[Federal Register Volume 59, Number 19 (Friday, January 28, 1994)]
[Unknown Section]
[Page ]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-1967]


[Federal Register: January 28, 1994]


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DEPARTMENT OF COMMERCE
[A-557-807]


Final Determination of Sales at Less Than Fair Value: Welded 
Stainless Steel Pipe From Malaysia

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

EFFECTIVE DATE: January 28, 1994.

FOR FURTHER INFORMATION CONTACT: Pamela Ward or Shawn Thompson, Office 
of Antidumping Investigations, Import Administration, U.S. Department 
of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 
20230; telephone (202) 482-1174 or (202) 482-3965, respectively.

FINAL DETERMINATION:  We determine that welded stainless steel pipe 
from Malaysia is being, or is likely to be, sold in the United States 
at less than fair value, as provided in section 733 of the Tariff Act 
of 1930, as amended (the Act). The estimated margins are shown in the 
``Suspension of Liquidation'' section of this notice.

Case History

    Since the publication of our affirmative preliminary determination 
on September 7, 1993 (58 FR 47120), the following events have occurred.
    On September 7, 1993, the sole respondent in this investigation, 
Kanzen Tetsu Sdn. Bhd. (KT), requested a postponement of the final 
determination. We granted this request, and on September 9, 1993, we 
postponed the final determination until not later than January 21, 1994 
(58 FR 48849, September 20, 1993).
    On September 13, 1993, KT submitted a response to the Department's 
cost of production (COP) questionnaire. On September 27, 1993, we 
issued a supplemental COP questionnaire to KT. We received the response 
to this questionnaire on October 25, 1993.
    From November 8 through November 12, 1993, we conducted our 
verification in Malaysia of KT's responses to the Department's sales 
questionnaires.
    On November 8, 1993, petitioners submitted a letter requesting that 
the Department reject KT's October 25, 1993, COP response because KT 
failed to report product-specific production costs, as requested in the 
cost questionnaire.
    On November 10, 1993, KT responded to petitioners' November 8, 
1993, submission. Also on November 10 we informed KT that we had 
determined that the cost of manufacture (COM) information contained in 
the October 25, 1993, submission was not adequately product-specific to 
meet the Department's requirements, and that, accordingly, we would not 
verify that portion of the October 25, 1993, submission.
    From November 22 through November 25, 1993, we conducted our 
verification in Malaysia of KT's response to the Department's September 
13, 1993, COP questionnaire.
    Both petitioners and respondent filed case briefs on December 20, 
1993, and rebuttal briefs on December 28, 1993.
    On December 23, 1993, KT submitted revised sales, COP, constructed 
value (CV), and concordance databases, correcting minor errors 
discovered at verification. On January 5, 1994, petitioners submitted a 
letter requesting that the Department reject this submission because it 
contained revisions to KT's data which were unsupported by the record 
of this investigation. On January 7, 1994, KT replaced its COP, CV, and 
concordance databases in order to correct clerical errors made in its 
December 23, 1993, submission. We reviewed this submission and 
confirmed that it contained no new information.

Scope of Investigation

    The product covered by this investigation is welded austenitic 
stainless steel pipe of circular cross section (WSSP). WSSP is produced 
according to standards and specifications set forth by the American 
Society for Testing and Materials (ASTM). The designations for this 
product include, but are not limited to, ASTM A-312, ASTM A-358, ASTM 
A-409, and ASTM A-778. Welded pipes are generally used as conduits to 
transmit liquids or gases. The major applications for WSSP are: 
Digester lines; blow lines; pharmaceutical lines; petrochemical lines; 
brewery process and transport lines; general food processing lines; 
automotive lines; and paper processing machines.
    This product is classified under the following Harmonized Tariff 
Schedule of the United States (HTSUS) subheadings: 7306.40.1000, 
7306.40.5005, 7306.40.5015, 7306.40.5045, 7306.40.5060, and 
7306.40.5075. These subheadings are defined to encompass welded 
stainless steel tube as well as WSSP; however, the only product subject 
to this investigation is WSSP. Although the HTSUS subheadings are 
provided for convenience and customs purposes, our written description 
of the scope of this investigation is dispositive.

Period of Investigation

    The period of investigation (POI) is September 1, 1992, through 
February 28, 1993.

Such or Similar Comparisons

    We have determined that the product covered by this investigation 
comprises a single category of ``such or similar'' merchandise. We made 
similar merchandise comparisons on the basis of: (1) ASTM or equivalent 
specification, (2) grade of steel, (3) nominal size, (4) hot or cold 
finish, (5) wall thickness schedule, and (6) end finish, as described 
in Appendix V of the questionnaire. We made adjustments for differences 
in the physical characteristics of the merchandise, in accordance with 
section 773(a)(4)(C) of the Act.

