[Federal Register Volume 64, Number 50 (Tuesday, March 16, 1999)]
[Notices]
[Pages 12967-12977]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-6280]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-557-805]
Extruded Rubber Thread From Malaysia; Final Results of
Antidumping Duty Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
SUMMARY: On November 9, 1998, the Department of Commerce published in
the Federal Register the preliminary results of the administrative
review of the antidumping duty order on extruded rubber thread from
Malaysia. This review covers four manufacturers/exporters of the
subject merchandise to the United States (Filati Lastex Elastofibre
(Malaysia) (Filati), Heveafil Sdn. Bhd./Filmax Sdn. Bhd (collectively
Heveafil), Rubberflex Sdn. Bhd. (Rubberflex), and Rubfil Sdn. Bhd.
(Rubfil)). The period of review (POR) is October 1, 1996, through
September 30, 1997.
We gave interested parties an opportunity to comment on our
preliminary results. We have based our analysis on the comments
received and have changed the results from those presented in the
preliminary results of review.
EFFECTIVE DATE: March 16, 1999.
FOR FURTHER INFORMATION CONTACT: Shawn Thompson or Irina Itkin, AD/CVD
Enforcement Group II, Office 5, Import Administration, International
Trade Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, NW, Washington, DC 20230; telephone (202) 482-1776
or (202) 482-0656, respectively.
SUPPLEMENTARY INFORMATION:
Background
On November 9, 1998, the Department of Commerce (the Department)
published in the Federal Register its preliminary results of the 1996-
1997 administrative review of the antidumping duty order on extruded
rubber thread from Malaysia (63 FR 60295). The Department has now
completed this administrative review, in accordance with section 751(a)
of the Tariff Act of 1930, as amended (the Act).
Scope of the Review
The product covered by this review is extruded rubber thread.
Extruded rubber thread is defined as vulcanized rubber thread obtained
by extrusion of stable or concentrated natural rubber latex of any
cross sectional shape, measuring from 0.18 mm, which is 0.007 inch or
140 gauge, to 1.42 mm, which is 0.056 inch or 18 gauge, in diameter.
Extruded rubber thread is currently classifiable under subheading
4007.00.00 of the Harmonized Tariff Schedule of the United States
(HTSUS). The HTSUS subheadings are provided for convenience and customs
purposes. The written description of the scope of this review is
dispositive.
Applicable Statute and Regulations
Unless otherwise indicated, all citations to the Act are references
to the provisions effective January 1, 1995, the effective date of the
amendments made to the Act by the Uruguay Round Agreements Act (URAA).
In addition, unless otherwise indicated, all citations to the
Department's regulations are to the regulations codified at 19 CFR part
351 (1998).
Facts Available
A. Rubfil
In accordance with section 776(a)(2)(A) of the Act, we determine
that the use of facts available is appropriate as the basis for
Rubfil's dumping margin. Specifically, Rubfil failed to respond to the
Department's questionnaire, issued in November 1997. Because Rubfil did
not respond to the Department's questionnaire, we must use facts
otherwise available to calculate Rubfil's dumping margin.
Section 776(b) of the Act provides that adverse inferences may be
used with respect to a party that has failed to cooperate by not acting
to the best of its ability to comply with requests for information. See
Statement of Administrative Action accompanying the URAA, H.R. Rep. No.
316, 103rd Cong., 2d Sess. 870 (SAA). The failure of Rubfil to reply to
the Department's questionnaire demonstrates that it has failed to act
to the best of its ability in this review and, therefore, an adverse
inference is warranted.
As adverse facts available for Rubfil, we have used the highest
rate calculated for any respondent in any segment of this proceeding.
This rate is 54.31 percent.
B. Corroboration of Secondary Information
As facts available in this case, the Department has used
information derived from a prior administrative review, which
constitutes secondary information within the meaning of the SAA. See
SAA at 870. Section 776(c) of the Act provides that the Department
shall, to the extent practicable, corroborate secondary information
from independent sources reasonably at its disposal. The SAA provides
that ``corroborate'' means that the Department will satisfy itself that
the secondary information to be used has probative value. See SAA, H.R.
Doc. 316, Vol. 1, 103rd Cong., 2d Sess. 870 (1994).
To corroborate secondary information, the Department will, to the
extent practicable, examine the reliability and relevance of the
information to be used. However, unlike other types of information,
such as input costs or selling expenses, there are no independent
sources for calculated dumping margins. Thus, in an administrative
review, if the Department chooses as total adverse facts available a
calculated dumping margin from the same or a prior segment of this
proceeding, it is not necessary to question the reliability of the
margin for that time period. With respect to the relevance aspect of
corroboration, however, the Department will consider information
reasonably at its disposal as to whether there are circumstances that
would render a margin not relevant. Where circumstances indicate that
the selected margin may not be appropriate, the Department will attempt
to find a more appropriate basis for facts available. See, e.g., Fresh
Cut Flowers from Mexico; Final Results of Antidumping Duty
Administrative Review, 61 FR 6812, 6814 (February 22, 1996) (where the
Department disregarded the highest margin as adverse best information
available because the margin was based on another company's
uncharacteristic business expense resulting in an unusually high
margin).
For Rubfil, we examined the rate applicable to extruded rubber
thread from Malaysia throughout the course of the proceeding. With
regard to its probative value, the rate specified above is reliable and
relevant because it is a calculated rate from the 1994-1995
administrative review. There is no information on the record that
demonstrates that the rate selected is not an appropriate total adverse
facts available rate for Rubfil. Thus, the Department considers this
rate to be appropriate adverse facts available.
Normal Value Comparisons
To determine whether sales of extruded rubber thread from Malaysia
to
[[Page 12968]]
the United States were made at less than normal value (NV), we compared
the constructed export price (CEP) to the NV for Filati, Heveafil, and
Rubberflex, as specified in the ``Constructed Export Price'' and
``Normal Value'' sections of this notice.
When making comparisons in accordance with section 771(16) of the
Act, we considered all products sold in the home market as described in
the ``Scope of the Review'' section of this notice, above, that were in
the ordinary course of trade for purposes of determining appropriate
product comparisons to U.S. sales. Where there were no sales of
identical merchandise in the home market made in the ordinary course of
trade to compare to U.S. sales, we compared U.S. sales to sales of the
most similar foreign like product made in the ordinary course of trade,
based on the characteristics listed in sections B and C of our
antidumping questionnaire.
Level of Trade and CEP Offset
In accordance with section 773(a)(1)(B) of the Act, to the extent
practicable, we determine NV based on sales in the comparison market at
the same level of trade as export price (EP) or CEP. The NV level of
trade is that of the starting-price sales in the comparison market or,
when NV is based on constructed value (CV), that of the sales from
which we derive selling, general and administrative expenses (SG&A) and
profit. For EP, the U.S. level of trade is also the level of the
starting-price sale, which is usually from the exporter to importer.
For CEP, it is the level of the constructed sale from the exporter to
the importer.
To determine whether NV sales are at a different level of trade
than EP or CEP sales, we examine stages in the marketing process and
selling functions along the chain of distribution between the producer
and the unaffiliated customer. If the comparison-market sales are at a
different level of trade and the difference affects price
comparability, as manifested in a pattern of consistent price
differences between the sales on which NV is based and comparison-
market sales at the level of trade of the export transaction, we make a
level-of-trade adjustment under section 773(a)(7)(A) of the Act.
Finally, for CEP sales, if the NV level is more remote from the factory
than the CEP level and there is no basis for determining whether the
difference in the levels between NV and CEP affects price
comparability, we adjust NV under section 773(a)(7)(B) of the Act (the
CEP offset provision). See Notice of Final Determination of Sales at
Less Than Fair Value: Certain Cut-to-Length Carbon Steel Plate from
South Africa, 62 FR 61731 (Nov. 19, 1997).
