[Federal Register Volume 65, Number 26 (Tuesday, February 8, 2000)]
[Notices]
[Pages 6140-6147]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-2845]


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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 8, 1999, 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 Sdn. Bhd., 
Heveafil Sdn. Bhd./Filmax Sdn. Bhd., Rubberflex Sdn. Bhd., and Rubfil 
Sdn. Bhd.). The period of review is October 1, 1997, through September 
30, 1998.
    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:  February 8, 2000.

FOR FURTHER INFORMATION CONTACT:  Shawn Thompson or Irina Itkin, 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 8, 1999, the Department of Commerce (the Department) 
published in the Federal Register the preliminary results of the 1997-
1998 administrative review of the antidumping duty order on extruded 
rubber thread from Malaysia (64 FR 60766). 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.

Period of Review

    The period of review (POR) is October 1, 1997, through September 
30, 1998.

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 19 CFR part 351 (1999).

Facts Available

A. Use of Facts Available for Rubfil Sdn. Bhd. (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. Paragraphs 776(a)(2)(A) through (D) of the Act 
provide, respectively, that if an interested party: (A) withholds 
information that has been requested by the Department; (B) fails to 
provide such information in a timely manner or in the form or manner 
requested, subject to subsections 782(c)(1) and (e) of the Act; (C) 
significantly impedes a

[[Page 6141]]

determination under the antidumping statute; or (D) provides such 
information but the information cannot be verified, the Department 
shall, subject to subsection 782(d) of the Act, use facts otherwise 
available in reaching the applicable determination. Specifically, 
Rubfil failed to respond to the Department's questionnaire, issued in 
December 1998. Because Rubfil did not respond to the Department's 
questionnaire, paragraphs A through C of section 776(a)(2) of the Act 
apply. Moreover, Rubfil was advised that failure to respond to the 
Department's questionnaire would be considered a deficiency which would 
result in the use of facts available. In light of Rubfil's continued 
failure to respond and in accordance with sections 776(a) and 782(d) of 
the Act, we must use facts otherwise available to determine 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 for any respondent in any segment of this proceeding. That rate is 
52.89 percent. We find that the rate of 52.89 percent, which was 
assigned in a prior administrative review, is sufficiently high as to 
effectuate the purpose of the adverse facts available rule (see 
Extruded Rubber Thread from Malaysia; Final Results of Antidumping Duty 
Administrative Review, 63 FR 12752 (Mar. 16, 1998) (Thread Fourth 
Review)).

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 at 
870.
    To corroborate secondary information, the Department will, to the 
extent practicable, examine the reliability and relevance of the 
information to be used. However, unlike for other types of information, 
such as input costs or selling expenses, there are no independent 
sources for calculated dumping margins. Thus, in an administrative 
review, if the Department chooses as total adverse facts available a 
calculated dumping margin from the same or a prior segment of the 
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 (Feb. 22, 1996) (Fresh Cut 
Flowers) (where the Department disregarded the highest margin as 
adverse best information available because the margin was based on 
another company's uncharacteristic business expense resulting in an 
unusually high margin).
    For 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 1995-1996 
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 the United States were made at less than normal value (NV), we 
compared the export price (EP) to the NV for Rubberflex, as specified 
in the ``Export Price and Constructed Export Price'' and ``Normal 
Value'' sections of this notice, below. We compared the constructed 
export price (CEP) to the NV for Filati Lastex Sdn. Bhd. (Filati), 
Heveafil Sdn. Bhd./Filmax Sdn. Bhd (collectively Heveafil), and 
Rubberflex Sdn. Bhd. (Rubberflex), also as specified in those sections.
    When making comparisons in accordance with section 771(16) of the 
Act, we considered all home market sales of extruded rubber thread that 
were in the ordinary course of trade for purposes of determining 
appropriate product comparisons to U.S. sales. Where there were no 
sales in the ordinary course of trade of identical merchandise in the 
home market, 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 EP or CEP. The NV level of trade is that of 
the starting-price sales in the comparison market or, when NV is based 
on CV, that of the sales from which we derive selling, general and 
administrative expenses (SG&A) and profit. For EP, the U.S. level of 
trade is also the level of the starting-price sale, which is usually 
from the exporter to the 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 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, 61732-33 
(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 (OEMs)). According to these respondents, no level of 
trade adjustment was warranted. Although Filati claimed that the home 
market level was different, and more remote, than the level of trade of 
the CEP, we