Fair Value Comparisons

    To determine whether sales of WSSP from Malaysia to the United 
States were made at less than fair value, we compared the United States 
price (USP) to the foreign market value (FMV), as specified in the 
``United States Price'' and ``Foreign Market Value'' sections of this 
notice.

United States Price

    We based USP on purchase price, in accordance with section 772(b) 
of the Act, because the subject merchandise was sold to unrelated 
purchasers in the United States prior to importation and because 
exporter's sales price methodology was not otherwise indicated.
    After correcting the data used in our calculations for errors and 
omissions found at verification, we calculated purchase price based on 
packed F.O.B. prices to unrelated customers. In accordance with section 
772(d)(2)(A) of the Act, we made deductions, where appropriate, for 
foreign inland freight, foreign brokerage and handling, ocean freight, 
marine insurance, and containerization expenses. Regarding marine 
insurance, KT paid an insurance premium plus a commission to one of its 
marine insurance suppliers. At verification, we found that KT had 
inconsistently reported its marine insurance expense for this supplier 
(i.e., KT included the commission in one observation yet excluded it in 
another observation). KT explained that this commission was an 
intracompany service fee which its parent company charged KT for 
holding the group policy with the insurance company. However, KT could 
not substantiate at verification that it had properly excluded this 
commission. As a result, we resorted to the use of best information 
available (BIA), in accordance with section 776(c) of the Act. As BIA, 
we have made an adverse assumption and increased the amount reported 
for marine insurance to account for this commission for all 
transactions (except those we found at verification to be correct) by 
the amount of the commission.

Foreign Market Value

    In order to determine whether there were sufficient sales of WSSP 
in the home market to serve as a viable basis for calculating FMV, we 
compared the volume of home market sales of WSSP to the volume of third 
country sales of the same product, in accordance with section 
773(a)(1)(B) of the Act. KT had a viable home market with respect to 
sales of WSSP during the POI.
    As stated in our preliminary determination, the Department 
initiated an investigation under section 773(b) of the Act to determine 
whether KT made home market sales at less than their COP.
    If over 90 percent of respondent's sales of a given model were at 
prices above the COP, we did not disregard any below-cost sales because 
we determined that the below-cost sales were not made in substantial 
quantities. If between ten and 90 percent of the sales of a given model 
were made at prices below the COP, and such sales were made over an 
extended period of time, we discarded only the below-cost sales. Where 
we found that more than 90 percent of respondent's sales were at prices 
below the COP, and such sales were over an extended period of time, we 
disregarded all sales of that model and calculated FMV based on CV. No 
evidence was presented to indicate that below-COP prices would permit 
recovery of all costs within a reasonable period of time in the normal 
course of trade.
    In order to determine that below-cost sales were made over an 
extended period of time, we performed the following analysis on a 
model-specific basis: (1) If respondent sold a model in only one month 
of the POI and there were sales in that month below the COP, or (2) if 
respondent sold a model during two months or more of the POI and there 
were sales below the COP during two or more of those months, then 
below-cost sales were considered to have been made over an extended 
period of time.
    In order to determine whether home market prices were below the 
COP, we calculated the COP based on the sum of the respondent's cost of 
materials, fabrication, and general expenses. We corrected the reported 
COP and CV data for errors and omissions found at verification. We 
relied on the submitted COP and CV data, except in the following 
instances where the costs were not appropriately quantified or valued:
    1. We increased KT's general and administrative expenses (G&A) to 
(1) account for G&A incurred by KT's parent company because KT was 
unable to demonstrate that it had included these expenses in its 
reported G&A, (2) account for the amortization of pre-operating 
expenses which were not included in the submission, and (3) adjust for 
a clerical error found at verification. (See, Comment 5 in the 
``Interested Party Comments'' section of this notice.)
    2. We increased KT's cost of materials to offset the gain on 
foreign exchange reported by KT that was related to the acquisition of 
machinery used to produce non-subject merchandise. (See, Comment 8.)
    In accordance with section 773(e)(1)(B)(i) of the Act, we included 
in CV the greater of respondent's reported general expenses, adjusted 
as detailed above, or the statutory minimum of ten percent of the COM. 
For profit, we used the actual profit on home market sales because this 
amount was greater than the statutory minimum of eight percent of COM 
and general expenses. See, section 773(e)(1)(B)(ii) of the Act.
    In cases where we made price-to CV comparisons, we made 
circumstances-of-sale adjustments, where appropriate, for bank charges 
and credit expenses. Regarding credit expenses, KT calculated both home 
market and U.S. credit expenses using its respective average short-term 
interest rates in Malaysian Ringitts during the POI. We recalculated 
home market credit expenses using the consolidated short-term interest 
rate of KT and its parent company, which was based upon KT and its 
parent company's borrowings denominated in Malaysian Ringitts. In 
addition, KT failed to deduct discounts from the gross unit price in 
its home market credit calculation. We made the appropriate deductions 
in our recalculation.
    Regarding U.S. credit expenses, we recalculated KT's U.S. interest 
rate using the amounts of all U.S. dollar-denominated loans stated in 
U.S. dollars. (See, Comment 13.) We also recalculated the payment 
period for each transaction as the time between the date of shipment 
from KT's factory and the date of payment by the U.S. customer. (See, 
Comment 14.) We then recalculated U.S. credit expenses using the 
revised interest rate and payment period.
    In cases where we made price-to price-comparisons, we compared U.S. 
sales to home market sales made at the same level of trade, where 
possible, in accordance with 19 CFR 353.58 (1993). In addition, we 
disregarded home market sales of odd-length merchandise because we 
determined that these sales were made outside the ordinary course of 
trade. We also disregarded certain sales to end user customers, because 
we found at verification that the dates of sale for these transactions 
were outside the POI.
    We adjusted the reported home market data for errors and omissions 
found at verification. We then calculated FMV based on packed F.O.B. 
prices charged to unrelated customers in the home market. We made 
deductions, where appropriate, for discounts and rebates. We also made 
deductions, where appropriate, for inland freight. We deducted home 
market packing costs and added U.S. packing costs, in accordance with 
section 773(a)(1) of the Act.
    Pursuant to 19 CFR 353.56(a)(1) and 19 CFR 353.56(a)(2), we made 
circumstance-of-sale adjustments, where appropriate, for differences in 
bank charges and credit expenses, adjusted as described above.

