Notice of Final Determination of Sales at Less Than Fair Value: Melamine Institutional Dinnerware Products From Taiwan

DEPARTMENT OF COMMERCE

[A-583-825]

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

Melamine Institutional Dinnerware Products From Taiwan

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: January 13, 1997.

FOR FURTHER INFORMATION CONTACT: Everett Kelly or David J. Goldberger,

Import Administration, International Trade Administration, U.S.

Department of Commerce, 14th Street and Constitution Avenue, NW.,

Washington, DC 20230; telephone: (202) 482-4194, or (202) 482-4136,

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 Round Agreements Act (``URAA'').

Final Determination

We determine that melamine institutional dinnerware products

(``MIDPs'') from Taiwan 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 (Notice

of Preliminary Determination and Postponement of Final Determination:

Melamine Institutional Dinnerware Products from Taiwan (61 FR 43341,

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

In September and October 1996, we verified the questionnaire

responses of respondents Yu Cheer Industrial Co., Ltd. (Yu Cheer) and

Chen Hao Plastic Industrial Co., Ltd. (Chen Hao Taiwan). On November

23, 1996, the Department requested Chen Hao Taiwan to submit new

computer tapes to include data corrections identified through

verification. This information was submitted on December 5, 1996.

Petitioner, the American Melamine Institutional Tableware

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

November 27, 1996, and rebuttal briefs on December 3, 1996. The

Department held a public hearing for this investigation on December 5,

1996.

Scope of 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 POI is January 1, 1995, through December 31, 1995.

Facts Available

IKEA and Gallant

We did not receive a response to our questionnaire from either IKEA

Trading Far East Ltd. (IKEA) or Gallant Chemical Corporation (Gallant).

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

withholds information that has been requested by the Department, fails

to provide such information in a timely manner and in the form

requested, significantly impedes a proceeding, or provides such

information but the information cannot be verified, the Department

shall use the facts otherwise available in reaching the applicable

determination. Because IKEA and Gallant failed to submit the

information that the Department specifically requested, we must base

our determinations for those companies on the facts available.

Section 776(b) of the Act provides that adverse inferences may be

used against a party that has failed to cooperate by not acting to the

best of its ability to comply with a request for information. IKEA's

and Gallant's failure to respond to our questionnaire demonstrates that

IKEA and Gallant have failed to cooperate to the best of their

abilities in this investigation. Accordingly, the Department has

determined that, in selecting from among the facts otherwise available,

an adverse inference is warranted.

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

selects from

[[Page 1727]]

among the facts otherwise available and relies on ``secondary

information,'' the Department shall, to the extent practicable,

corroborate that information from independent sources reasonably at the

Department's disposal. The Statement of Administrative Action

accompanying the URAA, H.R. Doc. No. 316, 103d Cong., 2d Sess. (1994)

(hereinafter, the ``SAA''), states that the petition is ``secondary

information'' and that ``corroborate'' means to determine that the

information used has probative value. See SAA at 870.

In this proceeding, 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 both normal value and export

price in the petition on a market research report which utilized price

quotations from a manufacturer/exporter of MIDPs in Taiwan. The

petitioner also submitted a published price list of comparable

merchandise sold during the POI in Taiwan. The Department has

determined that the price list corroborates normal value used in the

petition.

The export price in the petition is consistent with export prices

reported by responding companies on the record of this investigation.

Therefore, we determine that further corroboration of the facts

available margin is unnecessary.

Fair Value Comparisons

To determine whether sales of the subject merchandise by Chen Hao

Taiwan and Yu Cheer to the United States were made at less than fair

value, we compared the Export Price (``EP'') to the Normal Value

(``NV''), as described in the ``Export Price'' and ``Normal Value''

sections of this notice. As set forth in section 773(a)(1)(B)(i) of the

Act, we calculated NV based on sales at the same level of trade as the

U.S. sale. In accordance with section 777A(d)(1)(A)(i), we compared

POI-wide weighted-average EPs to weighted-average NVs. In determining

averaging groups for comparison purposes, we considered the

appropriateness of such factors as physical characteristics.

