[Federal Register Volume 60, Number 183 (Thursday, September 21, 1995)]
[Notices]
[Pages 48966-48970]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-23487]
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DEPARTMENT OF COMMERCE
A-538-802
Shop Towels From Bangladesh; Final Results of Antidumping Duty
Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of Final Results of Antidumping Duty Administrative
Review.
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SUMMARY: On December 28, 1994, the Department of Commerce published the
preliminary results of its administrative review of the antidumping
duty order on shop towels from Bangladesh. The review covers six
producers and/or exporters of this merchandise to the United States and
the period September 21, 1991, through February 28, 1993.
We gave interested parties an opportunity to comment on the
preliminary results. Based on our analysis of the comments received and
the correction of certain clerical errors, we have made certain changes
for the final results. The review indicates the existence of dumping
margins for certain firms during the review period.
EFFECTIVE DATE: September 21, 1995.
FOR FURTHER INFORMATION CONTACT: Davina Hashmi or Michael Rill, Office
of Antidumping Compliance, International Trade Administration, U.S.
Department of Commerce, Washington, DC 20230; telephone (202) 482-4733.
SUPPLEMENTARY INFORMATION:
Background
On March 29, 1993, the Department of Commerce (the Department)
published in the Federal Register (57 FR 9688) the antidumping duty
order on shop towels from Bangladesh. Milliken & Company (Milliken),
the petitioner, requested in accordance with 19 C.F.R. 353.22 that we
conduct an administrative review of the period September 12, 1991,
through February 28, 1993. We published a notice of initiation of
administrative review for this period on May 6, 1993 (58 FR 26960). On
December 28, 1994, we published the preliminary results of the
administrative review (59 FR 66910).
The Department has now completed the administrative review in
accordance with section 751 of the Tariff Act of 1930, as amended (the
Tariff Act).
Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute and to the
Department's regulations are references the provisions as they existed
on December 31, 1994.
Scope of Review
The product covered by this administrative review is shop towels.
Shop towels are absorbent industrial wiping cloths made from a loosely
woven fabric. The fabric may be either 100 percent cotton or a blend of
materials. Shop towels are currently classifiable under item numbers
6307.10.2005 and 6307.10.2015 of the Harmonized Tariff Schedule (HTS).
Although HTS subheadings are provided for convenience and customs
purposes, our written description of this proceeding remains
dispositive.
The administrative review covers six firms for the period September
21, 1991, through February 28, 1993: Eagle Star Mills, Ltd. (Eagle
Star); Greyfab (Bangladesh) Ltd. (Greyfab); Hashem International
(Hashem); Khaled Textile Cotton Mills, Ltd. (Khaled); Shabnam Textiles
(Shabnam); and Sonar Cotton Mills (BD), Ltd. (Sonar).
Analysis of Comments Received
The Department gave interested parties the opportunity to comment
on the preliminary results. At the request of both respondents and
petitioner, we held a hearing on February 13, 1995. We received case
and rebuttal briefs from the petitioner and respondents Greyfab,
Hashem, Khaled, Shabnam, and Sonar.
General Comments
Comment 1: Respondents Greyfab, Khaled and Sonar contend that the
Department should not adjust their constructed value (CV) by
calculating an imputed interest expense on the loans made by directors
to their companies during the initial stages of production. Respondents
argue that such interest-free loans represent a form of equity infusion
and are the typical form of capitalization in the Bangladesh shop towel
industry for companies which do not finance operations through bank
loans. Respondents note the use of this form of capitalization by three
respondents as evidence of industry practice in Bangladesh. Respondents
claim that the actual interest expense recorded on their financial
statements should be used for CV, since this reflects the actual costs
the companies incurred. Further, respondents contend that the
Department did not have statutory authority to apply the ``best
evidence available'' provision for these related party transactions to
the general expenses, which include interest expenses. Moreover,
respondents maintain that, in calculating CV, the Department has not
established a precedent for imputing interest expense on interest-free
loans.
