Notice of Final Determination of Sales at Less Than Fair Value and Final Negative Critical Circumstances Determination: Disposable Pocket Lighters From Thailand

DEPARTMENT OF COMMERCE

International Trade Administration

[A-549-810]

Notice of Final Determination of Sales at Less Than Fair Value

and Final Negative Critical Circumstances Determination: Disposable

Pocket Lighters From Thailand

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: March 16, 1995.

FOR FURTHER INFORMATION CONTACT: David Boyland or Susan Strumbel,

Office of Countervailing Investigations, Import Administration,

International Trade Administration, U.S. Department of Commerce, 14th

Street and Constitution Avenue, NW, Washington, D.C. 20230; telephone

(202) 482-4198 and 482-1442, respectively.

Final Determination

We determine that disposable pocket lighters from Thailand are

being, or are [[Page 14264]] likely to be, sold in the United States at

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

1930 (the ``Act''), as amended. The estimated margins of sales at less

than fair value are shown in the ``Suspension of Liquidation'' section

of this notice.

Case History

Since the October 24, 1994 preliminary determination (59 FR 53414

(October 24, 1994)), the following events have occurred:

Between October 24 and October 28, 1994, we conducted verification

of the questionnaire responses. On October 31, 1994, petitioner

requested a public hearing. Respondent requested that the Department

postpone its final determination in this investigation on November 2,

1994. On November 16, 1994, the Department published its notice of

postponement of the final determination (59 FR 59211).

On February 1, 1995, petitioner filed a critical circumstances

allegation. The Department issued a preliminary negative critical

circumstances determination on March 3, 1994.

On February 13 and February 21, 1995, petitioner and respondent

filed case and rebuttal briefs, respectively. On February 28, 1995, the

Department held a public hearing.

Scope of the Investigation

The products covered by this investigation are disposable pocket

lighters, whether or not refillable, whose fuel is butane, isobutane,

propane, or other liquified hydrocarbon, or a mixture containing any of

these, whose vapor pressure at 75 degrees Fahrenheit (24 degrees

Celsius) exceeds a gage pressure of 15 pounds per square inch. Non-

refillable pocket lighters are imported under subheading 9613.10.0000

of the Harmonized Tariff Schedule of the United States (``HTSUS'').

Refillable, disposable pocket lighters would be imported under

subheading 9613.20.0000. Although the HTSUS subheadings are provided

for convenience and Customs purposes, our written descriptions of the

scope of these proceedings are dispositive.

Period of Investigation

The period of investigation (``POI'') is December 1, 1993 through

May 31, 1994.

Critical Circumstances

Petitioner alleged that critical circumstances exist with respect

to imports of disposable lighters from Thailand. In our determination

on March 3, 1995, pursuant to section 733(e)(1) of the Act and 19 CFR

353.16, we analyzed the allegations using the Department's standard

methodology.

On March 6, 1995, both petitioner and respondent submitted comments

with regard to the Department's preliminary negative critical

circumstances determination. In addition to submitting general

comments, petitioner also provided Port Import and Export Reporting

Services (``P.I.E.R.S.'') data (see, Exhibit C of petitioner's March 6,

1995 submission) in order to show that Thai Merry's shipments have

dropped off dramatically since the Department's preliminary affirmative

determination of sales at less than fair value (``LTFV''). According to

petitioner, the decline in imports of subject merchandise from Thailand

subsequent to the post-petition period indicates that critical

circumstances exist.

With respect to the additional information supplied by petitioner,

we note that the Department's analysis of critical circumstances

compared data covering December 1, 1993 through April 30, 1994 (the

``pre-petition period'') with data covering May 1, 1994 through

September 30, 1994 (the ``post-petition period''). As noted in the

preliminary negative critical circumstances determination, the

Department considered the post-petition period to be the first day of

the month of initiation through the period immediately prior to the

preliminary determination of sales at LTFV. While the data submitted by

petitioner show that shipments have declined subsequent to the

Department's preliminary LTFV determination, our analysis, and the

critical circumstances allegation itself, is based on respondent's

actions prior to the preliminary LTFV determination. Accordingly, while

we have examined the additional information provided by petitioner, it

does not alter our original analysis (see, February 27, 1995 Memorandum

to Susan H. Kuhbach, Director, Office of Countervailing Investigations

from David R. Boyland, Case Analyst, Office of Countervailing

Investigations). In the absence of information that would alter our

original analysis, we determine that critical circumstances do not

exist.

Class or Kind of Merchandise

The Department considers standard and child-resistant lighters to

be one class or kind of merchandise (see, Interested Party Comments,

Comment 1).

Product Comparisons

We have continued to treat standard lighters sold in the home

market as similar to child-resistant lighters, and identical to

standard lighters sold in the United States (see, Interested Party

Comments, Comment 2). For the U.S. sales compared to home market sales

of similar merchandise, we made an adjustment, pursuant to 19 CFR

353.57, for physical differences in merchandise.

