[Federal Register Volume 63, Number 50 (Monday, March 16, 1998)]
[Notices]
[Pages 12752-12764]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-6715]
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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 November 7, 1997, the Department of Commerce published in
the Federal Register the preliminary results of the administrative
review of the antidumping duty order on extruded rubber thread from
Malaysia. This review covers four manufacturers/exporters of the
subject merchandise to the United States (Filati Lastex Elastofibre
(Malaysia), Heveafil Sdn. Bhd./Filmax Sdn. Bhd, Rubberflex Sdn. Bhd.,
and Rubfil Sdn. Bhd.). The period of review is October 1, 1995, through
September 30, 1996.
We gave interested parties an opportunity to comment on our
preliminary results. 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: March 16, 1998.
FOR FURTHER INFORMATION CONTACT: Shawn Thompson or Fabian Rivelis, AD/
CVD Enforcement Group II, Office 5, Import Administration,
International Trade Administration, U.S. Department of Commerce, 14th
Street and Constitution Avenue, NW, Washington, DC 20230; telephone
(202) 482-1776 or (202) 482-3853, respectively.
SUPPLEMENTARY INFORMATION:
Background
On November 7, 1997, the Department of Commerce (the Department)
published in the Federal Register its preliminary results of the 1995-
1996 administrative review of the antidumping duty order on extruded
rubber thread from Malaysia (62 FR 60221). The Department has now
completed this administrative review, in accordance with section 751(a)
of the Tariff Act of 1930, as amended (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 classifiable under subheading
4007.00.00 of the Harmonized Tariff Schedule of the United States
(HTSUS). The HTSUS subheadings are provided for convenience and customs
purposes. The written description of the scope of this review is
dispositive.
Applicable Statute and Regulations
Unless otherwise indicated, all citations to the Act are references
to the provisions effective January 1, 1995, the effective date of the
amendments made to the Act by the Uruguay Round Agreements Act (URAA).
In addition, unless otherwise indicated, all citations to the
Department's regulations are to the regulations codified at 19 CFR Part
353 (April 1, 1997).
Facts Available
A. Heveafil Sdn. Bhd./Filmax Sdn. Bhd. (Heveafil)
In accordance with section 776(a)(2) of the Act, we determine that
the use of facts available is appropriate as the basis for Heveafil's
dumping margin because the Department could not verify the information
provided by Heveafil, as required under section 782(i) of the Act,
despite the Department's attempts to do so.
Specifically, we were unable to verify the cost of production (COP)
and constructed value (CV) information provided by Heveafil because we
discovered at verification that the company had destroyed the source
documents upon which a large portion of its response was based. The
destruction of these source documents raises particular concern, as
Heveafil should have been aware of the necessity of retaining these
documents based
[[Page 12753]]
upon its participation in prior segments of this proceeding. Moreover,
there were significant delays in the verification process itself,
caused by company difficulties in locating documents and the inability
of company officials to link information in the questionnaire response
to the accounting system. Our findings at verification are outlined in
detail in the public version of the cost verification report from Shawn
Thompson and Irina Itkin to Louis Apple, dated October 17, 1997
(Heveafil cost verification report).
Section 776(b) of the Act provides that adverse inferences may be
used with respect to a party that has failed to cooperate to the best
of its ability. See Statement of Administrative Action accompanying the
URAA, H.R. Rep. No. 316, 103rd Cong., 2d Sess. 870 (SAA). Because we
were unable to verify the information submitted by Heveafil in this
period of review (POR) and because the company failed to adequately
prepare and provide information during the verification, we determine
that Heveafil did not cooperate to the best of its ability. Thus,
pursuant to section 776(b) of the Act, we are basing Heveafil's margin
on adverse facts available for purposes of the final results.
As adverse facts available for Heveafil, we have used the highest
rate calculated for any respondent in any segment of this proceeding.
This rate is 54.31 percent. For further discussion, see Comment 16 in
the ``Analysis of Comments Received'' section of this notice.
B. Rubfil Sdn. Bhd. (Rubfil)
In accordance with section 776(a)(2)(A) of the Act, we also
determine that the use of facts available is appropriate as the basis
for Rubfil's dumping margin. Specifically, Rubfil failed to respond to
the Department's questionnaire, issued in December 1996. Because Rubfil
did not respond to the Department's questionnaire, we must use facts
otherwise available to calculate Rubfil's dumping margin.
Section 776(b) of the Act provides that adverse inferences may be
used with respect to a party that has failed to cooperate by not acting
to the best of its ability to comply with requests for information. The
failure of Rubfil to reply to the Department's questionnaire
demonstrates that it has failed to act to the best of its ability in
this review and, therefore, an adverse inference is warranted.
As adverse facts available for Rubfil, we have used the highest
rate calculated for any respondent in any segment of this proceeding.
This rate is 54.31 percent.
C. Corroboration of Secondary Information
As facts available in this case, the Department has used
information derived from a prior administrative review, which
constitutes secondary information within the meaning of the SAA. See
SAA at 870. Section 776(c) of the Act provides that the Department
shall, to the extent practicable, corroborate secondary information
from independent sources reasonably at its disposal. The SAA provides
that ``corroborate'' means that the Department will satisfy itself that
the secondary information to be used has probative value. See SAA, H.R.
Doc. 316, Vol. 1, 103rd Cong., 2d sess. 870 (1994).
To corroborate secondary information, the Department will, to the
extent practicable, examine the reliability and relevance of the
information to be used. However, unlike for other types of information,
such as input costs or selling expenses, there are no independent
sources for calculated dumping margins. Thus, in an administrative
review, if the Department chooses as total adverse facts available a
calculated dumping margin from the same or a prior segment of this
proceeding, it is not necessary to question the reliability of the
margin for that time period. With respect to the relevance aspect of
corroboration, however, the Department will consider information
reasonably at its disposal as to whether there are circumstances that
would render a margin not relevant. Where circumstances indicate that
the selected margin may not be appropriate, the Department will attempt
to find a more appropriate basis for facts available. See, e.g., Fresh
Cut Flowers from Mexico; Final Results of Antidumping Duty
Administrative Review, 61 FR 6812, 6814 (February 22, 1996) (Fresh Cut
Flowers) (where the Department disregarded the highest margin as
adverse best information available because the margin was based on
another company's uncharacteristic business expense resulting in an
unusually high margin).
For both Heveafil and Rubfil, we examined the rate applicable to
extruded rubber thread from Malaysia throughout the course of the
proceeding. With regard to its probative value, the rate specified
above is reliable and relevant because it is a calculated rate from the
1994-1995 administrative review. There is no information on the record
that demonstrates that the rate selected is not an appropriate total
adverse facts available rate for Heveafil and Rubfil. Thus, the
Department considers this rate to be appropriate adverse facts
available.
Normal Value Comparisons
To determine whether sales of extruded rubber thread from Malaysia
to the United States were made at less than normal value (NV), we
compared the constructed export price (CEP) to the NV for Filati Lastex
Elastofibre (Malaysia) (Filati) and Rubberflex Sdn. Bhd. (Rubberflex),
as specified in the ``Constructed Export Price'' and ``Normal Value''
sections of this notice.
On January 8, 1998, the Court of Appeals for the Federal Circuit
issued a decision in CEMEX v. United States, 1998 WL 3626 (Fed Cir.).
In that case, based on the pre-URAA version of the Act, the Court
discussed the appropriateness of using CV as the basis for foreign
market value when the Department finds home market sales to be outside
the ``ordinary course of trade.'' This issue was not raised by any
party in this proceeding. However, the URAA amended the definition of
sales outside the ``ordinary course of trade'' to include sales below
cost. See section 771(15) of the Act. Consequently, the Department has
reconsidered its practice in accordance with this court decision and
has determined that it would be inappropriate to resort directly to CV
as the basis for NV, in lieu of foreign market sales, if the Department
finds foreign market sales of merchandise identical or most similar to
that sold in the United States to be outside the ``ordinary course of
trade.'' Instead, the Department will use sales of similar merchandise,
if such sales exist. The Department will use CV as the basis for NV
only when there are no above-cost sales that are otherwise suitable for
comparison. Therefore, in this proceeding, when making comparisons in
accordance with section 771(16) of the Act, we considered all products
sold in the home market as described in the ``Scope of the Review''
section of this notice, above, that were in the ordinary course of
trade for purposes of determining appropriate product comparisons to
U.S. sales. Where there were no sales of identical merchandise in the
home market made in the ordinary course of trade to compare to U.S.
sales, we compared U.S. sales to sales of the most similar foreign like
product made in the ordinary course of trade, based on the
characteristics listed in sections B and C of our antidumping
questionnaire.
