[Federal Register Volume 63, Number 220 (Monday, November 16, 1998)]
[Notices]
[Pages 63671-63706]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-30414]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-588-028]
Roller Chain, Other Than Bicycle From Japan: Final Results and
Partial Recission of Antidumping Duty Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce
ACTION: Notice of Final Results and Partial Recission of Antidumping
Duty Administrative Review
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SUMMARY: On May 8, 1998, the Department of Commerce (the Department)
published the preliminary results and partial recission of the
administrative review of the antidumping duty order on roller chain,
other than bicycle, from Japan. This review covers fourteen
manufacturers/exporters/resellers of roller chain from Japan during the
period April 1, 1996, through March 31, 1997.
Based on our analysis of the comments received and the correction
of certain clerical errors, we have changed our results from those
presented in our preliminary results as described below in the
``Changes From the Preliminary Results'' section of this notice. The
final results are listed below in the section ``Final Results of
Review.''
EFFECTIVE DATE: November 16, 1998.
FOR FURTHER INFORMATION CONTACT: Ron Trentham or Cameron Werker, AD/CVD
Enforcement, Group II, Office Four, Import Administration,
International Trade Administration, U.S. Department of Commerce, 14th
Street and Constitution Avenue, N.W., Washington, D.C. 20230;
telephone: (202) 482-6320 and (202) 482-3874, respectively.
SUPPLEMENTARY INFORMATION:
The 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)
[[Page 63672]]
by the Uruguay Round Agreements Act (URAA). In addition, unless
otherwise indicated, all citations to the Department's regulations are
to the provisions codified at 19 CFR Part 353 (April 1997). Although
the Department's new regulations, codified at 19 CFR 351 (62 FR 27926
(May 19, 1997)) (``Final Regulations''), do not govern this
administrative review, citations to these regulations are provided,
where appropriate, as a statement of current Departmental practice.
Background
On May 8, 1998, the Department published its preliminary results of
review, Notice of Preliminary Results and Partial Rescission of
Antidumping Duty Administrative Review: Roller Chain, Other than
Bicycle, from Japan, 63 FR 25450 (RC 96-97 Preliminary Results), of the
antidumping finding on roller chain, other than bicycle, from Japan (38
FR 9926, April 12, 1973).
We gave interested parties an opportunity to comment on the
preliminary results. We received comments from: (1) Daido Kogyo Company
Ltd. (DK); (2) Izumi Chain Mfg. Company Ltd., (Izumi); (3) Pulton Chain
Company Inc. (Pulton); (4) R.K. Excel Company Ltd. (RK);
(5) Kaga Chain Manufacturer (Kaga); (6) Oriental Chain Company
(OCM); (7) Sugiyama Chain Company, Ltd. (Sugiyama); and (8) Tsubakimoto
Chain Co./U.S.-Tsubaki (Tsubakimoto), (collectively, the respondents),
and the petitioner (the American Chain Association (ACA)), on July 2,
1998.
On July 13, 1998, the same parties submitted rebuttal comments. We
received additional comments and rebuttal comments on September 1,
1998, and September 9, 1998, respectively, from Izumi, Sugiyama,
Tsubakimoto, the petitioner, and from an interested party, Jeffrey
Chain Company (Jeffrey Chain). We held a hearing on September 24, 1998,
to give interested parties the opportunity to express their views
directly to the Department. A segment of this hearing was closed to the
public in order to protect certain proprietary information. Based on
our analysis of the comments received and the correction of certain
clerical and computer programming errors, we have made changes from the
preliminary results, as described below in ``Changes From the
Preliminary Results'' and ``Interested Party Comments'' section of this
notice. The final results are listed below in the section ``Final
Results of Review.'' The Department has now completed this
administrative review in accordance with Section 751(a) of the Act.
Scope of the Review
The merchandise subject to this review is roller chain, other than
bicycle, from Japan. The term ``roller chain, other than bicycle,'' as
used in this review, includes chain, with or without attachments,
whether or not plated or coated, and whether or not manufactured to
American or British standards, which is used for power transmissions
and/or conveyance. This chain consists of a series of alternately-
assembled roller links and pin links in which the pins articulate
inside from the bushings and the rollers are free to turn on the
bushings. Pins and bushings are press fit in their respective link
plates. Chain may be single strand, having one row of roller links, or
multiple strand, having more than one row of roller links. The center
plates are located between the strands of roller links. Such chain may
be either single or double pitch and may be used as power transmission
or conveyor chain. This review also covers leaf chain, which consists
of a series of link plates alternately assembled with pins in such a
way that the joint is free to articulate between adjoining pitches.
This review further covers chain model numbers 25 and 35. Roller chain
is currently classified under the Harmonized Tariff Schedule of the
United States (HTSUS) subheading 7315.11.00 through 7619.90.00.
Although the HTSUS subheadings are provided for convenience and Customs
purposes, the written description remains dispositive.
On March 24, 1998, the Department determined that certain models of
silent timing chain produced and exported by Kaga for use in
automobiles are outside the scope of the antidumping finding. (See
Final Scope Ruling: Kaga's Request for Scope Ruling on Automotive
Silent Timing Chain, March 24, 1998 on file in room B-099 of the Main
Commerce Building).
Verification
As provided in section 782(i) of the Act, on July 6, 1998, the
Department conducted a partial verification, at the Department in
Washington, D.C., of the differences in merchandise (DIFMER)
information provided by Sugiyama. We used standard verification
procedures, including examination of relevant accounting, sales, and
other financial records containing relevant information. Our
verification results are outlined in the verification report on file in
the Central Records Unit (CRU) in room B-099 of the main Commerce
building, (see Memorandum to Holly Kuga from the Team, Regarding the
``Verification of the Cost of Manufacture and Variable Cost of
Manufacture Questionnaire Responses of Roller Chain, Other than
Bicycle, from Japan--Sugiyama Chain Co., Ltd.,--Administrative Review,
1996-1997,'' dated August 13, 1998 (Sugiyama Verification Report)).
Partial Rescission of Review
In our preliminary results, we determined that during the period of
review (POR), Peer Chain Co., (Peer) made no shipments of subject
merchandise to the United States. We confirmed with the United States
Customs Service (Customs) that Peer did not have entries of subject
roller chain during the POR. Therefore, we rescinded this review with
respect to Peer.
Hitachi Metals Techno, Ltd. (HMTL) is affiliated with a roller
chain producer subject to this annual review. During this POR, HMTL and
HMTL/Hitachi Maxco, Ltd., made no shipments of roller chain to the
United States. We confirmed with Customs that HMTL and HMTL/Hitachi
Maxco, Ltd., did not have entries of subject roller chain during the
POR. Consequently the issue of a separate review rate for HMTL and
HMTL/Hitachi Maxco, Ltd., is moot and we rescinded the review for this
reason with respect to these parties.
In addition, we determined in our preliminary results that we did
not have a basis to consider Daido Tsusho (DT), Nissho Iwai Corporation
(NIC) and Alloy Tool Steel Inc. (ATSI) for separate rates in this
review and rescinded the reviews for these entities. See RC 96-97
Preliminary Results at 25451.
Changes From the Preliminary Results
We calculated export price (EP), constructed export price (CEP),
and normal value (NV) based on the same methodology used in the
preliminary results with the exceptions discussed below. Where
applicable, we have cited to the relevant interested party comment;
otherwise, we address these changes further in the company-specific
final analysis memoranda on file in the CRU.
1. We modified the model match methodology with regard to matching
similar merchandise. See the Department Position to Model Match Comment
1, below.
2. With respect to DK, we have made a CEP-offset adjustment to NV
in our calculations and have corrected one clerical error. See the
Department Position to DK Comments 1 and 2 below.
3. We have corrected for a programming error for RK which
overstated the quantity and understated
[[Page 63673]]
the price of RK's chain sold in kits in the United States.
4. We have determined that the use of facts otherwise available is
warranted for Sugiyama and Kaga.
Facts Available (FA)
In accordance with section 776(a) of the Act, we have determined
that the use of adverse facts available is warranted for Izumi, Kaga,
OCM, Pulton, and Sugiyama for these final results of review.
1. Application of FA
Section 776(a) of the Act provides that, if an interested party
withholds information that has been requested by the Department, fails
to provide such information in a timely manner or in the form or manner
requested, significantly impedes a proceeding under the antidumping
statute, or provides information which cannot be verified, the
Department shall use, subject to sections 782(d) and (e), facts
otherwise available in reaching the applicable determination. In this
review, as described in detail below, the above-referenced companies
failed to provide the necessary information in the form and manner
requested, and, in some instances, the submitted information could not
be verified. Thus, pursuant to section 776(a) of the Act, the
Department is required to apply, subject to section 782(d), facts
otherwise available.
Section 782(d) of the Act provides that, if the Department
determines that a response to a request for information does not comply
with the request, the Department will inform the person submitting the
response of the nature of the deficiency and shall, to the extent
practicable, provide that person the opportunity to remedy or explain
the deficiency. If that person submits further information that
continues to be unsatisfactory, or this information is not submitted
within the applicable time limits, the Department may, subject to
section 782(e), disregard all or part of the original and subsequent
responses, as appropriate.
Pursuant to section 782(e) of the Act, notwithstanding the
Department's determination that the submitted information is
``deficient'' under section 782(d) of the Act, the Department shall not
decline to consider such information if all of the following
requirements are satisfied: (1) the information is submitted by the
established deadline; (2) the information can be verified; (3) the
information is not so incomplete that it cannot serve as a reliable
basis for reaching the applicable determination; (4) the interested
party has demonstrated that it acted to the best of its ability; and
(5) the information can be used without undue difficulties.
2. Selection of Facts Available
In selecting from among the facts otherwise available, section
776(b) of the Act authorizes the Department to use an adverse inference
if the Department finds that an interested party failed to cooperate by
not acting to the best of its ability to comply with the request for
information. See, e.g., Certain Welded Carbon Steel Pipes and Tubes
From Thailand: Final Results of Antidumping Duty Administrative Review,
62 FR 53808, 53819-20 (Oct. 16, 1997) (Pipe and Tubes From Thailand).
A. Total FA
Sugiyama
1. Application of FA
In accordance with section 782(d) of the Act, on August 15, 1997,
December 30, 1997, and January 19, 1998, the Department issued
supplemental questionnaires to Sugiyama, addressing multiple
deficiencies in its questionnaire responses. In addition, Department
officials met with Sugiyama's counsel to discuss these deficiencies and
how they could be cured. See Memorandum to the File from Cameron Werker
(February 6, 1998) on file in the CRU. However, as we discuss below,
the information submitted by Sugiyama in its supplemental questionnaire
responses continued to be inadequate and/or inappropriate for use in
our margin analysis.
In the preliminary results, the Department excluded from its margin
calculations home market sales submitted by Sugiyama after the deadline
for submission of factual information, and determined to apply adverse
FA to those U.S. transactions where the NV relied in whole or in part
on the untimely submitted sales. At that point, we explained that we
would address the appropriateness of including these untimely sales in
our margin analysis in the final results. See RC 96-97 Preliminary
Results at 25456. We further found that Sugiyama had failed to
cooperate to the best of its ability, and determined that, in selecting
among the FA to apply to the sales in question, an adverse inference
was warranted. We consequently assigned, as adverse FA, the rate of
42.48 percent that was calculated for Kaga in the preliminary results.
Id.
Following the preliminary determination, on June 8, 1998, we met
with Sugiyama's counsel, who informed us of additional deficiencies in
the company's questionnaire responses. Specifically, Sugiyama's counsel
informed the Department that: (1) the company failed to report key
information regarding certain affiliated reseller relationships; (2)
the company failed to report any home market sales of chain purchased
from other manufacturers subject to this review, and resold in the home
market; (3) the company does not maintain and, therefore, was unable to
report standard or product costs; and (4) Sugiyama reported estimated
model-specific overhead, material usage, and labor cost allocations
based on the company's ``experience,'' rather than supporting
documentation. For a detailed discussion of these deficiencies, see
Memorandum to the File from Jack K. Dulberger Regarding ``Meeting with
Representatives of Sugiyama Chain Company, Ltd., Regarding the 1996-97
Administrative Review of Roller Chain, Other Than Bicycle, from Japan''
(June 17, 1998) on file in the CRU.
Given the potentially significant impact of these data deficiencies
on our margin analysis, we decided to conduct a limited verification of
Sugiyama's reported DIFMER information (variable and fixed cost of
manufacturing data). The purpose of this partial verification was to
ascertain the reliability of the DIFMER response, so that the
Department would be able to decide whether to proceed with regular
verification of Sugiyama's facilities in Japan. We conducted this
verification on July 6, 1998, in Washington, D.C., and concluded that
Sugiyama was unable to demonstrate the reliability and completeness of
its cost data. Taking into account the fact that the unreliable DIFMER
data affected a significant portion of total U.S. sales, we were unable
to ascertain what portion of U.S. sales would be affected by the
unreported affiliations and unreported home market sales, and other
known deficiencies in the response, we determined to cancel the
scheduled verification of Sugiyama in Japan. For a more detailed
discussion of our verification findings, see the Sugiyama Verification
Report.
We further determined that Sugiyama failed to satisfy the five
requirements enunciated by section 782(e) of the Act. First, a
significant portion of the company's home market sales was untimely
submitted. Second, because Sugiyama lacked necessary documentation to
support its reported costs (see Summary of Results of the Partial-
Verification section in the Memorandum to Maria Harris Tildon from Holy
Kuga Regarding ``Determination of FA Based on Unreliable and/or
Deficient Data for
[[Page 63674]]
Sugiyama'' (August 14, 1998) (Sugiyama FA Memorandum) on file in the
CRU), a substantial portion of its response data could not be verified.
Third, because over 40 percent of the company's home market sales were
untimely submitted, additional home market sales were not reported at
all, and Sugiyama failed to disclose in its questionnaire responses
relevant information regarding certain corporate affiliations, the
information is so incomplete that it cannot serve as a reliable basis
for reaching the applicable determination. Fourth, Sugiyama did not
demonstrate that it acted to the best of its ability in providing the
necessary information. As explained above, and as detailed in the
Sugiyama FA Memorandum, after the November 17 deadline established for
submission of new factual information in this review, Sugiyama
continued to submit partial corrections to its timely submitted data
and to the untimely submitted home market affiliated sales information
that it provided to the Department for the first time on January 27,
1998. Finally, even if Sugiyama's submissions contained complete and
accurate information, the Department would not be able to use it
without undue difficulty in light of the magnitude of the submitted
corrections and clarifications.
For the reasons stated above, the application of section 782(e) of
the Act does not overcome section 776(a)'s direction to use facts
otherwise available for Sugiyama's submissions. We have thus concluded
that a determination predicated upon total FA is warranted in this
case.
2. Selection of FA. As discussed above, we found significant
problems with Sugiyama's submissions. Although we addressed the
company's deficiencies with respect to the home market sales database
in several supplemental questionnaires, Sugiyama failed to report a
significant portion of its home market sales. Specifically, Sugiyama
originally reported that one of its affiliated home market resellers
had sales to two customers in the home market during the POR. However,
in its revised database submitted in January 1998, Sugiyama included
previously unreported sales by that reseller to multiple additional
customers. After careful review of this submission, we discovered that
Sugiyama had increased its home market sales database by more than 40
percent. See RC 1996-1997 Preliminary Results at 25456. Moreover,
following the preliminary results, Sugiyama disclosed additional
reporting problems, including its failure to report key information
regarding company affiliations, which precluded the Department from
conducting an arms-length test, or from determining what percentage of
U.S. sales was affected by this omission without admitting new
information from Sugiyama. As described in detail in the Sugiyama FA
Memorandum, during the partial-verification in Washington, D.C., we
found that much of Sugiyama's cost data was not verifiable. The
company's cost allocations were estimates based on Sugiyama's
``experience,'' rather than supporting documentation, and were not
representative of POR costs. Accordingly, because Sugiyama did not act
to the best of its ability to comply with the request for information,
under section 776(b) an adverse inference is warranted. However,
because the company substantially cooperated throughout the course of
this review, we are resorting to FA that are less adverse to the
interests of Sugiyama. See, e.g., Fresh Cut Flowers from Colombia;
Final Results and Partial Rescission of Antidumping Duty Administrative
Review, 62 FR 53287, 53291-53292 (Oct. 14, 1997) (Fresh Cut Flowers--
Colombia 1997). As FA, we have applied the rate of 12.68 percent, the
margin calculated for another respondent in the 1990-1991
administrative review of this proceeding. This rate is a significant
increase from the company's current cash deposit rate and thus is
sufficiently adverse to induce cooperation by Sugiyama in future
reviews of this proceeding.
Kaga
1. Application of FA. In accordance with section 782(d) of the Act,
the Department provided Kaga with the opportunity to explain its
deficiencies in our supplemental questionnaires of October 31, 1997,
and March 25, 1998. Although Kaga responded to our supplemental
requests for information, the information provided was deficient. On
April 1, 1998, we received a call from counsel for Kaga, who stated
that in responding to our March 25, 1998, request for information
regarding missing values, other errors had been discovered. We
instructed Kaga to submit revised sales tapes for the U.S. and home
market by April 6, 1998, and cautioned Kaga that we would not grant any
other extensions to correct for data errors. At the same time, we
informed Kaga that if we found errors or had difficulty in using the
data on the revised tapes, we may proceed with our determination based
on FA. However, in letters submitted on April 28, and April 29, 1998,
Kaga admitted that its sales tapes submitted on April 6, 1998, in
response to our March 25, 1998, request for information were rife with
incorrect price and expense data. Moreover, following the preliminary
results, in its letter of June 30, 1998, and in its July 2, 1998, case
brief, Kaga disclosed programming errors affecting all CEP sales and an
undetermined number of EP sales, and reported conversion and coding
errors affecting an undetermined number of U.S. and home market sales.
As stated above, the Department issued multiple information requests
providing Kaga ample opportunities to cure its deficiencies. Given that
Kaga failed to provide the necessary information in the form and manner
requested, even after being provided several opportunities to cure
these deficiencies, the Department is required, under section 782(d),
to apply, subject to section 782(e), facts otherwise available.
We further determine that Kaga failed to satisfy several of the
requirements enunciated by section 782(e) of the Act. First, a
significant portion of the company's U.S. and home market sales data
was untimely submitted. Second, Kaga's information is so incomplete
that it cannot serve as a reliable basis for reaching the applicable
determination pursuant to subsection (e)(3), since the reported
programming errors affect all CEP sales and an undetermined number of
EP sales. Further, no information exists on the record regarding the
number of U.S. and home market gross unit prices which are incorrect
due to Kaga's miscalculations in converting gross unit prices from a
per-link to a per-foot basis. In addition, no information exists on the
record regarding the number of models of conveyor chain which were
incorrectly coded as industrial chain by Kaga. Third, Kaga did not
demonstrate that it acted to the best of its ability in providing the
necessary information under subsection (e)(4). As noted above, Kaga
failed to provide the necessary information even after the Department
issued multiple supplemental questionnaires providing Kaga ample
opportunity to cure its deficiencies. Fourth, to attempt to correct all
of the errors in Kaga's responses would be unduly burdensome on the
Department. Thus, even if the Department attempted to correct the
responses, given the numerous errors in Kaga's information on the
record, the information could be used without undue difficulties, as
required by subsection (e)(5).
For the reasons stated above, the application of section 782(e) of
the Act does not overcome section 776(a)'s direction to use facts
otherwise available for Kaga's submissions. Thus, the use of facts
available is warranted in this case.
[[Page 63675]]
2. Selection of FA
As discussed above, we found significant problems with Kaga's
submissions. Although the Department provided Kaga with the opportunity
to explain its deficiencies in our supplemental questionnaires of
October 31, 1997, and March 25, 1998, the information provided was
deficient. In a submission dated April 28, 1998, Kaga stated that it
had discovered inadvertent and previously undisclosed errors. Kaga
reported that, as a result of a programming error, home market packing
and indirect selling expenses were not calculated properly. For U.S.
sales, Kaga stated that the price for two chain models were reported
incorrectly. Further, Kaga reported that, as a result of programming
errors, the reported U.S. packing and commission values were incorrect.
It also noted that the reported indirect selling expenses for both EP
customers were incorrect. For the CEP customer, Kaga stated that
brokerage, date of sale, sales invoice date, date of shipment, and date
of receipt of payment were not reported as requested in the
Department's questionnaire. On April 29, 1998, Kaga submitted a letter
stating that it had found an additional error in the U.S. sales data
base. Kaga stated that due to this programming error, the amount
reported for U.S. inland freight from warehouse to one EP customer was
incorrect.
In its July 2, 1998, case brief, Kaga reiterated that it had
discovered two programming errors in the data processing. According to
Kaga, the first error was that only a single character was allowed to
the left of the decimal for U.S. gross unit price, resulting in an
understatement of Kaga's U.S. sales prices. This, Kaga noted, affected
sales to one EP customer and all CEP sales. The second error, affecting
only CEP sales, according to Kaga, occurred in its computer submission
of January 22, 1998 when in the data processing the prices from Kaga's
affiliated importer to its unaffiliated U.S. customers were mistakenly
deleted and, instead, used the transfer prices from Kaga to its
affiliated importer were used.
In addition, Kaga stated that it found three other errors by the
company itself. First, it reported that it miscalculated the per-foot
gross unit prices for ``several of its chains'' when converting from a
per-link basis for the Department. Second, Kaga noted that it
``mistakenly coded several models of conveyor chain . . . as industrial
chain.'' Third, Kaga stated that it included an invoice in the home
market sales data which represents an adjustment in price to a pre-
existing sale, and that any observation associated with this invoice
should be deleted from the home market data base.
As the record evidence demonstrates, despite numerous
opportunities, Kaga continued to provide erroneous data, the magnitude
of which prevented the Department from using Kaga's information in the
margin calculations. We thus find that Kaga did not act to the best of
its ability to comply with the request for information under section
776(b) and that, under section 776(b), an adverse inference is
warranted. However, because Kaga made an effort to comply throughout
the course of this review, we are resorting to facts available that are
less adverse to the interests of Kaga. See, e.g., Notice of Final
Determination of Sales at Less Than Fair Value: Steel Wire Rod From
Germany, 63 FR 8953, 8955 (February 23, 1998); and Fresh Cut Flowers-
Colombia 1997. Therefore, we have assigned Kaga an adverse FA rate of
12.68 percent (the rate calculated for another respondent in the 1990-
1991 review of this proceeding). This rate is a significant increase
from the company's current cash deposit rate and is thus sufficiently
adverse to induce cooperation by Kaga in future reviews of this
proceeding. For a detailed discussion of this issue see the Memorandum
From Tom Futtner, Acting Director, AD/CVD Enforcement, Group II, Office
4, to Holly A. Kuga, Acting Deputy Assistant Secretary, Import
Administration regarding ``Antidumping Duty Administrative Review:
Roller Chain, Other than Bicycle, from Japan (1996-1997)--Determination
of Facts Available for Kaga Industries, Co., Ltd.'' (November 4, 1998),
on file in the CRU.
OCM. For purposes of the preliminary results, the Department
concluded that OCM failed verification and that the determination based
on the total adverse FA was warranted for this company. We,
accordingly, assigned OCM an adverse FA rate of 17.57 percent and
articulated detailed reasons for our decision in the RC 96-97
Preliminary Results and the Memorandum from the Senior Director, AD/CVD
Enforcement, Group II, Office 4, to the Acting Deputy Assistant
Secretary, Import Administration, regarding ``Antidumping Duty
Administrative Review: Roller Chain, Other Than Bicycle from Japan
(1996-1997): Determination of Facts Available Based on Results of
Verification of Oriental Chain Manufacturing Co., Ltd.'' (April 30,
1998) (OCM FA Memorandum), on file in the CRU. For the final results,
we have reexamined our verification results and considered the
interested party comments (see the Department Position to OCM Comments
1 through 13). We continue to find that OCM did not act to the best of
its ability in responding to the Department's questionnaire, however,
as we explained in the preliminary results, because OCM made
substantial efforts to cooperate throughout the course of this review,
we are resorting to FA that are less adverse to the interests of the
company. Therefore, we are assigning OCM an adverse FA rate of 12.68
percent, which constitutes a rate calculated for another respondent in
a previous review and is a significant increase from OCM's current cash
deposit rate and is thus sufficiently adverse to induce cooperation in
future segments of this proceeding.
Pulton. For purposes of the preliminary results, the Department
concluded that, because Pulton refused to permit verification, a
determination based on the total adverse FA was warranted for this
company. We, accordingly, assigned an adverse FA rate and articulated
detailed reasons for our decision in RC 96-97 Preliminary Results and
the Memorandum from the Senior Director, AD/CVD Enforcement, Group II,
Office 4, to the Acting Deputy Assistant Secretary, Import
Administration, regarding ``Application of Total Facts Available to
Pulton Chain Company, Ltd., (Pulton) in the Administrative Review of
Roller Chain, Other than Bicycle from Japan (Roller Chain) Covering the
POR: April 1, 1996 through March 31, 1997'' (April 30, 1998), on file
in the CRU. For the final results, we have considered the interested
party comments (see the Department Position to Pulton Comments 1 and
2), and continue to find that Pulton's refusal to permit the Department
to verify the information in this review demonstrates that it failed to
cooperate by not acting to the best of its ability. Thus, consistent
with the Department's practice in cases where a respondent withdraws
its participation in a proceeding, in selecting FA for Pulton in this
review, an adverse inference is warranted. Therefore, we are assigning
Pulton an adverse FA rate of 17.57 percent, which constitutes a rate
calculated for another respondent in a previous review.