Filati, Heveafil, and Rubberflex claimed that they made home market
sales at only one level of trade (i.e., sales to original equipment
manufacturers). In order to determine whether NV was established at a
level of trade which constituted a more advanced state of distribution
than the level of trade of the CEP, we compared the selling functions
performed for home market sales with those performed with respect to
the CEP transactions which exclude economic activities occurring in the
United States. We found that Filati, Heveafil, and Rubberflex performed
essentially the same selling functions in their sales offices in
Malaysia for both home market and U.S. sales. Therefore, the
respondents' sales in Malaysia were not at a more advanced stage of
marketing and distribution than the constructed U.S. level of trade,
which represents an F.O.B. foreign port price after the deduction of
expenses associated with U.S. selling activities. Because we find that
no difference in level of trade exists between markets, we have not
granted a CEP offset to any of the respondents. For a detailed
explanation of this analysis, see the concurrence memorandum issued for
the preliminary results of this review, dated November 2, 1998. Also
see Comment 2 in the ``Analysis of Comments Received'' section of this
notice.
Constructed Export Price
For all sales by Filati, Heveafil, and Rubberflex, we based the
starting price on CEP, in accordance with section 772(b) of the Act.
For Filati, we have treated sales shipped directly from Malaysia to the
U.S. customer as CEP sales because we find that the extent of the
affiliate's activities performed in the United States in connection
with these sales is significant. For further discussion, see Comment 1
in the ``Analysis of Comments Received'' section of this notice.
In addition, for all three companies, we revised the reported data
based on our findings at verification.
A. Filati
We calculated CEP based on the starting price to the first
unaffiliated purchaser in the United States. In accordance with section
772(c)(1)(B) of the Act, we added an amount for uncollected import
duties in Malaysia. We made deductions from the starting price, where
appropriate, for rebates. In addition, where appropriate, we made
deductions for foreign inland freight, foreign brokerage and handling
expenses, ocean freight, marine insurance, U.S. customs duty, U.S.
brokerage and handling expenses, U.S. inland freight, and U.S.
warehousing expenses, in accordance with section 772(c)(2)(A) of the
Act.
We made additional deductions to CEP, where appropriate, for
commissions, credit expenses, U.S. indirect selling expenses, and U.S.
inventory carrying costs, in accordance with section 772(d)(1) of the
Act. We disallowed an offset claimed by Filati relating to imputed
costs associated with financing antidumping and countervailing duty
deposits, in accordance with the Department's practice. See Extruded
Rubber Thread from Malaysia; Final Results of Antidumping Duty
Administrative Review, 63 FR 12752, 12754, 12758 (Mar. 16, 1998)
(Thread Fourth Review); and Antifriction Bearings (Other Than Tapered
Roller Bearings) and Parts Thereof from France, Germany, Italy, Japan,
Romania, Singapore, Sweden and the United Kingdom; Final Results of
Antidumping Duty Administrative Reviews, 62 FR 54043, 54075 (Oct. 17,
1997) (AFBs). Also see Comment 3 in the ``Analysis of Comments
Received'' section of this notice, for further discussion.
Pursuant to section 772(d)(3) of the Act, we further reduced the
starting price by an amount for profit, to arrive at CEP. In accordance
with section 772(f) of the Act, we calculated the CEP profit rate using
the expenses incurred by Filati and its affiliate on their sales of the
subject merchandise in the United States and the foreign like product
in the home market and the profit associated with those sales.
B. Heveafil
In cases where Heveafil shipped merchandise directly from Malaysia
to U.S. customers, we used the bill of lading date as the date of sale
for these shipments, rather than the date of the U.S. invoice as
reported. For these shipments, we find that there is a long lag time
between the date of shipment to the customer and the date of invoice.
Therefore, in accordance with our policy and consistent with the
preliminary results, we used the bill of lading date as the date of
sale. See the concurrence memorandum issued for the preliminary results
of this review, dated November 2, 1998, for further discussion.
We calculated CEP based on the starting price to the first
unaffiliated customer in the United States. In accordance with section
772(c)(1)(B) of the Act, we added an amount for uncollected import
duties in Malaysia.
[[Page 12969]]
We made deductions from the starting price, where appropriate, for
rebates. We also made deductions for foreign inland freight, foreign
brokerage and handling expenses, ocean freight, marine insurance, U.S.
customs duty, U.S. brokerage and handling expenses, U.S. inland
freight, and U.S. warehousing expenses, in accordance with section
772(c)(2)(A) of the Act.
We made additional deductions to CEP, where appropriate, for credit
expenses, repacking expenses, U.S. indirect selling expenses, and U.S.
inventory carrying costs, in accordance with section 772(d)(1) of the
Act. Regarding indirect selling expenses, we disallowed an offset
claimed by Heveafil relating to imputed costs associated with financing
antidumping and countervailing duty deposits, in accordance the
Department's practice. See Thread Fourth Review and AFBs.
Pursuant to section 772(d)(3) of the Act, we further reduced the
starting price by an amount for profit, to arrive at CEP. In accordance
with section 772(f) of the Act, we calculated the CEP profit rate using
the expenses incurred by Heveafil and its affiliate on their sales of
the subject merchandise in the United States and the foreign like
product in the home market and the profit associated with those sales.
C. Rubberflex
We calculated CEP based on the starting price to the first
unaffiliated customer in the United States. We made deductions from the
starting price, where appropriate, for rebates. We also made deductions
for foreign inland freight, foreign brokerage and handling expenses,
ocean freight, marine insurance, U.S. customs duty, U.S. inland
freight, and U.S. warehousing expenses, in accordance with section
772(c)(2)(A) of the Act.
We made additional deductions to CEP, where appropriate, for credit
expenses, U.S. indirect selling expenses, and U.S. inventory carrying
costs, in accordance with section 772(d)(1) of the Act.
Pursuant to section 772(d)(3) of the Act, we further reduced the
starting price by an amount for profit, to arrive at CEP. In accordance
with section 772(f) of the Act, we calculated the CEP profit rate using
the expenses incurred by Rubberflex and its affiliate on their sales of
the subject merchandise in the United States and the foreign like
product in the home market and the profit associated with those sales.
Normal Value
In order to determine whether there is a sufficient volume of sales
in the home market to serve as a viable basis for calculating NV (i.e.,
the aggregate volume of home market sales of the foreign like product
is greater than five percent of the aggregate volume of U.S. sales), we
compared the volume of each respondent's home market sales of the
foreign like product to the volume of U.S. sales of subject
merchandise, in accordance with section 773(a)(1)(C) of the Act. Based
on this comparison, we determined that each respondent had a viable
home market during the POR. Consequently, we based NV on home market
sales.
Pursuant to section 773(b) of the Act, there were reasonable
grounds to believe or suspect that Filati, Heveafil, and Rubberflex had
made home market sales at prices below their COPs in this review
because the Department had disregarded sales below the COP for these
companies in the most recently completed administrative review. See
Thread Fourth Review. As a result, the Department initiated an
investigation to determine whether the respondents made home market
sales during the POR at prices below their respective COPs.
We calculated the COP based on the sum of each respondent's cost of
materials and fabrication for the foreign like product, plus amounts
for SG&A and packing costs, in accordance with section 773(b)(3) of the
Act.
Except as follows, we used the respondents' reported COP amounts to
compute weighted-average COPs during the POR:
Regarding the COP data reported by Filati, we found that in certain
instances Filati reported multiple costs for a single control number.