(i) Physical Characteristics

In accordance with section 771(16) of the Act, we considered all

products covered by the description in the Scope of Investigation

section, above, produced in Taiwan and sold in the home market during

the POI, to be foreign like products for purposes of determining

appropriate product comparisons to U.S. sales. Where there were no

sales of identical merchandise in the home market to compare to U.S.

sales, we compared U.S. sales to the next most similar foreign like

product on the basis of the characteristics listed in the Department's

antidumping questionnaire. In making the product comparisons, we relied

on the following criteria (listed in order of preference): shape type

(i.e., flat--e.g., plates, trays, saucers etc.; or container--e.g.,

bowls, cups, etc.), specific shape, diameter (where applicable), length

(where applicable), capacity (where applicable), thickness, design

(i.e., whether or not a design is stamped into the piece), and glazing

(i.e., where a design is present, whether or not it is also glazed).

(ii) Level of Trade

In the preliminary determination, the Department determined that no

difference in level of trade existed between home market and U.S. sales

for either Chen Hao Taiwan and Yu Cheer. Our findings at verification

confirmed that Chen Hao Taiwan and Yu Cheer performed essentially the

same selling activities for each reported home market and U.S.

marketing stage. Accordingly, we determine that all price comparisons

are at the same level of trade and an adjustment pursuant to section

773(a)(7)(A) is unwarranted.

Export Price

We calculated EP, in accordance with subsections 772(a) and (c) of

the Act, where the subject merchandise was sold directly to the first

unaffiliated purchaser in the United States prior to importation and

where CEP was not otherwise warranted based on the facts of record.

We calculated EP for each respondent based on the same methodology

used in the preliminary determination, with the following exceptions:

Chen Hao Taiwan

We added an amount to U.S. sales denominated in U.S. dollars to

account for bank and currency conversion charges not included in Chen

Hao Taiwan's reporting, based on information developed at verification

(see Comment 13).

Yu Cheer

We made the following corrections, based on our verification

findings:

(a) Revised payment dates for certain U.S. sales, for purposes of

calculating imputed credit; (b) Corrected foreign inland freight; (c)

revised packing labor expense; and (d) corrected certain packing

material expenses.

In order to reflect the corrected payment dates for certain U.S.

sales, we recalculated credit for all U.S. sales, using verified

shipment and payment dates and Yu Cheer's reported interest rate. Yu

Cheer did not provide information to weight-average the different

packing material purchase prices observed at verification. Accordingly,

we applied the highest price observed at verification for these

materials as facts available. This approach was also consistent with Yu

Cheer's reporting methodology for some of the packing material

expenses.

Normal Value

Cost of Production Analysis

In the preliminary determination, based on the petitioner's

allegation, the Department found reasonable grounds to believe or

suspect that Chen Hao Taiwan sales in the home market were made at

prices below the cost of producing the merchandise. As a result, the

Department initiated an investigation to determine whether Chen Hao

Taiwan made home market sales during the POI at prices below their

respective cost of production within the meaning of section 773(b) of

the Act.

Before making any fair value comparisons, we conducted the cost of

production (COP) analysis described below.

A. Calculation of COP

We calculated the COP based on the sum of Chen Hao Taiwan's cost of

materials and fabrication for the foreign like product, plus amounts

for home market selling, general and administrative expenses (SG&A) and

packing costs in accordance with section 773(b)(3) of the Act.

We adjusted financial expenses to exclude foreign exchange gains

(see Comment 10), and to include the interest expense associated with

loans from affiliated parties (see Comment 9). We also adjusted factory

overhead to include an amount for pension expenses (see Comment 11).

B. Test of Home Market Prices

We used Chen Hao Taiwan's adjusted weighted-average COP for the

POI. We compared the weighted-average COP figures to home market sales

of the foreign like product as required under section 773(b) of the Act

in order to determine whether these sales had been made at below-cost

prices within an extended period of time in substantial quantities, and

were not at prices which

[[Page 1728]]

permit recovery of all costs within a reasonable period of time. On a

model-specific basis, we compared the COP to the home market prices,

less any applicable movement charges and direct selling expenses. We

did not deduct indirect selling expenses from the home market price

because these expenses were included in the G&A portion of COP.