[[Page 12754]]
Level of Trade and CEP Offset
In accordance with section 773(a)(1)(B) of the Act, to the extent
practicable, we determine NV based on sales in the comparison market at
the same level of trade as export price (EP) or CEP. The NV level of
trade is that of the starting-price sales in the comparison market or,
when NV is based on CV, that of the sales from which we derive selling,
general and administrative expenses (SG&A) and profit. For EP, the U.S.
level of trade is also the level of the starting-price sale, which is
usually from the exporter to importer. For CEP, it is the level of the
constructed sale from the exporter to the importer.
To determine whether NV sales are at a different level of trade
than EP or CEP sales, we examine stages in the marketing process and
selling functions along the chain of distribution between the producer
and the unaffiliated customer. If the comparison-market sales are at a
different level of trade and the difference affects price
comparability, as manifested in a pattern of consistent price
differences between the sales on which NV is based and comparison-
market sales at the level of trade of the export transaction, we make a
level-of-trade adjustment under section 773(a)(7)(A) of the Act.
Finally, for CEP sales, if the NV level is more remote from the factory
than the CEP level and there is no basis for determining whether the
difference in the levels between NV and CEP affects price
comparability, we adjust NV under section 773(a)(7)(B) of the Act (the
CEP offset provision). See Notice of Final Determination of Sales at
Less Than Fair Value: Certain Cut-to-Length Carbon Steel Plate from
South Africa, 62 FR 61731 (Nov. 19, 1997).
Both Filati and Rubberflex claimed that they made home market sales
at only one level of trade (i.e., sales to original equipment
manufacturers) and that this level was different, and more remote, than
the level of trade at which they made CEP sales.
Because only one level of trade existed in the home market for both
respondents, we conducted an analysis to determine whether a CEP offset
was warranted for either company. In order to determine whether NV was
established at a level of trade which constituted a more advanced state
of distribution than the level of trade of the CEP, we compared the
selling functions performed for home market sales with those performed
with respect to the CEP transaction which excludes economic activities
occurring in the United States. We found that both respondents
performed essentially the same selling functions in their sales offices
in Malaysia for both home market and U.S. sales. Therefore, the
respondent's sales in Malaysia were not at a more advanced stage of
marketing and distribution than the constructed U.S. level of trade,
which represents an FOB foreign port price after the deduction of
expenses associated with U.S. selling activities. Because we find that
no difference in level of trade exists between markets, we have not
granted a CEP offset to either Filati or Rubberflex. For a detailed
explanation of this analysis, see the concurrence memorandum issued for
the preliminary results of this review, dated October 31, 1997.
Constructed Export Price
For all sales by Filati and Rubberflex, we based the starting price
on CEP, in accordance with section 772(b) of the Act. For further
discussion, see Comment 5 in the ``Analysis of Comments Received''
section of this notice.
Moreover, for both companies, we revised the reported data based on
our findings at verification.
A. Filati
We calculated CEP based on the starting price to the first
unaffiliated purchaser in the United States. In accordance with section
772(c)(1)(B) of the Act, we added an amount for uncollected import
duties in Malaysia. We made deductions from the starting price, where
appropriate, for discounts and rebates. In addition, where appropriate,
we made deductions for foreign inland freight, foreign brokerage and
handling expenses, ocean freight, marine insurance, U.S. customs duty,
U.S. brokerage and handling expenses, and U.S. inland freight, in
accordance with section 772(c)(2)(A) of the Act.
We made additional deductions to CEP, where appropriate, for
commissions, credit expenses, U.S. indirect selling expenses, and U.S.
inventory carrying costs, in accordance with section 772(d)(1) of the
Act. We recalculated U.S. indirect selling expenses to exclude an
offset claimed by Filati relating to imputed costs associated with
financing antidumping and countervailing duty deposits, in accordance
with the Department's practice. See Comment 4 in the ``Analysis of
Comments Received'' section of this notice, for further discussion.
Pursuant to section 772(d)(3) of the Act, we further reduced the
starting price by an amount for profit, to arrive at CEP. In accordance
with section 772(f) of the Act, we calculated the CEP profit rate using
the expenses incurred by Filati and its affiliate on their sales of the
subject merchandise in the United States and the foreign like product
in the home market and the profit associated with those sales.
B. Rubberflex
We calculated CEP based on the starting price to the first
unaffiliated customer in the United States. We made deductions from the
starting price, where appropriate, for discounts and rebates. We also
made deductions for foreign inland freight, foreign brokerage and
handling expenses, ocean freight, marine insurance, U.S. customs duty,
and U.S. inland freight, in accordance with section 772(c)(2)(A) of the
Act.
We made additional deductions to CEP, where appropriate, for credit
expenses, U.S. indirect selling expenses, and U.S. inventory carrying
costs, in accordance with section 772(d)(1) of the Act. We recalculated
U.S. indirect selling expenses to exclude an offset claimed by
Rubberflex relating to imputed costs associated with financing
antidumping and countervailing duty deposits, in accordance the
Department's practice. See Comment 4 in the ``Analysis of Comments
Received'' section of this notice, for further discussion.
Pursuant to section 772(d)(3) of the Act, we further reduced the
starting price by an amount for profit, to arrive at CEP. In accordance
with section 772(f) of the Act, we calculated the CEP profit rate using
the expenses incurred by Rubberflex and its affiliate on their sales of
the subject merchandise in the United States and the foreign like
product in the home market and the profit associated with those sales.
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 the volume of each respondent's home market sales of the
foreign like product to the volume of U.S. sales of subject
merchandise, in accordance with section 773(a)(1)(C) of the Act. Based
on this comparison, we determined that both Filati and Rubberflex had
viable home markets during the POR. Consequently, we based NV on home
market sales.
Pursuant to section 773(b) of the Act, there were reasonable
grounds to believe or suspect that Rubberflex had made home market
sales at prices below
[[Page 12755]]
its COP in this review because the Department had disregarded sales
below the COP for Rubberflex in a previous administrative review. See
Notice of Final Results of Antidumping Duty Administrative Review:
Extruded Rubber Thread from Malaysia, 61 FR 54767 (Oct. 22, 1996).
Moreover, the petitioner submitted an adequate allegation that there
were reasonable grounds to believe or suspect that Filati had made home
market sales at prices below its COP in this review. As a result, the
Department initiated an investigation to determine whether the
respondents made home market sales during the POR at prices below their
respective COPs.
We calculated the COP based on the sum of each respondent's cost of
materials and fabrication for the foreign like product, plus amounts
for SG&A and packing costs, in accordance with section 773(b)(3) of the
Act.
We used the respondents' reported COP amounts, adjusted as
discussed below, to compute weighted-average COPs during the POR. We
compared the weighted-average COP figures to home market sales of the
foreign like product, as required under section 773(b) of the Act, in
order to determine whether these sales had been made at prices below
the COP. On a product-specific basis, we compared the COP to home
market prices, less any applicable movement charges and discounts.
In determining whether to disregard home market sales made at
prices below the COP, we examined whether such sales were made: (1) In
substantial quantities within an extended period of time; and (2) at
prices which permitted the recovery of all costs within a reasonable
period of time in the normal course of trade. See Sec. 773(b)(1) of the
Act.
Pursuant to section 773(b)(2) of the Act, where less than 20
percent of a respondent's sales of a given product were at prices less
than the COP, we did not disregard any below-cost sales of that product
because we determined that the below-cost sales were not made in
``substantial quantities.'' Where 20 percent or more of a respondent's
sales of a given product were at prices below the COP, we found that
sales of that model were made in ``substantial quantities'' within an
extended period of time, in accordance with section 773(b)(2)(B) of the
Act. In such cases, we also determined that such sales were not made at
prices which would permit recovery of all costs within a reasonable
period of time, in accordance with section 773(b)(2)(D) of the Act.
Therefore, we disregarded the below-cost sales. Where all sales of a
specific product were at prices below the COP, we disregarded all sales
of that product.
We found that, for certain models of extruded rubber thread, more
than 20 percent of both Filati's and Rubberflex's home market sales
within an extended period of time were at prices less than COP.
Further, the prices did not provide for the recovery of costs within a
reasonable period of time. We therefore disregarded the below-cost
sales and used the remaining above-cost sales as the basis for
determining NV, in accordance with section 773(b)(1) of the Act. For
those U.S. sales of extruded rubber thread for which there were no
comparable home market sales in the ordinary course of trade, we
compared CEP to CV, in accordance with section 773(a)(4) of the Act.
In accordance with section 773(e) of the Act, we calculated CV
based on the sum of each respondent's cost of materials, fabrication,
SG&A, profit, and U.S. packing costs. In accordance with section
773(e)(2)(A) of the Act, we based SG&A and profit on the amounts
incurred and realized by each respondent in connection with the
production and sale of the foreign like product in the ordinary course
of trade, for consumption in the foreign country.
