[Federal Register Volume 62, Number 8 (Monday, January 13, 1997)]
[Notices]
[Pages 1708-1719]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-752]


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DEPARTMENT OF COMMERCE
International Trade Administration
[A-570-844]


Notice of Final Determination of Sales at Less Than Fair Value: 
Melamine Institutional Dinnerware Products From the People's Republic 
of China

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

EFFECTIVE DATE: January 13, 1997.

FOR FURTHER INFORMATION CONTACT: David J. Goldberger, Katherine 
Johnson, or Everett Kelly, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202) 
482-4136, (202) 482-4929, or (202) 482-4194, respectively.

The Applicable Statute

    Unless otherwise indicated, all citations to the Tariff Act of 
1930, as amended (``the Act'') are references to the provisions 
effective January 1, 1995, the effective date of the amendments made to 
the Act by the Uruguay Rounds Agreements Act (``URAA'').

Final Determination

    We determine that melamine institutional dinnerware products 
(``MIDPs'') from the People's Republic of China (``PRC'') are being, or 
are likely to be, sold in the United States at less than fair value 
(``LTFV''), as provided in section 735 of the Act.

Case History

    Since the preliminary determination in this investigation 
(Preliminary Determination and Postponement of Final Determination: 
Melamine Institutional Dinnerware Products from the PRC (61 FR 43337, 
August 22, 1996)), the following events have occurred:
    On August 22, 1996, Chen Hao Xiamen alleged that the Department 
made a ministerial error in its preliminary determination. The 
Department found that there was an error made in the preliminary 
determination; however, this error did not result in a change of at 
least five absolute percentage points in, but no less than 25 percent 
of, the weighted-average dumping margin calculated in the preliminary 
determination. Accordingly, no revision to the preliminary 
determination was made. (See Memorandum from the MIDP/PRC Team to Louis 
Apple dated September 16, 1996.)
    In September through November 1996, we verified the questionnaire 
responses of the following participating respondents and, where 
applicable, their affiliates: Chen Hao (Xiamen) Plastic Industrial Co. 
Ltd. (``Chen Hao Xiamen''), Dongguan Wan Chao Melamine Products Co., 
Ltd., (``Dongguan''), Gin Harvest Melamine (Heyuan) Enterprises Co. 
Ltd. (``Gin Harvest''), Sam Choan Plastic Co. Ltd. (``Sam Choan''), and 
Tar-Hong Melamine Xiamen Co. Ltd. (``Tar Hong'').
    Additional published information (PI) on surrogate values was 
submitted by petitioner and respondents on November 21, 1996. On 
November 22, 1996, the Department requested that Chen Hao Xiamen, 
Dongguan, Sam Choan, and Tar Hong submit new computer tapes to include 
data corrections identified through verification. This information was 
submitted on December 3 through 6, 1996.
    Petitioner, the American Melamine Institutional Tableware 
Association (``AMITA''), and the respondents submitted case briefs on 
November 26, 1996, and rebuttal briefs on December 4, 1996. The 
Department held a public hearing for this investigation on December 6, 
1996.

[[Page 1709]]

Scope of the Investigation

    This investigation covers all items of dinnerware (e.g., plates, 
cups, saucers, bowls, creamers, gravy boats, serving dishes, platters, 
and trays) that contain at least 50 percent melamine by weight and have 
a minimum wall thickness of 0.08 inch. This merchandise is classifiable 
under subheadings 3924.10.20, 3924.10.30, and 3924.10.50 of the 
Harmonized Tariff Schedule of the United States (``HTSUS''). Excluded 
from the scope of investigation are flatware products (e.g., knives, 
forks, and spoons).
    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) for all participating companies 
is January 1, 1995, through December 31, 1995.

Separate Rates

    Of the five responding exporters in this investigation, three--Gin 
Harvest, Tar Hong Xiamen, and Chen Hao Xiamen (1) are wholly foreign-
owned and (2) make all sales to the United States of merchandise 
produced by their company through Taiwan parent companies. Thus, we 
consider the Taiwan-based parent to be the respondent exporter in the 
proceeding. No separate rates analysis is required for these exporters. 
(See, e.g., Final Determination of Sales at Less Than Fair Value: 
Disposable Pocket Lighters from the People's Republic of China (60 FR 
22359, 22361, May 5, 1995)).
    Sam Choan is wholly foreign owned but its sales to the United 
States are made from its facilities in the PRC. For this respondent, a 
separate rates analysis is necessary to determine whether it is 
independent from PRC government control over its export activities.
    To establish whether a firm is sufficiently independent from 
government control to be entitled to a separate rate, the Department 
analyzes each exporting entity under a test arising out of the Final 
Determination of Sales at Less Than Fair Value: Sparklers from the 
People's Republic of China (56 FR 20588, May 6, 1991) and amplified in 
Final Determination of Sales at Less Than Fair Value: Silicon Carbide 
from the People's Republic of China (59 FR 22585, May 2, 1994) (Silicon 
Carbide). Under the separate rates criteria, the Department assigns 
separate rates in nonmarket economy cases only if respondents can 
demonstrate the absence of both de jure and de facto governmental 
control over export activities.

1. Absence of De Jure Control

    Respondents have submitted for the record the 1994 Foreign Trade 
Law of the PRC, enacted by the State Council of the central government 
of the PRC, which demonstrates absence of de jure control over the 
import and export of goods from the PRC by ``foreign trade operators.'' 
The term ``foreign trade operators'' refers to legal persons and other 
organizations engaged in foreign trade activities in accordance with 
the provisions of the 1994 law. The companies also reported that MIDPs 
are not included on any list of products that may be subject to central 
government export constraints.
    In prior cases, the Department has analyzed the provisions of the 
law that the respondents have submitted in this case and found that 
they establish an absence of de jure control (see Final Determination 
of Sales at Less Than Fair Value: Bicycles from the People's Republic 
of China (61 FR 19026, April 30, 1996) (Bicycles)). We have no new 
information in this proceeding which would cause us to reconsider this 
determination.
    However, as in previous cases, there is some evidence that the PRC 
central government enactments have not been implemented uniformly among 
different sectors and/or jurisdictions in the PRC. (See Silicon Carbide 
and Final Determination of Sales at Less Than Fair Value: Furfuryl 
Alcohol from the People's Republic of China (60 FR 22544, May 8, 1995) 
(Furfuryl Alcohol)). Therefore, the Department has determined that an 
analysis of de facto control is critical in determining whether 
respondents are, in fact, subject to a degree of governmental control 
which would preclude the Department from assigning separate rates.

2. Absence of De Facto Control

    The Department typically considers four factors in evaluating 
whether each respondent is subject to de facto governmental control of 
its export functions: (1) whether the export prices are set by or 
subject to the approval of a governmental authority; (2) whether the 
respondent has authority to negotiate and sign contracts and other 
agreements; (3) whether the respondent has autonomy from the government 
in making decisions regarding the selection of management; and (4) 
whether the respondent retains the proceeds of its export sales and 
makes independent decisions regarding disposition of profits or 
financing of losses (see Silicon Carbide and Furfuryl Alcohol).
    Each company asserted, and we verified, the following: (1) it 
establishes its own export prices; (2) it negotiates contracts, without 
guidance from any governmental entities or organizations; (3) it makes 
its own personnel decisions; and (4) it retains the proceeds of its 
export sales, uses profits according to its business needs and has the 
authority to sell its assets and to obtain loans. In addition, 
questionnaire responses on the record indicate that pricing was 
company-specific during the POI, which does not suggest coordination 
among or common control of exporters. During verification proceedings, 
Department officials viewed such evidence as sales documents, company 
correspondence, and bank statements. This information supports a 
finding that there is a de facto absence of governmental control of 
export functions. Consequently, we have determined that Dongguan and 
Sam Choan have met the criteria for the application of separate rates.

PRC-Wide Rate

    Because some companies did not respond to the questionnaire, we are 
applying a single antidumping deposit rate--the PRC-wide rate--to all 
exporters in the PRC (except the five participating exporters) based on 
our presumption that those companies are under common control by the 
PRC government. See, e.g., Bicycles.

