Final Determination of Sales at Less Than Fair Value: Welded Stainless Steel Pipe From Malaysia

DEPARTMENT OF COMMERCE

[A-557-807]

Final Determination of Sales at Less Than Fair Value: Welded

Stainless Steel Pipe From Malaysia

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: January 28, 1994.

FOR FURTHER INFORMATION CONTACT: Pamela Ward or Shawn Thompson, Office

of Antidumping Investigations, Import Administration, U.S. Department

of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC

20230; telephone (202) 482-1174 or (202) 482-3965, respectively.

FINAL DETERMINATION: We determine that welded stainless steel pipe

from Malaysia is being, or is likely to be, sold in the United States

at less than fair value, as provided in section 733 of the Tariff Act

of 1930, as amended (the Act). The estimated margins are shown in the

``Suspension of Liquidation'' section of this notice.

Case History

Since the publication of our affirmative preliminary determination

on September 7, 1993 (58 FR 47120), the following events have occurred.

On September 7, 1993, the sole respondent in this investigation,

Kanzen Tetsu Sdn. Bhd. (KT), requested a postponement of the final

determination. We granted this request, and on September 9, 1993, we

postponed the final determination until not later than January 21, 1994

(58 FR 48849, September 20, 1993).

On September 13, 1993, KT submitted a response to the Department's

cost of production (COP) questionnaire. On September 27, 1993, we

issued a supplemental COP questionnaire to KT. We received the response

to this questionnaire on October 25, 1993.

From November 8 through November 12, 1993, we conducted our

verification in Malaysia of KT's responses to the Department's sales

questionnaires.

On November 8, 1993, petitioners submitted a letter requesting that

the Department reject KT's October 25, 1993, COP response because KT

failed to report product-specific production costs, as requested in the

cost questionnaire.

On November 10, 1993, KT responded to petitioners' November 8,

1993, submission. Also on November 10 we informed KT that we had

determined that the cost of manufacture (COM) information contained in

the October 25, 1993, submission was not adequately product-specific to

meet the Department's requirements, and that, accordingly, we would not

verify that portion of the October 25, 1993, submission.

From November 22 through November 25, 1993, we conducted our

verification in Malaysia of KT's response to the Department's September

13, 1993, COP questionnaire.

Both petitioners and respondent filed case briefs on December 20,

1993, and rebuttal briefs on December 28, 1993.

On December 23, 1993, KT submitted revised sales, COP, constructed

value (CV), and concordance databases, correcting minor errors

discovered at verification. On January 5, 1994, petitioners submitted a

letter requesting that the Department reject this submission because it

contained revisions to KT's data which were unsupported by the record

of this investigation. On January 7, 1994, KT replaced its COP, CV, and

concordance databases in order to correct clerical errors made in its

December 23, 1993, submission. We reviewed this submission and

confirmed that it contained no new information.

Scope of Investigation

The product covered by this investigation is welded austenitic

stainless steel pipe of circular cross section (WSSP). WSSP is produced

according to standards and specifications set forth by the American

Society for Testing and Materials (ASTM). The designations for this

product include, but are not limited to, ASTM A-312, ASTM A-358, ASTM

A-409, and ASTM A-778. Welded pipes are generally used as conduits to

transmit liquids or gases. The major applications for WSSP are:

Digester lines; blow lines; pharmaceutical lines; petrochemical lines;

brewery process and transport lines; general food processing lines;

automotive lines; and paper processing machines.

This product is classified under the following Harmonized Tariff

Schedule of the United States (HTSUS) subheadings: 7306.40.1000,

7306.40.5005, 7306.40.5015, 7306.40.5045, 7306.40.5060, and

7306.40.5075. These subheadings are defined to encompass welded

stainless steel tube as well as WSSP; however, the only product subject

to this investigation is WSSP. Although the HTSUS subheadings are

provided for convenience and customs purposes, our written description

of the scope of this investigation is dispositive.

Period of Investigation

The period of investigation (POI) is September 1, 1992, through

February 28, 1993.

Such or Similar Comparisons

We have determined that the product covered by this investigation

comprises a single category of ``such or similar'' merchandise. We made

similar merchandise comparisons on the basis of: (1) ASTM or equivalent

specification, (2) grade of steel, (3) nominal size, (4) hot or cold

finish, (5) wall thickness schedule, and (6) end finish, as described

in Appendix V of the questionnaire. We made adjustments for differences

in the physical characteristics of the merchandise, in accordance with

section 773(a)(4)(C) of the Act.

