[Federal Register Volume 62, Number 119 (Friday, June 20, 1997)]
[Notices]
[Pages 33588-33601]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-16046]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-557-805]


Extruded Rubber Thread From Malaysia, Final Results of 
Antidumping Duty Administrative Review

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

SUMMARY: On December 10, 1996, the Department of Commerce (the 
Department) published in the Federal Register its preliminary results 
of the administrative review of the antidumping duty order on extruded 
rubber thread from Malaysia (61 FR 65019). This review covers Heveafil 
Sdn. Bhd. (``Heveafil''), Rubberflex Sdn. Bhd. (``Rubberflex''), Filati 
Lastex Elastofibre (Malaysia) (``Filati''), Rubfil Sdn. Bhd. 
(``Rubfil'') (collectively ``respondents''), manufacturers/exporters of 
the subject merchandise to the United States. The period of review 
(POR) is October 1, 1994 through September 30, 1995. We gave interested 
parties an opportunity to comment on our preliminary results. 
Petitioner and respondents submitted case briefs on March 10, 1997 and 
rebuttal briefs on March 17, 1997. Respondents requested a hearing on 
January 2, 1997, but later withdrew their request for a hearing. 
Therefore, we have based our analysis on the comments received, and 
have changed the results from those presented in the preliminary 
results of review.

EFFECTIVE DATE: June 20, 1997.

FOR FURTHER INFORMATION CONTACT:
Laurel LaCivita or James Terpstra, AD/CVD Enforcement Group II, Office 
4, Import Administration, International Trade Administration, U.S. 
Department of Commerce, 14th Street and Constitution Avenue, NW., 
Washington, DC 20230; telephone (202) 482-4740 or (202) 482-3965, 
respectively.

SUPPLEMENTARY INFORMATION:

The Applicable Statute

    Unless otherwise indicated, all citations to the statute are 
references to the provisions effective January 1, 1995, the effective 
date of the amendments made to the Tariff Act of 1930 (the Act), by the 
Uruguay Round Agreements Act (URAA). In addition, unless otherwise 
indicated, all citations to the Department's regulations are to the 
current regulations, as amended by the interim regulations published in 
the Federal Register on May 11, 1995 (60 FR 25130).

[[Page 33589]]

Background

    On October 7, 1992, the Department published in the Federal 
Register (57 FR 46150) the antidumping duty order on extruded rubber 
thread from Malaysia. On October 30, 1995, the petitioner, North 
American Rubber Thread, requested that the Department conduct an 
antidumping administrative review for the following producers and 
exporters of extruded rubber thread: Heveafil Sdn. Bhd (``Heveafil''), 
Rubberflex Sdn. Bhd. (``Rubberflex''), Filati Lastex Elastofibre 
(Malaysia) (``Filati''), and Rubfil Sdn. Bhd (``Rubfil''). On October 
31, 1995, these same producers and exporters requested to be reviewed. 
On November 16, 1995, we published a notice of initiation of an 
administrative review of this order for the period October 1, 1994, 
through September 30, 1995 (60 FR 57573), for the following producers 
and exporters of extruded rubber thread: Heveafil, Rubberflex, Filati, 
and Rubfil. We conducted a vertification of Rubberflex in Malaysia from 
September 23, 1996 until October 5, 1996, and of its U.S. affiliate in 
Hickory, North Carolina from October 16 to 18, 1996. Our preliminary 
results of review were published in the Federal Register on December 
10, 1996 (61 FR 65019). Petitioner and all respondents filed case 
briefs on March 10, 1997 and rebuttal briefs on March 17, 1997. The 
Department has now completed this administrative review in accordance 
with section 751(a) of the Act.

Scope of the Review

    The product covered by this review is extruded rubber thread. 
Extruded rubber thread is defined as vulcanized rubber thread obtained 
by extrusion of stable or concentrated natural rubber latex of any 
cross sectional shape, measuring from 0.18 mm, which is 0.007 inch or 
140 gauge, to 1.42 mm, which is 0.056 inch or 18 gauge, in diameter. 
Extruded rubber thread is currently classified under subheading 
4007.00.00 of the Harmonized Tariff Schedule of the United States 
(HTSUS). The HTSUS subheadings are provided for convenience and U.S. 
Customs purposes. Our written description of the scope of this review 
is dispositive.

Analysis of Comments Received

    We gave interested parties an opportunity to comment on the 
preliminary results. We received comments and rebuttal comments from 
North American Rubber Thread (petitioner), and Rubberflex, Rubfil, 
Heveafil and Filati (respondents).

Facts Available for Rubberflex

    We found that responses provided by Rubberflex could not be 
verified within the meaning of section 776(a)(2)(D) of the Act, and 
that the complete verification failure renders the response unusable 
under section 782(e) of the Act. For a significant portion of the cost 
and expense items reviewed at verification, the information provided in 
the questionnaire response was inaccurate or could not be verified. 
This includes, but is not limited to, indirect selling expenses, 
overhead, selling, general and administrative (SG&A) expenses, labor, 
materials, rebates, corporate structure, and the completeness of U.S. 
sales reporting. For numerous items, Rubberflex attempted to present 
revised information at verification. However, Rubberflex failed to 
disclose the numerous errors in its response prior to, or at the start 
of verification, as repeatedly requested by the Department. Rather, 
Rubberflex attempted to present its new information in a piecemeal 
manner, often late in the verification. This effectively precluded the 
Department from having adequate time to evaluate the scope and 
magnitude of the changes. Accordingly, we determined that Rubberflex 
failed to demonstrate the completeness and accuracy of its 
questionnaire response at verification and thus has failed 
verification.
    As discussed in comments 1 through 26 below, we carefully reviewed 
Rubberflex's arguments in light of the verification report and the 
supporting verification exhibits. This analysis reveals that 
Rubberflex's brief systematically mischaracterizes, and seeks to 
minimize the importance of, all of the myriad problems encountered at 
verification. As described below, as in the preliminary results of 
review, we find that, pursuant to sections 776(a) and 782(e) of the 
Act, the errors and problems found at verification render Rubberflex's 
questionnaire response unusable for purposes of calculating a margin.
    Where a party provides information requested by the Department but 
the information cannot be verified as required by section 782(i) of the 
Act, section 776(a)(2)(D) of the Act requires the Department to use 
facts otherwise available in reaching the applicable determination. 
Section 782(e) of the Act provides that the Department shall not 
decline to consider information that is submitted by an interested 
party and is necessary to the determination but does not meet all the 
applicable requirements established by the Department 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 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.
    In this case we have determined that the information submitted 
could not be verified and that Rubberflex did not act to the best of 
its ability. Moreover, using Rubberflex's information would create 
undue difficulty. Verification revealed numerous errors in Rubberflex's 
information. Using this information would require the Department to use 
information it knows is incorrect, unverified or both. At verification, 
we determined that a substantial portion of the information submitted 
by Rubberflex was incorrect and we were not always able to determine 
the correct information for every error found at verification. Thus, 
any attempt to use Rubberflex's data, in whole or in part, would be 
unduly difficult. Accordingly, we must decline to consider information 
submitted by Rubberflex.
    Moreover, we determine that, pursuant to section 776(b) of the Act, 
Rubberflex did not cooperate to the best of its ability to comply with 
our requests for information and therefore we are using adverse facts 
available to determine Rubberflex's margin. Such adverse inferences may 
include information derived from: (1) the petition, (2) a final 
determination in the investigation, (3) any previous review under 
section 751 of the Act of determination under section 753 of the Act, 
or (4) any other information placed on the record.
    In selecting a margin would be sufficiently adverse, we considered 
Rubberflex's degree of cooperation and the nature of the deficiencies 
detected at verification. Further, we note that Rubberflex's normal 
audit cycle coincided with verification in such a way as to hamper 
Rubberflex's preparation for the verification of certain items. In 
selecting a facts available margin which is appropriate in light of 
these circumstances, we determine that (as we did in our preliminary 
results) that 20.38 percent, which is Rubberflex's highest rate from a 
prior segment of this proceeding, is sufficiently adverse to encourage 
full cooperation in future segments of the proceeding. Moreover, this 
rate has

[[Page 33590]]

probative value because it is Rubberflex's calculated rate from the 
less than fair investigation. Furthermore, there is no evidence on the 
record indicating that this selected margin in not appropriate as 
adverse facts available (see, e.g., Antifriction Bearings (Other than 
Tapered Roller Bearings) and Parts Thereof from France, Germany, Italy, 
Japan, Singapore and the United Kingdom; Final Results of Antidumping 
Duty Administrative Review, 62 FR 2081, 2088 (January 15, 1997)).
    Section 776(c) of the Act requires the Department to corroborate 
secondary information used as facts available to the extent 
practicable. Secondary information is information derived from the 
petition that gave rise to the investigation or review, the final 
determination concerning the subject merchandise, or any previous 
review under section 751 concerning the subject merchandise. The 
Statement of Administrative Action, H.R. Doc. 316, Vol 1, 103d Cong., 
2d Sess. 870 (1994), (``SAA'') provides that ``corroborate'' means 
simply that the Department will satisfy itself that the secondary 
information to be used has probative value (see SAA at 870). Thus, to 
corroborate secondary information, the Department will, to the extent 
practicable, examine the reliability and relevance of the information 
used. However, unlike other type of information, such as input costs or 
selling expenses, there are no independent sources for calculated 
dumping margins. The only source for margins is an administrative 
determination . After reviewing the record, we are satisfied that this 
rate has probative value because it is Rubberflex's calculated rate 
from the less than fair value proceeding. Thus, we have determined that 
information and inferences which we have applied are reasonable to use 
under the circumstances of this review. See SAA at 869. Further, there 
is no reliable evidence on the record indicating that this selected 
margin is not appropriate as adverse facts available. (See, e.g., Fresh 
Cut Flowers from Mexico; Final Results of Antidumping Duty 
Administrative Review, 61 FR 6812, 6814 (February 22, 1996).

