# Final Determination of Sales at Not Less Than Fair Value: Saccharin From Korea > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A94-28161 ## Record - **Collection:** Federal Register - **Document type:** Uncategorized Document - **Published:** November 15, 1994 ## Text DEPARTMENT OF COMMERCE [A-580-823] Final Determination of Sales at Not Less Than Fair Value: Saccharin From Korea AGENCY: Import Administration, International Trade Administration, Department of Commerce EFFECTIVE DATE: November 15, 1994. FOR FURTHER INFORMATION CONTACT: Thomas McGinty or Peter Wilkniss, Office of Countervailing Investigations, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230; telephone (202) 482-5055 and 482-0588, respectively. FINAL DETERMINATION: We determine that saccharin from Korea is not being, nor 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''). Case History Since the publication of the preliminary determination in the Federal Register on June 23, 1994 (59 FR 32416), the following events have occurred. On July 6, 1994, pursuant to section 353.20(b)(1) of the Department's regulations, petitioner requested that the final determination in this case be postponed. On July 19, 1994, the Department published in the Federal Register a notice postponing the deadline for the final determination in this case until November 7, 1994. On July 12, 1994, at the request of the Department, Jeil Moolsan Company Inc. (``JMC'') submitted a revised response to the Department's cost of production questionnaire. On July 18, 19, and 20, 1994, the Department verified JMC's sales information at JMC's offices in Seoul, South Korea. On July 25, 26, and 27, 1994, the Department verified JMC's cost of production data at JMC's office in Seoul, South Korea. On September 16, 1994, and September 23, 1994, petitioner and respondent submitted case and rebuttal briefs to the Department. On September 30, 1994, the Department held a public hearing in this investigation. Scope of the Investigation The product covered by this investigation is saccharin. Saccharin is a non-nutritive sweetener used in beverages and foods, personal care products such as toothpaste, table-top sweeteners, animal feeds, and metalworking fluids. Three forms of saccharin are typically available as referenced in the American Chemical Society's Chemical Abstract Service (``CAS''). These forms are sodium saccharin (CAS #128-44-9), calcium saccharin (CAS #6485-34-3), and acid (or insoluble) saccharin (CAS #81-07-2). Saccharin is classified under subheading 2925.11.00 of the Harmonized Tariff Schedule of the United States (``HTS''). The scope of this investigation includes all types of saccharin imported under this HTS subheading including research and specialized grades. The HTS subheading is 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 June 1, 1993, through November 30, 1993. Product Comparisons In making our fair value comparisons, in accordance with the Department's standard methodology, we first compared merchandise identical in all respects. If no identical merchandise was sold, we compared the most similar merchandise, as determined by the model- matching criteria contained in Appendix V of the questionnaire (``Appendix V'') (on file in Room B-099 of the main building of the Department of Commerce (``Public File'')). Regarding level of trade, JMC reported and we verified that JMC sells only to distributors in the United States and to both distributors and trading companies in the U.K. (U.K. sales were used for foreign market value because the home market was determined not to be viable, see, ``Foreign Market Value'' section below.) However, JMC reported that there is no difference between prices or conditions of sale made at the distributor and trading company levels of trade. We examined this issue at verification and found no evidence that JMC's prices or conditions of sale differed on the basis of level of trade. Therefore, in keeping with past practice (see, e.g., Final Results of Administrative Review: Antifriction Bearings and Parts Thereof from the Federal Republic of Germany, et al. (56 FR 31692, 31709-11; July 11, 1991), and in accordance with 19 CFR 353.58, we have compared JMC's U.S. sales to distributors to U.K. sales to either distributors or trading companies, without distinction, in determining whether or not JMC made sales at less than fair value. Fair Value Comparisons To determine whether JMC's sales for export 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. With the exception of one sale to the United States, all comparisons of U.S. and third country sales involved identical merchandise. For the U.S. sale which was compared to a sale of similar merchandise, we made an adjustment for physical differences in merchandise pursuant to 19 CFR 353.57. United States Price Because JMC's U.S. sales of saccharin were made to unrelated purchasers prior to importation into the United States, and the exporter's sales price methodology was not indicated by other