Level of Trade

For the preliminary determination, respondent argued that, since

Thai Merry sells to large national distributors in the United States,

the home market sales used for comparison purposes should be limited to

those sales made to the single national distributor in the home market.

The Department, in its preliminary determination, stated that the

information submitted by the respondent did not justify distinguishing

between the national distributor in the home market and other

distributors.

Although the Department gave respondent the opportunity to provide

additional information to substantiate its claim that there is a

distinct national distributor level of trade in the home market,

respondent declined to do so. Moreover, at verification, we learned

that respondent's division of customers into either the retail level of

trade or the distributor level of trade was based solely on the volume

of lighters purchased by home market customers.

The Department analyzes levels of trade based on the differences in

functions performed by the seller or differences in the category of

customer. In this case, however, respondent based its level of trade

claim solely on differences in quantities purchased. Therefore, we have

not performed a level of trade analysis.

We note, however, that there are substantial differences in

quantities ordered by U.S. and home market customers. Moreover, within

the home market, sales are made in a wide range of quantities and with

larger quantities being sold at lower prices. In accordance with 19 CFR

353.55, we have identified the largest home market transactions and

have compared those with sales to the United States.

Fair Value Comparisons

To determine whether Thai Merry'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.

We made revisions to Thai Merry's reported data, where appropriate,

based on verification findings. [[Page 14265]]

United States Price

Because Thai Merry's U.S. sales of disposable pocket lighters 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, in accordance with section 772(b) of the Act, we

based USP on the purchase price (``PP'') sales methodology. We

calculated Thai Merry's PP sales based on packed, CIF prices to

unrelated customers in the United States.

We made deductions to the U.S. price, where appropriate, for

foreign inland freight, foreign brokerage/handling expenses, marine

insurance, and ocean freight. In calculating the imputed U.S. credit

expense, we used the borrowing rate in the United States on short-term

dollar-denominated loans (see, Interested Party Comments, Comment 11).

For a further discussion of the Department's treatment of U.S. credit

expense, please see Memorandum to Barbara R. Stafford, Deputy Assistant

Secretary, Investigations from Susan H. Kuhbach, Director, Office of

Countervailing Investigations, (September 26, 1994) on file in room B-

099 of the U.S. Department of Commerce.

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 but

not collected on inputs. We also made an adjustment to U.S. price for

VAT taxes paid on the comparison sales in Thailand, in accordance with

our practice, pursuant to the Court of International Trade (``CIT'')

decision in Federal-Mogul, et al versus United States, 834 F. Sup.

1993. See, Preliminary Antidumping Duty Determination and Postponement

of Final Determination; Color Negative Photographic Paper and Chemical

Components Thereof from Japan, 59 FR 16177, 16179 (April 6, 1994), for

an explanation of this tax methodology.

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 viable.

We calculated FMV based on delivered prices, inclusive of packing,

to customers in the home market. From the delivered price, we deducted

home market packing and added U.S. packing costs.

Pursuant to section 773(a)(4)(B) of the Act and 19 CFR

353.56(a)(2), we made circumstance-of-sale-adjustments for differences

in movement charges between shipments to the United States and

shipments in the home market. We also made circumstance-of-sale-

adjustments for differences in advertising expenses, and direct selling

expenses, including payments made by Thai Merry to a third party. With

respect to the home market credit expense, we have attributed this

expense to only those home market sales identified as ``credit sales.''

Additionally, we note that respondent provided a value-based allocation

for advertising expense in its home market sales listing. We have

substituted respondent's value-based allocation with a per unit

advertising expense for the final determination.

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.

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, cost and financial

records, and selection of original source documentation used in making

our final determination.

Interested Party Comments

Comment 1: Respondent argues that since standard lighters can no

longer be imported into the United States because of a Consumer Product

Safety Commission (``CPSC'') regulation which came into effect after

the POI, standard lighters and child-resistant lighters should be

considered two separate classes or kinds of merchandise. In support of

its arguments, respondent has outlined differences between standard and

child-resistant lighters relevant to the Diversified Products criteria

(see, Diversified Product Corporation versus United States, 582 F.

Supp. 887 CIT 1983). These differences are summarized as follows: (1)

The differences in physical characteristics are minor. However, the

fact that child-resistant lighters can be legally imported, while

standard lighters cannot, makes these differences significant,

according to respondent; (2) with respect to ultimate use, respondent

notes that the types of lighters are in fact different since the child-

resistant lighter is intended to be used only by persons mature enough

to understand the danger associated with the lighter; (3) as regards,

expectation of the ultimate purchaser, respondent argues that, while

both types of lighters can produce flames with which to light

something, the child-resistant lighter is expected to be safer; (4)

with respect to channels of trade, respondent notes that once the

inventories of standard lighters imported prior to July 12, 1994 have

been sold, the channels of trade of the two types of lighters will be

distinct because only one will exist legally (child-resistant) while

the other will not (standard); (5) as regards advertising and display,

respondent argues that child-resistant lighters are marketed as not

only disposable lighters, but child-proof products which marketing

officials promote as such. Additionally, according to respondent, the

CPSC regulation requires that the two types of lighters be displayed

differently and that once inventories of standard lighters are sold,

they will not be displayed or advertised anywhere; (6) with respect to

cost, respondent notes that the cost of producing the child-resistant

lighters is legally significant because the additional cost allows the

lighters to be exported to the United States. Also, with respect to

cost, respondent argues that the price of standard and child-resistant

lighters are sharply different.