Comments Concerning Rubberflex

    Rubberflex argues that the Department was not justified in 
disregarding its responses and assigning facts available in the 
preliminary results. Rubberflex contends that the Department verified 
Rubberflex's questionnaire responses, and that, at most, the Department 
should use partial facts available for certain aspects of its dumping 
calculations. Rubberflex made numerous detailed arguments refuting and 
rebutting the Department's preliminary results, verification report, 
and verification failure memo. We have addressed these to the greatest 
extent practicable in this notice. However, many of the comments are 
extremely detailed and many can only be completely addressed by 
reference to proprietary data. Accordingly, we addressed each comment 
in complete detail in a proprietary analysis memorandum to the file 
dated June 9, 1997.
    Comment 1: Reconciliation of Sales, Profit and Expenses.
    Rubberflex maintains that it provided the Department with a 
reconciliation of its calendar year 1994 and 1995 trial balances to the 
appropriate audited, consolidated financial statements at verification. 
Rubberflex states that, contrary to the verification report, total 
sales, profit, financing expenses, and indirect selling expenses were 
reconciled to the audited financial statements.
    DOC Position: We agree that Rubberflex was able to reconcile its 
audited financial statements to its trial balance for the above-
mentioned figures. We disagree that this had any bearing on the 
verification of specific items. This reconciliation was not what was 
requested of them at verification. Rubberflex voluntarily provided all 
of this information in response to the Department's request that it 
demonstrate that the indirect selling expenses reported in the revised 
response provided at verification tied to the audited financial 
statements. Rubberflex did not demonstrate that the figures reported in 
its revised response for indirect selling expenses and G&A tied to its 
audited financial statements.
    Comment 2: Reconciliation of Rubberflex's Affiliates' Financial 
Statements.
    Rubberflex disputes the Department's determination that its home 
market indirect selling expenses did not reconcile to its current 
financial statement due to the fact that indirect selling expenses 
incurred in Rubberlex's U.K. and German branch offices (expenses which 
account for differences between the home market indirect selling 
expenses and the financial statement) could not be verified. Rubberflex 
contends that during verification it demonstrated how total sales, 
expenses, and profits of the U.K. and German branches accounted for 
differences between consolidation totals and totals for Rubberflex in 
Malaysia. Further, Rubberflex claims that it should not be held 
accountable for providing original copies of the auditors' 
consolidation worksheets in the short time permitted at verification. 
Rubberflex also contends that it stressed during verification that 
information involving its U.K. and German branches could only be 
accurately verified on site in those particular countries.
    DOC Position: We disagree. It is one of the primary requirements of 
verification that a company is required to tie the information in its 
questionnaire response to its audited consolidated financial 
statements. Rubberflex failed to do so at verification. Rubberflex is 
essentially arguing that we should accept their attempt, but ultimate 
failure. We disagree. Given the circumstances of this review, where 
Rubberflex provided numerous, inadequately explained or documented, 
revisions to its questionnaire response, Rubberflex's failure in this 
regard undermines the entire verification.
    Comment 3: Home Market Sales List.
    Rubberflex states that verification demonstrated that all home 
market sales were correctly reported and traced through the accounting 
records. In addition, Rubberflex maintains that the Department found 
that Rubberflex's date-of-sale methodology accurately reflected the 
date that all material terms of the sale were established and that all 
credit memos for returned and defective merchandise were accurately 
reported.
    DOC Position: We agree with Rubberflex in general that the home 
market sales list verified. The verification report identifies the 
minor discrepancies noted.
    Comment 4: Home Market Movement Expenses.
    Rubberflex states that the verification report indicates that home 
market movement expenses were traced to the general ledger and that all 
freight expenses were properly accounted for. Further, Rubberflex 
argues that the Department confused the facts in this review with 
verification difficulties regarding home market movement expenses in 
the 1993/1994 administrative review and that this confusion resulted in 
the Department's erroneous decision to use adverse facts available on 
issues relating to another review.
    DOC Position: We agree with Rubberflex's characterization of the 
verification of home market movement expenses. We disagree that any of 
the information presented in the 1993-1994 review influenced the use of 
adverse facts available in the instant review.
    Comment 5: Home Market Credit Expenses.

[[Page 33591]]

    Rubberflex states that its original response contained the 
information needed to calculate home market credit expenses and that 
this response was neither revised nor found to contain any significant 
errors during verification. Rubberflex states that the one clerical 
error found by the Department at verification resulted in an increase 
to the short-term interest rate.
    DOC Position: We agree with Rubberflex that we found only small 
clerical error at verification which resulted in an increase to the 
short-term interest rate. However, we disagree that this was the only 
error found at verification. We also found that Rubberflex failed to 
include certain expenses related to export credit refinancing (ECR) 
expenses in its calculation of the interest rate used to impute credit 
expenses on home market sales.
    Comment 6: Home Market Packing Expenses.
    Rubberflex claims that at the beginning of verification, it 
disclosed to the Department that it had erroneously allocated the cost 
of all factory workers' benefits in the category of fixed overhead 
costs, rather than allocating that cost among direct labor costs, fixed 
overhead costs, and packing labor costs. Rubberflex stated that a 
corrected worksheet reflecting this reallocation was submitted to the 
department at the beginning of the cost verification, and subsequently 
verified. Rubberflex contends that a comparison of the original to the 
corrected worksheets reveals only minor changes in the calculation of 
packing labor costs. Further, Rubberflex also contends that it 
submitted an additional worksheet which proved that the reallocation 
did not affect the total cost of production (COP) or constructed value 
(CV).
    DOC Position: We agree with Rubberflex that we found only minor 
discrepancies in Rubberflex's calculation of packing material and 
labor. However, we disagree that Rubberflex presented any documentation 
at the beginning of verification to demonstrate what changes it made to 
the classification of labor expenses in its sale and cost response. 
Rubberflex did make a general oral statement that it had reallocated 
some labor costs across packing, indirect overhead and factory labor, 
but it did not spell out those changes. The Department then directly 
and repeatedly requested Rubberflex to provide this information in 
writing, which it said it would do. However, Rubberflex failed to 
report any of its changed allocations until each subject arose in the 
course of the verification.
    Comment 7: Home Market Indirect Selling Expenses.
    Rubberflex states that the worksheets provided in its questionnaire 
response regarding home market indirect selling expenses and general 
and administrative expenses (G&A) were based on its auditor's 
presentation of G&A expenses, which in turn were based on Rubberflex's 
trial balance and general ledger. Rubberflex contends that the titles 
of the concepts listed in the auditor's presentation did not always 
relate directly to the titles of the accounts used by Rubberflex in the 
ordinary course of business because the auditor collapsed several 
accounts into a single concept. Rubberflex further contends that while 
preparing for verification, it discovered that the worksheets in its 
response required two corrections. However, Rubberflex maintains that: 
(1) it disclosed these changes on the first day of verification, (2) 
the Department reviewed these revisions, and (3) these revisions were 
tied to the financial statements.
    DOC Position: As we explained in the Facts Available for Rubberflex 
section of this notice and the Department's position to Comments 1 and 
2, Rubberflex failed to demonstrate that it reported all of the 
appropriate indirect selling expenses and G&A expenses to the 
Department, despite three separate submissions, and that it failed to 
tie the reported expenses to its audited financial statements. It 
failed to provide a worksheet, or any other type of document, 
reconciling the ``titles and concepts'' used in its trial balance to 
those on the audited financial statements. (See page 2 of the 
Department's December 12, 1996 memorandum concerning the verification 
failure for Rubberflex.) Therefore, Rubberflex failed to demonstrate 
that it included all appropriate indirect selling expenses and G&A 
expenses in its revised exhibit, and that those expenses tied to the 
total amount of expenses recorded for Rubberflex Malaysia on 
Rubberflex's financial statements.
    Comment 8: U.S. Sales Listing.
    Rubberflex contends that it demonstrated at the verification in 
Malaysia that (1) all export price (EP) sales entered into the United 
States during the review period were reported; (2) it accurately 
reported the date of sale for EP sales as the Malaysian bill of lading 
date; and (3) it accurately reported foreign inland freight, packing, 
indirect selling expenses, brokerage and handling, international 
freight and marine insurance pertaining to U.S. sales that were 
incurred in Malaysia.
    DOC Position: We disagree with Rubberflex's characterization of the 
portion of the U.S. sales verification which took place in Malaysia. At 
the Malaysian portion of verification, Rubberflex showed that it 
reported all entries into the United States during the period of review 
and that it used the Malaysian bill of lading date as the date of sale 
for EP sales, including certain ``consignment'' sales. However, our 
review of Rubberflex's U.S. sales reporting during the U.S. portion of 
the verification revealed a great deal of confusion concerning the date 
of sale and the accuracy of the computer sales listing. Rubberflex was 
unable to demonstrate that the price, quantity and date of sale were 
accurately reported on the computer sales listing. In Malaysia, and in 
the questionnaire response, the date of sale for all EP sales was 
identified as the Malaysian bill of lading date. However, in the United 
States, company officials stated that for certain consignment sales, 
Rubberflex used the date on which the rubber thread is withdrawn from 
Rubberflex's customer's inventory as the date of sale. Thus, the 
questionnaire response, and the Malaysian verification findings, were 
contradicted. Moreover, because Rubberflex failed to indicate on its 
computer tape which sales were consignment sales, it was not possible 
to know what date of sale was operative for any of the sales listed on 
the computer tape.
    With respect to the accuracy of the other expenses: (1) the 
problems with foreign inland freight and indirect selling expenses are 
discussed elsewhere, and (2) we found only minor discrepancies with 
ocean freight, marine insurance or brokerage and handling.
    Comment 9: The Total Volume and Value of EP and Constructed Export 
Price (CEP) Sales.
    Rubberflex argues that the Department was able to reconcile the 
quantity and value of Rubberflex's sales to the response after certain 
adjustments were made at the U.S. verification. Rubberflex contends 
that, at the U.S. verification, Rubberflex provided worksheets that 
traced the reported quantities and values of the U.S. sales to 
Rubberflex's audited financial statements.
    DOC Position: We disagree. The verification report establishes that 
Rubberflex was never able to conclusively demonstrate that its U.S. 
sales were correctly reported. Rubberflex was not able to demonstrate 
the validity of the information provided on the computer tapes by the 
end of the verification.
    As Rubberflex explains in its case brief, it presented a 
reconciliation of the