Company-specific calculations are discussed below.
A. Filati
We made the following adjustments to Filati's reported COP and CV
data based on our findings at verification. For the cost of
manufacturing (COM), in order to properly value second quality
merchandise and apply the appropriate manufacturing variance, we first
valued the second quality merchandise at the standard cost of the first
quality product that was intended to be produced. We then calculated
the variance between the revised total standard cost and the total
actual cost, and applied the variance proportionately to each per-unit
standard cost. We also recalculated Filati's reported general and
administrative (G&A) expense ratio by excluding direct selling,
indirect selling, G&A, and financial expenses from the denominator of
the ratio. The resulting ratio was applied to the per-unit COM.
Finally, we recalculated Filati's reported interest expense using the
consolidated financial statements of its parent company. Specifically,
we divided net interest expense by the cost of operations. For further
discussion of these adjustments, see Comment 13 in the ``Analysis of
Comments Received'' section, below, and the cost calculation memorandum
from Michael Martin and Gina Lee to Christian Marsh, dated March 9,
1998.
Where NV was based on home market sales, we based NV on the
starting price to unaffiliated customers. We made adjustments to
Filati's reported sales data based on our findings at verification.
For all price-to-price comparisons, we made deductions from the
starting price for rebates, where appropriate. We also made deductions,
where appropriate, for foreign inland freight, pursuant to section
773(a)(6)(B) of the Act. Pursuant to section 773(a)(6)(C)(iii) of the
Act, we made circumstance-of-sale adjustments, where appropriate, for
differences in credit expenses, bank charges, and U.S. commissions.
Where applicable, in accordance with 19 CFR 353.56(b)(1), we offset any
commission paid on a U.S. sale by reducing the NV by the amount of home
market indirect selling expenses and inventory carrying costs, up to
the amount of the U.S. commission.
In addition, we deducted home market packing costs and added U.S.
packing costs, in accordance with section 773(a)(6) of the Act. Where
appropriate, we made adjustments to NV to account for differences in
physical characteristics of the merchandise, in accordance with section
773(a)(6)(C)(ii) of the Act and 19 CFR 353.57.
For CV-to-CEP comparisons, we made circumstance-of-sale
adjustments, where appropriate, for differences in credit expenses,
bank charges, and U.S. commissions, in accordance with sections
773(a)(6)(C)(iii) and 773(a)(8) of the Act. Where applicable, in
accordance with 19 CFR 353.56(b)(1), we offset any commission paid on a
U.S. sale by reducing the NV by the amount of home market indirect
selling expenses and inventory carrying costs, up to the amount of the
U.S. commission.
B. Rubberflex
Where NV was based on home market sales, we based NV on the
starting price to unaffiliated customers. We made adjustments to
Rubberflex's reported sales data based on our findings at verification.
We made deductions from the starting price for discounts and
rebates, where appropriate. We also made deductions for foreign inland
freight and foreign inland insurance, pursuant to section 773(a)(6)(B)
of the Act. In addition, we made a circumstance-of-sale adjustment for
differences in credit expenses. We deducted home market packing costs
and added U.S. packing costs, in accordance with section 773(a)(6) of
the Act. Where appropriate, we made adjustments to NV to account for
[[Page 12756]]
differences in physical characteristics of the merchandise, in
accordance with section 773(a)(6)(c)(ii) of the Act and 19 CFR 353.57.
For CV-to-CEP comparisons, we made circumstance-of-sale
adjustments, where appropriate, for differences in credit expenses.
Duty Absorption
On December 16, 1996, the petitioner requested that the Department
determine, with respect to all respondents, whether antidumping duties
had been absorbed during the POR. Section 751(a)(4) of the Act provides
for the Department, if requested, to determine during an administrative
review initiated two or four years after the publication of the order,
whether antidumping duties have been absorbed by a foreign producer or
exporter if the subject merchandise is sold in the United States
through an affiliated importer.
For transition orders as defined in section 751(c)(6)(C) of the Act
(i.e., orders in effect as of January 1, 1995), section 351.213(j)(2)
of the Department's new antidumping regulations provide that the
Department will make a duty-absorption determination, if requested, for
any administrative review initiated in 1996 or 1998. See 62 FR 27394
(May 19, 1997). Because the order on extruded rubber thread from
Malaysia has been in effect since 1991, it is a transition order in
accordance with section 751(c)(6)(C) of the Act. The preamble to the
new antidumping regulations explains that reviews initiated in 1996
will be considered initiated in the second year and reviews initiated
in 1998 will be considered initiated in the fourth year (62 FR 27317,
May 19, 1997). This approach ensures that interested parties will have
the opportunity to request a duty-absorption determination prior to the
time for sunset review of the order under section 751(c) of the Act on
entries for which the second and fourth years following an order have
already passed. Since this review was initiated in 1996, and a request
was made for a determination, we are making a duty-absorption
determination as part of this administrative review.
As indicated above, section 751(a)(4) of the Act provides for a
determination on duty absorption if the subject merchandise is sold in
the United States through an affiliated importer. In this case, the
respondents sold through importers that are affiliated. We have
determined that duty absorption by all respondents has occurred in this
administrative review. This determination is made only with respect to
the percentages of sales shown below which were made through the
respondents' U.S. affiliates and which had positive dumping margins:
------------------------------------------------------------------------
Percentage of
U.S.
affiliates'
Manufacturer/exporter/reseller sales with
dumping
margins
------------------------------------------------------------------------
Heveafil................................................ 100.00
Filati.................................................. 100.00
Rubberflex.............................................. 57.35
Rubfil.................................................. 100.00
------------------------------------------------------------------------
With respect to Heveafil and Rubfil, because the former failed
verification and the latter did not respond to our questionnaire, we
determined the dumping margins for these two companies on the basis of
adverse facts available. Lacking other information, we find duty
absorption on all sales by these two companies. See Antifriction
Bearings (Other Than Tapered Roller Bearings) and Parts Thereof from
France, Germany, Italy, Japan, Romania, Singapore, Sweden and the
United Kingdom; Final Results of Antidumping Duty Administrative
Reviews, 62 FR 54043 (Oct. 17, 1997) (AFBs) and Tapered Roller Bearings
and Parts Thereof, Finished and Unfinished, From Japan, and Tapered
Roller Bearings, Four Inches or Less in Outside Diameter, and
Components Thereof, From Japan; Final Results of Antidumping Duty
Administrative Reviews, 63 FR 2558 (Jan. 15, 1998) (TRBs) (where we
found duty absorption with respect to all sales for which the
respondent provided no data in response to the Department's
questionnaire).
With respect to the other respondents with affiliated importers
(i.e., Filati and Rubberflex) for which we did not apply adverse facts
available, we must presume that the duties will be absorbed for those
sales which were dumped. As the above chart indicates, 100 percent of
Filati's sales, and 57.35 percent of Rubberflex's sales, by volume,
were dumped. Our duty-absorption presumptions can be rebutted with
evidence that the unaffiliated purchasers in the United States will pay
the ultimately assessed duty. After publication of our preliminary
results, we gave interested parties the opportunity to submit evidence
that the unaffiliated purchasers in the United States will pay the
ultimately assessed duties. However, we received no such evidence.
Under these circumstances, we find that antidumping duties have been
absorbed by all respondents on the percentages of U.S. sales indicated.
Specific arguments relating to duty absorption are discussed in Comment
1 of the ``Analysis of Comments Received'' section, below.
Currency Conversion
We made currency conversions into U.S. dollars based on the
exchange rates in effect on the dates of the U.S. sales as certified by
the Federal Reserve Bank.
Section 773A 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 for the daily rate, in accordance with established practice.
Analysis of Comments Received
We gave interested parties an opportunity to comment on the
preliminary results. We received comments from North American Rubber
Thread (the petitioner), and two respondents, Filati and Heveafil. We
also received rebuttal comments from Filati and Heveafil.
General Issues
Comment 1: Duty Absorption
According to the petitioner, the Department should find that the
respondents are absorbing antidumping duties in cases where their U.S.
subsidiaries are the importers of record.
Filati and Heveafil assert that there is no evidence that they are
absorbing antidumping duties in this review. According to these
companies, the duties for this review period have yet to be assessed.
Consequently, there can be no finding that these companies are
absorbing duties for this POR.
Moreover, these respondents state that both the URAA and SAA
require that the Department perform a meaningful analysis of whether
antidumping duties are absorbed. Therefore, these respondents argue
that it is not lawful for the Department to merely presume that duty
absorption has taken place by virtue of a finding that dumping margins
exist on sales through affiliated importers. According to these
respondents, such a presumption shifts the burden of demonstrating that
duties are not being absorbed to the respondents. These respondents
state that this presumption is both unfair and unreasonable because it
is impossible to rebut, given that it would require their
[[Page 12757]]
customers to assume an unlimited, contingent liability for antidumping
duties several years after the sale.