Currency Conversion

    Because certified exchange rates from the Federal Reserve were not 
available, we made currency conversions based on the official monthly 
exchange rates in effect on the dates of the U.S. sales as certified by 
the International Monetary Fund.

Verification

    As provided in section 776(b) of the Act, we verified information 
provided the respondent by using standard verification procedures, 
including the examination of relevant sales and financial records, and 
selection of original source documentation containing relevant sales 
information.

Critical Circumstances

    Petitioners allege that ``critical circumstances'' exist with 
respect to imports of WSSP from Malaysia. Section 735(a)(3) of the Act 
provides that critical circumstances exist if we determine that there 
is a reasonable basis to believe or suspect that:
    (A)(i) There is a history of dumping in the United States or 
elsewhere of the class or kind of merchandise which is the subject of 
the investigation, 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 
merchandise which is the subject of the investigation at less than its 
fair value, and
    (B) There have been massive imports of the class or kind of 
merchandise which is the subject of the investigation over a relatively 
short period.
    Regarding a history of dumping, petitioners have argued that the 
existence of U.S. antidumping orders on WSSP from Taiwan and Korea is 
sufficient for the Department to find a history of dumping in this 
case. However, the Department's practice in this area is to consider 
only those orders on subject merchandise from the country under 
investigation as sufficient evidence of a history of dumping. 
Consequently, because there have been no antidumping orders on WSSP 
from Malaysia, we find no history of dumping.
    In determining whether any importer had knowledge of dumping, we 
normally consider margins of 25 percent or more sufficient to impute 
knowledge of dumping under section 735(e)(1)(A) of the Act when USP is 
based on purchase price. Because the final dumping margin for KT is 
less than 25 percent, we do not impute importer knowledge of sales at 
less than fair value, under section 735(a)(3)(A)(ii) of the Act. Since 
the criteria necessary to find the existence of critical circumstances 
under section 735(a)(3)(A) are not present, we do not need to determine 
whether imports of subject merchandise have been massive over a 
relatively short period, in accordance with section 735(a)(3)(B) of the 
Act.
    Accordingly, we determine that critical circumstances do not exist 
with respect to imports of WSSP from Malaysia.

