costs. Tung Mung notes that in
the present case, the Department found that Ta Chen's losses on its
sales of Tung Mung merchandise amounted to 2.61 percent, which the
Department deemed to be ``substantial.'' Tung Mung argues that this
margin is only a fraction over the de minimis limit of two percent, and
thus can hardly be deemed ``substantial.''
Petitioners argue that the Department should find that Ta Chen sold
a substantial portion of its resales in the United States at prices
substantially below its total acquisition costs. Petitioners state that
the evidence in this case points to Ta Chen's selling a substantial
volume of its resales at prices substantially below its total
acquisition costs, as was the case in Mitsui. Petitioners also state
that, as in SSPC from Taiwan, there can be no single threshold which
constitutes substantial losses with regard to middleman dumping,
because each case involves a unique set of circumstances and thus a
fixed numerical guideline defining substantial losses should not be
created.
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 15.34 percent for Ta Chen's
purchases from Tung Mung and YUSCO, as well as the 2.61 percent
calculated for Ta Chen with regard to Tung Mung's merchandise in the
Preliminary Decision, constitute substantial losses. The Department has
stated its general position in SSPC from Taiwan at page 15504.
Moreover, because we are assigning Ta Chen a significantly higher loss
percentage for this final determination, we believe that there can be
no question but that such losses must be considered substantial.
Comment 31: Agency
Ta Chen contends that the transactions involving the subject
merchandise do not fall within the ambit of any middleman dumping
provision for the following reasons: (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 Tung Mung 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 commercial law
principles in its administration of the antidumping laws, citing NSK v.
United States, 115 F. 3d 965 (Fed. Cir. 1997). Ta Chen claims that U.S.
commercial law considers the following factors in determining whether
an intermediary is
[[Page 30622]]
acting as an agent or as a buyer: (1) (W)hether 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, citing
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 claims that an analysis of the record demonstrates that
none of the aforementioned four factors exist in the instant case and
thus, Ta Chen is acting as an agent. First, Ta Chen Taiwan claims that
in all instances it acts on behalf of TCI with regard to U.S. sales.
Second, Ta Chen claims that Ta Chen Taiwan was not permitted to sell
the items to other distributors in the United States, and had no
control over the U.S. prices of coil. Third, Ta Chen claims that TCI
alone selected the U.S. customers to which it would subsequently sell
the imported products. Fourth, Ta Chen claims that coil was shipped
directly from YUSCO or Tung Mung to TCI for TCI's warehouse inventory,
and therefore Ta Chen Taiwan does not maintain inventory for any
products for U.S. sale. Finally, Ta Chen claims that title was
transferred immediately from Tung Mung or YUSCO to TCI. Ta Chen argues
that the above facts prove that TCI is the true buyer from YUSCO or
Tung Mung, and Ta Chen Taiwan is merely TCI's buyer's agent. Moreover,
TCI argues that the sales are direct sales between YUSCO or Tung Mung
and TCI.
Ta Chen argues that the antidumping statute only applies to
producers and exporters; therefore, Ta Chen contends, TCI should not be
subject to the dumping determination. Ta Chen states that the Act
directs the Department to determine the individual weighted average
dumping margin of each known exporter and producer of the subject
merchandise, and also cites AK Steel Corp. v. U.S., Slip Op. 98-159 at
20-23 (CIT November 23, 1998) in support of this position. Ta Chen
argues that it is well established under Department precedent that if
suppliers sell to a trading company and had knowledge, at the time they
sold their merchandise, that those sales were destined for the United
States, the Department finds that suppliers are effectively acting as
exporters and therefore uses their [suppliers] pricing structure to
measure dumping activity, citing Antifriction Bearings from France, 57
FR 28360 (1992). Ta Chen argues that the manufacturers, Tung Mung and
YUSCO, had knowledge that all sales to TCI were destined for the United
States. In this regard, Ta Chen argues, YUSCO and Tung Mung are the
exporters under Department practice.
Ta Chen argues that middleman dumping is a narrowly defined
exception to the Department's general practice to use the producer's
price to the U.S. in the dumping analysis. Ta Chen argues that this
exception does not apply in this case. Ta Chen points to the
legislative history of the Trade Agreements Act of 1979 as support that
middleman dumping is limited to the issues involved in Voss
International v. United States, (``Voss'') C.D. 4801 (May 7, 1979),
citing Senate Report. Ta Chen argues that the legislative history
regarding middleman dumping analysis instructs that where a producer
knows that the merchandise was intended for sale to an unrelated
purchaser in the United States under terms of sale fixed on or before
the date of [U.S.] importation, the producer's sale price to an
unrelated middleman will be used as the purchase price (``Purchase
price'' may be used if transactions between related parties indicate
that the merchandise has been sold prior to importation to a U.S. buyer
unrelated to the producer.'' See Senate Report). Ta Chen argues that
the instant case is distinct from Voss because YUSCO's and Tung Mung's
terms of sale were fixed before exportation. Ta Chen concludes that the
middleman dumping exception as delineated in Voss does not apply in the
instant case, and therefore, 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 also cites to Fuel Ethanol at 5577 as further support. Ta Chen
claims that YUSCO and Tung Mung sell directly to TCI, an unaffiliated
U.S. customer, and therefore, there is no middleman. Ta Chen argues
that Department precedent demonstrates that middleman dumping is found
where a foreign manufacturer sells to a trading company located in the
foreign manufacturer's home market or third country which in turn is
``selling to U.S. purchasers below its acquisition or purchase cost,''
citing Fuel Ethanol at 5573 & 5576-77. Ta Chen asserts that the
Department has never found middleman dumping where a foreign
manufacturer sells to an unaffiliated U.S. company. Ta Chen argues TCI
purchased coil from the Taiwan manufacturer; thus, a ``middleman'' as
defined by Fuel Ethanol does not exist.