Filati and Heveafil also contend that acceptance of the
Department's presumption renders meaningless any sunset reviews,
because the existence of dumping margins would be sufficient to make an
affirmative finding.
Finally, Heveafil argues that the Department should not find that
it absorbed antidumping duties based on Rubfil's rate in a previous
review because that rate clearly is not representative of Heveafil's
sales patterns. Instead, Heveafil asserts that the Department should
make a determination based on Heveafil's actual experience, as
submitted to the Department in past reviews.
DOC Position
We disagree with the respondents. An investigation as to whether
there is duty absorption does not simply involve publishing the margin
in the final results of review. The Department's determination that
duty absorption exists is based on the lack of any information on the
record that the first unaffiliated customer will be responsible for
paying the duty that is ultimately assessed. Absent such an irrevocable
agreement between the affiliated U.S. importer(s) and the first
unaffiliated customer, there is no basis for the Department to conclude
that the duty attributable to the margin is not being absorbed. See,
e.g., AFBs at 54043 and 54044.
As in previous cases where the Department has found duty absorption
(see, e.g., AFBs and TRBs), this is an instance where the existence of
margins raises an initial presumption that the affiliated importer(s)
are absorbing the duty. As such, the burden of producing evidence to
the contrary shifts to the respondent. See Creswell Trading Co., Inc.
v. United States, 15 F.3d 1054 (CAFC 1994). Here, the respondents have
failed to place evidence on the record, despite being given ample time
to do so, in support of their position that their affiliated
importer(s) are not absorbing the duties.
Regarding Heveafil's argument that we should make our duty-
absorption determination based on Heveafil's actual experience, as
submitted to the Department in past reviews, we also disagree. The
Department's current practice is to find that duty absorption occurred
for companies having a margin based on adverse facts available, absent
any information to the contrary. See AFBs and TRBs. Because Heveafil
submitted no information showing that its affiliated importer is not
absorbing the duties for this POR, we find that duty absorption
occurred.
Finally, regarding the argument that the presumption of absorption
renders the sunset provisions meaningless, we note that the Department
has no experience in conducting sunset reviews. Thus, we are unable to
determine the impact of any duty absorption finding on a subsequent
sunset review.
Comment 2: Calculation of CV Profit
The petitioner argues that the Department should exclude all below-
cost sales from the calculation of CV profit, in accordance with its
practice. As support for this contention, the petitioner cites
Mechanical Transfer Presses From Japan; Final Results of Antidumping
Administrative Review, 62 FR 11820, 11822 (Mar. 13, 1997) (MTPs from
Japan).
Filati disagrees, citing to the Department's practice under the old
law, in which the Department consistently rejected such arguments.
Filati argues that the URAA does not require a change in the
Department's practice. Specifically, Filati contends that the
Department may exclude below-cost sales only when it determines that
such sales are outside the ordinary course of trade. Filati cites
Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts
Thereof from France, Germany, Italy, Japan, Singapore, and the United
Kingdom; Final Results of Antidumping Duty Administrative Reviews, 62
FR 2081, 2114 (Jan. 15, 1997) (1994-1995 AFBs Reviews), where the
Department stated that sales must be disregarded under the cost test
before they can be excluded from the calculation of CV profit. Filati
asserts that this practice is consistent with the SAA as well as the
WTO antidumping code.
Filati further argues that, in this case, the Department should not
exclude any of its sales of second quality merchandise from the
calculation of CV profit (or, correspondingly from the calculation of
NV)--irrespective of whether they are above or below cost--because they
are not outside the ordinary course of trade. According to Filati,
these sales are the type of unusual, off-spec, infrequent sales
contemplated by the SAA in its discussion of what types of below-cost
sales should be included as part of NV. Specifically, Filati cites the
SAA at 833, which states that ``below-cost sales may be used to
determine normal value if those sales are obsolete or end-of-model-year
merchandise.''
DOC Position
We agree with Filati, in part. It is the Department's practice to
disregard below-cost sales in the calculation of CV profit only when
those sales fail the cost test. See, e.g., MTPs from Japan, 1994-1995
AFBs Reviews, and Notice of Final Determination of Sales at Less Than
Fair Value: Static Random Access Memory Semiconductors from Taiwan 63
FR 8909 (Feb. 23, 1998) (SRAMs from Taiwan). Consequently, in
accordance with our practice, we have excluded below-cost sales from
the calculation of CV profit only when they were made in substantial
quantities within an extended period of time at prices which would not
permit the recovery of all costs within a reasonable period of time.
We disagree with Filati's contention that its below-cost sales of
second quality merchandise were made in the ordinary course of trade.
The Department's practice is not to distinguish between first and
second quality merchandise in conducting the cost test. See, e.g.,
Polyethylene Terephthalate Film, Sheet, and Strip from the Republic of
Korea; Final Results of Antidumping Administrative Reviews and Notice
of Revocation in Part, 61 FR 35177 (July 5, 1996). Consequently, where
these sales failed the cost test, we find that they were made outside
the ordinary course of trade. Accordingly, we have excluded such sales
from our analysis for purposes of the final results.
Comment 3: Date of Payment
The Department noted at verification that both Filati and
Rubberflex had not received payment for certain U.S. sales. According
to the petitioner, the Department should use the date of the final
results as the date of payment for these transactions. The petitioner
asserts that, if payment for these sales had been received by the time
of verification, the respondents should have indicated this to the
Department.
Filati maintains that the Department's consistent policy is to use
the last day of verification as the date of payment for the unpaid
sales. See Brass Sheet and Strip from Sweden: Final Results of
Antidumping Administrative Review, 60 FR 3617, 3620 (Jan. 18, 1995)
(Brass Sheet and Strip from Sweden). Filati states that this date is
the last date on which the Department can be certain that payment had
not been received, given that the Department's regulations do not allow
respondents to provide information after verification. Furthermore,
Filati argues that the use of the date of the final results would be
unduly punitive, because there is an
[[Page 12758]]
extended period between the time that the sales were made and the date
of the final results of the review.
DOC Position
The Department's recent practice regarding this issue has been to
use the last day of verification as the date of payment for unpaid
sales. See SRAMs from Taiwan and Brass Sheet and Strip from Sweden. In
accordance with our practice, we have used the last day of verification
as the date of payment for the transactions in question.
Company-Specific Issues
A. Filati
Comment 4: Offset for Imputed Costs Associated With AD/CVD Duty
Deposits
In its questionnaire response, Filati reported the opportunity
costs associated with financing its cash deposits of antidumping and
countervailing duties as an offset to U.S. indirect selling expenses.
Filati notes that the Department's decision to deny this offset for
purposes of the preliminary results is consistent with its recent
practice. See AFBs. However, Filati contends that the Department's
change in policy conflicts with prior decisions both by the Department
and the Court of International Trade (CIT). See, e.g., 1994-1995 AFBs
Reviews and Federal-Mogul v. United States, 950 F. Supp. 1179 (CIT
1996).
Specifically, Filati asserts that the reasoning in AFBs was flawed,
in two respects. First, Filati asserts that AFBs was based on the
premise that money is fungible. According to Filati, however, this
point is irrelevant because the company has incurred a real expense
which it would not have incurred but for the existence of the
antidumping duty order. Second, Filati asserts that AFBs was based on
the premise that there is no ``real'' opportunity cost associated with
the duty deposits. Filati maintains that this point is also incorrect,
because respondents making cash deposits are required to divert funds
from more profitable ventures.
According to Filati, the CIT has mandated that imputed interest
expenses incurred with respect to antidumping or countervailing duty
deposits are not ``selling expenses,'' and, therefore, the antidumping
law does not allow their deduction from CEP. Consequently, Filati
argues that the Department should allow its offset for purposes of the
final results.
DOC Position
We disagree. For these final results, we have continued to deny an
offset to Filati's U.S. indirect selling expenses for expenses which
Filati claims are related to financing of antidumping and
countervailing duty cash deposits.
As the Department explained in AFBs, the statute does not contain a
precise definition of what constitutes a selling expense. Instead,
Congress gave the administering authority discretion in this area. It
is a matter of policy whether we consider there to be any financing
expenses associated with cash deposits. We recognize that we have, to a
limited extent, removed such expenses from indirect selling expenses
for such financing expenses in other proceedings. However, we have
reconsidered our position on this matter and have now concluded that
this practice is inappropriate.