In those cases, we used the higher of the costs for purposes of the
final results. In addition, we disallowed a portion of an offset
claimed by Filati to its reported financing expenses because Filati was
unable to demonstrate at verification that this offset was related to
short-term income. See Comment 8.
Regarding the COP data reported by Heveafil, we reclassified
certain variable overhead expenses as fixed overhead, based on our
findings at verification. We also adjusted the company's financing
expenses to reflect our findings at verification. Finally, as facts
available we increased the material costs reported for one product by
the percentage by which the reported costs differed from the standard
costs observed at verification. See Comment 10.
Regarding the COP data reported by Rubberflex, we increased these
costs to include a portion of the 1997 year-end adjustments made by the
company's auditors. See Comment 12.
We compared the weighted-average COP figures to home market sales
of the foreign like product, as required under section 773(b) of the
Act, in order to determine whether these sales had been made at prices
below the COP. On a product-specific basis, we compared the COP to home
market prices, less any applicable movement charges and discounts.
In determining whether to disregard home market sales made at
prices below the COP, we examined whether such sales were made: (1) in
substantial quantities within an extended period of time; and (2) at
prices which permitted the recovery of all costs within a reasonable
period of time in the normal course of trade. See section 773(b)(1) of
the Act.
Pursuant to section 773(b)(2) of the Act, where less than 20
percent of a respondent's sales of a given product were at prices less
than the COP, we did not disregard any below-cost sales of that product
because we determined that the below-cost sales were not made in
``substantial quantities.'' Where 20 percent or more of a respondent's
sales of a given product were at prices below the COP, we found that
sales of that model were made in ``substantial quantities'' within an
extended period of time, in accordance with section 773(b)(2)(B) of the
Act. In such cases, we also determined that such sales were not made at
prices which would permit recovery of all costs within a reasonable
period of time, in accordance with section 773(b)(2)(D) of the Act.
Therefore, we disregarded the below-cost sales. Where all sales of a
specific product were at prices below the COP, we disregarded all sales
of that product.
In this review segment, we found that, for certain models of
extruded rubber thread, more than 20 percent of each respondent's home
market sales within an extended period of time were at prices less than
COP. Further, the prices did not provide for the recovery of costs
within a reasonable period of time. We therefore disregarded the below-
cost sales and used the remaining above-cost sales as the basis for
determining NV, in accordance with section 773(b)(1) of the Act.
Company-specific calculations are discussed below.
A. Filati
In all instances, NV for Filati was based on home market sales.
Accordingly, we based NV on the starting price to unaffiliated
customers. We made deductions from the starting price for rebates,
where appropriate. We also made deductions, where appropriate, for
foreign inland freight,
[[Page 12970]]
pursuant to section 773(a)(6)(B) of the Act. Pursuant to section
773(a)(6)(C)(iii) of the Act, we also made deductions for home market
credit expenses and bank charges. Where applicable, in accordance with
19 CFR 351.410(e), we offset any commission paid on a U.S. sale by
reducing the NV by the amount of home market indirect selling expenses
and inventory carrying costs, up to the amount of the U.S. commission.
In addition, we deducted home market packing costs and added U.S.
packing costs, in accordance with section 773(a)(6) of the Act. Where
appropriate, we made adjustments to NV to account for differences in
physical characteristics of the merchandise, in accordance with section
773(a)(6)(C)(ii) of the Act and 19 CFR 351.411.
B. Heveafil
In all instances, NV for Heveafil was based on home market sales.
Accordingly, we based NV on the starting price to unaffiliated
customers. We made deductions from the starting price for discounts,
where appropriate. We also made deductions for foreign inland freight
and foreign inland insurance, pursuant to section 773(a)(6)(B) of the
Act. Pursuant to section 773(a)(6)(C)(iii) if the Act, we also made
deductions for home market credit expenses and bank charges.
In addition, we deducted home market packing costs and added U.S.
packing costs, in accordance with section 773(a)(6) of the Act. Where
appropriate, we made adjustments to NV to account for differences in
physical characteristics of the merchandise, in accordance with section
773(a)(6)(c)(ii) of the Act and 19 CFR 351.411.
C. Rubberflex
In all instances, NV for Rubberflex was based on home market sales.
Accordingly, we based NV on the starting price to unaffiliated
customers. We made deductions from the starting price for foreign
inland freight and foreign inland insurance, pursuant to section
773(a)(6)(B) of the Act. Pursuant to section 773(a)(6)(C)(iii) of the
Act, we also made deductions for home market credit expenses.
In addition, we deducted home market packing costs and added U.S.
packing costs, in accordance with section 773(a)(6) of the Act. Where
appropriate, we made adjustments to NV to account for differences in
physical characteristics of the merchandise, in accordance with section
773(a)(6)(c)(ii) of the Act and 19 CFR 351.411.
Currency Conversion
We made currency conversions into U.S. dollars based on the
exchange rates in effect on the dates of the U.S. sales as certified by
the Federal Reserve Bank.
Section 773A of the Act directs the Department to use a daily
exchange rate in order to convert foreign currencies into U.S. dollars
unless the daily rate involves a fluctuation. It is the Department's
practice to find that a fluctuation exists when the daily exchange rate
differs from the benchmark rate by 2.25 percent. The benchmark is
defined as the moving average of rates for the past 40 business days.
When we determine a fluctuation to have existed, we substitute the
benchmark for the daily rate, in accordance with established practice.
Analysis of Comments Received
We gave interested parties an opportunity to comment on the
preliminary results. We received comments from North American Rubber
Thread (the petitioner), and two respondents, Filati and Rubberflex. We
also received rebuttal comments from the petitioner, Filati, Heveafil,
and Rubberflex.
A. Filati
Comment 1: Treatment of Direct Container Sales
During the POR, Filati shipped certain sales directly from the
factory in Malaysia to its U.S. customers. The Department treated these
``direct container'' shipments as CEP sales for purposes of the
preliminary results. Filati argues that this treatment was incorrect,
based on the Department's criteria for determining whether a sale is an
EP transaction (rather than a CEP sale). Filati relies in large part
upon the Department's determination in Certain Cold-Rolled and
Corrosion-Resistant Carbon Steel Flat Products From Korea: Final
Results of Antidumping Duty Administrative Review, 61 FR 18547 (Apr.
26, 1996) (Carbon Steel from Korea) to support its position. Filati
asserts that Carbon Steel from Korea identifies the factors the
Department will consider when determining the classification of sales.
Id. at 18551. Whenever sales are made prior to the date of importation
through an affiliated sales agent in the United States, the Department
concludes that EP is the most appropriate determinant of the U.S. price
where all of the following factors are present:
The merchandise in question is shipped directly from the
manufacturer to the unaffiliated buyer without being introduced into
the physical inventory of the selling agent;
Direct shipment from the manufacturer to the unaffiliated
buyer is the customary channel for sales of the subject merchandise
between the parties involved; and
The selling agent in the United States acts only as a
processor of sales-related documentation and a communication link with
the unaffiliated U.S. buyer. Id.
Filati contends that each of these criteria is met with respect to
its direct container sales. Specifically, Filati states that, because
the bill of lading date was reported as the date of sale and this date
was prior to entry, the direct container sales were made prior to
importation. In addition, Filati asserts that the first and second
criteria are met, since: (1) the subject merchandise was shipped
directly to the U.S. customer without being introduced into the
physical inventory of Filati USA; and (2) direct shipments have been a
normal commercial channel for the customer involved.
Regarding the third criterion, Filati argues that the Department
erroneously found in the preliminary results that the activities
carried out by Filati USA exceeded those of a document processor and
communication link. Filati contends that the selling activities
performed by Filati USA are within the range of activities previously
determined by the Department to be consistent with EP classification.