Izumi. For purposes of the preliminary results, the Department
concluded that Izumi failed verification and that a determination based
on the total adverse FA was warranted for this company.
[[Page 63676]]
We, accordingly, assigned Izumi an adverse FA rate of 17.57 percent and
articulated detailed reasons for our decision in the RC 96-97
Preliminary Results and the Memorandum from the Senior Director, AD/CVD
Enforcement, Group II, Office 4, to the Acting Deputy Assistant
Secretary, Import Administration, regarding ``Antidumping Duty
Administrative Review: Roller Chain, Other Than Bicycle from Japan
(1996-1997): Determination of Facts Available Based on Results of
Verification of Izumi Chain Manufacturing Co., Ltd.''(April 30, 1998)
(Izumi FA Memorandum), on file in the CRU. For the final results, we
have reexamined our verification results and considered the interested
party comments (see the Department Position to Izumi Comment 1 ).
However, as we explained in the preliminary results, because Izumi made
substantial efforts to cooperate throughout the course of this review,
we are resorting to FA that are less adverse to the interests of the
company. Therefore, we are assigning Izumi an adverse FA rate of 12.68
percent, which constitutes a rate calculated for another respondent in
a previous review.
B. Partial FA for DK and Enuma Chain Manufacturing Company (Enuma)
For purposes of the preliminary results, the Department concluded
that because DK and Enuma failed to report DIFMER and/or constructed
value (CV) data, an adverse FA was warranted for all unmatched DK and
Enuma sales. We, accordingly, assigned DK and Enuma an FA rate of 42.48
percent for any unmatched sales and articulated detailed reasons for
our decision in the RC 96-97 Preliminary Results and the Memorandum
from the Senior Director, AD/CVD Enforcement, Group II, Office 4, to
the Acting Deputy Assistant Secretary, Import Administration, regarding
``Application of Partial Facts Available for Certain U.S. Sales of
Roller Chain Manufactured by Daido Kogyo Co., Ltd., and Enuma Chain
Manufacturing Co., Ltd., and Kaga Industries Co., Ltd.'' (April 30,
1998), on file in the CRU. For the final results, we find that the
42.48 percent calculated rate for Kaga in the preliminary results is
not valid. See the discussion on FA for Kaga, above. However, since
these two respondents refused to provide this information, we are
continuing to assign DK and Enuma an adverse FA rate based on the
highest rate from the proceeding which has not been invalidated. For
purposes of the final results, that rate changed from 42.48 percent to
17.57 percent.
3. Corroboration of Information Used as Facts Available
Section 776(b) of the Act authorizes the Department to use as
adverse FA information derived from the petition, the final
determination from the less than fair value (LTFV) investigation, a
previous administrative review, or any other information placed on the
record.
Section 776(c) of the Act requires the Department to corroborate,
to the extent practicable, secondary information used as FA. Secondary
information is described in the Statement of Administrative Action
(SAA) (at 870) as ``[i]nformation derived from the petition that gave
rise to the investigation or review, the final determination concerning
the subject merchandise, or any previous review under section 751
concerning the subject merchandise.''
The SAA further provides that ``corroborate'' means simply that the
Department will satisfy itself that the secondary information to be
used has probative value (see SAA at 870). Thus, to corroborate
secondary information, the Department will, to the extent practicable,
examine the reliability and relevance of the information used. However,
unlike other types of information, such as input costs or selling
expenses, there are no independent sources for calculated dumping
margins. The only source for margins is an administrative
determination. Thus, in an administrative review, if the Department
chooses as total adverse FA a calculated dumping margin from a prior
segment of the proceeding, it is not necessary to question the
reliability of the margin from that time period (i.e., the Department
can normally be satisfied that the information has probative value and
that it has complied with the corroboration requirements of section
776(c) of the Act). See, e.g., Elemental Sulphur from Canada:
Preliminary Results of Antidumping Duty Administrative Review, 62 FR at
971 (January 7, 1997) and Antifriction Bearings (Other than Tapered
Roller Bearings) and Parts Thereof from France, Germany, Italy, Japan,
Singapore, and the United Kingdom 62 FR 2801 ( January 15, 1997) (AFBs
1997).
As to the relevance of the margin used for adverse FA, the
Department stated in Tapered Roller Bearings from Japan; Final Results
of Antidumping Duty Administrative Review 62 FR 47454 (September 9,
1997) that it will consider information reasonably at its disposal as
to whether there are circumstances that would render a margin
irrelevant. Where circumstances indicate that the selected margin is
not appropriate as adverse [FA], the Department will disregard the
margin and determine an appropriate margin. See also Fresh Cut Flowers
from Mexico; Preliminary Results of Antidumping Duty Administrative
Review, 60 FR 49567 (September 26, 1995). We have determined that there
is no evidence on the record of the 1987-1988 or 1990-1991
administrative reviews, where we calculated the 17.57 and 12.68 percent
rates, respectively, which would indicate that the 17.57 or 12.68
percent rates are irrelevant or inappropriate as adverse FA rates for
certain respondents in the instant review. Therefore, we have applied,
as FA, the 17.57 and 12.68 percent margins from prior administrative
reviews of this finding.
Interested Party Comments
We gave interested parties an opportunity to comment on the
preliminary results. As noted above, we received comments and rebuttal
comments from the petitioner and nine of the respondents and rebuttal
comments from one other domestic interested party.
General Issues
Model Match
Comment 1: Sugiyama argues that the Department should modify its
model match methodology to take account of the fundamentally different
physical characteristics, uses, and manufacturing processes between
plated and unplated chain. According to Sugiyama, these differences are
reflected in significant cost and price disparities. Sugiyama claims
that the Department's preliminary model match methodology ignores these
differences, and by matching expensive plated chain to unplated chain,
significantly distorts the dumping margin.
RK states that, in the preliminary results, the Department erred in
matching U.S. sales of a certain model of chain with home market sales
of several different models of chain. RK notes that section 771(16)(B)
and (C) of the Act authorize the Department to match U.S. sales of
subject merchandise with sales in the comparison market of ``similar
merchandise,'' namely, merchandise that is either ``like that
merchandise [sold in the United States] in component material or
materials and in the purpose for which used, and approximately equal in
commercial value to that merchandise,'' or merchandise that is of the
``same general class or kind'' as the subject merchandise, used for a
like purpose, and which can ``reasonably be
[[Page 63677]]
compared'' with the product sold in the United States. According to RK,
in creating an effective model match methodology to identify
``similar'' products, the Department must consider the specific facts
and circumstances regarding the product(s) under review and must base
the model match system on commercially significant physical
characteristics of the subject merchandise (i.e., physical
characteristics that affect the commercial value and sales price of the
product(s) under review).
Further, RK argues that the Department has a statutory duty to
compare products that are the most similar so that the resulting
dumping calculations will be as accurate and reliable as possible. RK
concludes that both the statute and the Department's model matching
decisions in other cases establish the principle that it is
inappropriate and unreasonable for the Department to make comparisons
between products with important physical differences that directly
affect commercial value. Thus, RK contends that it would be
unreasonable for the Department to match sales of certain chain models
where the models differ fundamentally in terms of their components and
materials, their purposes and uses, and their respective commercial
values. Accordingly, RK recommends that the Department adjust its model
match methodology (1) to account for different types of seals (e.g, O-
ring versus XW-ring), (2) to account for different types of materials,
and (3) to ensure that the model match system does not permit matches
across chain type or material.
RK further recommends that the Department adjust its model match
methodology to prevent matches across pitch length because almost all
parties, including the petitioner, have stated on the record that it is
inappropriate to match chains across pitch length. In addition, RK
requests that the Department adjust its model match methodology to
reflect the consensus of all parties to this review, including the
petitioner, that models of chain that differ in terms of certain key
characteristics, such as material, finish, and number of strands,
should never be considered ``identical'' or ``similar'' merchandise for
purposes of model-match in this proceeding.
Kaga contends that the Department's preliminary model match
methodology does not result in identical or reasonably similar home
market matches based on physical characteristics, commercial value,
purposes for which used and other factors which the Department is
required by statute to analyze. Kaga argues that by potentially
allowing one model match characteristic to determine foreign like
product, the Department's methodology essentially relies on the DIFMER
test (i.e., the test to determine if the difference in variable costs
of manufacturing is greater than 20 percent of the total cost of
manufacturing of the U.S. product) to eliminate inappropriate matches.
Kaga maintains that the DIFMER test should be used in conjunction
with a model match methodology, which first attempts to eliminate the
matching of models which are dissimilar in components, commercial value
and the purposes for which they are used. Kaga states that, once
merchandise has been determined to be sufficiently similar, the DIFMER
test should be applied to eliminate matches that may appear similar
based only on an analysis of physical characteristics, commercial value
and purpose for which the products are used, as required by the
statute. Kaga argues that, because different types of chain (i.e.,
industrial, motorcycle, leaf, silent timing, and conveyor chain) have
very different characteristics, components, uses and commercial value,
they should not be matched to each other. Kaga states that pitch is one
of the most basic measures of roller chain, noting that virtually all
parties, including the petitioner, have agreed that the Department
should not cross pitch for model match purposes. Kaga further argues
that the Department should not match chain that differ in terms of
number of strands and number of attachments. Kaga asserts that chain
with different numbers of strands differ in both physical
characteristics and uses, and that the presence of attachments
distinguishes attachment chain from non-attachment chain in terms of
components, purpose for which it is used and commercial value. In
addition, Kaga urges that, for the final results, the Department not
match sidebow (sidebar) chain to standard roller chain for the final
results. Kaga explains that standard roller chain cannot be used in an
application which requires sidebow chain because it does not have the
necessary flexibility.
More specifically, Kaga contends that the Department matched two
models of chain that have two critical distinctions, which render them
significantly different from each other. Kaga maintains that one chain
is a coupling specifically designed for use with a sprocket, which has
additional parts not found on the other chain. According to Kaga, these
special features are not captured in the reported VCOM of the product,
but do result in increased cost and thus increased price. Moreover,
Kaga argues that it sold such a small amount of the chain coupling that
it cannot reasonably be considered to have been sold ``in the ordinary
course of trade.''
Finally, Kaga asserts that the Department's model match criteria do
not meet the statutory definition of identical merchandise because
there are certain physical characteristics which are not accounted for
in the Department's matching criteria. Kaga cites ``F'' series chain as
an example, and claims that although ``F'' series chain is identical to
standard chain with the exception of a straight contour side plate,
this is a significant physical difference. Thus, Kaga recommends that,
in the final results, the Department use the CONNUMs developed by Kaga
that take into account these differences. Kaga concludes that in cases
where all 18 physical characteristics match, the Department should
apply the DIFMER test and make a DIFMER adjustment if the VCOM of the
home market and U.S. model are not the same.
The petitioner also urges the Department to consider refining its
model match methodology. However, the petitioner recommends that this
modification should closely parallel the three-tier approach set out in
the antidumping statute. According to the petitioner, the Department
should first seek to determine whether a particular U.S. sale can be
matched with a contemporaneous sale of an identical product (based on
the Department's 18 characteristics) in the comparison market. The
petitioner believes that the Department's approach with regard to
matching identical merchandise satisfies the statutory criteria set out
in section 771(16)(A) of the Act and should be retained.
If such identical matches do not exist, the petitioner next
recommends that the Department make a ``similar merchandise'' match
under section 771(16)(B) of the Act. Under this test, the merchandise
must be identical with respect to the first five elements (type, number
of strands, material, finish, and pitch) of the Department's model
match criteria in order to be considered similar merchandise. According
to petitioner, if these five criteria match, the program should then
select the most similar model through examination of the remaining 13
product characteristics. If such a match cannot be made, the petitioner
notes that the Department should then seek to make a match under the
general ``class or kind'' standard set out in section 771(16)(C) of the
Act.
Under this rung of comparison, the petitioner maintains that the
[[Page 63678]]
Department should institute a test for ``class or kind'' of merchandise
under section 771(16)(C) of the Act to determine which models share the
greatest number of the first five of the model match characteristics.
The petitioner states that, where two or more home market models share
the same number of characteristics (out of the first five), the program
should select the most similar product through examination of the
remaining 13 criteria, and then calculate an average VCOM if multiple
models share the same overall number of characteristics. The petitioner
argues that this is in accordance with section 771(16)(C) of the Act,
which provides that if the Department is satisfied that a particular
home market model is (i) ``produced in the same country and by the same
person and of the same general class or kind'' as the model sold in the
United States, and (ii) ``like'' that model ``in the purposes for which
used,'' then it may be used as a comparison model provided the
Department determines that the chain products ``may be reasonably
compared.''
In response to Sugiyama's request that the Department match plated
chain only to other plated chain and unplated chain only to other
unplated chain, the petitioner states that it would not object to the
proposed refinement of the Department's model match methodology,
provided that (1) it can be accomplished by resort to verifiable
information that is already on the record in this review; and (2) it is
applied to all respondents. The petitioner believes that the five
elements listed above are the most important for determining matches
and does not agree with RK that seal type should be added to the five
basic model matching criteria or used to create unique chain types.
According to the petitioner, under its recommended refinements to the
model match methodology, the models that RK is concerned about would
not be matched to each other because they differ in one or more of the
first five elements.
Further, the petitioner disagrees with Kaga's claim that there are
certain physical characteristics that are not accounted for in the
Department's model match criteria. According to the petitioner, Kaga's
one example is not so significant as to justify an abandonment of the
Department's model match criteria. Moreover, the petitioner notes that
minor physical differences can easily be taken into account by
comparing the VCOMs of the home market and U.S. models and making a
DIFMER adjustment, where warranted.
The petitioner notes that section 771(16)(C) of the Act requires
that the foreign like product need only be ``of the same general class
or kind as the subject merchandise.'' Moreover, the petitioner points
out that it need not share similar ``component material or materials''
with the U.S. model nor does the comparison model need to be
``approximately equal in commercial value'' to the U.S. model. In
short, the petitioner concludes that section 771(16)(C) of the Act
imposes a reasonableness test. Namely, the Department must be accorded
some degree of flexibility when determining whether two roller chain
models ``may reasonably be compared.'' Thus, the petitioner does not
agree with Kaga and RK that chain which differ with respect to one or
more of the first five model match criteria can never be used for
comparison purposes.
The petitioner asserts that there appears to be no dispute that all
of the comparison models questioned by RK and Kaga satisfy the third
criterion of the definition, namely, that they were produced in Japan
by the same companies that manufactured the U.S. models and are clearly
all part of the same general class or kind of merchandise. Moreover,
the petitioner contends that, contrary to RK and Kaga's arguments, the
comparison chain models are clearly put to uses which are ``like''
those of the U.S. models, and emphasizes that the uses in question need
only be similar in nature and not identical.
Department Position: We agree in part with RK, Kaga, Sugiyama and
the petitioner. Based on our analysis of the written comments submitted
to the Department since the preliminary results in this proceeding, we
find that the model match methodology used in our preliminary results
should be modified with regard to identifying similar merchandise. To
continue to rely on the model match methodology used in our preliminary
results would, in some cases, yield inappropriate results; namely, it
would group physically diverse chain that has vastly different uses and
different commercial values together as similar merchandise.
For purposes of calculating NV, section 771(16) of the Act defines
``foreign like product'' as merchandise which is either (1) identical
or (2) similar to the merchandise sold in the United States. See
section 771(16) (A) (B) and (C); see also 19 CFR 351.411(a). Where
there are no identical products sold in the home or other foreign
markets, the Department will identify, by employing an appropriate
product matching methodology, the product sold in the foreign market
that is most similar to the product sold in the United States. Because
the antidumping statute does not detail the methodology that must be
used in determining what constitutes ``similar'' merchandise, the
Department has broad discretion, implicitly delegated to it by
Congress, to apply an appropriate model match methodology to determine
which home market models are properly comparable with U.S. models under
the statute. See, e.g., Koyo Seiko Co., Ltd, et al. v. United States,
66 F.3d 1204 (Fed. Cir. 1995). The Courts will uphold the Department's
model match methodology as long as it is reasonable. See, e.g., AK
Steel Corporation, et al. v. United States, Slip Op. 97-152, Court No.
96-05-01312 (CIT 1997) (AK Steel); NTN Bearing Corp. of America, et al.
v. United States, 924 F. Supp. 200 (CIT 1996); SKF USA Inc., et al. v.
United States, 876 F. Supp. 275 (CIT 1995).
In this case, in identifying which physical characteristics should
be given the most weight in our determination of appropriate product
comparisons, we considered comments from all parties, based upon which
we then developed a product matching methodology predicated upon 18
physical characteristics, as outlined in our supplemental questionnaire
of December 19, 1997. According to our revised methodology, we
attempted to match U.S. sales to contemporaneous sales of identical
products in the home market using these 18 product characteristics.
Where all 18 product characteristics matched, we considered U.S. and
home market models to be identical. Where we found no sales of
identical merchandise in the home market to compare to U.S. sales, we
compared U.S. sales to the next most similar foreign like product
(models which shared the greatest number of physical characteristics
with the models sold in the United States). Further, we made a DIFMER
adjustment to the home market sales price to account for the actual
physical differences between the products sold in the United States and
the home market. In those instances, where there were no sales of
identical or similar merchandise in the home market to compare to U.S.
sales, we compared U.S. sales to the CV of the product sold in the U.S.
market during the comparison period. See RC 96-97 Preliminary Results
at 25457.
For the final results of this review, we conclude, based on the
interested parties' comments, that our model match methodology should
be further modified. As explained by Sugiyama, RK and Kaga, relying on
the above model match methodology would match
[[Page 63679]]
chain so physically diverse that they could not be used in similar
functions and have different commercial values.
Accordingly, we have amended our matching methodology as follows:
roller chain models will be considered ``identical'' if they match with
regard to all 18 characteristics; roller chain models will be
considered ``similar'' for purposes of model matching only if they
share all of the first six characteristics, as outlined in our
supplemental questionnaire of December 19, 1997. Based on the comments
of respondents and petitioner in this and previous reviews, we have
concluded that the following six criteria must be identical for
merchandise to be considered similar: (1) type of chain; (2) number of
strands; (3) material; (4) finish; (5) pitch; and (6) type of seal. We
will then select the most ``similar'' model through a hierarchical
ranking of the remaining 12 product characteristics based on the order
in which they are incorporated into the CONNUM. We find that this
modification to our model matching methodology will yield more accurate
results and minimize the effects of potential distortions to our
calculations. See AK Steel at 42 ( the CIT upheld the Department's
departure from the original model match methodology, where the facts
relied upon by the Department were clearly articulated and were
rationally connected to its choice). Although the petitioner does not
agree that type of seal should be one of the six criteria, we have
concluded based on the comments of respondents (RK, DK, and Enuma) that
type of seal is a distinguishing characteristic and an important
differentiating feature between types of motorcycle chain.
With respect to RK's comment that the Department should not match
specific models of chain, we note that under our modified model match
methodology, these chains would no longer be considered similar for
model match purposes. Further, with respect to the company-specific
model match comments made by Kaga and Sugiyama, we note that the
Department's decision to apply total FA to these parties renders their
comments moot. See the Facts Available Section above.
Comment 2: Sugiyama states that where more than one home market
product is considered ``equally similar'' to the U.S. product being
analyzed, the Department's computer program randomly selected a single
home market match. According to Sugiyama, the Department should correct
the programming language to include all equally similar home market
products in the product comparison.
Responding to Sugiyama's error allegation, the petitioner points
out that Sugiyama was the only respondent to raise this issue. The
petitioner states that it was unable to determine whether this alleged
error actually occurred. The petitioner takes the position that, if the
Department determines that such an error in fact occurred, it agrees
that the Department should revise its program for the final results.
However, the petitioner insists that any program correction be written
by the Department itself.
Department Position: We disagree with Sugiyama's allegation that
the Department's preliminary model match program randomly selected a
home market match where more than one home market product was
considered ``equally similar'' to the U.S. product being analyzed. On
the contrary, an analysis of the Department's model match program shows
that where there was more than one possible home market match, the
program selected the ``most similar'' contemporaneous home market
match.
Company-Specific Issues
DK
Comment 1: DK asserts that the Department erred in finding no
difference in the LOT between DK's home market and U.S. sales and
asserts that it is entitled to a CEP offset. First, DK claims that the
Department incorrectly identified the stage of marketing of CEP sales.
Second, DK argues that even conceding this stage of marketing
definition, the Department was incorrect in finding that sales to DK's
unaffiliated home market customers and sales to Daido Corporation
(Daido Corp.) (DK's affiliated U.S. sales subsidiary) were at the same
stage in the marketing process. Third, DK asserts that the Department's
quantitative and qualitative analysis of selling activities in the home
and U.S. markets is in error.
With regard to the first issue, DK argues that the term CEP is
defined in section 772(b) of the Act to mean the price after all costs
have been deducted back to the factory door. Citing Sorenson v.
Secretary of the Treasury, 475 U.S. 851, 860, 106 S.Ct. 1600, 1606, 80
L.Ed. 2d 855 (1986), DK argues that in designating the CEP LOT to be
the sale between the exporter and the U.S. importer, the Department
disregarded ``[t]he normal rule of statutory construction [which]
assumes that `identical words used in different parts of the same Act
are intended to have the same meaning.'''
DK argues that based on this statutory definition, the Department
should not have designated the CEP LOT as the level of the constructed
sale from the exporter to the importer. Nevertheless, assuming that the
CEP LOT is at the level of the constructed sale from the exporter to
the importer, DK argues that the CEP sales and home market sales to
unaffiliated customers are still not at the same stage in the marketing
process.
Citing Dynamic Random Access Memory Semiconductors of one Megabit
or Above From the Republic of Korea; Preliminary Results of Antidumping
Duty Administrative Review and Notice of Intent not to Revoke Order, 63
FR 11411, 11415 (March 9, 1998)/(DRAMs Preliminary 96-97) and Dynamic
Random Access Memory Semiconductors of one Megabit or Above From the
Republic of Korea; Preliminary Results of Antidumping Duty
Administrative Review and Notice of Intent not to Revoke Order, 62 FR
12794, 12798 (March 18, 1997) (DRAMs Preliminary 95-96), DK contends
that sales to unaffiliated home market customers and to affiliated U.S.
importers are at different stages in the marketing process because
there is a significant difference in the ``nature'' of the commercial
activities associated with home market sales and with CEP sales. In
addition, DK argues, the home market sales occur in a ``competitive
environment,'' while the affiliated U.S. importer sales are made in a
``non-competitive environment'' with a corresponding lower level of
commercial activity. DK further asserts that Daido Corp., a national
distributor in the United States, and DK, a national distributor in
Japan, ``play exactly the same roles'' in their respective markets such
that sales to Daido Corp. cannot be at the same stage of marketing as
sales to unaffiliated home market customers. DK concludes that not only
is the Department's finding here in error, but that the marketing stage
for sales to Daido Corp. is less advanced than that for sales to home
market customers.
As to a comparison between the selling functions, DK claims that
the Department incorrectly disregarded significant quantitative and
qualitative differences between the selling functions performed in
Japan for home market sales and those performed in Japan for CEP sales.
Quantitatively, DK argues that only three of the selling functions
overlap between home market sales and sales to Daido Corp. DK does not
specify the three it is alluding to.
In addition, DK refutes the Department's assertion that advertising
and technical services are negligible items since DK did not claim them
as
[[Page 63680]]
selling expenses. DK notes that it did not claim either item as a
direct selling expense, however it did claim advertising expenses as
one of the categories in indirect selling expenses. With regard to
technical services, DK contends that although there is no accounting
categorization for technical services, they nevertheless occur and are
accounted for in the costs of salaries for local sales office personnel
and engineers.
DK further argues that the Department incorrectly ignored
significant qualitative differences between home market sales and sales
to Daido Corp. in three areas: developing and maintaining a customer
base, maintaining inventory, and maintaining local sales offices. DK
argues that these areas demonstrate qualitatively different selling
functions for home market sales and CEP sales.
In particular, DK argues that since it, DT, and Daido Corp. are all
affiliated with one another, deal in large quantities, and employ
electronic ordering, DK need make only a limited effort in maintaining
a customer base. Moreover, its records maintenance and collections
activities are negligible. DK contends that this differs with the
records maintenance and collections activities it carries out for its
more numerous home market customers. DK further argues that while it
maintains significant inventories for servicing the needs of home
market customers, such as the need to rapidly ship a model to a
customer, neither DK nor DT (DK's affiliated Japanese trading company)
maintain such inventory for sales to Daido Corp., rather they sell only
on a made-to-order basis. DK asserts that neither it nor DT maintain
inventory for CEP sales. Moreover, DT does not act as an independent
distributor by buying chain for its own account, holding inventory, and
selling therefrom. Since DT does not own a warehouse, it arranges for
freight forwarders to merely hold merchandise at the port while waiting
for DK to complete manufacturing of an entire order. Finally, DK
asserts that developing and maintaining home market customers and
maintaining local offices ``are at the heart of'' doing business in the
home market. DK argues that, by contrast, it and DT make ``almost no
effort'' in these activities with respect to Daido Corp. because of the
latter's ``captive customer'' status.
DK concludes that it has demonstrated a difference in LOT in the
two markets and that the LOT of CEP sales is at a less advanced stage
than the LOT of home market sales. However, since data is unavailable
to show a consistent level of price differences in the home market at
different levels of trade, it is entitled to a CEP offset in lieu of a
LOT adjustment.
The petitioner agrees with the Department's preliminary results
finding that DK is not entitled to a LOT adjustment or a CEP offset.
First, the petitioner disagrees with DK's argument that its CEP and
home market transaction are at different levels of trade. Specifically,
the petitioner states that once U.S. selling expenses and U.S. profit
are deducted from the CEP, the sale is at the same LOT as DT's EP price
sales.
