[Federal Register Volume 63, Number 157 (Friday, August 14, 1998)]
[Notices]
[Pages 43661-43674]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-21927]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-549-813]
Notice of Final Results and Partial Rescission of Antidumping
Duty Administrative Review: Canned Pineapple Fruit From Thailand
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
SUMMARY: On April 9, 1998, the Department of Commerce published the
preliminary results of its administrative review of the antidumping
duty order on canned pineapple fruit from Thailand. This review covers
seven producers/exporters of the subject merchandise. The period of
review is July 1, 1996, through June 30, 1997. Based on our analysis of
comments received, these final results differ from the preliminary
results. The final results are listed below in the section Final
Results of Review.
EFFECTIVE DATE: August 14, 1998.
FOR FURTHER INFORMATION CONTACT: Charles Riggle or Kris Campbell,
Office of AD/CVD Enforcement 2, Import Administration, International
Trade Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-
0650 and (202) 482-3813, respectively.
SUPPLEMENTARY INFORMATION:
Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute are
references to the provisions effective January 1, 1995, the effective
date of the amendments made to the Tariff Act of 1930 (the Act) by the
Uruguay Round Agreements Act (URAA). In addition, unless otherwise
indicated, all citations to Department of Commerce (the Department)
regulations are to the regulations provided in 19 CFR part 351, as
published in the Federal Register on May 19, 1997 (62 FR 27296).
Background
This review covers the following producers/exporters of merchandise
subject to the antidumping duty order on canned pineapple fruit from
Thailand: Siam Food Products Public Company Ltd. (SFP); The Thai
[[Page 43662]]
Pineapple Public Company, Ltd. (TIPCO); Thai Pineapple Canning Industry
Corp., Ltd. (TPC); Malee Sampran Factory Public Company Ltd. (Malee);
The Prachuab Fruit Canning Co. Ltd. (Prachuab); Siam Fruit Canning
(1988) Co. Ltd. (SIFCO); and Vita Food Factory (1989) Ltd. (Vita). On
April 9, 1998, the Department published the preliminary results of this
review. See Notice of Preliminary Results and Partial Rescission of
Antidumping Duty Administrative Review: Canned Pineapple Fruit From
Thailand, 63 FR 17357 (Preliminary Results). On June 8, 1998, we
received case briefs from: (1) Maui Pineapple Co. Ltd. and the
International Longshoremen's and Warehousemen's Union (collectively,
the petitioners); (2) all respondents listed above except for Prachuab
and Vita; 1 (3) U.S. importers Heartland Foods Inc., J.A.
Kirsch Corp., Mandi Foods, Inc., North East Marketing Co., Port Royal
Sales, Ltd., and Summit Import Corp. (collectively, Heartland et al.);
and (4) U.S. importer UniPro Foodservice, Incorporated (UniPro). On
June 15, 1998, we received rebuttal briefs from the petitioners, Malee,
TIPCO, TPC, and from Heartland et al.
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\1\ We received comments from SIFCO on May 29, 1998, in addition
to its June 8, 1998 submission. All dates referenced for documents
submitted by SIFCO are the dates on which the particular document
was certified as received by the Department, which differ from the
dates listed on the cover page of these documents.
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Scope of Review
The product covered by this review is canned pineapple fruit (CPF).
CPF is defined as pineapple processed and/or prepared into various
product forms, including rings, pieces, chunks, tidbits, and crushed
pineapple, that is packed and cooked in metal cans with either
pineapple juice or sugar syrup added. CPF is currently classifiable
under subheadings 2008.20.0010 and 2008.20.0090 of the Harmonized
Tariff Schedule of the United States (HTSUS). HTSUS 2008.20.0010 covers
CPF packed in a sugar-based syrup; HTSUS 2008.20.0090 covers CPF packed
without added sugar (i.e., juice-packed). Although these HTSUS
subheadings are provided for convenience and for customs purposes, our
written description of the scope is dispositive.
Duty Absorption
On February 12, 1998, the petitioners requested that the Department
investigate the extent to which duty absorption has occurred in this
review. As we stated in the Preliminary Results (63 FR at 17358),
section 351.213(j)(1) of our regulations provides that we will
determine whether antidumping duties have been absorbed by an exporter
or producer subject to the review if requested by a domestic interested
party within 30 days of the date of publication of the notice of
initiation. Because the petitioners' request was untimely filed, we did
not investigate the occurrence of duty absorption in this review. We
received no comments on this aspect of our preliminary results.
Partial Rescission of Antidumping Duty Administrative Review
On October 6, 1997, Dole Food Company Inc., Dole Packaged Foods
Company and Dole Thailand Ltd. (collectively, Dole) withdrew its
request for a review. Because there was no other request for a review
of Dole, and because Dole's letter withdrawing its request for a review
was timely filed, we are rescinding the review with respect to Dole in
accordance with 19 CFR 351.213(d)(1). See Preliminary Results, 63 FR at
17357. No parties commented on this issue for the final results.
Fair Value Comparisons
We calculated export price (EP), constructed export price (CEP) and
normal value based on the same methodology used in the preliminary
results with the following exceptions. Where applicable, we have cited
to the relevant interested party comment; otherwise, we address these
changes further in the company-specific final analysis memoranda.
SFP
We deducted international freight expenses for U.S. sales on which
this expense was incurred.
TPC
1. We added to normal value an amount for bank fees incurred in
Thailand after converting it from Thai baht. See TPC Comment 5, below.
2. We converted TPC's reported inventory carrying costs from Thai
baht before adding it to TPC's dollar-denominated indirect selling
expenses to create the variable INDH2BHT. See TPC Comment 4 below.
3. We corrected an erroneous exchange rate conversion of the
variable ISEL2COP.
4. For EP sales, we corrected certain programming language
regarding our use of contract date as the date of sale for purposes of
the margin calculation.
5. We corrected an exchange-rate conversion error on TPC's
commissions on comparison market sales.
6. We corrected errors reported by TPC to information related to
U.S. sales observations 130 and 145.
SIFCO
1. We adjusted the per-unit price of U.S. sales invoice SFC-524/
1996 based on findings at verification.
2. We converted inventory carrying cost and commission expenses to
Thai baht.
Prachuab
We corrected exchange-rate conversion errors on bank charges,
indirect selling expenses, commissions and credit on Prachuab's
comparison market sales and on bank charges on its U.S. sales.
Cost of Production
In accordance with section 773(b)(3) of the Act, we calculated the
weighted-average cost of production (COP), by product, based on the sum
of each respondent's costs of materials, fabrication, general expenses
and packing costs. We calculated the COP based on the same methodology
used in the preliminary results with the following exceptions:
Malee
We adjusted Malee's interest expense (see Malee Comment 2, below).
We adjusted general and administrative (G&A) expense to correct a
double-counting error.
TIPCO
We recalculated the cost of goods sold figure used in determining
TIPCO's G&A ratio. See TIPCO Comment 1, below.
SIFCO
We adjusted the following cost variables to account for corrections
at verification: sugar, fresh fruit, acid, direct labor, variable
overhead, fixed overhead, cans and lids, packing and tax rebates.
Prachuab
We calculated Prachuab's fruit costs based on the net realizable
value (NRV) methodology.
Analysis of Comments Received
We gave interested parties an opportunity to comment on the
preliminary results. As noted above, we received comments and rebuttal
comments from the petitioners, five of the respondents, and domestic
interested parties.
General Issues
Fruit Cost Allocation
SFP and TIPCO contend that the Department improperly used a net
realizable value (NRV) methodology to allocate fruit costs to calculate
COP and
[[Page 43663]]
constructed value (CV). The respondents state, first, that the Court of
Appeals for the Federal Circuit (CAFC) ruled in IPSCO, Inc. v. United
States, 965 F.2d 1056 (Fed. Cir. 1992) (IPSCO) that value-based
allocations of costs shared by co-products are not allowed under the
antidumping law. Second, the respondents argue that the IPSCO ruling
was applied specifically to this case by the Court of International
Trade (CIT) in Thai Pineapple Public Co., Ltd. v. United States, 946 F.
Supp. 11 (CIT 1996) (TIPCO), where the CIT ruled in an appeal of the
Department's final determination in the underlying investigation that
IPSCO applies to allocation of fruit costs.
Regarding the specific cost allocation methodology to be used in
place of the NRV methodology, the respondents state that they included
weight-based fruit cost allocations in their section D response that
are consistent with those reported by certain mandatory respondents in
the original investigation and later adopted by the Department in the
remand proceedings stemming from the less-than-fair-value
investigation.
The petitioners respond that the Department's use of the NRV
methodology in the preliminary results was correct and should not be
replaced with invalid weight-based allocations for the final results.
With respect to the validity of the NRV methodology, the petitioners
claim that: (1) it reasonably reflects the significantly different
quality of the fruit parts used in the production of CPF versus those
used in the production of juice products; and (2) IPSCO does not
invalidate this methodology, since it involved the allocation of costs
between two grades of merchandise that were physically identical,
including identical inputs, except in quality and in market value. The
petitioners argue that IPSCO did not indicate that use of a value-based
allocation methodology was legally impermissible but, rather, that the
courts will defer to the Department's preference for reliance on a
respondent's normal allocation methodology where appropriate,
particularly when there are significant differences in the raw
materials.
