[Federal Register Volume 59, Number 219 (Tuesday, November 15, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-28161]


[[Page Unknown]]

[Federal Register: November 15, 1994]


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DEPARTMENT OF COMMERCE
[A-580-823]

 

Final Determination of Sales at Not Less Than Fair Value: 
Saccharin From Korea

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

EFFECTIVE DATE: November 15, 1994.

FOR FURTHER INFORMATION CONTACT: Thomas McGinty or Peter Wilkniss, 
Office of Countervailing Investigations, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, NW., Washington, DC 20230; telephone 
(202) 482-5055 and 482-0588, respectively.

FINAL DETERMINATION: We determine that saccharin from Korea is not 
being, nor 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'').

Case History

    Since the publication of the preliminary determination in the 
Federal Register on June 23, 1994 (59 FR 32416), the following events 
have occurred. On July 6, 1994, pursuant to section 353.20(b)(1) of the 
Department's regulations, petitioner requested that the final 
determination in this case be postponed. On July 19, 1994, the 
Department published in the Federal Register a notice postponing the 
deadline for the final determination in this case until November 7, 
1994. On July 12, 1994, at the request of the Department, Jeil Moolsan 
Company Inc. (``JMC'') submitted a revised response to the Department's 
cost of production questionnaire. On July 18, 19, and 20, 1994, the 
Department verified JMC's sales information at JMC's offices in Seoul, 
South Korea. On July 25, 26, and 27, 1994, the Department verified 
JMC's cost of production data at JMC's office in Seoul, South Korea. On 
September 16, 1994, and September 23, 1994, petitioner and respondent 
submitted case and rebuttal briefs to the Department. On September 30, 
1994, the Department held a public hearing in this investigation.

Scope of the Investigation

    The product covered by this investigation is saccharin. Saccharin 
is a non-nutritive sweetener used in beverages and foods, personal care 
products such as toothpaste, table-top sweeteners, animal feeds, and 
metalworking fluids. Three forms of saccharin are typically available 
as referenced in the American Chemical Society's Chemical Abstract 
Service (``CAS''). These forms are sodium saccharin (CAS #128-44-9), 
calcium saccharin (CAS #6485-34-3), and acid (or insoluble) saccharin 
(CAS #81-07-2). Saccharin is classified under subheading 2925.11.00 of 
the Harmonized Tariff Schedule of the United States (``HTS''). The 
scope of this investigation includes all types of saccharin imported 
under this HTS subheading including research and specialized grades. 
The HTS subheading is 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 June 1, 1993, through 
November 30, 1993.

Product Comparisons

    In making our fair value comparisons, in accordance with the 
Department's standard methodology, we first compared merchandise 
identical in all respects. If no identical merchandise was sold, we 
compared the most similar merchandise, as determined by the model-
matching criteria contained in Appendix V of the questionnaire 
(``Appendix V'') (on file in Room B-099 of the main building of the 
Department of Commerce (``Public File'')).
    Regarding level of trade, JMC reported and we verified that JMC 
sells only to distributors in the United States and to both 
distributors and trading companies in the U.K. (U.K. sales were used 
for foreign market value because the home market was determined not to 
be viable, see, ``Foreign Market Value'' section below.) However, JMC 
reported that there is no difference between prices or conditions of 
sale made at the distributor and trading company levels of trade. We 
examined this issue at verification and found no evidence that JMC's 
prices or conditions of sale differed on the basis of level of trade. 
Therefore, in keeping with past practice (see, e.g., Final Results of 
Administrative Review: Antifriction Bearings and Parts Thereof from the 
Federal Republic of Germany, et al. (56 FR 31692, 31709-11; July 11, 
1991), and in accordance with 19 CFR 353.58, we have compared JMC's 
U.S. sales to distributors to U.K. sales to either distributors or 
trading companies, without distinction, in determining whether or not 
JMC made sales at less than fair value.

Fair Value Comparisons

    To determine whether JMC's sales for export to the United States 
were made at less than fair value, we compared the United States price 
(``USP'') to the foreign market value (``FMV''), as specified in the 
``United States Price'' and ``Foreign Market Value'' sections of this 
notice. With the exception of one sale to the United States, all 
comparisons of U.S. and third country sales involved identical 
merchandise. For the U.S. sale which was compared to a sale of similar 
merchandise, we made an adjustment for physical differences in 
merchandise pursuant to 19 CFR 353.57.