Fair Value Comparisons

To determine whether sales of WSSP from Malaysia to the United

States were made at less than fair value, we compared the United States

price (USP) to the foreign market value (FMV), as specified in the

``United States Price'' and ``Foreign Market Value'' sections of this

notice.

United States Price

We based USP on purchase price, in accordance with section 772(b)

of the Act, because the subject merchandise was sold to unrelated

purchasers in the United States prior to importation and because

exporter's sales price methodology was not otherwise indicated.

After correcting the data used in our calculations for errors and

omissions found at verification, we calculated purchase price based on

packed F.O.B. prices to unrelated customers. In accordance with section

772(d)(2)(A) of the Act, we made deductions, where appropriate, for

foreign inland freight, foreign brokerage and handling, ocean freight,

marine insurance, and containerization expenses. Regarding marine

insurance, KT paid an insurance premium plus a commission to one of its

marine insurance suppliers. At verification, we found that KT had

inconsistently reported its marine insurance expense for this supplier

(i.e., KT included the commission in one observation yet excluded it in

another observation). KT explained that this commission was an

intracompany service fee which its parent company charged KT for

holding the group policy with the insurance company. However, KT could

not substantiate at verification that it had properly excluded this

commission. As a result, we resorted to the use of best information

available (BIA), in accordance with section 776(c) of the Act. As BIA,

we have made an adverse assumption and increased the amount reported

for marine insurance to account for this commission for all

transactions (except those we found at verification to be correct) by

the amount of the commission.

Foreign Market Value

In order to determine whether there were sufficient sales of WSSP

in the home market to serve as a viable basis for calculating FMV, we

compared the volume of home market sales of WSSP to the volume of third

country sales of the same product, in accordance with section

773(a)(1)(B) of the Act. KT had a viable home market with respect to

sales of WSSP during the POI.

As stated in our preliminary determination, the Department

initiated an investigation under section 773(b) of the Act to determine

whether KT made home market sales at less than their COP.

If over 90 percent of respondent's sales of a given model were at

prices above the COP, we did not disregard any below-cost sales because

we determined that the below-cost sales were not made in substantial

quantities. If between ten and 90 percent of the sales of a given model

were made at prices below the COP, and such sales were made over an

extended period of time, we discarded only the below-cost sales. Where

we found that more than 90 percent of respondent's sales were at prices

below the COP, and such sales were over an extended period of time, we

disregarded all sales of that model and calculated FMV based on CV. No

evidence was presented to indicate that below-COP prices would permit

recovery of all costs within a reasonable period of time in the normal

course of trade.

In order to determine that below-cost sales were made over an

extended period of time, we performed the following analysis on a

model-specific basis: (1) If respondent sold a model in only one month

of the POI and there were sales in that month below the COP, or (2) if

respondent sold a model during two months or more of the POI and there

were sales below the COP during two or more of those months, then

below-cost sales were considered to have been made over an extended

period of time.

In order to determine whether home market prices were below the

COP, we calculated the COP based on the sum of the respondent's cost of

materials, fabrication, and general expenses. We corrected the reported

COP and CV data for errors and omissions found at verification. We

relied on the submitted COP and CV data, except in the following

instances where the costs were not appropriately quantified or valued:

1. We increased KT's general and administrative expenses (G&A) to

(1) account for G&A incurred by KT's parent company because KT was

unable to demonstrate that it had included these expenses in its

reported G&A, (2) account for the amortization of pre-operating

expenses which were not included in the submission, and (3) adjust for

a clerical error found at verification. (See, Comment 5 in the

``Interested Party Comments'' section of this notice.)

2. We increased KT's cost of materials to offset the gain on

foreign exchange reported by KT that was related to the acquisition of

machinery used to produce non-subject merchandise. (See, Comment 8.)

In accordance with section 773(e)(1)(B)(i) of the Act, we included

in CV the greater of respondent's reported general expenses, adjusted

as detailed above, or the statutory minimum of ten percent of the COM.

For profit, we used the actual profit on home market sales because this

amount was greater than the statutory minimum of eight percent of COM

and general expenses. See, section 773(e)(1)(B)(ii) of the Act.

In cases where we made price-to CV comparisons, we made

circumstances-of-sale adjustments, where appropriate, for bank charges

and credit expenses. Regarding credit expenses, KT calculated both home

market and U.S. credit expenses using its respective average short-term

interest rates in Malaysian Ringitts during the POI. We recalculated

home market credit expenses using the consolidated short-term interest

rate of KT and its parent company, which was based upon KT and its

parent company's borrowings denominated in Malaysian Ringitts. In

addition, KT failed to deduct discounts from the gross unit price in

its home market credit calculation. We made the appropriate deductions

in our recalculation.