With respect to the validity of the weight-based methodologies
submitted by SFP and TIPCO, the petitioners state that these
allocations: (1) do not reflect the historical fruit cost allocations
used by these companies; and (2) do not reasonably reflect the costs
associated with the production of canned pineapple fruit because they
fail to incorporate any measure of the qualitative factor of the
different parts of the pineapple. For these reasons, the petitioners
claim, such methodologies do not meet the statutory requirements set
forth in section 773(f)(1)(A) of the Act.
DOC Position: Consistent with past segments of this proceeding, we
have continued to allocate raw fruit costs incurred by SFP and TIPCO
using an NRV methodology, which reasonably reflects qualitative
differences that exist between the joint raw materials used to produce
CPF and juice. 2 In the less-than-fair-value investigation
involving this case (Final Determination of Sales at Less Than Fair
Value: Canned Pineapple Fruit from Thailand, 60 FR 29553, 29559-62
(June 5, 1995) (LTFV Final Determination)), we rejected the
respondents' arguments that we should disregard fruit costs as recorded
in their normal books and records in favor of fruit costs calculated
based on the relative weight of the fruit contained in CPF versus juice
products. 3 In the Notice of Final Results of Antidumping
Duty Administrative Review: Canned Pineapple Fruit From Thailand, 63 FR
7392 (February 13, 1998) (1995-96 Final Results), we determined that,
while certain respondents had replaced their historical fruit cost
allocation methodologies with weight-based allocation methodologies,
such allocations were inappropriate because they did not incorporate
any measure of the qualitative factor of the different parts of the
pineapple, and therefore did not reasonably reflect the costs
associated with production of canned pineapple fruit. See 1995-96 Final
Results, 63 FR at 7398.
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\2\ In addition to SFP and TIPCO, we have used an NRV
methodology for all companies in this review based on sales and
separable costs for 1990-94 period, with the exception of Malee.
Because Malee already allocates fruit costs on a basis that
reasonably takes into account qualitative differences between
pineapples parts used in CPF versus juice products in its normal
accounting records, we have not required Malee to recalculate its
reported costs using the NRV methodology. See Preliminary Results,
63 FR at 17360-17361.
\3\ As noted by SFP and TIPCO, this aspect of the LTFV Final
Determination was overturned by the CIT in TIPCO and is currently on
appeal before the CAFC.
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For the same reasons as those provided in the above determinations,
we continue to reject the use of a weight-based allocation methodology
in this review. As we stated in the 1995-96 Final Results, a reasonable
fruit cost allocation methodology is one that reflects the
significantly different quality of the fruit parts that are used in the
production of CPF versus those used in the production of juice
products. An allocation methodology based on NRV data recognizes these
differences.
We disagree with the respondents' arguments that the CAFC ruled in
IPSCO that value-based cost allocations are unlawful. In that case, the
Department allocated costs equally between two grades of pipe,
reasoning that because they were produced simultaneously, the two
grades of pipe in fact had identical production costs. While the CAFC
noted, in deferring to the Department's ``consistent and reasonable
interpretation of section 1677b(e),'' that the allocation of costs
based on relative value resulted in an unreasonable circular
methodology (i.e., because the value of the pipe became a factor in
determining cost, which became the basis for measuring the fairness of
the selling price of pipe), nowhere did the appellate court indicate
that use of an allocation methodology based on relative value was
legally impermissible. IPSCO, 965 F.2d at 1061. On the contrary, IPSCO
suggests that the courts will defer to the Department's preference for
reliance on a respondent's normal allocation methodologies,
particularly when there are significant differences in the raw
materials. Thus, our reasoning in the instant case (i.e., that the use
of the pineapple cylinder in production of CPF and the use of the
shells, cores, and ends in production of juice and concentrate,
requires a value-based allocation) is fully consistent with IPSCO.
Company-Specific Issues
Vita
Use of Adverse Facts Available for Vita
U.S. importers Heartland et al. and UniPro submitted comments
addressing the following alleged errors in the application of adverse
facts available to Vita in the preliminary results: (1) the margin
assigned to Vita fails to reflect the amended final determination in
the underlying investigation (see Comment 2A, below); (2) the
assignment of an adverse rate to Vita is inappropriate because the
company acted to the best of its ability (Comment 2B); (3) the
preliminary margin assigned to Vita is not ``representative'' because
it does not reflect current market conditions (Comment 2C); (4) the
rate applied to Vita for the purposes of the preliminary results cannot
be corroborated (Comment 2D); and (5) the antidumping law should not be
administered in a manner that would cause unjust and unwarranted harm
to U.S. companies (Comment 2E).
Comment 2A: The Use of a Facts Available Rate from the Final
Determination Instead of the Amended Final Determination--Heartland et
al. and UniPro argue that the 55.77 percent margin assigned to Vita
(based on the
[[Page 43664]]
rate calculated for Siam Agro Industry Pineapple & Others Public
Company Ltd. (SAICO) in the underlying investigation) reflects a rate
that was subsequently reduced to 51.16 percent after certain clerical
errors were corrected in the amended LTFV determination in this case
(Notice of Antidumping Duty Order and Amended Final Determination:
Canned Pineapple Fruit From Thailand, 60 FR 36775 (July 18, 1995)).
Therefore, they assert, if the Department decides to use the SAICO rate
in the final results, the correct rate should be 51.16 percent from the
amended final determination.
The petitioners agree with Heartland et al. and UniPro on this
point.
DOC Position: We agree that the amended final rate is the correct
rate and have used it for the purposes of these final results.
Comment 2B: Assignment of an Adverse Rate--Heartland et al. argue
that the Department's assignment of an adverse rate to Vita is
inappropriate because the company acted to the best of its ability.
Instead, these companies maintain, the Department should base Vita's
rate on the ``all others'' rate from the investigation.
Heartland et al. state that section 776(a) of the Act lists
specific instances in which the Department must determine dumping
margins on the basis of facts available. According to Heartland et al.,
the Department is permitted, but not required, to use an inference that
is adverse to the interests of a party only if that party has been
deemed uncooperative due to a failure to act to the best of its
ability. Heartland et al. assert that, in the preliminary results, the
Department merely quoted the antidumping statute with regard to the use
of adverse facts available, and made no factual finding that Vita was
uncooperative due to a failure to act to the best of its ability. In
this regard, Heartland et al. cite Borden Inc., et al. v. United
States, Slip Op. 98-36 at 74 (CIT, March 26, 1998) for the proposition
that the Department must make a specific factual finding of non-
cooperation, as opposed to simply quoting section 776 of the Act.
Heartland et al. maintain that such a finding must be made on the basis
of substantial evidence on the record before the Department can resort
to the use of adverse facts available.
As evidence that Vita acted to the best of its ability, Heartland
et al. point out that Vita provided a timely response to sections A
through C of the Department's questionnaire. In this respect, Heartland
et al. contend that Vita's position in this review is analogous to that
of SNFA, the foreign manufacturer in Allied-Signal Aerospace v. United
States, 28 F.3d 1188 (Fed. Cir. 1994) (Allied-Signal), in which the
CAFC found that SNFA had responded to the best of its ability even
though it had been unable to provide the Department with all requested
information. Upon remand SNFA was assigned a margin based on the ``all-
others'' rate. Heartland et al. maintain that, like SNFA, Vita
submitted a substantial amount of information, but claim that factors
outside Vita's control (three questionnaires in 25 days, loss of legal
counsel, currency depreciation, and the Thai economic crisis), rather
than ``deliberate recalcitrance,'' prevented it from providing a more
complete response.
The petitioners respond that, while any of the instances described
in section 776(a) is a sufficient basis for facts available, Vita's
voluntary termination of its participation involves three of these
(i.e., withholding requested information, failing to provide
information within established deadlines, and significantly impeding a
proceeding). Moreover, the petitioners state, the Department clearly
made a fact-based finding that Vita was an uncooperative respondent,
citing the chronology of events listed in the Preliminary Results (63
FR at 17358) detailing the Department efforts to notify Vita directly
of its obligations, along with Vita's failure to respond. The
petitioners argue that, given the fact that Vita dismissed its counsel
and dropped out of the review shortly after the petitioners filed a
below-cost allegation with respect to Vita, an inference can be made
that Vita realized that its margin would be above its deposit rate
(which was based on the ``all others'' rate) if it provided the
requested NRV data, noting that Vita and its counsel were well aware
that the magnitude of the margins in this case has been driven by the
NRV data submitted by the respondents. The petitioners further argue
that, in order to be deemed cooperative, the respondent must remain
cooperative throughout the review, and maintain that the courts have
uniformly approved the use of facts available where respondents attempt
to control the process to their benefit through a submission of
piecemeal information (citing Pistachio Group of the Association of
Food Industries v. United States, 671 F. Supp. 31, 40 (CIT 1987)).
The petitioners state that, unlike the Allied-Signal case cited by
Heartland et al., where the respondent in that case demonstrated that
it was willing to respond but was unable to do so, there is no record
evidence that Vita was unable to respond. On the contrary, the
petitioners argue, Vita acknowledged in a September 25, 1997, letter to
the Department (at 2) that it ``maintained all of the sales data''
requested by the Department. As to the purported reasons for Vita's
inability to respond to the questionnaire, the petitioners point out
that the other respondents were also dealing with the same economic
conditions and they all participated in this review, two of them doing
so without counsel.