Facts Available

    Pursuant to sections 776 (a) and (b) of the Act, we have based the 
PRC-wide rate on facts available, using adverse inferences, because the 
non-responding companies have failed to cooperate to the best of their 
ability. Section 776(a)(2) of the Act provides that ``if an interested 
party or any other person--(A) withholds information that has been 
requested by the administering authority, (B) fails to provide such 
information by the deadlines for the submission of the information or 
in the form and manner requested, subject to subsections (c)(1) and (e) 
of section 782, (C) significantly impedes a proceeding under this 
title, or (D) provides such information but the information cannot be 
verified as provided in section 782(i)--the administering authority * * 
* shall, subject to section 782(d), use the facts otherwise available 
in reaching the applicable determination under this title.''
    In addition, section 776(b) of the Act provides that, if the 
Department finds that an interested party ``has failed to cooperate by 
not acting to the best of its

[[Page 1710]]

ability to comply with a request for information,'' the Department may 
use information that is adverse to the interests of that party as the 
facts otherwise available. The statute also provides that such an 
adverse inference may be based on secondary information, including 
information drawn from the petition.
    Section 776(c) of the Act provides that where the Department relies 
on ``secondary information,'' the Department shall, to the extent 
practicable, corroborate that information from independent sources 
reasonably at the Department's disposal. The SAA, accompanying the 
URAA, clarifies that the petition is ``secondary information.'' See, 
SAA at 870. The SAA also clarifies that ``corroborate'' means to 
determine that the information used has probative value. Id. However, 
where corroboration is not practicable, the Department may use 
uncorroborated information.
    The exporters that did not respond in any form to the Department's 
questionnaire have not cooperated at all. Further, absent a response, 
we must presume government control of these and all other PRC companies 
for which we cannot make a separate rates determination. Accordingly, 
consistent with section 776(b)(1) of the Act, we have applied, as total 
facts available the margin alleged in the petition, as adjusted by the 
Department. We considered the petition as the most appropriate 
information on the record to form the basis for a dumping calculation 
for these uncooperative respondents. In accordance with section 776(c) 
of the Act, we sought to corroborate the data contained in the 
petition.
    The petitioner based its allegation of U.S. price on catalog prices 
of one of the respondents. The factors used in the petition are based 
on petitioner's own production experience. The factors in the petition 
consistent with the factors reported by responding companies on the 
record of this investigation. The surrogate values used by petitioner 
are based on publicly available information. Therefore, we detemine 
that further corroboration of the facts available margin is 
unnecessary.
    We also applied adverse facts available to Dongguan based on the 
fact that we were unable to verify its response. See Comment 20 in the 
``Interested Party Comments'' section of this notice, below.

Fair Value Comparisons

    To determine whether respondents' sales of the subject merchandise 
to the United States were made at less than fair value, we compared the 
export price (EP) to the NV, as described in the ``Export Price'' and 
``Normal Value'' sections of this notice. In accordance with section 
777A(d)(1)(A)(i), we compared weighted-average EPs for the POI to the 
factors of production.

Export Price and Constructed Export Price

    For Chen Hao Xiamen, Gin Harvest, Sam Choan, and Tar Hong, when the 
subject merchandise was sold directly to the first unaffiliated 
purchaser in the United States prior to importation and when 
constructed export price (``CEP'') methodology was not otherwise 
indicated, we calculated the price of the subject merchandise in the 
United States in accordance with section 772(a) of the Act. In 
addition, for Tar Hong, where sales to the first unaffiliated purchaser 
took place after importation into the United States, we based the price 
in the United States on CEP, in accordance with section 772(b) of the 
Act.
    We excluded from our analysis all sales of products with a minimum 
thickness of less than 0.08 inch to the extent mistakenly or 
erroneously reported by the exporter in its sales listing. For Tar 
Hong, we also excluded all sales of three-piece sets where the combined 
thickness of the three items was less than 0.24 inch because we were 
unable to determine piece-specific prices and characteristics for such 
sets. See Comment 10, below.
    We corrected respondents' data for errors and omissions found at 
verification. In addition, we made company-specific adjustments as 
follows:

1. Chen Hao Xiamen

    The calculation of EP for purposes of the final determination did 
not differ from our preliminary calculations.

2. Dongguan

    We based Dongguan's final dumping margin on adverse facts 
available. See Comment 20.

3. Gin Harvest

    We calculated EP in accordance with our preliminary calculations, 
except for the following changes based on verification findings: (1) we 
excluded sales of one product which we found to be outside the scope of 
investigation; (2) we corrected the reported movement expenses for one 
sale; and (3) we corrected for all sales the reported distance from the 
factory to the port for calculating the surrogate value for foreign 
inland freight.

4. Sam Choan

    We calculated EP in accordance with our preliminary calculations, 
except that we corrected the reported market-economy brokerage expense 
for sales to one customer based on verification findings.

5. Tar Hong Xiamen

    We calculated EP and CEP in accordance with our preliminary 
calculations, except as follows, based on information derived at 
verification.
    We recalculated discounts by applying the reported discount 
percentage to the gross unit price of the sale. We also recalculated 
marine insurance by applying a percentage based on value, rather than 
based on volume as reported, since this expense was incurred on a value 
basis.
    For CEP sales, we reallocated movement expenses and added an amount 
for unreported U.S. brokerage expenses. We reallocated and corrected 
indirect selling expenses, all freight expenses not reported elsewhere 
(see Comment 15), and other expenses not reported elsewhere (see 
Comment 18). In this reallocation, we recalculated by dividing the 
combined POI expenses of Tar Hong's two U.S. affiliates, by the sum of 
the POI sales values from these entities. We also recalculated reported 
credit based on corrections to reported payment dates.

Normal Value

A. Factors of Production

    In accordance with section 773(c) of the Act, we compared the NV 
calculated according to the factors of production methodology, except 
as noted below for Chen Hao Xiamen. Where an input was sourced from a 
market economy and paid for in market economy currency, we used the 
actual price paid for the input to calculate the factors-based NV in 
accordance our practice. See Lasko Metal Products v. United States, 437 
F. 3d 1442, 1443 (Fed. Cir.1994) (``Lasko''). For all producers, we 
recalculated the values for materials purchased from market economies, 
based on our verification findings. We excluded Taiwan VAT assessed on 
Taiwan material purchases (see Comment 3).
    Furthermore, for Tar Hong, we added PRC brokerage for market-
economy inputs. For Gin Harvest and Sam Choan, the equivalent charges 
are included in the reported movement expenses as Hong Kong brokerage. 
In addition, for Tar Hong and Gin Harvest we added freight from the 
port to the factory for inputs purchased from market economies.

[[Page 1711]]

    In instances where inputs were sourced domestically, we valued the 
factors using published publicly available information from Indonesia. 
Reported unit factor quantities were multiplied by Indonesian values. 
From the available Indonesian surrogate values we selected the 
surrogate values based on the quality and contemporaneity of data. As 
appropriate, we adjusted input prices to make them delivered prices. 
For those values not contemporaneous with the POI, we adjusted for 
inflation using wholesale price indices published in the International 
Monetary Fund's International Financial Statistics. For a complete 
analysis of surrogate values, see the Valuation Memorandum: Preliminary 
Antidumping Duty Determination of Melamine Institutional Dinnerware 
Product from the People's Republic of China (PRC) dated August 14, 1996 
(Preliminary Valuation Memorandum), and the Valuation Memorandum: Final 
Antidumping Duty Determination of Melamine Institutional Dinnerware 
Products (MIDP) from the People's Republic of China (PRC) dated 
December 20, 1996 (Final Valuation Memorandum).
    We added amounts for overhead, general expenses, interest and 
profit, based on the experience of P.T. Multi Raya Indah Abadi 
(Multiraya), an MIDP producer in Indonesia (see, also, Comment 2), as 
well as for packing expenses incident to placing the merchandise in 
condition packed and ready for shipment to the United States. We have 
recalculated the percentages for overhead, selling, general and 
administrative (SG&A), and interest expenses using the detailed public 
version of Multiraya's financial statement placed on the record of this 
investigation by the respondents. In our recalculations, as detailed in 
the December 20, 1996 Final Valuation Memorandum, we have eliminated 
the source of possible double counting for electricity alleged by 
respondents in their case brief. For Tar Hong, we calculated a value 
for the cost of transporting material purchases from the PRC port to 
the factory using the surrogate value for truck freight. Based on 
verification results, we revised calculations for Gin Harvest, as 
follows. We revised the value of freight for certain material inputs to 
correct the reported distance from the supplier to the factory. We also 
revised reported electricity consumption and reported packing material 
consumption for certain products. For Sam Choan, because freight data 
for diesel fuel was not reported, we applied facts available based on 
the furthest distance to a supplier cited in the response.