United States Price

    Because JMC's U.S. sales of saccharin were made to unrelated 
purchasers prior to importation into the United States, and the 
exporter's sales price methodology was not indicated by other 
circumstances, we based USP on the purchase price (``PP'') sales 
methodology in accordance with section 772(b) of the Act.
    We calculated JMC's PP based on packed and delivered prices to 
unrelated customers in the United States. We made deductions to the 
U.S. price, where appropriate, for foreign brokerage and handling, 
containerization, marine insurance, and freight expenses and charges. 
In accordance with section 772(d)(1)(B) of the Act, we made an addition 
to the U.S. price for the amount of import duties imposed on inputs 
which were subsequently rebated upon exportation of the finished 
merchandise to the United States.

Foreign Market Value

    In order to determine whether there was a sufficient volume of 
sales in the home market to serve as a viable basis for calculating 
FMV, we compared the volume of home market sales of subject merchandise 
to the volume of third country sales of subject merchandise, in 
accordance with section 773(a)(1)(B) of the Act. As a result, we 
determined that the home market was not viable. Therefore, we have 
based FMV on JMC's sales to the largest third country market by volume, 
the U.K., in accordance with 19 CFR 353.49(b).
    We calculated FMV based on delivered prices, inclusive of packing, 
to customers in the U.K. From the delivered price, we deducted third 
country packing and added U.S. packing costs. In light of the decision 
of the court of Appeals for the Federal Circuit in Ad Hoc Committee of 
AZ-NM-TX-FL Producers of Gray Portland Cement v. United States, 13 F3d 
398 (Fed. Cir. 1994), we deducted post-sale movement charges from FMV 
under the circumstance-of-sale provision of 19 CFR 353.56(a). Pursuant 
to section 773(a)(4)(B) of the Act and 19 CFR 353.56(a)(2), we also 
made circumstance-of-sale adjustments for differences in quality 
inspection charges and expenses related to securing credit including: 
advise charges, postage, interest paid to the bank in relation to the 
terms of payment, and outside bank charges. In addition, we added the 
amount of import duties imposed on inputs which as subsequently rebated 
upon exportation of the finished merchandise to the U.K.

Cost of Production

    Petitioner alleged that JMC made third country sales during the POI 
at prices below the cost of production (``COP''). Based on petitioner's 
allegations, we concluded that we had reasonable grounds to ``believe 
or suspect'' that sales were made below COP. Thus, we initiated a COP 
investigation pursuant to section 773(b) of the Act.
    We performed a product-specific cost test, in which we examined 
whether each home market sale was priced below that product's COP. The 
Department defines COP as the sum of direct material, direct labor, 
variable and fixed factory overhead, general expenses, and packing 
expense, in accordance with 19 CFR 353.51(c). (See, e.g., Preliminary 
Results of Antidumping Duty Administrative Review: Polyethylene 
Terephthalate Film, Sheet, and Strip from the Republic of Korea (59 FR 
35099; July 8, 1994).) We compared the COP for each product to the 
third country unit price, net of movement expenses.
    With the following exceptions, we relied on submitted and verified 
COP information. At verification, we found that JMC included commission 
and dividend income as an offset to G&A expenses in its cost of 
production response. Since dividend income relates to the investment 
activities of JMC and not to JMC's production activity, we have 
adjusted JMC's reported G&A expenses to exclude dividend income as an 
offset to JMC's G&A expense. Likewise, commission income is related to 
the activities of JMC's retail division, not JMC's cost of producing 
saccharin. Therefore, we have also excluded commission income as an 
offset to JMC's G&A expense.
    In accordance with section 773(b) of the Act, we also examined 
whether JMC's third country sales were made below COP in substantial 
quantities over an extended period of time, and whether such sales were 
made at prices that would permit the recovery of all costs within a 
reasonable period of time in the normal course of trade.
    To satisfy the requirement of section 773(b)(1) that below-cost 
sales be disregarded only if made in substantial quantities, the 
following methodology was used: For each product where less than ten 
percent, by quantity, of the third country sales made during the POI 
were made at prices below the COP, we included all sales of that model 
in the computation of FMV. For each product where ten percent or more, 
but less than 90 percent, of the home market sales made during the POI 
were priced below COP, we excluded from the calculation of FMV those 
third country sales which were priced below COP, provided that the 
below-cost sales of that product were made over an extended period of 
time. Where we found that more than 90 percent of JMC's sales were at 
prices below the COP, and such sales were made over an extended period 
of time, we disregarded all sales of that product and calculated FMV 
based on constructed value.
    In accordance with section 773(b)(1) of the Act, in order to 
determine whether below-cost sales had been made over an extended 
period of time, we compared the number of months in which below-cost 
sales occurred for each product to the number of months in the POI in 
which that product was sold. If a product was sold in three or more 
months of the POI, we did not exclude below-cost sales unless there 
were below-cost sales in at least three months during the POI. When we 
found that sales of a product only occurred in one or two months, the 
number of months in which the sales occurred constituted the extended 
period of time; i.e., where sales of a product were made in only two 
months, the extended period of time was two months, where sales of a 
product were made in only one month, the extended period of time was 
one month. (See Preliminary Results and Partial Termination of 
Antidumping Duty Administrative Reviews: Tapered Roller Bearings, Four 
Inches or Less in Outside Diameter, and Components Thereof, From Japan 
(58 FR 69336, 69338, December 10, 1993). We examined JMC's model-
specific COP data, as corrected based on our findings at verification, 
and found no sales below COP.

