Notice of Final Determination of Sales at Less Than Fair Value: Melamine Institutional Dinnerware Products From the People's Republic of China

DEPARTMENT OF COMMERCE

International Trade Administration

[A-570-844]

Notice of Final Determination of Sales at Less Than Fair Value:

Melamine Institutional Dinnerware Products From the People's Republic

of China

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: January 13, 1997.

FOR FURTHER INFORMATION CONTACT: David J. Goldberger, Katherine

Johnson, or Everett Kelly, Import Administration, International Trade

Administration, U.S. Department of Commerce, 14th Street and

Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202)

482-4136, (202) 482-4929, or (202) 482-4194, respectively.

The Applicable Statute

Unless otherwise indicated, all citations to the Tariff Act of

1930, as amended (``the Act'') are references to the provisions

effective January 1, 1995, the effective date of the amendments made to

the Act by the Uruguay Rounds Agreements Act (``URAA'').

Final Determination

We determine that melamine institutional dinnerware products

(``MIDPs'') from the People's Republic of China (``PRC'') are being, or

are likely to be, sold in the United States at less than fair value

(``LTFV''), as provided in section 735 of the Act.

Case History

Since the preliminary determination in this investigation

(Preliminary Determination and Postponement of Final Determination:

Melamine Institutional Dinnerware Products from the PRC (61 FR 43337,

August 22, 1996)), the following events have occurred:

On August 22, 1996, Chen Hao Xiamen alleged that the Department

made a ministerial error in its preliminary determination. The

Department found that there was an error made in the preliminary

determination; however, this error did not result in a change of at

least five absolute percentage points in, but no less than 25 percent

of, the weighted-average dumping margin calculated in the preliminary

determination. Accordingly, no revision to the preliminary

determination was made. (See Memorandum from the MIDP/PRC Team to Louis

Apple dated September 16, 1996.)

In September through November 1996, we verified the questionnaire

responses of the following participating respondents and, where

applicable, their affiliates: Chen Hao (Xiamen) Plastic Industrial Co.

Ltd. (``Chen Hao Xiamen''), Dongguan Wan Chao Melamine Products Co.,

Ltd., (``Dongguan''), Gin Harvest Melamine (Heyuan) Enterprises Co.

Ltd. (``Gin Harvest''), Sam Choan Plastic Co. Ltd. (``Sam Choan''), and

Tar-Hong Melamine Xiamen Co. Ltd. (``Tar Hong'').

Additional published information (PI) on surrogate values was

submitted by petitioner and respondents on November 21, 1996. On

November 22, 1996, the Department requested that Chen Hao Xiamen,

Dongguan, Sam Choan, and Tar Hong submit new computer tapes to include

data corrections identified through verification. This information was

submitted on December 3 through 6, 1996.

Petitioner, the American Melamine Institutional Tableware

Association (``AMITA''), and the respondents submitted case briefs on

November 26, 1996, and rebuttal briefs on December 4, 1996. The

Department held a public hearing for this investigation on December 6,

1996.

[[Page 1709]]

Scope of the Investigation

This investigation covers all items of dinnerware (e.g., plates,

cups, saucers, bowls, creamers, gravy boats, serving dishes, platters,

and trays) that contain at least 50 percent melamine by weight and have

a minimum wall thickness of 0.08 inch. This merchandise is classifiable

under subheadings 3924.10.20, 3924.10.30, and 3924.10.50 of the

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

from the scope of investigation are flatware products (e.g., knives,

forks, and spoons).

Although the HTSUS subheadings are provided for convenience and

customs purposes, our written description of the scope of this

investigation is dispositive.

Period of Investigation

The period of investigation (POI) for all participating companies

is January 1, 1995, through December 31, 1995.

Separate Rates

Of the five responding exporters in this investigation, three--Gin

Harvest, Tar Hong Xiamen, and Chen Hao Xiamen (1) are wholly foreign-

owned and (2) make all sales to the United States of merchandise

produced by their company through Taiwan parent companies. Thus, we

consider the Taiwan-based parent to be the respondent exporter in the

proceeding. No separate rates analysis is required for these exporters.

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

Disposable Pocket Lighters from the People's Republic of China (60 FR

22359, 22361, May 5, 1995)).

Sam Choan is wholly foreign owned but its sales to the United

States are made from its facilities in the PRC. For this respondent, a

separate rates analysis is necessary to determine whether it is

independent from PRC government control over its export activities.

To establish whether a firm is sufficiently independent from

government control to be entitled to a separate rate, the Department

analyzes each exporting entity under a test arising out of the Final

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

People's Republic of China (56 FR 20588, May 6, 1991) and 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) (Silicon

Carbide). Under the separate rates criteria, the Department assigns

separate rates in nonmarket economy cases only if respondents can

demonstrate the absence of both de jure and de facto governmental

control over export activities.

1. Absence of De Jure Control

Respondents have submitted for the record the 1994 Foreign Trade

Law of the PRC, enacted by the State Council of the central government

of the PRC, which demonstrates absence of de jure control over the

import and export of goods from the PRC by ``foreign trade operators.''

The term ``foreign trade operators'' refers to legal persons and other

organizations engaged in foreign trade activities in accordance with

the provisions of the 1994 law. The companies also reported that MIDPs

are not included on any list of products that may be subject to central

government export constraints.

In prior cases, the Department has analyzed the provisions of the

law that the respondents have submitted in this case and found that

they establish an absence of de jure control (see Final Determination

of Sales at Less Than Fair Value: Bicycles from the People's Republic

of China (61 FR 19026, April 30, 1996) (Bicycles)). We have no new

information in this proceeding which would cause us to reconsider this

determination.

However, as in previous cases, there is some evidence that the PRC

central government enactments have not been implemented uniformly among

different sectors and/or jurisdictions in the PRC. (See Silicon Carbide

and Final Determination of Sales at Less Than Fair Value: Furfuryl

Alcohol from the People's Republic of China (60 FR 22544, May 8, 1995)

(Furfuryl Alcohol)). Therefore, the Department has determined that an

analysis of de facto control is critical in determining whether

respondents are, in fact, subject to a degree of governmental control

which would preclude the Department from assigning separate rates.

2. Absence of De Facto Control

The Department typically considers four factors in evaluating

whether each respondent is subject to de facto governmental control of

its export functions: (1) whether the export prices are set by or

subject to the approval of a governmental authority; (2) whether the

respondent has authority to negotiate and sign contracts and other

agreements; (3) whether the respondent has autonomy from the government

in making decisions regarding the selection of management; and (4)

whether the respondent retains the proceeds of its export sales and

makes independent decisions regarding disposition of profits or

financing of losses (see Silicon Carbide and Furfuryl Alcohol).

Each company asserted, and we verified, the following: (1) it

establishes its own export prices; (2) it negotiates contracts, without

guidance from any governmental entities or organizations; (3) it makes

its own personnel decisions; and (4) it retains the proceeds of its

export sales, uses profits according to its business needs and has the

authority to sell its assets and to obtain loans. In addition,

questionnaire responses on the record indicate that pricing was

company-specific during the POI, which does not suggest coordination

among or common control of exporters. During verification proceedings,

Department officials viewed such evidence as sales documents, company

correspondence, and bank statements. This information supports a

finding that there is a de facto absence of governmental control of

export functions. Consequently, we have determined that Dongguan and

Sam Choan have met the criteria for the application of separate rates.

PRC-Wide Rate

Because some companies did not respond to the questionnaire, we are

applying a single antidumping deposit rate--the PRC-wide rate--to all

exporters in the PRC (except the five participating exporters) based on

our presumption that those companies are under common control by the

PRC government. See, e.g., Bicycles.

