[Federal Register Volume 62, Number 190 (Wednesday, October 1, 1997)]
[Notices]
[Pages 51427-51437]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-26045]
[[Page 51427]]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-583-826]
Notice of Final Determination of Sales at Less Than Fair Value:
Collated Roofing Nails From Taiwan
AGENCY: Import Administration, International Trade Administration, U.S.
Department of Commerce.
EFFECTIVE DATE: October 1, 1997.
FOR FURTHER INFORMATION CONTACT: Everett Kelly at (202) 482-4194, or
Brian Smith at (202) 482-1766, Import Administration, International
Trade Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, NW., Washington, DC 20230.
Applicable Statute and Regulations
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 regulations are to
19 CFR Part 353, as the codified on April 1, 1997. Although the
Department's new regulations, codified at 19 CFR 351 (62 FR 27296 (May
19, 1997) (``Final Regulations''), do not govern this investigation,
citations to those regulations are provided, where appropriate, as a
statement of current departmental practice.
Final Determination
We determine that collated roofing nails (``CR nails'') from Taiwan
are being sold in the United States at less than fair value (``LTFV''),
as provided in section 735 of the Act as amended (``the Act''). The
estimated margins are shown in the ``Suspension of Liquidation''
section of this notice.
Case History
Since the preliminary determination in this investigation (see
Notice of Preliminary Determination and Postponement of Final
Determination: Collated Roofing Nails from Taiwan, 62 FR 25904 (May 12,
1997)), the following events have occurred:
In June 1996, we attempted to verify the questionnaire responses of
the following respondents: Unicatch Industrial Co. Ltd. (``Unicatch''),
Lei Chu Enterprises Co., Ltd (``Lei Chu''), S&J Wire Products Company,
Ltd. (``S&J''), and Romp Coil Nail Industries (``Romp'').
The Paslode Division of Illinois Tool Works Inc. (``Petitioner''),
Unicatch, Lei Chu, and Romp submitted case briefs on July 30, 1997, and
rebuttal briefs on August 5, 1997. The Department held a public hearing
on August 7, 1997.
Scope of Investigation
The product covered by this investigation is CR nails made of
steel, having a length of \13/16\ inch to 1\13/16\ inches (or 20.64 to
46.04 millimeters), a head diameter of 0.330 inch to 0.415 inch (or
8.38 to 10.54 millimeters), and a shank diameter of 0.100 inch to 0.125
inch (or 2.54 to 3.18 millimeters), whether or not galvanized, that are
collated with two wires.
CR nails within the scope of this investigation are classifiable
under the Harmonized Tariff Schedule of the United States (``HTSUS'')
subheadings 7317.00.55.06. Although the HTSUS subheadings are provided
for convenience and customs purposes, our written description of the
scope of this investigation is dispositive.
Period of Investigation
The period of this investigation (``POI'') for all respondents is
October 1, 1995, through September 30, 1996.
Facts Available
A. K. Ticho
We did not receive a response to our questionnaire from K. Ticho,
an exporter of the subject merchandise during the POI. Section
776(a)(2) of the Act requires the Department to base its determination
on the facts available when interested parties withhold information
specifically requested by the Department. Because K. Ticho failed to
submit information that the Department specifically requested, we must
base our determination for that company on the facts available. Section
776(b) provides that an adverse inference may be used against a party
that has failed to cooperate by not acting to the best of its ability
to comply with a request for information. The Department has determined
that by failing to respond, K. Ticho has not acted to the best of its
ability to comply with our request for information and, therefore, in
selecting from among the facts otherwise available, an adverse
inference is warranted.
Romp
Romp reported sales and cost data based on unaudited financial
statements. At verification, we were unable to reconcile Romp's
financial statements to its tax return or any other independent source
(see Romp Coil Cost Verification Report, July 18, 1997). In situations
where a respondent does not have audited financial statements, the
Department may use the company's tax return as an independent source to
substantiate the company's questionnaire responses (see Final Results
of Antidumping Administrative Review: Fresh Cut Flowers from Mexico; 60
FR 49569-49572 (September 26, 1995)). In this instance, because we were
unable to reconcile Romp's financial statements to its tax return, we
determined that the financial statements were unreliable and unusable
as we were unable to confirm the quantity and value reported as well as
confirm that all sales made by Romp during the POI were reported to the
Department. Section 776(a)(2)(D) of the Act requires the Department to
base its determination on the facts available when information, but
that information submitted by a party cannot be verified as provided in
section 782(i). Accordingly, we must base our determination for Romp on
the facts available.
Section 776(b) provides that an adverse inference may be used
against a party that has failed to cooperate to the best of its
ability. We have determined that by failing to provide us the financial
statements used to prepare Romp's tax return for purposes of testing
the reliability and accuracy of reported costs, expenses, and the value
of sales during the POI, Romp has not acted to the best of its ability
in this investigation. Further, the information in the financial
statements that Romp provided to the Department's verifiers cannot
serve as a reliable basis for our final determination. While the
Department attempts to work within the limitations presented by the
respondent's normal accounting systems, as a threshold matter, the
Department must ensure that the total amount of reported sales and
costs during a particular investigation are fully captured in the
information submitted to the Department. This is especially so in cases
involving cost of production and constructed value, in which the
Department must ensure that the total amount of the reported costs
account for all actual costs incurred by the respondent in producing
the subject merchandise during the period under examination. Despite
prior notice by the Department of the intended verification procedures,
Romp never notified the Department that it was unable to provide a
reliable independent source to substantiate the data contained in its
unaudited financial statements. Therefore, in light of the importance
of this data to the Department's determination, we have determined that
in selecting from among the facts
[[Page 51428]]
available, an adverse inference is warranted.
Selection of Adverse Facts Available Margin
As adverse facts available, we considered the highest margin
contained in the petition (as recalculated by the Department at
initiation) as the most appropriate information on the record to form
the basis for dumping margins for K.Ticho and Romp. Section 776(c) of
the Act provides that where the Department selects from among the facts
otherwise available and relies on ``secondary information,'' such as
the petition, the Department shall, to the extent practicable,
corroborate that information from independent sources reasonably at the
Department's disposal. The Statement of Administrative Action
accompanying the URAA, H.R. Doc. No. 316, 103d Cong., 2d Sess at 870
(1994) (``SAA''), states that ``corroborate'' means to determine that
the information used has probative value.
To corroborate the data contained in the petition, we examined the
basis for the estimated margins. The petitioner based its allegation of
export price on price quotes from two manufacturer/exporters of CR
nails in Taiwan and import statistics. These price quotations were
adjusted for movement expenses using customs data and IM-145 Import
Statistics. See Notice of Initiation of Collated Roofing Nails from
Korea, Taiwan and the People's Republic of China, 61 FR at 67307-08. As
explained in Final Determination of Sales at Less Than Fair Value:
Certain Pasta From Turkey, 61 FR 30309 (June 14, 1996), we consider
information from independent public sources, such as import statistics,
as having probative value. Furthermore, the two price quotes in the
petition are consistent with export prices reported by the respondents
on the record of this investigation. Therefore, we determine that the
export price calculations set forth in the petition have probative
value.
The petitioner based Normal Value (``NV'') on Constructed Value
(``CV''). See Notice of Initiation. To calculate CV, the petitioner
used manufacturing costs based on its own production experience, its
1995 audited financial statements, and publicly available industry
data. Id. The CV calculations in the petition are consistent with the
CVs reported by the respondents on the record of this investigation. As
such, we determine that the NV calculations have probative value. (see
Memorandum, dated May 5, 1997.)
Based on our reexamination of the price information supporting the
petition, we determine that the highest margin in the petition, as
recalculated by the Department corroborated within the meaning of
section 776(c) of the Act.
Fair Value Comparisons
Unicatch, Lei Chu, S&J
To determine whether sales of the subject merchandise by Unicatch,
Lei Chu, and S&J to the United States were made at less than fair
value, we compared the Export Price (``EP'') or Constructed Export
Price (``CEP'') to the NV, as described in the ``Export Price'' and
``Constructed Export Price,'' and ``Normal Value'' sections of this
notice, below. In accordance with section 777A(d)(1)(A)(i) of the Act,
we compared POI-wide weighted-average EPs or CEPs to weighted-average
NVs.