[[Page 6142]]

have found the levels of trade to be the same.
    In order to determine whether NV was established at a level of 
trade which constituted a more advanced stage of distribution than the 
level of trade of the CEP, we compared the selling functions performed 
for home market sales with those performed with respect to the CEP 
transaction, which excludes economic activities occurring in the United 
States. In examining the record, we found that all sales in the home 
market for all respondents were in a single channel of trade (i.e., to 
OEMs) constituting a single stage of marketing. Moreover, we found that 
Filati, Heveafil, and Rubberflex performed essentially the same selling 
functions in their sales offices in Malaysia for all 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 FOB foreign port price after 
the deduction of expenses associated with U.S. selling activities. See 
19 CFR 351.412(c)(2). 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 1, 1999.

Export Price and Constructed Export Price

    For Rubberflex, we based the U.S. price on EP, in accordance with 
section 772(a) of the Act, when the subject merchandise was sold 
directly to the first unaffiliated purchaser in the United States prior 
to importation and CEP methodology was not otherwise indicated.
    In addition, for all companies, we based the U.S. price on CEP 
where sales to the unaffiliated purchaser took place after importation 
into the United States, in accordance with section 772(b) of the Act. 
We also based U.S. price on CEP for Filati and Heveafil where the 
merchandise was shipped directly to certain unaffiliated customers 
because we found that the extent of the affiliates' activities 
performed in the United States in connection with those sales was 
significant. For further discussion, see Comment 1 in the ``Analysis of 
Comments Received'' section of this notice.

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 from CEP, where appropriate, for 
commissions, credit expenses and U.S. indirect selling expenses, 
including 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, 64 FR 12967, 12968 (Mar. 16, 
1999) (Thread Fifth Review; Thread Fourth Review, 63 FR at 12754; 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 2 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

    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. 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 and U.S. indirect selling expenses, including 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 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 based EP or CEP, as appropriate, on the starting price to the 
first unaffiliated purchaser in the United States. We made deductions 
from the starting price, where appropriate, for rebates. We also made 
deductions, where appropriate, 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 from CEP, where appropriate, for 
credit expenses and U.S. indirect selling expenses, including 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 was during the POR 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 was 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

[[Page 6143]]

market during the POR. Consequently, we based NV on home market sales.
    Pursuant to section 773(b)(2)(A)(ii) 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 costs of 
production (COPs) in this review because the Department had disregarded 
sales below the COP for these companies in the most recent 
administrative review. See Thread Fifth Review, 64 FR at 12969. As a 
result, the Department initiated an investigation to determine whether 
the respondents made home market sales during the POR at prices below 
their respective COPs.
    We calculated the COP based on the sum of each respondent's cost of 
materials and fabrication for the foreign like product, plus amounts 
for SG&A and packing costs, in accordance with section 773(b)(3) of the 
Act.
    We compared the COP figures to home market prices 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, discounts, and rebates.
    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)(c)(i) 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 (as defined in section 773(b)(2)(B) of the 
Act), in accordance with section 773(b)(2)(C)(i) of the Act. In such 
cases, we also determined that such sales were not made at prices which 
would permit recovery of all costs within a reasonable period of time, 
in accordance with section 773(b)(2)(D) of the Act. Therefore, we 
disregarded the below-cost sales. Where all sales of a specific product 
were at prices below the COP, we disregarded all sales of that product.
    We found that, for certain models of extruded rubber thread, more 
than 20 percent of 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 sales as the basis for determining NV, in accordance with 
section 773(b)(1) of the Act. For those U.S. sales of extruded rubber 
thread for which we were unable to make comparisons with home market 
sales, we compared CEP to CV, in accordance with section 773(a)(4) of 
the Act.
    In accordance with section 773(e) of the Act, we calculated CV 
based on the sum of each respondent's cost of materials, fabrication, 
SG&A, profit, and U.S. packing costs. In accordance with section 
773(e)(2)(A) of the Act, we based SG&A and profit on the amounts 
incurred and realized by each respondent in connection with the 
production and sale of the foreign like product in the ordinary course 
of trade, for consumption in the foreign country.
    Company-specific calculations are discussed below.