circumstances, we based USP on the purchase price (``PP'') sales methodology in accordance with section 772(b) of the Act. We calculated JMC's PP based on packed and delivered prices to unrelated customers in the United States. We made deductions to the U.S. price, where appropriate, for foreign brokerage and handling, containerization, marine insurance, and freight expenses and charges. In accordance with section 772(d)(1)(B) of the Act, we made an addition to the U.S. price for the amount of import duties imposed on inputs which were subsequently rebated upon exportation of the finished merchandise to the United States. Foreign Market Value In order to determine whether there was a sufficient volume of sales in the home market to serve as a viable basis for calculating FMV, we compared the volume of home market sales of subject merchandise to the volume of third country sales of subject merchandise, in accordance with section 773(a)(1)(B) of the Act. As a result, we determined that the home market was not viable. Therefore, we have based FMV on JMC's sales to the largest third country market by volume, the U.K., in accordance with 19 CFR 353.49(b). We calculated FMV based on delivered prices, inclusive of packing, to customers in the U.K. From the delivered price, we deducted third country packing and added U.S. packing costs. In light of the decision of the court of Appeals for the Federal Circuit in Ad Hoc Committee of AZ-NM-TX-FL Producers of Gray Portland Cement v. United States, 13 F3d 398 (Fed. Cir. 1994), we deducted post-sale movement charges from FMV under the circumstance-of-sale provision of 19 CFR 353.56(a). Pursuant to section 773(a)(4)(B) of the Act and 19 CFR 353.56(a)(2), we also made circumstance-of-sale adjustments for differences in quality inspection charges and expenses related to securing credit including: advise charges, postage, interest paid to the bank in relation to the terms of payment, and outside bank charges. In addition, we added the amount of import duties imposed on inputs which as subsequently rebated upon exportation of the finished merchandise to the U.K. Cost of Production Petitioner alleged that JMC made third country sales during the POI at prices below the cost of production (``COP''). Based on petitioner's allegations, we concluded that we had reasonable grounds to ``believe or suspect'' that sales were made below COP. Thus, we initiated a COP investigation pursuant to section 773(b) of the Act. We performed a product-specific cost test, in which we examined whether each home market sale was priced below that product's COP. The Department defines COP as the sum of direct material, direct labor, variable and fixed factory overhead, general expenses, and packing expense, in accordance with 19 CFR 353.51(c). (See, e.g., Preliminary Results of Antidumping Duty Administrative Review: Polyethylene Terephthalate Film, Sheet, and Strip from the Republic of Korea (59 FR 35099; July 8, 1994).) We compared the COP for each product to the third country unit price, net of movement expenses. With the following exceptions, we relied on submitted and verified COP information. At verification, we found that JMC included commission and dividend income as an offset to G&A expenses in its cost of production response. Since dividend income relates to the investment activities of JMC and not to JMC's production activity, we have adjusted JMC's reported G&A expenses to exclude dividend income as an offset to JMC's G&A expense. Likewise, commission income is related to the activities of JMC's retail division, not JMC's cost of producing saccharin. Therefore, we have also excluded commission income as an offset to JMC's G&A expense. In accordance with section 773(b) of the Act, we also examined whether JMC's third country sales were made below COP in substantial quantities over an extended period of time, and whether such sales were made at prices that would permit the recovery of all costs within a reasonable period of time in the normal course of trade. To satisfy the requirement of section 773(b)(1) that below-cost sales be disregarded only if made in substantial quantities, the following methodology was used: For each product where less than ten percent, by quantity, of the third country sales made during the POI were made at prices below the COP, we included all sales of that model in the computation of FMV. For each product where ten percent or more, but less than 90 percent, of the home market sales made during the POI were priced below COP, we excluded from the calculation of FMV those third country sales which were priced below COP, provided that the below-cost sales of that product were made over an extended period of time. Where we found that more than 90 percent of JMC's sales were at prices below the COP, and such sales were made over an extended period of time, we disregarded all sales of that product and calculated FMV based on constructed value. In accordance with section 773(b)(1) of the Act, in