[Federal Register Volume 62, Number 226 (Monday, November 24, 1997)]
[Notices]
[Pages 62547-62559]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-30834]
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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 February 13, 1997, 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 (62 FR 6758). This review covers Heveafil
Sdn. Bhd. (``Heveafil''), Rubberflex Sdn. Bhd. (``Rubberflex''), Filati
Lastex Elastofibre (Malaysia) (``Filati''), Rubfil Sdn. Bhd.
(``Rubfil'') and Rubber Thread International (Rubber Thread)
(collectively ``respondents''), manufacturers/exporters of the subject
merchandise to the United States. The period of review (POR) is October
1, 1993 through September 30, 1994. We gave interested parties an
opportunity to comment on our preliminary results.
[[Page 62548]]
Petitioner and respondents submitted case briefs on March 10, 1997 and
rebuttal briefs on March 17, 1997. No hearing was conducted in this
review. 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: November 24, 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 and to the
Department's regulations are in reference to the provisions as they
existed on December 31, 1994. We are conducting this administrative
review in accordance with section 751(a) of the Tariff Act of 1930, as
amended (the Act).
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. In October 1994, the petitioner, North American
Rubber Thread, and the following respondents requested the Department
to conduct an antidumping administrative review covering the period
October 1, 1993 through September 30, 1994: Heveafil Sdn. Bhd.
(``Heveafil''), Rubberflex Sdn. Bhd. (``Rubberflex''), Filati Lastex
Elastofibre (Malaysia) (``Filati''), and Rubfil Sdn. Bhd (``Rubfil'').
In addition, petitioner requested a review of Rubber Thread
International (Rubber Thread). On November 14, 1994, we published a
notice of initiation of an administrative review of this order for the
period October 1, 1993, through September 30, 1994 (59 FR 56459). We
conducted a verification 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 February 13, 1997 (62 FR
6758). Petitioner, Heveafil, Filati, Rubfil and Rubberflex filed case
briefs on March 10, 1997 and rebuttal briefs on March 17, 1997. Rubber
Thread reported that it made no shipments of the subject merchandise
during the POR. 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).
Best Information Available (BIA) for Rubberflex
We found that responses provided by Rubberflex could not be
verified within the meaning of section 776(b) of the Act. For a
significant portion of the cost and expense items reviewed at
verification, the information provided in the questionnaire responses
was inaccurate or could not be verified. This includes, but is not
limited to, information on 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 responses 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 responses at verification and thus failed verification.
As discussed in comments 1 through 27 below, we carefully reviewed
Rubberflex's arguments in light of the February 14, 1997 verification
report (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, and as
in the preliminary results of review, we find that, pursuant to section
776(b) of the Act, the errors and problems found at verification render
Rubberflex's questionnaire responses unusable for purposes of
calculating a margin.
Section 776(b) of the Act requires the Department to use the best
information available (BIA) if it is unable to verify the accuracy of
the information submitted. In deciding what to use as BIA, the
Department's regulations provide that the Department may take into
account whether a party refuses to provide requested information. See
19 CFR 353.37(b). Thus, the Department may determine the appropriate
BIA on a case-by-case basis.
In cases where we have determined to use total BIA, we apply a two
tier methodology of BIA depending on whether the companies attempted to
or refused to cooperate in these reviews. See 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). When a
company refuses to provide the information requested in the form
required, or otherwise significantly impedes the Department's
proceedings, we assign that company first-tier BIA, which is the higher
of: (1) The highest of the rates found for any firm for the same class
or kind of merchandise in the same country of origin in the less-than-
fair-value (LTFV) investigation or a prior administrative review; or
(2) the highest calculated rate found in this review for any firm for
the same class or kind of merchandise in the same country of origin.
When a company substantially cooperates with our requests for
information including, in some cases, verification, but failed to
provide complete or accurate information, we assign that company
second-tier BIA, which is the higher of: (1) The highest rate
(including the ``all others'' rate) ever applicable to the firm for the
same class or kind of merchandise from either the LTFV investigation or
a prior administrative review or, if the firm has never before been
investigated or reviewed, the all others rate from the LTFV
investigation; or (2) the highest
[[Page 62549]]
calculated rate for any firm in this review for the class or kind of
merchandise from the same country of origin. See Allied-Signal
Aerospace Co. v. United States, 996 F.2d 1185 (Fed. Cir. 1993).