[[Page 33592]]

volume and value of sales from its financial statements to the 
response. We found a number of clerical errors and omissions, such as 
credit memos that were initially omitted from the reconciliation 
exercise because they were omitted from the response. We found that: 
(1) certain sales were reported in two review periods; (2) others were 
misclassified between EP and CEP sales; (3) the date of sale for 
certain EP sales was misreported; and (4) Rubberflex could not 
reconcile its credit memos to the specific line items on the computer 
tape. Given that we found errors in almost every phase of the numerous 
attempted reconciliations of U.S. sales, it is not accurate to claim, 
as does Rubberflex, that the quantity of U.S. sales was in any way 
reconciled completely. Consequently, we found that these errors and 
omissions undermined the integrity of the response and made the 
computer tape unusable for the purpose of calculating a margin.
    Comment 10: Date of Sale Methodology for U.S. Sales in the 1993-
1994 Review.
    Rubberflex notes that the Department's December 12, 1996 memorandum 
stated that ``Rubberflex failed to use the appropriate date of sale 
methodology for purchase price sales in the 1993-1994 review.'' 
Rubberflex contends that the date of sale issues relating to the 1993/
1994 review were erroneously considered in the Department's 
determination to use ``adverse facts available'' in the 1994-1995 
review.
    DOC Position: We note that the December 12, 1996 memorandum applied 
both to the 1993-1994 and the 1994-1995 reviews. In the example cited 
by Rubberflex, the Department identified that the date of sale issue 
applied clearly to the 1993-1994 review, based on the evidence on the 
record in that segment of the proceeding. Rubberflex is incorrect that 
such information was considered in our determination to use ``adverse 
facts available'' in the instant review. The Department's determination 
in the instant review is based only on information pertaining to the 
1994-1995 period of review.
    Comment 11: Review Classification According To Date of Entry.
    Rubberflex states that its inadvertent error of classifying 37 
sales under two different review periods can be easily rectified, and 
should not form the basis for the assignment of total facts available. 
Rubberflex disputes the Department's contention that Rubberflex was not 
able to state with any clarity for which review the 37 sales should 
have been reported. Rubberflex claims that the Department verified the 
entry dates for the sales in question and noted no discrepancies. 
Therefore, Rubberflex requests that the Department revisit this issue 
and reclassify those 37 sales into the appropriate review period 
according to date of entry.
    DOC Position: At verification, Rubberflex was unable to 
appropriately classify all of its sales to the United States with 
regard to review period and type of sale (export price (EP) or 
constructed export price (CEP)). We asked Rubberflex to properly 
classify 37, of the approximately 125 EP sales, that we found reported 
in both reviews. Rubberflex claimed that all consignment sales should 
be classified in the 1994-1995 review. However, this classification did 
not coincide with the narrative of its response which indicated that it 
used the Malaysian bill of lading date as the date of sale. Some of 
these consignment sales had U.S. entry dates which occurred during the 
1993-1994 review. Therefore, since the U.S. entry date always follows 
the bill of lading date in Malaysia (since the ship arrives in the U.S. 
after it leaves Malaysia), these sales could not properly be classified 
in the 1994-1995 review. When the Department tried to examine the rest 
of the computer sales listing for the treatment of the date of sale in 
consignment sales, it found that Rubberflex did not indicate which 
sales were consignment sales on the computer sales listing submitted to 
the Department. Consequently, the Department cannot determine whether 
the rest of the sales reported on the computer tape were appropriately 
classified with respect to review period, and therefore, we have no 
basis by which to accurately reclassify these 37 sales or to verify the 
accuracy of respondent's classification of the remaining U.S. sales as 
reported by respondent.
    We note again that it is Rubberflex's responsibility, not the 
Department's, to prepare the questionnaire response. The errors we 
found at verification in the preparation of Rubberflex's U.S. sales 
data were so wide-spread and pervasive that the Department could not 
ensure that any of the reported information was correct unless we were 
to undertake the task of reconstructing the questionnaire response 
ourselves.
    Comment 12: CEP and EP Sales.
    Rubberflex disputes the Department's determination that it 
misreported or duplicated the reporting of certain sales (i.e., certain 
sales classified as both CEP and EP). Rubberflex explains that it 
clarified during verification the reason why certain invoices were 
referenced under different review periods and classified under 
different U.S. databases. As an example, Rubberflex states that sales 
must be reported under various U.S. classification because certain 
consignment sales and sales made out of inventory normally result in a 
number of invoices issued by the U.S. affiliate, whereas the container 
corresponding to those sales is recorded in Rubberflex's books as a 
single invoice. Moreover, Rubberflex claims that during verification, 
the Department examined a few invoices having similar circumstances and 
indicated its satisfaction with Rubberflex's explanations, and did not 
request to view additional invoices. Rubberflex contends that it 
properly reported all U.S. sales.
    Petitioner contends Rubberflex misstates the standard for when 
sales are EP versus CEP. If a subsidiary is fully responsible for 
setting the terms of the sale (as Rubberflex's U.S. subsidiary is for 
all U.S. sales), that alone makes the sales CEP sales according to 
Final Determination of Sales at Less Than Fair Value: Brake Drums and 
Brake Rotors From the People's Republic of China, 62 FR 9171, 9171-72 
(February 28, 1997) (Comments 14 and 16).
    DOC Position: We disagree with Rubberflex. the verification report 
states that company officials were confused about the classification of 
Rubberflex's U.S. sales with respect to CEP and EP and with respect to 
review period. At the conclusion of the verification, company officials 
were still unable to determine which sales should or should not be 
reported, or whether they were EP or CEP sales.
    Comment 13: Credit Memos in the U.S. Market.
    Rubberflex contends that the Department overstates the impact of 
the omitted credit memos during the POR. Rubberflex claims that its 
U.S. affiliate identified the omitted credit memos, most of which had 
no effect on unit price, and thus no effect on dumping margins of any 
U.S. sales. Rubberflex disputes the Department's determination that the 
omitted credit memos made it impossible to tie the U.S. sales listing 
to the U.S. affiliate's financial statements.
    DOC Position: We disagree. Rubberflex reported the U.S. price and 
quantity net of credit notes, despite instructions in the questionnaire 
to record price and quantity adjustments separately. Therefore, it is 
not possible to determine which sales have price and quantity 
adjustments attributed to them by examining the computer tape.
    At verification, Rubberflex was unable to reconcile the credit 
memos to the

[[Page 33593]]

computer sales listing. First, Rubberflex failed to have its 
reconciliation (via the mechanism of credit memos) of the EP sales 
value from the financial statements to the response prepared at the 
beginning of the verification. Secondly, Rubberflex initially failed to 
report all of its credit memos with respect to CEP sales on the 
reconciliation from the financial statements to the computer sales 
listing. Further examination revealed that Rubberflex had also failed 
to revise the computer sales listing to account for these missing 
credit memos. Finally, Rubberflex company officials in the United 
States stated that they did not know how to tie the credit memos listed 
in the verification exhibit 52 to the questionnaire responses since 
Rubberflex company officials in Malaysia prepared that portion of the 
response.
    Comment 14: Corrected Worksheets Should Be Part of the Record.
    Rubberflex contends that given the time constraints, it was unable 
to present corrected worksheets on the first day of verification, and 
therefore, those worksheets, which Rubberflex contends were 
subsequently submitted and verified, should not be disregarded. 
Rubberflex disputes the Department's finding that it had no worksheets 
to demonstrate how the original responses were prepared or why they 
were changed or what the relationship was between the original and 
revised submissions. Rubberflex contends that corrected worksheets were 
submitted during verification, are referred to in the Department's 
verification report and are found in the verification exhibits. 
Rubberflex states that a side-by-side comparison of the original to the 
revised worksheets clearly reveals the relationship between the 
documents.
    Rubberflex also contends that on the first day of verification, it 
suggested to the Department that any corrected worksheets be included 
as part of the verification exhibits normally submitted after 
verification and that the Department did not object to its proposal. 
Rubberflex also states that it repeatedly requested to submit revised 
computer tapes to reflect corrections it claims to have presented 
during the beginning of verification. However, Rubberflex claims that 
the Department never responded to its request.
    Petitioner emphasized that Rubberflex did not submit to the 
Department a listing of reporting errors at the commencement of 
verification, nor was petitioner served such a list, as required by the 
Department's regulations. Petitioner contends that Rubberflex's claim 
that the Department was advised at the commencement of verification of 
certain errors in its submissions should be of no consequence.
    DOC Position: As stated in our preliminary results, we found that 
the responses provided by Rubberflex could not be verified. The 
inaccuracies which render the response unusable for purposes of margin 
calculations include the fact that Rubberflex attempted to provide 
revised questionnaire responses at verification for home market 
indirect selling expenses, direct labor and packing labor expense, 
variable overhead and cost of goods sold; for these same expenses 
Rubberflex could not demonstrate how the original response was 
supported by documentation, nor could it document the difference 
between the original and revised submission for these items.
    Rubberflex failed to provide written disclosure of changes made to 
its questionnaire response on the first day of verification, although 
it was asked to do so. Rather, it provided verification exhibits which 
constitute revised questionnaire responses throughout the course of the 
verification. Rubberflex also failed to explain and/or quantify the 
effects of these revisions, rending the Department unable to assess the 
significance or impact of these changes. As we stated in Elemental 
Sulphur From Canada: Preliminary Results of Antidumping Duty 
Administrative Review, 62 FR 969, 970 (January 7, 1997), the Department 
can accept new information at verification only when (1) the need for 
that information was not evident previously, (2) the information makes 
minor corrections to information already on the record, or (3) the 
information corroborates, supports, or clarifies information already on 
the record.
    Rubberflex states in its brief that it submitted such revisions at 
the beginning of the verification. This is directly contradicted by the 
facts on the record. There were 38 verification exhibits covering the 
verification in Malaysia. The document concerning packing cost is 
exhibit number 18, that regarding direct labor is exhibit number 22 and 
that regarding fixed overhead is exhibit number 33. As such, the record 
clearly demonstrates that the information was provided piecemeal, and 
late in the verification exercise.
    We also disagree with Rubberflex's contention that the Department 
engaged in any discussion whatsoever during verification concerning a 
``suggestion'' that Rubberflex file any corrected worksheets with the 
exhibits normally filed after verification. We further disagree that 
Rubberflex engaged in any discussion what ever concerning the provision 
of a revised computer tape. Given the pervasive errors and changes made 
to the questionnaire response and the difficulties verifying those 
changes, the Department has no reason to believe that a new computer 
tape, submitted after verification, would accurately represent the 
changes to the response that were presented during the verification. 
Under the circumstances of this case, the Department would undermine 
its purpose in verifying the questionnaire response by accepting such 
new information after verification.
    Comment 15: Corporate Structure.
    Rubberflex disputes the Department's finding that Rubberflex failed 
to identify the owners of its company and the existence of an 
affiliated European company. Rubberflex claims that it demonstrated the 
identify of its parent company through its ``annual return'' to the 
Government of Malaysia which reports information regarding its 
shareholders and directors. Further, Rubberflex contends that it tied 
the shareholdings from the ``annual return'' to a corporate structure 
worksheet provided in its response.
    In addition, regarding any European affiliates, Rubberflex contends 
that it could not provide documentation regarding the sale of these 
companies, which it explained to the Department at verification. 
Rubberflex further states that, regardless, the sale of affiliated 
European resellers have no relevance to Rubberflex's sales verification 
in the home and U.S. markets.
    DOC Position: We disagree with Rubberflex that corporate structure 
was adequately verified. Rubberflex provided new information at 
verification by introducing the existence of a previously unreported 
corporate owner. We asked Rubberflex to provide information regarding 
whether this company had any affiliation with Rubberflex's customers or 
suppliers. However, Rubberflex declined to produce such information. 
Rubberflex merely stated, as it does in its case briefs, that the 
affiliated European resellers have no relevance to Rubberflex's sales 
in the home market and the United States. Consequently, the Department 
was unable to satisfy itself regarding whether any related-party sales, 
loans, equipment purchases or raw material purchases occurred during 
the POR. As the U.S. Court of International Trade stated Krupp Stahl 
A.G. v. United States, 17 CIT 450; 822 F. Supp. 789, 792 (1993), it is 
inappropriate for respondents to limit or control which information 
they present to the Department in a way that it impedes the 
Department's ability to confirm the accuracy of the questionnaire 
response or forces the