Moreover, citing prior roller chain reviews, the petitioner asserts
that DK's proposed definition of the starting point for comparing CEP
and home market transactions as at the ``factory door'' was previously
rejected by the Department. (See Final Results of Antidumping
Administrative Review, and Determination not to Revoke in Part: Roller
Chain, other than Bicycle, from Japan, 62 FR 60472, 60479-80 (November
10, 1997) (Roller Chain 95-96); and Notice of Final Results of
Antidumping Administrative Review, and Determination not to Revoke in
Part: Roller Chain, other than Bicycle, from Japan, 62 FR 64322, 64325-
26 (December 4, 1996) (Roller Chain 94-95). Furthermore, the petitioner
cites Borden Inc. v. United States, (Consolidated Court No. 96-08-
01970, Slip. Op. 98-36, 1998 Ct. Intl. Trade, at 66 (March 26, 1998)
(Borden), to demonstrate that this position has been upheld by the CIT.
Specifically, the petitioner points out that regarding the Department's
antidumping regulations, the court found that a CEP offset adjustment
based on a ``factory door'' approach would be ``distortive'' because it
would lead to an ``automatic CEP offset.''
The petitioner also disagrees with DK's argument that the
commercial environment for its CEP sales was significantly different
than the one for home market sales, necessarily resulting in differing
selling activities associated with each type of sale. Further, the
petitioner notes that DK did not specifically challenge the
Department's finding that no substantive differences appeared between
the selling activities performed by DK and DT for EP and CEP sales. In
support of the Department's conclusions, the petitioner notes that in
the home market, Daido Corp. sells directly to OEMs and through various
distributors while for U.S. sales, DT sells directly to OEMs and
through DK's U.S. distributor, thus the sales seem to be made at
parallel levels of trade.
The petitioner also contends that there is a possibility that the
inventory maintained by DK in Japan for its home market customers could
easily be used to fill orders for Daido Corp., although the petitioner
offers no specific evidence regarding its concern. In addition, the
petitioner disagrees with DK that significant differences existed
between the selling activities it performed for sales in the two
markets.
Finally, the petitioner points out that the Department found that
three of the selling activities performed for home market sales were
nominal in nature. With respect to four of the six remaining selling
activities discussed by Department (inventory/warehousing, preparing
chain for shipment, bill collection, and record maintenance), the
petitioner contests DK's distinction between the activities performed
for home market and those performed for U.S. sales as ``merely
differences in degree and not in kind.'' As far as maintaining a
customer base in Japan, the petitioner notes that DK did expend
additional resources for this activity. Nevertheless, notwithstanding
the differences in the latter category, the petitioner concludes that
the Department's analysis that sales in the two markets were not made
at different LOTs is clearly substantiated by the evidence on the
record of this review, and is consistent with the Department's finding
for this respondent in the two most recent prior segments of this
proceeding.
Department Position: Based on our analysis of the record
information, for these final results, we find that a LOT difference
exists between DK's U.S. CEP sales and its home market sales.
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 LOT as the EP or the CEP transaction. The NV LOT is that of
the starting-price sales in the comparison market or, when NV is based
on constructed value, that of the sales from which we derive selling,
general and administrative expenses and profit. For EP sales, the U.S.
LOT is also the level of the starting-price sale, which is usually from
exporter to importer. For CEP, it is the level of the constructed sale
from the exporter to the importer. 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 (November 19, 1997) (Carbon Steel
Plate). The statute and the SAA clearly support analyzing the LOT of
CEP sales at the level of the constructed sale to the U.S. importer--
that is, the level after
[[Page 63681]]
expenses associated with economic activities in the United States have
been deducted pursuant to section 772(d) of the Act. The Department has
clearly adopted this interpretation in previous cases. See e.g.,
Dynamic Random Access Memory Semiconductors of One Megabit or Above
From the Republic of Korea; Final Results of Antidumping Duty
Administrative Review, Partial Rescission of Administrative Review and
Notice of Determination Not to Revoke Order, 63 FR 50867, 50872
(September 23, 1998) (DRAMs Final Results 96-97); see also Notice of
Final Determination of Sales at Less Than Fair Value; Static Random
Access Memory Semiconductors From the Republic of Korea, 63 FR 8945
(February 23, 1998) (SRAMs 1996). We note that DK, in the hearing,
conceded the correctness of the Department's designation of CEP LOT as
at the level of the constructed sale from the exporter to the importer.
See Hearing Transcript, (October 2, 1998) at 49.
To determine whether NV sales are at a different LOT 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.
Customer categories such as distributors, retailers, or end-users
are commonly used by petitioners or respondents to describe different
LOTs, but, without substantiation, they are insufficient to establish
that a claimed LOT is valid. An analysis of the chain of distribution
and of the selling functions substantiates or invalidates the claimed
LOTs.
Our analysis of the marketing process in both the home market and
United States begins with goods being sold by the producer and extends
to the sale to the final user. The chain of distribution between the
producer and the final user may have many or few links, and each
respondent's sales occur somewhere along this chain. In the United
States, the respondent's sales are generally to an importer, whether
independent or affiliated. We review and compare the distribution
systems in the home market and the United States, including selling
functions, class of customer, and the extent and level of selling
expenses for each claimed LOT.
Unless we find that there are different selling functions for sales
to the U.S. and home market sales, we will not determine that there are
separate LOTs. Different LOTs necessarily involve differences in
selling functions, but differences in selling functions, even
substantial ones, are not alone sufficient to establish a difference in
the LOTs. Differences in LOTs are characterized by purchasers at
different stages in the chain of distribution and sellers performing
qualitatively or quantitatively different functions in selling to them.
If the comparison-market sale is at a different LOT, 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 LOT of the export transaction, we make a
LOT 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
e.g., Carbon Steel Plate at 61732.
In the questionnaire the Department issued to DK and the other
respondents, we requested that they provide information about their
channels of distribution in the home and U.S. markets, including
selling activities performed and classes of customer. Specifically, we
requested information about the following nine types of selling
activities: (1) developing and maintaining customers; (2) maintaining
inventory; (3) preparing chain for shipment; (4) maintaining customer
records; (5) collecting bills; (6) maintaining local offices; (7)
technical assistance; (8) advertising; and (9) ``other activities'' (to
which DK responded with information regarding liability insurance).
DK sells to two types of customers in the home market (i.e., OEMs
and distributors). We found that there was one LOT in the home market--
direct sales of roller chain from DK to the unaffiliated home market
customers.
DK sales in the U.S. market are made exclusively through its
affiliated trading company, DT, who either sells directly to two types
of unaffiliated U.S. customers (i.e., OEMs and distributors), or to
Daido Corp., DK's U.S. subsidiary. We have designated the former as EP
sales because the subject merchandise was sold directly to the first
unaffiliated purchaser in the United States prior to importation and
CEP methodology was not otherwise warranted based on the facts of the
record. We have designated the sales through Daido Corp. as CEP sales
because the first sale to an unaffiliated purchaser in the United
States was made by Daido Corp. after importation.
We first compared the home market sales to the EP sales, including
the selling functions performed for each. We initially note that the
structure of the two distribution systems appears very similar in that
both DK and DT sell directly to OEMs and distributors. Moreover, we
note that there are not substantial differences in selling activities.
For home market sales, DK performs the following nine types of selling
activities: developing and maintaining customers; maintaining
inventory; preparing chain for shipment; maintaining customer records;
collecting bills; maintaining local offices; technical assistance;
advertising; and providing liability insurance. Based on a careful
review of the record evidence, we found that DK/DT performed the
following five selling activities for EP sales: developing and
maintaining customers, preparing chain for shipment, maintaining
customer records, collecting bills, and advertising. Although more
selling activities were performed in the home market, we concluded from
the overlap that there were not significant differences in selling
activities performed in the home and EP markets. Consequently, based on
all of the above, we consider home market sales and EP sales to be at
the same LOT.
We then compared the U.S. EP sales to the CEP sales. As noted
above, EP sales are to two classes of customers while DK makes all of
its CEP sales through DT, an affiliated trading company. DT, in turn,
resells the merchandise to Daido Corp., its affiliated U.S. sales
subsidiary. Daido Corp. then makes CEP sales to unaffiliated customers
in the United States (i.e., OEMs and distributors). These differ from
EP sales, where DT sells directly to unaffiliated customers, in that DT
makes all of its CEP sales through Daido Corp., an affiliated U.S.
subsidiary. Thus, because the EP sales are made directly to the OEMs
and distributors, while the CEP sales are to Daido Corp. who then sells
to OEMs and distributors, we find that the EP and CEP sales appear to
be made at different points in the chain of distribution.
Since we have determined that EP and CEP are at different LOTs, we
next examined whether the CEP and home market sales were at the same
LOT. For purposes of our analysis, we examined information regarding
the distribution systems for CEP and home markets sales, including the
quantitative and qualitative aspects of the selling functions, the
classes of customer, and the selling expenses for each of the companies
described above.
Based on our analysis of the record evidence, we have found that
DK's CEP and home market transactions are at different stages in the
marketing process
[[Page 63682]]
and thus at different LOTs. As we noted above, on the home market side,
DK sells directly to OEMs and distributors. However, CEP sales go
through Daido Corp. to OEMs and distributors in the United States.
Therefore, sales to Daido Corp. appear to be at an earlier point in the
chain of distribution than DK home market sales to OEMs and
distributors.
We then compared the selling functions performed for home market
sales and for CEP sales and we found that at the level of the
constructed sale from the exporter (DT) to the importer (Daido Corp.),
only three selling activities overlap between home market and CEP
sales: preparing chain for shipment; maintaining customer records; and
collecting bills.
Further, we found that DK performs several selling activities for
home market sales not performed by DK/DT for CEP sales. Chief among
these are maintaining inventory; maintaining local offices; and
developing and maintaining customers. With regard to the first of these
items, we note that DK maintains an inventory of finished chain at its
home market warehouse which enables it to ship a model to a home market
customer within one or two days from receipt of order. In contrast, DT
does not maintain a warehouse in Japan for purposes of maintaining an
inventory for U.S. sales. Rather, Daido Corp. in the United States
maintains an inventory for such sales. Since DT ships to Daido Corp.
from the port only when a complete shipment is available, it arranges
for freight forwarders to hold the merchandise (DT does not own a
warehouse) at the port while waiting for DK to complete manufacturing
of an entire order. This is clearly different from maintaining
inventory for servicing the needs of home market customers. This
distinction is similar to and consistent with prior treatment of such
activity. See Notice of Final Results and Partial Rescission of
Antidumping Duty Administrative Review: Certain Welded Carbon Steel
Pipe and Tube From Turkey, 63 FR 35190, 35192-93 (June 29, 1998) (Steel
Pipe and Tube 1998), where we found two levels of trade in the home
market based, in significant part, on the differences in the area
inventory maintenance and inventory-related selling activities. In
Steel Pipe and Tube 1998, one group of affiliated resellers did not
take merchandise into inventory prior to sale (merchandise was stocked
at the production mill prior to direct shipment to the resellers'
customers), while another group of affiliated resellers made sales to
customers from inventory that the resellers maintained at their
locations. The Department found that the latter group had ``the
responsibility of storing merchandise before purchasers have been
found.'' Steel Pipe and Tube 1998 at 35193. The Department further
noted that inventory maintenance gave rise to additional selling
functions performed by resellers in this LOT (i.e., forecasting,
planning, ordering, incurring inventory carrying costs, and delivery-
related functions) which were not performed by the resellers who did
not maintain inventory. The Department further found that ``inventory
maintenance is a principal selling function that distinguishes these
levels [of trade].'' Id.
In summary, DK has clearly described its process in the CEP market
as temporarily stockpiling or staging roller chain at its freight
forwarders' facilities at the port, which we find to be different from
maintaining inventory for servicing the needs of home market customers,
in that in maintaining a warehouse inventory, orders can be filled
immediately. However, U.S. sales cannot be filled immediately from the
port of export. Rather, the U.S. customer must wait until full
shiploads are accumulated and transported to the United States.
Although the petitioner argues that inventory maintained by DK in
Japan for home market customers could be used to fill CEP sales, we
note that DK's questionnaire responses consistently describe how for
CEP sales, DK and DT operate as previously described. We note that DK
has clearly explained how it stages merchandise from DK's factory at
the port until the full order is available, and then consolidates all
merchandise consolidated into a single shipment for Daido Corp. We find
nothing in the record contradicting this description.
With respect to the remaining activities for home market sales,
developing and maintaining home market customers and maintaining local
offices, we note that DK/DT do not perform any such activities for CEP
sales.
Finally, as to the two home market selling activities we discussed
as negligible in our preliminary results, DK clarified the extent to
which these selling activities--advertising and technical services--
were performed for home market customers. DK pointed out that its
engineering and sales office personnel provide technical assistance,
including design services, to home market customers. In addition, DK
claimed advertising expenses as one of the categories of its indirect
selling expenses. In comparison, we find that these selling activities
were performed for home market but not for CEP sales.
Based on our analysis of the record evidence, we conclude that
there are significant differences between the selling functions
performed in Japan for home market sales and those performed in Japan
for CEP sales.
The Department considers the totality of the circumstances in
evaluating whether qualitatively and quantitatively different selling
functions are performed for purchasers at different places in the chain
of distribution. See Notice of Final Determination of Sales at Less
Than Fair Value: Steel Wire Rod From Canada, 63 FR 9182, 9193 (February
24, 1998). The record evidence in this review indicates that there are
significant quantitative and qualitative differences in the selling
activities performed by DK and DT/DK for sales in the home market and
CEP sales to the United States. This finding supports our conclusion
that the home market and CEP sales occur at different stages of
marketing and thus at different LOTs.
In addition, based on the above analysis, we determined that DK
sold the subject merchandise during the POR at a LOT in the home market
which was more advanced than the LOT of the CEP sales of subject
merchandise in the United States. Since we found that DK has a single
LOT in the home market, we cannot quantify the difference in prices at
two (or more) home market LOTs. Consequently, we do not have the data
necessary to make a LOT adjustment for DK. Therefore, we have made a
CEP-offset adjustment to NV in our calculations for DK pursuant to
section 773(a)(7)(B) of the Act. We have made no adjustment for
purposes of comparisons to EP sales since we have determined home
market and EP sales to be at the same LOT.
Comment 2: The petitioner states that the Department failed to
deduct international freight and packing expenses for DK's CEP sales.
Specifically, DK reported international freight expenses and U.S.
packing expenses under the variable names ``INFRTDKY'' and ``DKPACKU,''
respectively. According to the petitioner, the Department, however,
used different variable names in calculating CEP. The petitioner
requests that the Department revise its program for the final results.
We received no comment on this issue from DK.
Department Position: We agree with the petitioner and have
corrected these adjustments in our calculations for the final results.
Sugiyama
Comment 1: Sugiyama argues that, for the final results, the
Department should calculate a margin for Sugiyama based
[[Page 63683]]
on all verifiable data, including the sales information submitted to
the Department after the questionnaire responses were due. Sugiyama
claims that this untimely submitted information was nonetheless
verifiable and, thus, it provides the Department with a reasonable
basis for actual margin analysis. Sugiyama explains that the
information was untimely submitted because the company was dependent on
receiving certain sales data from its shareholder, over whom Sugiyama
had no control. Therefore, according to the company, the untimeliness
factor is not an indication of Sugiyama's failure to cooperate.
Sugiyama concludes that the Department should accept this information
instead of applying adverse FA.
Notwithstanding Sugiyama's assertion that the Department should use
its information, Sugiyama further argues that, if the Department
determines to use FA in this situation, the Department must be guided
by the standard articulated by the CIT in Borden, where the Court
rejected the Department's use of adverse FA, despite the fact that the
respondent in that case provided less than ideal information to the
Department. Thus, according to the company, applying adverse FA to
Sugiyama in this review would be inappropriate in light of the Borden
decision.
The petitioner notes that the Department conducted a partial
verification of Sugiyama in Washington, D.C. on July 6, 1998, and
conditioned its undertaking a full verification in Japan on Sugiyama's
successful partial verification. The petitioner takes the position that
Sugiyama's responses, unless successfully verified, should be rejected
by the Department.
Department Position: We disagree with Sugiyama. As we explained in
detail in the ``Application of Facts Available'' section of this
notice, as well as in the Sugiyama Verification and FA Memoranda, the
record amply demonstrates that the information provided by Sugiyama
during the course of this proceeding was deficient, untimely and
unverifiable. Thus, sections 776(a)(2) (A), (B), and (D) of the Act
mandate that the Department reject Sugiyama's responses and apply total
FA. Moreover, Sugiyama has no basis to complain about a lack of
opportunities to cure its deficiencies under section 782(d) of the Act.
As the record demonstrates, the Department issued several supplemental
questionnaires, held numerous meetings with the counsel, and even
conducted an atypical ``mini-verification'' procedure to provide
Sugiyama with the final opportunity to prove that its information was
complete and reliable.
Furthermore, Sugiyama misinterprets the CIT's Borden decision.
Decided on a specific set of facts, the Court in Borden held that the
Department did not abuse its discretion by applying total FA to the
respondent who submitted untimely and deficient data. The Court was
concerned, however, that the Department prematurely concluded that
adverse inference was warranted in applying FA, where the Department
did not make an additional finding that the respondent had failed to
act to the best of its ability. See Borden, Slip Op. at 74-76. Thus, in
light of the Department's findings with respect to Sugiyama's
submissions (see the Sugiyama Verification Report and the Sugiyama FA
Memoranda), the decision to apply total FA is entirely consistent with
Borden. The issue of drawing an adverse inference in applying FA to
Sugiyama, the proper focus of the Borden decision, is addressed in the
Facts Available section, above.
Comment 2: With respect to the Department's decision to cancel the
verification in Japan, Sugiyama claims that it devoted much time and
many resources to prepare for the verification, and was fully organized
to host the Department's verifiers. Sugiyama asserts that it brought to
the Department's attention DIFMER issues in advance of the
verification, as soon as the company discovered these errors during the
preparation for verification. Although Sugiyama acknowledges that
certain aspects of its DIFMER methodology were problematic, and that
the Department has discretion to decide upon its appropriateness, the
company disagrees that these issues justified the cancellation of the
entire verification.
Elaborating on the DIFMER problems contained in Sugiyama's
responses, the company disagrees that 43 percent of its U.S. sales are
affected by the rejected DIFMER data. Rather, Sugiyama points out,
assuming that certain alleged programming errors and home market sales
omissions are corrected by the Department, only 11 percent, by
quantity, of U.S. sales are affected. Sugiyama maintains that the
Department's action in declining to verify Sugiyama was unnecessary and
urges the Department to accept as verified all information it submitted
and to use that information in calculating a dumping margin for
Sugiyama.
Sugiyama next proposes the following alternatives that the
Department should consider in dealing with the company's DIFMER
deficiencies: (1) calculate a margin for all sales with identical
matches, and apply the resulting margin to the similar match sales as a
``surrogate'' for DIFMER; (2) calculate a margin for all sales with
identical matches, and simply omit the DIFMER adjustment in calculating
the margin for U.S. sales with similar matches; (3) calculate a margin
for all sales with identical matches, but apply the DIFMER only where
it would increase the NV; (4) calculate a margin for all sales,
applying the maximum DIFMER of 20 percent to all sales with similar
matches, in accordance with Gray Portland Cement from Mexico, 63 FR
12764, 12779 (March 16, 1998); or (5) apply only a partial FA rate to
all U.S. sales with similar matches. Sugiyama points out that the last
option would be consistent with the Department's decision in this
review to apply partial FA for non-identical merchandise to two
respondents (DK and Enuma), who refused to provide the DIFMER
information as requested by the Department. If the Department selects
this last option, Sugiyama proposes that the Department apply a less
adverse rate of 17.57 percent from the preliminary results.
Department Position: We disagree with Sugiyama's argument that our
cancellation of a full verification was unnecessary. As the petitioner
noted (see comment 1, above), the Department conditioned its
undertaking a full verification of Sugiyama in Japan on the success of
the partial verification conducted in Washington. For the reasons
discussed in the ``Facts Available'' section above, Sugiyama's partial
verification was not successful. Therefore, it was appropriate for the
Department not to conduct the full verification in Japan.
Furthermore, as discussed in the ``Facts Available'' section,
above, the Department has determined that the information provided by
Sugiyama is unreliable and inadequate for the purpose of calculating a
margin for the final determination. Because we concluded that Sugiyama
failed to provide its responses to the Department's questionnaire in
the form and manner requested, and some of these responses were
untimely, section 776(a) requires the Department to use facts otherwise
available with respect to Sugiyama.
Comment 3: Assuming that the Department maintains its decision
enunciated in the August 14, 1998, FA Memorandum, to apply total FA to
Sugiyama, the company argues that, consistent with Fresh Cut Flowers--
Colombia 1997, the Department should select a non-adverse FA rate
normally applied to ``cooperative'' respondents. Sugiyama claims that
an adverse rate is
[[Page 63684]]
designed to provide an incentive for unwilling or unmotivated
respondents to cooperate with the Department's request for information,
rather than to punish for methodological errors made by actively
participating respondents, such as Sugiyama.
Sugiyama further explains that its efforts to respond to the
Department's requests, although ``imperfect,'' demonstrate that the
company acted to the best of its ability and that it did not knowingly
withhold information. Sugiyama claims that it undertook major efforts
to prepare responses, including thousands of hours of data collection
and preparation, even though the company had not been involved in
antidumping proceedings in recent years, and thus did not have in place
systems designed to readily collect the information requested by the
Department.
Sugiyama asserts that the application of the 42.48 percent adverse
FA rate from the preliminary results would force the company to shut
down and end its participation entirely. Sugiyama contends that the
cooperative FA rate that was used in the preliminary results for other
companies who, like Sugiyama, acted to the best of their ability to
cooperate, would adequately serve to carry out the FA policy without
forcing the company into insolvency.
Jeffrey Chain, a U.S. producer and importer of roller chain, joins
Sugiyama in its efforts to persuade the Department to apply a less
adverse FA rate that would recognize Sugiyama's participatory efforts
in this proceeding. Jeffrey Chain argues that the Department's decision
should take into account the fact that Sugiyama substantially
cooperated in this review. Thus, according to Jeffrey Chain, the rate
selected by the Department should be consistent with the rates applied
to other cooperative respondents in this review, and one which
encourages cooperative behavior from future respondents in the
proceeding. Jeffrey Chain notes that, under section 776 of the Act, the
Department must distinguish between respondents who comply with the
Department's requests for information, and those who refuse to comply,
to generally encourage respondents' participation and cooperation.
Jeffrey Chain reminds the Department that Sugiyama prepared
numerous questionnaire responses and was prepared for the Department's
verification, thereby manifesting ``substantial compliance'' with the
Department's requests for information. Moreover, Jeffrey Chain contends
that the record does not demonstrate that Sugiyama did not cooperate
fully with, or refused to provide information to, the Department.
Jeffrey Chain concludes that, in light of Sugiyama's relatively low
margins in past segments of the proceeding, a less adverse FA rate used
for other cooperative respondents in the preliminary results would be
sufficiently adverse to ensure Sugiyama's future participation and
prevent it from benefitting from its failure to submit certain
information in the current segment.
The petitioner supports the Department's decision expressed in the
August 14, 1998, Memorandum to apply total FA to Sugiyama. However, the
petitioner acknowledges that Sugiyama substantially cooperated with the
Department in this review. The petitioner suggests that the Department
is in a ``unique position'' to evaluate whether Sugiyama acted to the
best of its ability, a decision which the petitioner defers to the
Department. Were the Department to determine for the final results that
Sugiyama, in fact, substantially cooperated in the review, the
petitioner claims it would support a less adverse FA rate of 17.57
percent.
Department Position: We disagree, for the reasons discussed in the
Facts Available section above, with Sugiyama's arguments that it acted
to the best of its ability, and find that an adverse inference is
warranted for Sugiyama for these final results of review. Because we
have determined that the 42.48 percent rate calculated for Kaga for the
preliminary results of this review is no longer valid (see the
Department Position to Pulton Comment 2, below), it is not necessary to
address the company's arguments regarding the merits of this rate.
However, we have considered Sugiyama's efforts, throughout the course
of this review, to comply with the Department's requests for
information and, accordingly, assigned to Sugiyama a less adverse FA
rate of 12.68 percent. As noted previously, this rate is a significant
increase from the company's current cash deposit rate and thus is
sufficiently adverse to induce cooperation by Sugiyama in future
reviews of this proceeding.
Comment 4: Sugiyama made several comments regarding LOT,
calculation of DIFMER, its related resellers' cutting cost, discounts,
and FA for one particular sale with a date of sale prior to the POR.
Department Position: We note that the Department's decision to
apply total FA for Sugiyama for the final results renders these
comments moot.
RK
Comment 1: RK states that in the preliminary results, the
Department made a programming error that substantially overstated the
quantity and substantially understated the price of RK's motorcycle
chain sold in kits in the United States. RK argues that for the final
results, the Department should make minor adjustments in programming
language so that the amount and price of chain sold in the United
States in kits are calculated accurately.
The petitioner agrees with RK that the Department made a clerical
error with respect to the treatment of RK's U.S. kit sales and does not
object to the correction proposed by RK.
Department Position: We agree with RK and the petitioner and have
made the appropriate changes to RK's margin calculation program.
Pulton
Comment 1: Citing the Department's Antidumping Duties;
Countervailing Duties; Final Rule 19 CFR Part 351 et al., 62 Fed. Reg.
27296, 27340 (1998), Pulton claims that, in determining whether a
company has acted to the best of its ability, the Department considers,
on a case-specific basis, whether the failure to respond was caused by
practical difficulties that made the company ``unable to respond.''