We applied second-tier BIA to Rubberflex. While Rubberflex
cooperated throughout the administrative review by submitting
questionnaire responses and submitting to verification, we found that
responses provided by Rubberflex could not be verified. Accordingly, we
resorted to BIA pursuant to section 776(b) of the Act. The deficiencies
are outlined in detail in the preliminary results of review and in the
public version of the memorandum on Rubberflex's Failed Verification
from Holly Kuga to Jeffrey P. Bialos, dated December 12, 1996.
In this case, the BIA rate is the highest calculated rate for any
firm in this review for the class or kind of merchandise from the same
country of origin. Thus, as a result of our review, we determined the
dumping margin for Rubberflex to be 29.83 percent.
Comments Concerning Rubberflex
Rubberflex argues that the Department was not justified in
disregarding its responses and assigning a total BIA rate in the
preliminary results. Rubberflex contends that the Department verified
Rubberflex's questionnaire responses, and that, at most, the Department
should use partial BIA 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 November
12, 1997.
Comment 1: Reconciliation of Sales, Profit and Expenses. Rubberflex
maintains that it provided the Department with a reconciliation of its
calendar year 1993 and 1994 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 the
total value of the expenses reported on the trial balance to its
audited financial statements for the above-mentioned figures. We
disagree that this had any bearing on the verification of the amounts
reported in the questionnaire response. This reconciliation was not
what was requested of the company at verification. Rubberflex
voluntarily provided the reconciliation of sales, cost and profit from
the trial balance to the audited financial statement in response to the
Department's request that it demonstrate that the indirect selling
expenses figures provided 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 Rubberflex'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: Italian Sales List. Rubberflex states that the
Department verified that all Italian sales were reported. Moreover,
Rubberflex contends that the Department noted no discrepancies when
Rubberflex tied Italian sales to its 1993/94 audited financial
statements and other ledger balance accounts. Rubberflex claims that
the sales prices and quantity for all third-country sales reviewed by
the Department tied to source documents presented by Rubberflex, except
for one minor discrepancy in the quantity reported in the sales list.
DOC Position: The Department did not note any discrepancies in its
verification report with respect to the volume and value of sales to
Italy. However, we did not verify the price of Italian back-to-back
sales or inventory sales, since the proof of payment information is
kept in Italy.
Comment 4: Foreign Inland Freight, and Brokerage and Handling.
Rubberflex contends that these expenses were reported on a transaction-
specific basis, and charged on a flat-rate based on the size of the
container or the bill of lading. Although Rubberflex was unable to
present original invoices for these expenses, or proof of payment on
two preselected sales, Rubberflex contends that it was able to
demonstrate that the flat fee allocated according to the actual
quantity shipped tied to amounts reported in its response.
DOC Position: We agree that Rubberflex was unable to present
original invoices for these expenses, or proof of payment on two
preselected sales. In addition, our December 12, 1996 memorandum
Rubberflex Sdn. Bhd.: Reasons for a determination of failed
verification for the 1993-1994 and 1994-1995 reviews of extruded rubber
thread from Malaysia (A-557-805) (December 12, 1996 memorandum) states
that, Rubberflex was missing a number of freight invoices and/or the
batch statements tying the invoices to the financial statements, and as
a result, [we] could not document freight expenses from the factory to
the port. Therefore, we disagree that Rubberflex was able to
demonstrate that the flat fee allocated according to the actual
quantity shipped tied to amounts reported in its response.
Comment 5: Ocean Freight. Rubberflex claims that the Department
verified ocean freight on sales to Italy on a transaction-specific
basis, and found no discrepancies in the information presented with
respect to pre-selected sales.
DOC Position: We agree with Rubberflex's characterization of the
verification of ocean freight.
Comment 6: Credit Expenses in the Home Market. Rubberflex states
that its original response contained the
[[Page 62550]]
information needed to calculate credit expenses for third-country sales
and that this response was neither revised nor found to contain any
significant errors during verification.
DOC Position: Our verification report notes that Rubberflex
reported the appropriate expenses for its net interest expense in the
cost response, but omitted certain expenses related to export credit
refinancing (EAR) expenses from its calculation of the interest rate
used in home market sales. Therefore, we disagree with Rubberflex's
contention that credit expenses for third-country sales were verified
as reported.