In making our comparisons, in accordance with section 771(16) of
the Act, we considered all products sold in the home market, fitting
the description specified in the ``Scope of Investigation'' section of
this notice, above, to be foreign like products for purposes of
determining appropriate product comparisons to U.S. sales. Unicatch,
Lei Chu, and S&J reported that they had no viable home market or third
country sales during the POI. We therefore made no price-to-price
comparisons. See the ``Normal Value'' section of this notice, below,
for further discussion.
Level of Trade and CEP Offset
In the preliminary determination, where that we used each
respondent's financial statements to derive SG&A and profit for the CV
calculations, the Department determined that there was insufficient
evidence on the record to justify a level of trade adjustment or CEP
offset because we were unable to isolate the particular selling
expenses associated with each respondent's NV. We found no evidence at
verification to warrant a change from that preliminary determination.
Accordingly, we have not made either a LOT adjustment or CEP offset for
any of the respondents in this final determination.
Export Price and Constructed Export Price
We calculated EP and CEP, as appropriate, in accordance with
section 772(a), (c) and (d) of the Act, where the CR nails were sold
directly to the first unaffiliated purchaser in the United States prior
to importation and where CEP was not otherwise warranted based on the
facts of record. The calculation for each respondent was based on the
same methodology used in the preliminary determination, with the
following exceptions:
Unicatch--We made changes to the following fields based on
Unicatch's pre-verification corrections and verification findings:
Payment Date; Invoice Number; Quantity (Cartons); Gross Unit Price;
Discounts; U.S. Inland Freight from port to warehouse and warehouse to
customer; warranties; international freight, brokerage and handling
(Taiwan); port charges; marine insurance; U.S. duties; Duty Drawback;
Indirect Selling Expenses; Inventory Carrying Costs; Packing. In
addition we deleted certain sales of non-subject merchandise and added
sales found at verification. See Valuation Memorandum dated September
24, 1997.
Lei Chu--We made changes to the following fields based on Lei Chu's
pre-verification corrections and verification findings: Payment Date;
Sales Terms; Port Charges; Bank Charges; Marine Insurance; Invoice
Number; Gross Unit Price; Sale Date; Taiwan Inland Freight from plant
to port; International freight, Brokerage and Handling (Taiwan). See
Valuation Memorandum dated September 24, 1997.
S&J--We made changes to the following fields based on S&J's pre-
verification corrections and verification findings: Inland freight;
Brokerage and Handling, International Freight. In addition, we included
sales reported by S&J's affiliate New Lan Luang (see Comment 17). See
Valuation Memorandum dated September 24, 1997.
Normal Value
In order to determine whether there is a sufficient volume of sales
in the home market to serve as a viable basis for calculating NV (i.e.,
the aggregate volume of home market sales of the foreign like product
is greater than five percent of the aggregate volume of U.S. sales), we
compared each respondent's volume of home market sales of the foreign
like product to the volume of U.S. sales of the subject merchandise, in
accordance with section 773(a)(1)(C) of the Act. Unicatch, Lei Chu, and
S&J reported that they had no home market sales during the POI.
Therefore, we have determined that none of the respondents have a
viable home market. Because Unicatch, Lei Chu, and S&J also reported
that they had no viable third country sales during the POI, we based NV
on CV in accordance with section 773(a)(4) of the Act.
Calculation of CV
In accordance with section 773(e)(1) of the Act, we calculated CV
based on the sum of each respondent's cost of materials, fabrication,
Selling, General
[[Page 51429]]
and Administrative expenses (``SG&A''), profit and U.S. packing costs
as reported in the U.S. sales listings. In this case, none of the
respondents had home market selling expenses or home market profit upon
which to base CV in accordance with section 772(e)(2)(A).
Section 773(e)(2)(B) of the Act sets forth three alternatives for
computing profit and SG&A without establishing a hierarchy or
preference among the alternative methods. We did not have the necessary
cost data for method one (calculating SG&A and profit incurred by the
producer on the home market sales of merchandise of the same general
category as the exports in question), or method two (averaging SG&A and
profit of other investigated producers of the foreign like product).
The third alternative method (section 773(e)(2)(B)(iii) of the Act)
provides that profit and SG&A may be computed by any other reasonable
method, capped by the amount of profit normally realized on sales in
the home market of the same general category of products. The SAA
states that, if the Department does not have the data to determine
amounts for profit under alternative method one and two or a profit cap
under alternative method three, it may apply alternative three (without
determining the cap) on the basis of ``the facts available.'' SAA at
841. Therefore, as the facts available under section 773(e)(2)(B)(iii)
of the Act, for Unicatch and S&J, we are using each respondent's
overall profit and SG&A rate associated with its total sales as
recorded in its most recent financial statement. Because the figures
recorded in the financial statements are company-specific and
contemporaneous with the POI, we determine this data to be a reasonable
surrogate for SG&A and profit of the foreign like product. With respect
to Lei Chu, because its financial statement includes sales of
merchandise not related to the merchandise under investigation, e.g.,
not within the same general category of CR nails products, we
determined that using Lei Chu's financial statement is not an
appropriate basis for deriving SG&A and profit. Therefore, we are using
the weighted average of the profit rate and SG&A of other respondents
in this investigation for Lei Chu (see Lei Chu Calculation Memorandum,
September 24, 1997). For a further discussion of this methodology, see
Comment 2 below.
Price to CV Comparisons
Because we based SG&A on respondents' financial statements, where
we compared CV to EP, we did not make any circumstance of sale
adjustments for direct expenses and commissions as we were unable to
isolate these amounts from total SG&A.
Currency Conversion
We made currency conversions into U.S. dollars based on the
official exchange rates in effect on the dates of the U.S. sales as
certified by the Federal Reserve Bank. Section 773A(a) of the Act
directs the Department to use a daily exchange rate in order to convert
foreign currencies into U.S. dollars unless the daily rate involves a
fluctuation. It is the Department's practice to find that a fluctuation
exists when the daily exchange rate differs from the benchmark rate by
2.25 percent. The benchmark is defined as the moving average of rates
for the past 40 business days. When we determine a fluctuation to have
existed, we substitute the benchmark rate for the daily rate, in
accordance with established practice. Further, section 773A(b) directs
the Department to allow a 60-day adjustment period when a currency has
undergone a sustained movement. A sustained movement has occurred when
the weekly average of actual daily rates exceeds the weekly average of
benchmark rates by more than five percent for eight consecutive weeks,
see Change in Policy Regarding Currency Conversions, 61 FR 9434 (March
8, 1996). Such an adjustment period is required only when a foreign
currency is appreciating against the U.S. dollar. The use of an
adjustment period was not warranted in this case because the New Taiwan
Dollar (NTD) did not undergo a sustained movement.
Critical Circumstances
The petition contained a timely allegation that there is a
reasonable basis to believe or suspect that critical circumstances
exist with respect to imports of subject merchandise. Section 733(e)(1)
of the Act provides that the Department will determine that there is a
reasonable basis to believe or suspect that critical circumstances
exist if: (A)(i) there is a history of dumping and material injury by
reason of dumped imports in the United States or elsewhere of the
subject merchandise, or (ii) the person by whom, or for whose account,
the merchandise was imported knew or should have known that the
exporter was selling the subject merchandise at less than its fair
value and that there was likely to be material injury by reason of such
sales, and (B) there have been massive imports of the subject
merchandise over a relatively short period.
In the preliminary determination, we determined that there was no
reasonable basis to believe or suspect that critical circumstances
existed with respect to imports of CR nails from Taiwan by Unicatch,
Lei Chu, S&J, and Romp. This preliminary determination was based on a
finding that there was no evidence of a history of dumping and no basis
to impute knowledge of dumping and resultant material injury. As no
interested party has challenged this determination and because the
calculated final dumping margins for Unicatch, Lei Chu, and S&J do not
exceed the benchmark amounts for establishing imputed knowledge (e.g.