Filati acknowledges that Filati USA takes title to the merchandise,
invoices the customer, and in some cases, arranges and pays for
delivery from the port of entry. However, Filati contends that Filati
USA has only limited authority to set prices in the United States. As
support for this assertion, Filati cites to the Filati USA verification
report, where the Department noted that prices are quoted in accordance
with a window that is set based on consultations with the parent
company.
In addition, Filati asserts that the Department has accorded EP
treatment to sales by respondents who performed selling functions that
were more significant than those performed by Filati USA. Filati cites
to Carbon Steel from Korea and AK Steel Corp. v. United States, Slip
Op. 98-159 at 10-12 (Court of International Trade (CIT), Nov. 23, 1998)
(AK Steel) in support of its position. In the former, the Department
found that sales were properly classified as purchase price (the old-
law equivalent of EP) transactions when the U.S. affiliate: (1)
extended credit to certain customers by permitting them to
[[Page 12971]]
delay payment for subject merchandise, (2) identified customers; (3)
negotiated prices; (4) provided some warranty-related services; (5)
engaged in marketing activities that included development of downstream
applications for subject merchandise; and (6) posted cash deposits of
antidumping and countervailing duties on behalf of its U.S. customers.
Filati argues that the activities performed by Filati USA are less
significant than those performed by the respondent in Carbon Steel from
Korea, because Filati USA is not involved in advanced marketing or
product development. Consequently, Filati contends that there is even
more justification for classifying its direct container shipments as EP
transactions than there was in Carbon Steel from Korea.
Filati states that, in AK Steel, the CIT upheld the Department's EP
classification of ``back-to-back'' sales where the U.S. affiliate: (1)
took title to the shipment; (2) acted as importer of record; (3) made
initial contact with the direct shipment customer; (4) negotiated price
based upon predetermined factors; (5) received purchase orders from the
customer and forwarded them to the exporter/producer for confirmation;
(6) invoiced the customer; (7) conducted market research and economic
planning; (8) ``found'' (and possibly solicited) direct container
customers; (9) arranged and paid for post-sale warehousing,
transportation, U.S. Customs duties, brokerage, handling, and other
expenses; and (10) extended credit to and accepted payment from direct
container customers. Regarding the instant case, Filati argues that,
because there is no evidence that Filati USA ``found'' direct container
customers or conducted market research and economic planning, Filati's
activities relating to direct container sales were also less
significant than those performed by the respondent in AK Steel.
Finally, Filati notes that the Department found that Filati's
direct container shipments were PP/EP transactions in the second and
third reviews of this proceeding. Filati contends that, because its
method of making these shipments has not changed since the time of
those reviews, the Department should continue to treat direct container
sales as EP transactions in the instant review.
According to the petitioner, the Department correctly treated
Filati's direct container shipments as CEP transactions. As support for
its position, the petitioner cites to the Filati USA verification
report at page 4, where the Department stated that Filati USA
determines the prices for direct container sales. The petitioner also
cites to the Notice of Final Determinations of Sales at Less Than Fair
Value: Brake Drums and Brake Rotors from the People's Republic of
China, 62 FR 9160, 9171 (Feb. 28, 1997) and Small Diameter Circular
Seamless Carbon and Alloy Steel Standard, Line and Pressure Pipe From
Germany: Preliminary Results of Antidumping Duty Administrative Review,
63 FR 13217 (Mar. 18, 1998). In those cases, the Department determined
that the respondents' sales were CEP transactions because it concluded
that, in the former case, the U.S. affiliate was instrumental in
determining the terms of sale, while in the latter, the selling
functions of the U.S. affiliate extended beyond those of a processor of
documents or a communications link.
DOC Position
We agree with the petitioner. In our preliminary results of review,
we examined the facts of this case in light of the statutory
definitions of EP and CEP sales. Section 772(b) of the Act, as amended,
defines CEP as ``the price at which the subject merchandise is first
sold (or agreed to be sold) in the United States before or after the
date of importation by or for the account of the producer or exporter
of such merchandise or by a seller affiliated with the producer or
exporter, to a purchaser not affiliated with the producer or exporter,
as adjusted'' (emphasis added). Section 772(a) of the Act defines EP as
``the price at which the subject merchandise is first sold (or agreed
to be sold) before the date of importation by the producer or exporter
of the subject merchandise outside of the United States to an
unaffiliated purchaser in the United States, or to an unaffiliated
purchaser for exportation to the United States, as adjusted'' (emphasis
added).
As the statutory definitions state, sales before importation can be
classified as either EP or CEP sales. The decisive factor for sales
prior to importation is where the selling activity takes place (i.e.,
in or outside the United States). Distinguishing EP and CEP
transactions based on where selling activity takes place is consistent
with the purpose of ensuring that, where appropriate, expenses related
to selling activity in the United States are deducted to reach a
constructed ``export'' price.
It is the Department's practice to examine several criteria to
determine whether sales made prior to importation through a sales agent
to an unaffiliated customer in the United States are EP sales,
including: (1) Whether the merchandise was shipped directly from the
manufacturer to the unaffiliated U.S. customer; (2) whether this was
the customary commercial channel between the parties involved; and (3)
whether the function of the U.S. selling agent was limited to that of a
``processor of sales-related documentation'' and a ``communications
link'' with the unaffiliated U.S. buyer. Where all three criteria are
met, indicating that the activities of the U.S. selling agent are
ancillary to the sale, the Department has determined the sales to be EP
sales. Where one or more of these conditions are not met the Department
has classified the sales in question as CEP sales. (See, e.g., Viscose
Rayon Staple Fiber from Finland: Final Results of Antidumping Duty
Administrative Review, 63 FR 32820, 32821 (June 16 1998) (Viscose Rayon
from Finland); Certain Cold-Rolled and Corrosion-Resistant Carbon Steel
Flat Products from Korea: Final Results of Antidumping Duty
Administrative Reviews, 63 FR 13170 (Mar. 18, 1998).)
The crucial distinction between EP and CEP treatment lies in the
last factor (i.e., whether the entity in the United States acted only
as a processor of documentation and a communication link). This factor
entails a fact-based analysis to determine whether the entity in the
United States is actually engaged in significant selling activities, in
which case CEP applies, or is merely performing ancillary functions for
a foreign seller, in which case EP is appropriate. The classification
of sales as EP or CEP is not confined to tallying up the various
functions of the U.S. selling agent. In Industrial Nitrocellulose From
the United Kingdom: Notice of Final Results of Antidumping Duty
Administrative Review, 64 FR 6609, 6611 (Feb. 10, 1999), we observed
that ``[t]he Department looks at the totality of the evidence to
determine whether an agent's role in the sales process is beyond the
ancillary role.'' As noted above, in cases where the U.S. affiliate or
sales agent has a significant role in making U.S. sales (including
setting the price in the United States and providing after-sale
support), we generally find that CEP treatment is appropriate. See,
e.g., Notice of Final Determination of Sales at Less Than Fair Value:
Stainless Steel Wire Rod From Spain, 63 FR 40391, 40395 (July 29, 1998)
(SSWR from Spain); and Viscose Rayon from Finland.
Our analysis of the facts in this case indicates that during the
POR Filati USA's role in making direct container sales was extensive.
Specifically, Filati
[[Page 12972]]
USA: (1) Made initial contact with the customer; (2) transmitted the
order to Filati in Malaysia; (3) quoted prices without consulting the
parent company on a sale-by-sale basis; (4) took title to the
merchandise; (5) invoiced, and received payment from, the customer; and
(6) arranged and paid for delivery from the U.S. port to the customer.