Regarding U.S. credit expenses, we recalculated KT's U.S. interest

rate using the amounts of all U.S. dollar-denominated loans stated in

U.S. dollars. (See, Comment 13.) We also recalculated the payment

period for each transaction as the time between the date of shipment

from KT's factory and the date of payment by the U.S. customer. (See,

Comment 14.) We then recalculated U.S. credit expenses using the

revised interest rate and payment period.

In cases where we made price-to price-comparisons, we compared U.S.

sales to home market sales made at the same level of trade, where

possible, in accordance with 19 CFR 353.58 (1993). In addition, we

disregarded home market sales of odd-length merchandise because we

determined that these sales were made outside the ordinary course of

trade. We also disregarded certain sales to end user customers, because

we found at verification that the dates of sale for these transactions

were outside the POI.

We adjusted the reported home market data for errors and omissions

found at verification. We then calculated FMV based on packed F.O.B.

prices charged to unrelated customers in the home market. We made

deductions, where appropriate, for discounts and rebates. We also made

deductions, where appropriate, for inland freight. We deducted home

market packing costs and added U.S. packing costs, in accordance with

section 773(a)(1) of the Act.

Pursuant to 19 CFR 353.56(a)(1) and 19 CFR 353.56(a)(2), we made

circumstance-of-sale adjustments, where appropriate, for differences in

bank charges and credit expenses, adjusted as described above.

Currency Conversion

Because certified exchange rates from the Federal Reserve were not

available, we made currency conversions based on the official monthly

exchange rates in effect on the dates of the U.S. sales as certified by

the International Monetary Fund.

Verification

As provided in section 776(b) of the Act, we verified information

provided the respondent by using standard verification procedures,

including the examination of relevant sales and financial records, and

selection of original source documentation containing relevant sales

information.

Critical Circumstances

Petitioners allege that ``critical circumstances'' exist with

respect to imports of WSSP from Malaysia. Section 735(a)(3) of the Act

provides that critical circumstances exist if we determine that there

is a reasonable basis to believe or suspect that:

(A)(i) There is a history of dumping in the United States or

elsewhere of the class or kind of merchandise which is the subject of

the investigation, or

(ii) The person by whom, or for whose account, the merchandise was

imported knew or should have known that the exporter was selling the

merchandise which is the subject of the investigation at less than its

fair value, and

(B) There have been massive imports of the class or kind of

merchandise which is the subject of the investigation over a relatively

short period.

Regarding a history of dumping, petitioners have argued that the

existence of U.S. antidumping orders on WSSP from Taiwan and Korea is

sufficient for the Department to find a history of dumping in this

case. However, the Department's practice in this area is to consider

only those orders on subject merchandise from the country under

investigation as sufficient evidence of a history of dumping.

Consequently, because there have been no antidumping orders on WSSP

from Malaysia, we find no history of dumping.

In determining whether any importer had knowledge of dumping, we

normally consider margins of 25 percent or more sufficient to impute

knowledge of dumping under section 735(e)(1)(A) of the Act when USP is

based on purchase price. Because the final dumping margin for KT is

less than 25 percent, we do not impute importer knowledge of sales at

less than fair value, under section 735(a)(3)(A)(ii) of the Act. Since

the criteria necessary to find the existence of critical circumstances

under section 735(a)(3)(A) are not present, we do not need to determine

whether imports of subject merchandise have been massive over a

relatively short period, in accordance with section 735(a)(3)(B) of the

Act.

Accordingly, we determine that critical circumstances do not exist

with respect to imports of WSSP from Malaysia.

Interested Party Comments

Comment 1: Petitioners argue that KT was unable to substantiate its

cost data at verification. As a result, petitioners contend that these

data are unusable and the Department is required to reject KT's cost

data completely and base the final determination on BIA. Petitioners

maintain that, under the statute and the Department's regulations, the

Department must use BIA to set antidumping duty margins whenever a

respondent ``refuses or is unable to produce information requested in a

timely manner and in the form required, or otherwise significantly

impedes an investigation'' (see, section 776(b) of the Act).

Petitioners further assert that the Department must also use BIA if it

is ``unable to verify the accuracy of the information submitted'' by a

respondent (see, section 776(c) of the Act).