Facts Available

Pursuant to sections 776 (a) and (b) of the Act, we have based the

PRC-wide rate on facts available, using adverse inferences, because the

non-responding companies have failed to cooperate to the best of their

ability. Section 776(a)(2) of the Act provides that ``if an interested

party or any other person--(A) withholds information that has been

requested by the administering authority, (B) fails to provide such

information by the deadlines for the submission of the information or

in the form and manner requested, subject to subsections (c)(1) and (e)

of section 782, (C) significantly impedes a proceeding under this

title, or (D) provides such information but the information cannot be

verified as provided in section 782(i)--the administering authority * *

* shall, subject to section 782(d), use the facts otherwise available

in reaching the applicable determination under this title.''

In addition, section 776(b) of the Act provides that, if the

Department finds that an interested party ``has failed to cooperate by

not acting to the best of its

[[Page 1710]]

ability to comply with a request for information,'' the Department may

use information that is adverse to the interests of that party as the

facts otherwise available. The statute also provides that such an

adverse inference may be based on secondary information, including

information drawn from the petition.

Section 776(c) of the Act provides that where the Department relies

on ``secondary information,'' the Department shall, to the extent

practicable, corroborate that information from independent sources

reasonably at the Department's disposal. The SAA, accompanying the

URAA, clarifies that the petition is ``secondary information.'' See,

SAA at 870. The SAA also clarifies that ``corroborate'' means to

determine that the information used has probative value. Id. However,

where corroboration is not practicable, the Department may use

uncorroborated information.

The exporters that did not respond in any form to the Department's

questionnaire have not cooperated at all. Further, absent a response,

we must presume government control of these and all other PRC companies

for which we cannot make a separate rates determination. Accordingly,

consistent with section 776(b)(1) of the Act, we have applied, as total

facts available the margin alleged in the petition, as adjusted by the

Department. We considered the petition as the most appropriate

information on the record to form the basis for a dumping calculation

for these uncooperative respondents. In accordance with section 776(c)

of the Act, we sought to corroborate the data contained in the

petition.

The petitioner based its allegation of U.S. price on catalog prices

of one of the respondents. The factors used in the petition are based

on petitioner's own production experience. The factors in the petition

consistent with the factors reported by responding companies on the

record of this investigation. The surrogate values used by petitioner

are based on publicly available information. Therefore, we detemine

that further corroboration of the facts available margin is

unnecessary.

We also applied adverse facts available to Dongguan based on the

fact that we were unable to verify its response. See Comment 20 in the

``Interested Party Comments'' section of this notice, below.

Fair Value Comparisons

To determine whether respondents' sales of the subject merchandise

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

export price (EP) to the NV, as described in the ``Export Price'' and

``Normal Value'' sections of this notice. In accordance with section

777A(d)(1)(A)(i), we compared weighted-average EPs for the POI to the

factors of production.

Export Price and Constructed Export Price

For Chen Hao Xiamen, Gin Harvest, Sam Choan, and Tar Hong, when the

subject merchandise was sold directly to the first unaffiliated

purchaser in the United States prior to importation and when

constructed export price (``CEP'') methodology was not otherwise

indicated, we calculated the price of the subject merchandise in the

United States in accordance with section 772(a) of the Act. In

addition, for Tar Hong, where sales to the first unaffiliated purchaser

took place after importation into the United States, we based the price

in the United States on CEP, in accordance with section 772(b) of the

Act.

We excluded from our analysis all sales of products with a minimum

thickness of less than 0.08 inch to the extent mistakenly or

erroneously reported by the exporter in its sales listing. For Tar

Hong, we also excluded all sales of three-piece sets where the combined

thickness of the three items was less than 0.24 inch because we were

unable to determine piece-specific prices and characteristics for such

sets. See Comment 10, below.

We corrected respondents' data for errors and omissions found at

verification. In addition, we made company-specific adjustments as

follows:

1. Chen Hao Xiamen

The calculation of EP for purposes of the final determination did

not differ from our preliminary calculations.

2. Dongguan

We based Dongguan's final dumping margin on adverse facts

available. See Comment 20.

3. Gin Harvest

We calculated EP in accordance with our preliminary calculations,

except for the following changes based on verification findings: (1) we

excluded sales of one product which we found to be outside the scope of

investigation; (2) we corrected the reported movement expenses for one

sale; and (3) we corrected for all sales the reported distance from the

factory to the port for calculating the surrogate value for foreign

inland freight.

4. Sam Choan

We calculated EP in accordance with our preliminary calculations,

except that we corrected the reported market-economy brokerage expense

for sales to one customer based on verification findings.

5. Tar Hong Xiamen

We calculated EP and CEP in accordance with our preliminary

calculations, except as follows, based on information derived at

verification.

We recalculated discounts by applying the reported discount

percentage to the gross unit price of the sale. We also recalculated

marine insurance by applying a percentage based on value, rather than

based on volume as reported, since this expense was incurred on a value

basis.

For CEP sales, we reallocated movement expenses and added an amount

for unreported U.S. brokerage expenses. We reallocated and corrected

indirect selling expenses, all freight expenses not reported elsewhere

(see Comment 15), and other expenses not reported elsewhere (see

Comment 18). In this reallocation, we recalculated by dividing the

combined POI expenses of Tar Hong's two U.S. affiliates, by the sum of

the POI sales values from these entities. We also recalculated reported

credit based on corrections to reported payment dates.

Normal Value

A. Factors of Production

In accordance with section 773(c) of the Act, we compared the NV

calculated according to the factors of production methodology, except

as noted below for Chen Hao Xiamen. Where an input was sourced from a

market economy and paid for in market economy currency, we used the

actual price paid for the input to calculate the factors-based NV in

accordance our practice. See Lasko Metal Products v. United States, 437

F. 3d 1442, 1443 (Fed. Cir.1994) (``Lasko''). For all producers, we

recalculated the values for materials purchased from market economies,

based on our verification findings. We excluded Taiwan VAT assessed on

Taiwan material purchases (see Comment 3).

Furthermore, for Tar Hong, we added PRC brokerage for market-

economy inputs. For Gin Harvest and Sam Choan, the equivalent charges

are included in the reported movement expenses as Hong Kong brokerage.

In addition, for Tar Hong and Gin Harvest we added freight from the

port to the factory for inputs purchased from market economies.

[[Page 1711]]

In instances where inputs were sourced domestically, we valued the

factors using published publicly available information from Indonesia.

Reported unit factor quantities were multiplied by Indonesian values.

From the available Indonesian surrogate values we selected the

surrogate values based on the quality and contemporaneity of data. As

appropriate, we adjusted input prices to make them delivered prices.

For those values not contemporaneous with the POI, we adjusted for

inflation using wholesale price indices published in the International

Monetary Fund's International Financial Statistics. For a complete

analysis of surrogate values, see the Valuation Memorandum: Preliminary

Antidumping Duty Determination of Melamine Institutional Dinnerware

Product from the People's Republic of China (PRC) dated August 14, 1996

(Preliminary Valuation Memorandum), and the Valuation Memorandum: Final

Antidumping Duty Determination of Melamine Institutional Dinnerware

Products (MIDP) from the People's Republic of China (PRC) dated

December 20, 1996 (Final Valuation Memorandum).

We added amounts for overhead, general expenses, interest and

profit, based on the experience of P.T. Multi Raya Indah Abadi

(Multiraya), an MIDP producer in Indonesia (see, also, Comment 2), as

well as for packing expenses incident to placing the merchandise in

condition packed and ready for shipment to the United States. We have

recalculated the percentages for overhead, selling, general and

administrative (SG&A), and interest expenses using the detailed public

version of Multiraya's financial statement placed on the record of this

investigation by the respondents. In our recalculations, as detailed in

the December 20, 1996 Final Valuation Memorandum, we have eliminated

the source of possible double counting for electricity alleged by

respondents in their case brief. For Tar Hong, we calculated a value

for the cost of transporting material purchases from the PRC port to

the factory using the surrogate value for truck freight. Based on

verification results, we revised calculations for Gin Harvest, as

follows. We revised the value of freight for certain material inputs to

correct the reported distance from the supplier to the factory. We also

revised reported electricity consumption and reported packing material

consumption for certain products. For Sam Choan, because freight data

for diesel fuel was not reported, we applied facts available based on

the furthest distance to a supplier cited in the response.