Comment 7: Packing Expenses Incurred in the Home Market. 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
expenses. 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 sales
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 8: Indirect Selling Expenses Incurred in the Home Market.
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 Best Information 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 9: U.S. Sales Listing. Rubberflex contends that it
demonstrated at the verification in Malaysia that (1) all purchase
price (PP) sales entered into the United States during the review
period were reported; (2) it accurately reported the date of sale for
PP 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
verification of the U.S. sales. 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. At verification in Malaysia, and in the
questionnaire response, the date of sale for all PP sales was
identified as the Malaysian bill of lading date. However, in the United
States, company officials stated that for certain consignment sales,
which were made prior to importation, 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 10: The Total Volume and Value of PP and Exporter's Sales
Price (ESP) 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 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 PP and ESP sales; (3) the date of
sale for certain PP sales was misreported; and (4) Rubberflex could not
reconcile its
[[Page 62551]]
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 11: Date of Sale Methodology for U.S. Sales. 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 terms of sale sometimes changed between purchase order and the bill
of lading date; thus the essential terms were not set on the purchase
order date. It notes that the reporting methodology for this review is
consistent with the methodology used in both the original investigation
and the prior reviews. Rubberflex contends that the verifiers confirmed
that no entries had been improperly omitted in the beginning of the
1993-1994 period of review.
DOC Position: We disagree that Rubberflex reported all of its sales
to the United States that were required by the questionnaire. Page 33
of our questionnaire asked Rubberflex to report all purchase price
sales that caused the entry of the subject merchandise during the
period of review, regardless of whether the sale date occurred during
the period of review, or prior to the period of review. Rubberflex
claimed at verification both in Malaysia and in the United States that
the terms of the sale, that is, the price and quantity of the sale,
were fixed on the purchase order date, and that the purchase order was
required either to initiate production or shipment. The verification
points to few, if any, changes in the terms of the sale after the
purchase order date. Therefore, by using the Malaysian bill of lading
date as date of sale for PP sales, and by reporting only those sales
that were shipped from Malaysia during the period of review, rather
than all purchase price sales that caused the entry of the subject
merchandise during the review period, (which it had the ability to
report) Rubberflex failed to report all the sales required by the
Department's questionnaire. In addition, at verification, Rubberflex
claimed that all consignment sales that entered the U.S. during the
review period, but were withdrawn from Rubberflex's customer's
inventory after the review period, should have been reported during the
subsequent (1994-1995) review period using the U.S. invoice date as the
date of sale. This date of sale methodology does not agree either with
what was reported in the response, or what was requested in the
Department's questionnaire.
Comment 12: 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 BIA. 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 (PP or ESP). We asked
Rubberflex to properly classify 37 of the approximately 125 PP 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 period. 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 13: ESP and PP Sales. Rubberflex disputes the Department's
determination that it misreported or duplicated the reporting of
certain sales (i.e., certain sales classified as both ESP and PP).
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. classifications
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 that Rubberflex confused the standard for when
sales are PP versus ESP. 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 ESP 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. Pages 27 and 28 of the
verification report note that company officials were confused about the
classification of Rubberflex's U.S. sales with respect to ESP and PP
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 PP or ESP
sales.
Comment 14: 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
[[Page 62552]]
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 computer sales listing. First, Rubberflex failed to have
its reconciliation (via the mechanism of credit memos) of the PP sales
value from the financial statements to the response prepared at the
beginning of the verification. Second, Rubberflex initially failed to
report all of its credit memos with respect to ESP 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 response since
Rubberflex company officials in Malaysia prepared that portion of the
response.
Comment 15: U.S. Inland Freight. Rubberflex claims that it tied its
U.S. average freight expense to its financial statements for a sample
month, except for a small amount due to accruals.
DOC Position: We agree with Rubberflex's characterization of the
U.S. inland freight verification.
Comment 16: Inventory Carrying Costs. Rubberflex contends that it
established the accuracy of all of the figures used to calculate
inventory carrying costs in the United States: the cost of goods sold
in the U.S. and time on the water.