See the Filati USA verification report at page 4. Thus, the record
shows that Filati USA was significantly involved in every aspect of the
sales to U.S. direct container customers, except for arranging for
shipment of the subject merchandise from Malaysia to the U.S. port of
entry.
Filati USA's role in negotiating the terms of the sales in question
is more significant than that of a conduit of information between the
U.S. customer and the Malaysia parent. Specifically, Filati USA had the
authority to contact U.S. customers directly, and then to negotiate and
accept sales terms on a case-by-case basis without Filati's approval.
Both of these functions contradict Filati's claim that the U.S.
subsidiary's role is ancillary. The record of this case shows Filati
USA's involvement in the U.S. sales process is extensive, as evidenced
by the selling functions described herein. Based on these facts, we
determine that Filati USA's role in making direct container sales
exceeds that of a mere processor of sales-related documentation and
communication link between the parent company and U.S. customer.
Filati argues that its sales should be classified as EP sales
because its selling activities fall within a range of activities
previously determined to be EP sales. However, as discussed above, this
determination must be based on the facts as a whole. The facts here
demonstrate that Filati is substantially involved in the selling of the
subject merchandise. Therefore, CEP treatment is required.
We also find unpersuasive Filati's claim that Filati USA had
limited authority to set prices because it did so only within
parameters set by Filati. In similar circumstances, we have found the
U.S. subsidiary's role in making the sales at issue to be significant
enough to warrant their treatment as CEP sales. For example, in SSWR
from Spain, we found that the U.S. subsidiary's ability to negotiate
prices within the parameters set by the parent company, in conjunction
with other sale related activities, was sufficient to warrant
classification of those sales as CEP sales. In addition, in U.S. Steel
Group v. United States Slip Op. 98-96 at 26 (CIT July 7, 1998), the CIT
upheld the Department's classification of U.S. sales as CEP
transactions, based in part on the U.S. subsidiary's ability to
negotiate prices above the minimum set by the parent company.
We also find that Filati's reliance upon Carbon Steel from Korea is
misplaced. The record on which that determination was based
demonstrated that the U.S. subsidiary performed limited liaison
functions in the processing of sales-related documentation and a
limited role as a communication link. Moreover, in the most recent
administrative review conducted on carbon steel from Korea, the
Department reclassified the respondents' U.S. sales as CEP transactions
based on record evidence establishing that the U.S. subsidiary was, in
fact, substantially involved in selling the subject merchandise. See
Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products
From Korea: Final Results of Antidumping Duty Administrative Review, 63
FR 13170, 13177 (Mar. 18, 1998) (Carbon Steel from Korea II) (the
respondents' selling agent played a key role in the sales negotiation
process by writing and signing sales contracts and a central role in
all sales activities after the merchandise arrived in the United
States).
We similarly find Filati's cite to AK Steel to be inapposite. In AK
Steel, the CIT affirmed the Department's initial classification of
direct container sales as EP transactions based on the fact that there
was no evidence on the record to indicate that the U.S. subsidiary had
the freedom to negotiate prices. More importantly, the CIT in AK Steel
expressly distinguished its holding in that case from its prior holding
in U.S. Steel Group, citing to this factual distinction as the basis
for reconciling the decisions.
Consequently, consistent with the final results of the fourth
review of this proceeding (see Thread Fourth Review) and the
Department's current practice, we have continued to treat these
transactions as CEP sales for purposes of the final results.
Comment 2: CEP Offset
Filati argues that the Department erroneously denied it a CEP
offset in the preliminary results. First, Filati contends that the
Department's finding that U.S. sales are made at the same level of
trade as home market sales is inconsistent with its finding that the
U.S. subsidiary performs significant selling functions. Specifically,
Filati argues that, because the selling functions performed by the U.S.
subsidiary are not taken into account when determining the selling
functions in the CEP channel, it would be impossible to find that home
market sales, which include all selling functions, are made at the same
level of trade as CEP sales.
In addition, the respondent claims that, with respect to U.S. sales
from inventory, Filati USA undertakes additional selling functions
(i.e., inventory maintenance, addressing of customer complaints, and
handling of returns and refunds related to merchandise quality
problems) which are excluded from the LOT analysis for the CEP channel,
but are performed by Filati for home market sales. Consequently, Filati
contends that a CEP offset is warranted because its home market sales
are made at a more advanced level of trade than its CEP sales.
According to the petitioner, the Department correctly denied a CEP
offset to Filati because Filati failed to develop the record to support
its CEP offset claim. Specifically, the petitioner claims that Filati
has failed to demonstrate that its level of trade in the home market is
different from its level of trade in the United States. The petitioner
argues that Filati's claim that a CEP offset is warranted is based
solely on the fact that the U.S. subsidiary has involvement in making
U.S. sales and on the fact that those sales are determined to be CEP
sales. As support for its position, the petitioner cites to the
legislative history of the URAA, which emphasizes that CEP offsets are
not automatically provided, but rather are granted when respondents
demonstrate that certain stated conditions are true.
DOC Position
We agree with the petitioner. In accordance with section
773(a)(7)(B) of the Act, the Department grants a CEP offset where a
respondent demonstrates that its home market sales are made at a more
advanced state of distribution that its U.S. sales. In this case, we
conducted an analysis in order to determine whether Filati's normal
values were established at a level of trade which constituted a more
advanced state of distribution than the level of trade of the CEP. See
the ``Level of Trade and CEP Offset'' section of this notice, above.
After performing this analysis, the Department found that Filati
performed essentially the same selling functions in its sales offices
in Malaysia for both home market and U.S. sales.
We disagree with Filati that this finding is inconsistent with a
finding that Filati's U.S. subsidiary performs significant selling
functions. We note
[[Page 12973]]
that Filati's U.S. sales initially are at a more advanced level of
distribution than its home market sales. After the deduction of the
selling expenses associated with selling activities occurring in the
United States, however, the levels of trade in both markets become the
same. At this point, the relevant U.S. transaction becomes the
constructed sale between the exporter (i.e., Filati) and the importer
(i.e., Filati USA). Consequently, based on the information on the
record, we have continued to deny a CEP offset to Filati for these
final results.
Comment 3: Offset for Imputed Costs Associated With AD/CVD Duty
Deposits
In its questionnaire response, Filati reported the opportunity
costs associated with financing its cash deposits of antidumping and
countervailing duties as an offset to U.S. indirect selling expenses.
Filati concedes that the Department's decision to deny this offset for
purposes of the preliminary results is consistent with the recent
practice articulated in AFBs. However, Filati contends that the
Department's change in policy conflicts with prior decisions both by
the Department and the CIT. See, e.g., Antifriction Bearings (Other
Than Tapered Roller Bearings) and Parts Thereof From France, Germany,
Italy, Japan, Singapore, and the United Kingdom; Final Results of
Antidumping Duty Administrative Reviews, 62 FR 2081, 2104 (Jan. 15,
1997 (1994-1995 AFBs Reviews); and Federal-Mogul v. United States, 950
F. Supp. 1179 (CIT 1996).
Specifically, Filati asserts that the reasoning in AFBs was flawed
in two respects. First, Filati asserts that AFBs was based on the
premise that money is fungible. According to Filati, however, this
point is irrelevant because the company has incurred a real expense
which it would not have incurred but for the existence of the
antidumping duty order. Second, Filati asserts that AFBs was based on
the premise that there is no ``real'' opportunity cost associated with
the duty deposits. Filati maintains that this point is also incorrect,
because respondents making cash deposits are required to divert funds
from more profitable ventures.
In addition, Filati contends that the CIT has taken a consistent
position which approves of the offset. Filati cites to Timken Co. v.
United States, 16 F. Supp. 2d 1102, 1105 (CIT 1998) (Timken), which
lists the cases in which the court has upheld the Department's
decisions to grant the adjustment and the cases in which it has
remanded decisions to deny the offset.
