Porcelain-on-Steel Cooking Ware From the People's Republic of China; Final Results of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[A-570-506]

Porcelain-on-Steel Cooking Ware From the People's Republic of

China; Final Results of Antidumping Duty Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of final results of Antidumping Administrative Review.

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SUMMARY: On February 3, 1997, the Department of Commerce (the

Department) published in the Federal Register the preliminary results

of its administrative review of the antidumping duty order on

porcelain-on-steel (POS) cooking ware from the People's Republic of

China (PRC) (62 FR 4979). This review covers shipments of the

merchandise to the United States during the period December 1, 1994

through November 30, 1995. Based upon our findings at verification and

our analysis of the comments received from interested parties, we have

made certain changes to our preliminary results. These changes are

addressed in the Facts Available, Export Price and Normal Value

sections below.

EFFECTIVE DATE: June 17, 1997.

FOR FURTHER INFORMATION CONTACT: Judy Kornfeld or Kelly Parkhill,

Office of CVD/AD Enforcement VI, Import

[[Page 32758]]

Administration, International Trade Administration, U.S. Department of

Commerce, 14th Street and Constitution Avenue, NW., Washington, D.C.

20230; telephone: (202) 482-2786.

Applicable Statute and Regulations

Unless otherwise stated, all citations to the statute are

references to the provisions effective January 1, 1995, the effective

date of the amendments made to the Tariff Act of 1930 (the Act) by the

Uruguay Round Agreements Act (URAA). In addition, unless otherwise

indicated, all citations to the Department's regulations are references

to the regulations as amended by the Interim Regulations published in

the Federal Register on May 11, 1995 (60 FR 25130).

SUPPLEMENTARY INFORMATION:

Background

On December 2, 1986, the Department published in the Federal

Register (51 FR 43414) the antidumping duty order on POS cooking ware

from the PRC. On December 4, 1995, the Department published a notice of

``Opportunity to Request Administrative Review'' (60 FR 62070) of this

antidumping duty order. We received a timely request for review, and on

February 1, 1995, we initiated the review, covering the period December

1, 1994, through November 30, 1995 (61 FR 3670). This review covers one

manufacturer/exporter of POS cooking ware from the PRC, Clover

Enamelware Enterprise, Ltd. (Clover) and its third-country reseller in

Hong Kong, Lucky Enamelware Factory Ltd. (Lucky). Clover and Lucky

(hereafter Clover/Lucky) are affiliated parties within the meaning of

section 771(33) of the Act. (See Memorandum from Case Analyst to File,

dated January 17, 1997, ``POS Cooking Ware from the PRC--Status as

Affiliated Parties,'' which is a public document on file in the Central

Records Unit (Room B-099 of the Main Commerce Building).)

On February 3, 1997, the Department published in the Federal

Register the preliminary results of its administrative review of the

antidumping duty order on POS cooking ware from the PRC (62 FR 4979).

There was no request for a hearing. On March 4, 1997, a case brief was

timely submitted by Clover/Lucky (respondent).

We verified the questionnaire response of Clover/Lucky during March

1997. The results of this verification are outlined in the public

version of the verification report dated May 8, 1997 (Verification

Report), which is on file in the Central Records Unit (Room B-099 of

the Main Commerce Building). We invited interested parties to comment

on our verification report. On May 11, 1997, Clover/Lucky submitted

comments and on May 14, 1997, General Housewares Corp. (petitioner)

submitted comments. On May 19, 1997, respondent submitted rebuttal

comments. The Department has now completed this review in accordance

with section 751(a) of the Act.

Scope of the Review

Imports covered by this review are shipments of POS cooking ware,

including tea kettles, which do not have self-contained electric

heating elements. All of the foregoing are constructed of steel and are

enameled or glazed with vitreous glasses. The merchandise is currently

classifiable under the HTS item 7323.94.00. HTS items numbers are

provided for convenience and Customs purposes. The written description

of the scope remains dispositive.

Separate Rates

In our preliminary results, we determined that Clover/Lucky was

entitled to a separate rate under the test established in the Final

Determination of Sales at Less Than Fair Value: Sparklers from the

People's Republic of China (56 FR 20588; May 6, 1991), as amplified in

Final Determination of Sales at Less Than Fair Value: Silicon Carbide

from the People's Republic of China (59 FR 22585; May 2, 1994). During

the course of verification, we confirmed that export prices for Clover

are not set by, nor subject to approval of, any government authority.

This point was supported by the company's sales documentation and

customer correspondence. We also confirmed, based on examination of

documents related to sales negotiations, written agreements and other

correspondence, that respondents have the authority to negotiate and

sign contracts and other agreements independent of government

intervention (see Verification Report, pp. 4-5).

Based on our examination of company records during verification, we

have determined that Clover had autonomy from the central government in

making decisions regarding selection of management. We also found no

involvement by any government entity in the selection of management or

hiring. The record therefore demonstrates an absence of de facto

government control over Clover.

The record similarly demonstrates an absence of de jure government

control over Clover, for reasons stated in the preliminary results of

this review. Accordingly, we determine that Clover/Lucky should receive

a separate rate. (For a further discussion, see Memorandum from Kelly

Parkhill to Barbara E. Tillman, dated January 17, 1997, ``Assignment of

Separate Rate for Clover/Lucky in the 1993-1994 and 1994-1995

Administrative Reviews of POS Cooking Ware from the Peoples Republic of

China,'' which is a public document on file in the Central Records Unit

(Room B-099 of the Main Commerce Building).)