Finally, respondents assert that, if the Department considers it
appropriate to impute interest expense on the director loans, it should
not rely on the short- or medium-term interest rate used to compute CV
for the preliminary results of review. Rather, respondents contend
that, because the loans do not have fixed repayment schedules, they are
designed to meet the three companies' long-term financing needs. As
such, respondents argue that the Department should impute interest
expense based on an interest rate charged on a long-term bank loan to
one of the other two remaining respondents. According to Greyfab,
Khaled and Sonar, this bank loan rate, charged by an unrelated party,
represents an appropriate interest rate.
Petitioner argues that the Department properly imputed interest
expense on interest-free loans from related parties and that this is
consistent both with related party transaction provisions in the
statute and with the Department's normal practice. Petitioner also
states that the director loans are not equity capital, as claimed by
the respondents. In petitioner's view, the CV the Department uses in
its margin
[[Page 48967]]
calculations should reflect the fair market cost of this type of loan.
Petitioner further asserts that, contrary to respondents' claim,
director loans are not the customary form of financing shop towel
production in Bangladesh, since two of the five respondents do not have
such loans, and that other alternative forms of financing, including
bank loans, are normally used. Petitioner contends that the Department
used an appropriate short- to medium-term interest rate for the
preliminary results. Petitioner argues that the absence of a specified
repayment schedule and the use of funds from the loans for start-up
costs support the Department's treatment of these loans as short- to
medium-term in nature. Petitioner asserts that the Department should
use the same interest rate for its final results.
DOC Position: We agree with petitioner. The director loans are
identified on the respondents' financial statements as ``Loan from
Director'' and ``Director's Loan.'' Additionally, there is no evidence
on the record to support respondents' contention that these amounts
should be treated as equity capital and, in fact, equity accounts
appear elsewhere on their financial statements. Since we have no basis
to reclassify these amounts to equity, we consider them to be loans,
consistent with respondents' financial statement treatment. See Final
Determination of Sales at Less than Fair Value: Fresh Cut Roses from
Ecuador, 60 FR 7019, 7039 (February 6, 1995).
We disagree with respondents' assertion that we do not have the
statutory authority to apply the ``best evidence available'' provision
to determine the interest rate applicable to these related party
transactions. Section 773(e)(2) of the statute permits the Department
to use best evidence available to assign an appropriate amount to any
element of value, including interest expense, which it believes is not
fairly valued. As demonstrated in Final Determination of Sales at Less
than Fair Value: Aramid Fiber Formed of Poly-Phenylene Terephthalamide
From the Netherlands, 59 FR 23684, 23689 (May 6, 1994), our practice is
to impute interest expense on transactions when the rate charged by a
related party lender does not reflect a fair market rate. In this case,
we do not consider the respondents' interest-free related party loans
to be reflective of the fair market borrowing rate in Bangladesh since
such loans typically involve some cost to the borrower. Therefore, we
imputed interest expense on these loans using a rate of 15 percent.
We obtained the 15-percent interest rate from the November 1993
version of International Financial Statistics, published by the
International Monetary Fund (IMF). The publication describes the rate
as representative of the amount Bangladesh banks charge ``usually to
meet the short- and medium-term financing needs of the private sector''
(as shown on page XVIII). Despite their claim that the director loans
should be classified as long-term liabilities, respondents only point
to the absence of a fixed repayment schedule in support of their claim.
We disagree with respondents; in this instance, the absence of a fixed
repayment schedule is, in fact, indicative of a short-term demand note
because the lender can demand payment on the principal at any time. In
addition, there is evidence on the record supporting the position that
these amounts should be considered current liabilities, including the
significant loan repayments made by Greyfab and Sonar and the statement
by respondents that the amounts are refundable when funds become
available from company operations.
Finally, we do not believe the alternative interest rate suggested
by the respondents is appropriate, as the bank loan to which they refer
occurred after the period of review (POR) and the interest rate is
adjustable. Accordingly, we consider the IMF rate for short- and
medium-term financing to be a reasonable approximation of the fair
market borrowing rate in Bangladesh for similar loans.