According to petitioners, the problems that the Department

discovered during verification are significant and pervasive. (See,

Comment 2 through Comment 8 for the specific issues raised by

petitioners.) Petitioners contend that, because of the serious nature

of the deficiencies in KT's cost data, the Department cannot, and

should not, develop an alternative basis for constructing KT's

production costs. Rather, petitioners argue that the Department should

resort to total BIA. In selecting the BIA rate, petitioners assert that

the Department should use the highest rate possible, which is the

highest margin contained in the petition.

KT argues that the Department is authorized to use BIA if a party

``refuses or is unable to produce information requested in a timely

manner and in the form required,'' or if a party ``significantly

impedes an investigation.'' KT asserts that, in order for these

conditions to be satisfied, the Department must have requested the

information and the respondent must have either failed to supply the

information or have been unable to comply with the request.

Furthermore, KT argues that, even where the Department has requested

information, it is not authorized to use BIA unless it has provided

respondent with a warning and an opportunity to correct any

deficiencies. KT asserts that, since it (1) provided all of the

information requested by the Department, (2) in no way impeded this

investigation, and (3) did not have an opportunity to correct perceived

deficiencies, there is no basis for the Department to resort to any

form of BIA.

KT claims that if the Department determines that it is appropriate

to use BIA for purposes of the final determination, it should use a

non-punitive, partial BIA, to reallocate KT's fabrication costs. (See,

Comment 3, below.) According to KT, since KT has fully cooperated with

the Department throughout this investigation, there is no reason for

the Department to completely disregard KT's entire cost submission.

DOC Position: We agree with KT. The Department has determined that

KT reported the majority of its production cost with no material

problems. (See, cost verification report, dated December 9, 1993.)

Because we have determined the KT's cost submission is reliable, there

is no reason to completely disregard KT's entire cost submission. (See,

comments below for a discussion regarding specific issues of validity.)

Comment 2: KT contends that the Department should accept the

material costs reported in its September 13, 1993, response. KT argues

that the Department verified that KT accurately reported in this

response its actual production quantities and actual material costs

incurred during the POI. According to KT, since the submitted product-

specific material costs are the result of actual material expenses

divided by actual production quantities, there is no basis for

suspecting that the reported per unit material costs are incorrect. KT

also maintains that its calculation of steel coil costs on a grade-by-

grade basis is appropriate because the cost of the coil did not vary

based on gauge.

Additionally, KT maintains that, contrary to petitioners'

assertions, product-specific material costs reported in its September

13 submission are different from product-specific material costs

reported in its October 25 submission for a legitimate reason--because

the methodologies used in each submission were different.

Finally, KT notes that although the weighted-average material

expenses decreased slightly between the September and October

responses, the percentage of the five most frequently sold home-market

products that were sold at prices below the cost of production remained

exactly the same, regardless of which response's material costs are

used. Thus, KT maintains that the difference between the two

submissions in material expenses does not materially affect the margin

calculation.

According to petitioners, since KT did not submit actual costs on a

product-specific basis, acceptance of its cost data would be improper

and inconsistent with the Department's normal practice. Thus,

petitioners contend that KT's cost submission should be rejected.

Moreover, petitioners claim that the calculation methodologies used

to prepare KT's September and October responses were virtually

identical. According to petitioners, for both the September and October

responses, KT calculated its material costs by multiplying the average

per-kilogram material cost by the nominal weight of the pipe.

Petitioners assert that the nominal weights used for these calculations

were identical because KT stated that the nominal weight of the pipe

was determined according to ASTM A-312 specifications. Thus,

petitioners contend that differences in the materials costs could only

arise if KT used different average per kilogram materials costs for its

September and October responses. Petitioners maintain that these per

kilogram materials costs are different for no apparent reason and are

therefore suspect.

Petitioners contend that KT is incorrect in its assertion that the

difference in the material costs reported in the two cost responses is

immaterial to whether home market sales were made at prices below KT's

cost of production. According to petitioners, KT's analysis mistakenly

assumes that the understatement of its costs can be corrected by merely

using the costs in KT's unverified October response. Consequently,

petitioners argue that the Department should reject both of KT's cost

responses and use BIA to establish KT's final dumping margin.

DOC Position: We agree with KT. The Department verified that KT

accurately reported its actual material expenses incurred during the

POI. Although the Department noted at verification that KT did not

break out material costs between specific dimensions of pipe within a

particular grade for the verified submission, the record indicates that

the company incurred the same per kilogram cost for differing gauges of

coil within a particular grade of steel.