C. Results of COP Test

Pursuant to section 773(b)(2)(C) of the Act, where less than 20

percent of a respondent's home market sales for a model are at prices

less than the COP, we do not disregard any below-cost sales of that

model because we determine that the below-cost sales were not made

within an extended period of time in ``substantial quantities.'' Where

20 percent or more of a respondent's home market sales of a given model

during the POI are at prices less than COP, we disregard the below-cost

sales because they are (1) made within an extended period of time in

substantial quantities in accordance with sections 773(b)(2) (B) and

(C) of the Act, and (2) based on comparisons of prices to weighted-

average COPs for the POI, were at prices which would not permit the

recovery of all costs within a reasonable period of time in accordance

with section 773(b)(2)(D) of the Act. The results of our cost test for

Chen Hao Taiwan indicated that for certain home market models less than

20 percent of the sales of the model were at prices below COP. We

therefore retained all sales of the model in our analysis and used them

as the basis for determining NV. Our cost test for Chen Hao Taiwan also

indicated that within an extended period of time (one year, in

accordance with section 773(b)(2)(B) of the Act), for certain home

market models more than 20 percent of the home market sales were sold

at prices below COP. In accordance with section 773(b)(1) of the Act,

we therefore excluded these below-cost sales from our analysis and used

the remaining above-cost sales as the basis for determining NV.

In this case, we found that some models had no above-cost sales

available for matching purposes. Accordingly, export prices that would

have been compared to home market prices for these models were instead

compared to constructed value (CV).

D. Calculation of CV

In accordance with section 773(e) of the Act, we calculated CV

based on the sum of a respondent's cost of materials, fabrication,

selling, general, and administrative expenses (``SG&A''), profit and

U.S. packing costs as reported in the U.S. sales databases. In

accordance with section 773(e)(2)(A) of the Act, we based SG&A and

profit on the amounts incurred and realized by Chen Hao Taiwan in

connection with the production and sale of the foreign like product in

the ordinary course of trade for consumption in the foreign country.

Where appropriate, we calculated Chen Hao Taiwan's CV based on the

methodology described in the calculation of COP above. We made the same

adjustments to Chen Hao Taiwan's reported CV as we described above for

COP.

Price to Price Comparisons

Adjustments to Normal Value

We based normal value on the same methodology used in the

preliminary determination, with the following exceptions:

Chen Hao Taiwan

For one of several packing materials used by Chen Hao Taiwan, we

found a slight discrepancy between the reported consumption and costs,

and the verified consumption and costs. This discrepancy, however,

affects only a small part of the overall packing material cost and

would have an ad valorem effect of less than .33 percent. Consistent

with 19 CFR 353.59(a), which permits the Department to disregard

insignificant adjustments, we have not adjusted the reported packing

materials cost in our fair value comparisons for Chen Hao Taiwan.

Yu Cheer

We revised packing labor and certain packing material expenses,

based on verification findings. Yu Cheer did not provide information to

weight-average the different packing material purchase prices observed

at verification. Accordingly, we applied the highest price observed at

verification for these materials as facts available. This approach was

also consistent with Yu Cheer's reporting methodology for some of the

packing material expenses.

Price to CV Comparisons

Where we compared Chen Hao Taiwan's CV to Chen Hao Taiwan's export

prices, we deducted from CV the weighted-average home market direct

selling expenses and added the weighted-average U.S. product-specific

direct selling expenses (where appropriate) in accordance with section

773(a)(8) of the Act.

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, see Change in Policy Regarding

Currency 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.

Verification

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

information submitted by the 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

Comment 1: Scope of Investigation

Respondents argue that the scope of investigation should be revised

to exclude melamine dinnerware that

[[Page 1729]]

exceeds a thickness of 0.08 inch and is intended for retail markets

when such products are accompanied by 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: Acceptance of Chen Hao Taiwan Questionnaire Responses

Petitioner argues that the Department should reject Chen Hao

Taiwan's questionnaire responses because the extensive, fundamental

changes to the responses submitted during the course of the

investigation render its data unreliable. In particular, petitioner

objects to Chen Hao Taiwan's submission of allegedly ``minor

corrections'' at the beginning of verification and submitted for the

record on October 8, 1996. Petitioner claims that this information is

untimely under 19 CFR 353.31 as it contains new information, which may

not be accepted at verification, and should therefore be (wholly or, at

a minimum, partially) rejected for use in the final determination

following the precedent in Final Results of Administrative Review:

Titanium Sponge from the Russian Federation (61 FR 58525, November 15,

1996) (Titanium Sponge). Further, petitioner claims it was deprived of

its ability to comment on this data prior to verification.