B. Multinational Corporation Provision

For Chen Hao Xiamen, petitioner alleged that section 773(d)(3) of

the Act, the special rule for multinational corporations, should be

applied to Chen Hao Xiamen's NV. We have determined that the record

evidence for Chen Hao Xiamen supports a finding that the first two

criteria of the MNC provision have been met. In order to determine if

the third criterion was satisified, we calculated NV for Taiwan-

produced merchandise (affiliated party NV) in addition to calculating

NV using the factors of production methodology, described above, to

determine whether affiliated party NV exceeded PRC NV.

We note that there are several ways in which the third criterion

may be applied in this case. In the preliminary determination, we found

that the affiliated party NV (price or COP, as appropriate) exceeded

the PRC NV for a substantial majority (by quantity) of the U.S. sales.

An alternative approach is to match each Taiwan transaction with its

most comparable PRC NV. For each Taiwan transaction, the PRC NV and the

Taiwan price are compared to each other; if the Taiwan price exceeds

the PRC NV for a preponderance of Taiwan sales (by quantity), all

comparisons of EP to NV are made using Taiwan sales as NV. Yet another

approach is to determine the number of models where the Taiwan NV is

higher than the NV based on the factors of production. Whichever

approach to apply the third criterion of the MNC provision is used,

however, the result in each case would be to use the Taiwan NV. In any

event, whether or not the MNC provision applies, the result would be

the same--a de minimis or zero margin for Chen Hao Xiamen.

In applying Taiwan NV, we compared Taiwan sales to Chen Hao

Xiamen's U.S. sales in the same manner as discussed in our preliminary

determination, except that we adjusted COP in the following manner: a)

we revised the financial expense to exclude foreign exchange gains, and

to include the interest expense associated with loans from affiliated

parties; and b) we adjusted factory overhead expenses to include an

amount for pension expenses. These changes are discussed in detail in

the final determination notice in the companion Taiwan investigation.

With regard to the calculation of Chen Hao Xiamen's factors of

production, at verification, we found that Chen Hao Xiamen did not

account for a rebate in its reported cost of melamine powder purchased

from a Taiwan supplier. We do not have sufficient information on the

record to accurately allocate this rebate to Chen Hao Xiamen's costs,

since neither Chen Hao Xiamen nor Chen Hao Taiwan identified the total

amount of purchases from this supplier that were eligible for this

rebate, and transferred to Chen Hao Xiamen, as discussed in the

Department's verification report of Chen Hao Taiwan. Consequently, we

have not adjusted Chen Hao Xiamen's melamine powder costs for the

rebate.

In addition, we added PRC brokerage and freight from the port to

the factory for market-economy inputs. We also calculated a value for

the cost of transporting material purchases from the PRC port to the

factory using the surrogage value for truck freight. Finally, we

revised the reported consumption of packing materials for certain

products, based on our findings at verification.

For comparisons of Chen Hao Xiamen's EP to NV based on Taiwan

prices, we made circumstance of sale adjustments for differences in

imputed credit, bank charges incurred on U.S. sales, and royalty

expenses incurred in Taiwan on Taiwan sales. As Chen Hao Xiamen did not

report credit expenses and bank charges in its sales response, we

calculated these expenses using payment information obtained during

verification. Chen Hao Taiwan, the parent company, reported in its

public questionnaire response that it did not borrow in U.S. dollars

and thus used the average short-term interest in the United States

during the POI of 8.83 percent, as reported in International Financial

Statistics, published by the International Monetary Fund, to calculate

imputed credit for its U.S. sales. We applied this same rate to

calculate credit expenses for Chen Hao Xiamen's U.S. sales.

Verification

As provided in section 782(i) of the Act, we verified the

information submitted by respondents for use in our final

determination. We used standard verification procedures, including

examination of relevant accounting and production records and original

source documents provided by respondents.

Interested Party Comments

General Comments

Comment 1: Scope of Investigation

Respondents argue that the scope of investigation should be revised

to exclude melamine dinnerware that exceeds a thickness of 0.08 inch

and is intended for retail markets when such products are accompanied

by

[[Page 1712]]

appropriate certifications presented upon importation to the United

States.

Petitioner objects to respondents'' scope revision proposal

because, it believes, it has no legal or factual basis and would result

in an order that would be very difficult to administer. Petitioner

further contends that antidumping orders based on importer

certifications of use, such as the proposal advocated by respondents,

are difficult to administer and should be avoided where possible.

Petitioner argues that if respondents want to produce merchandise for

the retail market that presents no scope issue, respondents can produce

merchandise of a thinner wall thickness that falls outside of the

scope.

DOC Position. We agree with petitioner. Petitioner has specifically

identified which merchandise is to be covered by this proceeding, and

the scope reflects petitioner's definition. As we stated in Final

Determination of Sales at Less Than Fair Value: Carbon and Alloy Steel

Wire Rod from Brazil (59 FR 5984, February 9, 1994), [p]etitioners'

scope definition is afforded great weight because petitioners can best

determine from what products they require relief. The Department

generally does not alter the petitioner's scope definition except to

clarify ambiguities in the language or address administrability

problems. These circumstances are not present here.

The petitioner has used a thickness of more than 0.08 inch, not end

use, to define melamine ``institutional'' dinnerware. The physical

description in the petition is clear, administrable and not overly

broad. Thus, we agree with petitioner that there is no basis for

redefining the scope based on intended channel of distribution or end

use, as respondents propose.

Comment 2: Calculation of Profit, Overhead, SG&A, and Interest

Petitioner proposes that the Department use a surrogate profit

figure based on sales made in the ordinary course of trade by

Indonesian producer, Multiraya, the respondent in the concurrent MIDP

from Indonesia investigation. Petitioner characterizes the profit

figure used at the preliminary determination (i.e., as derived from

Multiraya's 1995 financial statement) as inappropriate because it

covers non-subject merchandise, below-cost sales, and dumped export

sales--all of which petitioner contends should not be included in the

profit calculation.

Petitioner argues that the current law is very clear in that, when

available, profit for a constructed value (CV) calculation is home

market profit. Petitioner asserts that the Department's consistent

practice has been to use either the former statutory minimum of eight

percent or else a domestic, rather than an export, profit value.

Respondents argue that the Department should use the public

summaries of Multiraya's 1995 financial statement to calculate

surrogate overhead, SG&A, interest expense, and profit. According to

respondents, Multiraya exports merchandise that is virtually identical

to that exported from the PRC; therefore, Multiraya's company-wide

profit rate is pertinent to the valuation of PRC merchandise. To the

extent that the Department uses Multiraya's company-wide costs to

calculate constructed value in the Indonesian proceeding, respondents

contend that it should also base surrogate profit on company-wide

Multiraya data.

In addition, respondents argue that petitioner's profit calculation

is contrary to the Department's practice of basing NV in NME cases on

export data. Respondents contend that the Department's practice is

meant to ensure that product disparities like those reflected in

petitioner's profit calculation do not undermine the accuracy of the

CV. Moreover, respondents claim that there is a disparity between the

products sold by Multiraya in the home market and the products exported

by the PRC companies; the vast majority of products exported by the PRC

respondents were decorated and glazed, unlike Multiraya's home market

sales, which were virtually all undecorated and unglazed. Therefore,

the respondents argue that the Department should use the company-wide

profit from Multiraya's public version financial statement to calculate

the applicable surrogate profit percentage.

DOC Position. We agree with petitioner and have used as surrogate

profit a percentage derived from Multiraya's public version

questionnaire response. In this investigation, we are faced with the

unusual situation of having on the record both a public financial

statement from the surrogate country as well as the public version

questionnaire responses of the Indonesian respondent in the concurrent

investigation. The Department's preference is to use the most product-

specific information possible from the surrogate market to calculate

surrogate profit. Insofar as publicly ranged data may be imprecise, it

would be speculative to rely on such data as an accurate measure of

whether sales are below cost and outside the ordinary course of trade.