Currency Conversion

    We made currency conversions based on the official exchange rates 
in effect on the dates of the U.S. sales as certified by the Federal 
Reserve Bank of New York.

Margin Calculation

    Based on the calculation methodology outlined above, we calculated 
a margin of zero percent for U.S. sales of saccharin from Korea.

Verification

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

Interested Party Comments

Comment 1

    Petitioner argues that evidence has been uncovered in this 
investigation which suggests that JMC employs a dual cost accounting 
system. Under such a system, JMC could arrange for dual pricing from 
suppliers and assign all low cost inputs to either home market or third 
country production in order to minimize below cost sales. Further, 
petitioner argues that the impact of such a system could be more 
distortive in a situation where the home market is determined to be not 
viable. This would allow all high cost inputs to be allocated to 
domestic production thereby decreasing the likelihood that the 
Department's cost analysis would find sales below cost in the third 
country market.
    According to petitioner, in Certain Circular Welded Carbon Steel 
Pipes and Tubes from the Republic of Korea, 49 FR 9926 (March 16, 
1984), the Department reasoned that where different costs are 
associated with producing for export as compared with domestic 
production and the merchandise is identical, it is appropriate to use 
the average cost of producing that merchandise in calculating cost of 
production or constructed value. Therefore, when presented with 
evidence that a respondent maintains two distinct cost systems, the 
Department has no alternative but to disregard the respondent's COP 
information and apply the best information available. Petitioner 
asserts that such a situation exists in this investigation.
    Respondent argues that JMC does not maintain a dual cost system. 
Respondent outlines the verification procedures employed by the 
Department to verify the accuracy and completeness of JMC's cost 
accounting system and argues that the Department conducted a complete 
verification of JMC's cost of production response and found no evidence 
to indicate that such a system exists.
    Respondent points out that the word ``export'' referred to by 
petitioner as evidence of the existence of a dual cost system pertains 
to JMC's cost of sales accounts. These sales accounts are used by JMC 
to track the cost of sales to each market at any given time. However, 
JMC's production costs across markets for identical merchandise are 
identical.

DOC Position

    We disagree with petitioner. We conducted a thorough verification 
of JMC's cost accounts and cost of production questionnaire response 
and found no evidence that JMC employs a dual cost system as alleged by 
petitioner. The only evidence petitioner points to is that JMC 
maintains separate accounts for the cost of export and domestic sales. 
However, based on our review of JMC's accounting system, we are 
satisfied that the per unit cost of export and domestic sales are not 
segregated and that no additional costs have been allocated to either 
home market or third country sales.