[[Page 33594]]

Department to use information most beneficial to them.
    Comment 16: Direct Material Costs.
    Rubberflex claims that the Department verified the direct material 
costs used in its cost of production (COP) and constructed value (CV) 
submissions. Rubberflex contends that the Department examined the 
following steps Rubberflex used to calculate the direct material costs: 
(1) the compound recipes of direct materials latex and chemicals used 
as the basis for determining product-specific cost of productions for 
all types of rubber thread; (2) the budgeted costs used to derive the 
standard per-unit costs; (3) the actual cost of materials used; and (4) 
the variance between standard and actual material costs. Rubberflex 
argues that the Department verified the steps by examining batch 
records (computer listings which aggregate a number of invoices that 
will appear as a single line item in the general ledger), testing 
inventory formulas, and determining that Rubberflex accurately captured 
and reflected all direct material costs incurred during the review 
period.
    Rubberflex notes that the Department questioned the budgeted costs 
because they were derived in 1991 and differed from the weighted-
average costs of materials in inventory. Rubberflex stated that these 
budgeted costs had not been revised since 1991 because they were still 
a reasonable estimation of the costs of the various materials used to 
produce rubber thread and none of the costs had changed significantly. 
Rubberflex argues that the budgeted costs are a reasonably accurate 
tool for predicting costs over time.
    DOC Position: We disagree with Rubberflex that per-unit direct 
materials cost was verified. We did verify the total material cost 
during the POR as well as the actual quantity of materials used. 
However, neither of these figures alone is sufficient to calculate the 
per-unit cost reported in the questionnaire response. Rubberflex 
reported its per-unit material cost by multiplying actual material used 
per product by standard material prices to arrive at a standard cost. 
To calculate a variance Rubberflex calculated the total material cost 
at standard; it then made a factory-wide adjustment for the difference 
between total actual material cost and the total material cost at 
standard. This methodology is not, in itself, a problem.
    There are two problems which arise from Rubberflex's use of the 
1991 standard prices. The first is that Rubberflex was unable to 
substantiate how those prices were calculated in 1991 and what those 
figures represent. Therefore, it is not possible to evaluate the 
accuracy of the per-unit cost calculations. Rubberflex made no attempt 
to demonstrate that these prices were reasonable, or that the use of 
1991 prices to calculate costs for 1995 products was non-distortive.
    The second problem is that the 1991 standard prices presumably 
reflect the relative prices sometime prior to that time. However, these 
relative prices have changed. As the verification report on page 16 
states, we compared the 1991 standard prices with the actual POR prices 
and found that the prices of individual materials increased or 
decreased at different rates. Because each product uses a different mix 
of materials, the cost of producing each different product would change 
relative to the cost of other products produced in the factory. 
However, by applying as a factory-wide variance the total actual 
material cost as compared with the 1991 standard prices, Rubberflex 
reported per-unit material costs failed to account for the changes in 
the relative costs. Thus, these costs are inaccurate.
    Comment 17: Direct Labor Costs.
    Rubberflex contends that the Department verified its labor costs in 
full. Rubberflex argues that it used the following steps to calculate 
the direct labor costs reported in its COP/CV submissions: (1) 
calculate actual direct labor cost per minute of production by dividing 
total direct labor costs during the review period by the total 
production time during the review period; (2) allocate the cost per 
minute to specific products based on the standard number of minutes 
required to produce particular types of rubber thread; and (3) adjust 
the product-specific costs calculated using the standard yield for the 
variance between actual and predicted factory operation.
    Rubberflex notes that at the beginning of verification, it 
disclosed certain minor revisions, and provided a corrected worksheet, 
to the Department. Rubberflex claims that a side-by-side comparison of 
the original and corrected worksheets reveals only minor corrections. 
In order to verify the corrected worksheet, Rubberflex states that it 
traced all of the reported expenses to its trial balance, and traced 
from the trial balance to the general ledger and relevant source 
documentation.
    DOC Position: We agree that Rubberflex followed the method it 
outlined to determine direct labor expenses. However, we disagree with 
Rubberflex's characterization that these expenses were fully verified. 
See DOC Position to comment 14. Rubberflex failed to clearly 
demonstrate the impact of these changes on the calculations in the 
questionnaire response. For example, Rubberflex contends that the 
revised data was merely a reclassification. Despite the fact that much 
of Rubberflex's explanation is post hoc, their own exhibits belie their 
assertions. An examination of the exhibits placed side-by-side in 
exhibit 3 of Rubberflex's brief reveals numerous and significant 
differences in the exhibits, differences not explained at verification 
nor in the case brief.
    A second problem arose during the verification of labor expenses. 
As we explain on pages 13 of our February 14, 1997 verification report, 
Rubberflex failed to provide the original source documentation for 
managerial labor, despite the Department's request, thus ``placing 
control . . . in the hands of uncooperative respondents who could force 
Commerce to use possibly unrepresentative information most beneficial 
to them.'' Krupp Stahl, 822 F. Supp. at 792.
    Comment 18: Variable Overhead Costs.
    Rubberflex contends that at the beginning of verification, it 
disclosed to the Department two minor errors concerning its variable 
overhead costs: (1) Rubberflex reported the salary of the factory 
supervisor and manager as variable overhead costs, rather than fixed 
overhead costs; and (2) certain components of variable overhead needed 
to be corrected to reflect year-end adjustments. Rubberflex stated that 
a corrected worksheet reflecting this reallocation was submitted to the 
Department during the cost verification. Rubberflex claims that a side-
by-side comparison of the original and corrected worksheets reveal only 
minor changes. Rubberflex states that the costs were verified by the 
Department and that final expense figures used were appropriately 
recorded in monthly accounts, according to the Department's 
verification report. In addition, Rubberflex states that these minor 
changes were necessitated by adjustments made by the auditors after 
performing a physical inventory of materials.
    DOC Position: We disagree. See DOC Position to comment 14.
    Comment 19: Fixed Overhead Costs.
    Rubberflex contends that at the beginning of verification, it 
disclosed to the department several minor errors concerning its fixed 
overhead costs: (1) Rubberflex reported the salary of the factory 
supervisor and manager as variable overhead costs, rather than fixed 
overhead costs; (2) the cost of all benefits for workers in the factor 
was included in fixed overhead cost, rather than being allocated among 
direct labor

[[Page 33595]]