Interested Party Comments

    Comment 1: Petitioners argue that KT was unable to substantiate its 
cost data at verification. As a result, petitioners contend that these 
data are unusable and the Department is required to reject KT's cost 
data completely and base the final determination on BIA. Petitioners 
maintain that, under the statute and the Department's regulations, the 
Department must use BIA to set antidumping duty margins whenever a 
respondent ``refuses or is unable to produce information requested in a 
timely manner and in the form required, or otherwise significantly 
impedes an investigation'' (see, section 776(b) of the Act). 
Petitioners further assert that the Department must also use BIA if it 
is ``unable to verify the accuracy of the information submitted'' by a 
respondent (see, section 776(c) of the Act).
    According to petitioners, the problems that the Department 
discovered during verification are significant and pervasive. (See, 
Comment 2 through Comment 8 for the specific issues raised by 
petitioners.) Petitioners contend that, because of the serious nature 
of the deficiencies in KT's cost data, the Department cannot, and 
should not, develop an alternative basis for constructing KT's 
production costs. Rather, petitioners argue that the Department should 
resort to total BIA. In selecting the BIA rate, petitioners assert that 
the Department should use the highest rate possible, which is the 
highest margin contained in the petition.
    KT argues that the Department is authorized to use BIA if a party 
``refuses or is unable to produce information requested in a timely 
manner and in the form required,'' or if a party ``significantly 
impedes an investigation.'' KT asserts that, in order for these 
conditions to be satisfied, the Department must have requested the 
information and the respondent must have either failed to supply the 
information or have been unable to comply with the request. 
Furthermore, KT argues that, even where the Department has requested 
information, it is not authorized to use BIA unless it has provided 
respondent with a warning and an opportunity to correct any 
deficiencies. KT asserts that, since it (1) provided all of the 
information requested by the Department, (2) in no way impeded this 
investigation, and (3) did not have an opportunity to correct perceived 
deficiencies, there is no basis for the Department to resort to any 
form of BIA.
    KT claims that if the Department determines that it is appropriate 
to use BIA for purposes of the final determination, it should use a 
non-punitive, partial BIA, to reallocate KT's fabrication costs. (See, 
Comment 3, below.) According to KT, since KT has fully cooperated with 
the Department throughout this investigation, there is no reason for 
the Department to completely disregard KT's entire cost submission.
    DOC Position: We agree with KT. The Department has determined that 
KT reported the majority of its production cost with no material 
problems. (See, cost verification report, dated December 9, 1993.) 
Because we have determined the KT's cost submission is reliable, there 
is no reason to completely disregard KT's entire cost submission. (See, 
comments below for a discussion regarding specific issues of validity.)
    Comment 2: KT contends that the Department should accept the 
material costs reported in its September 13, 1993, response. KT argues 
that the Department verified that KT accurately reported in this 
response its actual production quantities and actual material costs 
incurred during the POI. According to KT, since the submitted product-
specific material costs are the result of actual material expenses 
divided by actual production quantities, there is no basis for 
suspecting that the reported per unit material costs are incorrect. KT 
also maintains that its calculation of steel coil costs on a grade-by-
grade basis is appropriate because the cost of the coil did not vary 
based on gauge.
    Additionally, KT maintains that, contrary to petitioners' 
assertions, product-specific material costs reported in its September 
13 submission are different from product-specific material costs 
reported in its October 25 submission for a legitimate reason--because 
the methodologies used in each submission were different.
    Finally, KT notes that although the weighted-average material 
expenses decreased slightly between the September and October 
responses, the percentage of the five most frequently sold home-market 
products that were sold at prices below the cost of production remained 
exactly the same, regardless of which response's material costs are 
used. Thus, KT maintains that the difference between the two 
submissions in material expenses does not materially affect the margin 
calculation.
    According to petitioners, since KT did not submit actual costs on a 
product-specific basis, acceptance of its cost data would be improper 
and inconsistent with the Department's normal practice. Thus, 
petitioners contend that KT's cost submission should be rejected.
    Moreover, petitioners claim that the calculation methodologies used 
to prepare KT's September and October responses were virtually 
identical. According to petitioners, for both the September and October 
responses, KT calculated its material costs by multiplying the average 
per-kilogram material cost by the nominal weight of the pipe. 
Petitioners assert that the nominal weights used for these calculations 
were identical because KT stated that the nominal weight of the pipe 
was determined according to ASTM A-312 specifications. Thus, 
petitioners contend that differences in the materials costs could only 
arise if KT used different average per kilogram materials costs for its 
September and October responses. Petitioners maintain that these per 
kilogram materials costs are different for no apparent reason and are 
therefore suspect.
    Petitioners contend that KT is incorrect in its assertion that the 
difference in the material costs reported in the two cost responses is 
immaterial to whether home market sales were made at prices below KT's 
cost of production. According to petitioners, KT's analysis mistakenly 
assumes that the understatement of its costs can be corrected by merely 
using the costs in KT's unverified October response. Consequently, 
petitioners argue that the Department should reject both of KT's cost 
responses and use BIA to establish KT's final dumping margin.
    DOC Position: We agree with KT. The Department verified that KT 
accurately reported its actual material expenses incurred during the 
POI. Although the Department noted at verification that KT did not 
break out material costs between specific dimensions of pipe within a 
particular grade for the verified submission, the record indicates that 
the company incurred the same per kilogram cost for differing gauges of 