Facts Available

Section 776(a)(2) of the Act states that, if an interested party

withholds information that has been requested or provides such

information but the information cannot be verified as provided in

section 782(i), the Department shall also use the facts otherwise

available in reaching the applicable determination. Section 776(b) of

the Act authorizes the Department to use, as facts otherwise available,

information derived from the petition, the final determination, a

previous review, or other information placed on the record. We

determine, in accordance with section 776(a)(2) of the Act, that the

use of partial facts available as the basis for calculating certain

constructed values is appropriate in this case, as discussed below.

(See Memorandum to Jeffrey Bialos from Barbara E. Tillman ``Use of

Facts Available'' dated May 30, 1997 (Facts Available Memorandum),

which is on file in the Central Records Unit (Room B-099 of the Main

Commerce Building).)

At verification, we were unable to tie reported labor hours to

supporting attendance and payroll documents. In addition, we discovered

that the labor hours reported on certain supporting documents were

altered for purposes of this antidumping proceeding; company officials

admitted to altering certain source documents in order to reconcile

them with the figures reported in the questionnaires responses. Because

Clover/Lucky did not act to the best of its ability in responding to

our request for this information pursuant to section 782(e)(4) of the

Act, we have drawn an adverse inference under the authority provided by

section 776(b) of the Act. As facts available, we are using the highest

labor cost for an individual piece of cooking ware from the information

submitted by Clover/Lucky. See, e.g., Notice of Final Results of

Antidumping Duty Administrative Review: Welded Carbon Steel Pipe from

Turkey (61 FR 69067, 69073; December 31, 1996).

Also at verification, we discovered certain information which had

not been previously reported in Clover/Lucky's

[[Page 32759]]

questionnaire responses. The company did not report three steel

invoices, certain minor chemicals used in the production of POS cooking

ware, well water consumed for industrial use and two insignificant

brokerage and handling fees. We verified and collected this new

information, which has been placed on the record as verification

exhibits. Nevertheless, because Clover/Lucky failed to provide this

information by the deadline for submission of information, in

accordance with section 776(a) of the Act, the Department must use

facts available. However, because Clover/Lucky was fully cooperative in

complying with our request for this information at verification, the

Department has determined that, in selecting among the facts available

to apply to these unreported expenses, no adverse inference is

warranted. Consequently, as facts available, we have used this new

information now on the record in determining these final results. See

Notice of Final Determination of Sales at Less Than Fair Value; Brake

Drums and Brake Rotors from the People's Republic of China; 62 FR at

99160, 99167 (February 28, 1997). (See also Facts Available Memorandum

for a further discussion.)

Export Price

As described in the preliminary results, the Department used export

price (EP) for sales made by Clover/Lucky, in accordance with section

772(a) of the Act. Pursuant to findings at verification, as discussed

in the Facts Available section above and Facts Available Memorandum, we

made minor adjustments to movement expenses to include import and

export declaration fees found at verification, which were not reported

in Clover/Lucky's questionnaire responses. (See Memorandum from Case

Analyst to the File, ``Analysis for the Final Results of the 1994-1995

Administrative Review of POS Cooking Ware from the PRC--Clover/Lucky''

dated May 30, 1997 (Calculation Memorandum), on file in the Central

Records Unit (Room B-099 of the Main Commerce Building).)

Normal Value

As stated in the preliminary results, in accordance with section

773(c)(3) of the Act, we calculated normal value (NV) by valuing

factors of production, except with respect to the factors of steel,

percolators and packing materials purchased by Lucky. For these

factors, which were paid for in market economy currencies, we used the

actual prices paid for the factors to calculate the factor-based NV in

accordance with our practice. See e.g., Lasko Metal Products v. United

States, 437 F. 3d 1442, 1443 (Fed. Cir. 1994). We calculated NV for

these final results as discussed in the preliminary results, making

adjustments for specific verification findings and certain revisions to

surrogate values, discussed below (for a fuller discussion see

Calculation Memorandum).

At verification, we discovered three steel invoices from

the period of review (POR) that were not reported in Clover/Lucky's

questionnaire responses. (See Facts Available section above.) As a

result, we are adjusting the average price paid for steel inputs to

include these three purchases.

At verification, we discovered five chemicals used in the

production of POS cooking ware during the POR which were not reported

in Clover/Lucky's questionnaire responses. (See Facts Available section

above.) We valued these chemical factors of production, which included

bentonite, antimony trioxide, potassium chloride, titanium dioxide and

sodium nitrite, by using the consumption amounts collected at

verification and surrogate per kilogram values obtained from the

Foreign Trade Statistical Bulletin-Imports, November 1995, from

Indonesia (Indonesian Import Statistics), which is public information.

At verification, we discovered that certain packing

materials purchased by Clover were paid for in renminbi, instead of

Hong Kong dollars, as reported in Clover/Lucky's questionnaire

response. However, because there is no other information on the record

that can be used to construct a value for these packing materials and

because these materials were invoiced in Hong Kong dollars, as facts

available, we have continued to use the actual prices charged in Hong

Kong dollars to Clover to value these materials.

In our preliminary results, we used a surrogate overhead

rate which included energy and indirect labor. Thus, we did not include

Clover/Lucky's reported energy factors. However, at verification we

discovered that water, one of the reported energy/utility factors, is

not only an indirect material input falling under factory overhead, but

also a direct material input in the production of cooking ware. In

addition, we discovered that well water is consumed for industrial use,

but, as the company does not pay for the well water, it was not

previously reported. (See Facts Available section above.) As described

above, we collected information at verification regarding the total

amount of water consumed for industrial use and calculated a cost for

water consumed in the production of POS cooking ware by using

Indonesian water rates reported in the ADB, Water Utilities Data Book

for the Asian Pacific Region for 1993, which is public information. We

adjusted these water rates to reflect yearly inflation using wholesale

price indices, excluding petroleum, obtained from the International

Financial Statistics published by the International Monetary Fund.