B. Multinational Corporation Provision

    For Chen Hao Xiamen, petitioner alleged that section 773(d)(3) of 
the Act, the special rule for multinational corporations, should be 
applied to Chen Hao Xiamen's NV. We have determined that the record 
evidence for Chen Hao Xiamen supports a finding that the first two 
criteria of the MNC provision have been met. In order to determine if 
the third criterion was satisified, we calculated NV for Taiwan-
produced merchandise (affiliated party NV) in addition to calculating 
NV using the factors of production methodology, described above, to 
determine whether affiliated party NV exceeded PRC NV.
    We note that there are several ways in which the third criterion 
may be applied in this case. In the preliminary determination, we found 
that the affiliated party NV (price or COP, as appropriate) exceeded 
the PRC NV for a substantial majority (by quantity) of the U.S. sales. 
An alternative approach is to match each Taiwan transaction with its 
most comparable PRC NV. For each Taiwan transaction, the PRC NV and the 
Taiwan price are compared to each other; if the Taiwan price exceeds 
the PRC NV for a preponderance of Taiwan sales (by quantity), all 
comparisons of EP to NV are made using Taiwan sales as NV. Yet another 
approach is to determine the number of models where the Taiwan NV is 
higher than the NV based on the factors of production. Whichever 
approach to apply the third criterion of the MNC provision is used, 
however, the result in each case would be to use the Taiwan NV. In any 
event, whether or not the MNC provision applies, the result would be 
the same--a de minimis or zero margin for Chen Hao Xiamen.
    In applying Taiwan NV, we compared Taiwan sales to Chen Hao 
Xiamen's U.S. sales in the same manner as discussed in our preliminary 
determination, except that we adjusted COP in the following manner: a) 
we revised the financial expense to exclude foreign exchange gains, and 
to include the interest expense associated with loans from affiliated 
parties; and b) we adjusted factory overhead expenses to include an 
amount for pension expenses. These changes are discussed in detail in 
the final determination notice in the companion Taiwan investigation.
    With regard to the calculation of Chen Hao Xiamen's factors of 
production, at verification, we found that Chen Hao Xiamen did not 
account for a rebate in its reported cost of melamine powder purchased 
from a Taiwan supplier. We do not have sufficient information on the 
record to accurately allocate this rebate to Chen Hao Xiamen's costs, 
since neither Chen Hao Xiamen nor Chen Hao Taiwan identified the total 
amount of purchases from this supplier that were eligible for this 
rebate, and transferred to Chen Hao Xiamen, as discussed in the 
Department's verification report of Chen Hao Taiwan. Consequently, we 
have not adjusted Chen Hao Xiamen's melamine powder costs for the 
rebate.
    In addition, we added PRC brokerage and freight from the port to 
the factory for market-economy inputs. We also calculated a value for 
the cost of transporting material purchases from the PRC port to the 
factory using the surrogage value for truck freight. Finally, we 
revised the reported consumption of packing materials for certain 
products, based on our findings at verification.
    For comparisons of Chen Hao Xiamen's EP to NV based on Taiwan 
prices, we made circumstance of sale adjustments for differences in 
imputed credit, bank charges incurred on U.S. sales, and royalty 
expenses incurred in Taiwan on Taiwan sales. As Chen Hao Xiamen did not 
report credit expenses and bank charges in its sales response, we 
calculated these expenses using payment information obtained during 
verification. Chen Hao Taiwan, the parent company, reported in its 
public questionnaire response that it did not borrow in U.S. dollars 
and thus used the average short-term interest in the United States 
during the POI of 8.83 percent, as reported in International Financial 
Statistics, published by the International Monetary Fund, to calculate 
imputed credit for its U.S. sales. We applied this same rate to 
calculate credit expenses for Chen Hao Xiamen's U.S. sales.

Verification

    As provided in section 782(i) of the Act, we verified the 
information submitted by respondents for use in our final 
determination. We used standard verification procedures, including 
examination of relevant accounting and production records and original 
source documents provided by respondents.

Interested Party Comments

General Comments

Comment 1: Scope of Investigation
    Respondents argue that the scope of investigation should be revised 
to exclude melamine dinnerware that exceeds a thickness of 0.08 inch 
and is intended for retail markets when such products are accompanied 
by

[[Page 1712]]

appropriate certifications presented upon importation to the United 
States.
    Petitioner objects to respondents'' scope revision proposal 
because, it believes, it has no legal or factual basis and would result 
in an order that would be very difficult to administer. Petitioner 
further contends that antidumping orders based on importer 
certifications of use, such as the proposal advocated by respondents, 
are difficult to administer and should be avoided where possible. 
Petitioner argues that if respondents want to produce merchandise for 
the retail market that presents no scope issue, respondents can produce 
merchandise of a thinner wall thickness that falls outside of the 
scope.
    DOC Position. We agree with petitioner. Petitioner has specifically 
identified which merchandise is to be covered by this proceeding, and 
the scope reflects petitioner's definition. As we stated in Final 
Determination of Sales at Less Than Fair Value: Carbon and Alloy Steel 
Wire Rod from Brazil (59 FR 5984, February 9, 1994), [p]etitioners' 
scope definition is afforded great weight because petitioners can best 
determine from what products they require relief. The Department 
generally does not alter the petitioner's scope definition except to 
clarify ambiguities in the language or address administrability 
problems. These circumstances are not present here.
    The petitioner has used a thickness of more than 0.08 inch, not end 
use, to define melamine ``institutional'' dinnerware. The physical 
description in the petition is clear, administrable and not overly 
broad. Thus, we agree with petitioner that there is no basis for 
redefining the scope based on intended channel of distribution or end 
use, as respondents propose.
Comment 2: Calculation of Profit, Overhead, SG&A, and Interest
    Petitioner proposes that the Department use a surrogate profit 
figure based on sales made in the ordinary course of trade by 
Indonesian producer, Multiraya, the respondent in the concurrent MIDP 
from Indonesia investigation. Petitioner characterizes the profit 
figure used at the preliminary determination (i.e., as derived from 
Multiraya's 1995 financial statement) as inappropriate because it 
covers non-subject merchandise, below-cost sales, and dumped export 
sales--all of which petitioner contends should not be included in the 
profit calculation.
    Petitioner argues that the current law is very clear in that, when 
available, profit for a constructed value (CV) calculation is home 
market profit. Petitioner asserts that the Department's consistent 
practice has been to use either the former statutory minimum of eight 
percent or else a domestic, rather than an export, profit value.
    Respondents argue that the Department should use the public 
summaries of Multiraya's 1995 financial statement to calculate 
surrogate overhead, SG&A, interest expense, and profit. According to 
respondents, Multiraya exports merchandise that is virtually identical 
to that exported from the PRC; therefore, Multiraya's company-wide 
profit rate is pertinent to the valuation of PRC merchandise. To the 
extent that the Department uses Multiraya's company-wide costs to 
calculate constructed value in the Indonesian proceeding, respondents 
contend that it should also base surrogate profit on company-wide 
Multiraya data.
    In addition, respondents argue that petitioner's profit calculation 
is contrary to the Department's practice of basing NV in NME cases on 
export data. Respondents contend that the Department's practice is 
meant to ensure that product disparities like those reflected in 
petitioner's profit calculation do not undermine the accuracy of the 
CV. Moreover, respondents claim that there is a disparity between the 
products sold by Multiraya in the home market and the products exported 
by the PRC companies; the vast majority of products exported by the PRC 
respondents were decorated and glazed, unlike Multiraya's home market 
sales, which were virtually all undecorated and unglazed. Therefore, 
the respondents argue that the Department should use the company-wide 
profit from Multiraya's public version financial statement to calculate 
the applicable surrogate profit percentage.
    DOC Position. We agree with petitioner and have used as surrogate 
profit a percentage derived from Multiraya's public version 
questionnaire response. In this investigation, we are faced with the 
unusual situation of having on the record both a public financial 
statement from the surrogate country as well as the public version 
questionnaire responses of the Indonesian respondent in the concurrent 
investigation. The Department's preference is to use the most product-
specific information possible from the surrogate market to calculate 
surrogate profit. Insofar as publicly ranged data may be imprecise, it 
would be speculative to rely on such data as an accurate measure of 
whether sales are below cost and outside the ordinary course of trade. 
Accordingly, for the purpose of deriving a surrogate profit percentage, 
we have used all sales in the public version, rather than excluding 
allegedly below cost sales.
Comment 3: Tax Paid on Melamine Purchased From Taiwan
    Petitioner argues that the Department should affirm its practice in 
the preliminary determination and include the tax paid by the PRC 
respondents on purchases of melamine powder from Taiwan in the 
valuation of material costs. Petitioner asserts that the respondents 
pay the Taiwan value added tax (VAT) to unaffiliated suppliers either 
directly or through affiliated companies in Taiwan, and that the tax 
imposes a net cost because the PRC companies are not collecting the VAT 
from their customers. Consequently, petitioner contends that the tax 
should be included in the material cost calculation. Petitioner claims 
that even if the Taiwan government rebates to the respondent's 
affiliate any such tax collected, it does not mean that the purchaser 
benefits from the rebate.
    Respondents argue that the Department should exclude from the 
market-economy prices of material inputs the Taiwan VAT that was paid 
upon purchase, but rebated or credited upon export from Taiwan to the 
PRC. Respondents assert that the Department verified that Taiwan VAT 
paid on materials purchased from Taiwan suppliers is credited to the 
purchasers'' VAT liability account. As a result, respondents claim that 
they receive a benefit equal to the amount of VAT paid. Thus, VAT is 
effectively not paid on these exports.
    DOC Position. We agree with respondents. At verification, we 
confirmed that Taiwan VAT on melamine powder paid by the Taiwan 
companies is offset by the VAT owed by the PRC purchaser (respondent). 
This offset is equivalent to a rebate since the PRC purchaser receives 
a credit against the VAT owed and does not have to pay a VAT amount (as 
VAT owed is equal to the amount of VAT paid). The net effect is that 
the respondent incurs a cost for melamine powder exclusive of VAT. 
Accordingly, we have not added VAT from the market economy to the value 
of these inputs.
Comment 4: Use of Taiwan Prices for Melamine Powder Purchased from PRC 
Suppliers
    Petitioner argues that the Department should not use Taiwan prices 
for all melamine powder purchased by PRC producers if the producer has 
obtained