We have long maintained, and continue to maintain, that antidumping
duties, and cash deposits of antidumping duties, are not expenses that
we should deduct from CEP. To do so would involve a circular logic that
could result in an unending spiral of deductions for an amount that is
intended to represent the actual offset for the dumping. See, e.g.,
Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts
Thereof From France, et al.; Final Results of Antidumping Duty
Administrative Reviews, 57 FR 28360 (June 24, 1992). We have also
declined to deduct legal fees associated with participation in an
antidumping case, reasoning that such expenses are incurred solely as a
result of the existence of the antidumping duty order. Id. Underlying
our logic in both these instances is an attempt to distinguish between
business expenses that arise from economic activities in the United
States and business expenses that are direct, inevitable consequences
of the dumping order.
Financial expenses associated with cash deposits are not a direct,
inevitable consequence of an antidumping order. As noted in AFBs, money
is fungible. If an importer acquires a loan to cover one operating
cost, that may simply mean that it will not be necessary to borrow
money to cover a different operating cost. See AFBs at 54079. Companies
may choose to meet obligations for cash deposits in a variety of ways
that rely on existing capital resources or that require raising new
resources through debt or equity. For example, companies may choose to
pay deposits by using cash on hand, obtaining loans, increasing sales
revenues, or raising capital through the sale of equity shares. In
fact, companies face these choices every day regarding all their
expenses and financial obligations. There is nothing inevitable about a
company having to finance cash deposits and there is no way for the
Department to trace the motivation or use of such funds even if it
were.
In a different context, we have made similar observations. For
example, we stated that ``debt is fungible and corporations can shift
debt and its related expenses toward or away from subsidiaries in order
to manage profit.'' See Ferrosilicon From Brazil; Final Results of
Antidumping Duty Administrative Review, 61 FR 59407, 59412 (Nov. 22,
1996) (regarding whether the Department should allocate debt to
specific divisions of a corporation).
So, while under the statute we may allow a limited exemption from
deductions from CEP for cash deposits themselves and legal fees
associated with participation in dumping cases, we do not see a sound
basis for extending this exemption to financing expenses allegedly
associated with financing cash deposits. By the same token, for the
reasons stated above, we would not allow an offset for financing the
payment of legal fees associated with participation in a dumping case.
We see no merit to the argument that, since we do not deduct cash
deposits from CEP, we should also not deduct financing expenses that
are arbitrarily associated with cash deposits. To draw an analogy as to
why this logic is flawed, we also do not deduct corporate taxes from
CEP; however, we would not consider a reduction in selling expenses to
reflect financing alleged to be associated with payment of such taxes.
Finally, we also determine that we should not use an imputed amount
that would theoretically be associated with financing of cash deposits.
There is no real opportunity cost associated with cash deposits when
the paying of such deposits is a precondition for doing business in the
United States. Like taxes, rent, and salaries, cash deposits are simply
a financial obligation of doing business. Companies cannot choose not
to pay cash deposits if they want to import, nor can they dictate the
terms, conditions, or timing of such payments. By contrast, we impute
credit and inventory carrying costs when companies do not show an
actual expense in their records because companies have it within their
discretion to provide different payment terms to different customers
and to hold different inventory balances for different markets. We
impute costs in these circumstances as a means of comparing different
conditions of sale in different markets. Thus, our policy on imputed
expenses is consistent; under this policy, the imputation of financing
costs to actual expenses is inappropriate.
[[Page 12759]]
Comment 5: Treatment of EP Sales
During the POR, Filati classified all sales shipped directly to
U.S. customers as EP sales. The petitioner argues that the Department
should treat these transactions as CEP sales because, according to the
petitioner, Filati's U.S. subsidiary acts as more than a paper
processor and communications link between the Malaysian parent and its
customers. Specifically, the petitioner maintains that Filati's U.S.
affiliate is involved in the actual negotiation of prices to
unaffiliated U.S. customers.
The petitioner cites to the following cases as precedent for
reclassifying the transactions in question as CEP sales: Small Diameter
Circular Seamless Carbon and Alloy Steel Standard, Line and Pressure
Pipe From Germany: Preliminary Results of Antidumping Duty
Administrative Review, 62 FR 47446, 47448 (Sept. 9, 1997); Notice of
Preliminary Determinations of Sales at Less Than Fair Value and
Postponement of Final Determinations: Brake Drums and Brake Rotors From
the People's Republic of China, 61 FR 53190, 53194 (Oct. 10, 1996);
Certain Cut-To-Length Carbon Steel Plate From Germany: Final Results of
Antidumping Duty Administrative Review, 62 FR 18390, 18392 (Apr. 15,
1997); and Sebacic Acid From the People's Republic of China; Final
Results of Antidumping Duty Administrative Review, 62 FR 10530, 10532
(Mar. 7, 1997). In those cases, the Department classified the
respondents' U.S. sales as CEP transactions, because the U.S. companies
performed significant selling functions in the United States.
Consequently, the petitioner maintains that the Department should
deduct the indirect selling and operating costs of Filati's U.S.
subsidiary from the starting price for purposes of the final results.
Filati contends that the Department properly treated its direct
shipment sales as EP sales. Filati states that the Department has
consistently classified Filati's direct shipment sales as EP sales from
the original investigation through the latest published administrative
review (i.e., Extruded Rubber Thread From Malaysia; Final Results of
Antidumping Duty Administrative Review, 62 FR 52547 (Nov. 24, 1997)).
Furthermore, Filati notes that the facts of this review in no way
differ from the facts of previous reviews with respect to the role in
the sales process of Filati's U.S. affiliate. According to Filati, the
sales in question were made prior to entry in the normal, customary
commercial channel for the customers involved. Moreover, Filati asserts
that the selling activities of its U.S. affiliate were well within the
range of activities that the Department has previously found to be
consistent with EP sales.
Filati notes that the cases cited by the petitioner are
distinguishable from the circumstances present in this case, in that
the U.S. subsidiaries in those cases set the prices of the direct
sales. According to Filati, the Department confirmed at verification
that Filati (USA) has no flexibility or authority to set prices or
other significant terms for direct sales.
DOC Position
We agree with the petitioner. When sales are made prior to the date
of importation through an affiliated or unaffiliated entity in the
United States, the Department uses the following criteria to determine
whether U.S. sales should be classified as EP sales:
The merchandise in question is shipped directly from the
manufacturer to the unaffiliated buyer without being introduced into
the physical inventory of the selling agent;
Direct shipment from the manufacturer to the unaffiliated
buyer is the customary channel for sales of the subject merchandise
between the parties involved; and
The selling agent in the United States acts only as a
processor of sales-related documentation and a communication link with
the unaffiliated U.S. buyer (i.e., a ``paper-pusher'').
See Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat
Products from Korea: Final Results of Antidumping Duty Administrative
Reviews, 62 FR 18404 (Apr. 15, 1997).
Although the sales in question were made prior to importation and
were shipped directly to the unaffiliated customer without entering the
U.S. inventory, we note that the U.S. affiliate did not serve mainly as
a processor of sales-related documentation and a communications link
with the buyer. Specifically, Filati stated in its questionnaire
response that, for all direct sales, its U.S. affiliate makes the
initial contact with the U.S. customer, negotiates terms of sale,
contacts Filati to arrange for production and shipment of the container
to the United States, and issues the final invoice to, and collects
payment from, the customer. See Filati's February 20, 1997,
questionnaire response at A-9 and A-10. As noted in the U.S. sales
verification report at page 5, we found no discrepancies with the
information reported in Filati's response regarding its sales process.
Because the extent of the affiliate's activities in the United
States are significant, we find that the affiliate is not merely a
paper processor. Accordingly, we have treated these transactions as CEP
sales for purposes of the final results.
Comment 6: Sales with Zero Prices
According to the petitioner, the Department should include Filati's
sales with zero prices in its analysis for purposes of the final
results. The petitioner states that these transactions are actual sales
because: (1) The parties negotiated a price; and (2) Filati transferred
title to the product to the customer. The petitioner asserts that
Filati's decision to give a full rebate to the customer after the terms
of sale were set does not negate the fact that a sale occurred.
Filati contends that the Department correctly excluded the
transactions in question from its analysis in the preliminary results.
According to Filati, the concurrence memorandum cited by the petitioner
predates the Department's current policy in this area, which was set in
response to a decision by the Court of Appeals for the Federal Circuit
(CAFC). See NSK v. United States 115 F.3d 965, 975 (CAFC 1997) (NSK).
Specifically, Filati notes that the court held in NSK that the
existence of consideration (i.e., a bargained-for exchange) is the
determinative factor, absent which there can be no sale. According to
Filati, because there was no consideration for the transactions in
question, the Department cannot treat them as sales.