coil within a particular grade of steel.
    We find that a comparison of the methodologies used in September 
and October responses is irrelevant because we only verified the 
methodology used in the September response. Prior to verification, we 
determined that the costs contained in the October submission were not 
adequately product-specific to meet the Department's requirements; 
therefore, we informed KT that we would not verify the COM portion of 
that response. Rather, the Department verified the material costs used 
in the September submission.
    Because the methodologies used to compile the data in the two 
submissions were different, the costs reported in the submissions also 
differed. Therefore, the fact that the September data differed from the 
October data does not provide sufficient grounds to reject these costs. 
Because we verified the reasonableness of the September costs, we have 
accepted them for purposes of the final determination.
    Comment 3: Petitioners argue that the Department should reject the 
cost of production data contained in KT's original cost submission 
because the Department was unable to verify the reported fabrication 
costs. Specifically: (1) The fabrication costs reported by KT in its 
September 13, 1993, submission were allocated to cost centers based on 
budgeted usage rates which could not be reconciled to KT's actual POI 
experience; (2) KT's methodology of allocating fabrication costs 
between industrial and ornamental pipe yields a result which is 
inconsistent with its reported production process steps; and (3) total 
manufacturing costs for industrial pipe were allocated to each subject 
product based on the weight of production rather than machine time.
    Petitioners note that, to the extent the Department resorted to 
weight-based allocations in a previous case involving WSSP (see, Final 
Determination of Sales at Less than Fair Value: Certain Welded 
Stainless Steel Pipe from Taiwan (58 FR 53705, November 12, 1992) (WSSP 
from Taiwan)), that case represents an aberration from the Department's 
usual practice and is clearly distinguishable from the facts in the 
present case. Petitioners maintain that in WSSP from Taiwan the 
Department accepted the Taiwanese respondent's allocation because it 
concluded that the allocation ``did not materially affect the cost 
calculation because labor and overhead represented a small part of 
total cost of production.'' In this case, however, petitioners contend 
that KT's submitted data demonstrate that fabrication costs can hardly 
be considered immaterial in relation to the submitted total cost of 
production.
    Thus, petitioners contend that KT's reliance on WSSP from Taiwan as 
a basis for claiming that weight-based allocations are acceptable is 
misplaced. Alternatively, petitioners assert that the Department 
accepts allocation methodologies based on weight only when a respondent 
affirmatively shows that such allocations make sense in light of the 
specific fabrication process for the product under investigation and 
when allocations based on machine time cannot be performed. According 
to petitioners, neither criterion has been satisfied by KT, and thus 
the Department should reject KT's weight-based allocations in favor of 
BIA.
    KT disagrees, claiming that the cost verification report clearly 
indicates that KT accurately reported all direct labor and factory 
overhead expenses incurred during the POI. Thus, KT contends that 
petitioners' claim that the Department was unable to verify KT's 
fabrication costs should be dismissed out of hand.
    KT states that it allocated fabrication costs between industrial 
and ornamental pipe production based on the actual staffing for factory 
laborers, the actual usage of production equipment, the company's 
actual production experience and, for variable overhead expenses, 
budgeted usage rates. According to KT, the difference between 
fabrication expenses per kilogram for industrial and ornamental pipe 
reflects the fact that KT produces more industrial pipe than ornamental 
pipe.
    Additionally, KT claims that the Department should accept its 
submission methodology of allocating fabrication costs on the basis of 
weight for three reasons. First, the methodology conforms with the way 
in which KT calculates the cost of goods sold in the normal course of 
business, and there is no evidence on the record that allocating 
fabrication expenses on the basis of weight is in fact distortive. 
Second, during the POI, KT did not track the information needed to 
allocate fabrication costs on the basis of machine time. Third, the 
Department has accepted weight-based allocations of these costs in past 
cases involving stainless steel pipe. Accordingly, KT argues that the 
Department should accept its allocation of fabrication expenses for 
purposes of the final determination.
    DOC Position: At verification, we determined that KT accurately 
reported its aggregate fabrication costs during the POI. Therefore, we 
disagree with petitioners that KT's fabrication costs should be 
dismissed for purposes of the final determination.
    In cases where machinery or processes were dedicated to the 
production of specific product types (e.g., WSSP), KT assigned costs 
directly to these products without allocation. For example, KT assigned 
depreciation expenses on machinery dedicated to the production of WSSP 
directly to WSSP. Only in cases where KT incurred fabrication costs 
common to the production of both subject and non-subject merchandise 
did KT allocate these costs.
    We recognize that KT's basis for the allocation of these costs to 
the subject merchandise used budgeted estimates which KT was unable to 
reconcile to its actual production experience during the POI. However, 
we found at verification that KT did not maintain the level of detailed 
records in its normal accounting system that permitted such a 
reconciliation. Moreover, the Department determined that these 
estimates are reasonable based on visual inspection of the production 
process and analysis of KT's documentation. Contrary to petitioners' 
assertions, during the POI KT did not maintain its records at a 
sufficient level of detail to perform a more product-specific 
allocation (e.g., records of machine time, etc.). Accordingly, we find 
that KT's allocation methodology is reasonable, in light of the 
specific circumstances of this case. Thus, we have accepted the use of 
KT's methodology in this case for purposes of the final determination.
    Comment 4: Petitioners argue that KT calculated its production 
costs on the basis of theoretical production weights that overstate the 
weight of finished production, thus artificially lowering its submitted 
per unit production costs. Therefore, petitioners contend that the cost 