Comment 2: Khaled claims that the Department's calculation of
interest expense on director loans for the preliminary results of
review was incorrect. Khaled notes that the Department multiplied the
amount of the director loan by the imputed interest rate to obtain a
twelve-month interest expense figure and then divided this amount by
the cost of goods sold figure from Khaled's audited financial
statements to calculate the interest factor. Khaled argues that this is
inappropriate because the financial statements cover an eight-month
period and claims that the Department should adjust the interest
expense figure to reflect an eight-month period.
Petitioner contends that the Department's calculation of interest
expense for Khaled is understated. Petitioner states that the
Department should use a twenty-month period to calculate interest
expense because the director loans were outstanding during a twelve
month period in which operations were suspended, plus the eight months
immediately following, which were covered by Khaled's financial
statements.
DOC Position: Since we have determined that it is appropriate to
impute interest on the director loans, we must consider the proper
period over which to calculate the imputed interest. It is well-
established Department practice to calculate a net interest expense
factor based on a respondent's full-year audited financial statements
for the year that most closely corresponds to the POR. See, e.g., Final
Determination of Sales at Less Than Fair Value: Canned Pineapple Fruit
From Thailand, 60 FR 29553, 29569 (June 5, 1995). Khaled's financial
statements include a statement from its auditors expressing an opinion
on the profit and loss statement ``for the year ended on that date''
(February 28, 1993). However, the heading of the profit and loss
statement suggests that it covers a period from July 1992 to February
1993. Due to the conflicting evidence in Khaled's financial statements,
we were unable to determine with certainty whether the profit and loss
statement does, in fact, cover only eight months. Therefore, in
accordance with our practice, we computed the interest expense factor
by dividing the full year's imputed interest expense by the cost of
goods sold figure listed in the respondent's financial statement.
Comment 3: Sonar disagrees with the Department's decision to reject
portions of its brief regarding the prior year adjustments it reported
on its financial statements for fiscal years 1991, 1992, and 1993.
Sonar states that its submission containing these explanations does not
represent new factual information, as determined by the Department.
Rather, Sonar contends, the submission merely explains and reorganizes
data it submitted earlier in the review. In addition, Sonar states that
the Department should not apply best information available (BIA) to the
company's general expenses because of the unexplained prior year
adjustment amounts. Sonar notes that it has substantially cooperated
with the Department. Thus, in Sonar's view, it would be unjust for the
Department to apply an adverse methodology due to the company's failure
to provide a complete response to one question of a supplemental
questionnaire.
Sonar asserts that if the Department does use BIA, then it should
select a neutral surrogate amount for selling, general and
administrative (SG&A) expenses rather than the BIA methodology which
the Department used in the preliminary results of review. Sonar claims
that the approach the Department used for the preliminary
[[Page 48968]]
results is inconsistent, since the Department treated negative and
positive prior year adjustments in the same manner, i.e., by adding the
adjustment amounts to the reported SG&A expenses. Sonar also claims
that this methodology is arbitrary in that it results in SG&A figures
which are many times as high as those shown for other companies in the
industry.
Petitioner asserts that, because Sonar submitted its explanation of
the prior year adjustments long after the Department's due date, the
Department's treatment of these adjustments using BIA is justified.
Petitioner views the respondent's failure to provide the necessary
information regarding the prior year adjustments as uncooperative and
states that the Department should reject Sonar's submitted costs and,
citing National Steel Corporation et al. v. United States, Slip. Op.
94-194 (CIT December 13, 1994), argues that the Department should
instead apply a first-tier total BIA margin of 42.31 percent.
Petitioner further argues that even if the Department does not use
first-tier total BIA to establish Sonar's dumping margin, then the
Department should apply an adverse partial BIA because Sonar omitted
information that was not beyond its control and which affects a large
portion of its total sales during this review period. Finally,
petitioner suggests that even if the Department considers its use of
BIA inappropriate, it should still include the prior year adjustments
in CV as it is within the Department's discretion to do so.
DOC Position: We disagree with Sonar that the Department should
accept its untimely submission of information explaining the prior year
adjustments. Sonar submitted this information of the prior year
adjustments on the record well beyond the due date (see letter from
Director, Office of Antidumping Compliance, addressed to Sonar Cotton
Mills (BD), April 18, 1995).