DOC Position: We were unable to examine Rubberflex's inventory
turnover rates and U.S. interest rates during verification and,
therefore, disagree with Rubberflex's contention that we established
the accuracy of all the figures necessary to calculate inventory
carrying costs in the United States. We agree that we found no
discrepancies in the verification of the cost of goods sold in the
United States and time on the water, which are the two other figures
required to verify the inventory carrying costs.
Comment 17: 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, financing expenses and the 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, rendering 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 costs 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 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 concerning the provision of a revised
computer tape. Moreover, 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 18: 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
[[Page 62553]]
company. Rubberflex claims that it demonstrated the identity 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 in 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 impedes the Department's
ability to confirm the accuracy of the questionnaire response or forces
the Department to use information most beneficial to them.
Comment 19: Direct Material Costs. Rubberflex claims that the
Department verified the direct material costs used in its COP and 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
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 actual material prices paid by
Rubberflex during the POR have changed relative to the 1991 standard
prices that were used as the basis for the company's standard costs and
variance allocation. As the verification report on page 17 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. In several instances the changes were substantial.
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. Thus, by neglecting to update
its standard material prices to reflect changes in the actual cost of
materials, Rubberflex failed to accurately capture the per-unit
materials cost for the subject merchandise, both in terms of its
standard cost and for its variance allocation.
Comment 20: 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 17. 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 reflected merely a reclassification of certain labor
costs. 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 that
Rubberflex failed to account for.
A second problem arose during the verification of labor expenses.
As we explain on page 15 of our verification report, Rubberflex failed
to provide
[[Page 62554]]
supporting documentation for managerial labor expenses, 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 21: 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 reveals 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 17.
Comment 22: 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 factory was included in fixed overhead cost, rather
than being allocated among direct labor 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 exist 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 17.
Comment 23: 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. Pages 18 and 19 of the
verification report note 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 24: 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 17. 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 totals 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
[[Page 62555]]
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 25: 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 17 and pages
20 and 21 of the verification report.
Comment 26: 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 BIA in the preliminary results. According to
Rubberflex, these procedural errors were due to the 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 1994-1995 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
reviews. 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 BIA rate for Rubberflex's antidumping
margin. (See Best Information Available for Rubberflex section above.)
Comment 27: Partial BIA. Because of the arguments presented,
Rubberflex claims that the application of a total BIA 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 were
disclosed at the commencement of verification should not provide the
legal basis for the Department to disregard its entire response and
resort to BIA. Rubberflex cites to prior Departmental determinations in
which the Department states that it will resort to BIA only for those
specific items of the response that it was not able to verify. See
Notice of Preliminary Results of Antidumping Duty Review; Roller Chain,
Other Than Bicycle, From Japan, 61 FR 28171, (June 4, 1996); Final
Results of Antidumping Duty Review and Revocation in Part of
Antidumping Duty Order on Tapered Roller Bearings and Parts Thereof,
Finished and Unfinished from the People's Republic of China, 62 FR
6189, (February 11, 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 Rubberflex's claims that the Department was able to
verify its responses, Rubberflex argues that the Department does not
have legal grounds to use total BIA.
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 BIA rate. Petitioner cites to the Department's Analysis
Memorandum of December 12, 1996 and the 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 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
[[Page 62556]]
commencement of verification regarding certain errors in its
submissions 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 Best Information Available for Rubberflex section of this
notice.
Comments Concerning Other Respondents
Comment 28: ESP versus PP Sales. The petitioner alleges that
Heveafil's back-to-back sales are ESP, and not PP 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 24, 1995
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.
Petitioner further contends that the Department has found that
sales made under circumstances like those made by Heveafil and Filati
are ESP 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 ESP 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: (1) The U.S.
subsidiary was the importer of record and took title to the
merchandise; (2) the U.S. subsidiary financed the relevant sales
transactions; (3) 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 PP 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 administrative review.