[[Page 1713]]

some of its melamine powder from the PRC. Petitioner claims that it is 
not enough to provide that the market-economy price may be disregarded 
``where the amount purchased from a market economy supplier is 
insignificant'' (Antidumping Duties; Countervailing Duties; Notice of 
Proposed Rulemaking, 61 FR 7,309, 7,345 (February 27, 1996)). According 
to petitioner, it should be the other way around--only if the amount 
purchased within the non-market economy is insignificant will it be 
appropriate to use the price actually paid to market economy suppliers 
of the input to represent the overall cost of that factor of 
production. Or, at a minimum, petitioner argues, the overall value of 
the factor in question should be a weighted average of the surrogate 
value and the market-economy price.
    Respondents argue that petitioner offers no reasonable 
justification as to why the Department should not use prices paid to 
market economy suppliers to value melamine powder purchased from a PRC 
supplier. Respondents state the Department's practice is to use the 
price paid to a market economy supplier (See e.g. Bicycles) and that 
this practice has been upheld by the Federal Circuit. Lasko Metal 
Products, Inc. v. United States, 43 F.3d 11442 (Fed. Cir. 1994).
    DOC Position. We agree with respondents. When melamine powder was 
purchased from a market economy, we used the prices paid to market 
economy suppliers to value this input, even though the producer did not 
purchase 100 percent of the melamine powder from a market economy. We 
believe that the market economy price is the most appropriate basis for 
determining the value of melamine powder purchased from PRC suppliers.
Comment 5: Labor Rate Calculation
    Petitioner argues that the Department's labor rate calculation 
should reflect at most 50 weeks of work time, as opposed to the 52-week 
work year that was used in the preliminary determination, because 
Attachment 4 of the August 14, 1996, Preliminary Valuation Memorandum 
notes that employers in Indonesia are required to provide paid annual 
leave of at least two weeks per annum.
    Respondents argue that just because Indonesian employers are 
required to give two weeks paid leave per year does not mean that 
workers actually take two weeks leave, but simply reflects the fact 
that Indonesian workers have the option of taking this time while 
receiving full pay. Respondents therefore argue that no adjustment is 
necessary to the labor rate because the Department cannot assume that 
the amount of leave allowed by employers is actually taken by workers.
    DOC Position. We agree with respondents that our labor rate 
calculation is correct. We used monthly labor rates from the 1995 issue 
of Indonesia: A Brief Guide for Investors, which already include paid 
leave and other benefits, as detailed in the Preliminary Valuation 
Memorandum. We subsequently derived an hourly rate from the monthly 
rates, which already includes some benefits. Accordingly, we believe 
that it would be speculative to adjust the rate as reported for any 
potentially used vacation days.
Comment 6: Inflation of Costs Denominated in U.S. Dollars
    Petitioner argues that the Department made an error in its 
preliminary determination by not inflating costs denominated in U.S. 
dollars, particularly those for cardboard and containerization. 
Petitioner contends that the costs in question are internal Indonesian 
costs which which would have been incurred in rupiahs, even if they 
happened to have been expressed in 1993 U.S. dollars. Petitioner claims 
that the changes in the rupiah/dollar exchange rate have not reflected 
the considerable inflation in Indonesia in recent years, so it is not 
appropriate to leave these adjustments at their original dollar 
amounts.
    Respondents argue that, contrary to petitioner's suggestion, no 
adjustment or conversion of figures denominated in U.S. dollars is 
necessary. Respondents argue that the Department has rejected similar 
requests in other NME cases. In this case, according to respondents, 
the value and prices denominated in U.S. dollars are subject to the 
risks and opportunity costs associated with the U.S. dollars, and are 
not affected by Indonesian inflation. Respondents contend that 
petitioner's exchange rate inflation adjustments and exchange rate 
conversions would bring in numerous factors that would distort the 
factor value.
    DOC Position. With regard to the figures for cardboard and 
containerization, we agree with respondents that no adjustment or 
conversion of figures denominated in U.S. dollars is necessary. In 
accordance with Department practice with regard to NMEs, surrogate 
values reported in U.S. dollars are not adjusted for inflation. See 
Final Results of Antidumping Duty Administrative Review: Tapered Roller 
Bearings and Parts Thereof, Finished and Unfinished from the Republic 
of Hungary (56 FR 41819, August 23, 1991) and Final Determination of 
Sales at Less Than Fair Value: Ferrovanadium and Nitrided Vanadium from 
the Russian Federation (60 FR 27957, 27963, May 26, 1995). See 
Valuation Memorandum: Preliminary Antidumping Duty Determination of 
Ferrovanadium from Russia dated December 27, 1994.
Comment 7: Duty on Melamine Powder
    Petitioner believes that the Department should increase the cost of 
melamine powder imported into the PRC by the PRC duty rate applicable 
to such imports. Petitioner argues that import duties are as much a 
feature of non-market economies as they are of market economies, and 
that the proper rate in this case is the PRC duty rate. Petitioner 
argues that inclusion of the PRC duty rate is necessary to reflect the 
producer's actual cost for the imported input.
    Respondents argue that the Department normally disregards such 
rates since it deems all NME costs to be unreliable. Respondents 
further argue that the Department cannot accept the valuation of PRC 
import duties yet disregard all other PRC values and expenses.
    DOC Position.  We agree with respondents that we normally disregard 
such a duty because it is a PRC cost denominated in RMB. See Final 
Determination of Sales at Less Than Fair Value: Oscillating Fans and 
Ceiling Fans from the People's Republic of China (56 FR 55271, October 
25, 1991). Accordingly, we have not increased the cost of melamine 
imported into the PRC by this duty rate.
Comment 8: Consumption and Yield Information
    Petitioner argues that verification revealed Tar Hong's reported 
consumption of both melamine powder and LG powder to be grossly 
unreliable. Petitioner states that if the Department does not reject 
the factor consumption data entirely, then an appropriate adjustment 
would be to increase the melamine powder consumption for all Tar Hong 
products by the largest percentage amount which the Department found to 
be understated. Petitioner argues that this adjustment is conservative, 
given that four of the five samples described in the verification 
report were understated.
    Similarly, petitioner claims that verification establishes that Gin 
Harvest maintains product specific yield information, yet it reported 
an overall yield figure which it applied to all of its products. 
Petitioner further argues that, because Gin Harvest produces and sells 
very different products to the United