DOC Position
We agree with Filati. At verification, we found that Filati shipped
the merchandise in question, but then issued a refund to its customers
after being informed that the merchandise was damaged and could not be
used. See the Filati U.S. sales verification report from David Genovese
and Irina Itkin, dated August 1, 1997, at page 2. The fact that Filati
initially negotiated a price for these transactions is not relevant,
because the sales were, in effect, canceled due to quality problems
with the merchandise. Consequently, we find that these transactions
were not sales, and we have excluded them from our analysis for
purposes of the final results.
Comment 7: U.S. Commissions to Company Employees
The petitioner argues that the Department should treat Filati's
commission payments to its U.S. sales agent as a direct selling
expense, in accordance with its current practice.
[[Page 12760]]
According to Filati, the commissions in question are not
commissions per se. Rather, Filati maintains that these payments are
part of the compensation provided to its U.S. salesperson and, as such,
were properly reported as indirect selling expenses. Moreover, Filati
asserts that these commissions are paid periodically and are not
related directly to specific sales; thus, Filati argues that, by
definition, they cannot be direct selling expenses. Filati asserts that
the Department should continue to treat these commissions as U.S.
indirect selling expenses for purposes of the final results.
DOC Position
We agree with Filati. At verification, we confirmed that the
expenses in question were not commissions per se, but rather were part
of the salary paid to a company employee and were not directly related
to specific sales. Consequently, we find that these expenses were
properly reported in Filati's U.S. indirect selling expenses and we
have continued to treat them as such for purposes of the final results.
Comment 8: Calculation of Inventory Carrying Costs
The petitioner contends that Filati incorrectly calculated
inventory carrying costs on the basis of gross unit price, rather than
COM. The petitioner asserts that the Department should recalculate
inventory carrying costs using COM, in accordance with its standard
practice.
According to Filati, the Department instructed it to calculate its
inventory carrying costs using gross unit price. Filati asserts that
use of gross unit price is appropriate because the opportunity cost of
carrying inventory is related to the price that a company receives, not
the costs that it incurs.
DOC Position
We agree with the petitioner. It is the Department's practice to
calculate inventory carrying costs based on COM. See, e.g., Final
Determination of Sales at Less than Fair Value: Canned Pineapple Fruit
from Thailand, 60 FR 29553 (June 5, 1995) and Certain Corrosion-
Resistant Carbon Steel Flat Products from Australia; Final Results of
Antidumping Duty Administrative Reviews, 61 FR 14049 (March 29, 1996).
We note that companies generally value the cost of their finished goods
inventory using the costs incurred to manufacture their products,
rather than the value of future sales. Therefore, we recalculated
inventory carrying costs using COM for purposes of the final results.
Comment 9: Double-Counting of Indirect Selling Expenses
The petitioner argues that the Department may have double-counted
the deduction for Filati's home market indirect selling expenses, in
that the Department used home market indirect selling expenses to
offset both U.S. commissions and the indirect selling expenses of
Filati's U.S. subsidiary.
According to Filati, the Department did not double-count indirect
selling expenses because the Department denied Filati a CEP offset for
purposes of the preliminary results. Consequently, Filati asserts that
the Department did not use home market indirect selling expenses to
offset the expenses of Filati's U.S. subsidiary.
DOC Position
We agree with Filati. We used Filati's home market indirect selling
expenses only to offset the company's U.S. commissions. Accordingly, we
have not double-counted these expenses for purposes of the final
results.
Comment 10: Treatment of Uncollected Duties In Price-to-CV Comparisons
During the POR, the government of Malaysia allowed Filati to import
rubber thread inputs duty free; however, when Filati sold extruded
rubber thread in the home market, the government charged it a duty
equal to three percent of the sales price. In the preliminary results,
the Department treated these amounts as uncollected import duties and
added them to the U.S. starting price for purposes of price-to-price
comparisons. Filati argues that the Department should also have added
an amount for uncollected import duties to the starting price for
purposes of price-to-CV comparisons. Filati states that the statute
requires such an adjustment regardless of whether normal value is based
upon price or CV. See 19 U.S.C. 1677a(c)(1)(B).
DOC Position
We agree. Section 772(c)(1)(B) of the Act directs the Department to
increase CEP by the amount of any import duties imposed by the country
of exportation which have been rebated, or which have not been
collected, by reason of exportation of the subject merchandise to the
United States. Because these duties have not been collected by reason
of exportation of the subject merchandise, we have added them to CEP
for all comparisons for purposes of the final results.
Comment 11: Inclusion of Uncollected Duties in COP
According to Filati, the Department should not add the uncollected
duties referenced in Comment 10 above to COP because they are not
recorded as raw materials costs in Filati's accounting system. Filati
notes that both 19 U.S.C. 1677b(b)(3) and the SAA at 834 require
respondents to base their reported production costs on the actual costs
recorded in their normal accounting records.
However, Filati contends that, if the Department finds that the
duties at issue should be included in COP, the Department should apply
the duty percentage to raw material costs only.
DOC Position
We disagree that we should not add the uncollected duties to COP.
Section 773(f)(1)(A) of the Act requires the Department to depart from
the records of the producer if: (1) Those records are not in accordance
with the general accepted accounting principles (GAAP) of the exporting
country; and (2) such costs do not reasonably reflect the costs
associated with the production and sale of the merchandise. In this
case, we acknowledge that Filati's treatment of these duties is in
accordance with Malaysian GAAP. However, we find that this treatment is
contrary to the requirements of section 773(f)(1)(A) of the Act, as it
does not reasonably reflect Filati's cost of production. Specifically,
we find that, because the amounts in question are charged by the
Malaysian government in place of import duties on raw materials, they
appropriately form part of Filati's cost of production. Accordingly, we
have included these duties in the calculation of COP and CV.
We also disagree that we should apply the three percent duty to
Filati's raw materials costs. Because these duties are assessed as a
percentage of home market price, we have continued to calculate them in
this manner. To do otherwise would result in our not capturing the full
amount of the duty, which would consequently understate the amount of
duty included in COP and CV.
Comment 12: Selection of Cost Response
Filati argues that the Department should use the COPs and CVs that
it reported in its original section D response, rather than the costs
reported in the supplemental response. Filati argues that, in its
original response, it calculated the cost of manufacture for COP and CV
based on a methodology that follows its normal standard cost accounting
system and applies actual
[[Page 12761]]
inputs from its normal books and records. Filati argues it demonstrated
at verification that the reported costs using this methodology
reconcile to the actual costs used by Filati; that the reported costs
were in accordance with applicable accounting norms; and that these
costs reasonably reflect the cost of producing the merchandise. Filati
asserts that the Department's normal practice is to accept a cost
methodology when it is from the company's normal records, consistent
with accounting norms, and is not proven to be distortive. Filati also
argues that its original method is reasonable, as demonstrated by the
small variance between its actual and standard costs.
DOC Position
We disagree. Section 773(f)(1)(A) of the Act states that costs
shall normally be calculated based on the records of the exporter or
producer of the merchandise. Contrary to Filati's assertion, the costs
reported in the company's original section D response were not those
reflected in its normal cost accounting system. In its normal records,
Filati records per-unit costs using a standard cost system and derives
actual costs by applying cost variances. In its original response,
Filati derived new per-unit costs by applying to its financial
accounting data a new actual cost methodology. Although the data that
Filati used in the original response were from its financial accounting
system, the per-unit amounts were reallocated to obtain per-unit costs
that differed from the per-unit costs in its normal accounting system.
Filati developed new COPs and CVs specifically to respond to the
Department's questionnaire.
We find unpersuasive Filati's argument that its alternative costing
method is reasonable. The Department normally relies on the records of
the producer if they are in accordance with the GAAP of the exporting
country and reasonably reflect the costs associated with the production
and sale of the merchandise. Filati's standard cost system is
acceptable under Malaysian GAAP and produces per-unit costs that
reasonably reflect the costs associated with the production and sale of
the merchandise.
In a supplemental questionnaire, we directed Filati to resubmit its
per-unit COPs and CVs based on the standard cost system it uses in the
normal course of business. Filati complied with this request.
Therefore, we used the costs and variances from Filati's standard cost
system for purposes of the final results.
Comment 13: Offset to Financial Expenses
Filati argues that the Department should allow the total amount of
consolidated interest income as an offset to consolidated interest
expense in the calculation of its financial expense ratio. According to
Filati, the company demonstrated at verification that all of the
interest income in question was from short-term investments.
DOC Position
We agree. The audited consolidated financial statements show that
the interest income was generated from current assets. Therefore, we
have allowed the full amount of interest income as an offset to
interest expense.
Comment 14: Unreported Costs
The petitioner claims that Filati failed to report cost information
for one second-quality, and several first-quality, products. According
to the petitioner, the Department should assign costs to these products
based on adverse facts available. The petitioner maintains that to do
otherwise would reward Filati for its failure to report costs for the
products in question.