Analysis of Comments Received

We gave interested parties an opportunity to comment on the

preliminary results as well as the verification report. We received a

case brief from respondent and comments on the verification report from

respondent and petitioner.

Comment 1: In the preliminary results, the Department found that

Clover/Lucky did not report some or all factors of production data for

three models sold in the United States during the POR. Respondent

claims that two model numbers were inadvertently omitted from one

exhibit in the questionnaire response and the other model number

involved a typographical error. The company corrected these

discrepancies and submitted the revised information. Along with these

corrections, respondent also submitted changes to the local color oxide

consumption and scrap steel percentage reported in its response.

Department's Position: Because the information and minor

clarifications were submitted to the Department prior to verification

and because we were able to establish the accuracy of the information

at verification, we accepted them and have adjusted our final results

accordingly.

Comment 2: Respondent claims that the import and export declaration

fees paid in Hong Kong dollars during the POR were insignificant when

compared to the total sales to the United States during the POR.

Therefore, the company claims that it omitted these amounts and treated

them as indirect selling expenses.

Department's Position: Although we agree with respondent that these

fees are small relative to total sales to the United States during the

POR, we disagree that these fees should be classified as indirect

selling expenses. As discussed in the verification report, these fees

are charged for the preparation of import and export declarations for

each shipment the company arranges. These fees are directly tied to

each sale and should have been reported separately or included in

brokerage and handling expenses. We have therefore treated them as

direct selling expenses, specifically brokerage and handling

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expenses, for purposes of these final results.

Comment 3: With respect to the Department's discovery at

verification of three missing steel invoices, respondent claims that

these unreported invoices resulted in minimal changes to the average

steel prices paid for each thickness of steel. Respondent further

claims they did not have any significant effect on the computation of

the factors for steel usage.

Department's Position: The effect on the average steel price is

only one consideration in evaluating the significance of the three

missing steel purchases. The significance is also determined by the

proportion of the unreported purchases to total purchases during the

POR. Respondent failed to report approximately 18 percent of the POR

purchases of steel. However, because we collected the invoices as part

of our completeness check at verification, and they are now on the

record, as facts available we are including these three invoices in

calculating the average price paid for steel during the POR. See Facts

Available section above and Facts Available Memorandum.

Comment 4: With respect to its reporting of theoretical weights for

each product, respondent states that the reported theoretical weights

were generally greater than the actual weights for selected items at

verification, and therefore the steel usage overstatement, which had

the effect of increasing the normal value, was not an error in favor of

Clover. As to the frying pan, the actual weight again was shown to be

less than either the true theoretical weight or the incorrectly

calculated theoretical weight reported in the submission.

Department's Position: We have accepted respondent's methodology

for calculating theoretical weights as reported in its response because

we find it to be reasonable and not distortive for purposes of

performing the antidumping analysis. See, e.g., Gray Portland Cement

and Clinker from Mexico; Final Results of Antidumping Duty

Administrative Review (62 FR 17148, 17163; April 9, 1997). In our

Verification Report, we noted that the reported length of the handle

portion of the frying pan was incorrect, and, therefore, the

theoretical weight for the frying pan was miscalculated. We adjusted

the theoretical weight for the frying pan in calculating our final

results.

Comment 5: With respect to the five missing chemicals discovered at

verification by Department officials, respondent claims that these

chemicals were not omitted from the response altogether, but were

included in calculating the ``chemical 2'' factor input reported in its

response. Further, respondent understood that it was required to

provide actual quantities purchased during the POR that were delivered

to Clover.

Department's Position: Respondent included the quantity of the five

chemicals in an aggregate consumption figure in its response. However,

it did not identify these chemicals in the breakdown of that aggregate

figure. An aggregate figure alone is insufficient for reporting

purposes if the chemicals which make up this quantity are not properly

identified.

In order for the Department to properly calculate a factor value

for each input, it must have the exact breakdown of each chemical used.

The Department uses these reported inputs, along with appropriate

prices from a chosen surrogate country, to arrive at the normal value

of the subject merchandise in non-market economy cases. For that

reason, the Factors of Production questionnaire asks for each factor of

production used to produce one unit of the subject merchandise. As

mentioned earlier, we verified and collected the new information and

used surrogate per kilogram values obtained from the Indonesian Import

Statistics, which is public information.

Comment 6: With respect to the labor factor of production, and

specifically usage of the piece rate table, respondent states that this

table is based upon years of experience from performing the same

process over a period of 30 years on the same equipment as well as

historical data derived from the original Hong Kong factory. Moreover,

respondent claims the piece rate table is revised when needed based on

the changes in the production process and the changes in the efficiency

pattern of the workers. According to respondent, the table, which it

regards as its list of standard labor hours, includes the people

required to produce each piece or set, the time it takes to dip, clean

and hang each piece at each phase of the production process, the

technical specification for each machine, and the conveyer speed.

Respondent claims that no separate documentation exists or was

prepared, such as time and motion studies, to support the figures in

the piece-rate table because the piece rate table was regarded as

accurate and salaries were based upon this table.

Further, the workers are paid following the piece rate table based

upon the discretion of the supervisor who calculates the work/hour

credit for the quantities produced. The discretion is based upon the

knowledge and experience of the supervisor of the manufacturing

process.

Department's Position: Our findings at verification corroborate

respondent's description of how the standard hours in the piece rate

table were derived.

Company officials explained that the piece rate table is based

on estimates, many of which date back to when Lucky began producing

enamelware in Hong Kong 30 years ago. The table is updated

periodically to add standard times for new products. No time-in-

motion studies or timing of production process was [sic] done in

coming up with either the original Hong Kong standards or the

standards for new enamelware products. All standards were created

based on experience of those involved in creating the tables as to

how long the process should take to produce a given item. Since

these hours were based solely on the individuals' estimates, there

was no documentation available to support any of these figures.