We also disagree with petitioner that the Department should apply a
first-tier total BIA. Because Sonar cooperated in all other aspects of
the review, application of total BIA is inappropriate. However, because
we did not receive a timely explanation of these prior year adjustment
amounts, we have applied a partial BIA approach in our treatment of
them for purposes of calculating CV. As BIA, we have included the
negative ``expense'' prior year adjustment amounts and we have excluded
the positive ``income'' prior year adjustment amount.
Comment 4: Greyfab argues that the Department erroneously double-
counted the treatment of inspection fees on U.S. sales by subtracting
these fees from United States price (USP) while adding these fees to
the foreign market value (FMV). Respondents request that the Department
change its calculations to ensure that its sales reflect the adjustment
correctly.
Department's Position: We disagree with respondents. The Department
made the correct calculation for the circumstance-of-sale adjustment by
subtracting inspection fees from only USP. We did not make an
adjustment to FMV for inspection fees in our preliminary results.
Therefore, no change to our calculations is necessary.
Comment 5: Hashem contends that the Department used the incorrect
invoice price for two shipments. Hashem states that it submitted the
correct invoice price for both shipments to the Department in the
supplemental questionnaire response dated April 1, 1994. However,
Hashem asserts the Department neglected to use this information in the
preliminary calculations.
Department's Position: We agree with Hashem. We have made the
necessary changes for these final results.
Comment 6: Hashem argues that for the sales it made to a certain
customer, the Department erroneously used the amounts that Hashem
reported as ``total net weight (lbs)'' instead of using the amounts
reported as ``total net weight (kgs)''. Respondent asserts that the
Department should use the value for ``total net weight (kgs)'' in its
calculation of USP because, in its view, to do otherwise significantly
overstates the ``total net weight (kgs)'' which has a significant
impact on the Department's calculation of USP. In addition, respondent
asserts that the Department used the incorrect values in the ``total
net weight (kgs)'' column for three observations in the calculations of
USP. The respondent states that for one of the observations, the
Department erroneously divided the weight (kgs/bale) by the conversion
factor used to convert pounds to kilograms, when none of the other
figures in the same column within the spreadsheet were manipulated by
the conversion factor. The respondent states that in the case of the
other two observations, the figures used by the Department in the
``total net weight column'' were not the values it reported for these
specific observations, but rather, were values taken from different
observations in Hashem's reported spreadsheet.
Department's Position: We agree with the respondent and have made
the necessary corrections for these final results.
Comment 7: Petitioner argues that the Department should add an
imputed interest expense to Sonar's CV for a bank loan which appears on
the company's financial statements. Petitioner notes that even though
Sonar did not make any interest payments on this bank loan, Sonar has
incurred a period obligation to pay interest. Petitioner suggests that
Sonar's attempt to obtain a waiver is evidence that there is an
obligation to pay interest it incurred during the period. According to
petitioner, the Department should include this obligation in Sonar's CV
and impute interest at the prevailing lending rate of 15 percent.
Sonar claims that the Department has no authority to disregard
actual general expenses in transactions between unrelated parties in
calculating CV. Sonar also notes that a reserve has not been recorded
on its audited financial statements for any potential interest
obligation and that there is no evidence on the record that it will pay
interest to the bank which made the loan. Sonar argues that any
interest which it might pay to the bank in the future is currently a
potential contingent liability and claims that the Department's
practice does not support adjusting actual expenses under such
circumstances.
DOC Position: We agree with petitioner. Although Sonar did not
reserve for interest related to the bank loan in its financial
statements, we believe there is a basis for imputing interest on the
loan and adding this expense to the company's CV. The Department's
practice is to rely on a respondent's books and records prepared in
accordance with its home country GAAP unless those accounting
principles do not reasonably reflect costs associated with the
production of the subject merchandise. See, e.g., Final Determination
of Sales at Less Than Fair Value: Canned Pineapple Fruit From Thailand,
60 FR 29553, 29560 (June 5, 1995). In this instance, respondent's
accounting principles do not reasonably reflect costs. Although Sonar
has provided audited financial statements which do not reflect an
interest accrual, there is no evidence to support the position that the
company does not have an obligation to pay interest on its bank loan.