costs, fixed overhead costs, and packing labor costs; and (3) 
Rubberflex's auditor made a provision for writing-off finished goods 
inventory, which did not exists at the time of the original 
questionnaire response. Rubberflex stated that it provided a corrected 
worksheet reflecting this reallocation during the cost verification. 
Rubberflex contends that the magnitude of any corrections made with 
regard to the original worksheet were minor. Rubberflex contends that 
the Department verified the corrected worksheet by tracing expense 
amounts to source documents, the trial balance and the general ledger.
    DOC Position: We disagree. See DOC Position to comment 14.
    Comment 20: Depreciation.
    Rubberflex claims that the Department verified the reported 
depreciation figures by tracing the figures to the trial balance, 
general ledger, asset schedules, and selected purchase invoices for 
assets. Rubberflex disputes the Department's finding in the 
verification report that it could not rely on the accuracy of reported 
depreciation expense due to the fact that the ``original cost basis'' 
for certain assets acquired prior to 1990 could not be traced to the 
appropriate asset schedule in the year of purchase. Rubberflex 
justifies its inability to produce ``original cost basis'' information 
on certain assets by claiming that: (1) it is unreasonable for 
accounting or tax purposes to maintain accounting documents for more 
than five years, particularly where Malaysian tax authorities do not 
require the retention of these documents for that period of time; (2) 
Rubberflex was not notified that such documents may be needed for 
verification purposes; and (3) the Department traced the annual 
depreciation for assets purchased before 1990 to trial balances and 
asset schedules for fiscal years 1993, 1994, and 1995, and could 
plainly see that the assets were being depreciated in a systematic 
manner, which was reviewed and approved by its auditors. Therefore, 
Rubberflex claims that its inability to provide original asset 
schedules for years prior to 1990 does not provide grounds for the 
Department to question the accuracy of the reported costs.
    DOC Position: We disagree with Rubberflex that its inability to 
provide original asset ledgers for certain items requested is not a 
verification problem. The verification report specifies that we became 
aware that Rubberflex purchased certain major pieces of capital 
equipment from an affiliated party. Examples of these purchases are 
recorded on verification exhibit 36. Page 18 of the verification report 
notes that we attempted to determine whether the transfer price of such 
equipment, and the associated depreciation expenses, represented arm's-
length transactions. Rubberflex failed to provide information 
responsive to our request. Thus, we were unable to satisfy ourselves in 
this regard.
    We agree that Rubberflex reported the depreciation expenses on its 
books and records, which were audited and in accordance with Malaysian 
GAAP. Normally we use the costs and expenses recorded on the company's 
books and records, provided that we are satisfied that such costs are 
non-distortive. In this case, we had reason to question whether the 
depreciation expenses recorded on Rubberflex's books where under- or 
overstated (i.e. distortive) by reason of an affiliated party 
transaction.
    Finally, it is reasonable to request Rubberflex to document the 
figures that it used to record its depreciation expense on its books 
and records. Rubberflex depreciates certain machines and buildings for 
more than 5 years and reflects those figures on its books and records. 
It is standard verification practice to ask companies to demonstrate 
the figures, and to keep documentation supporting information submitted 
in an antidumping proceeding, for the purpose of verification. The U.S. 
Court of International Trade held in Krupp Stahl, 822 F. Supp. at 792, 
that, despite the fact that the German authorities did not require the 
company to maintain business records for more than five years, it did 
not absolve a respondent in an antidumping proceeding of the 
responsibility of providing source documents to support its 
questionnaire response.
    Comment 21: General and Administrative (G&A) Expenses.
    Rubberflex states that at the beginning of verification, it 
submitted a revised worksheet which properly captured certain G&A 
expenses. Some of these expenses were misclassified as G&A expenses in 
the original questionnaire response and, therefore, were not properly 
included in the worksheet for indirect selling expenses. Rubberflex 
further explains that it provided worksheets and source documentation 
which substantiated its allocation methodology with regard to indirect 
selling expenses and G&A expenses. Rubberflex contends that the 
Department traced the amounts shown in the revised worksheet to 
relevant trial balances, source documentation, and the general ledger.
    DOC Position: We disagree, See DOC Position to comment 14. The G&A 
expenses in the original questionnaire response were presented in a 
different format from the G&A expenses in the revisions presented at 
verification, so direct comparisons are not possible. Rubberflex never 
presented a systematic explanation of how individual elements of G&A 
were affected by the revisions, nor how or why the total changed. 
Rather, as with variable overhead, the Department was left with 
insufficient time and information to evaluate the magnitude of the 
change. Again, this was a situation where a company's ``failure to 
reconcile its submitted costs to its normal books and records prevents 
us from quantifying the magnitude of the distortions which exist in its 
submitted data.'' Certain Cut-to-Length Carbon Steel Plate From Sweden: 
Preliminary Results of Antidumping Duty/Administrative Review, 61 FR 
51898, 51899 (October 4, 1996) (the Department's position adopted in 
the final results of review, 62 FR 18396 (April 15, 1997)).
    Finally, contrary to Rubberflex's assertion, it was unable to tie 
the specific line items from its revised worksheets to the audited 
financial statements. The fact that total profit, sales, and cost of 
goods sold (COGS) figures were traced is irrelevant. It is precisely 
the items which could not be traced--the components of G&A--which were 
under evaluation at verification.
    Comment 22: Financing Expense.
    Rubberflex states that while preparing for verification it 
discovered slight errors related to the amounts reported for bank 
charges and interest on bills refinanced. Rubberflex further states 
that these corrections were presented to the Department at verification 
and that it demonstrated the accuracy of the revised worksheet by tying 
the total financing expenses and interest received to the total 
expenses stated in the trial balance for financing expenses and 
interest received, respectively.
    DOC Position: We disagree. See DOC Position to comment 14.
    Comment 23: Conduct of the review.
    Rubberflex contends that it fully cooperated under difficult 
circumstances during this proceeding and that the Department must bear 
a significant portion of the responsibility for any problems that arose 
at verification. In addition to the short preparation time given to 
Rubberflex prior to the verification, Rubberflex enumerates a list of 
Departmental procedural errors, which Rubberflex contends unfairly 
prejudiced its interests and resulted in the use of facts available in 
the preliminary results. According to Rubberflex, these procedural 
errors were due to the

[[Page 33596]]

Department's untimely handling of the case. Rubberflex stated that it 
did the best it could under these circumstances to cooperate fully and 
that it submitted its responses and verification exhibits in a timely 
manner, and prepared for the verification to the extent possible given 
the time available.
    DOC Position: We agree with Rubberflex that there was a great deal 
of case activity within a relatively short period in 1996. However, we 
disagree that we unfairly prejudiced Rubberflex by our conduct of the 
case. The supplemental questionnaires for this and the prior review 
were relatively short and not overly demanding and Rubberflex was given 
adequate time to respond. The record reflects that Rubberflex was given 
several extensions of time to submit its data; in fact, Rubberflex was 
granted every extension request it made. Finally Rubberflex was given 
sufficient notice of the timing of verification, and the Department 
followed the same standard procedures, and issued a standard 
verification outline which was substantially similar for the 
verification of information in both the 1993-1994 and 1994-1995 review. 
These procedures were similar to those followed in the original 
investigation, when Rubberflex underwent verification. Thus, there is 
little evidence that the Department's conduct of the case placed an 
``unreasonable'' burden on Rubberflex. Rather, in this case, as in 
virtually every case the Department conducts, the burden on respondents 
is to provide accurate and timely data which can be verified. To the 
greatest extent possible, the Department strives to be flexible with 
deadlines for respondents; ultimately, however it is respondents' 
responsibility to meet this burden. Nevertheless, we took into account 
Rubberflex's level of cooperation in this case in our selection of the 
appropriate facts available for Rubberflex's antidumping margin. (See 
Facts Available for Rubberflex section above.)
    Comment 24: Rubberflex's Cooperation.
    Rubberflex argues that the evidence on the record disputes the 
Department's assertion in the preliminary determination that Rubberflex 
failed to cooperate. Rubberflex contends that it timely filed its April 
15, 1996 questionnaire response as well as its September 17, 1996 
supplemental response. Further, Rubberflex argues that it prepared for 
verification to the best of its ability and prepared worksheets 
requested by the Department to the extent possible given the time 
constraints. Rubberflex states that in the second administrative 
review, the Department stated the Rubberflex ``cooperated throughout 
the administrative review by submitting questionnaire responses and 
with verification.'' Rubberflex argues that the level and quality of 
its participation in this review was precisely the same as the second 
review. Therefore, Rubberflex maintains that the Department cannot 
logically conclude that it did not cooperate in this review.
    DOC Position: Rubberflex points to the Department's application in 
the preliminary results of the 1993-1994 review in this case of the 
second-tier `'cooperative'' BIA rate set forth in Antifriction Bearings 
(Other Than Tapered Roller Bearings) and Parts Thereof From France, et 
al.; Final Results of Antidumping Duty Administrative Reviews, Partial 
Termination of Administrative Reviews, and Revocation in Part of 
Antidumping duty Orders, 60 FR 10900 (February 28, 1995) to argue that 
the Department's treatment in this review is inconsistent with that of 
the prior review. Contrary to Rubberflex's characterization, there is 
nothing inconsistent about the Department's treatment of Rubberflex in 
theses two administrative reviews. We explained in our Notice of 
Preliminary Results of Antidumping Duty Administrative Review: Extruded 
Rubber Thread from Malaysia, 62 FR 6758 (February 13, 1997), concerning 
the 1993-1994 administrative review, that Rubberflex cooperated 
throughout the review by submitting questionnaire responses and by 
participating in verification. However, we found that information could 
not be verified and thus resorted to BIA pursuant to section 776(b) of 
the Act. Although the degree of cooperation by Rubberflex in the two 
reviews is substantially the same, this final results is governed by 
the new statutory provisions concerning the use of facts otherwise 
available. As stated in our Preliminary Results, Rubberflex has not 
cooperated to the best of its ability.
    Comment 25: Partial Facts Available.
    Because of the arguments presented, Rubberflex claims that the 
application of a total adverse facts available is not warranted. 
Rubberflex contends that during verification, it tied all information 
submitted in its original response to its trial balance, and 
ultimately, to its audited financial statements. Further, Rubberflex 
emphasizes that because the Department verified virtually all of the 
submitted sales and cost data, the fact that a few minor errors 
disclosed at the commencement of verification should not provide the 
legal basis for the Department to disregard its entire response and 
resort to adverse facts available. Rubberflex cites to prior 
Departmental determinations in which the Department states that it will 
resort to facts available ``only for those specific items of the 
response that it was not able to verify.'' See Notice of Final 
Determination of Sales at Less Than Fair Value: Brake Drums and Brake 
Rotors from the People's Republic of China, 62 FR 9160, 9167 (February 
28, 1997); and Certain Internal Combustion Industrial Forklift Trucks 
from Japan; Final Results of Antidumping Duty Administrative Review, 62 
FR 5592, 5594 (February 6, 1997). Rubberflex concedes that it did not 
submit an error-free response. However, Rubberflex states that minor 
errors and corrections were presented to the Department during 
verification. Rubberflex argues that the fact that some corrections 
were not presented on the first day of verification does not provide 
the Department reasonable grounds for disregarding them because 
Rubberflex was provided only two days for verification preparation. 
Therefore, in light of the above-mentioned circumstances, Rubberflex's 
cooperation in this review, and that Rubberflex's claims that the 
Department was able to verify its responses, Rubberflex argues that the 
Department does not have legal grounds to use adverse facts available.
    Petitioner contends that because the Department determined during 
verification that Rubberflex's questionnaire responses were wholly 
deficient and unverifiable, Rubberflex should therefore be assigned a 
total facts available rate. Petitioner cites to the Department's 
Analysis Memorandum of December 12, 1996 and verification report, which 
document Rubberflex's uncooperativeness due to misreportings, 
inaccuracies and omissions of certain information. Petitioner therefore 
argues that the Department should assess a margin which corresponds to 
criteria outlined in the Department's Antidumping Manual; ``* * * when 
a substantial amount of a response does not verify, the Department will 
normally assign the highest margin for the relevant class or kind of 
merchandise among (1) the margins in the petition, (2) the highest 
calculated margin of any respondent within that country * * *'' See 
U.S. Department of Commerce, Antidumping Manual, July 1993, Ch. 6, at 
3. Further, Petitioner disputes that Rubberflex's claimed errors are 
minor. Petitioner contends that Rubberflex's purported justification 
for such errors, which Rubberflex claims were the result of year-end 
accounting adjustments, are unsubstantiated, and unpersuasive. 
Petitioner contends that any year-end