15% for CEP sales and 25% for EP sales), we do not find that critical
circumstances exist for any of these companies. Regarding all other
exporters, because we do not find that critical circumstances exist for
any of the investigated companies with calculated dumping margins, we
also determine that critical circumstances do not exist for companies
covered by the ``All Others'' rate. Based upon adverse facts available,
however, we do find that critical circumstances exist with respect to
exports by K. Ticho and Romp. (see Comment 20).
Verification
As provided in section 782(i) of the Act, we verified or attempted
to verify the information submitted by respondents for use in our final
determination. We used standard verification procedures, including
examination of relevant accounting and production records and original
source documents provided by respondents.
Interested Party Comments
Comment 1: Indirect Selling Expenses
Unicatch argues that the Department erroneously deducted its
indirect selling expenses incurred in Taiwan from CEP. Unicatch states
that it calculated its Taiwan indirect selling expenses as a percentage
of total Unicatch sales because it was unable to specify whether any of
the indirect selling expenses were directly related to its U.S. sales.
Unicatch asserts pursuant to section 772(d) of the Tariff Act of 1930,
as amended, that the Department has an established practice in which it
does not deduct indirect selling expenses incurred by a foreign
producer in the exporting country in calculating CEP. See Notice of
Final Determination: Pet Film from Korea, 62 FR 38064, 38066 (July 16,
1997). Unicatch further contends that the Department has codified this
established practice in the final regulations citing, 62 FR 27296, May
19, 1997 at section 351.402(b) which states that the Department ``will
not make adjustments for any expense
[[Page 51430]]
that is related solely to the sale to an affiliated importer in the
United States.'' As a result, Unicatch contends the Department should
not deduct any such indirect selling expenses incurred in Taiwan from
CEP in the final determination.
Petitioner contends the Department was correct to deduct Unicatch's
indirect selling expenses in constructing CEP as all deductions met
statutory requirements. First, petitioner argues the Department
verified that Unicatch's sales department provides general sales
support services for U.S. sales including contacts with affiliates and
customers. Second, petitioner argues that indirect selling expenses are
expenses which do not result from a direct relationship with the
subject merchandise. Thus, petitioner argues that Unicatch's claim that
these expenses are not directly related to the sale of the subject
merchandise is irrelevant. Finally, petitioner claims that the
Department verified that the international sales division dealt with
sales to various export markets, and although there is no sales
division devoted to U.S. sales, given that a majority of Unicatch's
sales are to the U.S., these expenses should be deducted from CEP.
DOC Position
We agree with the respondent and have not deducted Unicatch's
indirect selling expenses incurred in Taiwan from CEP because the
record evidence does not support a finding that these selling expenses
are related specifically to economic activities in the United States.
Consistent with the SAA and Sec. 351.402(b) of the Final Regulations
(62 FR 27411), we make deductions under section 772(d) of the Act only
for selling expenses that relate to economic activity in the United
States, which we deem to be expenses associated with the sale to the
unaffiliated U.S. purchaser and not the sale to the affiliated U.S.
importer. See, e.g., PET Film from Korea, 62 FR 38064, 38066 (July 16,
1997); Grey Portland Cement and Clinker from Mexico: Final Results of
Antidumping Duty Administrative Review, 62 FR 17148, 17168 (April 6,
1997).
Unicatch's indirect selling expenses incurred in Taiwan are
comprised of salary, travel, and entertainment expenses incurred by its
international and domestic sales divisions. See Sales Verification
Report for Unicatch, July 17, 1997 (``Unicatch Sales Verification
Report'') at 11. We verified that Unicatch does not have a sales staff
dedicated entirely to U.S. sales, but rather its salespeople deal with
sales to various export markets. Id. Further, we verified that none of
the reported indirect expenses can be tied specifically to sales to
unaffiliated customers in the U.S. but rather are incurred by Unicatch
to complete the sale to the affiliated purchaser. Id. Although
Unicatch's third country sales are not viable (i.e., greater than 5% of
U.S. sales) for purposes of calculating NV, we verified that Unicatch
did have POI sales in other export markets, which further demonstrates
that its reported indirect selling expenses are not associated solely
with U.S. sales to unaffiliated customers. Therefore, we disagree with
petitioner's argument that because the overwhelming majority of
Unicatch's export sales are to the U.S., we should deduct these
expenses from CEP. See Notice of Final Determination of Sales at Less
Than Fair Value: Pasta from Italy, 61 FR 30326, 30352 (June 14, 1996)
(deducting inventory carrying costs incurred in Italy for enriched
pasta because enriched pasta was sold in the United States during the
POI).
Comment 2: Calculation of SG&A and Profit for All Respondents
Petitioner disagrees with the Department's decision in the
preliminary determination to use each respondent's overall SG&A and
profit rates contained in their financial statements because this data
includes amounts obtained from sales of non-subject merchandise.
Petitioner asserts that the only data pertaining to SG&A and profit
specific to the product under investigation is the information provided
by Lei Chu. Petitioner argues that one of the three alternative methods
to determine SG&A and profit for CV is to weight-average the actual
amounts realized on sales of the foreign like product by other
producers of the subject merchandise. Because Lei Chu was the only
company to provide the data specific to the subject merchandise,
petitioner contends that Lei Chu's data is the weighted-average SG&A
and profit rates for all Taiwan producers and should be used in all
respondent's CV calculations.
Unicatch and Lei Chu counter that the profit rate petitioner
asserts should be used in calculating CV was not verified by the
Department. More importantly, the profit rate is Lei Chu's
subcontractor's profit for processing wire into CR nails and does not
reflect all costs of producing and selling CR nails. Both respondents
contend that the Department should use the amounts derived from
Unicatch and Lei Chu's financial statements because this data
incorporates all appropriate costs and was verified by the Department.
Moreover, respondents contend that where actual data is not available,
773(e)(2)(B)(i) of the Act authorizes the Department to use amounts
generated from the ``general category of products'' as the subject
merchandise. They cite Shop Towels from Bangladesh 61 FR 65025
(December 10, 1996) and Forged Steel Crankshafts from the United
Kingdom 62 FR 16768 (April 18, 1997) as two cases in which the general
category of merchandise was determined to be all products from textile
mills and all types of crankshafts, respectively. In this case,
Unicatch and Lei Chu assert the general category of merchandise
encompasses nails and other fasteners and that both companies had sales
of nails and other fasteners in the home market. Therefore, the
companies contend, the Department should use the SG&A and profit from
each company's financial statement because the financial statements
encompass products within the same general category of merchandise.
Lei Chu argues that the Department erroneously used profit realized
by its subcontractor to calculate the CV of CR nails in the preliminary
determination of this investigation. Lei Chu contends the Department
should use SG&A and profit verified by the Department from Lei Chu's
financial statement to calculate CV for the sales of the subject
merchandise because Lei Chu qualifies as the producer of CR nails. Lei
Chu agrees that there were certain production processes of the subject
merchandise performed by an affiliated subcontractor. However, Lei Chu
states that the Department has found in past cases that the party
contracting for processing services was the producer of the subject
merchandise. In such instances, the Department applied SG&A and profit
realized by the contracting party to calculate the CV of the subject
merchandise and did not use the SG&A and profit of the subcontractor,
citing Notice of Final Determination: Chrome Plated Lug Nuts from
Taiwan, 56 FR 36130, 36131 (July 31, 1991).
According to Lei Chu, the Department verified that Lei Chu
organized the production of CR nails and performed certain production
processes during the POI. In addition, Lei Chu states the Department
verified that it purchased steel wire rods, maintained them as
inventory, retained title over the materials to produce the CR nails
and retained ownership over the CR nails throughout the production
process. Further, Lei Chu states that the Department verified that it
never sold or purchased wire to or from the subcontractor, and there
were no sales transactions between the two. Lei Chu claims the
Department verified that it
[[Page 51431]]
only paid a processing fee to the subcontractor. Finally, Lei Chu
argues that the fee and the profit from the subcontractors' financial
statement reflects only the costs of processing wire into CR nails. Lei
Chu believes its financial statement incorporates the full costs of CR
nails. As a result, Lei Chu argues that the Department should use its
1996 financial statements to calculate profit and SG&A.