Ta Chen argues that the Department's decision in SSPC from Taiwan
is contrary to the Department's own practice, U.S. commercial law
principles and commercial reality. Ta Chen contends that the SSPC from
Taiwan decision implies the finding that invoicing or transfer of title
to an entity alone is sufficient to show that a sales transaction
occurred. Ta Chen argues that this is contrary to law, citing FAG
(U.K.) Ltd. v. U.S., Slip Op. 98-133 at 15, n. 5 (CIT September 16,
1998) (finding that ``mere passage of title alone does not effect a
sale'' if one party controls the transaction and the other to whom
title passed is only acting as an agent of the controlling party,
citing AK Steel Corp., et. al. v. U.S., Slip Op. 98-159 at 7-16 (CIT
Nov. 23, 1998); J.C. Penney v. U.S., 451 F. Supp. 973, 986 (1978); and
Synthetic Methionine from Japan, 52 FR 10600, 10601 (1987).
Second, Ta Chen charges that the decision in SSPC from Taiwan
implies that simply because the agent is involved in the sales
negotiation or initially incurs costs (which are then passed onto the
buyer), it can be found that the sale is made to the agent. Ta Chen
argues that this assumption found in SSPC from Taiwan also contradicts
law and commercial reality. Ta Chen argues that the courts have
acknowledged that negotiating sales and incurring expenses on behalf of
the buyer are services characteristic of buying agents, citing Jay-Arr
Slimware Inc. v. U.S., 681 F. Supp. 875, 878 (CIT 1988); J.C. Penney v.
U.S., 451 F. Supp. 973, 984 (1978); Monarch Luggage Co. v. U.S., 715 F.
Supp. 1115, 116-7 (CIT 1989); and Rosenthal-Netter, Inc. v. U.S., 679
F. Supp. 21, 23 (CIT 1988).
[[Page 30623]]
Third, Ta Chen finds that SSPC from Taiwan contradicts law by
suggesting that middleman dumping can be found where there is a sale
from the Taiwan producer to TCI, with Ta Chen Taiwan acting only as an
agent. Ta Chen points out that SSPC from Taiwan cites to no supporting
legal authority except Voss, which as argued earlier by Ta Chen, does
not apply to the instant case.
Ta Chen argues that based on shipping terms, the transaction
between the seller and the intermediary is not a bona fide sale. TCI
argues that where the merchandise is shipped directly from the seller
to the ultimate consignee, as opposed to being shipped from the seller
to the intermediary and then to the ultimate consignee, the terms of
sale may indicate that simultaneous passage of title occurred.
According to TCI, an intermediary is considered to hold title only
momentarily, if ever, and does not bear the risk of loss according to
the term of sale. As such, TCI argues that based on the shipping terms,
a bona fide sale would not appear to exist between the seller and
intermediary, but rather between the seller and the U.S. ultimate
consignee, with the intermediary potentially serving as an agent,
citing Nissho Iwai. In addition, TCI notes that TCI's financial
statements indicate that TCI is ``engaged in the business of sales of
coils * * *'', citing March 3, 1999 Questionnaire Response. TCI also
notes that Ta Chen Taiwan's financial statement indicate that Ta Chen
Taiwan manufactures stainless steel pipe and fitting products and there
is no mention that Ta Chen Taiwan sells coil, citing their February 17,
1999 submission at Exhibit 6.
Tung Mung argues that the Department should not find middleman
dumping in this case because Ta Chen Stainless Steel Pipe Co., Ltd, is
not a middleman. Tung Mung argues that the verifications of Tung Mung
and Ta Chen made clear that Tung Mung's true customer is Ta Chen
International, Ta Chen's U.S. affiliate. Tung Mung maintains that TCI
makes its own decisions on what materials to purchase, based on its
assessment of market conditions in the United States, and simply uses
Ta Chen Taiwan as a communications link. Tung Mung asserts that
verification results of Ta Chen Taiwan show that pricing decisions are
being made by TCI, a U.S. corporation, rather than Ta Chen Taiwan. Tung
Mung argues that the Department confirmed at verification that TCI uses
Ta Chen Taiwan as an intermediary, instead of buying directly from the
manufacturer, because of differences in time zones and language
barriers, citing TCI Verification Report at p. 6.