Petitioner argues that both standard and child-resistant lighters

will be sold in competition with one another until the large stockpiled

supply of standard lighters imported prior to the CPSC ban is

exhausted. Petitioner argues that both lighters are functionally

equivalent, their physical characteristics are almost identical, the

ultimate use and expectation of the consumer is the same, and that

child-resistant and standard lighters are sold through the same

channels of distribution, with the same advertising and display.

Additionally, petitioner points out that the difference in price

between the standard and child-resistant lighter is distorted because

standard lighters are being dumped, as admitted in respondent's case

brief. Finally, petitioner states that the cost differences between the

two types of lighters is insufficient to support a class or kind

distinction.

DOC Position: Regarding the class or kind issue, the Department has

determined that there is only one class or kind of merchandise.

As regards physical characteristics, all parties agree, and the

record supports, that there is no distinct difference between standard

and child-resistant lighters. With respect to cost, the

[[Page 14266]] Department has already determined that it can match

child-resistant lighters sold in the United States to standard lighters

sold in the home market with a difference in merchandise adjustment

(``difmer'') (i.e., the difference in variable costs between the child-

resistant lighter and the standard lighter does not exceed 20 percent

of the total cost of manufacturing of the child-resistant lighter).

Therefore, we find that the difference in cost is not significant

enough to support a class or kind distinction. With respect to ultimate

use, and expectations of the ultimate purchaser, we note that, while

child-resistant lighters have a safety feature and the standard lighter

does not, the primary function of standard and child-resistant lighters

is the same. Additionally, the expectations of the consumer with regard

to the utility of child-resistant lighters and standard lighters are

the same. Also, regardless of the CPSC ban, standard and child-

resistant lighters are sold through the same channels of trade.

Finally, while we note that the advertising and display of standard and

child-resistant lighters may be marginally different because of the

child-safety feature, the differences in advertising and display are

minor and do not outweigh the fact that no differences are evident in

the other Diversified Products criteria, as noted above.

Respondent also argues that the import restriction distinction

between the two types of lighters is a ``clear dividing line,'' as that

term is used by the Department in Final Affirmative Less Than Fair

Value Determination: Sulfur Dyes, Including Vat Sulfur Dyes, from the

U.K. (``Sulfur Dyes From the U.K.'') 58 FR 3253 (January 8, 1993)). In

Sulfur Dyes From the U.K., the Department stated that ``when examining

differences in physical characteristics in the context of class or kind

analysis, the Department looks for 'clear dividing lines' between

product groups, not merely the presence or absence of physical

differences.'' (58 FR at 3254). According to respondent, because

standard lighters may no longer be imported, the Diversified Products

factors vis-a-vis child-resistant lighters are all diametrically

different.

Except for the import restriction associated with standard

lighters, respondent has provided no compelling reason to divide these

products into separate classes or kinds of merchandise. While

indicating that a ``clear dividing line'' is necessary to make a class

or kind distinction, the Department went on to state in Sulfur Dyes

from the U.K. that multiple classes or kinds did not exist because the

Department did not find ``clearly defined differences in any of the

Diversified Products criteria.'' In the instant case, the differences

presented by respondent to support its Diversified Products analysis,

as discussed above, are not compelling. Therefore, we continue to find

standard and child-resistant lighters to be one class or kind of

merchandise.

With respect to using an average-to-average methodology, we note

that, except in the most extraordinary circumstances, the Department's

long-standing practice is to compare individual U.S. transactions with

a weighted average FMV (see, 19 CFR 353.44(a)).

As to respondent's point that an average-to-average methodology

will be required under the new antidumping law, we note that this final

determination is being made pursuant to the previous law, which does

not require an average-to-average comparison. Finally, with respect to

applying a zero margin to child-resistant lighters, we note that the

Department applies a dumping margin on the basis of a class or kind of

merchandise, not on a product-specific basis (see, section 731 of the

Tariff Act of 1930, as amended).

Comment 2: Petitioner objects to the Department's preliminary

determination that child-resistant lighters can be compared to home

market sales of standard lighters. Petitioner argues that, based on the

differences in the cost of manufacture and commercial value, standard

and child-resistant lighters should not be considered ``similar.''