Filati maintains that it reported cost data for all products sold
during the POR, pursuant to the Department's instructions.
Specifically, Filati notes that it reported a single cost for each
unique product, regardless of whether the product was sold as first- or
second-quality merchandise. Filati asserts that it was not necessary to
report a separate cost for first- and second-quality production of a
given product in its COP and CV databases because the Department
assigns the same cost to both. According to Filati, the Department
should continue to use the costs of first- and second-quality products
interchangeably in cases where the cost for one or the other quality
was not explicitly identified in its databases.
DOC Position
We agree with Filati. The costs that the petitioner alleges that
Filati withheld are on the record of this proceeding. Since the per-
unit cost of a product is the same whether it is of first- or second-
quality, using the cost of one as a replacement for the other will not
affect our analysis. Therefore, we have made no adverse inference with
respect to the products in question for purposes of the final results.
Comment 15: G&A Expenses of Filati's Parent Company
According to the petitioner, the Department should include the G&A
expenses of MYCOM, Filati's parent company, in the calculation of
Filati's CV. The petitioner notes that MYCOM provides management
services to Filati.
According to Filati, its reported G&A expenses include all expenses
associated with the services provided by MYCOM. Filati contends that
there is no basis for including any other portion of MYCOM's expenses
in G&A, because these expenses relate to activities not associated with
the production or sale of extruded rubber thread.
DOC Position
We agree with the respondent. Filati included in its G&A expense
calculation the amount its parent charges Filati for the services the
parent provides. We reviewed this calculation at verification and found
it to be reflective of the cost incurred for the types of services that
MYCOM performed and the overall structure of the group companies
involved. Therefore, we have made no adjustment to Filati's G&A rate
calculation for additional MYCOM expenses.
B. Heveafil
Comment 16: Selection of Facts Available Rate for Heveafil
Heveafil argues that the Department should assign it a dumping rate
based on non-adverse facts available. Heveafil asserts that the
Department may only assign a dumping rate using adverse facts available
when it is unable to verify submitted data and the respondent ``failed
to cooperate by not acting to the best of its ability.'' According to
Heveafil, it cooperated to the best of its ability in this review by
submitting complete questionnaire responses and successfully verifying
its U.S. and home market sales data. Regarding the verification of its
cost data, Heveafil states that, although certain records were
inadvertently purged from its computer system, it acted to the best of
its ability to cooperate.
Specifically, Heveafil notes that it used its bills of materials
(BOMs) to calculate the product-specific costs reported to the
Department. Heveafil asserts that the database containing its BOMs was
purged from its computer system after it was transmitted to the
company's computer consultants for purposes of preparing a supplemental
questionnaire response. Heveafil asserts that it assumed that the
Department would consider the consultant's copy as an original source
document. According to Heveafil, while this misunderstanding was
unfortunate, it cannot be viewed as a failure to cooperate or an
attempt to control
[[Page 12762]]
verification. In any event, Heveafil contends that it did not
``destroy'' its BOMs database, as suggested by the Department's cost
verification report, because the database existed in the form of the
consultant's copy. Heveafil suggests that the Department should have
used this database to relate the reported costs to its production
records, even if the copy was considered to be only a worksheet.
Heveafil states that the Department should assess Heveafil's level
of cooperation in relation to its ability. In doing so, Heveafil claims
that the Department should consider that many of its employees during
this review were new to the company and did not have the experience in
antidumping reviews and verifications gained by many former employees.
Moreover, Heveafil argues that it did not stand to benefit from
withholding its BOMs. Heveafil states that it requested to participate
in this review because it expected an assessment rate of less than its
cash deposit rate of 7.88 percent. Therefore, Heveafil maintains that
it was clearly in its interest to provide all data necessary to the
successful completion of the review.
According to Heveafil, in the event that the Department uses
adverse facts available in this case, it should not assign Heveafil the
highest rate ever calculated for any respondent (i.e., 54.31 percent
for Rubfil in the third review). Rather, Heveafil argues that the
Department should assign it the highest rate it has received in a prior
segment of the proceeding, consistent with the Department's treatment
of Rubberflex in the third review. According to Heveafil, the
Department assigned it the same rate as a company that did not
cooperate at all in this review, while Heveafil submitted responses to
all questionnaires, passed its sales verifications, and verified parts
of the cost response. Heveafil argues that this arbitrary practice
would not encourage cooperation from a respondent interested in
participating in an administrative review because inadvertent errors
might negate all efforts to cooperate. Heveafil cites to Gray Portland
Cement and Clinker from Mexico; Final Results of Antidumping Duty
Administrative Review, 62 FR 17581, 17588 (April 10, 1997) and Final
Affirmative Countervailing Duty Determination: Certain Pasta from
Italy, 61 FR 30288, 30306 (June 14, 1996) as cases where the Department
has stated that the primary purpose for using adverse inferences is to
encourage future respondent cooperation.
Heveafil cites to Elemental Sulphur from Canada: Preliminary
Results of Antidumping Duty Administrative Review, 62 FR 969, 970 (Jan.
7, 1997) (Sulphur), Notice of Final Determination of Sales at Less Than
Fair Value: Certain Pasta from Turkey, 61 FR 30309, 30310 (June 14,
1996) (Pasta), and Chrome-Plated Lug Nuts from Taiwan; Final Results of
Antidumping Duty Administrative Review and Termination in Part, 61 FR
58372, 58373 (Nov. 14, 1996) (Lug Nuts) as cases where the Department
has assigned respondents the highest rate ever assigned to any
respondent in the proceeding only where the respondent deliberately
misled the Department or refused a direct request for information.
Heveafil states that, because it did not mislead the Department or
refuse to provide original information, it would be inappropriate to
assign it a rate on the same basis as the respondents in Sulphur,
Pasta, and Lug Nuts.
In addition, Heveafil argues that Rubfil's dumping rate from the
third administrative review is not relevant to its own experience
because: (1) There are significant differences in the companies' sizes
and consequent price and cost structures; and (2) Rubfil's margin is
approximately 45 percentage points above the highest margin ever
received by Heveafil. Heveafil contends that there is no evidence in
either its questionnaire responses or the Department's verification
reports to suggest that its prices and costs have increased so
drastically as to increase its dumping rate five times.
Finally, Heveafil notes that Rubfil has appealed the Department's
final results of the third review to the CIT. Heveafil maintains that,
until the issues raised in that proceeding are resolved, Rubfil's
dumping rate is not reliable.
DOC Position
We disagree with Heveafil's argument that the Department should
apply non-adverse facts available for the final results. Heveafil
attributes its failure of the cost verification simply to a
misunderstanding concerning the availability of its BOMs database.
However, the purging of the BOMs database was just one factor which
contributed to Heveafil's failed verification. In addition to purging
its computer system of the BOMs, Heveafil was unable to provide hard
copies of its BOMs during the POR. Thus, there was no reliable way to
test the veracity of the computer consultant's copy of the computer
database.
At verification, we afforded Heveafil the opportunity to tie its
reported cost data to its accounting system using source documents
other than the BOMs. Specifically, on the first day of verification we
requested the company's 1996 ``Budgeting Report'' which, according to
the section D response, was the basis for the reported cost data.
However, company officials indicated that they were unable to locate
this document in its entirety. Moreover, when we attempted to reconcile
the costs shown in the portion provided at verification, we were unable
to do so in a number of instances. Similarly, we were unable to
reconcile the costs for the products missing from the Budgeting Report
to Heveafil's inventory records. For these reasons, we have determined
that Heveafil did not cooperate to the best of its ability in verifying
its reported cost data. See Heveafil cost verification report for
further discussion.
It is true that the Department considers a respondent's ability to
cooperate in determining whether or not it has cooperated to the best
of its ability. See, e.g., 1994-1995 AFBs Reviews. As stated in the
1994-1995 AFBs Reviews, the Department considers the experience of the
respondent in antidumping duty proceedings, whether the respondent was
in control of the data the Department was unable to verify, and the
extent to which the respondent might have benefitted from its own lack
of cooperation.
This is the fourth review of the antidumping duty order on extruded
rubber thread from Malaysia. Heveafil has participated in each of the
prior reviews, as well as the original less than fair value (LTFV)
investigation. Although some of its accounting staff was inexperienced
at the time of verification, we cannot conclude that the company as a
whole was so inexperienced as to be unaware of the necessity of
retaining key source documents for verification purposes.
Moreover, we note that Heveafil generated the relevant source
documents in the ordinary course of business. Therefore, we find that
it maintained exclusive control of the documents necessary to prepare
its response and conduct verification.