order to determine whether below-cost sales had been made over an extended period of time, we compared the number of months in which below-cost sales occurred for each product to the number of months in the POI in which that product was sold. If a product was sold in three or more months of the POI, we did not exclude below-cost sales unless there were below-cost sales in at least three months during the POI. When we found that sales of a product only occurred in one or two months, the number of months in which the sales occurred constituted the extended period of time; i.e., where sales of a product were made in only two months, the extended period of time was two months, where sales of a product were made in only one month, the extended period of time was one month. (See Preliminary Results and Partial Termination of Antidumping Duty Administrative Reviews: Tapered Roller Bearings, Four Inches or Less in Outside Diameter, and Components Thereof, From Japan (58 FR 69336, 69338, December 10, 1993). We examined JMC's model- specific COP data, as corrected based on our findings at verification, and found no sales below COP. Currency Conversion We made currency conversions based on the official exchange rates in effect on the dates of the U.S. sales as certified by the Federal Reserve Bank of New York. Margin Calculation Based on the calculation methodology outlined above, we calculated a margin of zero percent for U.S. sales of saccharin from Korea. Verification As provided in section 776(b) of the Act, we verified information provided by the respondent using standard verification procedures, including the examination of relevant sales and financial records, and selection of original source documentation containing relevant information. Interested Party Comments Comment 1 Petitioner argues that evidence has been uncovered in this investigation which suggests that JMC employs a dual cost accounting system. Under such a system, JMC could arrange for dual pricing from suppliers and assign all low cost inputs to either home market or third country production in order to minimize below cost sales. Further, petitioner argues that the impact of such a system could be more distortive in a situation where the home market is determined to be not viable. This would allow all high cost inputs to be allocated to domestic production thereby decreasing the likelihood that the Department's cost analysis would find sales below cost in the third country market. According to petitioner, in Certain Circular Welded Carbon Steel Pipes and Tubes from the Republic of Korea, 49 FR 9926 (March 16, 1984), the Department reasoned that where different costs are associated with producing for export as compared with domestic production and the merchandise is identical, it is appropriate to use the average cost of producing that merchandise in calculating cost of production or constructed value. Therefore, when presented with evidence that a respondent maintains two distinct cost systems, the Department has no alternative but to disregard the respondent's COP information and apply the best information available. Petitioner asserts that such a situation exists in this investigation. Respondent argues that JMC does not maintain a dual cost system. Respondent outlines the verification procedures employed by the Department to verify the accuracy and completeness of JMC's cost accounting system and argues that the Department conducted a complete verification of JMC's cost of production response and found no evidence to indicate that such a system exists. Respondent points out that the word ``export'' referred to by petitioner as evidence of the existence of a dual cost system pertains to JMC's cost of sales accounts. These sales accounts are used by JMC to track the cost of sales to each market at any given time. However, JMC's production costs across markets for identical merchandise are identical. DOC Position We disagree with petitioner. We conducted a thorough verification of JMC's cost accounts and cost of production questionnaire response and found no evidence that JMC employs a dual cost system as alleged by petitioner. The only evidence petitioner points to is that JMC maintains separate accounts for the cost of export and domestic sales. However, based on our review of JMC's accounting system, we are satisfied that the per unit cost of export and domestic sales are not segregated and that no additional costs have been allocated to either home market or third country sales. Comment 2 Petitioner contends that the Department should disallow any offsets to JMC's general and administrative expenses (``G&A'') that cannot be tied to the production of the subject merchandise, but should include in G&A any losses on foreign currency transactions and translations. Petitioner points to two instances in JMC's cost of production submission where G&A offsets are claimed and should be disallowed. First, petitioner cites the cost verification report where the Department stated