According to petitioner, information that it submitted shows that the

two types of lighters are not ``approximately equal in commercial

value.'' Thus, petitioner argues that the requirements of 19 U.S.C.

1677(16)(B)(iii) have not been met. Instead, the Department improperly

relied solely on the physical characteristics of the merchandise in

making its preliminary determination. Furthermore, petitioner argues

that the commercial value aspect of 19 U.S.C. 1677(16)(b)(iii) is

designed for cases such as the instant one in which the differences in

overall cost and commercial value result from the mandatory child-

safety requirements. Such differences are attributable to capital

expenditures for research and development. Petitioner argues that the

Department should at least factor in the high cost of developing the

safety mechanism when making its such or similar analysis.

Respondent argues that there is no support for using cost in

determining whether the two lighters can be considered similar, except

to the extent that the Department will generally not compare products

where the difmer exceeds 20 percent of the cost of manufacturing of the

U.S. product. Moreover, respondent argues that the Department's

preliminary determination was consistent with past cases and the CIT's

ruling in United Engineering and Forging versus United States, 779 F.

Sup. 1375, 1381 (1991)).

DOC Position: We agree with respondent. The Department places

little weight on the commercial value criterion in determining what

constitutes such or similar merchandise (see, Final Results of

Administrative Review: Certain Forged Steel Crankshafts from the United

Kingdom , 56 FR 5975 (February 14, 1991)), and Final Determination of

Sales at Less Than Fair Value: Certain Portable Electric Typewriters

From Singapore, 58 FR 43334 (August 16, 1993)). Instead, the Department

focuses on the similarity of the physical characteristics, as evidenced

in the Department's such or similar determination in this

investigation. The Department's position in this regard has been upheld

by the CIT in United Engineering.

In this case, child-resistant and standard lighters closely

resemble each other in terms of their physical characteristics.

Moreover, while the commercial value of the two products (as reflected

in their prices) differed, the difference was not large (in absolute

terms) and decreased over time. Therefore, we have continued to find

that child-resistant lighters are similar to standard lighters.

Except for our general practice of limiting difmers to those which

do not exceed 20 percent of the cost of manufacturing the good sold in

the United States, we do not consider cost in determining what

constitutes similar merchandise. We note that the alleged research and

development costs referred to by petitioner would not be included in

the difmer, which includes only variable manufacturing costs.

Comment 3: Petitioner argues that Thai Merry gives quantity

discounts, which eliminates the need for a level of trade adjustment.

Petitioner also argues that Thai Merry has been unable to determine

which home market customers are retailers and which home market

customers are distributors, and instead has simply relied on volume

sold to distinguish between these levels. Additionally, petitioner

notes that Thai Merry has been unable to substantiate its claim that

the distributor level of trade should be sub-divided into distinct

levels of trade. Thus, according to petitioner, all of Thai Merry's

home [[Page 14267]] market sales should be found to be made at the same

level of trade.

Respondent argues that petitioner is incorrect in stating that Thai

Merry was unable to identify which customers were retailers or

distributors. Respondent argues that the threshold it provided for

dividing its customers into the two groups was conservative, i.e., this

threshold eliminates home market customers from the Department's LTFV

comparison that are clearly not distributors. Additionally, some of

those home market customers identified as distributors were in all

likelihood retailers. Respondent argues that use of a threshold was

necessary given the difficulty in identifying the exact level of trade

of every home market customer. Finally, respondent argues that the

Department is required to make comparisons at the same level of trade

(see, 19 CFR 353.58) and there is a significant dividing line between

the quantities purchased by the retail customers in the home market and

the quantities purchased by the large national distributors in the

United States. Therefore, the Department should rely on sales to home

market distributors, as defined by respondent, in making its

comparisons to U.S. sales.

DOC Position: While this issue has been framed in the context of

level of trade, the Department finds that the appropriate approach is

to identify home market sales that are in quantities comparable to U.S.

sales. We note that there is no home market customer who orders in

quantities approaching the average quantities ordered by U.S.

customers. Nevertheless, we examined the data and found that average

transaction prices varied with quantity. Therefore, we have selected

for comparison purposes large quantity home market transactions (see,

March 8, 1995 Memorandum to Barbara R. Stafford, Deputy Assistant

Secretary, Investigations from David Boyland, Case Analyst, Office of

Countervailing Investigations).

Comment 4: Petitioner argues that the Department's verification

report indicates that the U.S. price changed between the purchase order

date and the invoice date. As such, petitioner argues that the invoice

date should be considered the date of sale.

Respondent argues that the Department's verification report is

misleading because, while the invoice date is Thai Merry's first record

of the sale price, previously submitted information shows that the

price and quantity are recorded at the time of the purchase order.

Additionally, respondent argues that the ``revisions'' referred to in

the verification report were prospective changes in price, as opposed

to price changes to orders already made.