Finally, according to Filati, the Department has correctly held
that the costs associated with antidumping or countervailing duty
deposits are not ``selling expenses.'' Consequently, Filati maintains
that the antidumping law does not allow their deduction from CEP.
Based on the above arguments, Filati contends that the Department
should allow its offset to indirect selling expenses for the imputed
cost of financing its cash deposits of antidumping and countervailing
duties for purposes of the final results.
DOC Position
We disagree. For these final results, we have continued to deny an
offset to Filati's U.S. indirect selling expenses for expenses which
Filati claims are related to financing of antidumping and
countervailing duty cash deposits.
As the Department explained in AFBs, the statute does not contain a
precise definition of what constitutes a selling expense. Instead,
Congress gave the administering authority discretion in this area. It
is a matter of policy whether we consider there to be any financing
expenses associated with cash deposits. We recognize that we have, to a
limited extent in other proceedings, removed such expenses from
indirect selling expenses. However, we have reconsidered our position
on this matter and have now concluded that this practice is
inappropriate.
We have long maintained, and continue to maintain, that antidumping
duties, and cash deposits of antidumping duties, are not expenses that
we should deduct from CEP. To do so would involve a circular logic that
could result in an unending spiral of deductions for an amount that is
intended to represent the actual offset for the dumping. See, e.g.,
Tapered Roller Bearings and Parts Thereof, Finished and Unfinished,
From Japan, and Tapered Roller Bearings, Four Inches or Less in Outside
Diameter, and Components Thereof, From Japan; Final Results of
Antidumping Duty Administrative Reviews, 63 FR 63860, 63865 (Nov. 17,
1998); Tapered Roller Bearings and Parts Thereof, Finished and
Unfinished, From Japan, and Tapered Roller Bearings, Four Inches or
Less in Outside Diameter, and Components Thereof, From Japan; Final
Results of Antidumping Duty Administrative Reviews, 63 FR 2558, 2571
(Jan. 15, 1998); Certain Cut-to-Length Carbon Steel Plate from Germany;
Final Results of Antidumping Duty Administrative Review, 62 FR 18390,
18395 (April 15, 1997); and Antifriction Bearings (Other Than Tapered
Roller Bearings) and Parts Thereof From France, et al.; Final Results
of Antidumping Duty Administrative Reviews, 57 FR 28360 (June 24,
1992). We have also declined to deduct legal fees associated with
participation in an antidumping case, reasoning that such expenses are
incurred solely as a result of the existence of the antidumping duty
order. Id. Underlying our logic in both these instances is an attempt
to distinguish between business expenses that arise from economic
activities in the United States and business expenses that are direct,
inevitable consequences of the dumping order.
Financial expenses associated with cash deposits are not a direct,
inevitable consequence of an antidumping order. As noted in AFBs, money
is fungible. If an importer acquires a loan to cover one operating
cost, that may simply mean that it will not be necessary to borrow
money to cover a different operating cost. See AFBs at 54079. Companies
may choose to meet obligations for cash deposits in a variety of ways
that rely on existing capital resources or that require raising new
resources through debt or equity. For example, companies may choose to
pay deposits by using cash on hand, obtaining loans, increasing sales
revenues, or raising capital through the sale of equity shares. In
fact, companies face these choices every day regarding all their
expenses and financial obligations. There is nothing inevitable about a
company's having to finance cash deposits and there is no way for the
Department to trace the motivation or use of such funds even if it
were. Indeed, in this case the record evidence demonstrates that Filati
did not borrow funds in the United States, either to finance its cash
deposits or to fund other business expenses.
In a different context, we have made similar observations. For
example, we stated that ``debt is fungible and corporations can shift
debt and its related expenses toward or away from subsidiaries in order
to manage profit.'' See Ferrosilicon From Brazil; Final Results of
Antidumping Duty Administrative Review, 61 FR 59407, 59412 (Nov. 22,
1996) (regarding whether the Department should allocate debt to
specific divisions of a corporation).
Thus, while it is appropriate to exclude from CEP deductions cash
deposits themselves and legal fees associated with participation in
dumping cases, we do not see a sound basis for extending this practice
to expenses allegedly associated with financing cash deposits. By the
same
[[Page 12974]]
token, for the reasons stated above, we would not allow an offset for
financing the payment of legal fees associated with participation in a
dumping case.
We see no merit to the argument that, since we do not deduct cash
deposits from CEP, we should also not deduct financing expenses that
are arbitrarily associated with cash deposits. Our treatment of these
financing expenses is consistent with out treatment of other expenses,
such as taxes. Although we do not deduct corporate taxes from CEP, we
would not reduce selling expenses to reflect financing costs alleged to
be associated with payment of such taxes.
We also determine that we should not use an imputed amount that
would theoretically be associated with financing of cash deposits.
There is no real opportunity cost associated with cash deposits when
the paying of such deposits is a precondition for doing business in the
United States. Like taxes, rent, and salaries, cash deposits are simply
a financial obligation of doing business. Companies cannot choose not
to pay cash deposits if they want to import, nor can they dictate the
terms, conditions, or timing of such payments. By contrast, we impute
credit and inventory carrying costs when companies do not show an
actual expense in their records because companies have it within their
discretion to provide different payment terms to different customers
and to hold different inventory balances for different markets. We
impute costs in these circumstances as a means of comparing different
conditions of sale in different markets. Thus, our policy on imputed
expenses is consistent; under this policy, the imputation of financing
costs to actual expenses is inappropriate.
Regarding Filati's cite to Timken, we note that in this decision
the CIT acknowledged that it is the Department's current practice to
deny the offset to indirect selling expenses for financing cash
deposits related to antidumping or countervailing duties. However, the
CIT recognized that it has upheld the Department when it has decided to
grant the offset to indirect selling expenses. Consistent with the
CIT's prior decisions, it sustained the Department's determination to
grant the offset. While we concede that Timken references a number of
cases which were remanded to the Department after denying the offset,
we note that these cases were decided according to the Department's
prior practice regarding the offset.
Moreover, even were we to reverse our stated practice and allow an
offset, we would not do so in this case because Filati did not incur
any financing costs in the United States. Further, as we noted above,
it would be inappropriate to impute an amount which would be associated
with financing cash deposits in theory only, since the record shows
that Filati did not finance its cash deposits.
Finally, we disagree with Filati's argument that: it incurred a
real expense that it would not have incurred but for the existence of
the antidumping duty order. The only expenses relevant to this question
are U.S. financing expenses. Because the record shows no evidence of
financing activity in the United States, we find that Filati incurred
no ``real'' expense, despite its assertions to the contrary.
Therefore, in accordance with our current practice, we have
continued to deny an offset to Filati's indirect selling expenses for
purposes of the final results.
Comment 4: Foreign Movement Expenses on U.S. Sales
During the POR, Filati sold certain products from its U.S.
inventory which were imported prior to the POR. Because Filati did not
incur any foreign movement expenses during the POR for these products,
Filati based the movement expenses for these products on the average of
the expenses incurred for similar products imported during the POR,
rather than on the actual expenses incurred. At verification, Filati
provided the actual (i.e., pre-POR) movement expenses associated with
these sales.
According to Filati, the Department should accept its reported
movement expenses, rather than using the pre-POR data obtained at
verification. Filati argues that using the reported data is the most
reasonable method for Commerce to employ because that methodology uses
the data that is most current.
DOC Position
We disagree. It is the Department's preference to use actual data
over estimates when calculating price adjustments. The fact that the
actual movement expenses in question were incurred prior to the POR
makes them neither inaccurate nor unacceptable. Rather, this data is
more accurate than the reported data because it represents the amounts
that Filati actually incurred to transport the merchandise sold during
the POR. Therefore, we have used the actual movement expenses incurred
on these sales for purposes of the final results.