See Verification Report, p. 21.

However, in speaking with company officials and in our examination

of the piece rate tables at verification, there was no indication that

the piece rate tables were revised on any basis other than the periodic

update described above; no mention was made of making changes to the

tables to reflect changes in the production process or worker

efficiency. Also, other than a brief description of the process, or the

machine used in a process, we saw nothing in the piece rate tables that

indicated technical specifications for machinery or conveyer speeds.

The accuracy of information submitted to the Department for use in

its determinations must be verifiable. The figures from the piece rate

table submitted by respondent in lieu of actual labor hours (as

requested by the Department in its original and supplemental

questionnaires) are not. No supporting documentation for these rates

exists. Statements by company officials that the rates are accurate and

reflect actual labor hours are not sufficient for the Department to

consider the reported figures to have been verified, particularly in

light of the fact that many of the standard times are 30 years old and

are based on the experience and production of workers at the original

plant located outside the PRC. As such, we continue to find that the

reported ``labor'' factor of production was not supported by source

documents at verification. Therefore, we have drawn an adverse

inference under the authority provided by section 776(b) of the Act.

For a further discussion of our decision to use adverse facts available

for this factor, see the Facts

[[Page 32761]]

Available section of this notice and the Facts Available memorandum.

Comment 7: With respect to the labor factor of production,

respondent also claims that the majority of Clover's production workers

were paid on a piece rate basis during the POR. Respondent additionally

states that the ``floating workers'' labor hours, which are only in the

Enameling Department, are tied to the labor hours of the ``fixed post

worker'' which are calculated from the piece rate table. Probationary

workers are not paid based on the piece rate table inasmuch as they

have not developed the skills to handle the work. Therefore, respondent

claims, the piece rate table accurately reflects the actual labor hours

used to produce the subject merchandise.

Department's Position: We disagree with respondent. In trying to

ascertain whether the reported hours from the piece rate table

accurately reflected the actual hours worked by Clover production

workers, the Department verifiers found that a large number of workers

were not paid based on the piece rate table. This includes the metal

shearer, any worker assigned to assist him, probationary employees,

workers in the Milling Department and ``floating workers,'' the latter

constituting approximately half of the workers in the Enameling

Department. In addition, even those workers whose pay is based on the

piece rate table, may have significant portions of their pay calculated

on a non-piece rate basis. For example, adjustments are made to working

hours for certain duties, equipment set-up, equipment down time and

assignment to unfamiliar machines.

Further, the Department was unable to reconcile the reported per

unit labor hours from the piece rate tables with the company's payroll

and attendance records. At verification, the Department selected three

cooking ware items for verification. Numerous errors and discrepancies

were found in our examination of these items. In one instance, we

discovered that the supervisor had made up the hours on certain

supporting documents. In another, we found that workers were paid for

days on which they were absent, and not paid for days on which they

worked. For two of the three cooking ware items, company officials

could not account for the discrepancies between the reported

information on labor and the source documents. As a result, none of the

reported labor hours for these items could be verified.

Together or separately, the significant number of workers paid on a

non-piece rate basis, the numerous adjustments to working hours, the

errors and discrepancies found at verification, and the inability to

reconcile the piece rate table with the company's payroll and

attendance records demonstrates that the per unit labor hours submitted

by respondent in the questionnaire response based on the piece rate

table cannot be relied upon for purposes of these final results. We

have therefore drawn an adverse inference under the authority provided

by section 776(b) of the Act. For a further discussion of our decision

to use adverse facts available for the labor factor of production, see

the Facts Available section of this notice and the Facts Available

Memorandum.

Comment 8: With respect to supporting documents relating to the

labor factor of production, respondent claims that because the volume

of items going through the Metal Cleaning Department is so large, and

varies throughout the day, the supervisor listed some of the figures

for the computed labor hours based on his estimation. Respondent claims

that computing labor hours in this department is complicated and

mistakes are easily made. The fictitious hours initially recorded by

the supervisor on the supporting documentation was not done for

purposes of responding to the Department. As to the fictitious entries

in the revised document, respondent claims that the supervisor

understood he was to support the payment of days worked against the

days actually paid, and therefore prepared the records on this basis,

not as a method to create fictitious documents to provide to the

Department. In any case, respondent believes that the incorrect

documents provided in two transactions does not invalidate the total

payment procedures.

Department's Position: The Department found numerous instances of

errors and discrepancies in its verification of respondent's reported

labor hours. These errors and discrepancies were not limited to two

instances; errors, discrepancies and/or deviations from the reported

labor hours and piece rate based pay were found in every department and

every cooking ware item the Department examined. In addition, many of

the errors or discrepancies affected more than one employee. In some

cases, respondent was able to account for or provide an explanation for

the error, discrepancy or deviation; however, in several instances, the

information submitted in the response could not be reconciled with the

company's attendance and payroll records (see Verification Report, pp.

20-24; and Facts Available Memorandum). Further, at verification, a

company official admitted to altering two supporting payroll documents

in an effort to support the figures reported in the response while

another official stated that he made up the labor hours recorded on

certain attendance/payroll documents (see Verification Report, p. 22,

23).

For these reasons, and for the reasons discussed in the

Department's Position on Comments 6 and 7, we find that the information

submitted by respondent with respect to the labor factor of production

cannot be relied upon. Therefore, with respect to this factor, the

Department must rely upon facts otherwise available. Further, because

respondent did not act to the best of its ability in responding to our

request for such information pursuant to section 782(e)(4) of the Act,

as demonstrated by its alteration of source documents and inability to

reconcile the submitted labor hours in response with the company's

actual labor hours as recorded in its attendance and payroll records,

we have drawn an adverse inference under the authority provided by

section 776(b) of the Act. For a further discussion of our decision to

use adverse facts available for this factor, see the Facts Available

section of this notice and the Facts Available Memorandum.