We find that a comparison of the methodologies used in September

and October responses is irrelevant because we only verified the

methodology used in the September response. Prior to verification, we

determined that the costs contained in the October submission were not

adequately product-specific to meet the Department's requirements;

therefore, we informed KT that we would not verify the COM portion of

that response. Rather, the Department verified the material costs used

in the September submission.

Because the methodologies used to compile the data in the two

submissions were different, the costs reported in the submissions also

differed. Therefore, the fact that the September data differed from the

October data does not provide sufficient grounds to reject these costs.

Because we verified the reasonableness of the September costs, we have

accepted them for purposes of the final determination.

Comment 3: Petitioners argue that the Department should reject the

cost of production data contained in KT's original cost submission

because the Department was unable to verify the reported fabrication

costs. Specifically: (1) The fabrication costs reported by KT in its

September 13, 1993, submission were allocated to cost centers based on

budgeted usage rates which could not be reconciled to KT's actual POI

experience; (2) KT's methodology of allocating fabrication costs

between industrial and ornamental pipe yields a result which is

inconsistent with its reported production process steps; and (3) total

manufacturing costs for industrial pipe were allocated to each subject

product based on the weight of production rather than machine time.

Petitioners note that, to the extent the Department resorted to

weight-based allocations in a previous case involving WSSP (see, Final

Determination of Sales at Less than Fair Value: Certain Welded

Stainless Steel Pipe from Taiwan (58 FR 53705, November 12, 1992) (WSSP

from Taiwan)), that case represents an aberration from the Department's

usual practice and is clearly distinguishable from the facts in the

present case. Petitioners maintain that in WSSP from Taiwan the

Department accepted the Taiwanese respondent's allocation because it

concluded that the allocation ``did not materially affect the cost

calculation because labor and overhead represented a small part of

total cost of production.'' In this case, however, petitioners contend

that KT's submitted data demonstrate that fabrication costs can hardly

be considered immaterial in relation to the submitted total cost of

production.

Thus, petitioners contend that KT's reliance on WSSP from Taiwan as

a basis for claiming that weight-based allocations are acceptable is

misplaced. Alternatively, petitioners assert that the Department

accepts allocation methodologies based on weight only when a respondent

affirmatively shows that such allocations make sense in light of the

specific fabrication process for the product under investigation and

when allocations based on machine time cannot be performed. According

to petitioners, neither criterion has been satisfied by KT, and thus

the Department should reject KT's weight-based allocations in favor of

BIA.

KT disagrees, claiming that the cost verification report clearly

indicates that KT accurately reported all direct labor and factory

overhead expenses incurred during the POI. Thus, KT contends that

petitioners' claim that the Department was unable to verify KT's

fabrication costs should be dismissed out of hand.

KT states that it allocated fabrication costs between industrial

and ornamental pipe production based on the actual staffing for factory

laborers, the actual usage of production equipment, the company's

actual production experience and, for variable overhead expenses,

budgeted usage rates. According to KT, the difference between

fabrication expenses per kilogram for industrial and ornamental pipe

reflects the fact that KT produces more industrial pipe than ornamental

pipe.

Additionally, KT claims that the Department should accept its

submission methodology of allocating fabrication costs on the basis of

weight for three reasons. First, the methodology conforms with the way

in which KT calculates the cost of goods sold in the normal course of

business, and there is no evidence on the record that allocating

fabrication expenses on the basis of weight is in fact distortive.

Second, during the POI, KT did not track the information needed to

allocate fabrication costs on the basis of machine time. Third, the

Department has accepted weight-based allocations of these costs in past

cases involving stainless steel pipe. Accordingly, KT argues that the

Department should accept its allocation of fabrication expenses for

purposes of the final determination.

DOC Position: At verification, we determined that KT accurately

reported its aggregate fabrication costs during the POI. Therefore, we

disagree with petitioners that KT's fabrication costs should be

dismissed for purposes of the final determination.

In cases where machinery or processes were dedicated to the

production of specific product types (e.g., WSSP), KT assigned costs

directly to these products without allocation. For example, KT assigned

depreciation expenses on machinery dedicated to the production of WSSP

directly to WSSP. Only in cases where KT incurred fabrication costs

common to the production of both subject and non-subject merchandise

did KT allocate these costs.