Specifically, respondents argue that back-to-back sales must
continue to be treated as purchase price sales, in accordance with the
Department's practice for determining indirect PP/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 that would warrant altering
the treatment of these sales, the Department must not depart from its
position in 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) the
subject merchandise was shipped directly to the unrelated customer
without entering the inventory of the related selling agent; (3) direct
shipment to the unrelated buyer was the customary commercial channel
for sales of this merchandise between the parties involved; and, (4)
the related selling agent in the United States acted only as a
processor of sales-related documentation and a communication link with
the unrelated U.S. buyers. For the sales made prior to importation,
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 PP sales. Each company explained in its
questionnaire response that the back-to-back sales were made prior to
importation, and shipped directly to the unrelated buyer without ever
entering a branch office warehouse. They noted that the branch office
served only as a processor of sales related documents. Section 772(b)
of the Act states that: The term `purchase price' means the price at
which merchandise is purchased, or agreed to be purchased, prior to the
date of importation, from a reseller or the manufacturer or producer of
the merchandise, for exportation to the United States. Heveafil's and
Filati's back-to-back sales fall within the criteria for purchase price
sales set forth in section 772(b) of the Act. Since 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 PP sales, we are not
making any changes to our calculations.
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(d)(1)(D) 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
foreign market value (FMV) has been based on CV. Respondents note that
the Department has declined to make adjustments when FMV is based on
CV, 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 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, 60 FR 55272 (October 25, 1996).
Therefore, in accordance with section 772(d)(1)(D) of the Act, we
increase U.S. price by the amount of any
[[Page 62557]]
countervailing duty imposed on the merchandise * * * to offset an
export subsidy. The two most recently completed CVD reviews, Extruded
Rubber Thread from Malaysia; Final Results of Countervailing Duty
Administrative Review, 61 FR 55272 (October 25, 1996) for calendar year
1993 and Extruded Rubber Thread from Malaysia; Final Results of
Countervailing Duty Administrative Review, 60 FR 51982 (October 4,1995)
covering calendar year 1994, apply to this review. The calendar year
1993 CVD review found country-wide ad valorem net subsidies of 1% for
all companies, of which 0.28% consisted of export subsidies. Since this
total net subsidy rate is not de minimis within the meaning of 19 CFR
355.7 (section 355.7 of the Department's regulations), countervailing
duties will be imposed and we must increase U.S. price by the amount of
any countervailing duty imposed on the merchandise * * * to offset an
export subsidy. In the CVD review covering calendar year 1994, we found
company-specific ad valorem net subsidies of 0.23% for Heveafil, 0.19%
for Rubberflex, 0.38% for Rubfil and 1.39% for Filati (of which 0.15%
constituted export subsidies). These net subsidy rates, with the
exception of Filati's, are de minimis within the meaning of section
355.7 of the Department's regulations, and thus, duties will not be
imposed within the meaning of section 772(d)(1)(D) of the Act. Since
Filati's rate during both of these two CVD review periods was not de
minimis within the meaning of section 355.7 of the Department's
regulations, we therefore increased U.S. price in the antidumping duty
calculation for Filati by the amount of the countervailing duty imposed
on the subject merchandise to offset the export subsidies. The amount
of duty imposed to offset export subsidies is 0.28% for the period
October 1, 1993 through December 31, 1993, and 0.15% for the period
January 1, 1994 though September 30, 1994. We made no adjustments for
Rubberflex since we used BIA to determine the margin.
However, we do not increase U.S. price under section 772(d)(1)(D)
of the Act when, like the U.S. price, the foreign market value already
reflects the benefit of the export subsidies, such as in the case of
Heveafil and Rubfil. See, e.g., Notice of Final Determination of Sales
at Less Than Fair Value: Certain Carbon Steel Butt-Weld Pipe Fittings
from India, 60 FR 10545, 10550 (February 27, 1996). FMV for both Rubfil
and Heveafil was based on third-country sales and CV in this review.
With respect to exports to third-country markets, respondents receive
the same benefits from export subsidies as with exports to the United
States. Therefore, the benefits from the export subsidies were
reflected in both the U.S. price and the FMV and no adjustment was made
to U.S. price. For those sales where CV was used as the basis for FMV,
we used third-country SG&A expenses, as well as third-country profit in
determining CV for both companies. Since third-country SG&A and profit
reflect the benefits from the export subsidies, we have similarly made
no adjustment to U.S. price for the benefits from export subsidies.
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 added to U.S. price in accordance with section
772(d)(1)(C) of the Act. Alternatively, Filati proposes that the
Department treat TAXH as a difference in circumstances of sale, and
make a downward adjustment to FMV, in accordance with section
773(a)(4)(B) of the Act.