Petitioner argues that Lei Chu and its subcontractor should be
collapsed and the Department was correct in using the profit of Lei
Chu's subcontractor to calculate CV. Petitioner contends that the
subcontractor is the producer of the subject merchandise because it
performs more than minor additions needed to complete the production of
CR nails. Further, petitioner contends the case cited by Lei Chu,
Chrome Plated Lug Nuts, is not applicable because the two parties
involved in that case were not affiliated, and the respondent to that
investigation had more production responsibilities than Lei Chu.
Therefore, petitioner contends the Department properly calculated CV
using the profit of Lei Chu's subcontractor.
DOC Position
Neither Lei Chu, Unicatch, nor S&J had a viable home market upon
which to calculate NV; therefore, none of the respondents had home
market selling expenses and profit for sales of the foreign like
product upon which to base CV. As a result, in the preliminary
determination, pursuant to section 773(e)(2)(B)(iii) of the Act and
consistent with the SAA, we used each respondent's overall profit and
SG&A associated with total sales as recorded in its most recent
financial statements as facts available to derive SG&A and profit.
For Unicatch and S&J, for this final determination, we have
continued to use the SG&A and profit contained in their most recent
financial statements. For both companies, we verified that these
amounts reflected expenses and profit associated with overall sales of
other types of nails and similar steel products, such as fasteners,
which we deem to be within the same general category of products as CR
nails. We are satisfied that using the financial statements is a
reasonable methodology for calculating each company's SG&A and profit
because this data is company-specific, contemporaneous with the POI,
and is the most appropriate information on the record. For the reasons
discussed below, we disagree with petitioner's argument that we use the
amounts contained in Lei Chu's financial statements for all respondents
in lieu of using this verified company-specific data.
For Lei Chu's SG&A in the preliminary determination, we used its
financial statements and its affiliated subcontractor's financial
statements (see Calculation Memorandum dated September 24, 1997). For
Lei Chu's profit, we used its subcontractor's financial statements.
However, our findings at verification demonstrated that the amount
recorded on the subcontractor's financial statements is not reflective
of profit for the sale of the foreign like product or related
merchandise but rather is a ``tolling fee'' for its services (see Lei
Chu Cost Verification Report at pg 3). Further, the SG&A and profit
recorded in Lei Chu's financial statements are for amounts generated on
sales of merchandise completed unrelated to the subject merchandise,
e.g., not within the same general category of CR nails products. We
also note that Lei Chu's recorded net profit is zero. Although the URAA
and subsequent revisions to U.S. law eliminated the use of minimum
profit, we do not believe that it eliminated the presumption of a
positive profit element in the calculation of CV. Unlike sections
773(e)(2)(A) and 773(e)(2)(B) (i) or (ii), section 773(e)(2)(B)(iii)
specifically excludes the use of the term ``actual profit,'' and
instead directs us to use any other reasonable method that does not
exceed the amount normally realized by the industry in the same general
category of products. The SAA states that there is no hierarchy between
the alternatives in section 773(e)(2)(B), indicating that in some
instances, it may be more appropriate for the Department to ignore
``actual profit'' available under the two other alternatives and opt
instead for some other reasonable method to obtain a profit amount.
Therefore, if a company has no home market profit or has incurred
losses in the home market, the Department is not instructed to ignore
the profit element, include a zero profit, or even consider the
inclusion of a loss; rather, the Department is directed to find an
alternative home market profit. A clear reading of the statute
indicates that a positive amount for profit must be included in CV. See
Silicomanganese from Brazil: Final Results of Antidumping Duty
Administrative Review, 62 FR 37869, 37877 (July 15, 1997).
Therefore, we reject Lei Chu's argument and have not used its
company-wide SG&A and profit rates in our CV calculations. Instead, as
facts available, we used the weighted average of the SG&A and profit
from the financial statements of the other respondents in this
investigation (see Valuation Memorandum dated September 24, 1997).
Because this data represents POI-wide expenses and profit associated
with sales of merchandise in the same general category as CR nails
products, we find this data to be the most appropriate information on
the record to derive Lei Chu's SG&A and profit.
Comment 3: Unicatch's Steel Scrap
Unicatch argues that the Department should subtract its revenue on
steel scrap sales from the cost of manufacture (COM) of CR nails as
this information was presented to the Department in a timely manner at
the commencement of verification. Further, Unicatch states that the
Department was able to verify all information presented at the
commencement of verification including revenue from steel scrap and its
values per kilogram per CR nails. Thus, Unicatch suggests that
consistent with the Department's past cases, the value of steel scrap
should be subtracted from normal value, citing Brake Drums and Rotors
from the PRC.
Petitioner contends that the disclosure by Unicatch of the revenue
from steel scrap was not minor or timely. However, petitioner suggests
that if the Department makes the adjustment, and given that the revenue
is so small, it should make an adjustment in determining allocated
expenses and profit.
DOC Position
We agree with Unicatch that it is the Department's practice to
deduct from total COM revenue earned on the sale of scrap resulting
from the production of the subject merchandise. See Elemental Sulphur
from Canada; Final Results of Antidumping Administrative Review, 61 FR
8239, 8245 (March 4, 1996). Because we determined that Unicatch
submitted this data in a timely manner (see Comment 4) and we were able
to verify these amounts, we have deducted steel scrap revenue from
Unicatch's total COM.
Comment 4: Unicatch's and Lei Chu's Corrections and Facts Available
Unicatch and Lei Chu argue that the Department should incorporate
the corrections submitted at the commencement of their verifications in
the final margin calculations because the corrections were submitted in
a timely manner and verified by the Department. Both respondents
contend that the Department should not use facts available for two
reasons: (1) Making adverse assumptions and applying facts available
are not synonymous and (2)
[[Page 51432]]
neither respondent has done anything in this investigation that would
justify using adverse inferences. Both respondents argue that there
were few instances in the corrections that the Department was unable to
verify, and, further, both companies penalized themselves with errors
as often as they benefitted. Both respondents state that there is no
evidence on the record to suggest that either failed to cooperate by
not acting to the best of its ability to comply with Department's
requests for information. Lei Chu and Unicatch state that the
Department should weigh the record evidence to determine what type of
change, if any, would be probative of the issue under consideration.
However, both recommend that if the Department chooses to use facts
available, adverse inferences not be applied.
Petitioner contends that the Department should not incorporate
respondents' corrections because the corrections are not minor and the
number of errors reported by the respondents' raise serious doubts
about whether the companies acted to the best of their ability to
provide accurate information. In addition, petitioner notes that the
Department discovered numerous other errors at verification. Therefore,
petitioner suggests that the Department resort to ``facts available''
employing ``adverse inferences'' to portions of the respondents'
calculations.
DOC Position
We agree with Unicatch and Lei Chu and have accepted the
corrections for computing the final margin of the companies. The
Department's practice is to permit respondents to provide minor
corrections to submitted information at the commencement of
verification. See Notice of Final Determination of Sales at Less Than
Fair Value: Melamine Institutional Dinnerware Products From Taiwan, 62
FR 1726, 1729 (Jan. 13, 1997). Unicatch and Lei Chu provided the
Department with their corrections at the beginning of their respective
verifications. Lei Chu's corrections included sales and production
quantity, material costs, and fixed overhead. Unicatch's corrections
included production quantity, plating costs, scrap, packing, selling
expenses and steel wire costs. These revisions corrected data already
on the record and did not introduce new issues not previously reported
on the record. In sum, the corrections submitted by Unicatch and Lei
Chu were typical of the minor corrections routinely accepted by the
Department at the commencement of verification.