We recognize that KT's basis for the allocation of these costs to

the subject merchandise used budgeted estimates which KT was unable to

reconcile to its actual production experience during the POI. However,

we found at verification that KT did not maintain the level of detailed

records in its normal accounting system that permitted such a

reconciliation. Moreover, the Department determined that these

estimates are reasonable based on visual inspection of the production

process and analysis of KT's documentation. Contrary to petitioners'

assertions, during the POI KT did not maintain its records at a

sufficient level of detail to perform a more product-specific

allocation (e.g., records of machine time, etc.). Accordingly, we find

that KT's allocation methodology is reasonable, in light of the

specific circumstances of this case. Thus, we have accepted the use of

KT's methodology in this case for purposes of the final determination.

Comment 4: Petitioners argue that KT calculated its production

costs on the basis of theoretical production weights that overstate the

weight of finished production, thus artificially lowering its submitted

per unit production costs. Therefore, petitioners contend that the cost

data in KT's September 13, 1993, submission is unusable and should be

rejected by the Department.

KT contends that the use of theoretical weights does not affect the

accuracy of its submitted production costs. According to KT, since KT

used the same conversion factor for its calculation to convert (1) pipe

production stated in feet to production stated in kilograms, and (2)

production cost per kilogram to a production cost per foot, the

conversion factors are uniformly over- or under-stated by the same

amount.

DOC Position: We agree with KT. KT's calculation of theoretical

production weights overstates the actual weight of production during

the POI. However, as information on the record indicates, this same

theoretical production weight was used to convert the production costs

from a per kilogram cost to a per foot cost. Thus, the effect of

overstating the weight of production is offset by the use of the same

formula in converting the per kilogram cost back to a per foot cost.

Accordingly, no adjustment is deemed necessary.

Comment 5: KT contends that it properly reported all expenses

associated with management and financial services provided to KT by its

parent as part of its submitted G&A. KT states that fees for these

services are charged directly to KT and are reflected in the management

fee amount KT's parent company received from its subsidiaries in FY

1993. According to KT, because all management fees that are properly

allocable to KT are already charged directly to the company, there is

no basis for charging any additional amount to KT.

Petitioners contend that KT understated its submitted G&A by not

including a portion of its parent company's expenses incurred during

1992. Petitioners argue that, since KT's parent is principally an

investment holding company, all G&A incurred by the parent directly

relate to its investment holdings. Petitioners maintain that KT's claim

that all management fees and financial services provided by its parent

company to KT are accounted for in its submission is unverified and

unsupported. According to petitioners, the Department has no way of

knowing if KT's management fees were correctly calculated and reported.

Additionally, petitioners claim that the Department should increase

KT's submitted G&A by the omitted amortization of pre-operating

expenses as noted at verification.

DOC Position: We agree with petitioners. In cases where a parent

company is an investment holding company, it is the Department's

practice to allocate a portion of G&A expenses incurred by the parent

company to the respondent under the theory that the parent's G&A

expenses are incurred on behalf of the parent's investment holdings.

(See, e.g., Final Determination of Sales at Less Than Fair Value:

Ferrosilicon from Venezuela (58 FR 27524, May 10, 1993).) Since there

is no verified information on the record to support KT's claim that all

G&A expenses incurred by KT's parent for the benefit of KT were already

charged to KT and included in the submitted G&A calculation, we

adjusted KT's G&A to include a proportional amount of its parent's

administrative costs based on KT's parent's stock ownership of KT.

Additionally, we revised KT's G&A expense computation to include the

omitted amortization of pre-operating expenses as recorded on the

company's financial statements, as well as to correct for a clerical

error found at verification.

Comment 6: Petitioners claim that the production yields reported by

KT are inaccurate and unrealistic and cannot be relied upon by the

Department for its final determination.

KT argues that production yields are irrelevant because the costs

used for the final determination are KT's actual material expenses, not

standard costs. Thus, KT maintains that whether or not the production

yield used under the standard cost system is accurate is irrelevant to

the Department's analysis.

DOC Position: The apparent unrealistic production yields appear to

be generated from KT's usage of theoretical production weights. Since

this same theoretical weight was used to convert production costs from

a unit of weight basis to a unit of length basis, the effect of the

apparent unrealistic yield rate is offset. (See, Comment 4, above.)

Therefore, no adjustment was deemed necessary for the final

determination.

Comment 7: Petitioners contend that the stainless steel coil costs

KT used in its original response were not consistent with information

on the coil invoices obtained by the Department at verification and,

moreover, were inconsistent with the coil costs reported by KT in its

second cost questionnaire response. Petitioners argue that the

Department, therefore, should reject the stainless steel coil costs

reported by KT.