Accordingly, for the purpose of deriving a surrogate profit percentage,

we have used all sales in the public version, rather than excluding

allegedly below cost sales.

Comment 3: Tax Paid on Melamine Purchased From Taiwan

Petitioner argues that the Department should affirm its practice in

the preliminary determination and include the tax paid by the PRC

respondents on purchases of melamine powder from Taiwan in the

valuation of material costs. Petitioner asserts that the respondents

pay the Taiwan value added tax (VAT) to unaffiliated suppliers either

directly or through affiliated companies in Taiwan, and that the tax

imposes a net cost because the PRC companies are not collecting the VAT

from their customers. Consequently, petitioner contends that the tax

should be included in the material cost calculation. Petitioner claims

that even if the Taiwan government rebates to the respondent's

affiliate any such tax collected, it does not mean that the purchaser

benefits from the rebate.

Respondents argue that the Department should exclude from the

market-economy prices of material inputs the Taiwan VAT that was paid

upon purchase, but rebated or credited upon export from Taiwan to the

PRC. Respondents assert that the Department verified that Taiwan VAT

paid on materials purchased from Taiwan suppliers is credited to the

purchasers'' VAT liability account. As a result, respondents claim that

they receive a benefit equal to the amount of VAT paid. Thus, VAT is

effectively not paid on these exports.

DOC Position. We agree with respondents. At verification, we

confirmed that Taiwan VAT on melamine powder paid by the Taiwan

companies is offset by the VAT owed by the PRC purchaser (respondent).

This offset is equivalent to a rebate since the PRC purchaser receives

a credit against the VAT owed and does not have to pay a VAT amount (as

VAT owed is equal to the amount of VAT paid). The net effect is that

the respondent incurs a cost for melamine powder exclusive of VAT.

Accordingly, we have not added VAT from the market economy to the value

of these inputs.

Comment 4: Use of Taiwan Prices for Melamine Powder Purchased from PRC

Suppliers

Petitioner argues that the Department should not use Taiwan prices

for all melamine powder purchased by PRC producers if the producer has

obtained

[[Page 1713]]

some of its melamine powder from the PRC. Petitioner claims that it is

not enough to provide that the market-economy price may be disregarded

``where the amount purchased from a market economy supplier is

insignificant'' (Antidumping Duties; Countervailing Duties; Notice of

Proposed Rulemaking, 61 FR 7,309, 7,345 (February 27, 1996)). According

to petitioner, it should be the other way around--only if the amount

purchased within the non-market economy is insignificant will it be

appropriate to use the price actually paid to market economy suppliers

of the input to represent the overall cost of that factor of

production. Or, at a minimum, petitioner argues, the overall value of

the factor in question should be a weighted average of the surrogate

value and the market-economy price.

Respondents argue that petitioner offers no reasonable

justification as to why the Department should not use prices paid to

market economy suppliers to value melamine powder purchased from a PRC

supplier. Respondents state the Department's practice is to use the

price paid to a market economy supplier (See e.g. Bicycles) and that

this practice has been upheld by the Federal Circuit. Lasko Metal

Products, Inc. v. United States, 43 F.3d 11442 (Fed. Cir. 1994).

DOC Position. We agree with respondents. When melamine powder was

purchased from a market economy, we used the prices paid to market

economy suppliers to value this input, even though the producer did not

purchase 100 percent of the melamine powder from a market economy. We

believe that the market economy price is the most appropriate basis for

determining the value of melamine powder purchased from PRC suppliers.

Comment 5: Labor Rate Calculation

Petitioner argues that the Department's labor rate calculation

should reflect at most 50 weeks of work time, as opposed to the 52-week

work year that was used in the preliminary determination, because

Attachment 4 of the August 14, 1996, Preliminary Valuation Memorandum

notes that employers in Indonesia are required to provide paid annual

leave of at least two weeks per annum.

Respondents argue that just because Indonesian employers are

required to give two weeks paid leave per year does not mean that

workers actually take two weeks leave, but simply reflects the fact

that Indonesian workers have the option of taking this time while

receiving full pay. Respondents therefore argue that no adjustment is

necessary to the labor rate because the Department cannot assume that

the amount of leave allowed by employers is actually taken by workers.

DOC Position. We agree with respondents that our labor rate

calculation is correct. We used monthly labor rates from the 1995 issue

of Indonesia: A Brief Guide for Investors, which already include paid

leave and other benefits, as detailed in the Preliminary Valuation

Memorandum. We subsequently derived an hourly rate from the monthly

rates, which already includes some benefits. Accordingly, we believe

that it would be speculative to adjust the rate as reported for any

potentially used vacation days.

Comment 6: Inflation of Costs Denominated in U.S. Dollars

Petitioner argues that the Department made an error in its

preliminary determination by not inflating costs denominated in U.S.

dollars, particularly those for cardboard and containerization.

Petitioner contends that the costs in question are internal Indonesian

costs which which would have been incurred in rupiahs, even if they

happened to have been expressed in 1993 U.S. dollars. Petitioner claims

that the changes in the rupiah/dollar exchange rate have not reflected

the considerable inflation in Indonesia in recent years, so it is not

appropriate to leave these adjustments at their original dollar

amounts.

Respondents argue that, contrary to petitioner's suggestion, no

adjustment or conversion of figures denominated in U.S. dollars is

necessary. Respondents argue that the Department has rejected similar

requests in other NME cases. In this case, according to respondents,

the value and prices denominated in U.S. dollars are subject to the

risks and opportunity costs associated with the U.S. dollars, and are

not affected by Indonesian inflation. Respondents contend that

petitioner's exchange rate inflation adjustments and exchange rate

conversions would bring in numerous factors that would distort the

factor value.

DOC Position. With regard to the figures for cardboard and

containerization, we agree with respondents that no adjustment or

conversion of figures denominated in U.S. dollars is necessary. In

accordance with Department practice with regard to NMEs, surrogate

values reported in U.S. dollars are not adjusted for inflation. See

Final Results of Antidumping Duty Administrative Review: Tapered Roller

Bearings and Parts Thereof, Finished and Unfinished from the Republic

of Hungary (56 FR 41819, August 23, 1991) and Final Determination of

Sales at Less Than Fair Value: Ferrovanadium and Nitrided Vanadium from

the Russian Federation (60 FR 27957, 27963, May 26, 1995). See

Valuation Memorandum: Preliminary Antidumping Duty Determination of

Ferrovanadium from Russia dated December 27, 1994.

Comment 7: Duty on Melamine Powder

Petitioner believes that the Department should increase the cost of

melamine powder imported into the PRC by the PRC duty rate applicable

to such imports. Petitioner argues that import duties are as much a

feature of non-market economies as they are of market economies, and

that the proper rate in this case is the PRC duty rate. Petitioner

argues that inclusion of the PRC duty rate is necessary to reflect the

producer's actual cost for the imported input.

Respondents argue that the Department normally disregards such

rates since it deems all NME costs to be unreliable. Respondents

further argue that the Department cannot accept the valuation of PRC

import duties yet disregard all other PRC values and expenses.

DOC Position. We agree with respondents that we normally disregard

such a duty because it is a PRC cost denominated in RMB. See Final

Determination of Sales at Less Than Fair Value: Oscillating Fans and

Ceiling Fans from the People's Republic of China (56 FR 55271, October

25, 1991). Accordingly, we have not increased the cost of melamine

imported into the PRC by this duty rate.