[[Page 33597]]

adjustments should have been reported long before verification. 
Petitioner emphasizes that even minor errors would nevertheless 
generate an inaccurate margin calculation, which would place the U.S. 
industry at a disadvantage, given that extruded rubber thread is a 
commodity, price-sensitive product.
    Petitioner emphasizes that Rubberflex did not submit to the 
Department a listing of errors at the commencement of verification, nor 
was petitioner served such a list, as required by the Department's 
regulations. Petitioner contends that Rubberflex's claim that the 
Department was advised at the commencement of verification regarding 
certain errors in its submission is therefore of no consequence.
    DOC Position: We disagree with Rubberflex that the Department was 
able to verify Rubberflex's questionnaire response and tie all of the 
information provided in the original response to the trial balance, and 
ultimately to the audited financial statements. We have addressed this 
issue in the Facts Available for Rubberflex section of this notice.

Comments Concerning Other Respondents

    Comment 26: CEP versus EP Sales.
    The petitioner alleges that Heveafil's ``back-to-back'' sales are 
CEP, and not EP sales, as reported in the questionnaire response. The 
petitioner argues that the name ``back-to-back'' sales indicates that 
the U.S. subsidiary makes the sale and determines the price of the 
merchandise in the United States. Petitioner also notes that both 
Heveafil's and Filati's April 22, 1996 questionnaire responses indicate 
that the company's per-unit price is not fixed until the U.S. 
subsidiary issues the invoice to the U.S. customer. (Heveafil's 
response at page A-10 and Filati's response at page A-13.)
    Petitioner further contends that the Department has found that 
sales made under circumstances like those made by Heveafil and Filati 
are CEP sales. Petitioner notes that in Brake Drums and Brake Rotors 
from the PRC; Preliminary Determination of Sales at Less Than Fair 
Value and Postponement of Final Determination, 61 FR 53190, 53194 
(October 3, 1996), the Department stated that the ``responsibilities of 
the U.S. affiliates go well beyond those of a processor of sales 
related documentation'' or a ``communication link'' and therefore 
designated the sales in question as CEP sales. Petitioners note that in 
Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products 
from Korea; Preliminary Results of Antidumping Duty Administrative 
Review, 61 FR 51882, 51885 (October 4, 1996), the Department found it 
more appropriate to determine that sales were CEP sales where: the U.S. 
subsidiary was the importer of record and took title to the 
merchandise; the U.S. subsidiary financed the relevant sales 
transactions; and the U.S. subsidiary assumed the seller's risk. 
Petitioner argues that Heveafil's and Filati's sales meet these 
criteria.
    Heveafil and Filati contend that the Department has repeatedly 
treated ``back-to-back sales'' as EP sales in the original 
investigation and in all prior administrative reviews. They note that 
Commerce verified that the characterization of the sales is correct in 
both the original investigation and the first review.
    Specifically, respondents argue that back-to-back sales must 
continue to be treated as export price sales, in accordance with the 
Department's practice for determining ``indirect'' purchase price/EP 
sales as set forth in Certain Corrosion-Resistant Carbon Steel Flat 
Products from Korea; Final Results of Antidumping Duty Administrative 
Review, 61 FR 18547 (April 26, 1996). Heveafil and Filati argue that 
because petitioner has not submitted any new factual information on the 
record to alter prior treatment of these sales, respondents contend the 
Department must not depart from previous determinations. Accordingly, 
Heveafil and Filati argue that back-to-back sales conform to the 
Department's practice in the following ways: (1) sales were made prior 
to importation; (2) subject merchandise was not introduced into the 
inventory of U.S. affiliates; (3) the subsidiaries selling activities 
are consistent with the EP classification; and (4) neither subsidiary 
is engaged in advanced marketing or product development. For the sales 
made prior to important, Filati and Heveafil further note that date of 
sale was reported as the bill of lading date, which occurred before 
importation, a methodology argued to be consistent with the 
Department's past determinations.
    DOC Position: We agree that Heveafil's and Filati's ``back-to-
back'' sales are properly treated as EP sales. With respect to EP 
sales, section 772(a) of the Act states that: ``the term `export price' 
means the price at which the subject merchandise is first sold (or 
agreed to be sold) before the date of importation by the producer or 
exporter of the subject merchandise outside of the United States to an 
unaffiliated purchaser in the United States or to an unaffiliated 
purchaser for exportation to the United States.'' Based on the 
Department's practice, we examine several criteria for determining 
whether sales made prior to importation through an affiliated sales 
agent to an unaffiliated customer in the United States are EP sales, 
including: (1) Whether the merchandise was shipped directly from the 
manufacturer to the unaffiliated U.S. customer; (2) whether the sales 
follow customary commercial channels between the parties involved; and 
(3) whether the function of the U.S. selling agent is limited to that 
of a ``processor of sales-related documentation'' and a ``communication 
link'' with the unrelated U.S. buyer. Where all criteria are met, the 
Department has regarded the routine selling functions of the exporter 
as ``merely having been relocated geographically from the country of 
exportation to the United States,'' and has determined the sales to be 
EP sales. Where all conditions are not met, the Department has 
classified the sales in question as CEP sales. See, e.g., Final 
Determination of Sales at Less Than Fair Value: Brake Drums and Brake 
Rotors From the People's Republic of China, 62 FR 9171 (February 28, 
1997). Based on our analysis of the selling activities of Filati's and 
Heveafil's U.S. affiliates, we determine that EP is appropriate. The 
customary commercial channels between Heveafil and Filati their 
respective unaffiliated customers are that Heveafil and Filati ship the 
EP merchandise directly to the unaffiliated U.S. customer without 
having the merchandise enter into the inventory of the U.S. subsidiary, 
and that the U.S. selling agent is limited to that of a ``processor of 
sales-related documentation'' and a ``communications link'' with the 
unrelated U.S. buyer. Moreover we disagree with petitioner's 
characterization that the U.S. affiliate sets the price after 
importation. There has been no record evidence submitted in this 
segment of the proceeding that would cause us to alter our treatment of 
these sales as EP sales.
    Comment 27: Indirect Selling Expenses and Inventory Carrying Costs 
Incurred in the Home market for U.S. Sales.
    Heveafil, Filati and Rubfil argue that indirect selling expenses 
and inventory carrying costs incurred in the home market should not be 
deducted from CEP under section 772(d) of the Act. They note that the 
Department articulated a standard whereby it deducts selling expenses 
incurred in the home market from CEP only if they are specifically 
related to commercial activities in the United States. (See 
Antifriction Bearings (Other Than

[[Page 33598]]