KT argues that petitioners' claim that KT reported inconsistent

stainless steel costs is incorrect. KT asserts that petitioners are

basing this claim on a comparison of non-comparable figures.

Specifically, KT states that the figures taken from Exhibit 16 of its

original cost response are net of all adjustments for work in process,

exchange gains, and scrap expense and revenue, whereas the figures in

the second response include these expenses.

DOC Position: We disagree with petitioners. The Department verified

the accuracy of the coil costs contained only in the first submission.

(See, the ``Case History'' section of this notice for further

discussion.) Thus, any differences between the first and second

responses are irrelevant. Moreover, it is not relevant that the

weighted-average material costs reported in the first submission differ

from selected invoices included as exhibits to the cost verification

report. Specifically, the weighted-average prices are based on the

entire population of invoices which comprise KT's raw material

requisition values, while the invoices included as verification

exhibits are only a selected portion of them. To the extent that the

individual values are not identical, they should differ from the

average value.

Comment 8: Petitioners argue that the exhibits to the cost

verification report demonstrate that an exchange rate gain claimed by

KT as an offset to foreign exchange losses does not relate to the

merchandise under investigation and, accordingly, should not be

included in KT's submitted cost of manufacturing.

DOC Position: We agree. Accordingly, we have not allowed an offset

for this gain for purposes of the final determination.

Comment 9: Petitioners contend that the Department cannot rely on

KT's second cost submission because it contains unverified data. Thus,

petitioners maintain that the Department's conclusion in the cost

verification report that material costs in the first submission are

lower than material costs reported in the second cost submission does

not, and should not, lend any credibility to the data in the first

submission. According to petitioners, both submissions are flawed and

should be rejected in their entirety.

DOC Position: We agree with petitioners that the material cost data

contained in KT's second submission was not verified and should not be

relied upon by the Department. Therefore, no conclusions were drawn as

a result of comparing material costs contained in both the first and

second submissions.

Comment 10: KT argues that the Department should accept its

reported value for work in process. KT asserts that, although its

opening and closing work in process for the POI are valued at standard

cost, without any adjustment for the variance during the period, it is

mathematically impossible for this to result in an understatement of

KT's costs because KT had a negative variance for FY 1993.

DOC Position: We agree. Since KT had a negative variance during the

relevant periods, the effect of valuing work-in-process at standard

cost would be to overstate its costs. Therefore, no adjustment is

deemed necessary.

Comment 11: KT reported an average home market packing labor

expense for the POI based on the packing labor expenses incurred during

each month of the period. Petitioners contend that the Department

should use the monthly packing labor expenses in calculating KT's home

market packing expenses instead of the POI average. Petitioners assert

that the Department's longstanding policy is to use data that are as

sales-specific as possible. According to petitioners, in this case the

most specific data available are the monthly costs.

KT argues that using monthly packing labor costs would distort KT's

per unit packing expenses. KT maintains that it is appropriate to

spread packing labor expenses over the sales quantities during the

entire six-month POI because of fluctuations in monthly sales volumes.

KT asserts that this methodology yields a more representative per unit

expense for the POI because packing labor is a fixed cost.

DOC Position: We agree with KT. Normally, the Department prefers

respondents to report transaction-specific expenses under the theory

that individual prices are set to cover individual (i.e., transaction-

specific) costs. In this case, however, the costs are not transaction-

specific. Moreover, because KT's packing labor expenses are fixed, they

do not vary by sales volume. Therefore, fluctuations in the monthly

sales volumes create differences in the monthly average expense

amounts. Because these fluctuations in sales expenses are not

translated into changes in the per unit prices, they distort the margin

calculation. We agree with KT that using the POI-average minimizes the

effect of these fluctuations.

Therefore, we find that the POI average is more representative of

KT's per unit packing labor costs. Accordingly, we have accepted this

average for purposes of the final determination.

Comment 12: KT argues that the Department should affirm its

preliminary determination that critical circumstances do not exist with

respect to KT's exports of subject merchandise to the United States. KT

maintains that there is no history of dumping of subject merchandise

imported from Malaysia. In addition, KT claims that its exports were

not massive.

DOC Position: We agree. See, the Critical Circumstances section of

this notice for further discussion.