data in KT's September 13, 1993, submission is unusable and should be 
rejected by the Department.
    KT contends that the use of theoretical weights does not affect the 
accuracy of its submitted production costs. According to KT, since KT 
used the same conversion factor for its calculation to convert (1) pipe 
production stated in feet to production stated in kilograms, and (2) 
production cost per kilogram to a production cost per foot, the 
conversion factors are uniformly over- or under-stated by the same 
amount.
    DOC Position: We agree with KT. KT's calculation of theoretical 
production weights overstates the actual weight of production during 
the POI. However, as information on the record indicates, this same 
theoretical production weight was used to convert the production costs 
from a per kilogram cost to a per foot cost. Thus, the effect of 
overstating the weight of production is offset by the use of the same 
formula in converting the per kilogram cost back to a per foot cost. 
Accordingly, no adjustment is deemed necessary.
    Comment 5: KT contends that it properly reported all expenses 
associated with management and financial services provided to KT by its 
parent as part of its submitted G&A. KT states that fees for these 
services are charged directly to KT and are reflected in the management 
fee amount KT's parent company received from its subsidiaries in FY 
1993. According to KT, because all management fees that are properly 
allocable to KT are already charged directly to the company, there is 
no basis for charging any additional amount to KT.
    Petitioners contend that KT understated its submitted G&A by not 
including a portion of its parent company's expenses incurred during 
1992. Petitioners argue that, since KT's parent is principally an 
investment holding company, all G&A incurred by the parent directly 
relate to its investment holdings. Petitioners maintain that KT's claim 
that all management fees and financial services provided by its parent 
company to KT are accounted for in its submission is unverified and 
unsupported. According to petitioners, the Department has no way of 
knowing if KT's management fees were correctly calculated and reported. 
Additionally, petitioners claim that the Department should increase 
KT's submitted G&A by the omitted amortization of pre-operating 
expenses as noted at verification.
    DOC Position: We agree with petitioners. In cases where a parent 
company is an investment holding company, it is the Department's 
practice to allocate a portion of G&A expenses incurred by the parent 
company to the respondent under the theory that the parent's G&A 
expenses are incurred on behalf of the parent's investment holdings. 
(See, e.g., Final Determination of Sales at Less Than Fair Value: 
Ferrosilicon from Venezuela (58 FR 27524, May 10, 1993).) Since there 
is no verified information on the record to support KT's claim that all 
G&A expenses incurred by KT's parent for the benefit of KT were already 
charged to KT and included in the submitted G&A calculation, we 
adjusted KT's G&A to include a proportional amount of its parent's 
administrative costs based on KT's parent's stock ownership of KT. 
Additionally, we revised KT's G&A expense computation to include the 
omitted amortization of pre-operating expenses as recorded on the 
company's financial statements, as well as to correct for a clerical 
error found at verification.
    Comment 6: Petitioners claim that the production yields reported by 
KT are inaccurate and unrealistic and cannot be relied upon by the 
Department for its final determination.
    KT argues that production yields are irrelevant because the costs 
used for the final determination are KT's actual material expenses, not 
standard costs. Thus, KT maintains that whether or not the production 
yield used under the standard cost system is accurate is irrelevant to 
the Department's analysis.
    DOC Position: The apparent unrealistic production yields appear to 
be generated from KT's usage of theoretical production weights. Since 
this same theoretical weight was used to convert production costs from 
a unit of weight basis to a unit of length basis, the effect of the 
apparent unrealistic yield rate is offset. (See, Comment 4, above.) 
Therefore, no adjustment was deemed necessary for the final 
determination.
    Comment 7: Petitioners contend that the stainless steel coil costs 
KT used in its original response were not consistent with information 
on the coil invoices obtained by the Department at verification and, 
moreover, were inconsistent with the coil costs reported by KT in its 
second cost questionnaire response. Petitioners argue that the 
Department, therefore, should reject the stainless steel coil costs 
reported by KT.
    KT argues that petitioners' claim that KT reported inconsistent 
stainless steel costs is incorrect. KT asserts that petitioners are 
basing this claim on a comparison of non-comparable figures. 
Specifically, KT states that the figures taken from Exhibit 16 of its 
original cost response are net of all adjustments for work in process, 
exchange gains, and scrap expense and revenue, whereas the figures in 
the second response include these expenses.
    DOC Position: We disagree with petitioners. The Department verified 
the accuracy of the coil costs contained only in the first submission. 
(See, the ``Case History'' section of this notice for further 
discussion.) Thus, any differences between the first and second 
responses are irrelevant. Moreover, it is not relevant that the 
weighted-average material costs reported in the first submission differ 
from selected invoices included as exhibits to the cost verification 
report. Specifically, the weighted-average prices are based on the 
entire population of invoices which comprise KT's raw material 
requisition values, while the invoices included as verification 
exhibits are only a selected portion of them. To the extent that the 
individual values are not identical, they should differ from the 
average value.
    Comment 8: Petitioners argue that the exhibits to the cost 
verification report demonstrate that an exchange rate gain claimed by 
KT as an offset to foreign exchange losses does not relate to the 
merchandise under investigation and, accordingly, should not be 
included in KT's submitted cost of manufacturing.
    DOC Position: We agree. Accordingly, we have not allowed an offset 
for this gain for purposes of the final determination.
    Comment 9: Petitioners contend that the Department cannot rely on 
KT's second cost submission because it contains unverified data. Thus, 
petitioners maintain that the Department's conclusion in the cost 
verification report that material costs in the first submission are 
lower than material costs reported in the second cost submission does 
not, and should not, lend any credibility to the data in the first 