Accordingly, we determine that resorting to facts available is
unwarranted in this particular case. The Department's use of facts
available is subject to section 782(d) of the Act. Under section
782(d), the Department may disregard all or part of a respondent's
questionnaire responses when the response is not satisfactory or it is
not submitted in a timely manner. The Department has determined that
neither of these conditions apply. The Department was able to verify
the responses, thus rendering them satisfactory, and the types of
revisions submitted by Unicatch and Lei Chu met the deadline for such
corrections. Under section 782(e), the Department shall not decline to
consider information that is (1) timely, (2) verifiable, (3)
sufficiently complete in that it serves as a reliable basis for a
determination, (4) demonstrated to be provided based on the best of the
respondent's ability, and (5) can be used without undue difficulties.
Lei Chu and Unicatch have met these conditions. Therefore, we find no
basis to reject Lei Chu's and Unicatch's responses, and thus, no basis
to rely on the facts otherwise available for our final determination.
Comment 5: Plating Thickness
Petitioner argues that the plating thicknesses reported by
respondents do not meet U.S. Federal or regional building codes.
Moreover, petitioner claims that the actual plating thicknesses were
not verified by Department. Therefore, petitioner contends that the
Department should assume that respondents were aware of the building
codes and produced CR nails that did not comply with the codes. The
Department should use the information contained in the petition to
calculate NV based on CR nails that meet the U.S. building codes.
Unicatch and Lei Chu contend that the Department verified that all
costs attributable to plating were included in the CV database.
Therefore, both respondents argue that whether or not the subject
merchandise complies with U.S. building codes is irrelevant because the
purpose of this investigation is to accurately value respondents'
production costs of CR nails, not to examine the quality of their CR
nails.
DOC Position
We agree with Unicatch and Lei Chu that we have captured all costs
incurred in producing CR nails. During the cost verifications of all
respondents, we examined whether all material costs (including plating
costs) associated with the subject merchandise were reported completely
and accurately in the CV databases. We noted no discrepancies regarding
the material costs with the exception of minor errors, which have now
been corrected (see Cost Verification Reports for Lei Chu, Unicatch,
and Romp dated July 18, 1997, and Cost Verification Report for S&J
dated July 23, 1997). Thus, for each respondent with a calculated
dumping margin we have verified all material costs. Any alleged
misrepresentation concerning compliance with U.S. building codes is not
within the purview of the antidumping statute because such
misrepresentation would have no impact on our calculations.
Comment 6: Allocation Methodologies
Petitioner contends that respondents' allocation methodologies with
respect to the following expenses were incorrect.
(i) Shipping Related Expenses
Petitioner claims that any shipping related expenses should be
based on volume because the expenses are generally incurred based on
volume, rather than on gross packed weight. Petitioner argues that
allocating shipping expenses based on weight results in under-reported
transportation costs.
Unicatch and Lei Chu counter that basing shipping related expenses
on weight is acceptable when volume-based information is unavailable.
In this case, weight is the only allocation factor on the record. Both
respondents cite to Industrial Belts and Components Thereof from Japan,
58 FR 30018, 30022 (May 25, 1993) in support of this position.
DOC Position
We agree with respondents that a weight-based allocation
methodology for reporting shipping expenses is acceptable. Although the
Department prefers sale-specific movement expenses, the Department's
practice is to accept allocation methodologies for movement expenses at
the most specific level permitted by the respondent's books and records
kept in the ordinary course of business. See Notice of Final
Determination of Sales at Less Than Fair Value: Melamine Institutional
Dinnerware Products From Taiwan, 62 FR 1726, 1730 (Jan. 13, 1997).
Moreover, where multiple items were included in a shipment, we
instructed each respondent to report expenses using an allocation
methodology on the basis incurred, e.g., weight. Both Unicatch and Lei
Chu reported that a weight-based allocation methodology was necessary
because their shipments included non-subject merchandise. See Unicatch
and Lei Chu's Section C
[[Page 51433]]
response dated March 18, 1997. For S&J, the bill of lading records both
weight and volume figures without distinguishing between the two.
Therefore, we determine that allocating freight on weight is acceptable
for our final margin calculation (see S&J Sales Verification Exhibit
16).
(ii) Production Related Expenses, Factory Overhead, and Indirect
Selling Expenses
Petitioner argues that the allocation methodology of production,
factory overhead, and indirect selling expenses should be revised to
reflect the inclusion or exclusion of scrap, depending on the
processing stage in which the expense was incurred. Petitioner
suggests, for example, that post-scrap production stages, such as
packing, should be based on the weight of the product without the
scrap.
Unicatch and Lei Chu counter that allocating over finished goods,
which includes scrap, only increases the per-unit costs. Furthermore,
both respondents argue that petitioner's methodology will distort costs
downward by not accounting for scrap.
DOC Position
We agree with respondents that allocating expenses over the weight
of the finished good necessarily accounts for all costs related to
scrap. If the Department were to allocate certain expenses over a
weight which included scrap, the denominator of the calculation would
be greater than the weight of the finished product and would result in
understating the per-unit expense. Thus, we reject petitioner's
argument and will continue to allocate expenses over the total amount
of finished product.
(iii) Duty Drawback
Petitioner argues that the duty drawback allocation should be based
on the net weight of the CR nails.
Unicatch and Lei Chu counter that they did allocate duty drawback
by the net weight of the CR nails.
DOC Position
We agree with respondents that duty drawback was properly allocated
based on the net weight of the CR nails. As stated in the Unicatch
Sales Verification Report at. 8-9, the total duty drawback associated
with shipments to TCI or Unitech (Unicatch's affiliated U.S. importers)
were divided by the total net weight of the shipment to arrive at a
per-unit amount for duty-drawback. This same methodology was followed
for Lei Chu (see Lei Chu Sales Verification Report dated June 23,
1997).
(iv) Physical Weights
Petitioner contends that the Department should physically weigh the
subject merchandise and base all allocations on physical weights rather
than gross weights reported by the respondents.
Unicatch and Lei Chu counter that petitioner's request is untimely
and unreasonable. Both respondents argue that the weight-based
methodologies used are reasonable and consistent with past practice and
urge the Department to reject petitioner's contention.
DOC Position
At verification the Department examined the reported product
weights for Lei Chu and Unicatch and noted no discrepancies. Therefore,
we have used each company's verified weights in our calculations.
Comment 7: Value Added Taxes (VAT)
Petitioner argues that the Department should not assume that all
sales and expenses reported net of VAT were correct. Accordingly,
petitioner believes unless the Department verified all figures, the
Department must not assume that all figures are net of VAT.
Lei Chu and Unicatch contend that the sales reported were net of
VAT because under Taiwan law VAT is rebated on all export sales.
Because all respondents reported their sales as being export sales,
both respondents argue that the Department should reject petitioner's
claim.
DOC Position
In the preliminary determination, Unicatch or Lei Chu reported
brokerage and handling and international freight net of VAT. At
verification, we found that both respondents incur five percent VAT on
these expenses (see Unicatch Sales Verification Report at 7; Lei Chu
Sales Verification Report at 8). Since Lei Chu and Unicatch were unable
to provide supporting documentation to show that this VAT had been
rebated according to Taiwan law, we have applied a five percent VAT to
brokerage and handling and international freight for all sales by these
two companies (see Valuation Memorandum dated September 24,1997).
However, we found no indication at verification that VAT was incurred
on export sales for either Unicatch or Lei Chu.
Comment 8: Multinational Corporation Rule (MNC)
Petitioner argues that the MNC provision of the Act should be
applied to Unicatch and Top United (a manufacturer of CR nails in the
People's Republic of China). Petitioner cites to section 773(d) of the
Act, alleging that the conditions outlined are fulfilled by Unicatch
and Top United. Further, petitioner cites to Melamine Institutional
Dinnerware Products from the People's Republic of China 61 FR 43337
(August 22, 1996), in which the Department determined that the MNC
provision applies to cases involving non-market economies.
Unicatch counters that the allegation is untimely and unsupported
by evidence on the record of this investigation. Finally, Unicatch
argues that the petitioner has failed to demonstrate that two of the
three conditions necessary to apply the MNC rule are present, i.e., (1)
the petitioner has failed to demonstrate that the PRC market is not
viable; and (2) petitioner has failed to demonstrate that the normal
value for Taiwan nails is higher than the normal value for PRC nails.