Chen Hao Taiwan responds that, by focusing on the absolute number

of corrections made, petitioner ignores the fact that the changes were

made to ensure that the most complete and accurate responses were

submitted for the record and properly verified. According to Chen Hao

Taiwan, its revisions corrected typographical and data entry errors;

the corrections related to misreported items, rather than unreported

items. Chen Hao Taiwan adds that this situation is different from

Titanium Sponge, where the rejected submission related to previously

unreported items of which the Department was not alerted, while in this

proceeding, Chen Hao Taiwan properly advised the Department of its

corrections. Chen Hao Taiwan states that it responded to the best of

its ability in this proceeding and, thus, there is no basis to apply

facts available.

DOC Position. We disagree with petitioner's description of Chen Hao

Taiwan's October 8 submission as an extensive and entirely new cost

submission. Chen Hao Taiwan corrected elements of its labor and factory

overhead data, which resulted in revised figures for these components

of its COP and CV calculations. Although the labor and overhead

expenses for some specific products changed substantially, the effect

on the total COP and CV was relatively insignificant. Chen Hao Taiwan

did not revise its methodology for calculating these expenses. The

corrections submitted by Chen Hao Taiwan prior to verification did not

include new methodologies or expense claims; there was no new area of

the response in which the petitioner did not have the opportunity to

comment. In short, the corrections submitted by Chen Hao Taiwan were

typical of the minor corrections routinely accepted by the Department

at the commencement of verification.

We agree with Chen Hao Taiwan that the submission of these

corrections is not comparable with the Titanium Sponge example, where

the Department, rather than the respondent, identified the information

in the course of verification, and the information discovered was a new

issue, not previously discussed in the proceeding. Chen Hao Taiwan

fully apprised the Department of all revisions at the commencement of

verification. Its revisions corrected data already on the record and

did not introduce new issues not previously reported on the record.

Accordingly, we determine that resorting to facts available is

unwarranted in this particular case. The Department's use of facts

available is subject to section 782(d) of the Act. Under section

782(d), the Department may disregard all or part of a respondent's

questionnaire responses when the response is not satisfactory or it is

not submitted in a timely manner. The Department has determined that

neither of these conditions apply. The Department was able to verify

the response, thus rendering it satisfactory, and the types of

revisions submitted by Chen Hao Taiwan met the deadline for such

changes. Under section 782(e), the Department shall not decline to

consider information that is 1) timely, 2) verifiable, 3) sufficiently

complete that it serves as a reliable basis for a determination, 4)

demonstrated to be provided based on the best of the respondent's

ability, and 5) can be used without undue difficulties. In general,

Chen Hao Taiwan has met these conditions.

Accordingly, we find no basis to reject Chen Hao Taiwan's response,

and thus, no basis to rely on the facts otherwise available for our

final determination.

Comment 3: Yield Rate

Petitioner claims that Chen Hao Taiwan improperly reported overall

yield information for its COP and CV data when it had more accurate,

product-specific data available. Petitioner alleges that the

verification exhibits establish that Chen Hao Taiwan maintains product-

specific yield information and, therefore, could have reported its

costs on this basis, rather than an overall yield figure applied to all

of its products. Petitioner claims that by reporting overall yield

figures, Chen Hao Taiwan may be attempting to mask dumping margins

generated by sharply different yields among products, which is the

experience of the U.S. industry. Since Chen Hao Taiwan allegedly chose

instead to report less accurate production data, petitioner contends

that the Department should reject Chen Hao Taiwan's data as submitted

and adjust the yield rate by applying the reported yield factor to each

additional production step that each product undergoes.

Chen Hao Taiwan disputes petitioner's analysis of its production

records and states that the Department verified that Chen Hao Taiwan

does not

[[Page 1730]]

maintain records in its normal course of business that would permit it

to report product-specific yield. Chen Hao Taiwan maintains that the

verification exhibit cited by petitioner does not support petitioner's

contention that Chen Hao Taiwan was able to report product-specific

yield data. Chen Hao Taiwan argues that while petitioner may maintain

product-specific yield information, it does not mean that the

Department must also assume that respondent must also maintain the same

information. Chen Hao Taiwan asserts that the Department cannot

penalize a respondent with facts available for failure to provide

information which does not exist.