Pulton contends that it withdrew from verification due to such
practical difficulties.
Pulton argues that, given its lack of personnel resources, it would
have been commercially impossible and overly burdensome to submit to
verification. In support of this argument, Pulton states that it is a
small company that employs only two people in its Foreign Trade
Division and that most employees speak only a minimal amount of
English. Pulton asserts that submitting to verification would have
served to shut down its Foreign Trade Division for two weeks, resulting
in substantial lost sales.
Pulton claims however, that because it responded in a timely manner
to the main questionnaire and all of the Department's supplemental
questionnaires, it has clearly acted to the best of its ability to
comply with the Department's requests. Pulton asserts that, because
most of its records are manually created and maintained, it would have
been difficult to produce documents at verification at a reasonable
speed. Pulton, in fact, questions whether any company, such as itself,
which lacks significant computer capability, could pass a verification
in the present day.
[[Page 63685]]
Citing Borden at 76, Pulton argues that, since there is no evidence
on the record that it could have responded fully to the Department's
verification requests, an adverse inference is unwarranted.
Pulton claims that the circumstances in this case are similar to
those of Allied-Signal Aerospace Co. v. United States, 996 F.2d 1185,
1192 (Fed. Cir. 1993) (Allied-Signal), where the Court of Appeals for
the Federal Circuit (CAFC) found that the Department's decision to
characterize a respondent as uncooperative was unreasonable. Pulton
argues that, as in Allied-Signal, the Department's conclusion that
Pulton failed to cooperate to the best of its ability was unreasonable.
The petitioner argues that relevant cases and the Department's
decisions clearly indicate that the agency should not choose a more
favorable margin for Pulton simply because it made a business judgement
that participating in verification was not cost-effective. The
petitioner argues that there is no evidentiary support (i.e., an
affidavit or other certified submission) in the record for Pulton's
assertion that verification would have shut down Pulton's Foreign Trade
Division for two weeks, or that it would have cost the company a
substantial amount in lost sales.
The petitioner further claims that Pulton has not cited any cases
where the Department did not impose an adverse FA margin simply because
it would have been costly and difficult for a respondent to comply with
verification, or where the Department's decision to apply an adverse FA
margin under such circumstances has been overturned. The petitioner
differentiates this case from Borden, by arguing that the respondent in
Borden clearly had attempted to comply with the Department's requests
by making a number of attempts to generate the requested cost data. In
contrast, Pulton provided the Department with a speculative rationale
that the verification would have been impossible simply because Pulton
had predetermined that participation would be too expensive.
The petitioner also refutes the relevance of Allied-Signal by
arguing that, in Allied-Signal, the respondent had alerted the agency
of its difficulty in responding to the Department's questionnaire, and
had indicated its willingness to participate in a simplified review
process. Pulton, on the other hand, merely submitted a short,
unsubstantiated letter asserting that it would ``not be cost-effective
to participate in verification'' because of the expense of submitting
to verification, Pulton's insufficient staff support and the small
value of its roller chain sales to the United States. The petitioner
further argues that there is no indication that Pulton ever sought to
work out an accommodation with the Department.
According to the petitioner, Pulton's situation is analogous to
Empressa Nacional Siderurgica, S.A. v. United States, 880 F. Supp. 876,
880 (CIT 1995) (Empressa Nacional). In that case, the respondent argued
on the basis of Allied-Signal that, as a result of its cooperation, the
Department should not have chosen as BIA the highest rate calculated in
the preliminary determination. The Court disagreed, noting that the
respondent, ENSIDESA, ``did not request an extension of time until the
last day before the information was due,'' and that despite receiving
the extension, it informed the Department on the due date that it was
not submitting any of the data requested.
Department Position: We disagree with Pulton and continue to use an
adverse inference in applying total FA. The facts on the record have
not changed since the preliminary determination, where we applied total
adverse FA to Pulton. The reasons for this decision were articulated in
detail in the Memorandum to Maria Harris Tildon from Holly A. Kuga
Regarding the ``Application of Total Facts Available to Pulton (April
30, 1998) (Pulton FA Memorandum). We disagree with Pulton that it acted
to the best of its ability simply because it submitted its responses to
all sections of the Department's questionnaire in a timely manner. As
the Department explained in the Pulton FA Memorandum, Pulton's timely
responses were meaningless, because the Department was unable to check
the completeness and accuracy of this information in light of Pulton's
sudden refusal to undergo verification. See Notice of Final
Determination of Sales at Less Than Fair Value: Steel Wire Rod From
Venezuela, 63 FR 8946, 8947 (Febr. 23, 1998) (Steel Wire Rod From
Venezuela); and Notice of Final Determination of Sales at Less Than
Fair Value: Circular Welded Non-Alloy Steel Pipe From Romania, 61 FR
24274, 24275 (May 14, 1996).
Moreover, Pulton made no attempt to seek guidance from the
Department prior to the scheduled verification so that reasonable
accommodations could be made to help the company overcome its practical
difficulties without undermining the integrity of the verification
process. Instead, Pulton made a calculated business decision that it
was not ``cost effective'' to participate in verification. In light of
the above, we reiterate our position from the preliminary results that
Pulton did not act to the best of its ability.
Pulton's reliance on the Borden decision is misplaced. In Borden,
unlike in this case, the respondent was fully prepared to undergo the
verification process, making several attempts to comply with the
Department's requests for certain cost data, which were eventually
rejected for untimeliness and incompleteness prior to verification. The
Court generally agreed that the application of total FA in that case
was appropriate, but disagreed that adverse inference was warranted in
the selection of FA, where the Department made no finding that the
respondent did not act to the best of its ability. See Borden at 74-76.
In this case, unlike in Borden, we made a finding that Pulton did not
act to the best of its ability, and articulated, in detail, the reasons
for our decision in the Pulton FA Memorandum and RC 1996-1997
Preliminary Results.
Pulton's reliance on Allied-Signal is similarly inappropriate. In
Allied Signal, the CAFC found that the Department's decision to
characterize a respondent as ``uncooperative'' was unreasonable, where
the respondent ``alerted the ITA to its difficulty in responding to the
questionnaire and indicated its willingness to participate in a
simplified review process.'' Allied-Signal at 1192. Unlike in Allied-
Signal, Pulton made no such effort to approach the Department to seek
accommodations, but simply informed us shortly before the verification
was to commence that it was not willing to participate. Thus,
consistent with the Department's practice in cases where the respondent
withdraws its participation in a proceeding, in selecting FA for Pulton
in this review, an adverse inference is warranted.
Comment 2: Pulton notes that the 42.48 percent margin used by the
Department as FA for Pulton was calculated for Kaga in the preliminary
results and it is the second highest calculated rate ever applied to
any respondent in the history of this proceeding. Pulton states that,
when the Department relies on secondary information as FA, it is
required, to the extent practicable, to corroborate this information
from independent sources. Pulton argues that Kaga's preliminary results
margin has not been corroborated because the Department did not examine
its reliability or relevance. Pulton argues that, while the Department
assumed that this margin was properly calculated, Kaga's May 18, 1998,
letter disclosed that ``the data processing firm which produced Kaga's
U.S. sales diskette made a programming
[[Page 63686]]
error in transferring U.S. selling price data from Kaga's diskette into
the ITA's required format.'' Pulton claims that this indicates that the
data used was rife with error and, therefore, unreliable.
Pulton next takes issue with the relevance of the 42.48 percent
rate, noting that it reached a settlement with the Department in the
1993-1994 review for a 17.57 percent rate, following the CIT's
invalidation of the 43.29 percent rate because it was ``extremely
outdated'' and ``no other calculated rate in this investigation has
ever come close to this level.'' See Pulton Chain v. U.S., Slip Op. 97-
162 at 8 (CIT 1997) (Pulton). Pulton argues that the 42.48 percent
rate, which is remarkably close to the invalidated 43.29 percent rate,
is ``arbitrary and capricious and has no basis in law or fact.'' Pulton
concludes that there is nothing in this proceeding to indicate that
43.29 percent is in any way relevant to its own situation. Pulton
suggests that the Department use the information Pulton submitted to
calculate a margin in this review, or at least abstain from using an
adverse inference in selecting FA.
The petitioner argues that the 42.48 percent rate calculated for
Kaga should be imposed on Pulton, and if that rate is recalculated due
to errors in Kaga's submission, Pulton should receive the highest
calculated rate or 17.57 percent, whichever is higher. The petitioner
notes that the Department was not required to corroborate the 42.48
percent rate because the statute only requires corroboration if the
agency ``relies on secondary information rather than on information
obtained in the course of an investigation or review.''
Citing Fresh Cut Flowers--Columbia 1997 at 62 FR 53291, the
petitioner states that, as a matter of policy, a respondent like
Pulton, who has not cooperated in the review and has refused to undergo
verification, should not receive a margin lower than the one applied to
Kaga, who participated fully.
Addressing Pulton's argument with respect to the 42.48 percent rate
that was invalidated by the CIT in Pulton, the petitioner contends that
the rate was rejected in part because it was ``never used as an
assessment rate and was apparently considered likely to be inaccurate
when promulgated.'' In this case, unlike in Pulton, the petitioner
claims that the 42.48 percent rate was a calculated rate for Kaga in
the preliminary results of this proceeding.
Citing the Steel Wire Rod from Venezuela, the petitioner argues
that the Department should not rely on Pulton's information to perform
margin calculations because, absent verification, it is not possible to
check whether Pulton has submitted accurate data and, consequently,
there is no assurance that the resulting margins will be sufficient.
Petitioner states that the statute, under section 776(a) of the Act,
expressly provides that the Department shall use FA if the respondent
fails to provide the necessary information, or if the information is
unverifiable, the situation that Pulton has created in this review.
Department Position: Because the 42.48 percent rate calculated for
Kaga for the preliminary results of this review has been changed for
these final results and is no longer under consideration (see
discussion on FA for Kaga in ``Facts Available'' (FA) section, above),
it is not necessary to address the arguments regarding the merits of
this rate. As explained in detail in the Pulton FA Memorandum, we are
continuing to assign Pulton an adverse FA rate, only now that rate has
been changed from 42.48 to 17.57 percent, the highest rate from
previous segments of this proceeding, excluding the invalidated 43.29
percent rate.
Kaga
Comment 1: Kaga states that, subsequent to the Department's
preliminary determination, it discovered two programming errors made in
assembling its data in the proper computer format. The first error,
according to Kaga, occurred when only a single character was allowed to
the left of the decimal for U.S. gross unit price (GRSUPRU), resulting
in an understatement of Kaga's U.S. sales prices. According to Kaga,
this affected both EP and CEP sales. The second error (which affects
only CEP sales) occurred in its computer data submission of January 22,
1998, when the prices from Kaga's affiliated importer to its
unaffiliated U.S. customers were mistakenly deleted and, instead, used
the transfer prices from Kaga to its affiliated importer were used.
Kaga states that it submitted the correct prices in its first computer
data submission filed on September 12, 1997.
In addition, Kaga states that it found three other errors which it
made. First, according to Kaga, it miscalculated the per-foot gross
unit prices for several of its chains sold in the home market when
converting from a per-link basis in its books to a per-foot basis for
the Department. Second, Kaga states that it mistakenly coded several
models of conveyor chain as industrial chain. Kaga argues that the
information showing that those models are conveyor chain is already on
the record as part of Kaga's product catalog. Third, Kaga claims that
it included an invoice in the sales data, which represents an
adjustment in price to a pre-existing sale rather than a sale, and
requests that any observations associated with the invoice be deleted
from its home market data base.
Kaga requests that it be allowed to submit the correct price
information as well as any invoices which the Department deems
necessary, and that the Department correct Kaga's programming and
clerical errors for purposes of the final results.
Kaga contends that the Department's regulations allow for the
correction of errors in addition, subtraction, or other arithmetic
function, clerical errors resulting from inaccurate copying,
duplication, or the like, and any other type of unintentional errors.
Furthermore, Kaga contends that the CIT in Koyo Seiko Co., Ltd., v.
United States, 746 F.Supp. 1108, 1110 (CIT 1990) (Koyo Seiko), and the
CAFC in NTN Bearing Corporation v. United States 74f.3d 1204,1208 (CAFC
(1995) (NTN 1995), ruled that the Department should not only correct
its own errors but those made by the respondents, so that the
Department may fulfill its obligation to determine dumping margins as
accurately as possible.
Kaga states that the purpose of the preliminary results is to give
parties an opportunity for comment and request that the Department
correct these errors in order to calculate accurate dumping margins.
Further, Kaga contends that the Department must correct errors when
they are obvious on their face or when correct evidence is already on
the record. Further, Kaga states that in the interest of calculating
the most accurate dumping margins, the Department must not knowingly
use incorrect information. According to Kaga, these principles require
that the Department correct the errors generated by the data processing
firm because they are obvious and apparent on the record and the errors
made by Kaga itself because these errors are simply clerical in nature.
The petitioner claims that the proposed corrections and new data
submitted with Kaga's case brief reflect significant errors that the
Department should not accept at this late stage of the proceeding.
Moreover, the petitioner notes that the new data is untimely under 19
CFR 353.31(a)(1)(ii) (1997). The petitioner acknowledges that the
Department has some discretion in determining whether to accept late
filed evidence. However, the petitioner contends that the CIT in Usinor
Sacilor v. United States, 872 F. Supp 1000,1008 (CIT 1994) (Usinor),
Sugiyama Chain Co., v. United States, 797 F. Supp 989,
[[Page 63687]]
995 (CIT 1992) (Sugiyama), and NSK Ltd. v. United States, 798 F. Supp.
721, 725 (CIT 1992) (NSK), have affirmed the Department's decisions to
reject proposed corrections submitted after the deadlines. Moreover,
with respect to at least one correction proposed by Kaga, the
petitioner argues that Kaga has not cited to any evidence on the
record, nor has it now provided information to support its claim. The
petitioner argues that the extensive changes requested by Kaga do not
meet at least four of the Department's six conditions for correction of
clerical errors because: (i) the alleged errors are more substantial
than the kinds the Department previously has labeled clerical; (ii)
much of the information needed to corroborate the proposed changes
either is not on the record or could only be reconciled by the
Department through extensive manual review and, moreover, the
reliability of any such corrected information would be questionable;
(iii) although Kaga alerted the Department prior to the preliminary
determination to submissions errors, Kaga has failed to offer a
credible reason why it was so slow in discovering these errors; (iv)
Kaga waited to supplement the record and still has not provided fully
corrected information; and (v) the proposed corrections would affect
several portions of the response and entail ``substantial revision,''
under the Department's six-pronged test for determining whether it will
accept corrections of clerical errors. See Certain Fresh Cut Flowers
From Colombia; Final Results of Antidumping Duty Administrative
Reviews, 61 FR 42833, 42834 (August 19, 1996) (Fresh Cut Flowers--
Colombia 1996)). Furthermore, according to petitioner, the new
submission Kaga wants to make cannot be used unless the agency
determines that it is ``reliable.'' The petitioner argues that, given
the nature and extent of the proposed changes, this standard can only
be satisfied through a full scale verification of Kaga.
According to the petitioner, although Kaga focuses on how its facts
are analogous to the Koyo Seiko and NTN decisions, both cases are
factually distinct from Kaga's situation. First, the petitioner argues
that, unlike Koyo Seiko, where the Department did not dispute that
``the errors were purely clerical and would not require further
examination of the facts,'' the resolution of the issues raised by Kaga
in this review would require ``extensive additional examination,'' and
the petitioner would require verification of the materials that Kaga
submitted with its case brief. Further, the petitioner states that,
although several of Kaga's alleged errors involve manipulation of data,
the necessary corrective steps are much more complicated than most
purely clerical errors. Second, the petitioner points out that the Koyo
Seiko court noted that the respondent in that case ``notified Commerce
of the errors promptly upon their discovery.'' The petitioner claims
that, although Kaga may have notified the Department of its errors soon
after discovery, the errors should have been uncovered at an earlier
date. Moreover, the petitioner asserts that, although in Koyo Seiko the
Department was already in possession of an accurate hard copy of U.S.
sales figures in the administrative record, this is not the case here.
Third, the petitioner notes that, unlike Koyo Seiko, the Department did
not previously possess accurate pricing information for affected EP
transactions. In addition, the petitioner maintains that the accuracy
of several other proposed corrections cannot be determined without
undertaking an extensive, manual review of the computerized data in
Kaga's September 12, 1997, submissions and that there is no evidence on
the record to support some of the proposed changes. Fourth, the
petitioner contends that, whereas in NTN the clerical errors were
limited to coding errors and an error involving the listing of sales,
the correction of Kaga's errors is a significantly more involved
exercise. Finally, the petitioner notes that in other cases (e.g.,
Sugiyama and RHP Bearings v. United States, 19 CIT 1389, 1390 (1995)),
the Department and the courts have been more reluctant to label a
respondent's error clerical.
In response to the petitioner's comments, Kaga states that it is
not seeking to submit new information. It emphasizes that it is simply
asking the Department to correct certain ministerial errors contained
in its sales data submission of January 22, 1998. Kaga contends that
the correction of the programming errors will not require submission of
new information.
Kaga claims that none of the court cases cited by the petitioner
supports its argument. According to Kaga, each case is different from
Kaga's situation. Kaga contends that, contrary to the petitioner's
interpretation of Usinor, the court in that case held that the
Department abused its discretion in rejecting the plaintiff's
corrections. According to Kaga, Sugiyama involves corrections of
ministerial errors in the final results of the administrative review,
not the preliminary result which is exactly Kaga's situation. Finally,
Kaga argues that the ACA is wrong in characterizing the decision in NSK
as standing for the proposition that ``the submission of detailed
factual information at the prehearing state of an administrative review
is clearly untimely under any circumstances.'' Kaga maintains that the
petitioner fails to note that the NSK decision involved the submission
of detailed new information. Kaga notes that it does not seek to submit
``detailed new information.''
Further, Kaga claims that the ministerial errors which it has
discovered fully meet the Department's six requirements for accepting
clerical errors because: (i) the company has demonstrated that its
errors are clerical in nature; (ii) its corrective documentation is
reliable and Kaga invites the Department to conduct a verification of
its records; (iii) ample record evidence exists to demonstrate Kaga's
willingness, cooperation, and expedience in reporting its errors; (iv)
Kaga informed the Department of all its clerical errors by July 2,
1998, the due date for submission of the case brief ; (v) Kaga's
clerical errors do not constitute substantial revision; and (vi) Kaga
has not been verified, thus the corrections do not contradict verified
information.
Department Position: We agree with the petitioner that Kaga has not
satisfied the Department's standard for clerical error corrections and,
thus, the requested corrections have not been made. As a result of the
NTN decision, we have reevaluated our policy for accepting clerical
errors of respondents. See Preamble to Antidumping Duties, 62 FR 27296
(May 17, 1997). We may now accept corrections of such errors if all of
the following conditions are satisfied: (1) the error in question must
be demonstrated to be a clerical error, not a methodological error, an
error in judgement, or a substantive error; (2) we must be satisfied
that the corrective documentation provided in support of the clerical
error allegation is reliable; (3) the respondent must have availed
itself of the earliest reasonable opportunity to correct the error; (4)
the clerical error allegation, and any corrective documentation, must
be submitted to the Department no later than the due date for the
respondent's administrative case brief; (5) the clerical error must not
entail a substantial revision of the response; and (6) the respondent's
corrective documentation must not contradict information previously
determined to be accurate at verification. See Fresh Cut Flowers--
Colombia 1996.
As noted above, in its case brief of July 2, 1998, Kaga claimed to
have discovered two programming errors made in assembling its data in
the
[[Page 63688]]
proper computer format. The first programming error, according to Kaga,
occurred when a single character was allowed to the left of the decimal
for U.S. gross unit price (GRSUPRU) resulting in an understatement of
Kaga's U.S. sales prices. This error, Kaga claimed, affected sales to
one EP customer and all CEP sales. We have applied the six criteria set
forth in Fresh Cut Flowers--Colombia 1996 and have found that Kaga did
not meet the second criterion for accepting corrections of errors;
namely, that the corrective documentation provided in support of the
clerical error is reliable. An examination of the arguments and
supporting documents provided in Kaga's case brief and the record of
the proceeding demonstrates that, contrary to Kaga's claim, the decimal
programming error affects EP sales only. Further, the price list
submitted by Kaga for its EP customer does not reconcile with a number
of invoices from Kaga to the EP customer. In order to reconcile the
prices on the list with the invoices necessitates a conversion from a
per-link basis for each model of chain, and we discovered that in
several instances it would appear that Kaga failed to perform the
conversion correctly. Thus, we are not satisfied that the corrective
documentation provided by Kaga in support of its error allegation is
reliable.
The next programming error, affecting only CEP sales, according to
Kaga, occurred in its computer submission of January 22, 1998, when the
prices from Kaga's affiliated importer to its unaffiliated U.S.
customers were mistakenly deleted and, instead, used the transfer
prices from Kaga to its affiliated importer were used. Kaga claims that
the correct prices for CEP sales were submitted on the record in Kaga's
September 12, 1997, submission). To support this claim Kaga submitted
the invoices issued during the POR by Kaga's affiliated reseller to its
unaffiliated customers. We find that the CEP prices provided in Kaga's
September 12, 1997 submission do not reconcile in most instances with
the invoices issued by Kaga's affiliated reseller to its unaffiliated
customer. Therefore, because we are not satisfied that the corrective
documentation provided by Kaga in support of its second error
allegation is reliable, we conclude that Kaga did not satisfy the
second condition from Fresh Cut Flowers--Columbia 1996 that the
corrective documentation provided in support of the error allegation be
reliable.
In addition to the alleged programming errors discussed above,
Kaga, in its July 2, 1998, case brief also claimed that it found three
other errors made by Kaga itself. First, Kaga reported that it
miscalculated the per-foot gross unit prices for ``several of its
chains'' when converting from a per-link basis for the Department.
According to Kaga, in order to determine the per-foot price of models
of chain, the per-foot gross unit price is derived by dividing the
total sales price of the piece by the total length in feet. In
reviewing the conditions set forth in Fresh Cut Flowers--Colombia 1996,
we find that Kaga failed to meet the fourth condition: although Kaga
alleged its own errors no later than July 2, 1998, the due date for its
case brief, Kaga did not provide the information needed to correct the
alleged errors, nor the number of home market gross unit prices
(GRSUPRH) and U.S. GRSUPRUs, which are incorrect due to Kaga's
miscalculations in converting gross unit prices from a per-link to a
per foot basis. Thus, Kaga failed to provide corrective documentation
under the fourth condition set forth in Fresh Cut Flowers--Colombia
1996.
Second, Kaga noted that it ``mistakenly coded several models of
conveyor chain * * * as industrial chain'' and argued that the
information showing that those models are conveyor chain is already on
the record as part of Kaga's product catalog. Kaga represented that
corrections need to be made to several fields in Kaga's U.S. and home
market databases to reflect the accurate physical characteristics of
the incorrectly coded chain. In this instance, we find that in its July
2, 1998, case brief, Kaga failed to provide any information regarding
the specific models of conveyor chain which were incorrectly coded, nor
did it provide the number of U.S. and home market transactions affected
by its coding error. Thus, we are not satisfied that Kaga provided
corrective documentation required by the fourth condition in Fresh Cut
Flowers--Colombia 1996.
Third, Kaga claimed that it included an invoice in the home market
sales data which represents an adjustment in price to a pre-existing
sale, and that any observation associated with this invoice should be
deleted from the home market sales data base. As above, Kaga did not
attach any evidence to its case brief to corroborate its claim.
Therefore, Kaga failed to provide corrective documentation required by
the fourth condition in Fresh Cut Flowers--Colombia 1996.
Comment 2: Kaga states that on March 24, 1998, the Department
issued Final Scope Ruling-- Antidumping Finding on Roller Chain, Other
Than Bicycle from Japan--Request by Kaga Industries Co., Ltd., for a
Ruling on Automotive Silent Timing Chain. Kaga maintains that the sole
factor excluding Kaga's automotive timing chain from the scope of the
antidumping finding is the fact that the chain models do not have
rollers. According to Kaga, based on the Department's scope ruling,
with the stated exceptions of models 25 and 35 and leaf chain, all
chain manufactured by Kaga without rollers should be excluded from the
scope of the antidumping finding.
Kaga claims that several models of Kaga chain lack rollers, but
were not listed among the excluded silent timing chain in the
Department's March 24, 1998 final scope ruling. Therefore, Kaga
requests that the Department remove all C163, C168, and 05T chain from
the database used to calculate Kaga's antidumping duty margin.
The petitioner states that the Department has adopted formal
procedures for addressing scope questions affecting antidumping orders.
Further, the petitioner maintains that these procedures were followed
when the Department considered Kaga's request that certain silent
timing chain be excluded from the scope of the antidumping finding.
According to the petitioner, Kaga seeks through its case brief to
circumvent these established procedures and obtain additional exclusion
from the roller chain finding without subjecting its request to full
consideration by the parties and the Department. The petitioner states
that it strongly objects to this ``back door'' approach to scope
questions and urges the Department to deny Kaga's request. The
petitioner points out that Kaga has the option of submitting a formal
ruling request in the 1997-98 roller chain review.
Department Position: We agree with the petitioner that the
Department has a formal and established procedure for addressing scope
questions. Kaga's instant request for exclusion of the above noted
models is untimely as part of the administrative review proceeding and
was not in accordance with the regulations governing scope procedures.
Therefore, we are not excluding the requested models from the 1996-97
review of roller chain. Kaga may file a scope request regarding the
models of chain in question in accordance with 19 CFR 351.225(1998) at
any time in the future.