A. Filati

    In all instances, NV for Filati was based on home market sales. 
Accordingly, we based NV on the starting price to unaffiliated 
customers. For all price-to-price comparisons, we made deductions from 
the starting price for rebates, where appropriate. We also made 
deductions, where appropriate, for foreign inland freight, pursuant to 
section 773(a)(6)(B)(ii) 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

    Where NV was based on home market sales, we based NV on the 
starting price to unaffiliated customers. We made deductions from the 
starting price for discounts. We also made deductions for foreign 
inland freight and foreign inland insurance, pursuant to section 
773(a)(6)(B)(ii) 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.
    For CV-to-CEP comparisons, we made circumstance-of-sale 
adjustments, where appropriate, for differences in credit expenses, in 
accordance with sections 773(a)(6)(C)(iii) and 773(a)(8) of the Act.

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, pursuant to section 773(a)(6)(B)(ii) of the Act. 
Pursuant to section 773(a)(6)(C)(iii) of the Act, we also made a 
circumstance-of-sale adjustment for credit expenses.
    For all price-to-price comparisons, 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.

[[Page 6144]]

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.

A. Filati

Comment 1: Treatment of Direct Container Sales

    During the POR, Filati shipped some thread 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). According to Filati, 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.
    See, e.g., Notice of Final Determination of Sales at Less Than Fair 
Value: Stainless Steel Wire Rod from Korea, 63 FR 40404, 40418 (July 
29, 1998) (Korean Steel); and Certain Cold-Rolled and Corrosion-
Resistant Carbon Steel Flat Products From Korea: Final Results of 
Antidumping Duty Administrative Review, 61 FR 18547, 18551 (Apr. 26, 
1996) (Carbon Steel from Korea).
    Filati contends that each of these criteria was met with respect to 
its direct container sales. Specifically, Filati states that, because 
the date of sale was prior to entry, the direct container sales were 
made prior to importation. In addition, Filati asserts that the first 
and second criteria were 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 its U.S. affiliate, FLE-USA, exceeded those of a 
document processor and communication link. Filati contends that the 
selling activities performed by FLE-USA are within the range of 
activities previously determined by the Department to be consistent 
with EP classification.
    Filati acknowledges that FLE-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 FLE-USA 
has only limited authority to set prices in the United States. As 
support for this assertion, Filati cites to the U.S. sales verification 
report issued in the prior administrative review, where the Department 
noted that prices are quoted in accordance with a window that is set 
based on consultations with the parent company. (See Memorandum from 
Irina Itkin to Louis Apple regarding Verification of the Sales 
Questionnaire Responses of Filati Lastex Sdn. Bhd. and Filati Lastex 
Elastofibre in the Antidumping Duty Administrative Review on Extruded 
Rubber Thread from Malaysia, dated Oct. 7, 1998, at page 4 (FLE-USA 
Verification Report).)
    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 FLE-USA. Filati cites to 
AK Steel Corp. v. United States, Slip Op. 98-159 at 10-12 (Court of 
International Trade (CIT), Nov. 23, 1998) (AK Steel) and Certain Cold-
Rolled Carbon Steel Flat Products from the Netherlands: Final Results 
of Antidumping Duty Administrative Review, 64 FR 11825, 11828 (Mar. 10, 
1999) (Dutch Steel) in support of its position. Filati asserts that, in 
the former, the CIT upheld the Department's EP classification of U.S. 
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 customers; (9) arranged and paid for post-sale warehousing, 
transportation, U.S. Customs duties, brokerage, handling, and other 
expenses; (10) extended credit to and accepted payment from direct 
container customers; and (11) maintained relationships with those 
customers.
    Regarding the latter, Filati asserts that the Department found that 
sales were properly classified as EP transactions where the U.S. 
affiliate: (1) arranged visits and accompanied the foreign producer/
exporter on visits to U.S. customers; (2) relayed customer price and 
quantity quotes to the producer and the producer's reply to the 
customer; (3) advised the producer whether the price quotes were 
reasonable based on market research; (4) drafted and signed sales 
contracts on behalf of the foreign producer; (5) processed U.S. customs 
declarations and made arrangements with U.S. freight forwarders; (6) 
acted as importer of record; (7) received payment from the customer; 
and (8) provided some after-sale support functions, such as 
facilitating visits by the producer's service technician.
    Finally, Filati notes that the Department found that Filati's 
direct container shipments were 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.
    The petitioner contends that the Department correctly treated 
Filati's direct container shipments as CEP transactions. According to 
the petitioner, Filati concedes that its U.S. subsidiary negotiates 
U.S. prices, albeit within the constraints of a ``window.'' The 
petitioner asserts that Filati has failed to adequately define this 
window, including how it is determined, whether it changes from sale to 
sale, or whether FLE-USA can in fact determine what the window is. 
Thus, the petitioner asserts that the Department should continue to 
classify the sales in question as CEP sales.