DOC Position
We agree with Unicatch that petitioner's MNC allegation is
untimely. As stated in the preamble to the final regulations: ``[t]here
are a variety of analyses called for by section 773 that the Department
typically does not engage in unless it receives a timely and adequately
substantiated allegation from a party * * * the Department does not
automatically request information relevant to a multinational
corporation analysis under section 773(d) of the Act in the absence of
an adequate allegation.'' Final Regulations, 62 FR at 27357, citing
Certain Small Business Telephones and Subassemblies Thereof from
Taiwan, 54 FR 31987 (August 3, 1989).
In this case, petitioner alleged for the first time in its case
brief that the Department should apply the MNC rule to Unicatch and Top
United. Determining NV under the MNC provision is a complex analysis
that necessitates collection of information and calculation of sales
and cost data from companies who may or may not be subject to
investigation. Presenting the allegation after the preliminary
determination does not allow the Department sufficient time to collect
and analyze the information necessary to make a MNC determination at an
appropriate point in the proceeding. For this reason, the Department
has specifically rejected the notion that absent a timely and adequate
allegation, we are obligated to examine information that is
quantitatively and/or qualitatively different from the information
normally gathered as part of
[[Page 51434]]
its standard antidumping analysis because to do so would significantly
impair the Department's ability to comply with its statutory deadlines.
See Final Regulations, 62 FR at 27357. Therefore, we reject
petitioner's MNC allegation as untimely.
Comment 9: Reconciliation of Unicatch Sales to Financial Statements
Petitioner argues that the Department was unable to tie: (1) the
reported sales volume totals for all of Unicatch's sales directly to
the financial statements, and (2) Unicatch's general ledger to its 1995
income statement. As a result, petitioner asserts that Unicatch's
reported sales should not be deemed reliable as some sales may have
been excluded. Accordingly, petitioner suggests that the Department
apply facts available with adverse inferences because of the potential
of unreported sales.
Unicatch contends that because its CEP and EP sales included the
resale of CR nails by its affiliates, the Department was unable to
complete a total sales reconciliation using its financial statement
only. Unicatch states that reconciliation required tying relevant sales
to its affiliates' financial statements. Unicatch contends that the
Department verified the quantity and value of the resales at its
affiliates' headquarters using each affiliate's financial statement and
was able to clarify the differences from Unicatch's financial statement
without any discrepancies. Therefore, Unicatch contends that facts
available with adverse inferences is not warranted.
DOC Position
We disagree with petitioner's argument that use of adverse facts
available is warranted in this case. Contrary to petitioner's claim, we
verified Unicatch's total sales volume and value. As stated in its
sales verification report, ``we were unable to tie the reported sales
and volume and value totals for all of Unicatch sales, or for its EP
sales directly to the financial statements because the sales value
reported in the financial statement included the sales values for those
sales to Unicatch affiliated parties.'' Unicatch Sales Verification
Report at pg 3. However, when we verified Unicatch's affiliates, we
were able to tie the quantity and value reported to their financial
statements, clarifying any differences in Unicatch's financial
statement and reported sales volume (see Unicatch CEP Sales
Verification Report (July 23, 1997)). Therefore, we have determined
there is no evidence on the record to suggest Unicatch had any
unreported POI sales and resort to facts available is not warranted.
Comment 10: Reliability of Unicatch's Reported Costs
Petitioner argues that the cost methodologies used by Unicatch were
inappropriate because costs were not properly determined where steel
was processed through affiliated parties. Petitioner argues that
Unicatch's cost of materials should be measured against a ``market
value'' enabling the Department to determine that prices of the steel
are reasonable. In addition, petitioner states the Department should
assure that all costs associated with the affiliated parties' costs
were reported.
Unicatch contends that at the commencement of verification, it
provided the Department with sufficient information, including a sales
price from an unaffiliated supplier of wire rod, that enabled the
Department to test whether the steel price from an affiliated supplier
was reasonable. Unicatch states that it showed an example of an
unaffiliated supplier's price lower than transfer prices charged by
Unicatch's affiliates, even though the cost of production for those
affiliates was higher. Therefore, Unicatch contends that the cost of
production for steel is appropriate for its cost calculation
methodologies. Further, Unicatch contends that the Department verified
all reported costs associated with the affiliates' production of steel
wire (i.e., material, labor, overhead, SG&A and interest) and did not
find any discrepancies.
DOC Position
We disagree with petitioner and have determined that there is no
evidence of the record to suggest Unicatch's cost calculation
methodologies were incorrect. We verified the two methodologies used by
Unicatch to determine material costs for steel wire and welding wire.
The first methodology was based on the transfer price from its
affiliates and the second methodology was based on the cost of
production for wire purchased from its affiliates (see Unicatch Cost
Verification Report at 3-4). Although Unicatch had some purchases of
steel wire from an unaffiliated supplier, we verified that this
unaffiliated purchase price was lower than the reported transfer prices
charged by its affiliated suppliers. (Id. at Ver. Exh. 1). Therefore,
since the costs of production from Unicatch's affiliates were higher
than the transfer prices, in accordance with section 773(f)(3), we have
used the affiliates' COP data to calculate the actual material cost of
the wire inputs.
Comment 11: Corrections to Unicatch's Questionnaire Responses
Petitioner argues that the corrections submitted by Unicatch at the
time of verification are unacceptable because the Department was not
granted time to review the information and consider the appropriate
methods for verifying it. Petitioner believes that the Department
should re-examine the following changes submitted at verification: (1)
interest expenses; (2) SG&A; (3) packing costs; (4) existence of U.S.
affiliates; (5) ocean freight; (6) warranty expense; (7) selling
expense; (8) inland freight; (9) duty drawback; and (10) marine
insurance.
Specifically, petitioner states that Unicatch may have
underreported its interest expense because it may have been offset by
loans or other money transfers. Further, petitioner claims that
Unicatch's packing cost should have been reported separately according
to the Department's questionnaire, and the records about Unicatch's
affiliates were not accurate and thus, cannot be relied upon by the
Department. Therefore, petitioner suggests that the Department reject
Unicatch's submissions entirely based on adverse inferences and apply
the largest expense found to all of Unicatch's sales transactions, as
adverse facts available.
Unicatch contends that the corrections reported at the commencement
of its verification were not numerous and should not affect the
integrity of its response. Further, Unicatch states that the Department
was able to verify all corrections submitted. Unicatch contends that
the revisions submitted were typographical errors and other minor data
entry errors to the sales databases. Unicatch contends that the
Department should use the interest expenses recorded in its verified
financial statement to calculate CV and, since Unicatch did not
separate packing cost, the packing labor percentage would have been
inflated upward without having a major effect on the margin
calculation. Finally, Unicatch admits that some errors reported would
warrant the use of facts available but there is no instance in which
adverse inferences are warranted.
DOC Position
We agree with Unicatch and have accepted the corrections submitted
at the beginning of verification and the explanation for the
discrepancies. We verified all corrections submitted and noted only
minor discrepancies. In addition, we reviewed the allocation
methodologies used by Unicatch to compute its reported expenses (i.e.,
[[Page 51435]]
interest expense, warranty expense, duty drawback) and noted no
discrepancies (see Unicatch Sales Verification Report at 6-9; Unicatch
Cost Verification Report at 2).
Section 782(e) of the Act states that the Department shall not
decline to consider information that does not meet all of its
requirements if: (1) The information is submitted by the deadline
established for its submission, (2) the information can be verified,
(3) the information is not so incomplete that it cannot serve as a
reliable basis for reaching the applicable determination, (4) the
interested party has demonstrated that it acted to the best of its
ability in providing the information and meeting the requirements
established by the Department with respect to the information, and (5)
the information can be used without undue difficulties. Unicatch's
information meets all of these requirements. Accordingly, we have no
basis to conclude that the earlier responses distorted the Department's
analysis and warrant the use of adverse facts available.