Finally, the petitioners contend that they specifically requested a
review of Vita based on information that the current margin applicable
to Vita was not indicative of current market conditions, and argue that
Vita's failure to cooperate has affirmed that the petitioners were
correct. Therefore, they submit, the Department may not reward Vita's
non-participation by continuing to apply the ``all others'' rate as
suggested by Heartland et al.
DOC Position: We disagree with Heartland et al.'s assertion that no
adverse inferences should be made in selecting Vita's facts available
rate. Contrary to Heartland et al.'s assertions, our decision to rely
on an adverse rate was grounded in a fact-based finding in the
preliminary results that Vita had not cooperated to the best of its
ability in this review, and not on a mere recitation of the statutory
provisions concerning the use of facts available.
As we explained in the preliminary results, Vita was given multiple
opportunities to respond to the Department's request for information.
As illustrated by the following sequence of events, we made repeated
requests to obtain the information necessary for our analysis from
Vita, but were ultimately unsuccessful in our efforts to gather such
data. On January 8, 1998, counsel for Vita notified us that it had
withdrawn its representation of and entry of appearance on behalf of
Vita. On January 9, 1998, we contacted Vita to determine whether the
company planned to continue as a respondent in this review. Vita
notified the Department on January 12, 1998, that it planned to
continue in this review. On January 20, 1998, we notified Vita that we
had not received its response to our January 2, 1998, supplemental
section A questionnaire. Vita notified the Department on January 22,
1998, that it had no knowledge of the supplemental section A
questionnaire. Because we initially issued the supplemental section A
questionnaire to counsel for Vita prior to its withdrawal as Vita's
representative, we sent another copy of the questionnaire directly to
Vita on January 27, 1998, and requested that
[[Page 43665]]
Vita respond by February 4, 1998. We also provided Vita with
instructions on how to file submissions with the Department,
instructions for serving such submissions to interested parties, and an
interested parties list for this review. On the same date, we sent a
supplemental questionnaire for sections B and C directly to Vita by
certified mail. On February 5, 1998, we again informed Vita that we had
not received its response to the supplemental section A questionnaire.
At the same time, we reminded Vita of the February 6, 1998, deadline
for its responses to questionnaire section D (which we issued directly
to the company on January 13, 1998), and its February 11, 1998 response
to supplemental sections B and C questionnaire. Vita did not respond,
nor did it provide any explanation as to why it was unable to do so.
Unlike in Allied-Signal, Vita did not show a willingness to respond
throughout the review, but simply ceased communicating. Section
782(c)(1) of the Act requires that an interested party promptly notify
the Department if it is unable to submit information in the form and
manner requested, and that it provide a ``full explanation and
suggested alternate forms'' in which it is able to provide the
information. Because Vita, in not responding to our repeated requests
for information, has failed to act to the best of its ability, we have
applied adverse facts available in accordance with section 776(b) of
the Act.
Comment 2C : ``Representativeness'' of the Rate Selected--UniPro
and Heartland et al. argue that the proposed margin is not
representative of current market conditions, rendering it
inappropriate. For example, UniPro states, the proposed facts available
rate is more than nine times greater than the average margin for the
six respondents for whom the Department calculated margins in this
review. UniPro holds that the Department has previously rejected rates
as unrepresentative in similar circumstances, citing Fresh Cut Flowers
from Mexico: Final Results of Antidumping Duty Administrative Review,
61 FR 6812, 6814 (February 22, 1996), where the Department rejected as
facts available a margin that was ``out of proportion'' and where the
respondent ``represented only a small fraction of the industry.''
Likewise, UniPro claims, SAICO's margin from the underlying
investigation cannot be said to be representative of the industry nor
relevant to or probative of current conditions. UniPro suggests that,
given that the highest margin calculated for the preliminary results
was 14.19 percent, and the average of all calculated margins was 6.13
percent, it is highly unlikely that Vita would be able to compete in
the U.S. market even if the Department applies the ``all others'' rate
for the final results, much less the selected adverse facts available
rate.
The petitioners respond that the fact that the facts available rate
used by the Department in the preliminary results is four times higher
than the highest calculated rate for the instant review is irrelevant,
considering that SIFCO's preliminary calculated rate of 14.19 percent
is 14 times higher than Malee's preliminary calculated rate of 1.01
percent.
DOC Position: Our presumption is that the highest calculated margin
for any company in any segment of the proceeding is reflective of
current conditions, and that, had Vita been able to demonstrate that
its margin was lower than the highest margin calculated for any company
in any segment of the proceeding, it presumably would have done so. See
Mitsuboshi Belting Ltd. v. United States, CIT Court No. 93-09-00640,
Slip Op. 97-28 (March 12, 1997) (Mitsuboshi Belting) (CIT affirmed that
the use of a margin drawn from the investigation ``reflects a common
sense inference that the highest margin is the most probative of
current margins because, if it were not so, the importer, knowing the
rule, would have produced current information showing the margin to be
less''). See also Rhone Poulenc, Inc. v United States, 899 F. 2d 1185
(Fed. Cir. 1990) (Rhone Poulenc). Unlike Flowers from Mexico, the facts
in this case do not overcome this presumption. In Flowers from Mexico,
the highest calculated rate (264.43 percent for Florex) was determined
to be unrepresentative of the industry because Florex's accumulated
interest expenses from a separate line of business skewed its cost of
production figures. Conversely, there is no record of evidence to
suggest that SAICO's business practices differ from the rest of the
Thai pineapple industry such that it is not unable. We further note
that Florex's rate was considered so unusual that it was not included
in the calculation of the ``all others'' rate. That SAICO's rate was
included in the calculation of the ``all others'' rate in the LTFV
investigation is a further indication that the company was considered
to be representative of the pineapple industry. Accordingly, we find
that SAICO's rate from the investigation has probative value.
Comment 2D: Corroboration of the Rate Selected--Heartland et al.
argue that the rate applied to Vita in the preliminary results cannot
be used in the final results because the rate is not in accordance with
section 776(c) of the Act, which requires the Department to corroborate
secondary information used as adverse facts available. These companies
point out that not only does the 55.77 percent margin assigned to Vita
not reflect the publication of an amended final in the underlying
investigation (as stated above), it does not reflect the Department's
redetermination upon remand directed by the CIT in TIPCO, where in the
Department reduced SAICO's rate to 26.92 percent. While Heartland et
al. acknowledge that the Department has appealed TIPCO, they maintain
that the CIT's decision in this case invalidates, or at least casts
significant doubt upon the appropriateness of, the higher rate as a
basis for adverse facts available. In support of their argument,
Heartland et al. claim that, in D&L Supply Co. v. United States, 113
F.3d 1220, 1221 (Fed. Cir. 1997) (D&L Supply Co.), the court found that
the Department could not use a rate that has been vacated as erroneous
as the basis for best information available (facts available). Finally,
Heartland et al. contend that the 55.77 percent rate is not
corroborated because there is no evidence suggesting that Vita is now
selling CPF in the United States at dumping margins twice as high as
previously estimated, referencing the company's historical rate of
24.64, the ``all others'' rate.
The petitioners respond that, as the Department stated in the
Preliminary Results (63 FR at 17358), ``if the Department chooses as
total adverse facts available a calculated dumping margin from a prior
segment of the proceeding, it is not necessary to question the
reliability of the margin for that time period.'' Therefore, the
petitioners argue, the Department need not further corroborate such
margins. The petitioners add that D&L Supply Co. does not apply in this
instance because, unlike the ``invalidated'' rate in that case, the
TIPCO ruling is on appeal and is not yet final.
DOC Position: We agree with the petitioners that margins from other
segments of the proceeding are by definition reliable sources. See,
e.g., Extruded Rubber Thread from Malaysia; Final Results of
Antidumping Duty Administrative Review, 63 FR 12752, 12753 (March 16,
1998). Because the Department has filed an appeal and the CAFC has not
yet ruled on the case, the CIT decision in TIPCO is not final and
conclusive. Therefore, we may continue to assign a rate based on the
NRV
[[Page 43666]]
methodology where appropriate, until such time as there is a final
court decision not in harmony with the Department's position on this
issue. For this reason, Heartland et al.'s reliance on D&L Supply Co.
is premature. Absent evidence to the contrary, we consider SAICO's rate
from the underlying investigation to be reliable and, as discussed in
Comment 2C, above, to have probative value.
Comment 2E: Effect of Adverse Facts Available on Importers--
Heartland et al. maintain that they imported from Vita with the
knowledge that they would be liable for a cash deposit requirement of
24.64 percent and that they could not foresee or prevent the
circumstances that led to Vita being assigned a margin based on adverse
facts available. Therefore, they argue that they should not be made
victims of events beyond their control.
UniPro adds that the facts available rate assigned to Vita would
unduly punish importers, such as itself, who purchased from Vita,
without encouraging compliance with the Department's information
requests. UniPro points out that the petitioners did not request a
review of UniPro nor did the Department request any information from
UniPro during the review. Moreover, Unipro states, unlike the facts in
Rhone Poulenc, in which the CIT discusses obligations of U.S. importers
in the context of an affiliated importer,4 it does not
control the information needed by the Department, nor does it maintain
an ongoing commercial relationship with Vita, such that it would have
been able to provide it or to pressure Vita into providing it.