DOC Position

    In the preliminary results of this 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''

[[Page 6145]]

(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 
classifying sales made prior to importation is where the selling 
activity takes place (i.e., inside or outside of 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 in this case 
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). 
See Mitsubishi Heavy Industries v. United States, 15 F. Supp. 2d 807, 
811-12 (CIT 1998). 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. See Id. 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 Sheet 
and Strip in Coils From the Republic of Korea, 64 FR 30664, 30685-86 
(June 8, 1999); 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. 63 
FR at 32821.
    Our analysis of the facts in this case indicates that during the 
POR Filati's U.S. affiliate, FLE-USA, played an extensive role in 
making direct container sales. Specifically, FLE-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 page 9 of the 
September 13, 1999, supplemental response and the FLE-USA Verification 
Report at page 4. Thus, the record shows that FLE-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.
    FLE-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 Malaysian parent. Specifically, FLE-USA had the 
authority to contact U.S. customers directly, and then to negotiate and 
accept sales terms and prices 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 FLE-
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 FLE-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.
    We also find unpersuasive Filati's claim that FLE-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 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 Dutch Steel 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 held a limited role as a 
communication link. Specifically, the U.S. subsidiary in that case did 
not take title to the merchandise, finance sales, provide technical 
assistance, issue order confirmations or invoices, or accept payment 
from customers (except in extraordinary circumstances). See Dutch 
Steel, 64 FR at 11828. Moreover, the Department stated in its final 
determination that the U.S. subsidiary had no authority to negotiate 
prices, that it did not initiate contact with U.S. customers on its own 
authority, and that the preponderance of selling functions involved in 
U.S. sales occurred in the Netherlands. Id. at 11828-29. In the instant 
case, because FLE-USA contacted customers, took title to the 
merchandise, quoted prices without consulting with the parent company 
on a sale-by-sale basis, issued invoices, and accepted payment, we find 
that FLE-USA did not act as a mere communications link or document 
processor.
    We similarly find Filati's citation to AK Steel to be inapposite. 
In AK Steel,

[[Page 6146]]

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 in the most recent 
reviews of this proceeding (see Thread Fourth Review and Thread Fifth 
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: 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 made 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, just as it is irrelevant whether a company has 
actually obtained loans or has otherwise financed the antidumping cash 
deposits, 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, 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.
    Finally, 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.
    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

    Consistent with Department's current practice, we have continued to 
deny an offset to Filati's U.S. indirect selling expenses for 
theoretical expenses related to financing of antidumping and 
countervailing duty cash deposits. For a discussion of the Department's 
reasoning behind this practice, see AFBs, 62 FR at 54075 and Thread 
Fifth Review, 64 FR at 12973.
    We continue to believe that this practice is valid in general for 
the reasons articulated in AFBs and Thread Fifth Review. However, even 
were we to reverse our practice, the record of this case does not 
support Filati's claim. Specifically, 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.
    Regarding Filati's argument that expenses associated with financing 
cash deposits of antidumping duties may not be deducted from CEP, we 
find that Filati failed to demonstrate how the Department's denial of 
its offset resulted in an improper deduction of such selling expenses. 
Indeed, because the Department deducted neither actual nor imputed 
financing expenses, nor the cash deposits themselves, we have in fact 
made no deduction for expenses associated with financing Filati's cash 
deposits. In contrast, we find that Filati's scheme to reduce actual 
expenses by the amount of a theoretical offset is contrary to the 
explicit language of the Act, which requires the deduction of all 
selling expenses incurred by or for account of the affiliated seller in 
the United States in selling the subject merchandise. See section 
772(d) of the Act.
    Finally, regarding Filati's citation to Timken, we note that in 
this decision the CIT acknowledged that it is the Department's current 
practice to deny the type of offset in question. 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 in this area.
    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.