Comment 9: Respondent states that it now has an explanation for a

discrepancy that could not be resolved at verification. While reviewing

time cards and the Monthly Attendance Summary, the Department found a

worker who worked 13 days during the month of May but was paid for 18

days. Company officials now believe that the figure ``13 days'' was

actually overlooked when the payment records were created, and that the

worker was mistakenly paid for 18 days.

Department's Position: Respondent's comment addresses yet another

discrepancy discovered while the Department attempted to verify

reported labor hours. At verification, company officials could not

explain this discrepancy. It is not clear what respondent now means by

``overlooked;'' however, at this point, the explanation does not

override our findings at verification or our results in this review.

The purpose of verification is to verify the accuracy of the response

through examination of source documents, not to recreate supporting

source documentation that respondent has failed to maintain. See

Belmont Industries v. United States, 733 F. Supp. 1507, 1508 (CIT

1990). As stated above, with respect to labor hours, the Department is

relying upon facts otherwise available and we have drawn an adverse

inference under the authority

[[Page 32762]]

provided by section 776(b) of the Act. For a further discussion of our

decision to use adverse facts available for this factor, see the Facts

Available section of this notice and the Facts Available Memorandum.

Comment 10: Respondent claims that its purchases of packaging

materials from a PRC supplier during the POR was based upon quotations

and acceptances in Hong Kong dollars. Therefore, it reported these

purchases in Hong Kong dollars. The payment in renminbi at the market

rate of exchange was a manner of facilitating this payment.

Department's Position: At verification, Department officials

discovered that certain packing materials, reported in Hong Kong

dollars, were actually purchased from a PRC supplier in renminbi.

However, because the supplier originally charged Clover for these goods

in Hong Kong dollars, we are using the reported Hong Kong dollar prices

in our calculations, as was done in our preliminary results. See Normal

Value section above.

Comment 11: Respondent states that the Department's well water

consumption calculation is incorrect because it is based on a 365-day

period. The company claims that the figure should be based on the

number of working days during the POR, which was 282 days based on

Clover's payroll records.

Department's Position: We disagree with respondent. At

verification, the Department asked company officials to shut off the

well water to the plant and record the city water consumed over a

several day period. This period ran from Saturday through Monday. As

the sample period included both working and non-working days, it is

proper to estimate the annual water consumption on a 365-day basis

rather than the number of work days during the POR. In addition, the

282 day figure referred to by respondent in its comments was never

reported in its submission and, thus, not verified by the Department.

Comment 12: Respondent suggests a number of changes to the language

in the verification report which it claims are needed to address

alleged inaccuracies or omissions.

Department's Position: We have addressed respondent's suggested

changes in a memorandum to the file. See Memorandum to Barbara E.

Tillman from the Team ``Response to Respondent's Suggested Changes to

Language in the Verification Report'' dated May 30, 1997, which is on

file in the Central Records Unit (Room B-099 of the Main Commerce

Building).

Comment 13: Petitioner asserts that the Department should not

accept and use any of the data reported in Clover/Lucky's response.

Instead, the Department should reject Clover/Lucky's response in its

entirety and resort to total facts otherwise available to calculate

Clover/Lucky's dumping margin. According to petitioner, this margin

should be based on the highest rate ever calculated for any respondent

in the history of this proceeding, which is 66.65 percent.

Petitioner claims that it is the Department's practice to reject a

response in its entirety and resort to total facts available when it

discovers that information contained in the response was fabricated by

the respondent for purposes of the investigation or review. In the

Final Determination of Sales at Less than Fair Value; Sulfanilic Acid

From the Republic of Hungary (58 FR 8256, 8257; February 12, 1993)

(Sulfanilic Acid from Hungary), the Department discovered at

verification that a relevant portion of the respondent's questionnaire

response may have been fabricated, and the Department rejected the

respondent's entire response and used best information available (BIA).

Petitioner claims that this policy applies with even greater force

when, as in this review, the Department discovers direct evidence and/

or the respondent admits that it knowingly fabricated information

submitted to the Department.

Respondent claims that petitioner's statement that information

submitted in the response was knowingly false and fabricated by Clover/

Lucky is a mischaracterization of the verification report. At no time

did the company officials who prepared the final questionnaire

responses intend to mislead the Department or fabricate information for

the purposes of the questionnaire response. Source documents altered by

a Clover employee were not discovered by company officials until the

verification visit. Thus, the alteration made by the employee was not

known by the company officials at the time the questionnaire responses

were drafted. Petitioner also failed to mention that after the altered

source documents were returned to their original state, and a

transcribing error was accounted for, the source documents, worksheet

and information reported in the response tied to one another.

In regard to petitioner's assertion that the supervisor of the

Metal Fabrication department ``made up'' data on which Clover/Lucky

based its calculation of hours worked submitted in its responses,

respondent claims that these were only minor discrepancies and that,

further, the lasagna pan was discussed in the Department's verification

report without any reference to ``made up'' data. Moreover, the

allegedly ``made up'' information was initially compiled by the

supervisor for an internal report, not for the questionnaire response.

Again, the company officials who prepared the responses were unaware of

the fact that the supervisor in this department may have made up the

labor hour figures.

Department's Position: We disagree with petitioner that the use of

total facts available is appropriate in this review. The decision to

totally reject the response and use best information available in the

case cited by petitioner, Sulfanilic Acid from Hungary, was based on

the antidumping law as it existed prior to the Uruguay Round Agreements

Act (URAA). In deciding whether to reject Clover/Lucky's response and

use total facts otherwise available in this review, the Department must

examine the facts of the case in light of the new statutory guidelines

that exist under the Act, as amended by the URAA.