Comment 12: Whether Lei Chu and its Affiliate Should Be ``Collapsed''
Petitioner argues that Lei Chu and its affiliate are sufficiently
intertwined and should be collapsed and treated as one. Petitioner
states that Lei Chu has submitted information on the record that it is
affiliated with the Taichung Production Division (``TPD'') and one of
its suppliers and controls the sales and production activities of its
suppliers. Petitioner believes that if the Department does not collapse
the two companies Lei Chu could shift all of its production and exports
of the subject merchandise to TPD or TPD's supplier. Further,
petitioner argues that since the two companies should have been
collapsed, Lei Chu should have submitted a consolidated response to the
Department's questionnaire, and their failure to do so mandates the use
of facts available.
Lei Chu argues that if the Department determines that it should be
collapsed with its affiliate, the Department must use Lei Chu's profit
to calculate the profit of other Taiwan respondents because it reflects
the consolidated performance of Lei Chu.
DOC Position
We determine that the facts in this case do not warrant resort to
our collapsing practice because neither TPD nor Lei Chu's affiliated CR
nails supplier are separate producers. First, TPD is merely a
production division of Lei Chu, not a separate entity. Lei Chu Sect. A
Supp. QR, April 14, 1997, at 1. Although Lei Chu has ceased production
of CR nails at its TPD division, the evidence on the record
demonstrates that Lei Chu continues to produce CR nails through a
subcontractor. Pursuant to the contractual arrangement, Lei Chu
purchases wire rod and drawing materials and provides these materials
to its subcontractor who then produces the CR nails (see Lei Chu Cost
Verification Report, at 3). Lei Chu pays this affiliate a processing
fee and maintains title over the raw materials and completed CR nails
throughout the production process. Id. By its own admission, Lei Chu
controls the sales and production activities of this entity. Further
all CR nails production by the subcontractor is the property of Lei Chu
and is sold by Lei Chu. Thus, consistent with the Department's current
practice with respect to tolling operations (see e.g., section
351.401(h) of the Final Regulations, 62 FR at 27411), the subcontractor
is not considered the producer. Lei Chu is the producer of CR nails. In
essence, the subcontract relationship represents a single, vertically
integrated production operation rather than two separate producers in a
position to potentially evade a potential antidumping duty order by
shifting production from one facility to another.
Comment 13: Lei Chu Sales Below Fair Value
Petitioner argues that since Lei Chu's 1996 financial statement
does not show a profit during the POI, Lei Chu sold the subject
merchandise at less than fair value.
Lei Chu contends that there is nothing in the statute or the
Department's past determinations that supports petitioner's view and as
a result, the Department should reject, petitioner's argument.
DOC Position
We disagree with petitioner because there is nothing stated in the
statute or in past determinations to suggest that a company not showing
a profit is necessarily selling the subject merchandise at less than
fair value.
Comment 14: Lei Chu's Packing List Weights Are Not Reliable
Petitioner argues that the Department should not rely on the
packing list weights to determine the weights of the subject
merchandise for Lei Chu, because they are not accurate. Therefore,
petitioner suggests the Department weigh the subject merchandise and
use the results to compute CV.
Lei Chu contends the packing weights reported by Lei Chu are
reliable and were verified by the Department, citing, Lei Chu Cost
Verification report at 8. Therefore, Lei Chu suggests that the
Department reject petitioner's argument and continue to use the
verified packing list weights to compute CV.
DOC Position
We disagree with petitioner and have determined there is no
evidence on the record to suggest the weights reported on the packing
list are unreliable. In addition, we reviewed Lei Chu's packing
methodologies and did not note any discrepancies (see Lei Chu Cost
Verification Report at 8-9). Therefore, we will use Lei Chu's reported
weights to compute CV.
Comment 15: S&J Untimely Submissions
Petitioner argues that during the investigation, S&J failed to
provide copies of all of its submissions to all interested parties.
Further, petitioner claims S&J submitted documents incorrectly
according to the Administrative Protective Order (APO) regulations.
Therefore, petitioner suggests that the Department reject S&J
submissions in total and employ adverse inferences and use facts
available.
DOC Position
We disagree with petitioner. We have determined that there is no
indication or evidence on the record to suggest that S&J did not serve
all documents to interested parties in a timely manner or according to
APO regulations.
Comment 16: S&J Omissions and Errors to the Questionnaire Responses
Petitioner argues that S&J made numerous omissions and errors in
its questionnaire responses according to the Department's verification
report. These errors included unreported sales and unaccountable bank
charges. Therefore, petitioner suggests that in view of the large
number of errors and omissions, the Department should reject S&J's
submission in its entirety or apply facts available with adverse
inferences to the unreported sales.
DOC Position
We disagree with petitioners. We verified that S&J did not include
bank charges in its Section C response because it was unable to
separate bank changes from the other miscellaneous charges included in
the general ledger category (``Export Expense'') (see S&J Sales
Verification Report at 10). We
[[Page 51436]]
applied a bank charge percentage to all of S&J sales (see Valuation
Memorandum dated September 24, 1997). Therefore, although certain
discrepancies and omissions in S&J's reported sales and cost data were
discovered during verification, the discrepancies and omissions do not
warrant the use of adverse facts available. It is acceptable to address
and correct such errors individually, as was done in this case, where
appropriate. Such errors were addressed and corrected individually.
(See, e.g., Certain Corrosion-Resistant Carbon Steel Flat Products from
Korea; Final Results of Antidumping Duty Administrative Review 61 FR
18558 (April 26, 1996).)
Comment 17: Collapsing of S&J and New Lan Luang
Petitioner argues that the Department should collapse S&J and New
Lan Lung because the parties effectively operate as one. Further,
petitioner contends that if the Department does not collapse the two
companies it would provide a loophole for future investigations.
DOC Position
In order for the Department to collapse two producers, i.e., treat
them as a single entity, (1) the producers must be affiliated under
section 771(33) of the Act, (2) the producers must have production
facilities that are sufficiently similar so that a shift in production
would not require substantial retooling, and (3) there must be a
significant potential for manipulation of price or production. See Grey
Portland Cement and Clinker From Mexico: Final Results of Antidumping
Administrative Review, 62 FR 17148, 17155 (April 9, 1997); section
351.401(f) of the Final Regulations, 62 FR at 27410. When based on a
review of the totality of the circumstances, the Department determines
that two affiliated producers are sufficiently related so as to warrant
treatment as a single enterprise, collapsing these entities prevents
evasion of the antidumping duty order. See Certain Fresh Cut Flowers
From Colombia; Final Results of Antidumping Duty Administrative
Reviews, 61 FR 42833, 42853 (Aug. 19, 1996). Applying the criteria of
our collapsing inquiry as set forth above, we find (1) S&J and New Lan
Luang are affiliated under Sec. 771(33) of the Act, (2) a shift in
production would not require substantial retooling, and (3) there is a
significant potential for price or production manipulation due to,
among other factors, evidence of intertwined business operations and
common management of the production and sales decisions of both
companies. Based on this an analysis of the record evidence, we have
determined that it is appropriate to treat S&J and New Lan Luang as a
single entity for purposes of calculating a dumping margin in this
investigation.
First, we find that because S&J owns greater than 5% of New Lan
Luang, these companies are affiliated under Sec. 771(33)(E) of the Act.
Second, the record evidence demonstrates that although not a current
producer of CR nails (New Lan Luang ceased production of CR nails in
1994), New Lan Luang is capable of producing CR nails. See S&J Sect. A
Supp. QR, April 8, 1997, at 12; S&J Verification Report, at 2. Based on
these facts, it is reasonable to infer that a substantial retooling of
New Lan Luang's production facilities would not be necessary if S&J
were to shift production to New Lan Luang.