B. Rubberflex

Comment 3: Errors in Rubberflex's Sales Response

    In December 1999, Rubberflex notified the Department that it had 
discovered an error in its home market database which affected two 
sales. Specifically, Rubberflex stated that it had discovered that one 
of the sales in question had been exported to a third country and the 
other returned by the customer. At the Department's request, Rubberflex 
submitted documentation demonstrating that these transactions were not 
in fact home market sales. (See Memorandum from Shawn Thompson to The 
File regarding Submission of Additional Data and Extension of Briefing 
Schedule in the 97-98 Antidumping Duty Administrative Review on 
Extruded Rubber Thread from Malaysia, dated December 3, 1999.) 
Accordingly, Rubberflex contends that the Department should disregard 
these transactions when calculating NV.
    The petitioner maintains that Rubberflex's December submission 
should be rejected because it was untimely. Moreover, the petitioner 
alleges that Rubberflex has not demonstrated that the submission 
complies with the Department's requirements on new submissions--namely 
that the nature of the alleged errors is apparent from the prior record 
itself.

DOC Position

    It is the Department's practice to accept a correction of a party's 
clerical error if certain conditions are met. See, e.g., Antifriction 
Bearings (Other Than

[[Page 6147]]

Tapered Roller Bearings) and Parts Thereof from France, Germany, Italy, 
Japan, Romania, Sweden, and the United Kingdom; Final Results of 
Antidumping Duty Administrative Reviews, 64 FR 35590, 35625 (July 1, 
1999). In this case, those conditions have been met.
    In accordance with 19 CFR 351.301(c)(2), the Department may request 
that a respondent submit factual information at any time during a 
proceeding. Because the Department requested that Rubberflex submit the 
documentation in question, it is not untimely within the meaning of 19 
CFR 351.301.
    We find that the documentation provided by Rubberflex provides 
clear evidence that the sales at issue had been reported in error. 
Contrary to the petitioner's assertions, the Department does not 
require respondents to demonstrate that factual errors in their data 
are apparent in the record of a proceeding. The effect of such a 
requirement would be to preclude respondents, as is the case here, from 
notifying the Department of any clerical errors found in their data. 
See NTN Bearing Corp. v. U.S., 74 F.3d 1204, 1207-08 (1995). 
Consequently, because Rubberflex provided sufficient proof that the 
sales in question were not home market transactions, we have 
disregarded them for purposes of the final results.

Comment 4: 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. The petitioner contends that, if Flexfil had had 
significant involvement in the sales, they would have appeared on 
Flexfil's books. Furthermore, the petitioner asserts that such ``off 
the books'' allocations are inherently unverifiable and arbitrary. 
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.

DOC Position

    In its supplemental questionnaire response, Rubberflex demonstrated 
that Flexfil was actively involved in making sales to Canada. (See 
pages 15 and 16, as well as Exhibit 32, of the September 7, 1999, 
submission.) Not only did Flexfil routinely accept orders from Canadian 
customers on behalf of Rubberflex, but it also corresponded with them 
regarding the status of these orders and it handled various problems 
which arose during the sales process.
    Thus, 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. We note that 
this treatment of Flexfil's indirect selling expenses is in accordance 
with our treatment of such expenses in prior segments of this 
proceeding. See, e.g., Thread Fifth Review, 64 FR at 12976, where the 
Department verified Flexfil's role in making Canadian sales. 
Accordingly, we have accepted Flexfil's indirect selling expense 
allocation for purposes of the final results.

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, 
1997, through September 30, 1998:

------------------------------------------------------------------------
                                                                Percent
                    Manufacturer/Exporter                        margin
------------------------------------------------------------------------
Filati Lastex Sdn. Bhd.......................................       0.45
Heveafil Sdn. Bhd./..........................................  .........
Filmax Sdn. Bhd..............................................       0.17
Rubberflex Sdn. Bhd..........................................       1.10
Rubfil Sdn. Bhd..............................................      52.89
------------------------------------------------------------------------

    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 from warehouse, for consumption on or after the publication 
date of the final results of this administrative review, as provided 
for by section 751(a)(1) of the Act: (1) The cash deposit rates for the 
reviewed companies will be the rates for those firms as stated above 
(except for Filati and Heveafil the cash deposit rates will be zero 
because their margins are de minimis); (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 19 CFR 351.305(a)(3). 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).

    Dated: January 31, 2000.
Holly A. Kuga,
Acting Assistant Secretary for Import Administration.
[FR Doc. 00-2845 Filed 2-7-00; 8:45 am]
BILLING CODE 3510-DS-P