Section 782(e) of the Act states that:

In reaching a determination under section * * * 751 * * * the

administering authority * * * shall not decline to consider

information that is submitted by an interested party and is

necessary to the determination but does not meet all the applicable

requirements established by the administering authority * * *, if--

(1) The information is submitted by the deadline established for

its submission,

(2) The information can be verified,

(3) The information is not so incomplete that it cannot serve as

a reliable basis for reaching the applicable determination,

(4) The interested party has demonstrated that it acted to the

best of its ability in providing the information and meeting the

requirements established by the administering authority * * * with

respect to the information, and

(5) The information can be used without undue difficulties.

Clover/Lucky's sales response and its response for the factors of

production, other than labor, meet each of the above criteria. For

those miscellaneous items where the information did not meet the second

criterion, i.e., it could not be verified, the Department obtained the

necessary accurate information during the course of verification. This

information is being used as facts otherwise available in the

Department's calculations. (See Facts Available section and Facts

Available Memorandum.) Although the Department encountered some

difficulties in its verification of Clover/Lucky's response, many of

the errors in

[[Page 32763]]

the response and discrepancies between it and the company's books and

records were resolved at verification. The information now on the

record pertaining to the non-labor portions of Clover/Lucky's response,

including exhibits taken at verification, has been verified, is

sufficiently complete to be reliable, and can be used without undue

difficulties.

Further, the Statement of Administrative Action (SAA) provides

guidance concerning the use of facts available to the Department in

evaluating whether submitted information should be considered or

rejected under the new Act. It states:

Commerce * * * may take into account the circumstances of the

party, including (but not limited to) the party's size, its

accounting systems, and computer capabilities, as well as the prior

success of the same firm, or other similar firms, in providing

requested information in antidumping and countervailing duty

proceedings. SAA, H. R. Doc. 316, 103d Cong., 2d Sess. 865 (1994).

In NME cases, it is quite common for the Department to encounter

difficulties in obtaining complete and accurate information regarding

factors of production. See, e.g., Notice of Final Determination of

Sales at less Than Fair Value; Certain Cased Pencils from the People's

Republic of China (59 FR 55625, 55630; Nov. 8, 1994). The information

provided by Clover/Lucky in the non-labor portions of the response was

similar to and in many ways more accurate than information the

Department typically receives in responses provided by similarly

situated companies in the PRC or other NME countries. Therefore, the

Department considers that, with respect to the non-labor portion of

Clover/Lucky's response, the company has acted to the best of its

ability in providing the information and meeting the requirements

established by the administering authority.

As the Department has noted above, the same determination cannot be

made with respect to the company's submitted labor hours. In trying to

reconcile the company's reported labor hours to source documents, the

Department found a considerable number of errors and discrepancies as

well as numerous deviations from the piece rate table standards that

respondent used as the basis for its reported hours and which it

claimed reflected the actual working hours of its employees. In

addition, the Department discovered that, in one production department,

a supervisor recorded fictitious information on supporting payroll/

attendance documents while, in another department, payroll and

attendance records indicated that employees were either paid for days

they did not work or not paid for days they did (see Verification

Report, pp. 23-24).

Many of the discovered errors or discrepancies affected more than

one employee, indeed more than one category of employees. Although in a

few instances, respondent was able to account for or provide an

explanation for the error, discrepancy or deviation, in most instances,

the information submitted in the response could not be reconciled with

the company's attendance and payroll records (see Verification Report,

pp. 20-24; and Facts Available Memorandum).

Clover/Lucky's response with respect to labor does not meet the

criteria listed under section 782(e) of the Act. The information could

not be verified, nor can it serve as a reliable basis for reaching the

applicable determination. Further, due to the significant number of

errors and discrepancies, the information cannot be used by the

Department without undue difficulties.

More importantly, however, is the fact that, at verification, a

company official admitted to altering two supporting payroll documents

in an effort to support the figures reported in the response (see

Verification Report, p. 22). Regardless of the inability of the

Department to reconcile significant portions of the labor response with

the company's books and records, the alteration of supporting source

documents, on its own, is sufficient grounds for rejecting the

submitted labor hours and using facts otherwise available as it calls

into question the reliability of all submitted information with respect

to the labor factor of production.

For all of the above reasons, we find that the information

submitted by respondent with respect to the labor factor of production

cannot be relied upon. Therefore, with respect to this factor, the

Department has relied upon facts otherwise available. Further, because

respondent did not act to the best of its ability in responding to our

request for such information pursuant to section 782(e)(4) of the Act,

as demonstrated by its alteration of source documents and the numerous

errors and discrepancies discovered during the course of the

verification, we have drawn an adverse inference under the authority

provided by section 776(b) of the Act. For a further discussion of our

decision to use adverse facts available for this factor, see the Facts

Available section of this notice and the Facts Available Memorandum.

The Department has considered petitioner's argument that the

alteration of source documents and recording of fictitious information

on certain supporting payroll documents calls into question the

reliability of the entire response, not just that portion pertaining to

labor. During our verification of the other portions of Clover/Lucky's

response, we did not find any indication that other source documents

had been altered or contained fictitious information. In many cases,

our verification of these other items was complete, in that the

reported figures for the entire year were checked and cross-checked to

all relevant source documents and records.

In addition, there was no indication that the company officials

preparing the response knew of the altered source documents or payroll

documents containing fictitious information prior to verification.

Further, these company officials were forthcoming about the documents

in question. When questions first arose about these source documents,

they spoke with the employees that had originally compiled the

information and immediately reported to the Department verifiers that,

in the first instance, the source documents had been altered, and in

the second instance, the information recorded on certain supporting

payroll documents had been made up. Finally, we found no evidence that

the company officials responsible for altering certain source documents

and reporting fictitious information on certain supporting payroll

records participated in compiling the information for the response

outside of their respective departments.