submission. According to petitioners, both submissions are flawed and 
should be rejected in their entirety.
    DOC Position: We agree with petitioners that the material cost data 
contained in KT's second submission was not verified and should not be 
relied upon by the Department. Therefore, no conclusions were drawn as 
a result of comparing material costs contained in both the first and 
second submissions.
    Comment 10: KT argues that the Department should accept its 
reported value for work in process. KT asserts that, although its 
opening and closing work in process for the POI are valued at standard 
cost, without any adjustment for the variance during the period, it is 
mathematically impossible for this to result in an understatement of 
KT's costs because KT had a negative variance for FY 1993.
    DOC Position: We agree. Since KT had a negative variance during the 
relevant periods, the effect of valuing work-in-process at standard 
cost would be to overstate its costs. Therefore, no adjustment is 
deemed necessary.
    Comment 11: KT reported an average home market packing labor 
expense for the POI based on the packing labor expenses incurred during 
each month of the period. Petitioners contend that the Department 
should use the monthly packing labor expenses in calculating KT's home 
market packing expenses instead of the POI average. Petitioners assert 
that the Department's longstanding policy is to use data that are as 
sales-specific as possible. According to petitioners, in this case the 
most specific data available are the monthly costs.
    KT argues that using monthly packing labor costs would distort KT's 
per unit packing expenses. KT maintains that it is appropriate to 
spread packing labor expenses over the sales quantities during the 
entire six-month POI because of fluctuations in monthly sales volumes. 
KT asserts that this methodology yields a more representative per unit 
expense for the POI because packing labor is a fixed cost.
    DOC Position: We agree with KT. Normally, the Department prefers 
respondents to report transaction-specific expenses under the theory 
that individual prices are set to cover individual (i.e., transaction-
specific) costs. In this case, however, the costs are not transaction-
specific. Moreover, because KT's packing labor expenses are fixed, they 
do not vary by sales volume. Therefore, fluctuations in the monthly 
sales volumes create differences in the monthly average expense 
amounts. Because these fluctuations in sales expenses are not 
translated into changes in the per unit prices, they distort the margin 
calculation. We agree with KT that using the POI-average minimizes the 
effect of these fluctuations.
    Therefore, we find that the POI average is more representative of 
KT's per unit packing labor costs. Accordingly, we have accepted this 
average for purposes of the final determination.
    Comment 12: KT argues that the Department should affirm its 
preliminary determination that critical circumstances do not exist with 
respect to KT's exports of subject merchandise to the United States. KT 
maintains that there is no history of dumping of subject merchandise 
imported from Malaysia. In addition, KT claims that its exports were 
not massive.
    DOC Position: We agree. See, the Critical Circumstances section of 
this notice for further discussion.
    Comment 13: Both KT and petitioners contend that the Department 
should calculate KT's short-term interest rate on U.S. dollar-
denominated loans using the interest expenses incurred and the 
principal outstanding denominated in U.S. dollars rather than U.S. 
dollar-amounts converted to Malaysian Ringitts. KT notes that 
calculating the interest rate in this way eliminates from the 
calculation the effect of exchange rate fluctuations.
    DOC Position: We agree. At verification, we noted that KT had 
calculated its U.S. interest rate by converting U.S. dollar-denominated 
loans and interest payments to Malaysian Ringitts. We recalculated its 
interest rate based on the original currency of the loans and the 
interest payments (i.e., U.S. dollars) and used this revised rate in 
our U.S. credit calculation.
    Comment 14: Respondent argues that the Department should calculate 
KT's U.S. credit period using the date of invoice, rather than date of 
shipment from the factory. Respondent states that the invoice date is 
same as the bill of lading date and is the date on which the 
merchandise is shipped from Malaysia. Respondent adds that because the 
bill of lading date is the date on which the merchandise leaves KT's 
possession, the Department would be overstating KT's credit expenses 
for its U.S. sales if it used an earlier date. However, KT contends 
that, should the Department find it necessary to use shipment dates, 
the Department should use the shipment dates in its October 29, 1993, 
submission. KT notes that these data were verified by the Department.
    Petitioners argue that KT's proposed methodology of using bill of 
lading date in its U.S. credit calculation should not be used by the 
Department in the final determination. Petitioners assert that this 
methodology is contrary to the Department's longstanding policy as 
stated in the Preliminary Determination of Sale at Less than Fair 
Value: Welded Stainless Steel Pipe from Malaysia, 58 FR 47,120 
(September 7, 1993). Petitioners maintain that the Department should 
use the shipment dates submitted by KT on October 29, 1993.
    DOC Position: We agree with petitioners. As stated in our 
preliminary determination, it is the Department's practice to calculate 
credit expenses using the period between shipment of the merchandise 
from the factory and payment. (See, e.g., Final Determination of Sales 
at Less Than Fair Value: Ferrosilicon From Venezuela, 58 FR 27522 (May 
10, 1993) and Final Determination of Sales at Less Than Fair Value: 
Certain Hot-Rolled Lead and Bismuth Carbon Steel Products From the 
United Kingdom, 58 FR 6207 (January 27, 1993).) Moreover, we note that 
using the date of shipment from the factory does not overstate KT's 
U.S. credit expense because, contrary to KT's assertion, KT's factory 
shipment date generally follows the date of invoicing.
    Comment 15: Petitioners argue that the Department should not make a 
difference in merchandise (difmer) adjustment in any instance where 
such an adjustment would lower KT's FMV. Petitioners base their 
argument on the fact that the difmer adjustments are based on KT's cost 
data which petitioners claim is unreliable.
    Respondent maintains that the Department should make difmer 
adjustments in cases where sales of non-identical merchandise are 
compared.
    DOC Position: We agree with respondent. Because the Department has 
relied on KT's COP data, we have used this data to make our difmer 
adjustments.