[[Page 1714]]

States, these products necessarily have dramatically different product-
specific yields. This sharply differing yield result is fully 
consistent with the yield information provided by the domestic industry 
in this investigation, according to petitioner. Petitioner argues that 
the Department should not accept the overall yield data supplied by Gin 
Harvest because the issue of product-specific yields has been raised 
numerous times in this investigation, yet Gin Harvest ignored its more 
accurate data and submitted less accurate data in order to obtain a 
lower margin. Finally, petitioner claims that if the Department accepts 
Gin Harvest's yield data, it should apply the overall yield to each 
heat treatment step used to produce each transaction listed in the U.S. 
sales database.
    Tar Hong asserts that the Department verified its melamine powder 
and LG powder consumption allocation methodology and found no 
discrepancies. Tar Hong further claims that petitioner attacks the 
reliability of its melamine powder and LG powder allocations because of 
the production sampling performed at the verification in Xiamen. 
Although the Department's product sampling showed that per-unit, 
product-specific consumption was greater than that reported in some 
instances, according to Tar Hong, many variables (such as air 
temperature and moisture content on the day of production and the 
varying amounts of powder actually put into the mold by the individual 
workers) affect this production process so that the per-unit 
consumption figure will not be exactly the same for each production 
run. Accordingly, Tar Hong argues that the Department should ignore 
petitioner's request to increase the melamine powder consumption for 
all products and instead use the figures reported by Tar Hong.
    Gin Harvest argues that it and other respondents are unable to 
report material consumption on a product-specific basis. Gin Harvest 
claims that although the Department noted that Gin Harvest has some 
production process records that would permit a calculation of product-
specific material consumption, it also noted that such records are not 
maintained for any extended period of time by respondents in the normal 
course of business. Gin Harvest argues that it should not be punished 
for failing to provide data that it does not have.
    DOC Position. The Department's preference is to use product-
specific data. Where such information does not exist, the Department 
will use the most specific and reasonable information available (See, 
Final Determination of Sales at Less Than Fair Value: Welded Stainless 
Steel Pipe from Malaysia (59 FR 4023, 4027, January 28, 1994). With 
regard to consumption, petitioner's argument relies on a selective 
reading of the Tar Hong verification report. Although our initial 
sampling, based solely on material withdrawn from inventory, indicated 
potential under-reporting, a second, more comprehensive sampling, which 
also accounted for materials returned to inventory, showed no 
consistent pattern of under-or over-reporting (See Tar Hong 
verification report at pages 24-25.) Although the documents used in our 
sampling could be used to calculate product-specific yields, the only 
documents we reviewed were contemporaneous with verification, not the 
POI. Verification revealed no indication that Tar Hong retained records 
at this level of detail (records showing materials withdrawn and 
returned to inventory) for more than a week. Therefore, while our 
sampling showed some variations between products, there is no 
information on the record to indicate that Tar Hong's overall 
production factor methodology is distortive. In the absence of any 
other, more specific allocation methodology available to Tar Hong, we 
have accepted its consumption factor reporting.
    With regard to Gin Harvest's yield data, it reported an overall 
yield figure because it claimed that its records do not permit it to 
calculate product-specific yield data. Our verification revealed 
nothing to contradict the claim that Gin Harvest does not maintain 
product-specific yield data in its normal course of business.
    Further, petitioner's proposed adjustment methodology of applying 
the yield percentage at every production stage encountered is 
inconsistent with the Department's verification findings regarding the 
manner in which the PRC respondents, including Gin Harvest, calculate 
yield. Petitioner's methodology incorrectly assumes that, at each step 
(i.e., heat treatment, decoration, and glazing), the producer inspects 
the product and discards semi-finished products which do not meet 
specifications. However, as described in the respondents' questionnaire 
responses, it is not until all production steps have been completed 
that the respondents discard off-specification merchandise. That is, 
the overall yield figure is calculated based on production results 
after all production steps are completed. There is no information on 
the record to identify the actual yields at each step of production 
based on the POI production records maintained by Gin Harvest. Applying 
this overall yield to each production step would effectively double-or 
triple-count the rejection rate and thus unduly increase Gin Harvest's 
consumption factors. Gin Harvest's allocation was reasonable based on 
the records available to it. Accordingly, we have made no adjustment to 
its reported material consumption factors.

Company-Specific Comments

Tar Hong

Comment 9: Reporting of CEP and EP Sales
    Petitioner believes that Tar Hong incorrectly reported certain CEP 
sales as EP sales. Petitioner argues that the burden of proof is on 
respondent to satisfy the Department's four-prong test regarding the 
classification of U.S. sales as cited in the Department of Commerce, 
Antidumping Manual, Chapter 7 at page 3 (revised 8/91). Petitioner 
contends that in this case, Tar Hong has not even addressed two of the 
Department's four criteria. Petitioner argues that at verification, the 
Department found that the U.S. entities play a central role in these 
sales, which resemble reported CEP sales in all aspects, except that 
they are not introduced into U.S. inventory. According to petitioner, 
Tar Hong's U.S. affiliates have the authority to set the price and the 
quantity of the potentially dumped merchandise. Petitioner also 
disagrees with Tar Hong's contention that the role of the U.S. 
affiliates is less than that of the U.S. affiliates in the first 
administrative review of Certain Corrosion-Resistant Carbon Steel Flat 
Products from Korea: Final Results of Antidumping Duty Administrative 
Review, 61 FR 18547, 18551 (April 26, 1996) (Carbon Steel). Petitioner 
argues that the Korean firms in Carbon Steel had full control of the 
U.S. sales, and the U.S. affiliates were merely paper processors, as 
evidenced by the information placed on the record by the Korean firms 
indicating that the U.S. affiliates had no power to negotiate or 
approve sales. Consequently, petitioner argues that the Tar Hong sales 
in question should be treated as CEP transactions.
    Tar Hong argues that it properly classified certain sales as EP 
sales in accordance with the Department's three-factor test, as stated 
in Carbon Steel. First, Tar Hong claims that it has demonstrated that 
the sales transaction occurs prior to importation into the United 
States. Secondly, Tar Hong states that direct shipment from Tar Hong 
Xiamen to the unrelated U.S. customers is a normal commercial 
distribution

[[Page 1715]]