Based on the above, the Department does not consider the non-labor

information submitted by Clover/Lucky as it now appears on the record

to be unreliable. Therefore, as discussed above, and in accordance with

the mandate of section 782(e) of the Act, the Department cannot reject

the response in its entirety and use total facts otherwise available in

determining Clover/Lucky's antidumping margin.

The Department would like to clarify its position with respect to

two statements in respondent's rebuttal comments on this issue. First,

the verification report in no way suggests that the actions taken by

the Clover employee who altered the documents were ``clarified to the

satisfaction of the ITA.'' The Department does not condone the

alteration of source documents for purposes of the proceeding; it is

not possible for respondent to clarify this to our satisfaction.

Respondent quotes the verification report out of context; the statement

cited by respondent is merely

[[Page 32764]]

repeating the company's explanation of its resolution of the error,

including the alteration of source documents. As discussed above, the

Department considers the alteration of source documents by this

employee to be sufficient grounds not only for finding the affected

labor hours to have failed verification, but also for finding the

entire portion of the response with respect to labor to be not

verifiable.

Second, the production departments examined with respect to the

lasagna pan and round pie plate were not the same, as claimed by

respondent in its rebuttal brief. The two departments were,

respectively, the Metal Fabrication Department and the Metal Cleaning

Department (the latter department being the department in which the

supervisor made up the information on certain supporting payroll

documents) (see Verification Report, p. 22). Since the production

departments examined during the course of the verification were not the

same as claimed by respondent in its rebuttal comments, the conclusions

drawn by respondent are fundamentally incorrect and, therefore, cannot

be addressed further by the Department.

Comment 14: Petitioner states that if the submission of false

information alone does not render Clover/Lucky's response unusable, the

numerous additional discrepancies found by the Department's verifiers

should still require use of total facts available. In the eighth

administrative review, the Department preliminarily rejected Clover/

Lucky's response in its entirety and used total BIA based on Clover/

Lucky's failure of verification for information submitted to the

Department. Petitioner believes that the verification report in this

review addresses more numerous and extensive discrepancies than those

found in the eighth administrative review. Petitioner cites Silicon

Metal From Brazil; Final Results of Antidumping Duty Administrative

Review and Determination Not to Revoke in Part (62 FR 1954, 1969;

January 14, 1997) as support for using total, rather than partial facts

available.

Moreover, even if the Department determined that all of Clover/

Lucky's data except those relating to the labor factor of production

could be used, use of total facts available would still be necessary

because there is no reliable facts available information that can be

used as a surrogate for the flawed labor data. Petitioner cites Certain

Cut-To-Length Carbon Steel Plate From Sweden; Final Results of

Antidumping Duty Administrative Review (62 FR 18,396, 18,401; April 15,

1997) as support for this argument.

Respondent asserts in its rebuttal comments that there is clearly

no justification for rejection of its responses in their entirety. In

Final Determination of Sales at Less Than Fair Value; Paint Filters and

Strainers From Brazil (52 FR 19181, 19183; May 21, 1987), the

Department stated that finding omissions or errors in responses is

common during verification. A review of the petitioner's allegations,

compared with the overall accuracy of information submitted by Clover/

Lucky demonstrates that the errors and omissions found at verification

are not sufficient in themselves to invalidate or discredit Clover/

Lucky's response for the POR. Respondent also asserts that the

responses for each administrative review should be judged on their own

merits.

Respondent finally claims that the other discrepancies were

explained in its previously submitted comments, discussed above, and

should be regarded as verifiable after review of these explanations, as

the information submitted was not materially deficient. In addition,

the balance of the information reported in the responses was determined

to be correct.

Department's Position: We disagree with petitioner that the use of

total facts otherwise available is warranted in this review. As

explained above, the Department must evaluate whether to apply total

facts otherwise available in this review under section 782 (e) of the

Act.

Clover/Lucky's sales response and its response for the factors of

production, except with respect to labor, meet each of the criteria in

section 782(e). That aside, we also disagree that the errors found at

this verification, with respect to the non-labor portions of the

response, were more numerous or more serious than those found in the

previous administrative review where the Department decided that the

use of total best information available was appropriate. See Porcelain-

on-Steel Cooking Ware from the People's Republic of China; Preliminary

Results of Antidumping Duty Administrative Review (62 FR 4250; January

29, 1997).

The record in the two proceedings clearly shows that the Department

encountered far greater problems in verifying the non-labor portion of

the questionnaire responses in the earlier review. For example, in the

prior review, with respect to steel purchases from market economy

suppliers and steel consumption, the Department found numerous errors

in the reporting of steel purchases, was unable to tie steel

requisitions to inventory withdrawals, and could not corroborate the

submitted theoretical per-unit steel consumption figures with actual

readings or tie them to measurements in the technical drawings. See

Memorandum from Case Analyst to the File, dated May 28, 1997,

``Submission of the Verification Report (Public Version) from the 1993-

1994 Antidumping Administrative Review Proceeding of POS Cooking Ware

from the PRC to the Record for the 1994-1995 Antidumping Administrative

Review Proceeding of This Case'' (1993-1994 Verification Report), which

is on file in the Central Records Unit (Room B-099 of the Main Commerce

Building), pp. 2-8. Therefore, the Department determined that the

information regarding the price and quantity of steel, the major

material input into POS cooking ware was not sufficiently complete or

reliable to use in its calculations.