We consider zero interest expense on a loan an unreasonable cost of
borrowing. The interest expense associated with this bank loan should
properly be reflected in the cost of producing the subject merchandise.
Therefore, we imputed interest expense on this loan and adjusted CV
accordingly.
Comment 8: Petitioner argues that the Department should adjust
Greyfab's CV
[[Page 48969]]
to include the balance of ``Liabilities for Other Finance'', which
appears on the respondent's June 30, 1993, balance sheet. While
acknowledging that this amount concerns expenses incurred for the 1991
hurricane that damaged the company's factory building and production
facilities, petitioner argues that the Department should include this
expense in CV. Petitioner asserts that there is no basis to exclude
such repair and shut-down expenses from CV.
Greyfab claims that the Department should not include the
Liabilities for Other Finance in CV since this amount represents
extraordinary, non-operating expenses. According to Greyfab, the
Department's normal practice is to exclude such extraordinary losses
which are not related solely to current operations.
DOC Position: We disagree with petitioner. Petitioner refers to
``Liabilities for Other Finance'', which is a balance sheet item. The
balance sheet reports a company's assets and liabilities as of a
certain date, and does not necessarily reflect expenses incurred during
the POR. We are satisfied that Greyfab reconciled all costs reported on
its financial statements to its submitted costs. In addition, while
this liability reflects an expense which was recognized in either the
current year or a past year, there is no evidence on the record to
indicate that Greyfab has excluded POR repair and shut-down expenses
related to this liability. Accordingly, we have not adjusted CV for the
``Liabilities for Other Finance'' amount Greyfab reported on its
balance sheet.
Comment 9: Petitioner argues that the Department should adjust
Khaled's CV to include expenses related to a twelve-month suspension of
company operations. Petitioner claims that Khaled's reported expenses
for this event are inadequate and the Department should substitute a
BIA approach to calculate the actual costs incurred by the respondent.
Petitioner suggests that the temporary suspension of operations should
have resulted in the recording of significant expenses, including
depreciation of idle plant and equipment, shut-down costs, start-up
costs, inventory disposal expenses, and payments to officers and
employees. According to petitioner, Khaled did not account for any of
these expenses in its submissions.
Khaled argues that petitioner has no basis for suggesting that its
reported costs are inadequate and claims that the record provides no
evidence to suggest that Khaled incurred any expenses beyond those
which it submitted in its response. Khaled argues that all costs have
been properly reported in its audited financial statements and suggests
that there is no support for the Department to apply BIA.
DOC Position: We agree with the respondent. We are satisfied that
Khaled reconciled all costs reported on its financial statements to its
submitted costs. Khaled and its counsel have certified to the
Department that its submitted costs are accurate. See Antifriction
Bearings (other than Tapered Roller Bearings) and Parts Thereof from
France, Final Results of Antidumping Duty Administrative Review, 57 FR
28360 (1992). From a review of the record, there is no basis to
conclude that Khaled has not reported all costs related to its twelve-
month suspension of operations. Therefore, we have not adjusted CV as
petitioner suggests.
Comment 10: Petitioner claims that the Department should use BIA to
determine the cost associated with operating the weavers villages
(employee housing) that Khaled and Shabnam have established. According
to petitioner, the record indicates that Khaled and Shabnam have not
fully accounted for all expenses relating to these villages in their
cost submissions. Petitioner suggests that the fixed asset schedules
Khaled and Shabnam submitted do not appear to cover all assets and
expenditures related to the establishment and maintenance of the
weavers villages. Specifically, petitioner argues that the reported
costs do not reflect each company's cost of providing roads, repairs
and maintenance, security and health services, utilities, telephones
and entertainment. Additionally, petitioner claims that the Department
should adjust respondents' labor costs to reflect the provision of
company housing to employees. As BIA, petitioner suggests that the
Department use World Bank statistics which provide U.S. housing costs
as a percentage of total personal consumption expenditures.