Comment 3: Kaga argues that the Department in its computer program
erroneously made an adjustment for commission on CEP sales and an
adjustment for CEP profit on EP sales.
According to the petitioner, based on a review of Department's
computer
[[Page 63689]]
program, there is no evidence that the Department made such programming
errors.
Kaga next argues that the Department should not have applied FA to
certain U.S. sales of leaf chain which did not indicate the number of
strands. According to Kaga, by virtue of its physical construction,
leaf chain cannot be multi-strand. Kaga argues that this contention is
supported by information contained in its product catalog which is on
the record of this proceeding. Therefore, Kaga requests that the
Department treat these models as single strand chain for purposes of
the final results and that the Department not resort to FA.
The petitioner responds that some, but not all, of the sales to
which the Department applied FA were leaf chain. However, the
petitioner agrees that, given the unique characteristics of leaf chain,
it should not be considered to be multi-strand. Further, the petitioner
states that, if the Department can confirm from the evidence already on
the record that a particular sale to which the Department applied FA is
a leaf chain sale, the petitioner would not object to a programming
change to treat these sales as single strand chain.
Finally, Kaga claims the Department based the calculation of CEP
profit on an exchange rate of 100 yen/dollar. For purposes of the final
results, Kaga requests that the Department use the actual average
exchange rate for the period which Kaga calculated and appended to its
case brief. Kaga argues that this would be in accordance with the
Department's preference to use actual exchange rates data.
According to the petitioner, Kaga does not identify the source of
the exchange rates appended to its case brief, nor does it disclose how
the individual monthly averages were calculated. The petitioner argues
that, given these uncertainties, and given the fact that the new
information is untimely, it should be rejected by the Department.
Department Position: The Department has determined that total FA is
warranted for Kaga in this review. Therefore, Kaga's arguments,
discussed above, regarding (1) programming errors, (2) the application
of FA to certain U.S. sales, and (3) the Department's calculation of
CEP profit, are moot.
OCM
Comment 1: Verification--Home Market Sales Reporting Methodology.
Reiterating the reasons, described in its November 17, 1997
supplemental response, that OCM could not report all home market sales
of the foreign like product within the time provided for submitting the
questionnaire response, the company claims that it, in fact, reported
home market sales of models which were identical to models sold to the
United States, as well as all home market sales of standard roller
chain models which were similar to U.S. attachment or special chain
models. OCM based its similar model decision on type of chain (all
chain sold in the United States during the POR was industrial chain),
number of strands, material, finish, and pitch length. OCM asserts
that, when a standard chain and attachment or special chain are
identical in these characteristics, the chain will usually differ in
terms of only two product characteristics. For attachment chain, the
difference would lie in the type and spacing of the attachment. For
special chain, the difference would lie in the special feature plus a
dimension, such as pitch length.
OCM disagrees with the Department's statement in the Memorandum
from Cameron Werker and Frank Thomson to Holly Kuga Re: Verification of
Responses of Oriental Manufacturing Co., Ltd. in the Antidumping Duty
Administrative Review of Roller Chain, other than Bicycle, from Japan,
at 8, (April 30, 1998) (OCM Verification Report) that, despite the
Department's request in the verification agenda that OCM provide a list
of all home market models of roller chain, OCM failed to provide an
adequate list. OCM claims that, contrary to this statement, the company
presented a list that contained all home market models of the same type
and pitch length as those models sold in the United States during the
POR (Verification Exhibit 4 (VE 4-list)). OCM argues that the
Department never indicated that the verification list of home market
models was inadequate and that, consequently, it should now be assumed
that the list was in fact considered by the Department to be adequate.
OCM asserts that the fact that it only presented a list of home market
models with the same type and pitch length as those models sold in the
United States does not in any way support the OCM Verification Report's
summary of findings that ``OCM's stated methodology for reporting home
market sales clearly excludes certain similar models [the Department]
would have used in model matching.''
Next, OCM states that it would be factually incorrect to link the
finding in the OCM Verification Report that ``there could be cases in
which the pitch length is different between products, but the products
could still be characterized as similar for the purposes of product
matching'' to the Department's finding that ``OCM's stated methodology
for reporting home market sales clearly excludes certain similar models
we would have used in model matching.'' OCM maintains that home market
models with different pitch lengths than the U.S. model will ordinarily
not be most similar because they will have less than 16 product
characteristics in common. OCM states that, in general, five other
product characteristics change with the pitch length. Meanwhile,
according to OCM, when pitch lengths are identical, the U.S. model and
the most similar home market model will have 16 product characteristics
in common. OCM maintains that there is only one instance in this review
whereby a home market model with a different pitch length from a U.S.
model is the most similar match.
Department Position: We disagree with OCM's statement that it
reported all appropriate identical and similar home market models of
roller chain. First, we disagree with OCM's assertion that the list
provided at verification should be assumed adequate because, according
to OCM, the Department never indicated that the list was inadequate. A
review of the OCM Verification Report clearly demonstrates that the
list provided at verification was not consistent with the requirements
of the Department's January 16, 1998, verification agenda, and that the
Department made multiple attempts to obtain more complete information
regarding home market sales at verification. Specifically, upon
receiving OCM's list at verification, the Department informed OCM that
the list was not complete as required by the Department's verification
agenda. In response to the Department's questions regarding whether a
complete list could be provided, company officials explained that,
because there were thousands of home market roller chain models, it
would not have been practical or useful to list all of these models
(see OCM Verification Report at 8). Also at verification, OCM conceded
that its list was not complete given that ``while they consider pitch
length to be the defining characteristic of roller chain, there could
be cases in which the pitch length is different between products, but
the products could still be characterized as similar for the purposes
of product matching.'' See OCM Verification Report at 8. We also note
OCM's statement that when a standard chain and attachment or special
chain are identical in terms of type of chain, number of strands,
material, finish, and pitch length, then for special chain, the
different characteristics would lie in the
[[Page 63690]]
special feature plus a dimension such as pitch length, is inherently
contradictory.
Furthermore, the Department was aware of OCM's statements in its
questionnaire response that it did not report all home market sales,
given the limited time and large number of models which OCM sold in the
home market. As articulated in the OCM FA Memorandum, it has been the
Department's practice in previous segments of this proceeding to allow
respondents (e.g., Pulton and Izumi) to report only a limited number of
home market sales, contingent upon a determination by the Department
that the reported home market sales constitute all appropriate home
market comparison sales. We afforded OCM the same latitude in this
review. However, unlike other cases, we have determined that OCM's
reported home market sales do not constitute all appropriate home
market comparison sales. The request for a complete list of all home
market sales was a means by which to determine whether OCM had reported
all appropriate home market comparison sales. Namely, by reviewing
which models had been sold, but not reported, we could determine
whether, in fact, OCM had reported all models of the same type and
pitch as those sold in the United States, and whether more similar
models had been sold in the home market than had been reported for
comparison purposes. We note that OCM, during verification, provided us
with a second (much shorter) list of models that it suggested should
have been reported to the Department but, in fact, had not been.
Despite the failure of OCM to provide a complete list of home
market sales at verification, the Department nevertheless attempted to
use the information available to ascertain the appropriateness of the
home market sales which were reported. However, we were unsuccessful in
this attempt. OCM's suggestion that the Department should now accept
OCM's home market reporting methodology is inappropriate given the fact
that, at verification, OCM did not provide the necessary documentation
to support its claim that it had reported the most appropriate home
market comparison models.
Finally, OCM incorrectly links the Verification Report summary of
findings statement that OCM's reporting of home market sales ``clearly
excludes certain models [the Department] would have used in model
matching'' solely with the above discussion. In fact, this finding was
based partly on the above issue, but also on other factual discoveries
made at verification. Please see the Department's position to comments
3, 4, 9, 10 and 13, below.
Comment 2: Verification--Pitch Length of Specific Models. OCM
contests the OCM Verification Report statements on page 9 that
The Department found models in the brochure with slightly
different pitch lengths than those reported in verification exhibit
4 that were similar in regard to the other roller chain
characteristics (see OCM Extra Heavy Duty Chain models on page 7 of
Verification Exhibit 4). Company officials stated that, given their
adopted methodology, even though these other characteristics were
similar, because the pitch length was not identical to the U.S.
model, these products would not have been placed on the list in
Verification Exhibit 4.
OCM argues that the fact that it omitted certain models from the VE-4
list does not necessarily mean it excluded models from the reported
home market sales database that the Department might have used as
comparisons for U.S. sales. Since the models referenced from the
product brochure are groups of models with the same pitch length but
other different dimensions, OCM notes that models with different pitch
lengths almost never have any other physical dimensions in common and,
therefore, would be less similar than models with the same pitch and
few other characteristics that differed.
Department Position: Based on the Department's determination in
these final results of review that products that are not identical with
respect to six specific characteristics, including pitch, should not be
considered similar merchandise for purposes of our calculations, this
point is moot. We note however, that at the time we issued our
questionnaire, and even in the preliminary results, we were considering
the possibility that matching across pitch and the other five
characteristics was appropriate. Had we not amended our matching
methodology for these final results, OCM's reporting methodology would
not necessarily have resulted in identification of the most appropriate
home market matches for all U.S. sales.
Comment 3: Verification--Models Included in the Home Market Sales
Database. OCM disputes the OCM Verification Report statement on page 13
that
Contrary to OCM's assertion that its home market database was
constructed exclusive of roller chain models containing non-standard
links or chain that was endless, we found that nine of the ten sales
reviewed from June 1996 in OCM's home market data base contained
either an offset link, joint link, connecting link, or was endless
as evidenced from the June 1996 home market sales ledger.
Verification Exhibit 12 contains supporting documentation.
OCM claims that 8 of the 9 home market sales referenced above are
of a standard chain model sold with a loose connecting link provided
for use by the customer in assembling the chain. OCM claims that the
Japanese symbol for ``loose'' appears on the sales ledger lines for
these sales and that this distinction was explained to the verifiers.
OCM also claims that the ninth home market sale referenced above was a
special chain and, therefore, the connecting, or joint link discussion
does not apply.
OCM suggests, therefore, that the Department's OCM Verification
Report summary of findings statements that (1) OCM reported sales in
the home market of models it specifically stated that it intended to
exclude and did not report certain models of home market sales which
were identical to U.S. sales, and (2) Company officials were unable to
fully explain all the discrepancies, with a minor exception, are
invalid. According to OCM, the minor exception consists of seven U.S.
sales of special configuration chain. OCM notes that, although it sold
identical merchandise in the home market, while preparing its U.S.
sales database, it did not recognize these seven sales as special chain
and so did not include the identical merchandise in its reported home
market sales. OCM further contests the Department's conclusion that the
Department was unable to determine what percentage of reported sales
was affected by OCM's failure to report costs for endless chain or
chain with offset, joint, or connecting links. OCM suggests that this
conclusion by the Department implies that the failure to report such
costs was an error. OCM maintains that the Department's statement that
``OCM's reported variable cost of manufacture for home market models
covers different models than those identified in the sales listing''
is, thus, no longer relevant. According to OCM, it only reported home
market sales of standard chain as it intended and, therefore, properly
reported costs for only standard chain.
With regard to this issue, OCM claims that, at verification, the
verifiers did not identify the nine sales they believed to contain a
connecting link, joint link, attached offset link, or endless chain.
OCM claims that it was not able to correct the Department's error until
now because it did not become aware of the error until after the OCM
Verification Report was filed and, therefore, the case brief is the
earliest opportunity it had to discuss this error.
Department Position: We disagree with OCM. We maintain that our
[[Page 63691]]
Verification Report is accurate in all respects. Notwithstanding OCM's
claim that its home market database was constructed without roller
chain models containing non-standard links or chain that was endless,
we found that nine out of ten sales reviewed at verification contained
some type of non-standard link (see OCM Verification Report at 13 and
Verification Exhibit 12). Moreover, when asked by the Department at
verification why those specific sales appeared in the home market sales
database, given that OCM officials had just informed the verification
team that the home market sales listing excluded such models, company
officials repeatedly stated that the sales were mistakenly entered onto
the home market sales listing (see OCM Verification Report at 13).
Contrary to OCM's statements in its case brief, these comments by OCM
officials, directly confronted with these specific sales at
verification, demonstrate that the Department did, in fact, identify
the nine sales it believed to contain non-standard links, and that the
Department verifiers asked company officials to explain the
discrepancy. Therefore, OCM's contention that the OCM Verification
Report was the first time OCM was made aware of the nine sales is
clearly incorrect. Furthermore, given the discussions on this exact
point between the verification team and company officials, OCM's
assertion that it would have explained that these sales were of
standard chain with loose connecting links provided for use by the
customer in assembling the chain, is at best self-serving. Because of
the importance of this finding at verification, we discussed this issue
at great length with company officials, and, in fact, pointed out these
specific sales from the home market sales ledger in requesting an
explanation of the nature of these sales and models. Company officials
repeatedly asserted that these sales should not have been reported
because they contained joint or connecting links, and stated that
``temporary work staff with no knowledge of roller chain was hired to
construct the home market data base.'' Therefore, OCM's claim that this
finding is ``incorrect'' and that the ``ITA made a mistake'' represents
a post-hoc attempt to correct one of its numerous verification failures
to accurately present and explain information requested by the
verifiers that is crucial to complete a successful verification.
Notwithstanding these facts, OCM does not dispute that the nine
sales identified by the Department comprised special chain and that at
least eight of those identified contained a connecting link. Whether or
not the links were connected to the chain or not, as belatedly argued
by OCM, the fact that the non-standard links were included with the
chain is not disputed. Company officials were clearly unaware whether
such sales were reported in the home market sales listing, or to what
extent such sales were reported. Furthermore, OCM obviously failed to
report the costs of these extra non-standard links, which appeared in
nine of ten sales reviewed, since OCM maintains it did not account for
the ``loose'' non-standard links in its cost reporting. Moreover, OCM's
inability to accurately identify the sales it intended to report (see
OCM Verification Report at 13) demonstrates that not only could the
Department not determine the magnitude of this discrepancy, but neither
could OCM. Therefore, we are likewise unable to determine the extent of
products for which OCM did not report cost.
Comment 4: Verification--Unreported Home Market Sales. OCM next
points to the OCM FA Memorandum, in which the Department makes the
following statement:
OCM also provided a list of standard chain models sold in the
home market that it believed should have been included in its home
market sales data base. OCM noted that this list was not necessarily
inclusive.
OCM contests the Department's conclusion that six of the eleven models
presented by OCM in this list (VE-4) should have been reported in OCM's
home market database. OCM claims that page 14 of the OCM Verification
Report confirms that six of the models in question were either not sold
in Japan, were sold ``outside the 90-60 day rule period,'' or were
``home market sales of special configuration chain'' and, therefore,
were correctly omitted from the home market sales database.
OCM further disputes the OCM Verification Report conclusion that
the Department was ``unable to determine the magnitude of the
unreported home market sales of these models.'' OCM asserts that VE-4,
in fact, lists the number of home market sales for each model and the
date of each sale. OCM further states that the discussion at
verification regarding these models occurred prior to the discussion
regarding special configuration chain, and that this is probably the
reason that the Department did not realize that the five models were
actually special chain. OCM asserts that the possibility that the sales
of these five models might be special configuration chain was never
raised by anyone, and now that OCM has identified these sales as being
properly excluded from the home market data base, the statements in the
OCM FA Memorandum and OCM Verification Report are ``no longer
correct.'' OCM also notes that it has no recollection of stating that
``this list was not necessarily all inclusive.''
OCM claims that the above argument proves that the OCM Verification
Report summary of findings is invalid and, in fact, lends support to
the OCM assertion that it acted consistently in not reporting sales of
special configuration chain in the home market sales database.
Department Position: We disagree with OCM. First, OCM's above
assertion that the Verification Report confirms that six of the models
in question were not sold in Japan is incorrect. Page 14 of the OCM
Verification Report clearly states that
Examination of the ``sales by model'' book confirmed that there
were sales of six of the 11 models identified in verification
exhibit 4 which had not been reported in the home market sales
database but should have been reported.
Further, regarding the list provided at the start of verification,
which is contained in verification exhibit 4, we do not understand
OCM's statement it has no recollection of stating that, ``this list was
not necessarily all inclusive.'' Even before introductory comments
could be made by the Department at the start of verification, OCM
officials were in the process of hand-writing a list of roller chain
models sold in the United States, which potentially were also sold in
the home market and, therefore, should have been reported in OCM's home
market database (see OCM Verification Report at 2). As stated by OCM
officials themselves, the list was constructed at the very last minute,
and only after noticing that the home market database did not contain
some major standard models (e.g. models 100-3R and 100-4R). Therefore,
OCM officials noted 11 of these types of roller chain models on a piece
of paper (see Verification Exhibit 4), and submitted this hand-written
note to the Department verifiers, stating that it was a cursory list
and that, given the ``last minute nature'' of its preparation, it may
or may not include models sold in both the U.S. and home markets that
may not have been reported in the home market database (see OCM
Verification Report at 2).
Furthermore, we continue to conclude that we are unable to
determine the magnitude of the unreported home market sales of these
models (i.e., the models contained in VE-4, which were
[[Page 63692]]
described at the beginning of verification as models that may have been
improperly excluded from the home market database). We disagree with
OCM that the spreadsheet presented at verification as supporting
documentation for the above-referenced list of models is a
comprehensive list of all home market sales, reporting the date of each
sale related to the models contained in the above-referenced list.
While we do not dispute that the spreadsheet was reconciled to the
``sales by models'' book to ascertain the completeness of the
worksheet, we note that it was not possible to completely review OCM's
records, given the structure and nature of the records, to establish
that these were the only sales of these models made in the home market
and that, in fact, these were the only unreported models. Therefore, we
were, in fact, unable to determine the magnitude of the unreported home
market sales of these models.
Additionally, OCM did not at any time prior to, or during,
verification state that sales of these models were properly excluded
from its home market database because they constituted special chain.
Specifically, OCM stated that it hired temporary employees who were not
knowledgeable about roller chain to assist with the compilation of the
sales databases. OCM officials further stated that, rather than select
all appropriate sales from its records, the temporary employees were
instructed not to include any models containing a non-standard link or
attachment on the databases, and even given the instructions, there
were still discrepancies in the databases that OCM officials were
unaware of prior to their discovery by the Department at verification.
OCM could not explain many of the discrepancies, and simply attributed
them to the inexperience of the temporary work staff. See OCM
Verification Report at 12 and 13. OCM's post-hoc argument that these
sales were properly excluded from the home market sales database,
thereby rendering the Department's statements regarding this issue in
the OCM FA Memorandum and the OCM Verification Report inaccurate, is
without merit and contrary to facts on the record. Therefore, our
conclusions in the OCM Verification Report regarding these sales have
not changed.
Comment 5: Verification--Price Discrepancy for One Sale. OCM
refutes the OCM Verification Report statement that ``OCM incorrectly
over-reported the price for observation 691 (invoice number DF-1384) by
6.4 percent.'' OCM claims that the price reported for U.S. observation
691 was, in fact, the same price as on the invoice for DF-1384. OCM
claims that the page of the invoice that contains this price was not
included in Verification Exhibit 17.
Department Position: We agree with OCM that the price it reported
for U.S. observation 691 is the same price as recorded on the invoice.
The OCM Verification Report contained a typographical error in that it
was not U.S. observation 691 that was incorrect, but rather U.S.
observation 693. The price for U.S. observation 693 was incorrectly
over-reported by 6.4 percent.
Comment 6: Verification--Home Market Inland Freight. OCM disputes
the Department's findings regarding inland freight in the OCM
verification report. Specifically, OCM refutes the conclusion that
The freight rates in the August 15 response did not include all
home market destinations as identified on the freight rate
contracts. For example, company officials confirmed that OCM shipped
goods to customers in Yokohama, Sakata, Sapporo, Shintome (sic--
Shintone), and Awazu, for which there are rates in the above-
mentioned contracts, but were not included in Attachment B22 of the
August 15 response. * * * We were unable to determine which sales in
the home market sales listing were shipped to these destinations
because, although OCM provided a complete list of customer names in
its questionnaire responses, it did not provide a key code to the
location of each home market customer is (sic--in) response to the
Department's request for (``Destination'') in the original
questionnaire.
OCM claims that it did provide a key code to the location of each home
market customer in the form of area code listings and that it included,
at Attachment B-22 of its questionnaire response, an inland freight
cost chart linking the area codes in the home market customer list to
destination names (i.e., prefectures and cities). OCM notes, however,
that it failed to list certain cities in the above-discussed chart;
thus, ``identifying the shipments which went to Yokohama, Sakata,
Sapporo, Shintone and Awazu requires some knowledge of Japanese
geography.'' (Brief at 21) Notwithstanding this statement, OCM claims
that, by using the customer list and the inland freight cost chart, the
Department should have been able to identify sales to Yokohama, Sakata,
and Awazu.
OCM states that since Yokohama is located in the Kanto area and the
freight rate reported in the verification report for Kanto ``is
approximately the same as that reported by OCM * * * for the Kanto area
* * * the ITA should have had no problem here.'' (Brief at 22) OCM
makes a similar claim with regard to the Tohoku region, and for Awazu
in the Hokuriku area.
Regarding shipments to Sapporo, OCM states that, while its
transportation carrier in Hokkaido has one freight rate for Sapporo and
one rate for all other locations in Hokkaido, it applied only the
Sapporo rate to all Hokkaido shipments, in order to simplify the inland
freight cost calculation. Furthermore, OCM acknowledges that it
``provided less than complete information'' for Sapporo and Shintone.
Finally, OCM also acknowledges that its area code designation for
shipments to another region was incorrectly reported.
Department Position: We disagree with OCM regarding the findings at
verification with respect to OCM's reported home market inland freight.
In its case brief, OCM states that for three of the destinations in
question, there should have been no problem determining the freight
rate because all that is needed to determine which inland freight rate
to use is a ``knowledge of Japanese geography.'' It is not reasonable
for a respondent to expect that the Department should have such a level
of detailed knowledge at its finger-tips in the course of conducting
administrative reviews. It is incumbent upon the respondent to provide
all the necessary information and detail for the Department to be able
to ascertain if certain expenses were properly reported. As it is the
respondent's burden to explain its methodology and what it has reported
to the Department, we requested at verification that OCM explain under
which area code these locations should be characterized. We established
rates from OCM's source documentation, but at no time did OCM inform
the Department that the areas of Yokohama, Sakata, and Awazu fit into
any area codes already listed in OCM's inland freight cost chart.
Therefore, as stated in the OCM Verification Report, ``we were unable
to determine which sales in the home market sales listing were shipped
to these destinations.'' We further disagree with OCM's claim that,
since the freight rates in the source documents are ``approximately''
the same as the reported freight costs, we should have accepted its
reported freight costs. The point of verification is to determine the
accuracy of the reported values by tying them to those in the source
documents, not to accept ``approximate'' values at verification for
data that was never provided in response to the Department's
antidumping questionnaire.
Regarding the latter two locations, OCM has acknowledged that it
provided ``less than complete information'' (Brief at 22), which left
the Department unable
[[Page 63693]]
to determine which sales in the home market sales listing were shipped
to these destinations.
Comment 7: Verification--Weights Used to Calculate Home Market
Freight and Brokerage. OCM argues that, notwithstanding the problems
regarding the product-specific weights it used for its freight
calculations, the Department should accept its reported home market
freight and brokerage costs. OCM states that, while it would have been
easy to merely use the weights listed in its catalog, it attempted to
refine the chain weights. Therefore, in some cases, it used weights
from the catalog; in other cases, it used weights from a ``master
list'' of the refined chain weights, or a third weight which
incorporated the packing material weight. OCM argues that the
discrepancies between these weights are minor and do not justify
disregarding its reported inland freight and brokerage and handling
charges. For example, OCM states that the maximum difference between
the catalog weight and the weight used to calculate the inland freight
and brokerage and handling charges was 3.81 percent. OCM recommends
that the Department utilize weights listed in its catalog, which are
accurate weights and used by OCM in the ordinary course of business, to
calculate revised inland freight and brokerage and handling charges for
the final results of review. In those cases where a model's weight is
not listed in its catalog, OCM recommends using the ``master list''
weights.
Department Position: We disagree with OCM that the Department
should accept its reported home market freight and brokerage costs. As
OCM notes in its argument, it attempted to ``refine'' its chain
weights, although OCM never explained what it meant by ``refine.'' OCM
further notes that, in certain instances, it utilized the catalog
weights; in other instances it used weights from a ``master list of the
refined chain weights, and in still other instances, it used a third
weight which incorporated the packing material weight.'' While the
Department applauds OCM's efforts to ``refine'' its chain weights for
purposes of reporting its inland freight and brokerage expenses, OCM
was unable to explain or substantiate the weight reported for the
models selected at verification. Furthermore, OCM could not
substantiate the weights reported on the ``master list'' when asked to
do so at verification. Moreover, after OCM was unable to reconcile the
weights for the models selected using one or more of the above-
referenced methodologies, OCM officials explained that they were
mistaken regarding the methodology, and that the product catalog was
used to determine the reported weights. We were still unable to
reconcile all the freight expenses in the sales listing using the
catalog weights (see OCM Verification Report at 20). In short, the
Department was unable to reconcile the reviewed model-specific freight
charges to the reported company freight rates by using either the
product weights listed in the catalog or the weights provided by the
``master list'' (see OCM FA Memorandum).