Comment 8: Consumption and Yield Information

Petitioner argues that verification revealed Tar Hong's reported

consumption of both melamine powder and LG powder to be grossly

unreliable. Petitioner states that if the Department does not reject

the factor consumption data entirely, then an appropriate adjustment

would be to increase the melamine powder consumption for all Tar Hong

products by the largest percentage amount which the Department found to

be understated. Petitioner argues that this adjustment is conservative,

given that four of the five samples described in the verification

report were understated.

Similarly, petitioner claims that verification establishes that Gin

Harvest maintains product specific yield information, yet it reported

an overall yield figure which it applied to all of its products.

Petitioner further argues that, because Gin Harvest produces and sells

very different products to the United

[[Page 1714]]

States, these products necessarily have dramatically different product-

specific yields. This sharply differing yield result is fully

consistent with the yield information provided by the domestic industry

in this investigation, according to petitioner. Petitioner argues that

the Department should not accept the overall yield data supplied by Gin

Harvest because the issue of product-specific yields has been raised

numerous times in this investigation, yet Gin Harvest ignored its more

accurate data and submitted less accurate data in order to obtain a

lower margin. Finally, petitioner claims that if the Department accepts

Gin Harvest's yield data, it should apply the overall yield to each

heat treatment step used to produce each transaction listed in the U.S.

sales database.

Tar Hong asserts that the Department verified its melamine powder

and LG powder consumption allocation methodology and found no

discrepancies. Tar Hong further claims that petitioner attacks the

reliability of its melamine powder and LG powder allocations because of

the production sampling performed at the verification in Xiamen.

Although the Department's product sampling showed that per-unit,

product-specific consumption was greater than that reported in some

instances, according to Tar Hong, many variables (such as air

temperature and moisture content on the day of production and the

varying amounts of powder actually put into the mold by the individual

workers) affect this production process so that the per-unit

consumption figure will not be exactly the same for each production

run. Accordingly, Tar Hong argues that the Department should ignore

petitioner's request to increase the melamine powder consumption for

all products and instead use the figures reported by Tar Hong.

Gin Harvest argues that it and other respondents are unable to

report material consumption on a product-specific basis. Gin Harvest

claims that although the Department noted that Gin Harvest has some

production process records that would permit a calculation of product-

specific material consumption, it also noted that such records are not

maintained for any extended period of time by respondents in the normal

course of business. Gin Harvest argues that it should not be punished

for failing to provide data that it does not have.

DOC Position. The Department's preference is to use product-

specific data. Where such information does not exist, the Department

will use the most specific and reasonable information available (See,

Final Determination of Sales at Less Than Fair Value: Welded Stainless

Steel Pipe from Malaysia (59 FR 4023, 4027, January 28, 1994). With

regard to consumption, petitioner's argument relies on a selective

reading of the Tar Hong verification report. Although our initial

sampling, based solely on material withdrawn from inventory, indicated

potential under-reporting, a second, more comprehensive sampling, which

also accounted for materials returned to inventory, showed no

consistent pattern of under-or over-reporting (See Tar Hong

verification report at pages 24-25.) Although the documents used in our

sampling could be used to calculate product-specific yields, the only

documents we reviewed were contemporaneous with verification, not the

POI. Verification revealed no indication that Tar Hong retained records

at this level of detail (records showing materials withdrawn and

returned to inventory) for more than a week. Therefore, while our

sampling showed some variations between products, there is no

information on the record to indicate that Tar Hong's overall

production factor methodology is distortive. In the absence of any

other, more specific allocation methodology available to Tar Hong, we

have accepted its consumption factor reporting.

With regard to Gin Harvest's yield data, it reported an overall

yield figure because it claimed that its records do not permit it to

calculate product-specific yield data. Our verification revealed

nothing to contradict the claim that Gin Harvest does not maintain

product-specific yield data in its normal course of business.

Further, petitioner's proposed adjustment methodology of applying

the yield percentage at every production stage encountered is

inconsistent with the Department's verification findings regarding the

manner in which the PRC respondents, including Gin Harvest, calculate

yield. Petitioner's methodology incorrectly assumes that, at each step

(i.e., heat treatment, decoration, and glazing), the producer inspects

the product and discards semi-finished products which do not meet

specifications. However, as described in the respondents' questionnaire

responses, it is not until all production steps have been completed

that the respondents discard off-specification merchandise. That is,

the overall yield figure is calculated based on production results

after all production steps are completed. There is no information on

the record to identify the actual yields at each step of production

based on the POI production records maintained by Gin Harvest. Applying

this overall yield to each production step would effectively double-or

triple-count the rejection rate and thus unduly increase Gin Harvest's

consumption factors. Gin Harvest's allocation was reasonable based on

the records available to it. Accordingly, we have made no adjustment to

its reported material consumption factors.

Company-Specific Comments

Tar Hong

Comment 9: Reporting of CEP and EP Sales

Petitioner believes that Tar Hong incorrectly reported certain CEP

sales as EP sales. Petitioner argues that the burden of proof is on

respondent to satisfy the Department's four-prong test regarding the

classification of U.S. sales as cited in the Department of Commerce,

Antidumping Manual, Chapter 7 at page 3 (revised 8/91). Petitioner

contends that in this case, Tar Hong has not even addressed two of the

Department's four criteria. Petitioner argues that at verification, the

Department found that the U.S. entities play a central role in these

sales, which resemble reported CEP sales in all aspects, except that

they are not introduced into U.S. inventory. According to petitioner,

Tar Hong's U.S. affiliates have the authority to set the price and the

quantity of the potentially dumped merchandise. Petitioner also

disagrees with Tar Hong's contention that the role of the U.S.

affiliates is less than that of the U.S. affiliates in the first

administrative review of Certain Corrosion-Resistant Carbon Steel Flat

Products from Korea: Final Results of Antidumping Duty Administrative

Review, 61 FR 18547, 18551 (April 26, 1996) (Carbon Steel). Petitioner

argues that the Korean firms in Carbon Steel had full control of the

U.S. sales, and the U.S. affiliates were merely paper processors, as

evidenced by the information placed on the record by the Korean firms

indicating that the U.S. affiliates had no power to negotiate or

approve sales. Consequently, petitioner argues that the Tar Hong sales

in question should be treated as CEP transactions.

Tar Hong argues that it properly classified certain sales as EP

sales in accordance with the Department's three-factor test, as stated

in Carbon Steel. First, Tar Hong claims that it has demonstrated that

the sales transaction occurs prior to importation into the United

States. Secondly, Tar Hong states that direct shipment from Tar Hong

Xiamen to the unrelated U.S. customers is a normal commercial

distribution

[[Page 1715]]

channel used for these U.S. customers. Lastly, Tar Hong asserts that

the U.S. affiliates perform limited liaison functions serving primarily

as processors of sales-related documentation and communication links

with the unrelated buyers. Accordingly, Tar Hong claims that the

functions performed by its U.S. affiliates are consistent with selling

functions that the Department has determined in other cases to be of a

kind that would normally be undertaken by the exporter (see Carbon

Steel).

DOC Position. We agree with respondents that these sales are

properly treated as EP sales. Based on the record evidence, Tar Hong's

U.S. affiliates are merely processors of sales-related documentation

and a communication link with the unrelated customers. Although these

entities play an important role in Tar Hong's sales and distribution

process, that role is limited to sales documentation processing and

communication links. We find no compelling evidence in Tar Hong's

responses or in our verification findings to treat these sales as CEP

sales. Consistent with our approach in such cases as Final

Determination of Sales at Less Than Fair Value: Coated Groundwood Paper

from Finland (56 FR 56363, November 4, 1991), we have treated these

sales as EP sales.

Comment 10: Transactions Involving Dinnerware Sets

Petitioner states that Tar Hong improperly included non-subject

merchandise in its reported sales when it added the thicknesses of the

individual pieces of a set (plate, bowl, and cup) together to determine

whether the dinnerware set was subject merchandise. Similarly,

petitioner argues, pricing for dinnerware sets as well as the factors

of production was reported on a combined basis using the plate in the

dinnerware set as the identified product. Petitioner argues that this

grouping of data for sets was contrary to the instructions in the

questionnaire and prevents an item-by-item fair value comparison.