DOC Position: The verification report states that ``during our

examination of U.S. sales completeness...the standard and child-safety

lighter per-unit prices were applied consistently throughout the POI

with several upward price revisions occurring in the latter half of the

POI.'' ``Revisions,'' in the context of the verification report,

referred to assumed increases in the negotiated price, as opposed to a

change in price between the purchase order date and the invoice date.

The verification report also states that the first ``written''

record generated by Thai Merry of the negotiated price is the invoice.

While respondent has cited to a Purchasing and Payment Records

spreadsheet maintained by U.S. customers, this information does not by

itself prove when the purchase price was first recorded. The

spreadsheet includes Thai Merry's invoice number and hence was

generated sometime after Thai Merry's invoice information, including

unit price, was available to the U.S. customer. Therefore, it is not

correct to say, as respondent claims, that this information proves the

price was recorded at the time of the purchase order.

Given the fact that respondent's price negotiations with its U.S.

customers were unrecorded, it was not possible to ``verify'' that the

purchase order date was the date on which both price and quantity were

fixed. The information provided by respondent indicates that it is

reasonable to assume that the price was established prior to the

purchase order and that the purchase order established the quantity.

However, as the Department noted in Certain Stainless Steel Butt-Weld

Pipe and Tube Fittings From Japan; Final Results of Antidumping Duty

Administrative Review, 59 FR 12240, 12241 (March 16, 1994)), the date

of sale is evidenced by the ``first document which systematically

records agreement as to price and quantities * * * [m]oreover the

invoice date represents an accurate, reasonable, consistent methodology

to determine the date of sale.'' In this case, the appropriate date of

sale is the invoice date because it is the first written record

generated by Thai Merry of both price and quantity. Additionally, this

date was subject to verification during our examination of the U.S.

sales listing.

Comment 5: With respect to certain sales at the end of the POI,

respondent argues that a fire at one of Thai Merry's facilities made it

impossible to fill the entire May 15, 1994 purchase order. According to

a May 26, 1994 letter from the U.S. customer to Thai Merry, the

customer notified Thai Merry of a certain volume of lighters that would

be accepted for shipment. Respondent argues that the amount of child-

resistant lighters ultimately shipped pursuant to both the May 15, 1994

purchase orders and the June 15, 1994 purchase orders matched the

volume accepted by the U.S. customer in the May 26, 1994 letter to Thai

Merry. Accordingly, since these shipments were accepted during the POI

(i.e., May 26, 1994), the sales reflected in the June 15, 1994 purchase

orders should be considered POI sales. In response to the Department's

verification report, which indicates that the unfilled portion of the

May 15, 1994 purchase order was not accounted for in the subsequent

June 15, 1994 purchase orders, respondent argues that this is due to

the fact that standard lighters ordered on May 15, 1994, could not be

re-ordered because of the pending CPSC ban.

Petitioner argues that respondent's explanation should be rejected

because (1) the terms of the purchase could be changed up to the

invoice date, (2) there is no clearly established connection between

the June 15 and May 15 purchase orders, and (3) the May 26, 1994 letter

discusses a forthcoming purchase order which was not found to exist.

DOC Position: As noted in Comment 5, the Department is considering

the invoice date to be the date of sale. Accordingly, only those sales

invoiced during the POI will be considered POI sales for purposes of

the final determination.

Comment 6: Petitioner argues that sales by Thai Merry Hong Kong

(``TMHK'') to the United States should be included in the Department's

LTFV comparison. Petitioner notes that the factors the Department

considers when determining if the sales of two parties should be

collapsed include: (1) whether the companies are closely intertwined;

(2) whether transactions take place between the companies; (3) whether

the companies have similar types of production equipment, such that it

would be unnecessary to retool either plant's facilities before

implementing a decision to restructure either company's manufacturing

facilities; and (4) whether the companies involved are capable, through

their sales and production operations, of manipulating prices or

affecting production decisions (see, Final Determination of Sales at

Less Than Fair Value: Certain Granite Products from Italy, 53 FR 27187

(July 19, 1988)). Petitioner argues that the

[[Page 14268]] longstanding business relationship and the continued use

of the Thai Merry name indicate that the relationship between the two

companies did not end subsequent to Thai Merry's gradual sale of its

ownership interest in TMHK. Petitioner argues that the relatedness

issue is only one prong in the test used by the Department in

determining whether to collapse sales. When the preceding factors are

combined with the fact that the two companies are capable of price

manipulation, it is clear that TMHK's sales to the United States should

be included in the calculation of FMV. Petitioner argues that this

potential to manipulate prices is the primary factor in determining

whether TMHK's sales should be included in FMV and that the facts in

this case show that there was price manipulation.