Comment 13: Both KT and petitioners contend that the Department

should calculate KT's short-term interest rate on U.S. dollar-

denominated loans using the interest expenses incurred and the

principal outstanding denominated in U.S. dollars rather than U.S.

dollar-amounts converted to Malaysian Ringitts. KT notes that

calculating the interest rate in this way eliminates from the

calculation the effect of exchange rate fluctuations.

DOC Position: We agree. At verification, we noted that KT had

calculated its U.S. interest rate by converting U.S. dollar-denominated

loans and interest payments to Malaysian Ringitts. We recalculated its

interest rate based on the original currency of the loans and the

interest payments (i.e., U.S. dollars) and used this revised rate in

our U.S. credit calculation.

Comment 14: Respondent argues that the Department should calculate

KT's U.S. credit period using the date of invoice, rather than date of

shipment from the factory. Respondent states that the invoice date is

same as the bill of lading date and is the date on which the

merchandise is shipped from Malaysia. Respondent adds that because the

bill of lading date is the date on which the merchandise leaves KT's

possession, the Department would be overstating KT's credit expenses

for its U.S. sales if it used an earlier date. However, KT contends

that, should the Department find it necessary to use shipment dates,

the Department should use the shipment dates in its October 29, 1993,

submission. KT notes that these data were verified by the Department.

Petitioners argue that KT's proposed methodology of using bill of

lading date in its U.S. credit calculation should not be used by the

Department in the final determination. Petitioners assert that this

methodology is contrary to the Department's longstanding policy as

stated in the Preliminary Determination of Sale at Less than Fair

Value: Welded Stainless Steel Pipe from Malaysia, 58 FR 47,120

(September 7, 1993). Petitioners maintain that the Department should

use the shipment dates submitted by KT on October 29, 1993.

DOC Position: We agree with petitioners. As stated in our

preliminary determination, it is the Department's practice to calculate

credit expenses using the period between shipment of the merchandise

from the factory and payment. (See, e.g., Final Determination of Sales

at Less Than Fair Value: Ferrosilicon From Venezuela, 58 FR 27522 (May

10, 1993) and Final Determination of Sales at Less Than Fair Value:

Certain Hot-Rolled Lead and Bismuth Carbon Steel Products From the

United Kingdom, 58 FR 6207 (January 27, 1993).) Moreover, we note that

using the date of shipment from the factory does not overstate KT's

U.S. credit expense because, contrary to KT's assertion, KT's factory

shipment date generally follows the date of invoicing.

Comment 15: Petitioners argue that the Department should not make a

difference in merchandise (difmer) adjustment in any instance where

such an adjustment would lower KT's FMV. Petitioners base their

argument on the fact that the difmer adjustments are based on KT's cost

data which petitioners claim is unreliable.

Respondent maintains that the Department should make difmer

adjustments in cases where sales of non-identical merchandise are

compared.

DOC Position: We agree with respondent. Because the Department has

relied on KT's COP data, we have used this data to make our difmer

adjustments.

Continuation of Suspension of Liquidation

We are directing the Customs Service to continue to suspend

liquidation of all entries of WSSP that are entered, or withdrawn from

warehouse, for consumption on or after September 7, 1993, the date of

publication of our affirmative preliminary determination in the Federal

Register. The Customs Service shall require a cash deposit or the

posting of a bond equal to the estimated amount by which the FMV of the

merchandise subject to this investigation exceeds the USP as shown

below. This suspension of liquidation will remain in effect until

further notice. The weighted-average dumping margins are as follows:

------------------------------------------------------------------------

Weighted-

average Critical

Producer/manufacturer/exporter margin circumstances

percentage

------------------------------------------------------------------------

Kanzen Tetsu Sdn. Bhd....................... 9.13 No.

All Others.................................. 9.13 No.

------------------------------------------------------------------------

ITC Notification

In accordance with section 735(d) of the Act, we have notified the

International Trade Commission (ITC) of our determination. As our final

determination is affirmative, the ITC will determine whether these

imports are materially injuring, or threaten material injury to, the

U.S. industry within 45 days.

Notification to Interested Parties

This notice also serves as the only reminder to parties subject to

administrative protective order (APO) of their responsibility

concerning the return or destruction of proprietary information

disclosed under APO in accordance with 19 CFR 353.34(d). Failure to

comply is a violation of the APO.

This determination is published pursuant to section 735(d) of the

Act and 19 CFR 353.20(a)(4).

Dated: January 21, 1994.

Joseph A. Spetrini,

Acting Assistant Secretary for Import Administration.

[FR Doc. 94-1967 Filed 1-27-94; 8:45 am]

BILLING CODE 3510-DS-P