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\4\ In Rhone-Poulenc, 889 F.2d at 1190, the Court stated that
the Department ``fairly places the burden of production on the
importer, which has in its possession the information capable of
rebutting the agency's inference.''
---------------------------------------------------------------------------
The petitioners respond that neither the statute nor the
Department's regulations require the Department to consider injury or
harm to U.S. importers of merchandise that has been found to be sold at
less than fair value. Instead, the petitioners contend, the
Department's responsibility is to measure the degree of dumping by the
Thai exporters on a continuing basis, so as to alleviate and to offset
the injury to the domestic industry. The petitioners argue further that
the importers knew that the deposit rate could rise and that they
knowingly assumed this liability when they chose to purchase canned
pineapple fruit from Thailand rather than from the domestic industry.
The petitioners claim that Heartland et al. and UniPro cannot now claim
they are being injured as a result of their unilateral decision to
purchase from the Thai exporters, simply because the Department is
following its statutory authority to enforce U.S. trade laws.
DOC Position: Section 737(b)(1) of the Act mandates that any
antidumping duties in excess of the amount deposited be collected when
the deposit is lower than the duty determined. Therefore, importers are
on notice that the cash deposit rate is not a duty assessment rate but,
rather, an estimate dependent upon the continued cooperation of the
exporter. There is no guarantee that the final assessment rate will not
be higher than the cash deposit rate. On this point, the CIT has held
that the expectations of the U.S. importer are irrelevant in setting a
dumping margin. ``When a U.S. importer deals with a foreign company
that is subject to an antidumping duty order, the importer must realize
that the dumping margin could change to its benefit or detriment.''
Union Camp Corporation v. United States, CIT Court No. 97-03-00483,
Slip Op. 98-38 at 22 (March 27, 1998).
TPC
Comment 1: Date of Sale
TPC argues that the Department erroneously based date of sale for
TPC's EP sales on contract date, rather than invoice date, in the
preliminary results. TPC presents three primary arguments as to why the
Department should use invoice date as the date of sale, as follows.
1. TPC asserts that use of contract date as the date of sale for
TPC's EP sales is inconsistent with the Department's regulations (19
CFR 351.401(i)), which TPC interprets as providing that invoice date is
to be used not only where there are material changes between the date
of contract and the date of invoice, but also where the potential for
such change is present. While acknowledging that the date of sale
regulation allows for a date other than invoice date where such date
better reflects the date on which the material terms of sale are
established, TPC contends that the cautionary language regarding this
exception in the preamble to the Department's final regulations
(Preamble) (e.g., ``a preliminary agreement on terms, even if reduced
to writing, in an industry where renegotiation is common does not
provide any reliable indication that the terms are truly `established'
in the minds of the buyer and seller'' 5) renders the
exception inappropriate under the facts of this case. According to TPC,
the canned pineapple business is the type of industry where ``the
existence of an enforceable sales agreement between the buyer and the
seller does not alter the fact that, as a practical matter, customers
frequently change their minds and sellers are responsive to those
changes'' (citing the Preamble, 62 FR at 27348-49). Along these lines,
TPC also notes that the non-invoice date of sale example provided in
the Preamble concerns the sale of large, custom-made merchandise in
which the parties engage in formal negotiation and contracting
procedures.
---------------------------------------------------------------------------
\5\ Antidumping Duties; Countervailing Duties; Final Rule, 62 FR
27296, 27349 (May 19, 1997).
---------------------------------------------------------------------------
As a further indication that, for the Thai pineapple industry in
general, terms of sales contracts remain negotiable, TPC notes that in
the instant review the Department has relied on invoice date as the
date of sale for SFP, Malee and TIPCO in connection with
[[Page 43667]]
those respondents' EP sales. TPC maintains that there is nothing about
its contracts that make them any more enforceable or any less
renegotiable than similar contracts entered into by the other
respondents. Further, TPC argues, given that the structure of its
direct sales to the comparison market is very similar to the structure
of its EP sales, and considering that the Department based date of sale
on comparison market sales on invoice date (based on evidence of actual
changes to the material terms of sale in that market), the potential
for change similarly existed on TPC's EP sales contracts.
2. TPC argues that the Department's use of the contract date as the
date of sale is inconsistent with its current practice. According to
TPC, the Department recently clarified in Certain Cold-Rolled and
Corrosion Resistant Carbon Steel Flat Products From Korea: Final
Results of Antidumping Duty Administrative Reviews, 63 FR 13170 (March
18, 1998) (Flat Products From Korea) that the key to its date of sale
analysis is whether the material terms of sale can change up until the
invoice date, not whether any changes have actually occurred. TPC
claims that there is no record evidence in the instant review to
indicate that the terms could not be changed after the contract date--
only that for TPC's EP sales during the POR the terms did not change.
In fact, TPC argues, in Flat Products From Korea, the Department did
not discuss, nor does it appear that the respondent was required to
demonstrate, the number of changes that occurred between contract date
and invoice date for U.S. sales.
3. TPC suggests that use of invoice date as date of sale would
ensure fair price comparisons, promote consistency from one review to
the next, and would enable TPC to accurately predict which normal value
will ultimately be selected for comparison to individual U.S. sales.
Along these lines, TPC claims that use of invoice date as the date of
sale for its EP sales would be consistent with the date of sale for its
CEP and comparison market sales, noting the Department's stated
preference for comparing sales with dates of sale that are established
on the same basis as stated in 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 (September 9, 1997) (Seamless Pipe). Moreover, TPC claims,
determining the date of sale based on an empirical examination of the
actual number of changes that took place between the contract date and
the invoice date during a particular POR--and possibly changing the
basis for the date of sale from review to review--defeats two of the
objectives of the new date of sale regulation: predictability of
outcome and efficient use of the Department's resources. Otherwise, TPC
claims, it will never be sure which date will ultimately be used by the
Department in each new review unless and until a threshold number of
changes occurs.
The petitioners respond that the Department correctly based TPC's
EP date of sale on the contract date, consistent with the first
administrative review, since there were no changes made to the material
terms after this date for such sales. The petitioners state that when
the Department adopted its date of sale policy, where invoice date is
identified as the ``normal'' date of sale, it did so with the
understanding that under certain circumstances it may be appropriate to
use some other date, as explained in, e.g., Memorandum for Acting
Deputy Assistant Secretary from Team: Date of Sale in Circular Welded
Non-Alloy Steel Pipe from the Republic of Korea; Final Results of
Antidumping Duty Administrative Review, December 7, 1997.
The petitioners contend that TPC's cite to Flat Products From Korea
in an attempt to demonstrate that the key to the Department's date of
sale analysis is whether the material terms of sale can change up until
the invoice date is inaccurate. Whereas TPC states that there is no
record evidence in the instant review to indicate that the terms could
not be changed after the contract date, the petitioners state that the
only record evidence available indicates that no changes occurred to
the material terms of sale after the contract date. According to the
petitioners, this is a compelling reason to use a date other that
invoice date, and is fully consistent with Flat Products From Korea,
where the Department said that its current practice ``is to use the
date of invoice as the date of sale unless there is a compelling reason
to do otherwise.'' See Flat Products From Korea, 63 FR at 13194.
With respect to TPC's argument that, in Seamless Pipe, the
Department found that the U.S. date of sale should be invoice date
because use of the order confirmation date would mean comparing sales
for which prices were not established in the same manner, the
petitioners argue that the same rationale is precisely why the
Department's use of contract date is correct in the instant review:
this date represents the date when prices were established for all U.S.
EP sales.
The petitioners also address TPC's claims that if the Department
focuses on whether a certain number of changes has actually occurred,
instead of on whether such changes could occur, TPC would never be sure
which sales it should look to in the comparison market to ascertain
normal value. Instead, the petitioners claim, there is no guesswork
involved because TPC established the terms of sale for all U.S. EP
sales on the contract date, made no changes to price or quantity after
that date, and knew from the prior administrative review that the
Department considered these sales to have been established on the
contract date.
Finally, the petitioners state, given the severe and drastic
devaluation of the
[[Page 43668]]
Thai currency, use of the invoice date in the current and in future
reviews of this order would artificially distort the actual extent of
dumping because an exchange rate that is significantly lower than it
was when the U.S. price was contractually set would be used in the
conversion of normal value. Because TPC negotiated and established a
U.S. price on the date of the contract, the petitioners argue, the
Department's date of sale methodology should not be changed for the
final results.
DOC Position: As in the prior review, we have continued to base
TPC's EP sales on contract date. The record evidence in this segment of
the proceeding indicates that the material terms of sale were
established in the contracts that TPC entered into for such sales, and
that such terms never varied after the contract date.