channel used for these U.S. customers. Lastly, Tar Hong asserts that 
the U.S. affiliates perform limited liaison functions serving primarily 
as processors of sales-related documentation and communication links 
with the unrelated buyers. Accordingly, Tar Hong claims that the 
functions performed by its U.S. affiliates are consistent with selling 
functions that the Department has determined in other cases to be of a 
kind that would normally be undertaken by the exporter (see Carbon 
Steel).
    DOC Position. We agree with respondents that these sales are 
properly treated as EP sales. Based on the record evidence, Tar Hong's 
U.S. affiliates are merely processors of sales-related documentation 
and a communication link with the unrelated customers. Although these 
entities play an important role in Tar Hong's sales and distribution 
process, that role is limited to sales documentation processing and 
communication links. We find no compelling evidence in Tar Hong's 
responses or in our verification findings to treat these sales as CEP 
sales. Consistent with our approach in such cases as Final 
Determination of Sales at Less Than Fair Value: Coated Groundwood Paper 
from Finland (56 FR 56363, November 4, 1991), we have treated these 
sales as EP sales.
Comment 10: Transactions Involving Dinnerware Sets
    Petitioner states that Tar Hong improperly included non-subject 
merchandise in its reported sales when it added the thicknesses of the 
individual pieces of a set (plate, bowl, and cup) together to determine 
whether the dinnerware set was subject merchandise. Similarly, 
petitioner argues, pricing for dinnerware sets as well as the factors 
of production was reported on a combined basis using the plate in the 
dinnerware set as the identified product. Petitioner argues that this 
grouping of data for sets was contrary to the instructions in the 
questionnaire and prevents an item-by-item fair value comparison. 
Petitioner asserts that if the Department uses this data, it should 
apply the highest margin for any other transaction to all transactions 
involving sets as facts available.
    Tar Hong contends that the Department has data necessary to 
calculate piece-specific margins for Tar Hong's set sales and factors 
because the Department verified that Tar Hong reported the data for 
sales of products sold in sets on the same basis it reported the data 
for the factors of production for these products.
    DOC Position. We agree with Tar Hong and have appropriately 
adjusted our calculations to ensure a proper comparison. We excluded 
all sales of sets where the combined thickness is less than 0.24 inch. 
We have considered all pieces of a set to be subject merchandise when 
measurements are equal or greater than 0.24 inch.
Comment 11: Unit Price Reporting
    Petitioner contends that, in addition to the errors identified by 
the Department concerning Tar Hong's reporting of U.S. unit prices on a 
per-piece, rather than on a per-dozen, basis for many sales, there is 
reason to believe that there are additional errors of this type which 
were not individually identified by the Department. Accordingly, 
petitioner asserts that the Department should compare the margin in the 
final determination for Tar Hong's sales of pieces with the margin 
calculated on the sale of dozens or cases, and if the margins for the 
piece sales are lower than the margins for dozens and cases, then, as 
facts available, the piece calculations should be disregarded and the 
sales of dozens or cases should be relied upon for the final 
determination.
    Tar Hong argues that the errors found in its unit reporting do not 
merit application of facts available. Tar Hong contends that the 
Department verified that no other sales reported contained such errors.
    DOC Position. We examined this issue at verification and are 
satisfied that the record is complete and accurate with respect to the 
reported quantities and per-unit prices of U.S. sales. Accordingly, we 
used the corrected information in our calculations for the final 
determination.
Comment 12: Production Quantity Data
    Petitioner claims that the production quantity data submitted by 
Tar Hong on two prior occasions is grossly inaccurate, and that Tar 
Hong's shifting stance regarding the amount of merchandise produced 
during 1995 confirms that its most recent submission on October 23, 
1996, is not reliable. Petitioner argues that the total production 
quantity is a figure that is fundamental to the integrity of the 
submission, and that Tar Hong's repeated corrections leave no 
reasonable basis to believe that its latest number is accurate. 
Accordingly, petitioner argues, the figure should be rejected.
    Tar Hong claims that the Department verified its production 
quantities and confirmed the accuracy of its data.
    DOC Position. We agree with Tar Hong. We have accepted Tar Hong's 
explanation for the discrepancies and have verified its response in 
this regard. Section 782(e) of the Act states that the Department shall 
not decline to consider information that does not meet all of its 
requirements if:
    (1) The information is submitted by the deadline established for 
its submission, (2) the information can be verified, (3) the 
information is not so incomplete that it cannot serve as a reliable 
basis for reaching the applicable determination, (4) the interested 
party has demonstrated that it acted to the best of its ability in 
providing the information and meeting the requirements established by 
the Department with respect to the information, and (5) the information 
can be used without undue difficulties.
    Tar Hong's information meets all of these requirements. 
Accordingly, we have no basis to conclude that the earlier responses 
distorted the Department's analysis or otherwise impeded this 
proceeding.
Comment 13: Total Sales Value
    Petitioner states that Tar Hong has dramatically overstated the 
unit price on a number of U.S. sales transactions. Petitioner contends 
that if the Department concludes that the application of general facts 
available for Tar Hong is inappropriate (see Comment 19 below), it must 
adjust for this exaggeration of submitted prices by assuming that 
affected sales are of products with margins, and deducting the amount 
that the CEP and EP sales values were overstated from total U.S. price.
    Tar Hong claims that any discrepancy in its U.S. sales value 
reconciliation is due to petitioner's miscalculation of Tar Hong's 
sales values. Tar Hong adds that petitioner offers no explanation of 
its calculation, and suggests that petitioner's calculation failed to 
properly account for sales sold in units of cases or dozens.
    DOC Position. We agree with Tar Hong. Petitioner misinterpreted the 
information in a verification exhibit. The document does not include 
the EP sales booked in Taiwan; it applies only to the sales booked in 
the United States. Moreover, the exhibit cited by petitioner is not the 
only document the Department used to confirm Tar Hong's sales 
reporting, as discussed in the verification report. Based on the sum of 
our verification findings, we found no discrepancies in the total 
volume and value of sales reported.
Comment 14: Ocean Freight
    Petitioner argues that Tar Hong incorrectly assumed that all ocean

[[Page 1716]]

freight shipments were made in full container loads and that, the 
reported volumes of the master pack cartons, which are the basis for 
the movement charge allocations, are wrong. Petitioner claims that 
although Tar Hong provided revised information for the master pack 
cartons at verification, this information was not verified and 
therefore cannot be used. Petitioner argues that for purposes of the 
final determination, the container load error must be corrected and 
that, for the master carton error, either the Department should use 
general facts available or the highest unit freight reported for each 
freight adjustment affected by the errors.
    Tar Hong contends that the Department should accept its revised 
allocation because the Department found that Tar Hong's volume-based 
methodology to recalculate international freight was supported by its 
records.
    DOC Position. With regard to Tar Hong's ocean freight shipments, we 
found that the majority were in fact made in full container loads. Per 
our instructions, Tar Hong has reallocated EP ocean freight to account 
for our verification findings. We have also reallocated CEP ocean 
freight expenses based on our verification findings. In both 
situations, we consider the allocations to be proper.
    Furthermore, although we did not specifically verify the revised 
information submitted at verification with regard to the volumes of the 
master pack cartons, the remainder of Tar Hong's response was verified, 
and the revised information is consistent with Tar Hong's verified 
information. Accordingly, we have accepted Tar Hong's information for 
the purpose of recalculating CEP movement expenses.
Comment 15: U.S. Warehouse to Customer Freight
    Petitioner contends that Tar Hong's statements that it does not 
incur freight charges from the U.S. warehouse to the customer are 
unsupported. Petitioner claims that the verification report notes that 
Tar Hong's invoices report terms of CEP sales as ``delivered''. 
Petitioner therefore asserts that all freight expenses from Tar Hong's 
financial statements should be allocated to CEP sales.
    Tar Hong claims that the Department verified that, notwithstanding 
the printed ``Delivered'' term on Tar Hong's invoice, Tar Hong's CEP 
customers either come to Tar Hong's warehouse and pick up their 
purchased products, or make their own freight arrangements. Tar Hong 
asserts that the Department verified that, for the few deliveries that 
it made using its own vehicles, its allocation methodology was 
reasonable.
    DOC Position. We have accepted Tar Hong's explanation, but have 
recalculated and reclassified freight expenses based on our 
verification findings. Tar Hong's methodology allocated freight 
expenses to all CEP sales as a movement expense. That is, Tar Hong made 
no attempt to identify which particular sales may have actually 
incurred warehouse to customer freight. Since Tar Hong did not, and 
could not, allocate this expense only to those sales which incurred the 
expense, we determine that it is appropriate to treat all movement 
expenses not otherwise accounted for (i.e., warehouse to customer 
expenses) as indirect selling expenses. In our recalculation of 
indirect selling expenses, we have also included an amount for freight 
expenses identified in the financial statements, but not included in 
Tar Hong's calculation. (See Comment 18 below.) In this manner, we have 
included all expenses related to freight.
Comment 16: Packing Weights
    Petitioner argues that it is clear from the verification report 
that Tar Hong's packing weights are unreliable. Petitioner contends 
that the Department should increase the packing costs by the largest 
percentage of under reporting found at verification or, at the least, 
increase these weights by an average of the under reporting of the five 
samples.
    Tar Hong argues that packing costs are reliable and require no 
further adjustment because the measured weights of the packing 
materials were within acceptable tolerances.
    DOC Position. We agree with Tar Hong. We verified that the packing 
weights were within acceptable tolerances.
Comment 17: Unreported Returns and Claims
    Petitioner states that where verification exhibits show evidence of 
returns and claims for Tar Hong that were not reported as U.S. warranty 
expenses or allowances, at a minimum, the Department should apply 
information from the verification and adjust total U.S. price 
accordingly.
    Tar Hong claims that petitioner's discovery of alleged unreported 
returns and claims relate to nonsubject merchandise. Accordingly, no 
adjustment by the Department is necessary.
    DOC Position. We agree with Tar Hong. We found no evidence at 
verification of warranty claims for the subject merchandise. Tar Hong's 
explanation is consistent with our findings.
Comment 18: Unreported Movement Charges
    According to petitioner, the financial statements of Tar Hong's 
U.S. affiliates indicate that there are certain expenses that were 
incurred by respondent, but not reported as selling expenses or 
movement charges. Petitioner contends that the Department should 
account for these expenses by applying the total of these amounts 
directly against the margins.
    Tar Hong states that the Department verified that the allegedly 
unreported charges were not direct selling expenses or movement 
charges, as petitioner claims. Accordingly, no adjustment to the margin 
calculation is warranted.
    DOC Position. We agree with petitioner that these expenses should 
be accounted for. However, we disagree with petitioner's contention 
that the amount of the expenses should be applied directly against the 
margins. Petitioner offers no basis to consider this approach and there 
is no precedent for applying it here. Instead, we have included these 
expenses as part of our recalculation of indirect selling expenses. As 
discussed above at Comment 15, we have treated Tar Hong's unreported 
warehouse-to-customer expenses as indirect selling expenses. The 
additional expenses identified by petitioner appear properly classified 
in this instance as indirect selling expenses as well.
Comment 19: Use of Facts Available for Tar Hong
    Petitioner argues that Tar Hong's EP and CEP prices are grossly 
overstated through a series of reporting errors or misstatements, 
including those addressed above. Accordingly, petitioner contends, the 
Department cannot reasonably conclude that the U.S. sales data base is 
reliable. Further, petitioner contends that Tar Hong's NV data is also 
unreliable because, despite numerous changes, Tar Hong's total 
production figure is inaccurate, its treatment of sets makes a proper 
factors analysis impossible, and the weights of the reported products 
as well as the packing materials are systematically understated. 
Moreover, petitioner claims that the corrections submitted at 
verification should be rejected because an entirely new factors 
database was submitted and petitioner did not have a meaningful 
opportunity to comment on the new data. Petitioner concludes that the 
Department should use facts available because Tar Hong's data is 
unreliable and no acceptable means of correction exists.