Petitioner asserts that if the Department uses this data, it should

apply the highest margin for any other transaction to all transactions

involving sets as facts available.

Tar Hong contends that the Department has data necessary to

calculate piece-specific margins for Tar Hong's set sales and factors

because the Department verified that Tar Hong reported the data for

sales of products sold in sets on the same basis it reported the data

for the factors of production for these products.

DOC Position. We agree with Tar Hong and have appropriately

adjusted our calculations to ensure a proper comparison. We excluded

all sales of sets where the combined thickness is less than 0.24 inch.

We have considered all pieces of a set to be subject merchandise when

measurements are equal or greater than 0.24 inch.

Comment 11: Unit Price Reporting

Petitioner contends that, in addition to the errors identified by

the Department concerning Tar Hong's reporting of U.S. unit prices on a

per-piece, rather than on a per-dozen, basis for many sales, there is

reason to believe that there are additional errors of this type which

were not individually identified by the Department. Accordingly,

petitioner asserts that the Department should compare the margin in the

final determination for Tar Hong's sales of pieces with the margin

calculated on the sale of dozens or cases, and if the margins for the

piece sales are lower than the margins for dozens and cases, then, as

facts available, the piece calculations should be disregarded and the

sales of dozens or cases should be relied upon for the final

determination.

Tar Hong argues that the errors found in its unit reporting do not

merit application of facts available. Tar Hong contends that the

Department verified that no other sales reported contained such errors.

DOC Position. We examined this issue at verification and are

satisfied that the record is complete and accurate with respect to the

reported quantities and per-unit prices of U.S. sales. Accordingly, we

used the corrected information in our calculations for the final

determination.

Comment 12: Production Quantity Data

Petitioner claims that the production quantity data submitted by

Tar Hong on two prior occasions is grossly inaccurate, and that Tar

Hong's shifting stance regarding the amount of merchandise produced

during 1995 confirms that its most recent submission on October 23,

1996, is not reliable. Petitioner argues that the total production

quantity is a figure that is fundamental to the integrity of the

submission, and that Tar Hong's repeated corrections leave no

reasonable basis to believe that its latest number is accurate.

Accordingly, petitioner argues, the figure should be rejected.

Tar Hong claims that the Department verified its production

quantities and confirmed the accuracy of its data.

DOC Position. We agree with Tar Hong. We have accepted Tar Hong's

explanation for the discrepancies and have verified its response in

this regard. Section 782(e) of the Act states that the Department shall

not decline to consider information that does not meet all of its

requirements 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 Department with respect to the information, and (5) the information

can be used without undue difficulties.

Tar Hong's information meets all of these requirements.

Accordingly, we have no basis to conclude that the earlier responses

distorted the Department's analysis or otherwise impeded this

proceeding.

Comment 13: Total Sales Value

Petitioner states that Tar Hong has dramatically overstated the

unit price on a number of U.S. sales transactions. Petitioner contends

that if the Department concludes that the application of general facts

available for Tar Hong is inappropriate (see Comment 19 below), it must

adjust for this exaggeration of submitted prices by assuming that

affected sales are of products with margins, and deducting the amount

that the CEP and EP sales values were overstated from total U.S. price.

Tar Hong claims that any discrepancy in its U.S. sales value

reconciliation is due to petitioner's miscalculation of Tar Hong's

sales values. Tar Hong adds that petitioner offers no explanation of

its calculation, and suggests that petitioner's calculation failed to

properly account for sales sold in units of cases or dozens.

DOC Position. We agree with Tar Hong. Petitioner misinterpreted the

information in a verification exhibit. The document does not include

the EP sales booked in Taiwan; it applies only to the sales booked in

the United States. Moreover, the exhibit cited by petitioner is not the

only document the Department used to confirm Tar Hong's sales

reporting, as discussed in the verification report. Based on the sum of

our verification findings, we found no discrepancies in the total

volume and value of sales reported.

Comment 14: Ocean Freight

Petitioner argues that Tar Hong incorrectly assumed that all ocean

[[Page 1716]]

freight shipments were made in full container loads and that, the

reported volumes of the master pack cartons, which are the basis for

the movement charge allocations, are wrong. Petitioner claims that

although Tar Hong provided revised information for the master pack

cartons at verification, this information was not verified and

therefore cannot be used. Petitioner argues that for purposes of the

final determination, the container load error must be corrected and

that, for the master carton error, either the Department should use

general facts available or the highest unit freight reported for each

freight adjustment affected by the errors.

Tar Hong contends that the Department should accept its revised

allocation because the Department found that Tar Hong's volume-based

methodology to recalculate international freight was supported by its

records.

DOC Position. With regard to Tar Hong's ocean freight shipments, we

found that the majority were in fact made in full container loads. Per

our instructions, Tar Hong has reallocated EP ocean freight to account

for our verification findings. We have also reallocated CEP ocean

freight expenses based on our verification findings. In both

situations, we consider the allocations to be proper.

Furthermore, although we did not specifically verify the revised

information submitted at verification with regard to the volumes of the

master pack cartons, the remainder of Tar Hong's response was verified,

and the revised information is consistent with Tar Hong's verified

information. Accordingly, we have accepted Tar Hong's information for

the purpose of recalculating CEP movement expenses.

Comment 15: U.S. Warehouse to Customer Freight

Petitioner contends that Tar Hong's statements that it does not

incur freight charges from the U.S. warehouse to the customer are

unsupported. Petitioner claims that the verification report notes that

Tar Hong's invoices report terms of CEP sales as ``delivered''.

Petitioner therefore asserts that all freight expenses from Tar Hong's

financial statements should be allocated to CEP sales.

Tar Hong claims that the Department verified that, notwithstanding

the printed ``Delivered'' term on Tar Hong's invoice, Tar Hong's CEP

customers either come to Tar Hong's warehouse and pick up their

purchased products, or make their own freight arrangements. Tar Hong

asserts that the Department verified that, for the few deliveries that

it made using its own vehicles, its allocation methodology was

reasonable.

DOC Position. We have accepted Tar Hong's explanation, but have

recalculated and reclassified freight expenses based on our

verification findings. Tar Hong's methodology allocated freight

expenses to all CEP sales as a movement expense. That is, Tar Hong made

no attempt to identify which particular sales may have actually

incurred warehouse to customer freight. Since Tar Hong did not, and

could not, allocate this expense only to those sales which incurred the

expense, we determine that it is appropriate to treat all movement

expenses not otherwise accounted for (i.e., warehouse to customer

expenses) as indirect selling expenses. In our recalculation of

indirect selling expenses, we have also included an amount for freight

expenses identified in the financial statements, but not included in

Tar Hong's calculation. (See Comment 18 below.) In this manner, we have

included all expenses related to freight.

Comment 16: Packing Weights

Petitioner argues that it is clear from the verification report

that Tar Hong's packing weights are unreliable. Petitioner contends

that the Department should increase the packing costs by the largest

percentage of under reporting found at verification or, at the least,

increase these weights by an average of the under reporting of the five

samples.

Tar Hong argues that packing costs are reliable and require no

further adjustment because the measured weights of the packing

materials were within acceptable tolerances.

DOC Position. We agree with Tar Hong. We verified that the packing

weights were within acceptable tolerances.

Comment 17: Unreported Returns and Claims

Petitioner states that where verification exhibits show evidence of

returns and claims for Tar Hong that were not reported as U.S. warranty

expenses or allowances, at a minimum, the Department should apply

information from the verification and adjust total U.S. price

accordingly.

Tar Hong claims that petitioner's discovery of alleged unreported

returns and claims relate to nonsubject merchandise. Accordingly, no

adjustment by the Department is necessary.

DOC Position. We agree with Tar Hong. We found no evidence at

verification of warranty claims for the subject merchandise. Tar Hong's

explanation is consistent with our findings.