Moreover, we disagree with OCM's recommendation that the Department
simply use the weights listed in its catalog or the ``master list,'' in
instances where the catalog does not report the weight, as a surrogate
for weight. First, it is OCM's responsibility to report the accurate
weight of each product. OCM's suggestion that the Department go through
its home market sales database and match each product to the catalog in
order to assign a ``correct'' weight would be burdensome and overly
time-consuming. Moreover, OCM's suggestion that we use the ``master
list'' weights when the catalog does not report a weight, and catalog
weights where they exist, would constitute the use of unsubstantiated
information, given that we were unable to reconcile either the ``master
list'' or the catalog weights to any source documents. Therefore, we do
not agree with this assertion.
Comment 8: Verification--Material Costs. OCM notes that only one
reference exists in the Verification Report's summary of findings
regarding the Department's testing of its methodology for updating
material costs. The reference notes that OCM used the material costs
for the four largest selling chain models to update its standard
material costs to the POR, which OCM agrees with. OCM then notes that
the Department conducted an extensive exercise to arrive at a 1996
material cost for model 40 chain. This exercise resulted in a cost
significantly lower than the standard cost figure from 1993. OCM states
that this is consistent with everything OCM explained to the Department
regarding material cost changes between the standard cost system and
the POR costs.
Department Position: As noted by OCM, the summary of findings
section of the OCM Verification Report does contain a reference to the
materials cost adjustment calculated by OCM. The OCM Verification
Report also contains a detailed description of the procedures and
results of each test conducted by the Department on this issue, and
although the Department found that the 1996 reported cost of model 40
chain was lower than the standard cost figure from 1993 as stated by
OCM, the OCM verification report contains substantially more relevant
information regarding OCM's methodology. Specifically, we found that
although OCM's standard costs for raw material inputs were developed
using the standard cost survey covering the period April 1993 through
September 1993, OCM calculated its raw materials cost variance for
purposes of the dumping calculation as the difference between the
prices paid for raw materials during December 1993 and December 1996.
We note that OCM failed to disclose in its questionnaire response that
for purposes of calculating a raw material cost variance it substituted
December 1993 costs for the standard costs (reflective of the period
April 1993 through September 1993) and compared this substitute to raw
material costs incurred in only December 1996 rather than for the POR.
At verification, we compared the December 1993 prices paid for raw
material inputs to the standard raw material costs for models 40, 50,
60 and 80, to determine if the reported December 1993 data was
reflective of the standard costs. We found that the December 1993
material costs were not reflective of the April through September 1993
standard costs, thus indicating that the reported variance (between
December 1993 and December 1996 costs) was not reflective of what the
raw material price variance would be between the standard costs and the
1996 material costs. Moreover, we found an additional discrepancy in
the reported December 1993 cost of the roller contained in model 80-1R.
This discrepancy was due to the fact that OCM sourced this roller from
two vendors in December 1993, but calculated the cost based on
purchases from only one vendor, thus further bringing into question the
validity of the data.
We selected the next three highest selling models and tested the
difference between the April through September 1993 standard costs and
December 1996 actual costs. We found that the average reduction in
material costs for these three models was significantly different from
the average reduction in materials costs for the four models discussed
above (see OCM Verification Report at 22 through 24).
Further, we note that in attempting to calculate a material cost
variance, OCM did not account for differences in material usage between
the period used to derive the standard costs, or even December 1993,
and the POR. Therefore, although OCM is correct in stating that the
models the Department tested at
[[Page 63694]]
verification showed material costs which were lower in 1996 than 1993,
this result was based on incomplete and inappropriate cost data
provided by OCM and, therefore, is unreliable for purposes of
calculating a dumping margin.
Thus, OCM, in its comment, fails to address the results of all the
tests conducted by the Department at verification, which identify
discrepancies in OCM's calculations as well as evidence that OCM's
material cost adjustment based on four models is not representative of
the subject merchandise as a whole. For a more extensive analysis of
our findings at verification on this issue, see the OCM FA Memorandum,
which details the differences between the cost methodology OCM
reportedly utilized in its questionnaire response and that which OCM
described at verification, as well as our verification findings.
Lastly, OCM seems to discuss only the Summary of Findings section
of the OCM Verification Report regarding any discrepancies and
conclusions resulting from verification. First, the OCM Verification
Report, like any other Verification Report, draws no conclusions. It is
simply designed to report the findings from verification. Second, the
Summary of Findings section is just that, a summary. The full text of
the verification report contains detailed accounts of all procedures
and results of the verification, and must be read in its entirety in
order to fully understand the full scope of the verification.
Comment 9: Verification--Whether to Compare Standard Chain to
Special Chain. OCM refers to a worksheet in the OCM Verification Report
(exhibit 24-C) in support of its argument that special configuration
chain should not be compared to standard configuration chain. OCM notes
that this exhibit illustrates that, for model 40-1R, various special
chains are significantly higher in cost than the standard chain model.
OCM's purpose of including these figures was to illustrate that special
chain has a substantially higher production cost than standard chain
and, thus, the two types of chain should not be compared. OCM claims
that the OCM Verification Report states that the verifiers confirmed
the accuracy of the figures on the worksheet, but disagreed with OCM's
methodology for making the comparison between special and standard
chain. The verifiers determined that the special models cost more (but
significantly less than that which OCM calculated) than the standard
chain because the verifiers multiplied the special configurations'
manufacturing costs by three due to a differential in the number of
links in the special and standard chains. OCM argues that, regardless
of the cost differential disagreement between its methodology and the
verifiers methodology, the fact remains that special chain is
significantly more expensive to produce than standard chain.
Department Position: As stated by OCM, the purpose of the
worksheets contained in exhibit 24-C of the OCM verification report was
to illustrate the cost differences between a standard model chain
(i.e., model 40-1R) and the same model chain with non-standard links
(i.e., connecting link, offset link, both connecting and offset links,
and endless connection). After reviewing the worksheets provided by OCM
at verification and receiving explanations from company officials of
the calculations contained therein, we found that the cost differences
were not as OCM portrayed them. In fact, after recalculating the costs
of the chain with non-standard links, which was necessary because the
40-1R model used by OCM as the base model contained 240 links while all
the other comparison models with special links contained 70 or 71
links, we found that the cost differences between the base model and
the comparison models were dramatically less than calculated by OCM
(assuming the cost data used for these tests had been reliable) (see
OCM Verification Report at 24 and 25). Again, if the cost data had been
reliable, based on the recalculation at verification, the standard
model chain and the same model with a non-standard link were comparable
according to the Department's matching criteria and DIFMER test.
Comment 10: FA--Whether OCM Provided the Necessary Information in
the Form and Manner Requested. OCM asserts that it provided the
necessary information in the form and manner requested. OCM addresses,
in turn, the Department's findings that (1) ``OCM * * * did not report
all appropriate home market sales and cost information,'' and (2) the
Department was ``unable to verify the accuracy and completeness of
OCM's costs.''
Regarding the Department's finding that ``OCM * * * did not report
all appropriate home market sales and cost information,'' OCM first
addresses sales issues. OCM argues that it reported all home market
sales of models which were identical to those models sold in the United
States, but due to the extraordinary burden, it did not report all home
market sales of the foreign like product. OCM refers to its explanation
in the November 17 supplemental response for its failure to report all
home market sales of the foreign like product in the time permitted.
Specifically, OCM reiterates that (1) since its electronically stored
data base is purged after 100 days, OCM would have had to manually
input the data, which would be an impossible task given that its sales
ledger contained approximately 148,000 line items; and (2) the research
time to locate the data relevant to the requested product
characteristics for every home market special chain model and
attachment chain model sold during the relevant period could have taken
months. OCM states the Department never objected to its response
statements, and that this non-response suggests implicit agreement that
OCM would not have to report all home market sales. In fact, OCM cites
the OCM FA Memorandum, which states that it would allow OCM to report
limited home market sales contingent upon a determination that it had
reported all appropriate home market comparison sales.
OCM notes that, for U.S. sales of attachment chain or special chain
models, where no identical merchandise was sold in the home market, it
selected as similar the standard chain models identical to the U.S.
models in terms of the following characteristics: type of chain;
material; finish; number of strands; and pitch length. OCM states that
the similar model issue is not overly significant (i.e., 49 out of 117
U.S. models, and 246 out of 696 U.S. sales lacked an identical match).
OCM believes that the Department's concern with its home market sales
reporting focused on the ``extent of unreported home market sales of
merchandise identical or similar to merchandise sold in the United
States.'' OCM refers to the OCM FA Memorandum, in which we stated that
In its most recent supplemental response, OCM did not revise its
model match selections in accordance with the Department's
instruction re: revised model match methodology (i.e., it continued
to identify identical and similar product matches based on the four
product characteristics discussed above, rather than the 18
characteristics the Department deemed appropriate for model match) *
* * and
OCM's stated matching methodology clearly excludes certain home
market sales of identical and similar merchandise we would have used
in model matching since the Department's matching methodology is
based on 18 product characteristics, not just the four product
characteristics used by OCM.
OCM claims that, in fact, there is no evidence that OCM's model match
methodology excluded certain home market sales of merchandise the
[[Page 63695]]
Department would have used. Moreover, the Department's OCM FA
Memorandum and OCM Verification Report do not specifically identify
models excluded by OCM that the Department would have used in model
matching.
OCM further states that it is unclear if the summary of findings in
the OCM Verification Report are based on the notion that OCM used just
five, rather than 18, product characteristics to select similar home
market models. If so, OCM contends, the above explanation demonstrates
that there is no supporting evidence for this finding.
OCM next addresses the OCM Verification Report statement, in which
we stated that
Company officials acknowledged, however, that while they
consider pitch length to be the defining characteristic of roller
chain, there could be cases in which the pitch length is different
between products, but the products could still be characterized as
similar for purposes of product matching.
OCM acknowledges that this statement is true, but insists that it does
not in any way undercut its sales reporting methodology because only in
very rare cases would a model with a different pitch length be most
similar to a U.S. model. OCM reiterates that models with different
pitch lengths will differ in at least six product characteristics,
whereas models with the same pitch length (i.e., standard models that
are the base chain of the attachment chain and have the same pitch
length) will only vary by two or three product characteristics in most
cases. OCM notes that, in determining home market similar matches, it
selected the standard chain model of the same pitch length as the most
similar model.
Regarding configuration of models, OCM reiterates that it included
only standard configuration chain sales in the home market sales data
base because (1) special configurations are physically different from
the standard configuration of the same model, (2) the manufacturing
cost for special chain is significantly higher than that of standard
chain, and (3) at the time it prepared the home market data base, OCM
believed that its U.S. sales were all made in standard configuration.
OCM claims that its position that only home market standard
configuration chain sales should be compared with U.S. standard
configuration chain sales is consistent with and supported by the
statute. OCM states that the first choice in the hierarchy of
merchandise that can serve as the foreign like product is defined by
section 771(16)(A) of the Act as ``The subject merchandise and other
merchandise which is identical in physical characteristics with, and
was produced in the same country by the same person as, that
merchandise.'' Because special configuration chain is not ``identical
in physical characteristics with'' standard chain, it would not be the
first choice in the hierarchy and should not be compared to standard
chain. Instead, standard chain is the first choice in the hierarchy
described in the statute, and this is correctly what OCM used in
reporting the foreign like product.
OCM next repeats its arguments regarding the Department's finding
that nine of the ten sales examined in OCM's June 1996 sales ledger
contained an offset link, a joint link, a connecting link, or was
endless. OCM states that this finding is incorrect.
Referencing the issue raised in Comment 3 regarding the seven U.S.
sales of special configuration chain, OCM claims that its error with
regard to reporting home market sales of special configuration chain
does not support the preliminary results notice conclusion that the
Department was ``unable to determine the extent of unreported home
market sales of merchandise identical or similar to merchandise sold in
the United States.''
OCM claims that the preliminary results notice and OCM FA
Memorandum cite one cost reporting discrepancy (i.e., that OCM did not
report variable costs of manufacture (VCOMs) for certain models of
chain sold in both the U.S. and home markets during the POR.) OCM
states that it has already demonstrated that the Department was wrong
in concluding that OCM reported sales of special chain in the home
market sales data base, so in fact OCM reported the correct VCOM's for
all models. OCM acknowledges, however, that it reported the incorrect
VCOM for the seven U.S. sales of special chain, but insists that this
was the only discrepancy for this issue.
According to OCM, the above comments demonstrate that the
Department may not predicate its use of total FA on allegations that
OCM's method for selecting home market identical and similar models was
inappropriate, since its methodology resulted in the selection of all
identical and most similar home market models. OCM asserts that the
descriptions of its model match methodology should resolve any doubts
that the Department had about OCM's similar model selection methodology
and should put to rest the Department's assertion that OCM ``excluded
certain home market sales of identical and similar models we would have
used in model matching.''
Department Position: We disagree with OCM's claim that it provided
the necessary information in the form and manner requested as required
by section 776(a)(2)(B) of the Act. Regarding the first of OCM's three
assertions meant to support the above claim, we continue to maintain
that OCM did not report all appropriate home market sales and cost
information. OCM itself states that it unilaterally decided which
product characteristics to use in selecting similar home market models
to U.S. sales (i.e., 5 of the 18 product characteristics identified by
the Department). As stated in the OCM FA Memorandum, and acknowledged
by OCM, the Department allowed OCM to report limited home market sales
contingent upon a determination at verification that it had reported
all appropriate home market comparison sales. OCM had every opportunity
to justify and substantiate the appropriateness and accuracy of its
home market reporting methodology during verification. However, in
almost every instance, we found unexplained discrepancies. First, OCM's
questionnaire response claimed that it reported all home market sales
of merchandise identical to that sold in the United States. However, at
verification, we discovered that OCM had, in fact, made certain sales
of specialty chain in the United States, but did not report home market
sales of the same merchandise. Second, at verification, OCM officials
informed us that they had directed their staff to report home market
sales of only standard chain with no special links (i.e., not to report
standard chain with non-standard links). However, since certain chain
sold to the United States contained non-standard links, this
methodology clearly would result in exclusion of models that might have
been the most appropriate matches for certain U.S. sales. Third, while
reviewing the reported sales at verification, we found that OCM had
reported some home market sales of standard chain with non-standard
links (despite its intention otherwise). Finally, we note that OCM
classified standard chain with a loose attachment as plain standard
chain. Therefore, we disagree with OCM that its methodology resulted in
the selection of all identical and most similar home market models.
We also disagree with OCM's contentions regarding our findings that
``we were unable to verify the accuracy and completeness of OCM's
costs.'' First, with respect to cost, we note that OCM failed to report
any cost for specialty chain or for standard chain with non-standard
links. Second, OCM's questionnaire responses did not contain
[[Page 63696]]
accurate information on how the cost differences were calculated.
Furthermore, we found at verification discrepancies in OCM's
calculations as well as evidence that OCM's material cost adjustment
based on four models is not representative of the rest of the subject
merchandise.
In addition, in adjusting reported standard labor costs, OCM did
not address the issue of standard production times, which are a part of
the calculated model-specific labor costs. Finally, with respect to
both the material and the labor cost variances, we note that the data
used to calculate those variances does not correspond to the period on
which the standard costs are based (i.e., OCM compared costs between
two periods, neither of which corresponded to the standard cost base
period). For further discussion see the Department Position for Comment
11, the OCM FA Memorandum and the OCM Verification Report.
Comment 11: FA--Whether the Findings of Verification Justify Use of
Total FA. OCM claims that, with the exception of the chain weights and
freight rates, the numbers submitted by OCM consistently matched those
in its accounting records and could be traced through the accounting
system. OCM notes that, although the Department found that the cost
data could not be verified, the OCM verification report states that
OCM's reported 1993 cost data ``reconciled * * * with'' internal cost
ledgers. OCM also notes that the Department verified that the four
models used to update the material costs were, in fact, the four top
selling models to all markets during the POR, and that the Department
successfully traced the December 1996 material costs through OCM's
accounting system and financial statements. OCM goes on to state that
the accuracy of its labor cost data used to update the standard costs
to the POR, and its factory overhead expenses used in the VCOM
calculations, were likewise confirmed.
OCM states that the above information contradicts the Department's
preliminary results conclusions that (1) the information could not be
verified, (2) the Department could not establish whether the reported
costs reflect actual costs for the POR, and (3) the Department was
unable to establish the credibility of the information contained in
OCM's questionnaire responses. OCM then asserts that these statements
make no sense in light of the overall OCM Verification Report. OCM
states, however, that if the cost data it submitted was not the data
the Department wanted it to report, the issue is a reporting problem,
not a verification problem. OCM acknowledges the problems it had
reconciling standard costs to actual costs.
OCM states that, since the problems were in fact reporting issues
rather than verification issues, there are three implications arising
from this. First, the Department can no longer claim that OCM failed
verification and use that as a rationale for total FA. Second, the
CAFC's decision in Olympic Adhesives, Inc. v. United States, 899 F.2d
1565 (Fed. Cir., 1990) (Olympic Adhesives), restrains the Department
from using total FA where a company reported standard costs because it
could not report actual costs, and because the facts show that OCM
complied with section 782(c)(1) of the Act. Third, OCM claims that,
since a failed verification no longer supports the use of total FA, OCM
has now met the five criteria contained in 19 USC 1677m(e) in which
Congress directs the Department to use information submitted by a
respondent even if it does not meet all applicable requirements
established by the Department. Thus, OCM concludes that evidence cited
by the preliminary results notice does not support the proposition that
OCM's ``information cannot be verified.''
Department Position: We disagree with OCM's claim that, with the
exception of the chain weights and freight rates, the information
submitted by OCM consistently matched that in its accounting records
and could be traced through the accounting system. OCM's statement that
the OCM Verification Report states that OCM's reported 1993 cost data
``reconciled * * * with'' internal cost ledgers is accurate, but
disingenuous. Specifically, the 1993 materials costs were the result of
an extensive research survey, the findings of which were recorded in
the ``Unit Materials and Weight Book.'' The information contained in
this book was subsequently transferred to OCM's ``Cost of Production
Book,'' which is the basis for OCM's 1993 costs (see OCM Verification
Report at 21). However, the fact that some information from the
standard cost research survey could be traced through OCM's internal
records is not the real issue. Rather, the issue is that OCM did not
utilize the data from its standard cost research survey. Instead, OCM
reported material cost information from December 1993, a month outside
the period used to derive the standard costs.
Furthermore, even though the four models OCM used to update the
material costs were in fact the four top selling models to all markets
during the POR, they did not comprise a significant percentage of total
sales during the POR and, therefore, did not reflect an actual variance
for OCM's costs. We do not agree with OCM, however, that this is a
reporting problem. Clearly, OCM elected to use data that did not
correspond to the variance it was attempting to calculate, although it
did not so state in its questionnaire response. Thus, the supposed
variance is invalid. (see OCM Verification Report at 23). The fact
remains that the Department found that the cost data could not be
verified. See OCM comments 8 and 10.
OCM's assertion that the accuracy of its labor cost data used to
update the standard costs to the POR, and factory overhead expenses
used in the VCOM calculations were likewise confirmed, are also
inaccurate. The Department was able to confirm the accuracy of OCM's
aggregate factory overhead expenses for 1996; however, in attempting to
ascertain the validity of OCM's reported labor cost data, which was
used to update the standard costs to the POR, we found that OCM did not
calculate a variance between standard and actual POR production times,
which should be a part of the reported model-specific labor costs (see
OCM FA Memorandum at 7).
Furthermore, we found that OCM attempted to calculate a labor rate
variance based on the periods April 1993--March 1994 and April 1996--
March 1997 while standard labor costs were based on the period April
1993--September 1993. As an explanation for this, OCM stated that,
since the standards were an average, the fact that the labor rate
variance was calculated based on comparison of two 12 month periods and
the standard rates were based on six months should not matter. We
disagree with OCM that this was an appropriate methodology for
calculating its labor and overhead variances.
The Department's position in the preliminary results of this review
that we could not reconcile OCM's reported material and labor costs to
its internal books and records and, therefore, could not establish
whether the reported costs reflect actual costs for the POR are
consistent with our findings at verification and detailed in the OCM
Verification Report. The fact remains that the Department was unable to
establish the credibility of the information contained in OCM's
questionnaire responses.
Comment 12: FA--Whether OCM Acted to the Best of its Ability. OCM
argues that the OCM Verification Report statement that ``OCM has not *
* * acted to the best of its ability in providing the necessary
information'' is incorrect. OCM refers to the conclusion
[[Page 63697]]
that ``OCM elected not to follow the Department's clear instructions *
* * that OCM must report all appropriate home market sales and utilize
an appropriate cost methodology.'' OCM claims it has already addressed
the Department's findings regarding its reporting of home market sales.
Regarding cost-related examples cited by the preliminary results
notice, OCM first addresses the following statement:
For example, the company used standard cost data to report
model-specific material and labor costs, even though the Department
does not accept standard costs for purposes of antidumping analysis.
OCM asserts that it stated in its August 15, 1997, response that it did
not maintain product-specific actual cost data. OCM states that
penalizing it for failing to report non-existent data is contrary to
sections 776(a) and 782(c)(1) of the Act, as well as Olympic Adhesives
and Borden.
OCM maintains that it attempted to calculate product-specific
actual costs, but that none of its ideas, or those of the Department
suggested in meetings between OCM's counsel and the Department on
November 18, 1997 and December 18, 1997, were achievable in a
reasonable amount of time. OCM reiterates the four ideas it considered
to produce model-specific actual manufacturing costs, and outlines the
reasons that it could not execute these ideas. OCM then acknowledges
that, while one of the Department's verifiers was able to calculate
actual 1996 material costs for one model using documents provided at
verification, this task would have taken one individual roughly 1.5 to
3 work weeks to calculate the costs for all models sold in the United
States. OCM next notes that, for labor costs, it would have been
impossible to calculate actual costs because OCM does not maintain
information about labor or machine time spent on each product.
OCM asserts that the Department's position that standard costs are
unacceptable ``for purposes of antidumping analysis'' is inconsistent
with section 782(d)(c)(1) of the Act. OCM claims that there is
compelling evidence that OCM acted to the best of its ability because:
(1) OCM actively and aggressively attempted to produce the information
requested; (2) none of the possible methods to calculate a model-
specific actual cost were reasonable; and, (3) OCM suggested and
subsequently submitted an alternative form of data.
OCM next addresses the Department's concern that, in calculating a
variance between standard and actual costs for the POR, the company
compared data that did not reflect either the period used to calculate
the standard costs (April 1993-September 1993) or the POR (April 1996-
March 1997). OCM asserts that it used POR data (December 1996) for both
material and labor costs, but acknowledges that it did not use the
standard cost base period (April 1993-September 1993) in updating its
calculations. In the case of labor costs, OCM asserts that, since labor
cost data from the standard cost data period was not available, its
conduct in this regard clearly reflected acting to the best of its
ability to provide responsible and responsive information to the
Department.
Regarding material costs, OCM believes that December was an
appropriately representative month in both 1993 and 1996 to update the
standard material costs, as the material costs did not change very much
from month to month and December reflected a month within both the POR
and the end of the calendar year. OCM argues that, just because other
time periods could have been used, this does not indicate that OCM did
not act to the best of its ability by choosing December of 1993 and
1996. OCM claims that the fact that December 1993 is not part of the
standard cost base period does not establish that the choice of
December 1993 is indicative that OCM did not act to the best of its
ability.
Finally, OCM addresses the Department's concern that it
``calculated its variance for its four highest selling models of roller
chain and applied a simple average of these variances to the standard
costs reported for all other models.'' OCM first notes that this
statement applies exclusively to material costs. Next, OCM estimates
that it would take an inordinate amount of time to calculate updated
model-specific material cost figures. OCM then asserts that, while it
``certainly could have used more than four models'' to update the
material cost figures, the fact that it only used four models is not a
basis for concluding that OCM did not act to the best of its ability.
Department Position: There is no disagreement among all parties in
this review that OCM failed to follow the Department's instructions to
report its home market sales of roller chain models and the product
characteristics related to those products. Rather, as stated numerous
times above, OCM unilaterally decided which of the 18 characteristics
selected by the Department were most important. Notwithstanding OCM's
actions, the Department accepted OCM's reporting methodology with the
understanding that it was incumbent upon OCM to demonstrate, at
verification, that its limited reporting methodology was in fact
appropriate. As discussed above (see OCM comments 1 through 4), we
found at verification that: (1) OCM's methodology, as stated, was not
reflected in the actual home market database; (2) OCM did not provide
complete and accurate home market sales in accordance with its stated
methodology; and (3) OCM omitted sales of roller chain models that
could have been deemed similar to U.S. models that did not have
identical matches.
Second, regarding cost issues, the Department neither rejected
OCM's reported standard costs or deemed them unverifiable just because
they were standard costs. Rather, upon finding the deficiencies between
the methodology explained in the questionnaire responses and those
explained at verification, coupled with the fact that OCM failed to
report costs of the ``loose'' links sold (and packaged) with certain
models of chain, we determined that we were unable to establish the
credibility of OCM's reported costs. See OCM comments 8 and 10 as well
as the OCM Verification Report and OCM FA Memorandum. Thus, we disagree
with OCM that it acted to the best of its ability in providing the
necessary information. While we understand the stated problems OCM
encountered in the compilation of all the necessary data in order to
accurately respond to the Department's questionnaire and supplemental
questionnaires, our findings at verification clearly demonstrate that
OCM did not act to the best of its ability in providing the necessary
information.
Comment 13: Whether the Department's Decision to Use Adverse FA is
in Accordance with Law and is Supported by Substantial Evidence. OCM
contends that, in order for the Department to apply adverse FA, it must
first determine that OCM did not cooperate to the best of its ability.