Tapered Roller Bearings) from France, Germany, Italy, Japan, Singapore, 
and the United Kingdom; Final Results of Antidumping Duty 
Administrative Reviews 62 FR 2081, 2124 (January 15, 1997) and 
Preliminary Results of Antidumping Duty Administrative Review: Calcium 
Aluminate Flux from France, 61 FR 40396, 40397 (August 2, 1996).
    DOC Position: We agree with Heveafil, Filati and Rubfil. In 
Antifriction Bearings (Other Than Tapered Roller Bearings) from France, 
Germany, Italy, Japan, Singapore, and the United Kingdom; Final Results 
of Antidumping Duty Administrative Reviews 62 FR 2081, 2124 (January 
15, 1997) states that the ``statutory definition of `constructed export 
price' contained in section 772(d) of the Act indicates clearly that 
were are to base CEP on the U.S. resale price as adjusted for U.S. 
selling expenses and profit. As such, the CEP reflects a price 
exclusive of all selling expenses and profit associated with economic 
activities occurring in the United States.'' Our analysis of 
Heveafil's, Filati's and Rubfil's responses indicates that the indirect 
selling expenses and inventory carrying costs incurred in the home 
market were not specifically related to the economic operations of the 
U.S. affiliate. As a result, indirect selling expenses and inventory 
carrying costs incurred in the home market were no longer included in 
the CEP deduction. Consequently, we have revised our calculations to 
include in the CEP deduction only those expenses specifically related 
to the economic operations of the U.S. affiliate.
    Comment 28: U.S. Packing Expenses.
    Heveafil, Rubfil and Filati claim that we erroneously deducted U.S. 
packing expenses from the U.S. price. As stated by these respondents, 
the Act does not provide for the deduction of U.S. packing expenses 
from either EP or CEP.
    DOC Position: We agree. These calculations were made in error and 
have been corrected.
    Comment 29: Adjustments for Countervailing Duties (CVDs) Paid.
    Heveafil, Filati and Rubfil contend that the Department must 
increase the U.S. price for certain countervailing duties paid on 
imports of the subject merchandise pursuant to the CVD order. In 
accordance with section 772(c)(1)(C) of the Act, the Department should 
increase U.S. price by the ``amount of any countervailing duty imposed 
on the subject merchandise to offset an export subsidy.'' The 
Department, however, has not made adjustments nor increased U.S. price 
for export subsidies if normal value (NV) has been based on constructed 
value. Respondents note that the Department has declined to make and 
adjustments when normal value is based on constructed value, on the 
grounds that any benefit conferred through the export subsidy is 
reflected in the production costs as well as in U.S. price. (See Notice 
of Final Results of Antidumping Duty Administrative Review: Extruded 
Rubber Thread from Malaysia, 61 FR 54767 (October 22, 1996).
    Respondents also assert that export subsidies, specifically income 
tax holidays and income tax abatements, are not reflected in a 
company's production costs and must be included in an adjustment to 
U.S. price. They note that income taxes are not an element of the cost 
of production. Respondents note that the following Malaysian export 
subsidy programs found in the second and third countervailing duty 
reviews, qualify as income tax holidays or income tax abatements and 
thus, should be used in an adjustment to U.S. price: (1) Pioneer 
Status; (2) Abatement of Income Tax based on Ratio of Export Sales to 
Total Sales; (3) Abatement of Five Percent of the Value of Indigenous 
Malaysian Materials Used in Exports; (4) Industrial Building Allowance; 
and, (5) Double Deduction for Export Promotion Expenses.
    DOC Position: We agree with respondents that the programs: (1) 
Pioneer Status, (2) Abatement of Income Tax Based on the Ratio of 
Export Sales to Total Sales, (3) Abatement of Five Percent of the Value 
of Indigenous Malaysian Materials Used in Exports, (4) Industrial 
Building Allowance, and (5) Double Deduction for Export Promotion 
Expenses have been found countervailable and classified as export 
subsidies in the most recently completed countervailing duty review, 
Extruded Rubber Thread from Malaysia; Final Results of Countervailing 
Duty Administrative Review, 61 FR 55272 (October 25, 1996).
    Therefore, in accordance with section 772(c)(1)(C) of the Act, we 
increase U.S. price by ``the amount of any countervailing duty imposed 
on the subject merchandise to offset an export subsidy.'' The most 
recently completed CVD review, Extruded Rubber Thread from Malaysia; 
Final Results of Countervailing Duty Administrative Review, 61 FR 55272 
(October 25, 1996), found ad valorem net subsidies of 0.23% for 
Heveafil; 0.19% for Rubberflex; 1.39% for Filati; and, 0.38% Rubfil for 
1994. In the context of an administrative review (as opposed to a less-
than-fair value investigation), these rates, with the exception of 
Filati's, are de minimis pursuant to the language of the SAA, at page 
939, and thus will not be collected, i.e., ``imposed,'' within the 
meaning of section 772(c)(1)(C) of the Act. As a result, because we are 
comparing Filati's sales to the United States to home market sales or 
constructed value in the home market for this review, we will adjust 
the 1994 U.S. prices of Filati to account for the net export subsidies 
of 0.15%. We will also make adjustments to assessment and deposit rates 
for any export subsidies in the final results of the 1995 CVD review, 
which has not been completed.
    Comment 30: Import Duties.
    Filati claims that the Department erred in not making an adjustment 
for TAXH, which represents the impact of a duty imposed on imported 
inputs used to produce rubber thread which will later be exported, and 
is collected only on home market sales. Filati notes that TAXH is not 
collected on export sales. It claims that TAXH is included in the price 
of its home market sales and is passed on to its Malaysian customers, 
and, therefore, constitutes an indirect tax imposed directly upon the 
foreign like product which has not been collected on the subject 
merchandise. Therefore, Filati argues that TAXH must be deducted from 
normal value in accordance with section 773(a)(6)(B)(iii) of the Act. 
Alternatively, Filati proposes that the Department treat TAXH as a 
difference in circumstances of sale, and make a downward adjustment to 
normal value, in accordance with section 773(a)(6)(C)(iii) of the Act.
    Rubfil maintains that the Department must deduct DUTYH from the 
home market price in the calculation of normal value since it claims, 
for the first time in its rebuttal brief, that DUTYH is the same 3 
percent indirect tax adjustment reported by Filati, although Rubfil 
mistakenly referred to it as TAXH in the narrative portion of the 
response.
    Petitioner disputes Filati's and Rubfil's arguments. It claims that 
Filati did not claim that the home market prices it reported to the 
Department include these indirect taxes. Petitioner notes that, as a 
general matter, respondents, including Rubfil, usually report home 
market prices to the Department already exclusive of indirect taxes. As 
a result, petitioner argues that TAXH should not be netted from 
reported home market sales.
    DOC Position: We disagree that these expenses represent a tax. Both 
Filati's and Rubfil's April 22, 1996 questionnaire response identifies 
the expense reported in the TAXH or DUTYH column as a duty on imported 
merchandise. It is imposed when the goods are sold in the home market, 
and remains uncollected when the subject

[[Page 33599]]

merchandise is exported. Consequently, contrary to the respondents' 
characterization of the expense, the expenses recorded in the TAXH or 
DUTYH columns represent a duty, and not a tax. Filati and Rubfil 
explain that they include the amount of this duty in their home market 
price and pass it on to their customers. The duty is neither added to 
nor included in the price of the export goods. Because this duty is 
only collected on home market sales, and not on export sales, we have 
determined it to be an uncollected duty within the meaning of section 
772(c)(1)(B) of the Act, rather than an uncollected tax within the 
meaning of 773(a)(6)(B)(iii) of the Act. Consequently, pursuant to 
section 772(c)(2)(B) of the Act, we have revised our calculations by 
adding the amount of the uncollected duty to the U.S. price.
    Comment 31: Re-exports of Covered Merchandise.
    Filati contends that it is the Department's long-standing policy, 
which has been upheld by the U.S. Court of Appeals for the Federal 
Circuit (The Torrington Company v. United States, 82 F.3d 1039 (Fed. 
Cir. 1996)), not to calculate or collect antidumping duties on subject 
merchandise that is re-exported without any sale to unaffiliated 
parties in the United States. Filati contends that the Department 
cannot calculate or collect antidumping duties regarding such imports, 
because in the absence of sales in the United States, there is no basis 
for calculating United States price. Thus, Filati explains, where a 
respondent provides evidence that merchandise has been re-exported, the 
Department has modified its assessment methodology formula to account 
for the re-exports. Filati argues that it provided evidence of such 
entries in its September 23, 1996 supplemental response and that there 
were no computer programming instructions in the preliminary results of 
review to accommodate such re-exports. Filati further argues that the 
Department should structure its assessment instructions along the lines 
outlined in the Department's proposed regulations (by dividing the 
total duties calculated for the period of review (PUDD) by the entered 
value of the sales during the POR, and directing Customs to apply the 
resulting ad valorem rule to entries in the POR) as modified by the 
``per-unit'' methodology used in the Department's August 31, 1992 
memorandum for Richard W. Moreland, First Administrative Review of 3.5 
Inch Microdisks and Coated Media Thereof from Japan (Microdisks) 
Decisions Made with Respect to Issuing Assessment Instructions for all 
Five Japanese Companies which had a either PP and ESP Sales 
Transactions of 3.5-Inch Microdisks and Coated Media. Filati argues 
that this new ad valorem, assessment rate should be calculated as 
follows: PUDD/entered value of sales* (value of entries-value of re-
exports)/value of entries.
    DOC Position: The Department agrees with Filati that it is 
inappropriate to calculate or assess antidumping duties on covered 
merchandise that is re-exported from the United States before the goods 
are sold to an unaffiliated party in the United States. An examination 
of the facts of this record indicates that all of the merchandise was 
entered into the United States commerce for consumption. However, at 
the time of entry, Filati did not know whether the merchandise would be 
sold in the United States or Canada. At the end of the review period, 
Filati was aware of which entries were sold in the United States and 
which were re-exported without a sale to an unaffiliated party in the 
United States. It reported U.S. sales to the Department in its 
questionnaire response, and the re-exports to Canada in its 
supplemental response.
    Section 731 of the Act provides that once merchandise is subject to 
an antidumping order ``then there shall be imposed upon such 
merchandise an antidumping duty * * * in an amount equal to the amount 
by which the normal value exceeds the export price (or the constructed 
export price) for the merchandise.'' Section 751(a)(2) of the Act 
provides that, in computing the amount of the antidumping duty, the 
Department ``shall determine'' (1) the normal value and export price 
(or constructed export price) of each entry of the subject merchandise, 
and (2) the dumping margin for each entry. Thus, sections 731 and 
751(a)(2) of the Act call for the Department to determine the United 
States price (either the export price or the constructed export price). 
In the instant case, because there is no sale to an unaffiliated party 
in the United States, despite the fact that the goods have entered into 
the U.S. customs territory, there is no means by which the Department 
can calculate a United States price with respect to these particular 
imports. See The Torrington Company v. United States, 82 F.3d 1039, 
1044-1047 (Fed. Cir. 1996) (``Torrington'') (held that the re-exported 
goods do not enter into the calculation of the total antidumping duties 
owed by the respondent).
    Further the U.S. Court of Appeals for the Federal Circuit held in 
Torrington that under these circumstances the Department acts lawfully 
when it does not assess antidumping duties on the covered merchandise. 
See Torrington, 82 F.3d at 1040. The holding in Torrington sanctions 
the Department's longstanding practice in the regard. See, e.g., Final 
Results of Antidumping Duty Administrative Review and Revocation in 
Part of Antidumping Duty Order: Antifriction Bearings (Other Than 
Tapered Roller Bearings) and Parts Thereof from France, et al., 58 FR 
39729, 39784 (July 26, 1993) (Department's position was that where the 
bearings that entered the customs territory of the United States were 
re-exported prior to sale to an unrelated customer in the United 
States, there is no assessment of antidumping duties on those entries). 
Finally, the Torrington Court held that, in upholding the Department's 
practice not to calculate a United States price or assess with respect 
to entries that are later re-exported from the United States without a 
sale here to an unaffiliated party, this practice does not conflict 
with the U.S. duty drawback laws. Torrington,  82 F.3d at 1045.
    Comment 32: Currency Conversion Error.
    Filati argues that the Department erroneously failed to convert its 
inventory carrying costs into U.S. dollars.
    DOC Position: We agree and have corrected the error.
    Comment 33: The Difference in Physical Characteristics of 
Merchandise (DIFMER) Calculation.
    Heveafil contends that the Department incorrectly subtracted the 
DIFMER adjustment from home market prices since it calculated the 
DIFMER adjustment as the U.S. cost of manufacture (VCOMU) minus the 
home-market variable cost of manufacture (VCOMH). In this situation, 
the Department should add the DIFMER to the normal value (NV).
    DOC Position: We agree that, pursuant to section 773(6)(c)(ii) of 
the Act, it is appropriate to add the DIFMER to NV when the DIFMER is 
calculated as VCOMU minus VCOMH. However, our standard program was 
written to subtract it from normal value. Therefore, to keep Heveafil's 
program in conformity with the Department's standard computer program, 
we recalculated DIFMER as VCOMH minus VCOMU, then subtracted it from 
NV. This equation is identical to the remedy proposed by Heveafil.
    Comment 34: The Calculation of the Average Actual Profit for 
Constructed Value.
    Petitioner contends the Department erroneously used Heveafil's, 
Filati's and Rubfil's average actual profit on both