Respondent argues that section 771(13) of the Tariff Act of 1930,

19 U.S.C. 1677(13), governs the determination of ``related parties.''

Under this section of the statute, the Department has established a

test under which parties will not be considered related unless

ownership is greater than five percent. Respondent argues that since

Thai Merry has no ownership interest in TMHK, as shown at verification,

the two parties are not related. Respondent also argues that the

evidence provided by petitioner for collapsing the two parties is

unconvincing because: (1) The similarity in names between Thai Merry

and TMHK is merely cosmetic, and in fact TMHK has changed its name, (2)

buyers and sellers typically have frequent business transactions, and

(3) the price TMHK charged Thai Merry's U.S. customer is not unusual

because unrelated parties often sell similar products for similar

prices.

DOC Position: We note that the Department only collapses sales

under section 773(13) of the statute if the parties are related. Since

Thai Merry has no ownership interest in TMHK, the Department has not

considered TMHK's sales to the United States for purposes of

calculating the margin.

Comment 7: Petitioner argues that because of the nature of payments

by Thai Merry to Thai Merry America (``TMA'') (i.e., a specific amount

based on each U.S. sale), and because of the type of assistance being

provided by TMA (i.e., production consulting, research and

development), the payments to TMA should be treated as a direct selling

expense. Petitioner argues that the payments to TMA were, in part, for

research and development for the child safety lighter. Thus, the

payments to TMA were tied to the sale of a specific product line.

According to petitioner, the other assistance provided by TMA, for

example, production management, can also be tied directly to the sale

of child-resistant and standard lighters because, in the absence of

this assistance and the costs associated with them, these products

would not have been manufactured. Finally, petitioner argues that it is

precisely because these payments are directly tied to U.S. sales that a

circumstance-of-sale adjustment is necessary.

Respondent argues that the TMA payments, as characterized by

petitioner, indicate that these payments were related to production, as

opposed to sales. While these payments resemble commissions, they are

actually G&A expenses that do not qualify for a circumstance of sale

adjustment.

DOC Position: Before determining how to treat this payment, we

examined the payment arrangement between Thai Merry and TMA. Under this

arrangement Thai Merry's ultimate payment to TMA is based on total U.S.

sales. The services provided by TMA consist of production consulting,

research and development, and market research. Because the payments to

TMA are not connected with sales activity in the United States, we do

not view them as commissions. However, since the payments to TMA are

based on each U.S. sale, and calculated as a percentage of each U.S.

sale, we consider these payments to be a direct U.S. selling expense.

As a consequence, for purposes of the final determination, we have

added these payments to FMV.

Comment 8: Respondent argues that the incentive bonuses paid to

home market salesmen were not commissions. According to respondent,

this is because these payments are not tied to the number or value of

sales. Respondent argues that this is evidenced by the fact that

Chamber (the home market selling arm of Thai Merry) does not keep

records of sales per salesperson. Additionally, respondent notes that

there is no correlation between the amount of incentive bonus paid and

the value of sales during the previous month; i.e., if the bonus was in

fact a commission based on the value of sales, one would expect that

when the value of sales dropped the subsequent amount of incentive

bonuses paid would also drop. This was not the case.

DOC Position: Based on our review of the information, we see no

correlation between home market sales and the ``incentive bonuses''

paid to Chamber's salesmen. The absence of an observable correlation or

relationship between sales and incentive bonuses supports respondent's

claim that these payments are not commissions. Therefore, for the final

determination, we have determined that these payments are not

commissions.

Comment 9: Petitioner argues that for the final determination the

Department should apply the credit expense to only those home market

sales identified as ``credit sales.''

DOC Position: We agree and have made this correction.

Comment 10: Petitioner argues that the home market freight expense

should have been allocated on a weight or per-unit basis, instead of

using a value-based factor. Given customary freight rate structures, it

is unreasonable, according to petitioner, to allocate freight expenses

based on the value of subject merchandise. Finally, given respondent's

refusal to cooperate in providing a non-value-based freight amount, as

well the Department's preference for not including depreciation as part

of the freight expense, the Department should use the per-unit freight

cost incurred by Thai Merry on direct sales shipped in the home market,

as best information available (``BIA'').

Respondent argues that it was not possible to provide a weight-

based or per-unit cost for home market inland freight because home

market deliveries include subject and non-subject merchandise. Hence,

there is no common denominator with which to perform an allocation of

cost. Additionally, a weight-based calculation is not possible because

records are not kept with respect to total weight shipped. Respondent

also argues that there have been cases in which the Department has

accepted a value-based allocation (see, Antifriction Bearing (Other

than Tapered Roller Bearings) and Parts Thereof from France, Germany,

Italy, Japan, Romania, Singapore, Sweden, Thailand and the United

Kingdom, 58 FR 39729 (July 26, 1993)).

DOC Position: We agree with respondent. The Department verified

elements of respondent's value-based freight allocation. This

allocation incorporated expenses, including depreciation, which were

directly related to Chamber's transportation costs. The allocation

involved the appropriate costs and therefore appeared to be reasonable.

As such, we have continued to use a value-based factor for the final

determination.