Continuation of Suspension of Liquidation

    We are directing the Customs Service to continue to suspend 
liquidation of all entries of WSSP that are entered, or withdrawn from 
warehouse, for consumption on or after September 7, 1993, the date of 
publication of our affirmative preliminary determination in the Federal 
Register. The Customs Service shall require a cash deposit or the 
posting of a bond equal to the estimated amount by which the FMV of the 
merchandise subject to this investigation exceeds the USP as shown 
below. This suspension of liquidation will remain in effect until 
further notice. The weighted-average dumping margins are as follows: 

------------------------------------------------------------------------
                                               Weighted-                
                                                average       Critical  
       Producer/manufacturer/exporter            margin    circumstances
                                               percentage               
------------------------------------------------------------------------
Kanzen Tetsu Sdn. Bhd.......................         9.13  No.          
All Others..................................         9.13  No.          
------------------------------------------------------------------------

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 determine whether these 
imports are materially injuring, or threaten material injury to, the 
U.S. industry within 45 days.

Notification to Interested Parties

    This notice also serves as the only reminder to parties subject to 
administrative protective order (APO) of their responsibility 
concerning the return or destruction of proprietary information 
disclosed under APO in accordance with 19 CFR 353.34(d). Failure to 
comply is a violation of the APO.
    This determination is published pursuant to section 735(d) of the 
Act and 19 CFR 353.20(a)(4).

    Dated: January 21, 1994.
Joseph A. Spetrini,
Acting Assistant Secretary for Import Administration.
[FR Doc. 94-1967 Filed 1-27-94; 8:45 am]
BILLING CODE 3510-DS-P