In determining in the 1995-96 review to base EP sales on contract
date, we considered, and rejected, TPC's arguments that the
Department's regulations and preamble require a different result:
The general presumption in favor of invoice date continues to be
our normal practice. As explained in the preamble to the
Department's final regulations, ``in the Department's experience,
price and quantity are often subject to continued negotiation
between the buyer and seller until a sale is invoiced.'' See
Antidumping Duties; Countervailing Duties, 62 FR 27296, 27348 (May
19, 1997)(``Final Regulations'') at 27348. However, this presumption
applies ``absent satisfactory evidence that the terms of sale were
finally established on a different date.'' Id. at 27349. This caveat
reflects an awareness that, ``[i]n some cases, it may be
inappropriate to rely on the date of invoice as the date of sale,
because the evidence may indicate that, for a particular respondent,
the material terms of sale usually are established on some date
other than the date of invoice.'' Id. (emphasis added). Accordingly,
``[i]f the Department is presented with satisfactory evidence that
the material terms of sale are finally established on a date other
than the date of invoice, the Department will use that alternative
date as the date of sale.'' Id. (emphasis added). For these reasons,
while section 351.401(i) maintains the general presumption in favor
of invoice date, it provides for the use of a different date of sale
where the alternative date ``better reflects the date on which the
exporter or producer establishes the material terms of sale.''
Thus, while section 351.401(i) of our regulations maintains the
general preference in favor of the use of invoice date as the date of
sale, it does not, as TPC suggests, require such use wherever there is
any possibility for changes to the material terms of sale up to that
date. If the invoice date does not reasonably approximate the date on
which the material terms of sale were established, its use as the date
of sale in an antidumping analysis is inappropriate. The evidence on
the record indicates that there were in fact no changes to the
contracted terms of TPC's EP sales during the POR. Accordingly,
consistent with our current practice (see, e.g., Stainless Steel Bar
from India: Preliminary Results of New Shipper Antidumping Duty
Administrative Review, 63 FR at 3536, 3537 (January 23, 1998))
6 as well as with the prior review of TPC's sales (1995-96
Final Results, 63 FR at 7394), we determined that contract date is the
appropriate date of sale for TPC's EP sales.
---------------------------------------------------------------------------
\6\ Our decision to use the purchase order date as the
appropriate date of sale in that case was explained in the
preliminary results. However, no change in this decision was made
for the final results.
---------------------------------------------------------------------------
We disagree with TPC's contention that the uniform use of invoice
date as date of sale would ensure fair price comparisons. On the
contrary, the only dates that are substantively equivalent for purposes
of measuring price discrimination are the contract date for EP sales
and the invoice date for comparison market sales; although different in
name, these are the respective dates at which the material terms of
sale were established.
Our reasons for not simply basing date of sale on invoice date
across all markets, where such date does not reflect the material terms
of sale, were addressed in a recent determination involving Circular
Welded Non-Alloy Steel Pipe From the Republic of Korea; Final Results
of Antidumping Duty Administrative Review, 63 FR 32833, 32836 (June 16,
1998), as follows:
If we were to use invoice date as the date of sale for both
markets, we would effectively be comparing home market sales in any
given month to U.S. sales whose material terms were set months
earlier--an inappropriate comparison for purposes of measuring price
discrimination in a market with less than very inelastic demand.
Notwithstanding the respondent's comment that the terms of sale are
subject to change and that, therefore, the final terms are not known
until the date of invoice, we find that, in this case, there is no
information on the record indicating that the material terms of sale
change frequently enough on U.S. sales so as to give both buyers and
sellers any expectation that the final terms will differ from those
agreed to in the contract.
In that case, as in the 1995-96 Final Results, the Department
relied on contract date as the date of sale for U.S. sales other than
CEP sales out of inventory based on the reasons set forth above.
We also disagree with TPC that it has been unfairly penalized
because it is not able to predict, from review to review, which date of
sale the Department will choose. In fact, TPC has been well aware of
our practice in this regard for each of the two reviews of this case,
and our stated preference for contract date where virtually no post-
contractual changes are made has remained in place during both reviews.
TPC acknowledged early on in the first review that the Department might
find contract date to be the appropriate date of sale where the
material terms of sale where established at the contract date for
virtually all sales in a given market. See 1995-96 Final Results, 63 FR
at 7394-7395. In that review, we relied on contract date for EP and
comparison market sales, where changes were made to the contracted
terms for only one EP sale and five comparison market sales (out of
several hundred sales made in each market). Id. In this review, TPC
provided evidence of routine post-contractual changes in the material
terms of sale for third-country sales; accordingly, we agreed with the
company that invoice date was appropriate for this market. 7
In contrast, the company indicated that no EP sales had post-
contractual changes during the POR. Given the complete absence of POR
changes, and our use of contract date for EP sales in the first review
where the same company had only one post-contractual change on such
sales, the use of contract date for EP sales in this review is
consistent and predictable. Finally, given the precedent established in
this case, we are not persuaded by TPC's claim that it was unable to
predict the correct date of sale due to purported inconsistencies in
the Department's treatment of date of sale issues in other cases.
---------------------------------------------------------------------------
\7\ The frequency and the reasons for changes in contractual
terms are discussed in the business proprietary version of TPC's
October 22, 1997 questionnaire response (at 28) and in its January
20, 1998 supplemental questionnaire response (at 4).
---------------------------------------------------------------------------
Comment 2: Interest Calculation
The petitioners argue that the Department should exclude foreign
exchange gains from TPC's net interest calculation because it is
unclear and unsubstantiated from TPC's response that these gains are
related to TPC's production rather than to sales functions. According
to the petitioners, it is the Department's practice to include foreign
exchange gains and losses on financial assets and liabilities in its
calculations of COP and CV only where those gains and losses are
related to the company's production. This standard, the petitioners
assert, was not met with respect to the gains at issue because TPC did
not substantiate its claim that, after excluding certain
[[Page 43669]]
exchange gains and losses associated with interest arbitrage and
investment activities, the remaining exchange gains are attributable to
operations, as opposed to sales. 8 In fact, the petitioners
state, such gains may be attributable to accounts receivable. In this
respect, the petitioners note that the Department disallowed certain
gains related to accounts receivable made by another respondent in the
first review of this case, citing 1995-96 Final Results, 63 FR at 7401.
---------------------------------------------------------------------------
\8\ The petitioners note that TPC, in its October 22, 1997
section D questionnaire response (at 45), claims merely that these
exchange gains are ``attributed to operations.''
---------------------------------------------------------------------------
TPC responds that the Department should not exclude foreign
exchange gains and losses from its net interest calculation, labeling
as speculation the petitioners' argument that these foreign exchange
gains might include gains on export sales. Rather than point to record
evidence, TPC argues, the petitioners relied instead on the observation
that, for other companies, the Department has on occasion adjusted
interest expense to disallow foreign exchange gains on receivables. TPC
notes that the petitioners did not ask that the Department request
additional information from TPC regarding exchange gains and losses
after the company submitted its response to section D of the
Department's questionnaire. Finally, TPC states that its calculation of
foreign exchange gains and losses in this review closely tracks the
methodology that was verified and accepted in the prior review.
DOC Position: We disagree with the petitioners' assertion that
TPC's reported exchange rate gains should be disallowed. Our practice
is to include foreign exchange gains as an offset to finance expenses
if they are related to the cost of acquiring debt for purposes of
financing production operations, and to exclude this item if it relates
to sales. See Notice of Final Determination of Sales at Less Than Fair
Value: Certain Steel Concrete Reinforcing Bars from Turkey (Rebar from
Turkey), 62 FR 9737, 9741 (March 4, 1997). More specifically, we
include in COP and CV the amortized portion of net foreign exchange
gains and losses resulting from foreign-currency denominated loans as a
part of the financial expenses because they reflect the actual amount
of local currency that will have to be paid to retire the foreign-
currency denominated loan balances. See, e.g., Notice of Final
Determination of Sales at Less Than Fair Value: Fresh Atlantic Salmon
from Chile, 63 FR 31411, 31430 (June 9, 1998) (Salmon from Chile). On
the other hand, we do not consider exchange gains and losses from sales
transactions to be related to the manufacturing activities of the
company and we do not include them in the financial expense
calculation. See id.; see also Notice of Final Determination of Sales
at Less Than Fair Value: Steel Wire Rod from Trinidad and Tobago, 63 FR
9177, 9181 (February 24, 1998). In its financial expenses rate
calculation, TPC identified exchange gains attributable to debt and
exchange gains attributable to combined other operations (i.e., sales
and purchase transactions combined). Accordingly, we were able to
determine that TPC properly excluded from its calculation exchange
gains attributable to ``other operations.''
While we are not disallowing this offset based on the arguments set
forth by the petitioners, we adjusted it to reflect our practice
regarding the amortization of such gains. In its submitted financial
expense calculation, TPC included the total net exchange gains and did
not amortize its net exchange gains related to loans. For purposes of
our analysis, it is appropriate to amortize the foreign exchange gains
or losses over the life of the associated debt, as the gain or loss is
realized only as the loans are paid. See, e.g., Notice of Final Results
and Partial Rescission of Antidumping Duty Administrative Review:
Certain Welded Carbon Steel Pipe and Tube From Turkey, 63 FR 35190,
35199 (June 29, 1998) (Pipe and Tube From Turkey). Therefore, for these
final results, we amortized the net foreign exchange gains related to
loans reported in TPC's financial statements over the average remaining
life of the loans on a straight-line basis. We included the amortized
portion of the net exchange gains in the recalculation of financial
expenses. This adjustment did not change the net interest expense
reported by TPC. Due to the proprietary nature of this issue, it is
discussed in more detail in the Memorandum from Case Analyst to Office
Director: Final Results Analysis Memorandum for The Thai Pineapple
Canning Industry Corp., Ltd. (TPC) (August 7, 1998) (TPC Final Results
Analysis Memorandum).