Comment 11: Petitioner argues that, in this case, the use of a U.S.

interest rate to calculate the U.S. credit expense does not represent

``commercial reality.'' According to petitioner, since Thai Merry has

no loans in U.S. dollars and, therefore, finances all of its operations

[[Page 14269]] in Thai baht, the actual credit expense to Thai Merry is

a home market borrowing expense. Petitioner argues that, if the

Department must use a U.S. interest rate, it should at least impute a

credit expense based on a Thai interest rate for the ``time on the

water'' period between shipment date and payment date.

Respondent argues that, with respect to the U.S. credit expense

calculated at the preliminary determination, the Department correctly

interpreted LMI-LA Metalli Industriale, S.p.A. v. United States, 912 F.

2d. 455, 460 (Fed. Cir. 1990)) (``LMI''). Respondent argues that LMI

was not a fact-specific decision in which the respondent company's

dollar loans justified the use of a U.S. dollar interest rate. Rather,

according to respondent, the Court focused on the availability of a

lower borrowing rate. Respondent argues that the Department reasonably

found the borrowing rate to be based on the currency of sale at the

preliminary determination and should continue to use a dollar interest

rate for the final determination.

DOC Position: While Thai Merry had liabilities denominated solely

in baht, some of its assets (e.g., receivables pursuant to U.S. sales)

were denominated in dollars. As such, the cost to Thai Merry is the

cost it would incur in discounting a dollar receivable which would be

based on a dollar interest rate.

Because we believe that our original decision was correct and is

supported by LMI, we have continued to use a U.S. dollar interest rate

to calculate the U.S. credit expense.

Comment 12: Respondent argues that the methodology employed by the

Department at the preliminary determination, while consistent with the

decision in Federal-Mogul, et. al. v. United States, (``Federal

Mogul'') 834 F. Supp. 1391 (CIT)), is inconsistent with the expectation

of tax neutrality under GATT and ignores the methodology sanctioned by

a higher court, the U.S. Court of Appeals for the Federal Circuit (see,

Zenith Corp. v. United States, (``Zenith'') 988 F.2d 1573, 1583 n.4

(Fed. Cir, 1993) which stated that it was appropriate for the

Department to adjust U.S. price by the amount of VAT actually paid on

home market sales. Because the adjustments pursuant to Federal Mogul

exaggerate existing margins, the use of this methodology is in

violation of GATT. Respondent cites Article VI(1) and Article VI(4) of

the GATT and Article 2(6) of the Agreement on Implementation of Article

VI of the GATT, as unambiguously requiring that differences in the

level of indirect taxes shall not create/inflate dumping margins.

Petitioner argues that respondent's reliance on footnote 4 of Zenith is

incorrect because the Court of International Trade found that

``footnote 4 (of Zenith) is clearly at odds with Zenith and the

language of the statute and is dicta.'' Petitioner states that in

Avesta Sheffield, Inc. et. al. v. United States, Slip Op. 93-217 (CIT

Nov. 18, 1993) the court also found footnote 4 of Zenith to be dicta.

Additionally, with respect to respondent's argument that the

Department's VAT methodology is in conflict with Article VI(4) of GATT,

petitioner argues that under a proper interpretation of this article,

in which a multiplier effect only occurs in the presence of a dumping

margin, the Department's methodology fully comports with GATT.

DOC Position: We agree with petitioner. The VAT methodology used at

the preliminary determination has been used by the Department for all

recent antidumping determinations and is in accordance with both the

statute and the GATT. Accordingly, for the final determination we have

continued to use the VAT methodology used for the preliminary

determination (see, Preliminary Antidumping Duty Determination and

Postponement of Final Determination; Color Negative Photographic Paper

and Chemical Components Thereof from Japan, 59 FR 16177, 16179, (April

6, 1994)).

Comment 13: Petitioner states that it is not clear whether the

Department verified that all of Thai Merry's advertising expenses were

related to lighter sales. Additionally, it is also not clear, according

to petitioner, whether Thai Merry's general ledger distinguishes

between advertising for lighters and advertising for scouring pads.

Petitioner notes that only advertising expenses associated with the

sale of disposable lighters should be used to adjust the FMV.

Respondent argues that the Department examined Thai Merry's

advertising expense adjustment and found no indication that the company

incurs advertising expense for anything other than the sale of

lighters. Accordingly, the Department should utilize the verified

figure for home market advertising expenses in the final determination.

DOC Position: We agree with respondent. During our verification of

Thai Merry's advertising expenses, we noted no information indicating

that Thai Merry paid for any advertising other than advertising for

lighters. Accordingly, we have used the advertising expense, as

verified, for the final determination.

Comment 15: Petitioner argues that sales of imprinted and non-

imprinted Aladdin lighters, as well as wrapped lighters, should be used

in the calculation of FMV without a difmer adjustment because the

physical differences between these lighters and standard lighters are

minor. According to petitioner, respondent's argument that wrapped and

imprinted lighters should not be used in the FMV calculation because

there are no U.S. sales of such lighters is dubious since respondent

has already argued that standard and child-resistant lighters are one

such or similar category.