Comment 2

    Petitioner contends that the Department should disallow any offsets 
to JMC's general and administrative expenses (``G&A'') that cannot be 
tied to the production of the subject merchandise, but should include 
in G&A any losses on foreign currency transactions and translations.
    Petitioner points to two instances in JMC's cost of production 
submission where G&A offsets are claimed and should be disallowed. 
First, petitioner cites the cost verification report where the 
Department stated that JMC had included dividend and commission income 
as an offset to G&A, yet neither related to the production of 
saccharin. Second, petitioner argues that ``miscellaneous income'' 
should not be allowed as an offset, since there is no evidence that 
this income is related to the production of the subject merchandise.
    Petitioner argues that foreign exchange losses on foreign currency 
transactions and translations should be included in the G&A 
calculation, since all company debt is fungible. Foreign exchange 
gains, however, should be excluded from G&A, unless it can be proven 
that such gains are directly related to the production of subject 
merchandise.
    Respondent agrees with petitioner that the commission and dividend 
income is not directly related to the production of the subject 
merchandise. Respondent agrees that commission income should not be 
allowed as an offset to G&A, but since the dividend income is generated 
from assets which are classified in the ``current assets'' section of 
JMC's balance sheet and represents a use of working capital, dividend 
income is properly reported as an offset to G&A.
    Respondent argues that miscellaneous income is also properly 
claimed as an offset to G&A because, contrary to petitioner's 
contention, this income is associated with JMC's manufacturing 
operations. Respondent points to the verified cost response at page 20, 
supplemented by Attachment D-11. According to respondent, miscellaneous 
income consists of (1) an import agent fee, (2) commission income for 
advertising, and (3) sales of iron scrap.
    Respondent asserts that, contrary to petitioner's brief, gains and 
losses resulting from exchange rate fluctuations between the date of 
shipment and the date of payment, and gains and losses from translation 
of foreign currency loans, are separate and unrelated issues. 
Respondent asserts that gains and losses resulting from exchange rate 
fluctuations between the date of shipment and date of payment are not 
part of COP and thus have been appropriately excluded from the COP 
calculation. Respondent argues, however, that translation gains and 
losses related to debt should both be included in the calculation of 
interest expense.

DOC Position

    We agree with petitioner with respect to JMC's treatment of 
commission and dividend income. Since commission and dividend income 
are not related to JMC's production of the subject merchandise (see 
``Cost of Production'' section of this notice), they cannot be included 
in the G&A calculation. Therefore, we have adjusted JMC's reported G&A 
expense accordingly.
    We agree with respondent that miscellaneous income should be 
permitted as an offset to G&A because this income is related to JMC's 
production operations. Therefore, we have included this income as an 
offset to G&A, as reported.
    We agree with respondent, in part, with respect to foreign exchange 
gains and losses in that transaction and translation gains and losses 
should be examined separately. Foreign exchange gains and losses 
related to purchases of inputs to produce the subject merchandise 
should be included in COM. However, since we cannot conclusively 
determine whether JMC's net exchange loss on transactions was related 
specifically to such purchases, we consider it inappropriate to include 
the net loss in COM. Instead, we would normally include the net 
exchange loss in the G&A calculation, but since its inclusion would 
have virtually no effect on COP, we have not recorded such an 
adjustment.
    We agree with respondent that foreign exchange gains and losses on 
year-end translation of financial assets and liabilities should be 
included in JMC's calculation of interest expense. But since JMC has 
net interest income in excess of these losses, there is no effect on 
COP. Therefore, no adjustment was made to JMC's interest expense for 
these losses.

Comment 3

    Respondent contends that, contrary to the Department's sales 
verification report, JMC's reporting of quality inspection expense on a 
per kilogram basis is correct because JMC's gross unit price, as 
reported, is also on a per kilogram basis. Therefore, it makes no 
difference whether the adjustment for this expense is made on a per 
kilogram basis or as a percentage of the FOB price.

DOC Position

    We agree with respondent. In the verification report, we noted that 
JMC had incurred this expense on the basis of value, not quantity. 
However, because JMC's gross unit price is reported on the same basis 
there is no need to adjust JMC's reported quality inspection expense.

ITC Notification

    In accordance with section 735(d) of the Act, we have notified the 
ITC of our determination.

Notification to Interested Parties

    This notice 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 733(f) of the 
Act and 19 CFR 353.15(a)(4).

    Dated: November 7, 1994.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 94-28161 Filed 11-14-94; 8:45 am]
BILLING CODE 3510-DS-P