Finally, we note that we confirmed through our review of TPC's
financial statements in connection with this issue that TPC does not
have any assets that would generate long-term interest income. It is
the Department's practice to allow a respondent to offset financial
expenses with short-term interest income earned from the general
operations of the company. See, e.g., Pipe and Tube From Turkey, 63 FR
at 35199. The Department does not offset interest expense with interest
income earned on long-term investments because long-term investments do
not relate to current operations. Id.
Comment 3: G&A Expense Calculation
The petitioners claim that TPC's reported G&A expenses are
understated for two reasons. First, they are allegedly inconsistent
with TPC's 1996 financial statements. Due to the proprietary nature of
this comment, it is discussed in more detail in the TPC Final Results
Analysis Memorandum.
Second, the petitioners claim that TPC failed to include G&A
expenses incurred by Princes, an affiliated party located in the
Netherlands that resells the foreign like product in the comparison
market (Germany). In this regard, the petitioners note that the
Department's section D questionnaire (at 53) instructed TPC to
``include in your reported G&A expenses an amount for administrative
services performed on your company's behalf by its parent company or
other affiliated party.'' The petitioners claim that, because Princes
is involved in the sale of the foreign like product in TPC's third-
country market, Princes' G&A expenses should be included.
TPC disagrees with the petitioners' contention that the
Department's questionnaire instructed TPC to include Princes' expenses
in the G&A calculation. Instead, TPC states, the Department's
instruction is intended to cover a situation where the normal
administrative functions of an exporter/producer (e.g., the financial
department or senior management functions) are provided by an
affiliated party, such as a parent corporation. TPC suggests that this
is to alleviate any concern that such services are provided without
charge or at below market rates, and is not intended to cover
situations in which affiliated resellers are performing a sales
function in other markets. In this regard, TPC states that, because
Princes acts as a sales office, its expenses are selling expenses,
which are reported in the sections B and C sales responses, whereas
TPC's G&A expenses are reported in the section D cost response.
Furthermore, TPC argues, because selling expenses incurred by Princes
are already deducted from the gross price of comparison market sales in
determining the net price used for the cost test, including Princes'
expenses in TPC's G&A would constitute double-counting of such
expenses.
DOC Position: Due to the proprietary nature of the petitioners'
assertion that TPC's reported G&A expenses are inconsistent with its
1996 financial statements, we address the claim further
[[Page 43670]]
in the TPC Final Results Analysis Memorandum.
Regarding expenses incurred by Princes, we disagree with the
petitioners' claim that TPC inappropriately excluded such expenses from
its G&A calculation. Where an affiliate's costs pertain to reselling
the merchandise to unaffiliated customers, it is our practice to treat
such expenses as selling expenses. See, e.g., Tapered Roller Bearings
and Parts Thereof, Finished and Unfinished, From the People's Republic
of China; Final Results of Antidumping Duty Administrative Review, 62
FR 61276, 61287 (November 17, 1997).9 All of the expenses
incurred by Princes were related to sales activities on behalf of TPC's
comparison market sales. Princes operates a single sales office in the
Netherlands, through which it sells canned and packaged foods, canned
fruits, fish, meats, vegetables and pastas and sauces throughout Europe
and to Japan. See TPC's October 22, 1997 questionnaire response at 12.
The evidence on the record of this review indicates that TPC correctly
included Princes' expenses in its indirect selling expense calculation.
See Exhibit B-8 of TPC's October 22, 1997, questionnaire response. For
these reasons, consistent with the prior review of this case, we have
treated these expenses as selling expenses.10
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\9\ We determined that labor expenses incurred by a respondent's
U.S. affiliate were related to selling the merchandise to the first
unaffiliated customer in the United States and were not related to
production. Therefore, we deducted such expenses from the starting
price on CEP sales rather than including the expenses in the COP.
\10\ See Memorandum to Director, Office of Accounting From
Senior Accountant: Cost of Production and Constructed Value
Memorandum for Preliminary Results; Antidumping Duty Administrative
Review, Canned Pineapple Fruit from Thailand, Thai Pineapple Canning
Industry Corp. Ltd. ( July 31, 1997). We calculated TPC's G&A using
only TPC's administrative expenses.
---------------------------------------------------------------------------
Comment 4: Comparison Market Indirect Selling Expenses
TPC claims that the Department incorrectly excluded domestic (Thai)
inventory carrying costs (DINVCART) in calculating comparison market
indirect selling expenses.
The petitioners respond that the Department properly excluded this
expense in the calculation of third-country selling expenses, just as
it properly excluded Thai inventory carrying costs from the calculation
of U.S. indirect selling expenses. The petitioners assert that this
expense is not related either to economic activities in the third-
country or U.S. markets, and therefore should be treated the same in
the normal value and CEP calculations.
DOC Position: We agree with TPC that we mistakenly omitted
inventory carrying costs incurred in Thailand when calculating
comparison market indirect selling expenses. The petitioners' reference
to restricting indirect selling expenses to ``economic activities
occurring in the United States or in the third country market'' is
overly broad, since we do not apply this standard to third-country
indirect selling expenses, only to CEP selling expenses. In calculating
the CEP, we deduct from the starting price expenses (and profit)
associated with economic activities occurring in the United States that
relate to the sale to the unaffiliated purchaser. See TPC Comment 5,
below. We do not place a corresponding limitation on comparison market
selling expenses, but instead cap such expenses (to the extent that we
adjust for them, as a CEP offset), by the amount of indirect selling
expenses deducted in calculating the CEP. See 19 CFR 351.412(f)(2).
Comment 5: U.S. Direct Selling Expenses Incurred in Thailand
TPC claims that, for CEP comparisons, the Department erroneously
both: (1) added U.S. direct selling expenses incurred in Thailand
(DDIRSELU) to normal value, and (2) subtracted them from the gross U.S.
price.
While the petitioners agree with this assertion, they claim that
the Department failed to add U.S. warranty expenses to normal value for
EP comparisons.
DOC Position: Regarding our treatment of U.S. direct selling
expenses incurred in Thailand, we have added such expenses to normal
value for both CEP and EP comparisons. In calculating CEP, we deduct
from the starting price expenses (and profit) associated with economic
activities occurring in the United States 11 that relate to
the sale to the unaffiliated purchaser. See 19 CFR 351.402(b). We do
not adjust for any expense that is related solely to the sale to an
affiliated importer in the United States. However, we may make a COS
adjustment to normal value for such expenses. Id.
---------------------------------------------------------------------------
\11\ See the SAA at 823 discussing section 772(d)(1) of the Act.
---------------------------------------------------------------------------
The expenses reported under variable DDIRSELU are related to bank
fees incurred by TPC in Thailand. Exhibit 7C of TPC's October 22, 1997
questionnaire response clearly shows that these expenses were incurred
on sales to MIC, TPC's U.S. affiliate. As explained above, such
expenses may not be deducted from the starting price in calculating the
CEP. Therefore, while we intended to add this expense to normal value
as a COS adjustment, we have corrected the erroneous deduction from the
starting price in the United States.
We also agree with the petitioners' claim that any warranty
expenses incurred by TPC with respect to its EP sales should be added
to normal value as a COS adjustment.
Comment 6: Commission Offset
The petitioners claim that the Department failed to make a
commission offset for CEP comparisons involving home market commissions
but no U.S. commissions. According to the petitioners, such an offset
should be made as an upward adjustment to normal value, using the
lesser of home market commissions or indirect selling expenses incurred
in Thailand on U.S. sales. The petitioners note that, while U.S.-
incurred indirect selling expenses were deducted from the starting
price in calculating the CEP, Thai-incurred indirect selling expenses
were not.
TPC responds that the Department's preliminary margin program is in
this respect fully in accordance with the Department's current
practice, and claims that the petitioners' proposal would incorrectly
adjust for indirect selling expenses incurred in Thailand on sales made
to TPC's affiliate in the United States, which is contrary to section
772(d) of the Act and with Department practice. In this regard, TPC
cites Certain Stainless Steel Wire Rods from France: Final Results of
Antidumping Duty Administrative Review, 63 FR 30185, 30191 (June 3,
1998) in support of the proposition that the Department ``does not
deduct indirect selling expenses incurred in selling to the affiliated
U.S. importer under section 772(d) of the Act.''
DOC Position: We agree with the petitioners that a commission
offset, based on the lesser of home market commissions or those
indirect selling expenses incurred on U.S. sales that are not
associated with economic activities in the United States, is
appropriate for CEP comparisons involving commissions in the home
market but not in the U.S. market. Contrary to TPC's claim, this would
not involve the deduction from the U.S. starting price of indirect
expenses not associated with economic activities in the United States.
We have not deducted such expenses in arriving at the constructed
export price, in accordance with section 772(d) of the Act and the SAA.
However, having constructed an export price, it is appropriate to add
such expenses to normal value as a commission offset for
[[Page 43671]]
comparisons involving home market commissions but no U.S. commissions,
just as we would do so generally in an export price analysis. This in
accordance with the Department's regulations, which preclude a downward
adjustment to the U.S. starting price for such expenses in determining
the CEP, but allow for a COS adjustment to normal value for such
expenses, pursuant to section 773(a)(6)(C)(iii) of the Act. See 19 CFR
351.402(b); see also 19 CFR 351.410(e) (``The Secretary normally will
make a reasonable allowance for other selling expenses if the Secretary
makes a reasonable allowance for commissions in one of the markets
under considerations [sic], and no commission is paid in the other
market under consideration.'').