Comment 5: Conversion of Movement Charges Into Per-Pound Amounts
Filati asserts that the Department failed to convert certain U.S.
movement expenses which were reported on per-kilogram basis to a per-
pound basis before performing its margin calculations. Filati argues
that the Department should correct this error for purposes of the final
results.
DOC Position
We agree. Although Filati stated in its questionnaire response that
these expenses were reported on a per-pound basis, we found at
verification that they were actually reported as amounts per kilogram.
Consequently, we have treated them as such for purposes of the final
results.
Comment 6: Inclusion of Uncollected Duties in COP
During the POR, the government of Malaysia allowed Filati to import
rubber thread inputs duty free; however, when Filati sold extruded
rubber thread in the home market, the government charged it a duty
equal to three percent of the sales price. In the preliminary results,
the Department treated these amounts as uncollected import duties and
added them to the U.S. starting price and to COP.
According to Filati, the Department should not add these
uncollected duties to COP because they are not recorded as raw
materials costs in Filati's accounting system. Filati notes that
section 773(f)(1)(A) of the Act and 19 U.S.C. section 1677b(f)(1)(A)
require respondents to base their reported production costs on the
actual costs recorded in their normal accounting records.
However, Filati contends that, if the Department finds that
Filati's cost of production should be adjusted for these amounts, then:
(1) the percentage should be applied only to raw material costs, since
the duties are based on imported raw materials only; and (2) the
Department should use the weighted-average of the amounts paid during
the POR, rather than transaction-specific amounts, since the
questionnaire instructs respondents to report costs on a weighted-
average basis. Filati notes that the use of POR figures would be
consistent with the Department's treatment of these figures in the
fourth administrative review of this proceeding.
Although this issue was not raised by Heveafil, we note that it
applies to this company as well because Heveafil also paid the same
type of duties.
DOC Position
We disagree with Filati, in part. Section 773(f)(1)(A) of the Act
requires the Department to depart from the records of the producer if:
(1) Those
[[Page 12975]]
records are not in accordance with the general accepted accounting
principles (GAAP) of the exporting country; and (2) such costs do not
reasonably reflect the costs associated with the production and sale of
the merchandise. In this case, we acknowledge that Filati's treatment
of these duties is in accordance with Malaysian GAAP. However, we find
that this treatment is contrary to the requirements of section
773(f)(1)(A) of the Act, as it does not reasonably reflect Filati's
cost of production. Specifically, we find that, because the amounts in
question are charged by the Malaysian government in place of import
duties on raw materials, they appropriately form part of Filati's cost
of production. Accordingly, we have included these duties in the
calculation of COP and CV.
We also disagree that we should apply the three percent duty to
Filati's raw materials costs. Because these duties are assessed as a
percentage of home market price, we have continued to calculate them in
this manner. To do otherwise would result in our not capturing the full
amount of the duty, which would consequently understate the amount of
duty included in COP and CV.
However, we agree with Filati that we should use weight-averaged
figures when applying the uncollected duty to the COP because we
calculate a weight-averaged COP. We have revised our calculations to
use weight-averaged amounts for purposes of the final results.
Because Heveafil also reported uncollected duties in its
questionnaire response, we have also calculated Heveafil's duties in
the same manner.
Comment 7: G&A Expenses of Filati's Parent Company
According to the petitioner, the Department should include the G&A
expenses of MYCOM, Filati's parent company, in the calculation of
Filati's COP. The petitioner notes that MYCOM provides management
services to Filati.
According to Filati, its reported G&A expenses include all expenses
associated with the services provided by MYCOM. Filati contends that
there is no basis for including any other portion of MYCOM's expenses
in G&A, because these expenses relate to activities not associated with
the production or sale of extruded rubber thread.
DOC Position
We agree with Filati. Filati included in its G&A expense
calculation the amount its parent charges Filati for the services the
parent provides. We reviewed this calculation at verification and found
it to be reflective of the cost incurred for the types of services that
MYCOM performed. Therefore, we have made no adjustment to Filati's G&A
rate calculation for additional MYCOM expenses.
Comment 8: Offset to Financial Expenses
Filati reported its financing expenses based on the consolidated
financial statements of its holding company. Filati offset these
expenses with the interest income shown on these financial statements.
At verification, Filati was not able to demonstrate that the full
amount of this offset was generated from short-term sources. (See the
Filati cost verification report at page 17.)
Filati argues that the Department should grant the full amount of
interest income as an offset to financing expenses because Filati
demonstrated at verification that interest income is generated from
only two sources, both of which are short-term in nature. In addition,
Filati asserts that, should the Department determine that only a
partial offset is reasonable, it should: (1) base the offset amount on
both short-term deposits and cash-in-bank balances; and (2) use the
average balances for these accounts, rather than the year-end balances,
because interest is earned over time. In addition, Filati argues that,
should the Department exclude short-term deposits from the calculation
of the offset, it should use the average of the cash-in-bank balances
for 1996 and 1997 for the same reason.
DOC Position
We agree, in part. At verification, Filati was able to demonstrate
that one of the two sources mentioned above, cash in bank, generated
short-term interest income. Contrary to its assertions, Filati was not
able to demonstrate that the other source, short-term deposits,
generated any income at all. See the Filati cost verification report at
page 17. For this reason, we granted a partial offset to financing
expenses based on the cash-in-bank balance.
We also agree that it is appropriate to use average balances for
1996 and 1997 in our calculation of the offset. We have calculated the
offset accordingly for purposes of the final results.
B. Heveafil
Comment 9: Errors in Heveafil's Sales Responses
According to the petitioner, the Department discovered at
verification that Heveafil's home market and U.S. sales data contained
significant errors. Specifically, the petitioner claims that Heveafil:
(1) reported incorrect dates of shipment and payment for home market
sales, resulting in overstated home market credit expenses; (2)
reported Malaysian customs duties on home market sales for which there
were no duties; and (3) understated a number of adjustments related to
U.S. sales. The petitioner asserts that the Department should adjust
Heveafil's sales data using facts available in order to ensure that
Heveafil's dumping margin is not understated.
Heveafil concedes that the Department found errors at verification
but maintains that these errors were small and inadvertent. Heveafil
notes that most of the errors in dates of shipment were provided at the
beginning of verification and that the Department found only a single
instance of overstated customs duties. Regarding the U.S. adjustments
referenced by the petitioner, Heveafil asserts that the Department
found the reported data to be incorrect in only five instances and that
some of these errors were not in Heveafil's favor. Therefore, Heveafil
asserts that the Department should accept the corrections provided at
verification, rather than applying facts available.
DOC Position
We agree with Heveafil. The errors in question were neither
significant nor pervasive. Because it is the Department's practice to
accept minor corrections at verification, we have accepted these
corrections for purposes of the final results.
Comment 10: Errors in Heveafil's Cost Responses
According to the petitioner, the Department discovered at
verification that Heveafil misreported its costs. Specifically, the
petitioner claims that Heveafil understated certain material costs,
misstated yield rates, and misclassified certain variable overhead
costs as fixed. The petitioner asserts that the Department should
correct these problems by applying adverse inferences.
Heveafil disagrees, stating that its cost response is accurate and
acceptable. According to Heveafil, the Department found at verification
that Heveafil actually overstated its total costs. Heveafil notes that
its costs would be understated only if the Department were to correct
them for errors found at verification (e.g., the double-counting of
certain variable overhead expenses, etc.).