OCM asserts that there is no basis for such a finding. First, it has
reported all home market sales of all identical and most similar home
market models. Second, the existence of the seven unmatched U.S. sales
is insignificant. Third, it has demonstrated that it properly excluded
home market sales of the models the Department claimed should have been
reported. Fourth, two models with the same pitch length will be more
similar than two models with different pitch lengths, despite possibly
having certain other characteristics in common. Fifth, its matching
selection process, which is based on matching home market
[[Page 63698]]
standard chain sales against U.S. sales of standard chain, attachment
chain or special chain (all of which were the same pitch length as the
home market models) was appropriate. Sixth, it actively and
aggressively sought to find a method for producing VCOM and TCOM
information that would be acceptable to the Department and, in fact,
suggested an alternative form of the information, namely, the
appropriate cost data that represented updated material, labor and
overhead costs. Therefore, OCM concludes that there is no evidence in
the preliminary results notice, or in the OCM FA Memorandum to support
the Department's position that OCM did not act to the best of its
ability to comply with the Department's information request. OCM argues
that there are only indirect references in the OCM FA Memorandum about
counsel being ``informed'' and ``reminded'' about OCM's obligations.
OCM asserts that, just because the Department ``instructed,''
``informed'' and ``reminded'' it of its obligations does not mean that
OCM did not act to the best of its ability.
OCM argues that, other than the seven U.S. sales of special
configuration chain, there should be no issue regarding OCM's sales
reporting, and that there is no impediment to calculating actual
dumping margins for all identical models. OCM also states that its
standard costs updated to the POR should be used (in VCOM and TCOM) in
calculating difference in merchandise adjustments for similar model
matches. OCM argues that, if the Department continues to determine that
its cost information is unusable, then the Department should use a non-
adverse FA rate for OCM's U.S. sales which do not have an identical
home market model match. OCM argues that the Department should correct
the errors identified herein and revise OCM's dumping margin
accordingly.
Petitioner notes that, in its case brief, OCM argues that many of
the Department's findings were based on its own mistakes in reviewing
the company's data at verification and on an erroneous interpretation
of OCM's model match criteria. Petitioner recognizes that, while it was
not present during verification and thus cannot evaluate several of
OCM's fact-specific arguments, an examination of the available
materials indicates that the Department conducted a thorough analysis
of the relevant information, documented significant weakness in OCM's
questionnaire responses, and, after giving OCM opportunities to submit
revised materials, correctly determined that it had no choice but to
apply an FA margin.
Petitioner notes that the Department concluded that it could not
rely on OCM's submitted data in calculating dumping margins because the
data failed to satisfy the requirements of section 782(e) of the Act.
Specifically, petitioner states that the Department found that it could
not reconcile OCM's material and labor costs with its internal books
and records, that OCM failed to report all appropriate home market
sales and cost information after being informed of deficient responses,
that the Department could not determine the extent of unreported home
market sales or VCOM's, and that OCM did not act to the best of its
ability to report data as the Department requested.
Petitioner argues that while OCM asserts that it did not fail
verification, OCM acknowledged that the Department has questioned
whether its data ``is so incomplete that it cannot serve as a reliable
basis for reaching the applicable determination,'' and whether OCM has
acted to the best of its ability to provide the requested information.
Petitioner asserts that, consequently, OCM's data fail the third prong
of the ``facts available'' test, regardless of the accuracy of the
information itself.
Petitioner then addresses OCM's argument that, although the company
was unable to submit certain information in the form requested, it
attempted to work with the Department to provide information in
alternate forms, and therefore acted to the best of its ability to
provide the requested information. Petitioner notes that OCM suggests
that the Department cannot penalize a company by imposing an FA margin
for failure to produce nonexistent data. Petitioner acknowledges that
the courts have explained that the mere inability to report requested
information because a respondent does not record such information in
its system does not itself exempt the respondent from application of
best information available, the predecessor to FA. Cf. Hussey Copper,
Ltd. v. United States, 834 F. Supp. 413, 424 (CIT 1993).
Petitioner argues that there is ample support on the record to
justify application of an FA margin to OCM. However, petitioner also
acknowledges that the OCM Verification Report did, in fact, indicate
that there were substantial areas of OCM's responses in which the
Department found virtually no discrepancies. Moreover, petitioner notes
that OCM has not participated in recent roller chain proceedings.
Petitioner concludes that it ultimately supports the Department's
decision to apply a less adverse FA margin to OCM.
Department Position: We disagree with OCM. As fully discussed in
OCM comments 1 through 4 and 8 through 12, above, we were unable to
establish the credibility of the home market sales and cost data
reported in OCM's questionnaire responses. Moreover, as discussed in
the comments above, we continue to determine that OCM did not act to
the best of its ability in providing all the necessary data. As in the
preliminary results, we continue to find that, in determining the
dumping margin for OCM, the application of adverse FA is warranted in
this case. See the OCM FA Memorandum for a discussion of the adverse
facts available rate applied to OCM.
Tsubakimoto
Comment 1: Scope of the Tsubakimoto Revocation Notice. Tsubakimoto
argues that the petitioner's attempt to limit the scope of the
Department's revocation notice with respect to Tsubakimoto is untimely.
Tsubakimoto states that on two prior occasions, the petitioner has
attempted to contest the Department's determination to revoke the order
as it applies to Tsubakimoto. Tsubakimoto notes that the petitioner
filed a complaint with the Court of International Trade (CIT)
contesting the Department's Revocation in Part of Antidumping Finding:
Roller Chain, Other than Bicycle, From Japan, 54 FR 33259 (August 14,
1989) (1989 Revocation Notice). However, the CIT dismissed the case as
being untimely filed. See American Chain Association v. United States,
13 CIT 1090, 1092, and 1095, 746 F. Supp. 112 (December 28, 1989).
Furthermore, Tsubakimoto contends that the petitioner attempted to
circumvent the findings of the CIT by subsequently filing a challenge
to the final results of the Department's 1986-1987 administrative
review. Tsubakimoto notes that once again the CIT dismissed the case,
stating the ``antidumping duty determination was revoked without timely
challenge.'' See American Chain Association v. United States, 14 CIT
666, 746 F. Supp 116 (September 17, 1990). Tsubakimoto continues that
in this same ruling the CIT stated that a revocation ``becomes final
when a litigant misses the statutory deadline for challenging that
determination, as the plaintiff did here.'' Id.
In the subject administrative review, Tsubakimoto argues that the
petitioner is trying to address an issue which it has twice before been
precluded from challenging by the CIT. Tsubakimoto
[[Page 63699]]
argues that if the Department permits the petitioner to challenge the
scope of the revocation, it will unlawfully extend the statutory
deadline for challenging such a determination. Tsubakimoto, therefore,
requests that the Department dismiss the petitioner's comments as
untimely and continue its current practice with respect to the
Tsubakimoto revocation.
The petitioner argues that Tsubakimoto's ``timeliness'' argument is
merely a diversionary tactic, with no basis in law or fact. Regarding
the CIT's dismissal of its challenge of the Department's 1989
Revocation Notice, the petitioner maintains that there is no evidence
that any of the parties ever contemplated that the appeals might
potentially address the current scope question. The petitioner asserts
that for Tsubakimoto to suggest otherwise is disingenuous. The
petitioner stresses that throughout the course of this review, it has
emphasized that it is not seeking coverage of roller chain manufactured
by Tsubakimoto, but is seeking to clarify that the scope of the
revocation is consistent with its express terms--that it is limited to
roller chain that is both manufactured and exported by Tsubakimoto. The
petitioner maintains that this question is timely and notes that in the
three prior reviews it consistently requested that the Department
calculate margins for all merchandise by a certain other manufacturer
even if that merchandise had been exported by Tsubakimoto. The
petitioner argues however that it was not until the beginning of the
current review that Tsubakimoto admitted that it was, in fact,
exporting roller chain to the United States manufactured by the company
in question. See Comment 4 below for further discussion of this
allegation.
Department Position: The Department has considered petitioner's
request for an administrative review of Tsubakimoto as a reseller of
chain produced by other Japanese companies rather than as a challenge
to the Department's final determination of Tsubakimoto's revocation. As
stated by petitioner, it is not attempting to alter the scope of the
revocation notice since it is not seeking coverage of roller chain
manufactured by Tsubakimoto, but rather, is seeking clarification
regarding merchandise which is exported by Tsubakimoto but manufactured
by another Japanese producer. In that regard, we agree that
clarification is warranted and have reviewed the evidence on the
record. See Tsubakimoto Comment 2 for further discussion of revocation
of Tsubakimoto as a reseller/exporter.
Comment 2: Revocation of Tsubakimoto as a Reseller/Exporter. The
petitioner submits that the Department's preliminary determination that
the 1989 revocation applies to Tsubakimoto in both its capacity as a
manufacturer/exporter and reseller/exporter is not supported by the
relevant facts on the record, is otherwise contrary to law, and should
be reversed in the final results.
The petitioner first argues that, in determining the scope of the
Department's revocation determination with respect to Tsubakimoto, it
is important to consider the language of the revocation notice.
Specifically, the notice states, in relevant part that ``This partial
revocation applies to all unliquidated entries of this merchandise
manufactured and exported by Tsubakimoto * * *'' See 1989 Revocation
Notice. The petitioner contends that by its very terms, the revocation
only applies to merchandise that has been both manufactured and
exported by Tsubakimoto since it is a fundamental tenet of statutory
construction that ``the plain and unambiguous meaning of a statute
prevails in the absence of clearly expressed legislative intent to the
contrary.'' F.lli de Cecco di Felippo Fara San Martino S.p.A. v. United
States, Consolidated Court No. 96-08-01930, 1997 Ct. Int'l Trade LEXIS
at 17 (October 2, 1997). The petitioner further states that only ``the
most extraordinary showing of contrary intentions'' will lead the
courts to disregard the plain meaning of statutory language. Id.
Arguing that these principles of construction apply when determining
the scope of the Tsubakimoto revocation, the petitioner contends that
it is clear on its face that the phase ``merchandise manufactured and
exported by Tsubakimoto'' only reached roller chain actually produced
by Tsubakimoto. In order to cover merchandise manufactured by the other
parties, the petitioner maintains that the phrase would have to have
been written in the disjunctive (e.g., ``merchandise manufactured or
exported by Tsubakimoto'').
The petitioner argues that past Department determinations support
the straightforward reading of the Tsubakimoto revocation notice,
citing Steel Wire Strand for Pressed Concrete from Japan 55 FR 28796
(1990) (Steel Wire Strand from Japan) as the only other case in which
the Department has been called upon to interpret the phrase
``manufactured and exported.'' The petitioner notes that the Department
determined that ``the exclusion in that case was applicable only to
merchandise manufactured and exported by the respondent, not to
merchandise exported by the respondent that had been produced by
another manufacturer.''
The petitioner further argues that when the Department seeks to
reach beyond merchandise produced by a named foreign respondent, it
carefully tailors the language of its revocation notices to accomplish
this objective. See e.g., Steel Wire Rope from the Republic of Korea:
Effective Date of Revocation in Part of Antidumping Duty Order, 63 FR
20380 (April 24, 1998), Pressure Sensitive Plastic Tape from Italy:
Final Results of Antidumping Administrative Review and Revocation in
Part, 53 FR 16444 (May 9, 1988), Spun Acrylic Yarn from Japan: Final
Results of Antidumping Administrative Review and Revocation in Part, 52
FR 43781 (November 16, 1987), Elemental Sulphur from Canada:
Preliminary Results of Administrative Review of Antidumping Finding and
Intent to Revoke in Part, 49 FR 32632 (August 15, 1984), and Ferrite
Cores (of the Type Used in Consumer Electronic Products) from Japan:
Preliminary Results of Antidumping Administrative Review and Intent to
Revoke in Part, 52 FR 11524 (April 9, 1987). In each of these cases,
the petitioner states that the Department used language stipulating
that the scope of the notice covered merchandise ``manufactured and/or
exported'' by the entity in question. The petitioner also cites the
Department's approach to the potential revocation of other Japanese
roller chain producers and exporters in the 1980-1981 review (see
Roller Chain other than Bicycle from Japan: Preliminary Results of
Administrative Review of Antidumping Finding and Tentative
Determination to Revoke in Part, 47 FR 44597 (October 8, 1982)), in
which the Department also used the language ``manufactured and
exported,'' as illustrative of their argument. The petitioner argues
that the quoted language clearly demonstrates that (1) the Department
understood the phrase ``manufactured and exported by'' to require both
elements (i.e., both production and exportation); and (2) when
formulating revocation language applicable to a reseller/exporter, the
Department was quite careful to specify the precise source of the chain
in question.
Therefore, the petitioner maintains that the Department was simply
wrong when it stated in RC 96-97 Preliminary Results that
``determinations in other administrative proceedings concerning roller
chain from Japan indicate that Tsubakimoto was revoked as a
manufacturer/exporter and reseller/
[[Page 63700]]
exporter.'' The petitioner contends that the prior determinations
clearly demonstrate that the language employed in that notice was
intended to limit the revocation to roller chain that is both
manufactured and exported by Tsubakimoto (i.e., not to include roller
chain produced by other manufacturers and exported by Tsubakimoto).
The petitioner does not dispute Tsubakimoto's claim that the
Department calculated margins for roller chain ``manufactured and
exported by Tsubakimoto'' but also for roller chain which Tsubakimoto
purchased from affiliated suppliers and sold during the period looked
at for revocation. However, the petitioner states that this in no way
undermines the clear and unambiguous language of the Tsubakimoto
revocation notice. The petitioner suggests that roller chain
manufactured by one of the affiliated suppliers was not treated as
Tsubakimoto-manufactured chain in the 1986-1987 review, but rather was
treated as roller chain purchased from an ``outside independent''
company, as articulated in Tsubakimoto's questionnaire response at the
time. The petitioner notes that the Department did not collapse
Tsubakimoto and the supplier in question but instead permitted
Tsubakimoto to report the ``constructed value'' of the supplier-
manufactured chain based upon the prices that Tsubakimoto paid the
affiliated supplier for the chain. Lastly on this point, the petitioner
states that there is no evidence that the margins calculated for the
roller chain purchased from affiliated suppliers has a material impact
on Tsubakimoto's weighted-average dumping margin. In fact, the
petitioner contends that the weighted-average margin would have been de
minimis whether or not it included the affiliated-party sales. The
petitioner then asserts that the margins calculated for roller chain
purchased from affiliated suppliers did not directly affect the
antidumping duties owed on Tsubakimoto-produced chain or vice versa
since the assessment rates were calculated on a sale-by-sale basis, and
that these transaction-specific margins were not used in assessing
antidumping duties on the Tsubakimoto exports. To support this
argument, the petitioner cites Roller Chain other than Bicycle from
Japan; Final Results of Antidumping Duty Administrative Review and
Intent to Revoke in Part, 54 FR 3099, 3100 (January 23, 1989) (1989 RC
Final Results), which states that ``Individual differences between
United States price and foreign market value may vary from the
percentage stated above.''
The petitioner continues by arguing that the affiliated producer in
question (as mentioned above) was listed separately in the 1986-1987
notice of initiation. See Initiation of Antidumping and Countervailing
Duty Administrative Reviews 52 FR 18937 (1987). The petitioner
maintains that the Department would have had an obligation to calculate
margins for roller chain manufactured by this company even if it had
not initiated a review of Tsubakimoto-produced chain. As it turned out,
the petitioner continues, the affiliated producer in question was
responsible for providing data with respect to its direct U.S. sales,
while Tsubakimoto was responsible for furnishing data concerning the
affiliated producer's chain which it resold to the United States.
However, the petitioner maintains that this does not mean that these
two sales channels bore no relationship whatsoever. The petitioner
asserts that they were merely two different avenues through which
identical chain reached the U.S. market. Moreover, the petitioner notes
that the final results notice of the 1980-1983 backlog reviews
presumably identifies a cash deposit rate for any sales of the
affiliated producer's merchandise through Tsubakimoto since it has a
rate for the manufacturer's merchandise exported by all others. The
petitioner suggests that given the fact that in subsequent reviews this
affiliated producer has received antidumping margins over the de
minimis cut-off, the Department could well have concluded that if this
affiliated producer's roller chain were covered by the Tsubakimoto
revocation notice, the affiliated producer would restructure its
selling activities so as to avoid/evade the strictures of the U.S.
antidumping laws. In other words, the petitioner suggests that the
affiliated producer could potentially have used Tsubakimoto as a
conduit to sell dumped product to the United States. The petitioner
states that had it been aware that the revocation notice was intended
to reach sales of the affiliated producers'-manufactured roller chain,
it would have raised the issue as part of the 1986-1987 proceeding.
Moreover, the petitioner contends that the relevant Customs Service
liquidation instructions separately addressed roller chain ``produced
by Tsubakimoto.'' The petitioner states that following the completion
of the 1986-1987 roller chain administrative review, the results were
challenged in the U.S. Court of International Trade (CIT). As a result,
the petitioner continues, on March 23, 1989, the Department
communicated to the Customs Service that ``The Court of International
Trade, however, has enjoined the liquidation of unliquidated entries of
roller chain, other than bicycle, from Japan, produced by Tsubakimoto
Chain, which are covered by the final results * * *'' The petitioner
argues that it is patently obvious that these liquidation instructions
only applied to roller chain produced by Tsubakimoto itself and did not
apply to roller chain manufactured by other Japanese roller chain
producers. Furthermore, the petitioner notes that following the
termination of the CIT appeal, Customs instructions were sent out on
September 20, 1989 stating that ``effective immediately, field offices
may resume liquidation of future entries of the subject merchandise
manufactured by Tsubakimoto without regard to antidumping duties.'' The
petitioner adds that the above instructions were modified on October
26, 1989 to read that only roller chain that was both ``manufactured
and exported by Tsubakimoto'' was to be liquidated ``without regard to
antidumping duties.''
The petitioner warns that Tsubakimoto's assertion that the
Department ``has never issued separate cash deposit rates or assessment
instruction for any entries by Tsubakimoto of chain manufactured by
affiliated parties'' should be carefully considered. The petitioner
states that while the statement may potentially be correct depending on
the intended meaning of the term ``separate,'' it hides a larger truth.
Specifically, the petitioner asserts that since 1989, the Department
has consistently calculated antidumping cash deposit rates for the
affiliated producer's-manufactured roller chain which exceeded the de
minimis cut-off. The petitioner argues that if Tsubakimoto has chosen
not to post the applicable antidumping cash deposits on its affiliated
producer's exports, it has done so unilaterally, without consulting the
Department or the Customs Service.
Lastly, the petitioner maintains that there is absolutely no
support in the record of the 1986-1987 review for the proposition that
the Department had determined to collapse Tsubakimoto and its
affiliated producer as alluded to by Tsubakimoto in its June 19, 1997
submission. The petitioner states that all three companies were treated
as ``independent companies'' as requested by Tsubakimoto.
Tsubakimoto argues that the Department properly determined in its
preliminary results ``that the 1989 notice of revocation in part
applies to
[[Page 63701]]
Tsubakimoto in both its capacity as a manufacturer/exporter and
reseller/exporter of roller chain.'' See RC 96-97 Preliminary Results.
Tsubakimoto maintains that the record shows, throughout the course of
the antidumping proceeding, the Department has consistently treated
Tsubakimoto's sales of subject merchandise in the same manner (i.e.,
sales of chain manufactured by affiliated companies were treated as
Tsubakimoto sales for review purposes). Tsubakimoto states that neither
the language of the revocation, nor the underlying proceedings that
lead up to the revocation, contain any reference that the Department
was excluding sales made by Tsubakimoto of chain produced by other
parties.
Tsubakimoto asserts that in the 1986/1987 administrative review, as
well as in all prior reviews, the Department calculated its antidumping
margin with respect to Tsubakimoto based upon all sales made by
Tsubakimoto. See RC 1989 Final Results. See also Roller Chain, Other
Than Bicycle, From Japan: Final Results of Antidumping Duty
Administrative Review, 51 FR 43755 (December 4, 1986). Tsubakimoto
reiterates its claim that the record is devoid of any evidence which
indicates that the Department intended to exclude any reviewed sales
from the revocation. Tsubakimoto continues that, based upon its
submitted sales data (both as a manufacturer and reseller), the
Department concluded that ``there is no likelihood of resumption of
sales at less than fair value by Tsubakimoto.'' RC 1989 Final Results
at 3101. Also citing the RC 1989 Final Results, Tsubakimoto states that
the Department, when identifying Tsubakimoto, stated that ``This review
covers Tsubakimoto * * *, a manufacturer/exporter of Japanese roller
chain.'' Tsubakimoto argues that this sentence reveals that the
Department reviewed Tsubakimoto both in its role as a manufacturer and
exporter of subject merchandise without any limitation as to the
manufacturer of the chain being exported. Moreover, Tsubakimoto notes
that the Department's revocation notice stated that revocation applies
to ``all unliquidated entries of this merchandise manufactured and
exported by Tsubakimoto and entered, or withdrawn from warehouse, for
consumption on or after September 1, 1983.'' See 1989 Revocation
Notice.
Tsubakimoto further states that subsequent to the revocation
notice, the Department continued its practice and has never issued
separate cash deposit rates or assessment instructions for Tsubakimoto
entries manufactured by affiliated producers. Tsubakimoto notes that
following the 1989 Revocation Notice, the Department instructed the
Customs Service to liquidate Tsubakimoto's entries without regard to
the manufacturer of the chain. Moreover, Tsubakimoto notes that in RC
96-97 Preliminary Results, the Department stated that ``the
Department's determinations in other administrative proceedings
concerning roller chain from Japan indicate that Tsubakimoto was
revoked as a manufacturer/exporter and reseller/exporter.''
Furthermore, Tsubakimoto argues, the concept of assessment rates does
not pertain to either the weighted-average margin analysis or the final
results on which the Department based its revocation. Tsubakimoto
asserts that there was no separate rate established for Tsubakimoto's
sales of chain made by other producers; no separate margin analysis
programs or printouts issued; and all of the final results consistently
listed only one cash deposit rate for Tsubakimoto.
Therefore, Tsubakimoto maintains that, given the Department's
practice and based upon the underlying facts of the record, the
revocation applies to all imports by Tsubakimoto. Tsubakimoto argues
that it would be illogical, and contrary to law, for the Department to
review all of Tsubakimoto's sales as one channel of trade and to
calculate one unified weighted-average margin and only revoke the order
with respect to one type of chain.
Tsubakimoto further argues that the petitioner's argument that the
Department should adopt certain principles relating to statutory
construction is completely irrelevant to the present matter.
Tsubakimoto states that there is no statutory mandate that the
Department follow any particular course of analysis when applying its
past determinations. Tsubakimoto maintains that the Department is
guided by the general principles that its actions be in accordance with
law, reasonable, and supported by substantial evidence. Tsubakimoto
claims that these guiding principles give the Department the discretion
which is necessary in many cases when the Department is interpreting
and applying its own previous determinations as it is in this case.
Tsubakimoto refutes the relevance of the cases cited by the
petitioner in its attempt to emphasize the significance of the language
``manufactured and exported.'' Tsubakimoto states that with regard to
Wire Strand from Japan, the language of the determination clearly shows
that the company in question was not exporting products manufactured by
another producer during the relevant period of time and that if it were
to export merchandise manufactured by another manufacturer, such
merchandise would be subject to cash deposits, etc. Tsubakimoto argues
that in the instant case, Tsubakimoto was exporting chain manufactured
by other producers, a fact of which the Department and the petitioner
were well aware. Moreover, according to Tsubakimoto, the Department's
determinations were based on its analysis of all of Tsubakimoto's
sales. Tsubakimoto therefore maintains that the petitioner had every
opportunity during each of the respective reviews, and the revocation
proceeding itself, to object to the Department's treatment of
Tsubakimoto's sales of chain produced by other manufacturers but did
not do so and that it is now too late. Tsubakimoto argues that the
petitioner's citations to other non-chain notices are equally
unpersuasive and that the petitioner's argument is based on a literal
reading of the language in each notice without any attempt to analyze
the facts of each individual case. Regarding the petitioner's citation
to roller chain determinations in 1982 and 1983, Tsubakimoto notes that
the Department clearly specified different channels of trade when it
wished to treat the channels differently. In the present case,
Tsubakimoto states that the Department did not add any language to its
notices, either during the reviews, or in the revocation, that
indicated that Tsubakimoto's sales of chain produced by other
manufacturers were to be treated differently.
Tsubakimoto next states that it does not understand how the
petitioner's argument that Tsubakimoto purchased chain from ``outside
independent'' companies supports its claim that the Department has not
consistently treated Tsubakimoto sales without regard to manufacturer.
Tsubakimoto contends that the petitioner has failed to contradict the
fact that the Department always requested Tsubakimoto to include its
sales of chain made by other producers in its questionnaire response;
that the Department has always published one margin rate for all of
Tsubakimoto's U.S. sales; and that the Department, knowing that its
analysis leading up to the revocation included sales of chain made by
another producer, never stated in any notice that it intended to, or
was in fact, distinguishing between Tsubakimoto's sales of chain it
produced from sales of chain produced by other manufacturers.
Tsubakimoto also stresses that it is very important to note that the
petitioner has
[[Page 63702]]
failed to identify even one instance in any of the numerous proceedings
leading up to the revocation, as well as the revocation proceeding
itself, where it requested the Department treat Tsubakimoto's sales
differently based on the manufacturer of the chain. Tsubakimoto
hypothesizes that the reason for this is that the petitioner never
objected to such treatment during the relevant proceedings.
Tsubakimoto maintains that the facts alleged by the petitioner that
transaction-specific margins were applied to individual Tsubakimoto
exports, even if true and if there were facts on the record to support
the allegation, is meaningless to the issue at hand. Tsubakimoto notes
that sale-specific assessment rates are not relevant to whether the
Department will revoke a finding or an order. Tsubakimoto continues
that, individual assessments on each export, if true, is not
significant because this is true of Tsubakimoto-made chain as well,
thus, if the petitioner's argument is true, the margin calculated for
other sales of Tsubakimoto-made chain did not affect the margin
calculated for another sale of Tsubakimoto-made chain.