Petitioner disputes Filati'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 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
within the meaning of section 772(d)(1)(C). Filati's April 24, 1995
questionnaire response identifies the expense reported in the TAXH
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
merchandise is exported. Consequently, contrary to the Filati's
characterization of the expense, the expenses recorded in the TAXH
columns represent a duty, and not a tax. Filati explains that it
includes the amount of this duty in its home market price and passes it
on to its 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(d)(1)(B) of the Act,
rather than an uncollected tax within the meaning of section
772(d)(1)(C) of the Act. Consequently, pursuant to section 772(d)(1)(B)
of the Act, we have revised our calculations by adding the amount of
the uncollected duty to the U.S. price.
Comment 31: Assessment for Filati with Respect to Re-exports of
Covered Merchandise. Filati notes that the Department determined a rate
of 0.00% for the preliminary results of review. It claims that, should
the Department determine a margin for the final results of review, it
should take Filati's re-exports of covered merchandise into account
when determining the assessment rate. 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 rate to entries in the POR) as modified by the ``per-unit''
methodology used in the Department's August 31, 1992 memorandum to
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
[[Page 62558]]
Japanese Companies which had an 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 by dividing PUDD by the
entered value of sales and then multiplying the result by the value of
entries minus the value of re-exports divided by the value of entries
(PUDD/entered value of sales* (value of entries-value of re-exports)/
value of entries).
DOC Position: We have recalculated the margin for Filati and found
that none of the sales were made at prices that incurred a margin.
Therefore, the cash deposit rate and the assessment rate is zero and
this issue is moot.
Comment 32: 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
profitable and unprofitable sales for the profit figure in the CV
calculation. Petitioner argues that only profit on profitable sales
should be used in the calculation.
Respondents dispute petitioner's contention, arguing that the
Department calculates profit for CV 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 respondents. Section 773(e)(1)(B)(ii)
of the Act states that the amount of profit in the constructed value of
the imported merchandise shall not be less than 8 percent of the sum of
such general expenses and cost. The Act does not require the Department
to use only above cost sales in its calculation of profit for CV. This
position has been upheld in the court cases mentioned above. Therefore,
we have made no change to our calculations.
Comment 33: 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 criterion 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 criterion. 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 case.
Comment 34: 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 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 disagree. Heveafil reported more than one per-unit
cost of production for certain products in the 1994-1995 review, but
did not have this data problem in the 1993-1994 review. Therefore, we
have made no change to our calculation.
Comment 35: Rebates in the Calculation of a Home Market Price for
comparison to COP. Petitioner asserts that the Department failed to
deduct Heveafil's rebates from home market prices prior to conducting
the sales below cost test.
DOC Position: As indicated on lines 76 and 97 of the third-country
sales program issued in the preliminary results of review, we have
taken rebates and discounts into account in our determination of the
appropriate third-country price to be compared with the cost of
production in our cost test. Therefore, we have made no change to our
calculation.
Comment 36: 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 BIA, the highest unit U.S. marine insurance cost of U.S. sales
by Rubfil.
Rubfil responds that in its April 27, 1995 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.
DOC Position: In its December 19, 1996 Analysis Memorandum for the
Preliminary Results of Review 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, 1993 through September 30, 1994:
------------------------------------------------------------------------
Percent
Manufacturer/exporter margin
------------------------------------------------------------------------
Heveafil Sdn. Bhd............................................ 0.36
Rubberflex Sdn. Bhd.......................................... 29.83
Rubfil Sdn. Bhd.............................................. 29.83
Filati Lastex Elastofibre (Malaysia)......................... 0.00
[[Page 62559]]
Rubber Thread International.................................. (**)
------------------------------------------------------------------------
** There were no shipments or sales of covered merchandise that were
subject to this review. The company was not investigated/reviewed for
earlier periods.
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. Since
the final results for the more current review period, October 1, 1994
through September 30, 1995 were published on June 20, 1997, the cash
deposit instructions contained in that notice will apply to all
shipments to the United States of subject merchandise entered, or
withdrawn from warehouse, for consumption on or after June 20, 1997.
The dumping margins established for the October 1, 1993 through
September 30, 1994 period will have no effect on the cash deposit rate
for any firm.
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: November 12, 1997.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 97-30834 Filed 11-21-97; 8:45 am]
BILLING CODE 3510-DS-P