Comment 18: Unreported Movement Charges

According to petitioner, the financial statements of Tar Hong's

U.S. affiliates indicate that there are certain expenses that were

incurred by respondent, but not reported as selling expenses or

movement charges. Petitioner contends that the Department should

account for these expenses by applying the total of these amounts

directly against the margins.

Tar Hong states that the Department verified that the allegedly

unreported charges were not direct selling expenses or movement

charges, as petitioner claims. Accordingly, no adjustment to the margin

calculation is warranted.

DOC Position. We agree with petitioner that these expenses should

be accounted for. However, we disagree with petitioner's contention

that the amount of the expenses should be applied directly against the

margins. Petitioner offers no basis to consider this approach and there

is no precedent for applying it here. Instead, we have included these

expenses as part of our recalculation of indirect selling expenses. As

discussed above at Comment 15, we have treated Tar Hong's unreported

warehouse-to-customer expenses as indirect selling expenses. The

additional expenses identified by petitioner appear properly classified

in this instance as indirect selling expenses as well.

Comment 19: Use of Facts Available for Tar Hong

Petitioner argues that Tar Hong's EP and CEP prices are grossly

overstated through a series of reporting errors or misstatements,

including those addressed above. Accordingly, petitioner contends, the

Department cannot reasonably conclude that the U.S. sales data base is

reliable. Further, petitioner contends that Tar Hong's NV data is also

unreliable because, despite numerous changes, Tar Hong's total

production figure is inaccurate, its treatment of sets makes a proper

factors analysis impossible, and the weights of the reported products

as well as the packing materials are systematically understated.

Moreover, petitioner claims that the corrections submitted at

verification should be rejected because an entirely new factors

database was submitted and petitioner did not have a meaningful

opportunity to comment on the new data. Petitioner concludes that the

Department should use facts available because Tar Hong's data is

unreliable and no acceptable means of correction exists.

[[Page 1717]]

Tar Hong argues that the Department was able to verify all

corrections to source documents and the reason for the corrections.

Furthermore, according to Tar Hong, there is no evidence that Tar Hong

failed to cooperate with the Department by not acting to the best of

its ability to comply with requests for information. Tar Hong believes

that in those situations where there are discrepancies, the Department

should weigh the record evidence to determine what type of change, if

any, would be the most probative of the issue under consideration.

DOC Position. We do not agree with petitioner's assertion that Tar

Hong's data is unreliable and no acceptable means of correction exists.

Moreover, we do not agree with petitioner that Tar Hong's revised

factors database contains entirely new data. As discussed in our

responses above, we have rejected many of petitioner's claims with

regard to Tar Hong's data. The remaining errors are minimal and do not

undermine the integrity of the response. Thus, consistent with our

approach in such cases as Ferrosilicon from Brazil: Final Results of

Antidumping Duty Administrative Review, 61 FR 59407 (November 22,

1996), the use of facts available is not warranted in this instance.

Dongguan

Comment 20: Facts Available

Petitioner argues that the seriousness of the defects in Dongguan's

response is evident in that the Department was unable to verify its

U.S. sales. Petitioner claims that the verification report records the

Department's efforts on this critical issue, and confirms the suspect

nature of the data. For example, petitioner cites the Department's

finding in the verification report that no confirmation of sales of the

subject merchandise to the corporate tax statement was possible.

Furthermore, petitioner argues that the Department was unable to

complete a sales quantity document trace and that Dongguan's sales

records contained duplicate invoices. Petitioner further contends that

a failed verification is basically the same as a failure to respond at

all and facts available must be used.

Dongguan argues that, although the Department was unable to tie the

sales beyond the general ledger, it also noted that it did not observe

any apparent inconsistencies in the sales reporting, as revised through

verification. Dongguan claims that all other aspects of the accounting

system were verified as accurate and reliable. Dongguan also claims

that, although the Department was unable to tie sales to the corporate

income tax statement, it was able to verify the general integrity and

reliability of the sales reporting data from the invoices to the

response and to its accounting system. Dongguan asserts that the

Department was also able to verify that non-melamine sales income

reported in the accounting system was posted accurately and reliably in

the corporate tax system. Accordingly, Dongguan believes that the

Department need not apply facts available, given the overall

reliability of the accounting system.

DOC Position.We agree with petitioner. Dongguan's failure to

reconcile its sales response beyond the general ledger, coupled with

the absence of reliable alternative support documentation, such as

verifiable sequential invoice records, leaves no basis to accept the

integrity of the sales response and constitutes a verification failure

under Section 776(a)(2)(D) of the Act. A complete verification failure

also renders a response unusable under section 782(e) of the statute. A

verification failure of this magnitude demonstrates Dongguan's

``failure to cooperate by not acting to the best of its ability to

comply with our requests for information.'' Accordingly, for the above-

mentioned reasons, and consistent with Pasta from Turkey, 61 FR 30309,

30312 (June 14, 1996), we based Dongguan's final dumping margin on

adverse facts available. In addition, because this margin is based on

facts available, all other issues raised by the parties concerning

Dongguan are moot.

Sam Choan

Comment 21: Reporting Errors

Petitioner states that the verification report identifies a large

number of sales transactions of nonsubject merchandise that were

included in the preliminary determination. Petitioner further contends

that the difficulties experienced by the Department in verifying Sam

Choan's product weights undermine the reliability of the response and

that Sam Choan's response should be rejected because none of these

transactions were accurately reported. If the Department decides to use

Sam Choan's data, petitioner asserts that the weights for certain

product codes must be increased, consistent with the verification

findings.

Sam Choan argues that its revised sales listing reflects the

weights and thicknesses verified by the Department. Sam Choan further

states that the Department should exclude any merchandise that does not

fall within the scope of investigation.

DOC Position. We have used the weights, as corrected per our

verification, in our final determination. We find no basis to conclude

that errors in the weight reporting affect the overall integrity of the

response. As described in Ferrosilicon from Brazil: Final Results of

Antidumping Duty Administrative Review, 61 FR 59407 (November 22,

1996), these errors are not substantial and thus do not affect the

integrity of the response.

With regard to the reporting of out-of-scope merchandise, we have

excluded this merchandise for purposes of the final determination.

Chen Hao Xiamen

Comment 22: Application of the Multinational Corporation Provision

Chen Hao Xiamen argues that the Department's application of the MNC

rule in this case is not supported by the statute because the

Department has failed to demonstrate that the special and unique

circumstances required for application of the MNC rule are present in

this investigation. Furthermore, according to Chen Hao Xiamen, its

reported factors of production have been verified and accurate

surrogate country information exists to value the factors of

production. In addition, Chen Hao Xiamen argues that the Department's

application of the MNC provision arbitrarily assumes that a ``proper

comparison'' based on the factors of production and surrogate valuation

is impossible for Chen Hao Xiamen, but is possible for all other

respondents. Accordingly, for purposes of the final determination, Chen

Hao Xiamen believes that the Department should not apply the MNC rule

to Chen Hao Xiamen and instead should apply the surrogate country data

to value its factors of production.

Petitioner objects to respondents' claim that the MNC provision

does not apply to the Chen Hao respondents. Petitioner argues that

respondents misstate the law when they claim that the MNC provision

applies only when a comparison based on the factors of production and

surrogate valuation is not possible. According to petitioner, there is

no requirement that it be impossible to determine NV in the exporting

country. Moreover, petitioner argues that the very close cooperation

between the Chen Hao companies, confirmed at verification, makes a

compelling case for application of the MNC to prevent the use of the

the PRC company as an export platform. Finally, petitioner believes

that given the very substantial changes it believes should be made to

the factors analysis, the NV for

[[Page 1718]]

the PRC may exceed that of Taiwan. However, if the NV for Taiwan

remains higher, as was the case in the preliminary determination, the

petitioner urges that the Department once again apply the MNC

provision.