We also determine that the third criterion of our collapsing
inquiry is met. In determining whether there is a significant potential
for manipulation of price or production, the Department considers
factors such as (1) the level of common ownership, (2) interlocking
board of directors and common management, and (3) intertwined business
operations as evidenced by shared sales information, involvement in
production and pricing decisions, or significant transactions between
the two enterprises. See Certain Welded Carbon Steel Pipes and Tubes
From India; Final Results of New Shippers Antidumping Duty
Administrative Review, 62 FR 47632, 47638 (Sept. 10, 1997) (``Pipes and
Tubes from India''); Sec. 351.401 (f) of the Final Regulations, 62 FR
at 27410. All of these criteria need not be met in a particular case,
but rather serve as a reliable basis on which the Department may judge
whether the affiliated producers are sufficiently related to create the
potential of price or production manipulation. Pipes and Tubes from
India, 62 FR at 47638.
S&J's General Manager is also in charge of New Lan Luang. See S&J
Sect. A Supp. QR, at 2; S&J Verification Report, at 2. S&J explained
that its General Manager is responsible for sales and production
decisions and determines the prices of S&J's CR nails. See S&J Sect. A
QR, Feb. 26, 1997, at 5. At verification we discovered that the
Chairman of New Lan Luang is also the founder, former general manager,
and current advisor to S&J. See S&J Verification Report, at 2. This
individual is also the father of the S&J's current General Manager. Id.
Additionally, S&J officials explained that the two entities share
employees and S&J has on occasion transferred sales order to New Lan
Luang for completion. Id. The totality of the circumstances presented
by these facts indicate that the two companies operate under common
control of the same individual/family with respect to sales and
production decisions. Although both S&J's General Manager and New Lan
Luang's Chairman are only minority shareholders in both companies, we
conclude that their positions of legal and operational control in their
respective companies create a significant potential for price or
production manipulation. We therefore have treated S&J and New Lan
Luang as a single entity for purposes of calculating a dumping margin
in this investigation.
To construct a consolidated sales response for S&J/New Lan Luang,
we have included New Lan Luang's POI sales in our final margin
calculations. S&J reported New Lan Luang's total quantity and value
data for its U.S. sales during the POI; however, because we did not
specifically request S&J to report additional information on New Lan
Luang's POI sales, we do not have a complete sales database upon which
to calculate a dumping margin. Therefore, it is necessary to resort to
facts available in accordance with section 776(a)(1) of the Act for
this missing information. As facts available, we have used a simple
average of the amounts reported for the fields not included in the
sales database (i.e. exchange rate, foreign inland freight, brokerage)
(see Calculation Memorandum dated September 24, 1997).
Additionally, at verification, we discovered additional POI sales
by New Lan Luang that S&J failed to report. (see S&J Sales Verification
Report at 2). For those sales, we have applied adverse facts available
because we deem S&J's failure to provide us with complete information
that we specifically requested as a failure to cooperate to the best of
its ability within the meaning of section 776(b) of the Act.
Accordingly, for these unreported sales, we used the highest margin
calculated for any individual product (see Calculation Memorandum dated
September 24, 1997).
Comment 18: S&J Unaudited Financial Statements
Petitioner argues that the absence of audited financial statements
means that S&J's financial information is not reliable. Petitioner
argues that the reliance on the accounting system used for the
preparation of the audited financial system is a vital part of the
Department's determination that the company's sales and constructed
value
[[Page 51437]]
data are credible. Therefore, the Department should rely on adverse
facts available for S&J.
DOC Position
At verification we were able to reconcile S&J unaudited financial
statements to its 1996 tax return (see S&J Cost Verification Report
(July 23, 1997)). Therefore, because we were able to tie S&J's
financial statements to an independent outside source, we have
determined that there is no evidence on the record to indicate the
information on the financial statements is unreliable. See Mexican
Flowers, 60 FR at 49569.
Comment 19: Non-Mandatory Respondents
Petitioner suggests that the Department calculate a margin for non-
mandatory respondents using the results of each of the four mandatory
respondents, except those with zero dumping margins.
DOC Position
Non-mandatory respondents will be subject to the ``all others''
deposit rate, which we have calculated based on the weighted average of
margins calculated for mandatory respondents--excluding zero and de
minimis margins. (see March 13, 1997, Decision Memo)
Comment 20: Critical Circumstances
Petitioner argues that the Department should find that critical
circumstances exist with respect to K. Ticho. Petitioner contends that
a timely allegation of critical circumstances was made in the petition
and that K. Ticho failed to respond to the Department's questionnaire.
Therefore, as facts available, the Department should determine that
critical circumstances exist with respect to K. Ticho.
DOC Position
We agree with petitioner. Because K. Ticho failed to respond to the
Department's questionnaire, we have used the facts available as the
basis for determining whether critical circumstances exist. The facts
available margin (40.28%) exceeds the threshold for imputing knowledge
of dumping to the importers of the merchandise. In addition, we have
adversely inferred, as the facts available, a massive increase in
imports from K. Ticho. We, therefore, determine that critical
circumstances exist for K. Ticho, and will issue appropriate
instructions to the Customs service.
We also determine that critical circumstances exist for Romp. As
with K. Ticho, the final dumping margin for Romp exceeds 15%, the
minimum benchmark established sales to impute importer knowledge of
dumping and resultant injury. Also, because we have determined that the
reported quantity and value of POI sales are unreliable, we are also
adversely inferring, as facts available, a massive increase in imports
from Romp.
Continuation of Suspension of Liquidation
In accordance with section 733(d)(1) and 735(c)(4)(B) of the Act,
we are directing the Customs Service to continue to suspend liquidation
of all entries of CR nails from Taiwan, that are entered, or withdrawn
from warehouse, for consumption on or after May 12, 1997 (the date of
publication of the preliminary determination in the Federal Register),
except as noted below. With respect to entries of CR nails from Taiwan,
manufactured and exported by K. Ticho or Romp in accordance with
section 735(c) of the Act, we are directing Customs Service to continue
suspension of liquidation on all entries that are entered, or withdrawn
from warehouse, for consumption on or after February 10, 1997, which is
90 days prior to the date of publication of the preliminary
determination. The Customs Service shall continue to require a cash
deposit or posting of a bond equal to the estimated amount by which the
normal value exceeds the export price as shown below.
In accordance with section 735(a)(4) of the Act, because we have
calculated zero or de minimis rates for Unicatch, and Lei Chu, we will
instruct Customs to terminate suspension of liquidation of entries of
CR nails manufactured by these companies and to liquidate such entries
without regard to antidumping duties. We note that pursuant to 19 CFR
353.21, these companies will be excluded from any antidumping order
resulting from an affirmative finding of material injury by the
International Trade Commission. These suspension of liquidation
instructions will remain in effect until further notice.
The weighted-average dumping margins are as follows:
------------------------------------------------------------------------
Critical
Manufacturer/producer/exporter Margin percentage circumstances
------------------------------------------------------------------------
Unicatch......................... 0.00 No.
Lei Chu.......................... 0.07 (De Minimis) No.
S&J.............................. 5.36 No.
Romp............................. 40.28 Yes.
K. Ticho......................... 40.28 Yes.
All Others....................... 5.36 No.
------------------------------------------------------------------------
Pursuant to section 733(d)(1)(A) and section 735(c)(5) of the Act,
the Department has not included zero or de minimis weighted-average
dumping margins, or margins determined entirely under section 776 of
the Act, in the calculation of the ``all others'' rate.
ITC Notification
In accordance with section 735(d) of the Act, we have notified the
International Trade Commission (``ITC'') of our determination. As our
final determination is affirmative, the ITC will, within 45 days,
determine whether these imports are materially injuring, or threaten
material injury to, the U.S. industry. If the ITC determines that
material injury, or threat of material injury does not exist, the
proceeding will be terminated and all securities posted will be
refunded or canceled. If the ITC determines that such injury does
exist, the Department will issue an antidumping duty order directing
Customs officials to assess antidumping duties on all imports of the
subject merchandise entered for consumption on or after the effective
date of the suspension of liquidation.
This determination is published pursuant to section 735(d) of the
Act.
Dated: September 24, 1997.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 97-26045 Filed 9-30-97; 8:45 am]
BILLING CODE 3510-DS-P