that JMC had included dividend and commission income as an offset to G&A, yet neither related to the production of saccharin. Second, petitioner argues that ``miscellaneous income'' should not be allowed as an offset, since there is no evidence that this income is related to the production of the subject merchandise. Petitioner argues that foreign exchange losses on foreign currency transactions and translations should be included in the G&A calculation, since all company debt is fungible. Foreign exchange gains, however, should be excluded from G&A, unless it can be proven that such gains are directly related to the production of subject merchandise. Respondent agrees with petitioner that the commission and dividend income is not directly related to the production of the subject merchandise. Respondent agrees that commission income should not be allowed as an offset to G&A, but since the dividend income is generated from assets which are classified in the ``current assets'' section of JMC's balance sheet and represents a use of working capital, dividend income is properly reported as an offset to G&A. Respondent argues that miscellaneous income is also properly claimed as an offset to G&A because, contrary to petitioner's contention, this income is associated with JMC's manufacturing operations. Respondent points to the verified cost response at page 20, supplemented by Attachment D-11. According to respondent, miscellaneous income consists of (1) an import agent fee, (2) commission income for advertising, and (3) sales of iron scrap. Respondent asserts that, contrary to petitioner's brief, gains and losses resulting from exchange rate fluctuations between the date of shipment and the date of payment, and gains and losses from translation of foreign currency loans, are separate and unrelated issues. Respondent asserts that gains and losses resulting from exchange rate fluctuations between the date of shipment and date of payment are not part of COP and thus have been appropriately excluded from the COP calculation. Respondent argues, however, that translation gains and losses related to debt should both be included in the calculation of interest expense. DOC Position We agree with petitioner with respect to JMC's treatment of commission and dividend income. Since commission and dividend income are not related to JMC's production of the subject merchandise (see ``Cost of Production'' section of this notice), they cannot be included in the G&A calculation. Therefore, we have adjusted JMC's reported G&A expense accordingly. We agree with respondent that miscellaneous income should be permitted as an offset to G&A because this income is related to JMC's production operations. Therefore, we have included this income as an offset to G&A, as reported. We agree with respondent, in part, with respect to foreign exchange gains and losses in that transaction and translation gains and losses should be examined separately. Foreign exchange gains and losses related to purchases of inputs to produce the subject merchandise should be included in COM. However, since we cannot conclusively determine whether JMC's net exchange loss on transactions was related specifically to such purchases, we consider it inappropriate to include the net loss in COM. Instead, we would normally include the net exchange loss in the G&A calculation, but since its inclusion would have virtually no effect on COP, we have not recorded such an adjustment. We agree with respondent that foreign exchange gains and losses on year-end translation of financial assets and liabilities should be included in JMC's calculation of interest expense. But since JMC has net interest income in excess of these losses, there is no effect on COP. Therefore, no adjustment was made to JMC's interest expense for these losses. Comment 3 Respondent contends that, contrary to the Department's sales verification report, JMC's reporting of quality inspection expense on a per kilogram basis is correct because JMC's gross unit price, as reported, is also on a per kilogram basis. Therefore, it makes no difference whether the adjustment for this expense is made on a per kilogram basis or as a percentage of the FOB price. DOC Position We agree with respondent. In the verification report, we noted that JMC had incurred this expense on the basis of value, not quantity. However, because JMC's gross unit price is reported on the same basis there is no need to adjust JMC's reported quality inspection expense. ITC Notification In accordance with section 735(d) of the Act, we have notified the ITC of our determination. Notification to Interested Parties This notice 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 733(f) of the Act and 19 CFR 353.15(a)(4). Dated: November 7, 1994. Susan G. Esserman, Assistant Secretary for Import Administration. [FR Doc. 94-28161 Filed 11-14-94; 8:45 am] BILLING CODE 3510-DS-P --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A94-28161. Public record. Not legal advice.