Petitioners assert that, according to the record, the Taiwanese
producers' U.S. sales of subject merchandise were in all instances to
Ta Chen Taiwan, not to Ta Chen International. Petitioners point to
several verification findings with regard to sales functions and
corporate structure which, petitioners claim, demonstrate that Ta Chen
Taiwan was intimately involved in each purchase and intra-company
resale to TCI of YUSCO's and Tung Mung's products. Petitioners maintain
that these verification results prove that Ta Chen Taiwan purchased the
subject merchandise from YUSCO and Tung Mung and acted as a middleman
in connection with the resale of YUSCO's and Tung Mung's subject
merchandise in the United States.
Petitioners find suspect Ta Chen's explanation for those sales
where the invoicing did not go through Ta Chen Taiwan. Petitioners note
that Ta Chen claims that these sales are ``direct sales'' to TCI;
however, petitioners argue that Ta Chen provides no supporting evidence
for this claim. Petitioners point out that the record evidence
contradicts Ta Chen's assertions that the sales at issue were direct
sales to TCI. Petitioners note that Ta Chen stated that the sales in
question were direct sales since a certain party directly invoiced TCI.
Petitioners further note that when the Department asked TCI to prove
that it directly paid the certain party, TCI could not, citing TCI
Verification Report at page 17. Petitioners note that the documentation
indicated that the party paid was in fact Ta Chen Taiwan. Moreover,
petitioners maintain that other documents retrieved at verification
support that the payee was in fact Ta Chen Taiwan, despite Ta Chen's
claim at verification that Ta Chen Taiwan was indicated as the payee as
a result of a typographical error.
Petitioners cite Industrial Nitrocellulose from the United Kingdom;
Final Results of Antidumping Duty Administrative Review, 64 FR 6609,
6622 (February 10, 1999), where the Department found that a U.S.
selling agent was substantially involved in the sale process for the
foreign company because its duties as the foreign company's agent
included sales and solicitation and price negotiation. Likewise in this
investigation, petitioners argue, Ta Chen Taiwan negotiated with YUSCO
and Tung Mung the terms of sale and performed other sales functions
associated with these sales. Thus, petitioners argue, the role of Ta
Chen Taiwan was substantial and entailed much more than paper
processing and aiding communications between YUSCO and Tung Mung and
TCI. Petitioners conclude that the Department should find that TCI
therefore acted as a middleman in the resale of the subject merchandise
into the U.S. and include in the Department's dumping calculations the
full extent of dumping caused by Ta Chen's pricing to its unaffiliated
U.S. customers.
Department's Position: We disagree with Ta Chen that it is not the
middleman for resales of YUSCO's and Tung Mung'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 and between Tung Mung 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
[[Page 30624]]
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 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.
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 and Tung Mung
made sales to Ta Chen, not directly to TCI (although Tung Mung did have
a small number of direct sales to TCI, we are not considering them to
be subject to our middleman investigation). Contrary to Ta Chen's
assertions otherwise, Ta Chen did take legal title to the merchandise.
Even though YUSCO and Tung Mung 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 and Tung Mung, signs a sales contract with YUSCO and Tung Mung,
was invoiced by YUSCO and Tung Mung, paid YUSCO and Tung Mung for the
merchandise, entered these sales into Ta Chen's book, and undertook
various other activities involved in exporting and transporting the
merchandise. See Exhibits 6 and 8 of Tung Mung's Verification Report
dated April 12, 1999, page A-10 of Tung Mung's questionnaire response
dated September 8, 1998. See also pages 5, 13 and Exhibit 9 of YUSCO's
Sales Verification report dated April 12, 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. For a more complete discussion of
this issue, see SSPC from Taiwan, Comment 6.
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).
Suspension of Liquidation
In accordance with section 735(c)(1)(B) Act, we are directing the
U.S. Customs Service 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 final
determination in the Federal Register. The all-others rate reflects an
average of the corroborated non-de minimis margins alleged in the
petition. The Customs Service shall require a cash deposit or the
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
------------------------------------------------------------------------
Tung Mung/Ta Chen......................................... 14.95
Tung Mung................................................. 14.95
Chang Mien................................................ 0.98
YUSCO/Ta Chen............................................. 34.95
YUSCO..................................................... 34.95
All Others................................................ 12.61
------------------------------------------------------------------------
Since the final weighted average margin percentage for Chang Mien is de
minimis, Chang Mien will be excluded from an antidumping order, if
issued, on stainless steel sheet and strip in coils from Taiwan as a
result of this investigation.
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 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 to assess antidumping
duties on all imports of the subject merchandise entered for
consumption on or after the effective date of the suspension of
liquidation. This determination is issued and published in accordance
with sections 735(d) and 777(i)(1) of the Act.
Dated: May 19, 1999.
Richard W. Moreland,
Acting Assistant Secretary for Import Administration.
[FR Doc. 99-13681 Filed 6-7-99; 8:45 am]
BILLING CODE 3510-DS-P