Regarding its yield rates, Heveafil maintains that these rates were
correct and reconcilable to the standard yield rates used in the normal
course of the
[[Page 12976]]
company's business. Heveafil argues that standard yields, by
definition, differ from actual yields due to factors such as downtime.
Heveafil asserts that, because it accounted for the differences between
its standard and actual yields through the application of a variance,
the Department should accept its yields as reported.
Finally, Heveafil maintains that its classification of its overhead
expenses as variable or fixed in this administrative review is
consistent with its classification of these expenses in previous
administrative reviews. Heveafil asserts that, if the Department
disagrees with Heveafil's classification, it should reclassify these
expenses rather than reject them in their entirety.
DOC Position
We agree with Heveafil, in part. Although we found at verification
that the manufacturing costs in Heveafil's questionnaire response
contained certain errors, we noted that these errors generally resulted
in the overstatement of the company's costs. Moreover, we find that
none of these errors was so significant as to warrant the rejection of
Heveafil's data. Consequently, we have continued to rely on it for
purposes of the final results.
In general, when the Department deems a respondent's data to be
acceptable, our practice has been to correct it for errors found at
verification. However, we have not done so in this case (except as
noted below), because: (1) although Heveafil was able to identify the
total amount of certain errors at verification, it was unable to
provide corrections on a product-specific level; and (2) correcting
only some errors without correcting others would result in a net
understatement of Heveafil's COM.
Regarding the issue of whether Heveafil misclassified certain fixed
overhead costs as variable, we agree with the petitioner. Because we
can reclassify these costs as fixed overhead without changing the total
COM reported, we have done so for purposes of the final results.
Finally, we have corrected two additional errors found at
verification which are unrelated to the items noted above. First, we
found that the standard material costs were understated for one
product. Consequently, we have increased the material costs reported
for this product by the percentage by which the reported costs differed
from the correct standard costs, as facts available. We also revised
Heveafil's reported financing expenses, in order to: (1) Include an
amount for foreign exchange losses related to accounts payable
transactions during the POR; and (2) exclude an amount for bank charges
which had also been reported as selling expenses.
C. Rubberflex
Comment 11: Calculation of U.S. Indirect Selling Expenses
The petitioner argues that Rubberflex understated the indirect
selling expenses of its U.S. subsidiary, Flexfil, because it allocated
a certain portion of these expenses to Canadian sales which were not
invoiced by Flexfil. According to the petitioner, the Department should
reallocate these expenses using only the sales made by the subsidiary
and recorded in the subsidiary's books. In support of its position, the
petitioner cites to the Final Determination of Sales at Less Than Fair
Value; Certain Welded Stainless Steel Pipes from Taiwan, 57 FR 53705,
53718 (Nov. 12, 1992) (WSSP from Taiwan), where the Department found
that the indirect selling expenses of a U.S. subsidiary may not be
allocated over sales which do not appear on its books.
Rubberflex contends that it properly allocated the indirect selling
expenses in question. Rubberflex notes that Flexfil is actively
involved in making Canadian sales, because Flexfil conducts all
activities associated with procuring, maintaining, and servicing
Rubberflex's Canadian accounts. Rubberflex asserts that the only
difference between Flexfil's role in making Canadian and U.S. sales is
in the area of billing; there, Rubberflex invoices the Canadian
customers directly, whereas Flexfil invoices its U.S. customers.
According to Rubberflex, this difference exists so that Rubberflex can
take advantage of certain financing options in Malaysia that would not
be available were Flexfil the purchaser of record.
Rubberflex argues that this case is distinguishable from WSSP from
Taiwan, in that the respondent in that case only maintained
correspondence records related to its off-the-books sales. Rubberflex
contends that Flexfil's involvement meets a much higher standard, as
noted above. For this reason, Rubberflex asserts that Flexfil's
indirect selling expenses were appropriately allocated to Canadian
sales.
DOC Position
We agree with Rubberflex. At verification, we confirmed that
Flexfil was actively involved in making sales to Canada. Therefore,
because the indirect selling expenses incurred by Flexfil related, in
part, to sales to Canada, we find that it is appropriate to allocate a
portion of these expenses to Canadian sales. Accordingly, we have
accepted Flexfil's indirect selling expenses for purposes of the final
results.
Comment 12: Calculation of the Cost of Production
According to the petitioner, the Department found at verification
that Rubberflex understated its production costs. Specifically, the
petitioner maintains that Rubberflex failed to include in its costs:
(1) certain year-end adjustments related to the POR; and (2) bank
charges. The petitioner asserts that the Department should increase the
costs reported by the amounts found at verification.
Rubberflex states that it defers to the Department's judgement on
this issue.
DOC Position
We agree with the petitioner, in part. We have increased the costs
reported by Rubberflex to incorporate the portion of the year-end
adjustments related to the POR, based on our findings at verification.
We have made no additional adjustment to Rubberflex's costs for bank
charges, however, because Rubberflex correctly included the amount of
these charges in the indirect selling expenses reported in its most
recent home market sales listing.
Final Results of Review
As a result of comments received we have revised our analysis and
determine that the following margins exist for the period October 1,
1996, through September 30, 1997:
------------------------------------------------------------------------
Percent
Manufacturer/exporter margin
------------------------------------------------------------------------
Filati Lastex Elastofibre (Malaysia).................... 2.07
Heveafil Sdn. Bhd./Filmax Sdn. Bhd...................... 4.78
Rubberflex Sdn. Bhd..................................... 1.22
Rubfil Sdn. Bhd......................................... 54.31
------------------------------------------------------------------------
The Department shall determine, and the Customs Service shall
assess, antidumping duties on all appropriate entries. We have
calculated importer-specific assessment rates based on the ratio of the
total amount of antidumping duties calculated for the examined sales to
the total entered value of those sales. These rates will be assessed
uniformly on all entries of that particular importer made during the
POR. The Department will issue appraisement instructions directly to
the Customs Service.
Further, the following deposit requirements will be effective for
all shipments of extruded rubber thread from Malaysia entered, or
withdrawn
[[Page 12977]]
from warehouse, for consumption on or after the publication date of the
final results of this administrative review, as provided for by section
751(a)(1) of the Act: (1) The cash deposit rates for the reviewed
companies will be the rates for those firms as stated above; (2) for
previously investigated companies not listed above, the cash deposit
rate will continue to be the company-specific rate published for the
most recent period; (3) if the exporter is not a firm covered in this
review, or the LTFV investigation, but the manufacturer is, the cash
deposit rate will be the rate established for the most recent period
for the manufacturer of the merchandise; and (4) the cash deposit rate
for all other manufacturers or exporters will continue to be 15.16
percent, the all others rate established in the LTFV investigation.
These deposit requirements, when imposed, shall remain in effect
until publication of the final results of the next administrative
review.
This notice serves as a final reminder to importers of their
responsibility under 19 CFR 351.402(f) to file a certificate regarding
the reimbursement of antidumping duties prior to liquidation of the
relevant entries during this review period. Failure to comply with this
requirement could result in the Secretary's presumption that
reimbursement of antidumping duties occurred and the subsequent
assessment of double antidumping duties.
This notice also serves as the only reminder to parties subject to
administrative protective order (APO) of their responsibility
concerning the disposition of proprietary information disclosed under
APO in accordance with section 353.34(d) of the Department's
regulations. Timely notification of return/destruction of APO materials
or conversion to judicial protective order is hereby requested. Failure
to comply with the regulations and the terms of an APO is a
sanctionable violation.
This administrative review and notice are in accordance with
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)), section 777(i) of
the Act (19 U.S.C. 1677f(i)), and 19 CFR 351.210(c).
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-6280 Filed 3-15-99; 8:45 am]
BILLING CODE 3510-DS-P