DOC Position. The MNC rule applies when the criteria of section

773(d) of the Act are met, regardless of whether a comparison based on

factors is otherwise possible. For Chen Hao Xiamen, we have determined

that the record evidence supports a finding that the first criterion of

the MNC provision (ownership of the production facilities in the

exporting country by an entity with production facilities located in

another country) has been met. The second criterion of the MNC

provision (concerning viability of the PRC market) has been met, per

se, because Chen Hao Xiamen, the PRC exporter, did not make any sales

at all in the PRC market during the POI.

The third criterion was also met because Taiwan NV exceeded NV

based on the factors of production. See ``B. Multinational Corporation

Provision'' section of this notice.

Comment 23: Melamine Consumption

Petitioner states that the verification confirmed that Chen Hao

Xiamen used a methodology that leads to an understatement of melamine

powder consumption. Petitioner argues that Chen Hao Xiamen's

methodology is in contrast to the other PRC respondents and should be

restated to include all POI consumption.

Petitioner further argues that the verification report makes clear

that Chen Hao Xiamen could have provided yields on a product-specific

basis but instead reported an average that hides the peaks and valleys

in yields. Petitioner claims that if the Department accepts Chen Hao

Xiamen's yield data, it should apply the overall yield to each heat

treatment step indicated for each transaction in the U.S. sales

database.

Chen Hao Xiamen argues that it accurately reported its melamine

powder consumption and petitioner has provided no reasonable basis as

to why restating melamine powder consumption from a batch-by-batch

basis to a total POI basis would be any more accurate than its current

reporting. Accordingly, Chen Hao Xiamen believes that the Department

should ignore petitioner's suggestion.

Chen Hao Xiamen further argues that it could not have provided

product-specific yields. It provided yields on a production batch

basis, which it claims is the most specific data available related to

material consumption. Chen Hao Xiamen further argues that it should not

be punished for failing to provide data that it does not have.

DOC Position. With regard to consumption, we agree with Chen Hao

Xiamen. Our verification results confirm the reliability of Chen Hao

Xiamen's data. Accordingly, we have used Chen Hao Xiamen's reported

consumption figures, as corrected through verification, in our

analysis.

Moreover, although the Department prefers product-specific yield

information, where such information does not exist, the Department will

use the most specific information available. In this instance, Chen Hao

Xiamen reported yields on a batch specific basis. Further, we have no

evidence on the record that the Chen Hao Xiamen's methodology is

distortive of its experience during the POI. Accordingly, we have

rejected petitioner's arguments and accepted Chen Hao Xiamen's reported

yield data, as verified by the Department.

Comment 24: Selling Expense Adjustment

Petitioner contends that, for comparisons of EP to NV based on

Taiwan sales or Taiwan CV, EP and NV must be adjusted for selling

expenses. Petitioner argues that the Department erred in not adjusting

for U.S. selling expenses when the basis for NV was Chen Hao Taiwan's

price or CV in comparing EP to NV for Chen Hao Xiamen. Although Chen

Hao Xiamen did not provide U.S. selling expense information, according

to petitioner, credit expense can be calculated from the verification

exhibits.

Chen Hao argues that the Department should not adjust Chen Hao

Xiamen's EP when the basis for NV is Chen Hao Taiwan's price or CV.

Chen Hao further argues that imputing selling expenses where the

Department never provided respondents with an opportunity to present

that information would be arbitrary and unfair.

DOC Position. We agree with petitioner that for comparisons of EP

to NV based on Taiwan sales or Taiwan CV, EP and NV must be adjusted

for selling expenses. See ``B. Multinational Corporation Provision''

section of this notice.

Comment 25: Product Weights

Petitioner asserts that because verification showed that for six

products sampled, the weight verified was greater than the weight

reported, Chen Hao Xiamen thus systematically under-reported its

product weights. Petitioner contends that to correct the data, the

Department should increase the reported product weights by two percent,

which is the degree of under reporting identified for one of the

products examined at verification.

Chen Hao Xiamen claims that it did not systematically under report

its product weights, as claimed by petitioner. Chen Hao Xiamen argues

that, given that products produced from the same production batch may

have different weights due to varying amounts of melamine input powder,

this degree of discrepancy between the reported and verified weights is

well within an acceptable tolerance of reliability.

DOC Position. We agree with Chen Hao Xiamen. We note that the

weighing of the subject merchandise is inherently somewhat imprecise,

and that the verified weights were within acceptable limits.

Currency Conversion

We made currency conversions into U.S. dollars based on the

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

certified by the Federal Reserve Bank.

Section 773A(a) of the Act directs the Department to convert

foreign currencies based on the dollar exchange rate in effect on the

date of sale of the subject merchandise, except if it is established

that a currency transaction on forward markets is directly linked to an

export sale. When a company demonstrates that a sale on forward markets

is directly linked to a particular export sale in order to minimize its

exposure to exchange rate losses, the Department will use the rate of

exchange in the forward currency sale agreement.

Section 773A(a) also directs the Department to use a daily exchange

rate in order to convert foreign currencies into U.S. dollars unless

the daily rate involves a fluctuation. It is the Department's practice

to find that a fluctuation exists when the daily exchange rate differs

from the benchmark rate by 2.25 percent. The benchmark is defined as

the moving average of rates for the past 40 business days. When we

determine a fluctuation to have existed, we substitute the benchmark

rate for the daily rate, in accordance with established practice.

Further, section 773A(b) directs the Department to allow a 60-day

adjustment period when a currency has undergone a sustained movement. A

sustained movement has occurred when the weekly average of actual daily

rates exceeds the weekly average of benchmark rates by more than five

percent for eight consecutive weeks. (For an explanation of this

method, see Policy Bulletin 96-1: Currency

[[Page 1719]]

Conversions (61 FR 9434, March 8, 1996).) Such an adjustment period is

required only when a foreign currency is appreciating against the U.S.

dollar. The use of an adjustment period was not warranted in this case

because the New Taiwan dollar did not undergo a sustained movement, nor

were there currency fluctuations during the POI.

Continuation of Suspension of Liquidation

For Chen Hao Xiamen, Gin Harvest, and Sam Choan, we calculated a

zero or de minimis margin. Consistent with Pencils, merchandise that is

sold by these producers but manufactured by other producers will be

subject to the order, if issued. Entries of such merchandise will be

subject to the ``PRC-wide'' rate.

In accordance with section 733(d)(1) of the Act and 735(c)(1), we

are directing the Customs Service to continue to suspend liquidation of

all entries of MIDPS from the PRC, that are entered, or withdrawn from

warehouse for consumption, on or after the date of publication of this

notice in the Federal Register, except for entries of merchandise

manufactured by those producers receiving a zero or de minimis margin.

The Customs Service to require a cash deposit or posting of a bond

equal to the estimated amount by which the NV exceeds the EP as

indicated in the chart below. This suspension of liquidation will

remain in effect until further notice.

The weighted-average dumping margins are as follows:

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

Weighted-average margin

Manufacturer/producer/exporter percentage

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

Chen Hao Xiamen........................... 0.97 (de minimis).

Gin Harvest............................... 0.47 (de minimis).

Sam Choan................................. 0.04 (de minimis).

Tar Hong Xiamen........................... 2.74.

PRC-Wide Rate............................. 7.06.

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

The PRC-Wide rate applies to all entries of subject merchandise

except for entries from exporters/factories that are identified

individually above.

ITC Notification

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

ITC of our determination. As our final determination is affirmative,

the ITC will determine, within 45 days, whether these imports are

causing material injury, or threat of material injury, to an industry

in the United States. 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 canceled. If

the ITC determines that such injury does exist, the Department will

issue an antidumping duty 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.

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

Act.

Dated: January 6, 1997.

Robert S. LaRussa,

Acting Assistant Secretary for Import Administration.

[FR Doc. 97-752 Filed 1-10-97; 8:45 am]

BILLING CODE 3510-DS-P