We disagree with Heveafil's assertion that it did not stand to
benefit from withholding source documents. Absent reliable data, we
cannot accurately determine Heveafil's actual dumping liability during
the POR. We find Heveafil's assertion that it expected to receive a
significantly lower rate to be meaningless, because it is based not
only on speculation but also on unverifiable data.
We disagree with Heveafil that we should not assign, as adverse
facts available, the highest rate calculated for
[[Page 12763]]
Rubfil in a prior segment of this proceeding. In arguing against the
application of the highest rate calculated for any respondent in any
review, Heveafil attempts to distinguish its degree of cooperation with
the degree of cooperation exhibited by respondents in Sulphur, Pasta,
and Lug Nuts. However, in each of those cases, the underlying reason
for using the highest rate as adverse facts available was that the
information submitted by the respondents was rendered unusable because
it could not be verified. The Department's practice has been to reject
a respondent's submitted information in toto when flawed and
unverifiable cost data renders all price-to-price comparisons
impossible. See Notice of Final Determination of Sales at Less Than
Fair Value: Grain-Oriented Electrical Steel from Italy, 59 FR 33952,
33953-54 (July 1, 1994).
We also disagree with Heveafil's argument that Rubfil's rate from
the third review is neither relevant nor reliable. Regardless of
Rubfil's size relative to Heveafil, we find that its calculated rate
reflects the business practices occurring in the rubber thread
industry. Unlike in Fresh Cut Flowers, there is no evidence on the
record of this review which indicates that Rubfil's calculated rate was
based on an uncharacteristic business practice. Furthermore, the CIT
has not yet ruled on the matter of Rubfil's appeal. Therefore, absent
evidence to the contrary, we find that its rate is reliable and has
probative value.
We have considered Heveafil's argument that our selection of an
adverse facts available rate in this review is not consistent with our
treatment of Rubberflex in the third review. However, as stated in the
1994-1995 AFBs Reviews, as adverse facts available, we must apply a
rate sufficiently adverse so as to encourage cooperation from
respondents in future reviews. The intent of using an adverse inference
is to encourage successful verifications and to elicit the accurate
reporting of sales and cost data in future segments of the proceeding.
In this case, we find that the use of the highest rate ever calculated
for Heveafil of 10.68 percent would not achieve this purpose.
Comment 17: Duty Reimbursement
The petitioner argues that Heveafil's dumping duties should be
doubled, in accordance with the Department's regulations, because
Heveafil is, in effect, paying the dumping duties itself. Specifically,
the petitioner notes that Heveafil's U.S. affiliate is not a separate
entity, but, instead, is a branch of Heveafil. According to the
petitioner, this branch is the importer of record for the subject
merchandise and, consequently, is obligated to pay Heveafil's
antidumping duties. Thus, the petitioner asserts that reimbursement has
occurred.
According to Heveafil, the Department should not double its dumping
duties because the criteria under 19 CFR 353.26(a)(1) which would allow
it to do so have not been met. Specifically, Heveafil asserts that it
has neither paid antidumping duties on behalf of the importer nor
reimbursed the importer for these duties, because it, through its U.S.
branch, is itself the importer of record for all imports of subject
merchandise.
According to Heveafil, the Department faced a similar situation in
Circular Welded Non-Alloy Steel Pipe and Tube from Mexico: Preliminary
Results of Antidumping Duty Administrative Review and Partial
Termination of Review, 62 FR 64564 (Dec. 8, 1997). In that case, the
Department concluded that both the importer and exporter were one
entity; consequently, there could be no payment to, or on behalf of,
the importer within the meaning of the Department's regulations.
Furthermore, Heveafil asserts that, even it the requirements of 19
CFR 353.26 were to be met in this case, the remedy (i.e., reducing CEP
by the amount of the dumping duties) could not be applied because the
Department assigned Heveafil a dumping rate using facts available.
DOC Position
We agree with Heveafil. The imposition of antidumping duties is
intended to provide relief to U.S. industries injured by unfair trade
practices of foreign competitors. In effect, the imposition of
antidumping duties raises the price of subject merchandise to
importers, thereby providing a level playing field upon which injured
U.S. industries can compete. The remedial effect of the law is
defeated, however, where exporters themselves pay antidumping duties,
or reimburse importers for such duties. To ensure that the remedial
effect of the law is not undermined, the Department has authority to
reduce the U.S. starting price (used to determine dumping) by the
amount of any duty paid, or reimbursed, by the producer or reseller,
thereby increasing the amount of the duty ultimately collected.
Reimbursement takes place between affiliated parties if the
evidence demonstrates that the exporter directly pays antidumping
duties for the affiliated importer or reimburses the importer for such
duties. See 19 CFR 353.26; Color Television Receivers from the Republic
of Korea; Final Results of Antidumping Duty Administrative Reviews, 61
FR 4408 (Feb. 6, 1996); Brass Sheet and Strip from the Netherlands;
Final Results of Antidumping Duty Administrative Reviews, 57 FR 9534,
9537 (Mar. 19, 1992); and Brass Sheet and Strip from Sweden; Final
Results of Antidumping Duty Administrative Review, 57 FR 2706, 2708
(Jan. 23, 1992).
While we note the petitioner's argument regarding the corporate
relationship between Heveafil and its U.S. branch, it is the
Department's practice to treat affiliated parties as separate entities
when examining the question of reimbursement. See Final Results of
Antidumping Duty Administrative Review: Circular Welded Non-Alloy Steel
Pipe from Korea, 62 FR 55574 (Oct. 27, 1997). In this case, there is no
evidence of inappropriate financial intermingling or of an agreement to
reimburse antidumping duties between Heveafil and its U.S. branch.
Therefore, the Department has no reason to require payment of twice the
amount of any dumping duties owed.
Finally, we have considered Heveafil's argument that the Department
is unable to double dumping duties in a facts available situation.
Since there is no evidence which would require such a determination,
this argument is moot.
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, 1995, through September 30, 1996:
------------------------------------------------------------------------
Percent
Manufacturer/exporter margin
------------------------------------------------------------------------
Filati Lastex Elastofibre (Malaysia).................... 52.89
Heveafil Sdn. Bhd./Filmax Sdn. Bhd...................... 54.31
Rubberflex Sdn. Bhd..................................... 3.75
Rubfil Sdn. Bhd......................................... 54.31
------------------------------------------------------------------------
The Department shall determine, and the Customs service shall
assess, antidumping duties on all appropriate entries. Individual
differences between CEP and NV may vary from the percentages stated
above. We have calculated an importer-specific assessment rate based on
the ratio of the total amount of antidumping duties calculated for the
examined sales made during the POR to the total value of subject
merchandise entered during the POR. This rate will be assessed
uniformly on all entries of that
[[Page 12764]]
particular importer made during the POR. The Department will issue
appraisement instructions directly to the U.S. Customs Service.
Further, the following deposit requirements will be effective for
all shipments of extruded rubber thread from Malaysia entered, or
withdrawn from warehouse, for consumption on or after the publication
date of the final results of this administrative review, as provided
for by section 751(a)(1) of the Act: (1) The cash deposit rates for the
reviewed companies will be the rates for those firms as stated above
(except that for Heveafil the cash deposit rate will be reduced by 0.90
percent, the current cash deposit rate attributable to export
subsidies); (2) for previously investigated companies not listed above,
the cash deposit rate will continue to be the company-specific rate
published for the most recent period; (3) if the exporter is not a firm
covered in this review, or the LTFV investigation, but the manufacturer
is, the cash deposit rate will be the rate established for the most
recent period for the manufacturer of the merchandise; and (4) the cash
deposit rate for all other manufacturers or exporters will continue to
be 15.16 percent, the all others rate established in the LTFV
investigation.
These deposit requirements, when imposed, shall remain in effect
until publication of the final results of the next administrative
review.
This notice serves as a final reminder to importers of their
responsibility under 19 CFR 353.26 to file a certificate regarding the
reimbursement of antidumping duties prior to liquidation of the
relevant entries during this review period. Failure to comply with this
requirement could result in the Secretary's presumption that
reimbursement of antidumping duties occurred and the subsequent
assessment of double antidumping duties.
This notice also serves as the only reminder to parties subject to
administrative protective order (APO) of their responsibility
concerning the disposition of proprietary information disclosed under
APO in accordance with section 353.34(d) of the Department's
regulations. Timely notification of return/destruction of APO materials
or conversion to judicial protective order is hereby requested. Failure
to comply with the regulations and the terms of an APO is a
sanctionable violation.
This administrative review and notice are in accordance with
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)), section 777(i) of
the Act (19 U.S.C. 1677f(i)), and 19 CFR 353.22.
Dated: March 9, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-6715 Filed 3-13-98; 8:45 am]
BILLING CODE 3510-DS-P