TIPCO
Comment 1:
The petitioners argue that the Department should recalculate
TIPCO's G&A and interest expense ratios in accordance with the
Department's normal practice.
First, the petitioners claim that TIPCO has understated its actual
G&A ratio because record evidence indicates that TIPCO calculated the
ratio using an unconsolidated G&A expense amount as the numerator and
what appears to be a consolidated cost of goods sold (COGS) amount as
the denominator. The petitioners state that the Department should
recalculate TIPCO's G&A ratio using the 1996 unconsolidated COGS amount
from Exhibit 20 of TIPCO's October 20, 1997, questionnaire response.
In addition, the petitioners argue that TIPCO failed to submit its
1996 consolidated financial statements in accordance with the
Department's instructions and, as a result, the Department cannot
corroborate the reported 1996 consolidated interest expenses or the
1996 consolidated cost of goods sold figures, which were used to
calculate the reported interest expense ratio. Therefore, the
petitioners suggest that the Department use, as facts available,
TIPCO's 1995 consolidated financial statements to recalculate TIPCO's
interest expense ratio.
Finally, the petitioners argue that TIPCO improperly deducted an
amount for foreign exchange gains from its 1996 interest expenses to
arrive at its net interest expense ratio. According to the petitioners,
deducting the exchange gain from the interest expense amount does not
reflect the Department's policy since there is no evidence on the
record to demonstrate that these exchange gains were related to TIPCO's
production. The petitioners claim that in the prior review the
Department excluded exchange gains from the net interest expense
calculation when TIPCO failed to provide support for its claim that
exchange gains were related to financing activities (citing 1995-96
Final Results, 63 FR at 7401).
TIPCO did not comment on the calculation of its G&A expense.
Regarding the interest expense, TIPCO responds, first, that the
petitioners' assertion that the Department cannot corroborate the
interest expenses and COGS information appearing in TIPCO's 1996
consolidated financial statements is incorrect, claiming that the
information needed for corroboration is already on the record for this
proceeding because the complete 1996 consolidated financial statements
were submitted to the Department during the verification of the prior
review. TIPCO adds that the information it submitted during the first
review is part of the record for this review, noting that section
357.104(a) of the Department's regulations provides that the Department
maintains ``an official record of each antidumping and countervailing
duty proceeding'' and that a ``proceeding'' as defined by the
Department's regulations includes the time period covering multiple
reviews.12 Accordingly, TIPCO claims, the Department should
adhere in the final results to the interest expense calculation used in
the preliminary results.
---------------------------------------------------------------------------
\12\ TIPCO cites section 351.102(a) of the Department's
regulations as stating that a proceeding ``begins on the date of
filing a petition * * * and ends on the date of publication of the
earliest notice of: (1) Dismissal of petition, (2) Revision of
initiation, (3) Termination of investigation, (4) A negative
determination that has the effect of terminating the proceedings,
(5) Revocation of an order, or (6) Termination of a suspended
investigation.''
---------------------------------------------------------------------------
Second, regarding the exchange gain offset to interest expense,
TIPCO maintains that in its supplemental questionnaire response it
corrected its deduction of exchange gains from interest expenses for
precisely the reason put forth by the petitioners, i.e., in light of
the Department's finding in the final results of the prior review.
Thus, TIPCO claims, its interest calculation is in accordance with the
Department's decision in the prior review.
DOC Position: Regarding TIPCO's reported G&A expense, we agree with
the petitioners that the numerator and denominator were not calculated
on the same basis. We have corrected the denominator in the manner
suggested by the petitioners, to reflect a G&A ratio based on TIPCO's
unconsolidated G&A expenses in relationship to its unconsolidated COGS.
See Notice of Final Determination of Sales at Less Than Fair Value:
Stainless Steel Wire Rod from Japan, 63 FR 40434, 40440 (July 29,
1998).
Regarding the petitioners' claims concerning TIPCO's reported
interest expense, we have accepted this expense as reported for the
following reasons. First, we disagree with the petitioners' assertion
that TIPCO's reported 1996 interest expense and cost of goods sold
amounts must be disallowed due to insufficient documentation. Based on
the information provided by TIPCO in this case, as well as the absence
of any evidence to call into question the reliability of these figures,
we have accepted these items as reported, in accordance with our normal
practice.
In addition, we have allowed TIPCO's claimed exchange gain offset
to interest expense. The amount that the petitioners assert was claimed
as an offset reflects that reported in the initial response.
Subsequently, TIPCO reduced its reported exchange gain to a minor
fraction of that originally claimed, explaining that it was doing so in
light of our treatment of the company's exchange gains and losses in
the 1995-96 final results.13 We note that TIPCO made this
reduction to its interest offset on its own initiative, as part of its
supplemental questionnaire response. See TIPCO's February 9, 1998,
supplemental questionnaire response (at 63 and at Exhibit 23B). For
these reasons, we have accepted TIPCO's reported interest expenses for
these final results.
---------------------------------------------------------------------------
\13\ Contrary to the petitioners' assertion that we disallowed
TIPCO's exchange rate gains generally in the 1995-96 final results,
in fact we excluded only those exchange rate gains and losses
related to accounts receivable, while including those relating to
loans. 1995-96 Final Results, 63 FR at 7401.
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SIFCO
Comment 1: Appropriate Comparison Market
SIFCO contends that the Department's selection of Japan as the
appropriate comparison market to be used as the basis for normal value
was erroneous. Instead, while acknowledging that Japan is the most
viable third-country market in terms of volume and value of sales,
SIFCO claims that Canada is the most appropriate comparison market in
terms of price, cost of production, similarity of merchandise, and
market size.
According to SIFCO, during verification it used samples to
demonstrate the difference between the grade of merchandise sold to
Japan
[[Page 43672]]
versus that sold to the United States. SIFCO adds that in the sales
verification report, the Department concluded that the products were
sorted according to specifications reported in SIFCO's January 13,
1998, questionnaire response (at Appendix 2), and that the products
destined for Japan were generally more yellow in color than the
products destined for other countries. Based on those results, SIFCO
argues, Japan is not the most appropriate comparison market because the
merchandise sold to Japan is not similar in every aspect to the
merchandise sold to the United States.
Furthermore, SIFCO claims that where prices in more than one third
in a country satisfy the criteria of section 773(a)(1)(B)(ii) of the
Act,14 section 351.404(e)(1) of the Department's regulations
provides that the Department generally will select the third country in
which ``[t]he foreign like product exported to a particular third
country is more similar to the subject merchandise exported to the
United States than is the foreign like product exported to other third
countries.'' SIFCO claims that its reported sales data indicate that
the merchandise sold to Japan was particular to the Japanese market,
whereas most of the merchandise sold to Canada was also sold to the
United States; therefore, the Department should use sales of the
foreign like product to Canada as the basis for its calculation of
normal value.
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\14\ Normal value is based on prices at which the foreign like
product is sold (or offered for sale) for consumption in a country
other than the exporting country or the United States, if (I) such
price is representative, (II) the aggregate quantity (or, if
quantity is not appropriate, value) of the foreign like product sold
by the exporter or producer in such other country is 5 percent or
more of the aggregate quantity (or value) of the subject merchandise
sold in the United States or for export to the United States, and
(III) the administering authority does not determine that the
particular market situation in such other country prevents a proper
comparison with the export price or constructed export price.
---------------------------------------------------------------------------
The petitioners respond, first, that the volume of SIFCO's sales to
Japan was substantially greater than the volume of its sales to Canada,
noting that, in accordance with section 351.404(e) of the Department's
regulations, volume of sales is one of the primary criteria in the
Department's selection of third-country markets. The petitioners
contend that, in view of the magnitude of the sales volume to Japan
and, because SIFCO has failed to prove that Japan represents a
particular market situation such that it does not permit a proper
comparison with the export price, the Department cannot reject Japan as
the appropriate comparison market.
Second, the petitioners assert that the ``nominal'' product
differences between SIFCO's Japanese sales and its U.S. sales do not
render the Japanese market an unsuitable basis for normal value. The
petitioners claim that the only differences claimed by SIFCO that would
distinguish between the Japanese and the U.S. markets are in color and
in trimming. Moreover, the petitioners argue that these differences are
of little relevance to the selection of the appropriate comparison
market because the majority of SIFCO's sales to Japan and to the United
States were of standard grade. Acknowledging that fancy grade was sold
only to Japan, the petitioners state that it nevertheless accounted for
a relatively small volume (19 percent) of SIFCO's total Japanese sales.
Finally, the petitioners argue, Canada cannot be used as the
comparison market for determining normal value because SIFCO's sales to
Canada were not verified. Instead, the petitioners state, the
Department verified SIFCO's sales to Japan and found no evidence that
Japan is inappropriate as the comparison market. Finally, the
petitioners argue that SIFCO's argument in favor of Canada as the
appropriate comparison market was untimely, because, in accordance with
section 351.301(d) of the Department's regulations, claims with respect
to the proper comparison market must be made within 40 days of the
transmittal of the questionnaire.