Khaled and Shabnam claim that petitioner has no basis for arguing
that they have not properly accounted for the costs related to the
weavers' housing. They claim that they included amounts in their
submissions for repairs and maintenance, entertainment, and
miscellaneous expenses, and that their depreciation schedules include
amounts for colony and road development. Khaled and Shabnam also
indicate that the workers are responsible for maintenance of their own
homes. Respondents argue that the BIA methodology petitioner proposes
is unreasonable and claim that there is no rational relationship
between housing costs as a percentage of total personal consumption
expenditures in the United States and the cost of company housing in
Bangladesh.
DOC Position: We agree with the respondents. There is no reason for
the Department to apply a BIA rate to adjust respondents' labor costs
to reflect the provision of company housing to employees. From a review
of the record, there is no basis to conclude that Khaled and Shabnam
have not reported all costs related to the establishment and
maintenance of the weaver villages. In addition, respondents and their
counsel certified the accuracy of the respondents' responses. See
Antifriction Bearings (other than Tapered Roller Bearings) and Parts
Thereof from France, Final Results of Antidumping Duty Administrative
Review, 57 FR 28360 (1992). We are therefore satisfied that Khaled and
Shabnam reported all costs.
Comment 11: Sonar claims that the Department made a clerical error
in its calculation of SG&A for the preliminary results of review. Sonar
states that there is an incorrect formula in the Department's
calculations of CV for each product. Sonar requests that the Department
review its calculation of SG&A and make the appropriate corrections.
DOC Position: We agree with Sonar and have corrected this error in
our SG&A calculation for the final results of review.
Final Results of the Review
As a result of the comments received, we have revised our final
results and determine that the following margins exist for the period
September 21, 1991 through February 28,1993:
------------------------------------------------------------------------
Margin
Manufacturer/exporter (percent)
------------------------------------------------------------------------
Eagle Star................................................. 42.31
Greyfab.................................................... 0.00
Hashem..................................................... 0.01
Khaled..................................................... 9.61
Shabnam.................................................... 0.15
Sonar...................................................... 8.30
------------------------------------------------------------------------
The Department shall determine, and the Customs Service shall
assess, antidumping duties on all appropriate entries. Individual
differences between United States price and foreign market value may
vary from the percentages stated above. The Department will issue
appraisement instructions directly to the Customs Service.
Furthermore, the following deposit requirements will be effective
for all shipments of the subject merchandise entered, or withdrawn from
warehouse, for consumption on or after the
[[Page 48970]]
publication date of these final results of administrative review, as
provided by section 751(a)(1) of the Tariff Act: (1) The cash deposit
rates for Eagle Star, Greyfab, Hashem, Khaled, Shabnam, and Sonar will
be the rates shown above; (2) for previously reviewed or investigated
companies not listed above, the cash deposit rate will continue to be
the company-specific rate published for the most recent period; (3) if
the exporter is not a firm covered in this review, a prior review, or
the original less-than-fair-value (LTFV) investigation, but the
manufacturer is, the cash deposit rate will be the rate established for
the most recent period for the manufacturer of the merchandise; and (4)
the cash deposit rate for all other manufacturers or exporters will be
4.60 percent, the ``all others'' rate from the LTFV investigation.
These deposit requirements, when imposed, shall remain in effect
until publication of the final results of the next administrative
review.
This notice serves as a final reminder to importers of their
responsibility under 19 CFR 353.26 to file a certificate regarding the
reimbursement of antidumping duties prior to liquidation of the
relevant entries during this review period. Failure to comply with this
requirement could result in the Secretary's presumption that
reimbursement of antidumping duties occurred and the subsequent
assessment of double antidumping duties.
This notice also serves as a reminder to parties subject to
administrative protective orders (APO) of their responsibility
concerning the disposition of proprietary information disclosed under
APO in accordance with 19 CFR 353.34(d)(1). Timely written notification
of the return/destruction of APO materials or conversion to judicial
protective order is hereby requested. Failure to comply with the
regulations and the terms of an APO is a sanctionable violation.
This administrative review and notice are in accordance with
section 751(a)(1) of the Tariff Act (19 U.S.C. 1675(a)(1)) and 19 CFR
353.22.
Dated: September 13, 1995.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 95-23487 Filed 9-20-95; 8:45 am]
BILLING CODE 3510-DS-P