Respondent argues that it is a basic tenet of the antidumping law

that U.S. sales should be matched to identical sales in the home market

or, if an identical product is unavailable, the most similar home

market product should be compared to the U.S. sale. At verification,

respondent was able to identify home market sales of imprinted and non-

imprinted Aladdin lighters, as well as wrapped lighters. Since

imprinted and wrapped lighters are neither identical nor most similar

to U.S. sales, they should be excluded from the Department's LTFV

comparison.

DOC Position: We agree with respondent. Petitioner seems to argue

that imprinted and wrapped lighters sold in the home market should be

matched to non-imprinted, non-wrapped lighters sold in the U.S. This is

in spite of the fact that merchandise which is identical to the

merchandise sold in the U.S. is being sold in the home market. While

imprinted and wrapped lighters are within the same such or similar

category, they are not identical or most similar to the merchandise

sold in the United States. Therefore, we have excluded imprinted and

wrapped lighters from the calculation of FMV for the final

determination.

Comment 16: Petitioner argues that the Department should find

critical circumstances to exist. According to petitioner, when May 1994

shipments are excluded (i.e., the period which the Department referred

to as a unique ``spike''), Thai Merry's post-petition shipments

increased by an amount that can still be considered massive under 19

CFR 353.16(f)(2). Petitioner argues that critical circumstance should

be found to exist since the Department focused on the effect of the

CPSC ban, and that removing this period for comparison purposes still

yields a post-petition period increase which is ``massive.''

Additionally, because it received notification of the Department's

preliminary negative critical [[Page 14270]] circumstances

determination after close of business (``COB'') on March 3, 1995 and

the deadline for submitting comments to the determination was March 6,

1995, petitioner indicates that it was not allotted ``sufficient time''

to comment on the Department's analysis.

Respondent states that, while the Department could have based its

negative preliminary critical circumstances determination on factors

other than the CPSC ban and its effect on shipments, the Department

correctly found that critical circumstances do not exist.

DOC Position: We first note that the Department's preliminary

negative critical circumstance determination was not based solely on

the effect of the CPSC ban on Thai Merry's shipments during the post-

petition period. In making the negative preliminary critical

circumstances determination, the Department stated that its decision

was ``[b]ased on (1) an evaluation of apparent domestic consumption

during the pre- and post-petition period, as calculated by petitioner,

(2) Thai Merry's share of domestic consumption during the pre- and

post-petition periods, (3) the shipment data provided by respondent as

compared to previous periods, and (4) consideration of the

circumstances surrounding the large increase in shipment in May 1994* *

*'' (see, page 7 of unpublished version of the Department's March 3,

1995 preliminary negative critical circumstances Federal Register

notice). Because no additional information has been provided by

petitioner that conflicts with our preliminary determination, we

continue to find that critical circumstances do not exist.

With regard to petitioner's claim that it did not have sufficient

time to analyze the Department's preliminary negative critical

circumstances determination, we note that petitioner did not request

additional information under administrative protective order (``APO'')

(i.e., the Department's February 27, 1995 analysis memo) with which to

make its analysis until late in the afternoon of March 6, 1995 (i.e.,

the deadline date). Additionally, we note that on March 6, 1995, the

Department offered petitioner an extension for filing comments on the

preliminary negative critical circumstances determination if requested.

Petitioner specifically declined to make an extension request (see,

March 7, 1995 memo to case file from David R. Boyland, Case Analyst,

Office of Countervailing Investigations).

Continuation of Suspension of Liquidation

We are directing the Customs Service to continue to suspend

liquidation of all entries of disposable lighters, that are entered, or

withdrawn from warehouse, for consumption on or after October 24, 1994,

the date of publication of our affirmative 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 of 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

Producer/manufacturer/exporter margin

percentage

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

Thai Merry.................................................. 25.04

All Others.................................................. 25.04

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

International Trade Commission (ITC) Notification

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

ITC of our determination. The ITC will now determine, within 45 days,

whether these imports are materially injuring, or threatening material

injury to the U.S. industry. If the ITC determines that material

injury, or threat of material injury, does not exist, the proceeding

will be terminated and all securities posted will be refunded or

cancelled. If the ITC determines that such injury does exist, the

Department will issue an antidumping order directing Customs officials

to assess antidumping duties on all imports of the subject merchandise

entered, or withdrawn from warehouse, for consumption on or after the

effective date of the suspension of liquidation.

Notification to Interested Parties

This notice also serves as the only reminder to parties 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: March 8, 1995.

Susan G. Esserman,

Assistant Secretary for Import Administration.

[FR Doc. 95-6523 Filed 3-15-95; 8:45 am]

BILLING CODE 3510-DS-P