DOC Position: For these final results, we have continued to rely on
Japan as the comparison market for SIFCO. This market is the most
appropriate choice, considering both volume of sales and product
comparability. With respect to sales volume, SIFCO's sales to Japan
were approximately twice the volume of sales to Canada. In terms of
product comparability, while SIFCO focuses on the fancy grade
merchandise involved in a minority of sales to Japan, we note that
SIFCO's POR sales to both Japan and the United States were
predominantly of standard grade; such sales accounted for over 80
percent of the merchandise sold to both markets. While we recognize
SIFCO's claim that certain of its other sales to Japan are fancy grade,
this fact alone does not preclude our use of Japan as the comparison
market. For these reasons, we continue to find that Japan is the most
comparison market for SIFCO under the standard set forth in the
Department's regulations. See 19 CFR 351.404(e)(1) and (2) (regarding
product comparability and sales volume, respectively, as relevant
criteria for third-country market selection).
Comment 2: Allocation of Sugar Costs
SIFCO argues that, in the preliminary results, sugar costs were
erroneously included in the cost of manufacture for U.S. sales.
Instead, SIFCO claims, all sugar costs should be allocated to the cost
of manufacturing for sales to Japan. SIFCO points out that in its
January 9, 1998, questionnaire response (at Appendix 6), it requested
that sugar costs be excluded from the cost of manufacturing for sales
to the United States because, as indicated by SIFCO's reported U.S.
sales data, all products sold to the United States were packed in
natural juice.
Contrary to SIFCO's claim, the petitioners argue that, during the
POR, SIFCO sold to the United States canned pineapple fruit packed in
heavy syrup. Notwithstanding the fact that the Department's cost
verification report (at 2) 15 also states that all SIFCO's
products sold to the United States were packed in natural juice, the
petitioners note that Exhibit S-1 of the sales verification report
indicates a particular sale to the United States packed in heavy syrup.
Therefore, the petitioners argue, sugar costs should not be excluded
from the cost of manufacturing of any products that contain
sugar.16
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\15\ Memorandum to Office Director from Case Analysts:
Verification of the Cost of Production and Constructed Value Data
Submitted by Siam Fruit Canning (1988) Co. Ltd., in the 1996-97
Administrative Review of the Antidumping Duty Order on Canned
Pineapple Fruit From Thailand, June 3, 1998.
\16\ Heavy syrup contains sugar.
---------------------------------------------------------------------------
The petitioners add that SIFCO's claim that sugar costs should be
excluded from the calculation of cost of manufacturing for U.S. sales
is irrelevant because CV was not used as normal value, as all U.S.
sales were compared to sales in Japan. Finally, the petitioners argue
that, because all sales to Japan were packed in syrup, sugar costs
should not be removed from the costs of manufacturing for purposes of
the test of sales to Japan made below the cost of production.
DOC Position: We acknowledge that in the cost verification report
we erroneously stated that all of SIFCO's sales to the United States
were packed in natural juice. The petitioners are correct in pointing
out that the invoice attached to the sales verification report
17 as Exhibit S-1 does indicate that this U.S. sale was
packed in syrup. We have reexamined SIFCO's reported U.S. sales list
and have determined that
[[Page 43673]]
this represents the only such sale during the POR. For the final
results we have allocated sugar costs to all products that contained
sugar.
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\17\ Memorandum to Office Director from Case Analysts:
Verification of Sales Information Submitted by Siam Fruit Canning
(1988) Co. Ltd., in the 1996-97 Administrative Review of the
Antidumping Duty Order on Canned Pineapple Fruit From Thailand, June
3, 1998.
---------------------------------------------------------------------------
Malee
Comment 1: Calculation of G&A Expenses
The petitioners assert that the G&A expenses for Malee Supply
(1994) Co., Ltd. (Malee Supply) should be included in the calculation
of Malee's G&A expenses because Malee Supply is a distributor of CPF in
the home market. According to the petitioners, the Department's
questionnaire (at D-20) explicitly instructs the respondent to include
all relevant G&A incurred in connection with the production and sale of
the foreign like product, including ``an amount for administrative
services performed on your company's behalf by its parent company of
other affiliated party.''
Malee responds that the Department should not include Malee
Supply's selling and administrative expenses in the calculation of
Malee's COP and CV because doing so would mis-classify selling expenses
as production costs, and would also result in the double-counting of
such expenses since Malee has already reported them as selling
expenses. Malee states that Malee Supply, as Malee's subsidiary selling
arm, has no other purpose than to perform selling functions and,
therefore, its G&A expenses should be deemed selling expenses to be
used as adjustments to home market price. In addition, Malee argues
that even in cases where a selling agent has participated in further
manufacturing, the Department has treated SG&A expenses as selling
expenses, citing, e.g., Oil Country Tubular Goods from Argentina; Final
Determination of Sales at Less than Fair Value, 60 FR 33539, 33550
(June 28, 1995) (OCTG From Argentina).
DOC Position: As we stated in response to TPC Comment 3, above,
where an affiliate's costs pertain to reselling the merchandise to
unaffiliated customers, it is our practice to treat such expenses as
selling expenses. All of the expenses incurred by Malee Supply were
related to sales activities on behalf of Malee's home market sales. See
Page B-30 and Exhibit B-14 of Malee's October 21, 1997, response.
Accordingly, we have treated these expenses as selling expenses.
Comment 2: Calculation of Interest
The petitioners argue that Malee should have calculated its
interest factor based on Malee's consolidated financial statements, in
accordance with the Department's normal practice, citing Gray Portland
Cement and Clinker from Mexico: Final Results of Antidumping Duty
Administrative Review, 62 FR 17148, 17160 (April 9, 1997) (Cement from
Mexico), and Camargo Correa Metais, S.A. v. United States, 17 CIT 897
(1993).
Malee agrees with the petitioners' suggestion.
DOC Position: In accordance with the Department's practice (see
Cement from Mexico, 62 FR at 17160), we have recalculated Malee's
interest factor net of Malee's short-term interest income.
Comment 3: Conversion of U.S. Duty
Malee argues that, in the preliminary results, the Department
failed to convert to U.S. dollars those U.S. duty expenses reported in
Thai baht.
The petitioners respond that, acccording to Malee's October 20,
1997, questionnaire response (at C 25-26), Malee's U.S. duty was
reported in U.S. dollars and no conversion is necessary.
DOC Position: We agree with the petitioners and have not made any
adjustments to U.S. duty in the margin calculation.
Final Results of Review
As a result of our review, we determine that the following
percentage weighted-average margins exist for the period July 1, 1996,
through June 30, 1997:
------------------------------------------------------------------------
Margin
Manufacturer/exporter (percent)
------------------------------------------------------------------------
Siam Food Products Public Company Ltd....................... 0.59
The Thai Pineapple Public Company, Ltd...................... 5.24
Thai Pineapple Canning Industry Corp., Ltd.................. 4.37
Malee Sampran Factory Public Company Ltd.................... 0.30
The Prachuab Fruit Canning Co. Ltd.......................... 11.87
Siam Fruit Canning (1988) Co. Ltd........................... 5.41
Vita Food Factory (1989) Co. Ltd............................ 51.16
------------------------------------------------------------------------
The Department shall determine, and the Customs Service shall
assess, antidumping duties on all appropriate entries. In accordance
with 19 CFR 351.212(b)(1), we have calculated importer-specific
assessment rates by dividing the dumping margin found on the subject
merchandise examined by the entered value of such merchandise. We will
direct the Customs Service to assess antidumping duties by applying the
assessment rate to the entered value of the merchandise.
Furthermore, the following deposit requirements will be effective
for all shipments of the subject merchandise entered, or withdrawn from
warehouse, for consumption on or after the publication date of these
final results of administrative review, as provided by section 751(a)
of the Act: (1) for the companies named above, the cash deposit rate
will be the rate listed above, except if the rate is less than 0.5
percent and, therefore, de minimis, the cash deposit will be zero; (2)
for merchandise exported by manufacturers or exporters not covered in
this review but covered in a previous segment of this proceeding, the
cash deposit rate will continue to be the company-specific rate
published in the most recent final results in which that manufacturer
or exporter participated; (3) if the exporter is not a firm covered in
this review or in any previous segment of this proceeding, but the
manufacturer is, the cash deposit rate will be that established for the
manufacturer of the merchandise in these final results of review or in
the most recent final results in which that manufacturer participated;
and (4) if neither the exporter nor the manufacturer is a firm covered
in this review or in any previous segment of this proceeding, the cash
deposit rate will be 24.64 percent, the all others rate established in
the LTFV investigation. These deposit requirements shall remain in
effect until publication of the final results of the next
administrative review.
This notice also serves as final reminder to importers of their
responsibility 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 in the subsequent assessment of double antidumping
duties.
This notice also is the only reminder to parties subject to
administrative protective order (APO) of their responsibility
concerning the return or destruction of proprietary information
disclosed under APO in accordance with 19 CFR 353.34(d). Failure to
comply is a violation of the APO.
This determination is issued and published in accordance with
sections 751(a)(1) and 777(i)(1) of the Act.
[[Page 43674]]
Dated: August 7, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-21927 Filed 8-13-98; 8:45 am]
BILLING CODE 3510-DS-P