In the instant review, the Department was able to verify all

aspects of steel consumption, including the scrap rate, inventory

withdrawals, and the reported per unit steel consumption figures (see

Verification Report, pp. 15-17). Although the Department discovered

three unreported steel purchases, during the course of verification, it

obtained the missing invoices, determined that there were no other

unreported steel purchases, and confirmed the accuracy of the remaining

reported purchases (see Verification Report, p. 16). The missing

invoices are on the record and the Department has used the price

information contained in these invoices as facts otherwise available

for the unreported purchases (see Facts Available section and Facts

Available Memorandum). Therefore, unlike the prior review, the

information available to the Department regarding the price and

quantity of steel is sufficiently complete and reliable to use in its

margin calculations.

In the prior review, the Department was unable to verify the

consumption of enamel frit, another significant material input in the

POS cooking ware production process (see 1993-1994 Verification Report,

p. 8). In this review, following a correction to remove certain

quantities of clay and quartz from the reported enamel frit figure, the

Department was able to tie the reported amount of enamel frit consumed

to the company's books and records (see Verification Report, pp. 17-

18).

Also, in the prior review, respondent failed to report the quantity

of various energy inputs (fuel, water and electricity) consumed by

Clover/Lucky and there was no verifiable information

[[Page 32765]]

on the record regarding the consumption of these energy factors (see

1993-1994 Verification Report, pp. 1, 13-14). In this review,

respondent supplied these consumption figures. The Department found no

discrepancies in its verification of fuel consumption in this review

(see Verification Report, p. 26). The Department was also able to

verify electricity and city water consumption once the company had

revised their figures to reflect the actual rather provisional invoices

(see Verification Report, pp. 24-25). Further, the Department was able

to obtain an accurate estimation of industrial well water consumption,

which it had not been able to do in the previous review (see

Verification Report, p. 25).

Respondent's submitted figures for depreciation could not be

verified in the previous review. The Department selected the smallest

production department for verification because of the unwieldiness of

the company's records, yet the company was still unable to support the

depreciation expenses for a significant portion of the selected

department. The company was also unable to explain or demonstrate that

it kept track and could distinguish between molds and dies owned by

Clover, the PRC factory, and those on loan from Lucky, the parent

company located in Hong Kong (see 1993-1994 Verification Report, pp.

11-13). In this review, the Department was able to verify depreciation

expenses (see Verification Report, p. 26). Further, the company

demonstrated that it was able to distinguish between the molds and dies

owned by Clover and those on loan from Lucky, and the Department

confirmed that Clover's reported depreciation expenses did not include

depreciation expenses associated with the Lucky's molds and dies.

With respect to chemical inputs, the Department did discover that

respondent failed to identify five minor chemicals used in the

production process of POS cookware in this review (see Verification

Report, p. 18). These chemicals were part of an aggregate mixture of

chemicals described in the response as ``Chemical 2;'' the aggregate

figure included the quantities of these five chemicals but, because

they were not identified, these quantities were incorrectly allocated

to other chemicals in the mix. During the course of the verification,

we obtained an accurate breakdown of Chemical 2 and, as explained

above, have used this information as facts otherwise available in our

calculations (see Facts Available section and Facts Available

Memorandum).

Unlike the prior review, there is sufficient information on the

record of this proceeding, with respect to the non-labor portions of

the response, to serve as a reliable basis for our calculations.

Further, as explained above, the Department is rejecting the

information submitted by respondent with respect to labor and using

adverse facts otherwise available in its calculations (see Department's

Position on Comment 8, as well as the Facts Available section above and

the Facts Available Memorandum). We consider the information selected,

the highest labor cost for an individual piece of cooking ware from the

information submitted by Clover/Lucky, to be sufficiently adverse for

use in our calculations.

Final Results of Review

As a result of the comments received and our findings at

verification, we have changed the results from those presented in our

preliminary results of review. Therefore, we determine that the

following margins exist as a result of our review:

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

Margin

Manufacturer/exporter (percent)

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

Clover Enamelware Enterprise/Lucky Enamelware Factory...... 57.56

PRC-Wide Rate.............................................. 66.65

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

The Department shall determine, and the U.S. Customs Service shall

assess, antidumping duties on all appropriate entries. Individual

differences between United States price and NV may vary from the

percentages stated above. The Department will issue appraisement

instructions directly to the U.S. Customs Service.

Furthermore, the following deposit rates will be effective upon

publication of these final results for all shipments of POS cooking

ware from the PRC entered, or withdrawn from warehouse, for consumption

on or after the publication date, as provided for by section 751(a)(1)

of the Act: (1) For Clover/Lucky, which has a separate rate, the cash

deposit rate will be the company-specific rate stated above; (2) for

all other PRC exporters, the cash deposit rate will be the PRC-wide

rate stated above; (3) for non-PRC exporters of subject merchandise

from the PRC, the cash deposit rate will be the rate applicable to the

PRC supplier of that exporter.

These deposit rates shall remain in effect until publication of the

final results of the next administrative review.

Notification to Interested Parties

This notice also serves as a final reminder to importers of their

responsibility under 19 CFR 353.26 to file a certificate regarding the

reimbursement of antidumping duties prior to liquidation of the

relevant entries during this review period. Failure to comply with this

requirement could result in the Secretary's presumption that

reimbursement of antidumping duties occurred and the subsequent

assessment of double antidumping duties.

This notice also serves as a reminder to parties subject to

administrative protective orders (APOs) of their responsibility

concerning the disposition of proprietary information disclosed under

APO in accordance with 19 CFR 353.34(d)(1). Timely written notification

of the return/destruction of APO materials or conversion to judicial

protective order is hereby requested. Failure to comply with the

regulations and the terms of an APO is a sanctionable violation.

This administrative review and notice are in accordance with

section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)), section 777(i) of

the Act (19 U.S.C. 1677f(i), and 19 CFR 353.22.

Dated: June 3, 1997.

Robert S. LaRussa,

Acting Assistant Secretary for Import Administration.

[FR Doc. 97-15871 Filed 6-16-97; 8:45 am]

BILLING CODE 3510-DS-P