[[Page 1717]]

    Tar Hong argues that the Department was able to verify all 
corrections to source documents and the reason for the corrections. 
Furthermore, according to Tar Hong, there is no evidence that Tar Hong 
failed to cooperate with the Department by not acting to the best of 
its ability to comply with requests for information. Tar Hong believes 
that in those situations where there are discrepancies, the Department 
should weigh the record evidence to determine what type of change, if 
any, would be the most probative of the issue under consideration.
    DOC Position. We do not agree with petitioner's assertion that Tar 
Hong's data is unreliable and no acceptable means of correction exists. 
Moreover, we do not agree with petitioner that Tar Hong's revised 
factors database contains entirely new data. As discussed in our 
responses above, we have rejected many of petitioner's claims with 
regard to Tar Hong's data. The remaining errors are minimal and do not 
undermine the integrity of the response. Thus, consistent with our 
approach in such cases as Ferrosilicon from Brazil: Final Results of 
Antidumping Duty Administrative Review, 61 FR 59407 (November 22, 
1996), the use of facts available is not warranted in this instance.

Dongguan

Comment 20: Facts Available
    Petitioner argues that the seriousness of the defects in Dongguan's 
response is evident in that the Department was unable to verify its 
U.S. sales. Petitioner claims that the verification report records the 
Department's efforts on this critical issue, and confirms the suspect 
nature of the data. For example, petitioner cites the Department's 
finding in the verification report that no confirmation of sales of the 
subject merchandise to the corporate tax statement was possible. 
Furthermore, petitioner argues that the Department was unable to 
complete a sales quantity document trace and that Dongguan's sales 
records contained duplicate invoices. Petitioner further contends that 
a failed verification is basically the same as a failure to respond at 
all and facts available must be used.
    Dongguan argues that, although the Department was unable to tie the 
sales beyond the general ledger, it also noted that it did not observe 
any apparent inconsistencies in the sales reporting, as revised through 
verification. Dongguan claims that all other aspects of the accounting 
system were verified as accurate and reliable. Dongguan also claims 
that, although the Department was unable to tie sales to the corporate 
income tax statement, it was able to verify the general integrity and 
reliability of the sales reporting data from the invoices to the 
response and to its accounting system. Dongguan asserts that the 
Department was also able to verify that non-melamine sales income 
reported in the accounting system was posted accurately and reliably in 
the corporate tax system. Accordingly, Dongguan believes that the 
Department need not apply facts available, given the overall 
reliability of the accounting system.
    DOC Position.We agree with petitioner. Dongguan's failure to 
reconcile its sales response beyond the general ledger, coupled with 
the absence of reliable alternative support documentation, such as 
verifiable sequential invoice records, leaves no basis to accept the 
integrity of the sales response and constitutes a verification failure 
under Section 776(a)(2)(D) of the Act. A complete verification failure 
also renders a response unusable under section 782(e) of the statute. A 
verification failure of this magnitude demonstrates Dongguan's 
``failure to cooperate by not acting to the best of its ability to 
comply with our requests for information.'' Accordingly, for the above-
mentioned reasons, and consistent with Pasta from Turkey, 61 FR 30309, 
30312 (June 14, 1996), we based Dongguan's final dumping margin on 
adverse facts available. In addition, because this margin is based on 
facts available, all other issues raised by the parties concerning 
Dongguan are moot.

Sam Choan

Comment 21: Reporting Errors
    Petitioner states that the verification report identifies a large 
number of sales transactions of nonsubject merchandise that were 
included in the preliminary determination. Petitioner further contends 
that the difficulties experienced by the Department in verifying Sam 
Choan's product weights undermine the reliability of the response and 
that Sam Choan's response should be rejected because none of these 
transactions were accurately reported. If the Department decides to use 
Sam Choan's data, petitioner asserts that the weights for certain 
product codes must be increased, consistent with the verification 
findings.
    Sam Choan argues that its revised sales listing reflects the 
weights and thicknesses verified by the Department. Sam Choan further 
states that the Department should exclude any merchandise that does not 
fall within the scope of investigation.
    DOC Position. We have used the weights, as corrected per our 
verification, in our final determination. We find no basis to conclude 
that errors in the weight reporting affect the overall integrity of the 
response. As described in Ferrosilicon from Brazil: Final Results of 
Antidumping Duty Administrative Review, 61 FR 59407 (November 22, 
1996), these errors are not substantial and thus do not affect the 
integrity of the response.
    With regard to the reporting of out-of-scope merchandise, we have 
excluded this merchandise for purposes of the final determination.

Chen Hao Xiamen

Comment 22: Application of the Multinational Corporation Provision
    Chen Hao Xiamen argues that the Department's application of the MNC 
rule in this case is not supported by the statute because the 
Department has failed to demonstrate that the special and unique 
circumstances required for application of the MNC rule are present in 
this investigation. Furthermore, according to Chen Hao Xiamen, its 
reported factors of production have been verified and accurate 
surrogate country information exists to value the factors of 
production. In addition, Chen Hao Xiamen argues that the Department's 
application of the MNC provision arbitrarily assumes that a ``proper 
comparison'' based on the factors of production and surrogate valuation 
is impossible for Chen Hao Xiamen, but is possible for all other 
respondents. Accordingly, for purposes of the final determination, Chen 
Hao Xiamen believes that the Department should not apply the MNC rule 
to Chen Hao Xiamen and instead should apply the surrogate country data 
to value its factors of production.
    Petitioner objects to respondents' claim that the MNC provision 
does not apply to the Chen Hao respondents. Petitioner argues that 
respondents misstate the law when they claim that the MNC provision 
applies only when a comparison based on the factors of production and 
surrogate valuation is not possible. According to petitioner, there is 
no requirement that it be impossible to determine NV in the exporting 
country. Moreover, petitioner argues that the very close cooperation 
between the Chen Hao companies, confirmed at verification, makes a 
compelling case for application of the MNC to prevent the use of the 
the PRC company as an export platform. Finally, petitioner believes 
that given the very substantial changes it believes should be made to 
the factors analysis, the NV for