[[Page 33600]]

profitable and unprofitable sales for the profit figure in the 
constructed value calculation. Petitioner argues that only profit on 
profitable sales is used in the calculation.
    Respondents dispute petitioner's contention, arguing that the 
Department calculates constructed value profit without excluding below-
cost sales. In support of its argument, respondents rely on Federal-
Mogul Corp. v. United States, 918 F. Supp. 386, 403 (CIT 1996) and 
Torrington Co. v. United States, 881 F. Supp. 622, 633 (CIT 1995), as 
well as a number of results of reviews of Antifriction Bearings (Other 
Than Tapered Roller Bearings) and Parts thereof.
    DOC Position: We agree with petitioner. Section 773(e)(2)(A) of the 
Act states that the constructed value of the imported merchandise shall 
be the ``actual amounts incurred and realized by the specific exporter 
or producer being examined in the investigation or review for selling, 
general, and administrative expenses, and for profits, in connection 
with the production and sale of a foreign like product, in the ordinary 
course of trade, for consumption in the foreign country.'' Section 
771(15)(A) of the Act specifies that the Department shall consider the 
sales disregarded under section 773(b)(1) of the Act to be outside the 
ordinary course of trade. See also SAA, at 839. Therefore, we have 
changed our calculations to include only the profit from sales not 
disregarded under section 773(b) of the Act.
    Respondents cite a number of instances where the Department and the 
courts have included sales below cost in the calculation of profit for 
constructed value. We not that all of the cases cited by respondents 
pertain to the calculation methodology spelled out in the old law, and 
have been superseded by the new law, which establishes new methods of 
calculating profit for CV. See SAA, at 839
    Comment 35: The Use of Color as a Model Match Criterion.
    Petitioner argues that color should be excluded as a matching 
criterion. Petitioner cites Melamine Institutional Dinnerware from 
Taiwan: Final Determination of Sales at Less Than Fair Value 
(Melamine), 62 FR 1726, at 1773 (January 13, 1997), in which the 
Department stated that ``[c]olor is not a matching criteria in this 
investigation; thus, it is inappropriate to treat these products, if 
otherwise identical, as identical for purposes of model matching.''
    According to respondents, color should not be excluded as a 
matching criteria. Since color was used in the original investigation 
and subsequent reviews, the Department must apply the same matching 
criteria in this period of review.
    DOC Position: We agree with respondents that color is an 
appropriate model matching-criterion in this case. The Department has 
consistently used color as a product matching criteria in the 
investigation and reviews of the AD order. As we stated in our response 
to Comment 3 in the Final Determination of Sales at Less Than Fair 
Value: Extruded Rubber Thread from Malaysia, 57 FR 38465, 38468 (August 
25, 1992) ``because color can materially affect cost and be important 
to the customer and the use of the product, the Department determined 
at an early stage of this investigation that color should be included 
among the several product matching criteria.'' See, Final Determination 
of Sales at Less Than Fair Value: Extruded Rubber Thread from Malaysia, 
57 FR 38465 (August 25, 1992). At this time, petitioner supported this 
decision and has since not offered any substantive reasons for changing 
the matching criteria. Moreover, color is a characteristic fully in 
accordance with the matching criteria as outlined in the January 26, 
1994 memorandum to the file, entitled Changing the Department's 
Questionnaire Order of the Product Concordance. Petitioner did not 
comment on this memo which ranked color as third in the level of 
importance for the product matching criteria. With respect to Melamine, 
this determination covers a product with different physical 
characteristics, different uses and different expectations by the 
ultimate purchasers and, therefore, is irrelevant to this instant case.
    Comment 36: The Erroneous Deduction of CEP Profit from U.S. Sales.
    Heveafil argues that the Department incorrectly deducted CEP profit 
from certain CEP sales, despite the fact that CEP profit calculated by 
Commerce was negative. Heveafil suggests that we refer to observations 
one and two in the hard-copy of the results of the Department's 
preliminary margin program. Heveafil suggests that the Department 
revised the calculation of net CEP sales prices in the final results of 
review to ensure that CEP profit is not subtracted where none exists.
    DOC Position: We have examined the hard copy of the results of 
review for the 1994-1995 margin calculation program. None of the sales 
include CEP profit of less than zero. Therefore, we have made no change 
to our calculations.
    Comment 37: Heveafil's Reported Cost Figures.
    Petitioner notes that Heveafil reported more than one cost figure 
for a number of products without providing any explanation for the 
provision of more than one weighted-average cost. In addition, 
petitioner also notes that in its preliminary results of review, the 
Department erred in using the average of these cost figures to 
calculate the cost of production for Heveafil. Petitioner argues that 
by using this average cost, rather than the highest available cost, 
Heveafil benefits from the unexplained ambiguity in the response.
    DOC Position: We agree. Heveafil reported more than one per-unit 
cost of production for certain products. However, in this case, there 
is no evidence on the record to suggest that the highest reported cost 
is appropriate. Consequently, we determined the simple average value of 
each of the underlying components of the COP: material, labor, variable 
overhead, fixed overhead, indirect selling expenses, general and 
administrative expenses, net interest expense and home market packing. 
We then added the revised values for these expenses to obtain the 
average COP of each of the reported models as we did in the preliminary 
results of review.
    Comment 38: Rebates in Calculation of a Home Market Price for 
comparison to COP.
    Petitioner asserts that the Department failed to deduct Heveafil's 
rebates for home market prices prior to conducting the sales below cost 
test.
    DOC Position: As indicated on line 2821 of the home market sales 
program issued in the preliminary results of review, we have taken 
rebates and discounts into account in our determination of the 
appropriate home market price to be compared with the cost of 
production in our cost test. Therefore, we have made no change to our 
calculation.
    Comment 39: Marine Insurance.
    Petitioner asserts that Rubfil did not explain how it calculated 
its reported cost of marine insurance. Accordingly, it cannot be 
determined if marine insurance was correctly calculated. Petitioner 
therefore contends that the Department should use, as the facts 
available, the highest unit U.S. marine insurance cost to all U.S. 
sales by Rubfil.
    Rubfil responds that in its April 22, 1996 response, it explained 
that marine insurance was paid according to the terms of a global 
insurance policy that covers all risks associated with the shipment of 
merchandise from Rubfil's factory to its customers throughout the 
world. Rubfil provided a copy of the insurance agreement in exhibit C-
1, which did not explicitly spell out the per-shipment terms of the 
policy. Rubfil

[[Page 33601]]

notes that the Department did not request further information in its 
supplemental questionnaire. It argues that this policy has been in 
effect since 1990 and was spelled out in the narrative of the 
questionnaire response and was in effect during the 1994-1995 review. 
Therefore, Rubfil argues that the Department should not change its 
calculations.
    DOC Position: In the December 19, 1996, Preliminary Results 
Analysis Memorandum for Rubfil, the Department noted that Rubfil did 
not fully explain its calculations for marine insurance. However, we 
used the information provided in the questionnaire response to 
calculate our margins. We did not request Rubfil to submit further 
information, and there is no basis for making adverse inferences as 
suggested by petitioner. Therefore, we have not changed our 
calculations in this regard.

Final Results of Review

    As a result of comments received we have revised our preliminary 
results and determine that the following margins exist for the period 
October 1, 1994, through September 30, 1995:

------------------------------------------------------------------------
                                                                Percent 
                    Manufacturer/exporter                        margin 
------------------------------------------------------------------------
Heveafil Sdn. Bhd............................................       7.88
Rubberflex Sdn. Bhd..........................................      20.38
Rubfil Sdn. Bhd..............................................      54.31
Filati Lastex Elastofibre (Malaysia).........................       8.11
------------------------------------------------------------------------

    The Department shall determine, and the Customs Service shall 
assess, antidumping duties on all appropriate entries. Individual 
differences between United States price and foreign market value may 
vary from the percentages stated above. The Department will issue 
appraisement instructions directly to the U.S. Customs Service.
    Further, the following deposit requirements will be effective, upon 
publication of this notice of final results of review for all shipments 
of extruded rubber thread from Malaysia entered, or withdrawn from 
warehouse, for consumption on or after the publication date, as 
provided for by section 751(a)(1) of the Act: (1) The cash deposit 
rates for the reviewed companies will be the rates for those firms as 
stated above (except that for Filati the cash deposit rate will be 
reduced by 0.15 percent, the current cash deposit rate attributable to 
export subsidies); (2) for previously investigated companies not listed 
above, the cash deposit rate will continue to be the company-specific 
rate published for the most recent period; (3) if the exporter is not a 
firm covered in this review, or the original investigation, but the 
manufacturer is, the cash deposit rate will be the rate established for 
the most recent period for the manufacturer of the merchandise; and (4) 
the cash deposit rate for all other manufacturers or exporters will 
continue to be 15.16 percent, the all others rate established in the 
LTFV investigations.
    These deposit requirements, when imposed, shall remain in effect 
until publication of the final results of the next administrative 
review.
    This notice serves as a final reminder to importers of their 
responsibility under 19 CFR 353.26 to file a certificate regarding the 
reimbursement of antidumping duties prior to liquidation of the 
relevant entries during this review period. Failure to comply with this 
requirement could result in the Secretary's presumption that 
reimbursement of antidumping duties occurred and the subsequent 
assessment of double antidumping duties.
    This notice also serves as the only reminder to parties subject to 
administrative protective order (APO) of their responsibility 
concerning the disposition of proprietary information disclosed under 
APO in accordance with section 353.34(d) of the Department's 
regulations. Timely notification of return/destruction of APO materials 
or conversion to judicial protective order is hereby requested. Failure 
to comply with the regulations and the terms of an APO is a 
sanctionable violation.
    This administrative review and notice are in accordance with 
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)), section 771(i) of 
the Act (19 U.S.C. 1677f(i)) and 19 CFR 353.22.

    Dated: June 9, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-16046 Filed 6-19-97; 8:45 am]
BILLING CODE 3510-DS-M