Tsubakimoto discounts the petitioner's statement that there is no
evidence that the margins calculated on sales of chain made by another
producer ``had a material impact on Tsubakimoto's weighted average
dumping margin.'' Tsubakimoto contends that there are no facts on this
record to support this claim. Tsubakimoto also discounts the
petitioner's argument that it is significant that one of Tsubakimoto's
suppliers was listed separately in the 1986-1987 notice of initiation.
Tsubakimoto notes that the petitioner failed to mention that not all of
the suppliers were so listed. Nevertheless, Tsubakimoto maintains that
the Department's initiation of the supplier in question was proper
since there was more than one channel of trade for that supplier which
had to be analyzed separately. Tsubakimoto argues that this initiation
notice did not in any way controvert the fact that the Department
eventually issued one single margin rate for Tsubakimoto.
Tsubakimoto argues that the petitioner's assertion that had it
known the revocation notice was intended to reach sales of an
affiliated producer-manufactured roller chain it would have raised the
issue in the 1986-1987 proceeding is nothing more than post hoc
rationalization and irrelevant.
Tsubakimoto concludes that the Department's preliminary decision is
fully supported by fact and law and is consistent with how the
Department has treated Tsubakimoto in every proceeding leading to the
revocation.
Department Position: We disagree with petitioner that the
Department's revocation of Tsubakimoto applies only to merchandise that
has been both produced and exported by Tsubakimoto. Petitioner's briefs
did not provide any new arguments that we did not consider in making
our preliminary results finding. Therefore, as we stated in the RC 96-
97 Preliminary Results, the evidence on the record demonstrates that
the Department revoked Tsubakimoto with respect to both the
manufacturer/exporter and reseller/exporter operations the company
conducts. Although, as petitioner argues, regarding the principles of
construction, the phrase ``manufactured and exported'' used by the
Department in the 1989 Revocation Notice could be read to limit
Tsubakimoto's revocation to roller chain manufactured by Tsubakimoto,
we continue to find that other factors demonstrate the revocation also
covers Tsubakimoto as a reseller. Specifically, the de minimis margin
calculated in the 1986-1987 administrative review, which is the
foundation of the revocation under the Department's regulations at that
time (see 19 CFR 353.54 (1987)) included sales made by Tsubakimoto of
roller chain it purchased from two other Japanese manufacturers.
Therefore, the Department's revocation was based upon Tsubakimoto's
pricing practices as both a manufacturer/exporter and reseller/exporter
(see RC 96-97 Preliminary Results). We disagree with the petitioner's
contention that the margins calculated for the roller chain purchased
from affiliated suppliers are not relevant to the overall Tsubakimoto
dumping margin. All sales used to calculate the dumping margin which
resulted in the eventual revocation are equally important to the
overall calculation regardless of whether they raise or lower the
margin.
The petitioner argues that the margins calculated for roller chain
from affiliated suppliers did not directly affect the antidumping
duties owed on Tsubakimoto-produced chain or vice versa since the
margins were calculated on a sale-by-sale basis. Although petitioner's
statements are technically correct, we find that they shed no light on
whether the Department revoked Tsubakimoto as a reseller of another
company's product. The Department calculates transaction-specific
dumping margins in all reviews. These margins are then weight-averaged
for purposes of calculating a single cash deposit rate. In addition,
during the early and middle 1980's, the Department, in some cases, was
still issuing ``master list'' assessment instructions. Where the
Department had started to move toward issuing assessment rates, rather
than ``master list'' (i.e., transaction-specific) assessment
instructions, the assessment rates issued were importer-specific rates.
Therefore, the fact that the Department calculated transaction-specific
margins for the subject roller chain reviews does not support the
petitioner's argument regarding the Department's treatment of
Tsubakimoto as a reseller of another manufacturer's product.
We agree with the petitioner's contention that the affiliated
producer in question was listed separately in the 1986-1987 notice of
initiation and that the Department would have had an obligation to
calculate margins for roller chain manufactured by this company even if
it had not initiated a review of Tsubakimoto-produced chain. Our
determination in no way excludes the affiliated supplier from the order
with respect to the roller chain it manufactures and exports to the
United States.
Therefore, we have continued to apply the revocation to Tsubakimoto
as a manufacturer/exporter and reseller/exporter.
Comment 3: Tsubakimoto's Allegation of New Information. In its July
13, 1998, rebuttal brief, Tsubakimoto argues that the petitioner
included two items of new information in its July 2, 1998, case brief.
Specifically, Tsubakimoto states that the following two statements,
made by the petitioner, are untimely submissions of new factual
information and should be stricken from the record: (1) that
``individual assessment rates were calculated for shipments of
purchased chain, and these rates were calculated as if the chain had
been purchased from an unrelated party,'' and (2) that ``it is the
ACA's further understanding that for these pre-revocation
administrative transactions, the antidumping duties assessed on roller
chain purchased from related manufacturers varied from those assessed
on individual shipments of Tsubaki-manufactured chain.'' See
petitioner's July 2, 1998 case brief at 7 and 16.
The petitioner responded to Tsubakimoto's allegation of new
information on July 21, 1998, when it indicated where in the record of
this segment of the proceeding the information can be found on which it
based its two statements concerning assessment instructions. According
to the petitioner, the passages in question ``flow directly'' from the
standard
[[Page 63703]]
assessment language used by the Department in two previously published
Federal Register notices. See petitioner's July 21, 1998 letter at 2.
With regard to the first statement in question, the petitioner
states that this argument was presented in nearly identical terms in
its July 30, 1997 submission. In that submission, the petitioner
stated:
``* * * it should be emphasized that separate margins were
calculated for the various shipments of roller chain which
Tsubakimoto exported to the United States. Thus the margins
calculated for roller chain purchased from related suppliers did not
directly affect the antidumping duties owed on Tsubakimoto-produced
chain or vice versa.''
See Roller Chain, Other Than Bicycle, From Japan; Final Results of
Antidumping Duty Administrative Review and Intent to Revoke In Part, 54
FR 3100 (Jan. 14, 1989) (``The Department will instruct the Customs
Service to assess antidumping duties on all appropriate entries.
Individual differences between United States price and foreign market
value may vary from the percentage stated above.'').
See petitioner's July 21, 1998 letter at 4. Since the arguments
presented in its July 30, 1997 and the July 21, 1998 submissions are
nearly identical, the petitioner concludes that there is no basis for
Tsubakimoto's claim that the passage in question represents new
information to the record of this proceeding.
With respect to the second statement, the petitioner notes that the
passage in question is found in footnote 5 of its July 2, 1998 case
brief. This footnote states in its entirety:
``It is the ACA's information and belief that, in administrative
reviews covering earlier time periods, the Commerce Department also
calculated margins on a transaction-specific basis. See, e.g.,
Roller Chain, Other than Bicycle, from Japan, 52 FR 17425 (1987)
(April 1, 1981 through September 1, 1983). It is the ACA's further
understanding that for these pre-revocation administrative
transactions, the antidumping duties assessed on roller chain
purchased from related manufacturers varied from those assessed on
individual shipments of Tsubaki-manufactured chain. Contra Tsubaki
Submission at 2, 3 (July 23, 1997).''
See petitioner's July 21, 1998 letter at 5. The petitioner observes
that this footnote cites the final determination of the roller chain
review for Tsubakimoto for the period April 1, 1981 through September
1, 1983. According to the petitioner, the notice of final results for
the 1981-1983 reviews expressly stated that:
``* * * the Department will instruct the Customs Service to
assess antidumping duties on all appropriate entries. Individual
differences between United States price and foreign market value may
vary from the percentage stated above. The Department will issue
appraisement instructions on Tsubakimoto directly to the Customs
Service.''
See petitioner's July 21, 1998 letter at 6. The petitioner states
that its understandings as to the Department's approach to the
appraisement of the Tsubakimoto sales follow directly from this passage
of the published notice. Although the petitioner acknowledges that the
notice of final results for the 1981-1983 reviews is not on the record
of this segment of the proceeding, it states that it is absurd to
argue, as Tsubakimoto has done, ``that a party to an administrative
proceeding may not characterize statements in a published Federal
Register notice in its case brief.'' See petitioner's July 21, 1998
submission at 6. Furthermore, the petitioner contends that if
Tsubakimoto's argument was accepted, parties to antidumping proceedings
could not cite to any agency notices or court decisions in their briefs
unless copies of those determinations had previously been submitted to
the agency within the 180-day window set out in 19 CFR
351.31(a)(1)(ii).
Department Position: We agree with the petitioner that the two
statements identified by Tsubakimoto do not contain new factual
information. After analyzing the arguments presented by Tsubakimoto and
the petitioner, we find that both of the petitioner's statements are
assertions based upon information already contained in the record of
this proceeding. See Memorandum To the File from Mark Manning,
Tsubakimoto Chain Co.'s Allegation of New Information Contained in the
American Chain Association's Case and Rebuttal Briefs in the
Administrative Review of Roller China, Other Than Bicycle, From Japan,
dated August 5, 1998. Briefs are intended to provide parties the
opportunity to argue facts already on the record. The petitioner's case
brief was timely submitted, and did not contain factual information not
already on the record. Therefore, we determine that it is appropriate
to leave the statements contained in the petitioner's case brief on the
record of this proceeding.
Izumi
Comment 1: Adverse Facts Available. The petitioner argues that the
Department assigned Izumi a relatively favorable FA rate of 17.57
percent because of Izumi's ``substantial efforts to cooperate'' during
the review, even though the Department found that Izumi had ``not
demonstrated * * * that it acted to the best of its ability'' to
provide the requested information on Izumi's direct sales to the United
States. The petitioner argues that Izumi's minimal efforts to comply
with the Department's repeated requests for information over the course
of this proceeding cannot be viewed as ``cooperation.'' Therefore, the
petitioner maintains that Izumi's substantial failures in this
proceeding should subject it to the higher FA rate of 42.48 percent,
the rate calculated for Kaga in the preliminary results of review.
The petitioner notes that under the ``best information available''
standard that preceded the current ``facts available'' rule, the
Department utilized a two-tier approach for selecting the appropriate
rate, pegged to the company's level of cooperation. The petitioner
acknowledges that best information available is no longer the law, but
states that the two-tier approach developed under this standard is
relevant to understanding the Department's decisions on FA.
The petitioner theorizes that the purported ``substantial efforts
to cooperate'' appear primarily to have consisted of (1) the submission
of inadequate responses to the Department's questionnaire, and (2)
participation in a failed verification. The petitioner maintains that
Izumi substantially failed to cooperate in this review, citing the RC
96-97 Preliminary Results, which states that Izumi failed to comply
with the Department's repeated requests for third country sales and
appropriate cost information. Further, citing the same notice, the
petitioner states that ``Izumi had not demonstrated on the record that
it acted to the best of its ability in providing the necessary
information'' and had ``elected not to follow the Department's clear
instructions, which were enunciated in several questionnaires, that
Izumi must report all appropriate third country sales and an
appropriate cost methodology.'' The petitioner claims that Izumi
clearly chose not to provide critical data requested by the agency and,
thereby, made it impossible for the Department to calculate antidumping
margins for the company's U.S. sales.
The petitioner further argues that Izumi is an experienced player
in the proceedings, and that it has demonstrated in the past, that when
it desires, it can provide more comprehensive data. Moreover, the
petitioner argues that Izumi's failure to provide the Department with
the requested information hindered the Department's ability to
calculate
[[Page 63704]]
accurate dumping margins and had the same practical effect as the
decision by the Pulton Chain Company to withdraw from the proceeding.
Given Izumi's failure to cooperate, the petitioner contends that
the Department's application of a relatively-favorable facts available
margin is at odds with prior precedent. The petitioner cites the CIT's
decision to uphold the Department's determination to apply a calculated
margin, which was higher than that provided in the petition, as FA for
a ``large sophisticated company with demonstrated ability to
participate in the antidumping investigation'' which failed to provide
adequate cost of production and constructed value information. See
Empressa Nacional. The petitioner states that the Court was not
receptive to the company's argument that the Department should have
taken into consideration its ``previous extensive cooperation,''
including the fact that it responded in a timely fashion to the
Department's other questionnaires. The petitioner argues that Izumi's
faulty responses to the Department's questionnaires should carry no
more weight here.
The petitioner also cites Extruded Rubber Thread from Malaysia;
Final Results of Antidumping Administrative Review, 63 FR 12752 (March
16, 1998) as a recent case in which the Department applied ``the
highest rate calculated for any respondent in any segment of the
proceeding'' to a company which submitted responses to all
questionnaires, passed its sales verification, and verified parts of
its cost response. In applying a high adverse FA margin for this
company, the petitioner states that the Department explained that it
was unable to reconcile a number of the company's costs, and that even
if some of the accounting staff was inexperienced at the time of
verification, the company was experienced in the antidumping
proceedings, and that the company had control over the documents
necessary to prepare its response and conduct verification. The
petitioner notes that the above-referenced company received the same
adverse FA margin as a company that did not cooperate at all in the
same review. The petitioner further cites Pipes and Tubes from Thailand
as another example of where the Department applied an adverse inference
to a company who had failed to provide complete responses at
verification due to its lack of preparation. The petitioner argues that
Izumi's timely submission of some of the requested information should
not protect it from a more adverse FA margin.
The petitioner also argues that the facts surrounding Izumi's
responses to the Department's requests are distinguishable from the
cases cited by the Department in the RC 96-97 Preliminary Results,
where a respondent may not have acted to the best of its ability to
comply, but was deemed sufficiently cooperative to warrant a less
adverse fact available rate. For example, the petitioner states that in
Fresh Cut Flowers--Columbia 1997, the Department noted that the
respondent in question ``faced difficult circumstances during the
review period.'' The petitioner asserts that it knows of no such
circumstances facing Izumi in the instant review. Moreover, the
petitioner claims that with the exception of the rate applied to
companies that did not respond to the Department's questionnaires, or
responded after the deadline, the margin selected for the company in
the Fresh Cut Flowers--Columbia 1997 case was the highest imposed in
the proceeding. The petitioner also states Izumi's situation is
distinguishable from that in AFBs 1997. In AFBs 1997, the petitioner
notes that although the Department may not have selected the highest
potential margin, the rate chosen was more than twice as high as that
received by any other respondent. Moreover, the petitioner continues,
the Department had determined that ``use of the flawed response would
have yielded a more favorable margin'' for the respondent. The
petitioner contends that, unlike AFBs 1997, there is no assurance that
the rate chosen in the preliminary results for Izumi will encourage
cooperation in the future because it was not possible for the
Department to compare the chosen rate to Izumi's calculated rate due to
the flawed response. The petitioner argues that, presumably, Izumi
would have ``acted to the best of its ability'' to provide missing data
if it believed that the data would have produced a favorable margin. In
fact, the petitioner contends, the 17.57 percent rate, which has been
imposed in prior review proceedings, has not prompted any measurable
change in Izumi's level of cooperation. See Final Results of
Antidumping Duty Administrative Review and Partial Termination: Roller
Chain, Other than Bicycle, from Japan, 57 FR 6806 (February 28,1992).
Izumi argues that it acted to the best of its ability and responded
to all of the Department's requests for information. Izumi maintains
that the problems encountered at verification were the result of
Izumi's unsophisticated record keeping and accounting systems. Izumi
emphasizes that it is not a large sophisticated company as portrayed by
the petitioner; rather, its records are not computerized and it has no
formal cost accounting system. Moreover, Izumi contends that it is a
family-owned operation that is so small it is not required to file its
financial statements with the Japanese Ministry of Trade and Industry.
Izumi states that it was required to submit a great deal of sales
data as well as detailed data concerning the physical characteristics
of each model sold in the U.S. and home markets-much of which it states
was correctly reported. Izumi identifies only one instance in which its
data contained errors (i.e., where it omitted certain sales to the
Philippines). Izumi further states that it also provided cost
information to the best of its ability. Izumi contends that, despite
its efforts being hindered by the fact that it has no cost accounting
system, it did its best to report its costs based on the methodology
used to report its costs in the original investigation.
Given these facts, Izumi argues that there is no basis for
assigning Izumi an adverse FA rate under the guidelines set forth by
the CIT in Borden. Izumi first states that Borden makes clear that the
standards the Department used to apply ``best information available''
under the pre-URAA amendments to the Act no longer apply. Therefore,
Izumi maintains that the petitioner's reliance on the old ``two-
tiered'' methodology is unavailing. Izumi next states that Borden drew
a distinction between ``an unwillingness, rather than simply an
inability to cooperate.'' Izumi argues that nothing in the record of
the present review indicates an unwillingness on the part of Izumi to
cooperate. Lastly, Izumi notes that, like the respondent in Borden,
Izumi does not have a cost accounting system, which lead to the
submission of information that the Department found to have problems.
Izumi asserts that the petitioner's contention that an inadequate
response is the equivalent of deliberate non-cooperation is ridiculous.
Izumi argues that if the petitioner was correct, the Department would
always have to make the most adverse assumptions in assigning FA since
an adequate response can never be subject to the application of FA.
Moreover, Izumi maintains that the petitioner's argument that Izumi
provided more comprehensive data in prior reviews is untrue. Izumi
contends that it did not behave any differently in this review than it
has in past reviews. Izumi also asserts that it had difficulty in
obtaining third county data as the great volume of
[[Page 63705]]
data had to be manually reviewed and separated by country, and that it
had difficulties in accumulating the cost data given the above-
referenced lack of a cost accounting system. Izumi states that it has
always done its best to respond fully and completely to the
Department's requests for information and that the petitioner's
characterizations of Izumi's efforts as non-cooperative are inaccurate.
Furthermore, Izumi maintains that, contrary to the petitioner's
assertion that the Department did not make an adverse inference in
assigning Izumi a preliminary margin, the Department did, in fact, make
an adverse inference with regard to Izumi. Izumi contends that the rate
assigned for the preliminary results is higher than any calculated rate
for Izumi for the past five reviews. Izumi states that the non-adverse
FA rate for Izumi in the immediately preceding review (1995-1996) was
only 2.26 percent. Izumi maintains that the resulting 600 percent
increase in the deposit rate can hardly be characterized as favorable.
Izumi argues, that even if the Department was justified in making an
adverse inference in determining Izumi's rate, it was correct not to
use the most adverse rate. Izumi asserts that there is nothing in the
statute which mandates the use of an adverse inference where a
respondent has been cooperative. Thus, Izumi argues, the cases cited by
the petitioner do not bind the Department in this case. Izumi states,
that unlike Pipes and Tubes from Thailand, a case cited by the
petitioner, the Department has already found that Izumi did
significantly cooperate with the Department. Regarding Fresh Cut
Flowers--Columbia 1997, Izumi states that its situation is similar in
that it has made significant efforts to both respond to the
Department's questionnaires and undergo verification.
Finally, Izumi argues that the Department should also reject the
petitioner's demand that the Department use the rate assigned to Kaga
for the preliminary results. Izumi maintains that Kaga's rate was the
result of serious clerical errors, is not reliable, and should not be
used as the basis for Izumi's rate. Also, Izumi states that the
Department assigned Kaga's rate as the most adverse facts available
rate to another respondent in this review which refused to undergo
verification.
Department Position: We agree with Izumi, in part. For the reasons
explained in the RC 96-97 Preliminary Results and the Izumi FA
Memorandum, the application of section 782(e) of the Act does not
overcome section 776(a)'s direction to use FA for Izumi's submissions.
Thus, the use of FA is warranted in this case. Furthermore, because
Izumi did not act to the best of its ability to comply with the request
for information under section 776(b), an adverse inference is
warranted. We note that, unlike in Borden, however, as stated in the RC
96-97 Preliminary Results, because Izumi made substantial efforts to
cooperate throughout the course of this review, including undergoing
verification, we are continuing to resort to FA that are less adverse
to the interest of Izumi. Therefore, we used for Izumi an adverse FA
rate of 12.68 percent (a rate calculated for another respondent in the
1990-1991 review of this proceeding). This rate is a significant
increase from the company's current cash deposit rate and thus is
sufficiently adverse to induce cooperation by Izumi in future reviews
of this proceeding. If, in subsequent reviews, it is determined that
the adverse FA rate assigned to Izumi is not prompting Izumi to
completely and accurately report all requested information, the
selection of the facts available rate may be revisited.
Comment 2: Affiliation. Izumi maintains that Company X,
1 an affiliated Japanese producer of roller chain, is a
separate entity from Izumi. Izumi further argues that Company X's
ownership interest in Izumi, which was verified by the Department, has
not changed significantly during the almost 20 year history in which
the Department has had responsibility for the case. Izumi contends that
this relationship is well known to the Department and that the
Department has always calculated a separate margin for each company.
Furthermore, Izumi contends that Company X does not hold a controlling
interest in Izumi and that the sole Company X director on Izumi's Board
of Directors is affirmatively prohibited from voting in matters which
affect Company X. Izumi requests that the Department continue to treat
the two companies as separate entities.
---------------------------------------------------------------------------
\1\ Due to the proprietary nature of the affiliation, we have
referred to the company in question as `Company X'.
---------------------------------------------------------------------------
Department Position: In our preliminary results, we noted that the
majority of Izumi's home market sales were made to Company X, and
therefore, we would be reviewing the appropriateness of continuing our
analysis of Izumi as a separate entity for the purposes of the final
determination. In order to conduct our analysis of whether to collapse
Izumi and Company X into one entity under the antidumping law, the
Department issued a questionnaire to Izumi on May 27, 1998 and a
supplemental questionnaire on July 16, 1998. In order to gain
additional information, we also issued a questionnaire to Company X on
July 16, 1998. Izumi filed timely responses on June 24, 1998 and August
3, 1998, and Company X filed a timely response to its questionnaire on
August 3, 1998. The parties submitted their case and rebuttal briefs on
this issue on September 1, 1998 and September 9, 1998, respectively.
Due to the proprietary nature of this issue, we are unable to
discuss publicly the information on the record. Therefore, we have
summarized the parties' proprietary arguments, and the Department's
comments, in a separate decision memorandum that has been placed on the
record of this proceeding. See Decision Memorandum: Roller Chain, Other
than Bicycle, from Japan--Izumi Chain Mfg. Co. Ltd., Affiliation Issue,
1996-1997 Administrative Review, November 4, 1998 (Izumi Decision
Memorandum).
After analyzing the information provided by Izumi and Company X in
their questionnaire responses and the arguments presented in the
parties' briefs, we have determined that there is not sufficient
evidence on the record of this case to determine that Izumi and Company
X should be collapsed under the antidumping law. See the Izumi Decision
Memorandum at 23. However, we will request additional information for
this analysis and further examine this issue in the context of the
ongoing 1997-1998 administrative review of this order.
Final Results of Review
As a result of this review, we have determined that the following
margins exist for the period April 1, 1996 through March 31, 1997:
------------------------------------------------------------------------
Weighted-
average
Manufacturer/exporter margin
percentage
------------------------------------------------------------------------
Daido Kogyo Company Ltd................................... 00.03
Enuma Chain Mfg. Company.................................. 00.03
Izumi Chain Mfg. Company Ltd.............................. 12.68
Kaga Kogyo/Kaga Industries................................ 12.68
OCM Chain Company......................................... 12.68
Pulton Chain Company Inc.................................. 17.57
R.K. Excel Company Ltd.................................... 00.28
Sugiyama Chain Company, Ltd............................... 12.68
------------------------------------------------------------------------
Cash Deposit Requirements
The Department shall determine, and the Customs Service shall
assess, antidumping duties on all appropriate entries.
The following deposit requirements shall be effective upon
publication of
[[Page 63706]]
this notice of final results of administrative review for all shipments
of the subject merchandise from Japan that are entered or withdrawn
from warehouse, for consumption on or after the publication date, as
provided by 751(a)(1) of the Act: (1) the cash deposit rates for the
reviewed companies will be the rates listed above, except if the rate
is less than 0.5 percent and, therefore, de minimis, the cash deposit
rate 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 of review in
which that manufacturer participated; and (4) if neither the exporter
or the manufacturer is a firm covered in this review or in any previous
segment of this proceeding, the cash deposit rate will be 15.92
percent, the ``all others'' rate based on the first review conducted by
the Department in which a ``new shipper'' rate was established in the
final results of antidumping finding administrative review (48 FR
51801, November 14, 1983). These requirements shall remain in effect
until publication of the final results of the next administrative
review.
For duty assessment purposes, we have calculated importer-specific
assessment rates for roller chain. For CEP sales we calculated an
importer-specific assessment rate by aggregating the dumping margins
calculated for all U.S. sales to each importer and dividing this amount
by the estimated entered value of subject merchandise sold during the
POR to that importer. We calculated the estimated entered value by
subtracting international movement expenses and expenses incurred in
the United States from the gross sales value. For assessment of EP
sales, for each importer, we calculated a per unit importer-specific
assessment amount by aggregating the dumping margins calculated for all
U.S. sales to each importer and dividing this amount by the total
quantity of subject merchandise sold to that importer during the POR.
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 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 19 CFR 353.34(d). Timely written notification of
return/destruction of APO materials or conversion to judicial
protective order is hereby requested. Failure to comply with the
regulation and the terms of an APO is a sanctionable violation.
This administrative review and notice are in accordance with
sections 751(a)(1) and 777(i)(1) of the Act.
Dated: November 4, 1998.
Holly A. Kuga,
Acting Assistant Secretary for Import Administration.
[FR Doc. 98-30414 Filed 11-13-98; 8:45 am]
BILLING CODE 3510-DS-P