[[Page 1718]]

the PRC may exceed that of Taiwan. However, if the NV for Taiwan 
remains higher, as was the case in the preliminary determination, the 
petitioner urges that the Department once again apply the MNC 
provision.
    DOC Position. The MNC rule applies when the criteria of section 
773(d) of the Act are met, regardless of whether a comparison based on 
factors is otherwise possible. For Chen Hao Xiamen, we have determined 
that the record evidence supports a finding that the first criterion of 
the MNC provision (ownership of the production facilities in the 
exporting country by an entity with production facilities located in 
another country) has been met. The second criterion of the MNC 
provision (concerning viability of the PRC market) has been met, per 
se, because Chen Hao Xiamen, the PRC exporter, did not make any sales 
at all in the PRC market during the POI.
    The third criterion was also met because Taiwan NV exceeded NV 
based on the factors of production. See ``B. Multinational Corporation 
Provision'' section of this notice.
Comment 23: Melamine Consumption
    Petitioner states that the verification confirmed that Chen Hao 
Xiamen used a methodology that leads to an understatement of melamine 
powder consumption. Petitioner argues that Chen Hao Xiamen's 
methodology is in contrast to the other PRC respondents and should be 
restated to include all POI consumption.
    Petitioner further argues that the verification report makes clear 
that Chen Hao Xiamen could have provided yields on a product-specific 
basis but instead reported an average that hides the peaks and valleys 
in yields. Petitioner claims that if the Department accepts Chen Hao 
Xiamen's yield data, it should apply the overall yield to each heat 
treatment step indicated for each transaction in the U.S. sales 
database.
    Chen Hao Xiamen argues that it accurately reported its melamine 
powder consumption and petitioner has provided no reasonable basis as 
to why restating melamine powder consumption from a batch-by-batch 
basis to a total POI basis would be any more accurate than its current 
reporting. Accordingly, Chen Hao Xiamen believes that the Department 
should ignore petitioner's suggestion.
    Chen Hao Xiamen further argues that it could not have provided 
product-specific yields. It provided yields on a production batch 
basis, which it claims is the most specific data available related to 
material consumption. Chen Hao Xiamen further argues that it should not 
be punished for failing to provide data that it does not have.
    DOC Position. With regard to consumption, we agree with Chen Hao 
Xiamen. Our verification results confirm the reliability of Chen Hao 
Xiamen's data. Accordingly, we have used Chen Hao Xiamen's reported 
consumption figures, as corrected through verification, in our 
analysis.
    Moreover, although the Department prefers product-specific yield 
information, where such information does not exist, the Department will 
use the most specific information available. In this instance, Chen Hao 
Xiamen reported yields on a batch specific basis. Further, we have no 
evidence on the record that the Chen Hao Xiamen's methodology is 
distortive of its experience during the POI. Accordingly, we have 
rejected petitioner's arguments and accepted Chen Hao Xiamen's reported 
yield data, as verified by the Department.
Comment 24: Selling Expense Adjustment
    Petitioner contends that, for comparisons of EP to NV based on 
Taiwan sales or Taiwan CV, EP and NV must be adjusted for selling 
expenses. Petitioner argues that the Department erred in not adjusting 
for U.S. selling expenses when the basis for NV was Chen Hao Taiwan's 
price or CV in comparing EP to NV for Chen Hao Xiamen. Although Chen 
Hao Xiamen did not provide U.S. selling expense information, according 
to petitioner, credit expense can be calculated from the verification 
exhibits.
    Chen Hao argues that the Department should not adjust Chen Hao 
Xiamen's EP when the basis for NV is Chen Hao Taiwan's price or CV. 
Chen Hao further argues that imputing selling expenses where the 
Department never provided respondents with an opportunity to present 
that information would be arbitrary and unfair.
    DOC Position. We agree with petitioner that for comparisons of EP 
to NV based on Taiwan sales or Taiwan CV, EP and NV must be adjusted 
for selling expenses. See ``B. Multinational Corporation Provision'' 
section of this notice.
Comment 25: Product Weights
    Petitioner asserts that because verification showed that for six 
products sampled, the weight verified was greater than the weight 
reported, Chen Hao Xiamen thus systematically under-reported its 
product weights. Petitioner contends that to correct the data, the 
Department should increase the reported product weights by two percent, 
which is the degree of under reporting identified for one of the 
products examined at verification.
    Chen Hao Xiamen claims that it did not systematically under report 
its product weights, as claimed by petitioner. Chen Hao Xiamen argues 
that, given that products produced from the same production batch may 
have different weights due to varying amounts of melamine input powder, 
this degree of discrepancy between the reported and verified weights is 
well within an acceptable tolerance of reliability.
    DOC Position. We agree with Chen Hao Xiamen. We note that the 
weighing of the subject merchandise is inherently somewhat imprecise, 
and that the verified weights were within acceptable limits.

Currency Conversion

    We made currency conversions into U.S. dollars based on the 
official exchange rates in effect on the dates of the U.S. sales as 
certified by the Federal Reserve Bank.
    Section 773A(a) of the Act directs the Department to convert 
foreign currencies based on the dollar exchange rate in effect on the 
date of sale of the subject merchandise, except if it is established 
that a currency transaction on forward markets is directly linked to an 
export sale. When a company demonstrates that a sale on forward markets 
is directly linked to a particular export sale in order to minimize its 
exposure to exchange rate losses, the Department will use the rate of 
exchange in the forward currency sale agreement.
    Section 773A(a) also directs the Department to use a daily exchange 
rate in order to convert foreign currencies into U.S. dollars unless 
the daily rate involves a fluctuation. It is the Department's practice 
to find that a fluctuation exists when the daily exchange rate differs 
from the benchmark rate by 2.25 percent. The benchmark is defined as 
the moving average of rates for the past 40 business days. When we 
determine a fluctuation to have existed, we substitute the benchmark 
rate for the daily rate, in accordance with established practice. 
Further, section 773A(b) directs the Department to allow a 60-day 
adjustment period when a currency has undergone a sustained movement. A 
sustained movement has occurred when the weekly average of actual daily 
rates exceeds the weekly average of benchmark rates by more than five 
percent for eight consecutive weeks. (For an explanation of this 
method, see Policy Bulletin 96-1: Currency

[[Page 1719]]

Conversions (61 FR 9434, March 8, 1996).) Such an adjustment period is 
required only when a foreign currency is appreciating against the U.S. 
dollar. The use of an adjustment period was not warranted in this case 
because the New Taiwan dollar did not undergo a sustained movement, nor 
were there currency fluctuations during the POI.

Continuation of Suspension of Liquidation

    For Chen Hao Xiamen, Gin Harvest, and Sam Choan, we calculated a 
zero or de minimis margin. Consistent with Pencils, merchandise that is 
sold by these producers but manufactured by other producers will be 
subject to the order, if issued. Entries of such merchandise will be 
subject to the ``PRC-wide'' rate.
    In accordance with section 733(d)(1) of the Act and 735(c)(1), we 
are directing the Customs Service to continue to suspend liquidation of 
all entries of MIDPS from the PRC, that are entered, or withdrawn from 
warehouse for consumption, on or after the date of publication of this 
notice in the Federal Register, except for entries of merchandise 
manufactured by those producers receiving a zero or de minimis margin. 
The Customs Service to require a cash deposit or posting of a bond 
equal to the estimated amount by which the NV exceeds the EP as 
indicated in the chart below. This suspension of liquidation will 
remain in effect until further notice.
    The weighted-average dumping margins are as follows:

------------------------------------------------------------------------
                                               Weighted-average margin  
      Manufacturer/producer/exporter                 percentage         
------------------------------------------------------------------------
Chen Hao Xiamen...........................  0.97 (de minimis).          
Gin Harvest...............................  0.47 (de minimis).          
Sam Choan.................................  0.04 (de minimis).          
Tar Hong Xiamen...........................  2.74.                       
PRC-Wide Rate.............................  7.06.                       
------------------------------------------------------------------------

    The PRC-Wide rate applies to all entries of subject merchandise 
except for entries from exporters/factories that are identified 
individually above.

ITC Notification

    In accordance with section 735(d) of the Act, we have notified the 
ITC of our determination. As our final determination is affirmative, 
the ITC will determine, within 45 days, whether these imports are 
causing material injury, or threat of material injury, to an industry 
in the United States. If the ITC determines that material injury, or 
threat of material injury, does not exist, the proceeding will be 
terminated and all securities posted will be refunded or canceled. If 
the ITC determines that such injury does exist, the Department will 
issue an antidumping duty order directing Customs officials to assess 
antidumping duties on all imports of the subject merchandise entered, 
or withdrawn from warehouse, for consumption on or after the effective 
date of the suspension of liquidation.
    This determination is published pursuant to section 735(d) of the 
Act.

    Dated: January 6, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-752 Filed 1-10-97; 8:45 am]
BILLING CODE 3510-DS-P