DOC Position. We agree with Chen Hao Taiwan. The Department's

preference is to use product specific cost data, including product-

specific yield results, for calculating COP and CV. The Department uses

the most specific and reasonable allocation methods available, given a

respondent's normal record keeping system (see Final Determination of

Sales at Less than Fair Value: Welded Stainless Steel Pipe from

Malaysia, 59 FR 4023, 4027, January 28, 1994). In this instance, Chen

Hao Taiwan reported its costs based on overall yield information

because it claimed that its records do not permit it to calculate cost

data on a more specific basis. Our verification revealed nothing to

contradict Chen Hao Taiwan's claim that it does not maintain product-

specific yield data in its normal course of business. We also verified

that Chen Hao Taiwan was not able to calculate yields for the POI on a

more specific basis than the yield rate which was reported. The

accounting records identified by petitioner could arguably be used to

calculate an average yield for each specific order; however, Chen Hao

Taiwan does not retain production batch records in its normal course of

business beyond a short period of time. The examples from the

verification are from the time of verification, October 1996--well

beyond the POI. Moreover, Chen Hao Taiwan's financial accounting

documents, including inventory and production ledgers, do not track

production information on a product-specific basis. For these reasons,

we have accepted Chen Hao Taiwan's reported average yield rate

calculation, which was adequately analyzed at verification.

Comment 4: Home Market Freight Expenses

Petitioner claims that Chen Hao Taiwan improperly allocated home

market freight expenses across all products and all customers during

the POI. Petitioner states that, based on information contained in the

verification report, Chen Hao Taiwan should be able to report freight

expenses on a customer-specific basis. Petitioner asserts that Chen Hao

Taiwan's allocation methodology masks differences in freight expenses

that may result in a larger freight expense deduction for subject

merchandise sales than if freight expenses had been reported on a more

specific basis. Therefore, petitioner contends that the Department

should deny Chen Hao Taiwan's claimed freight adjustment.

Chen Hao Taiwan argues that verification indicated that Chen Hao

Taiwan's freight expense records did not permit reporting on a more

specific basis.

DOC Position. The Department's preference is that, wherever

possible, freight adjustments should be reported on a sale-by-sale

basis rather than an overall basis (see, e.g., Final Results of

Antidumping Duty Administrative Review: Replacement Parts for Self-

Propelled Bituminous Paving Equipment from Canada, 56 FR 47451, 47455,

September 19, 1991). If a respondent does not maintain its records to

enable freight expense reporting at this level, then our preference is

to apply an allocation methodology at the most specific level permitted

by a respondent's records. Chen Hao Taiwan allocated all home market

freight expenses incurred on subject merchandise by weight over all

home market sales, as demonstrated in the sample calculation submitted

in the July 19, 1996, supplemental questionnaire response. However, as

we noted in our verification report, ``we observed that Chen Hao may be

able to total the amount charged to each customer during the POI, and

divide that amount by the total shipments to that customer.'' This

method is preferable to the method used by Chen Hao Taiwan.

Nevertheless, we note that Chen Hao Taiwan allocated home market

freight expenses between subject and non-subject merchandise using a

weight-based methodology, in compliance with the Department's

supplemental questionnaire request. The Department did not specifically

request Chen Hao Taiwan to provide a customer-specific allocation.

Although Chen Hao Taiwan had the means to allocate home market freight

expenses on a more specific basis, its failure to do so does not

mandate the application of adverse facts available in this case because

Chen Hao Taiwan has been responsive to the Department's requests. The

principal advantage of a customer-specific freight allocation would be

to take into account the freight distance to the customer, since

distance is a component of the expense incurred by Chen Hao Taiwan.

Given the distribution of Chen Hao Taiwan's home market customers, as

identified in the verification report, and the location of Chen Hao

Taiwan's principal home market MIDP customer, we find that Chen Hao

Taiwan's reported home market freight methodology is sufficient. In

similar circumstances, we have accepted a respondent's methodology if

it is representative and non-distortive of transaction-specific sales

information (see Final Determination of Sales at Less than Fair Value:

Oil Country Tubular Goods from Korea, 60 FR 33561, June 28, 1995). Chen

Hao Taiwan's methodology meets these criteria. Consequently, we have

accepted Chen Hao Taiwan's reported home market freight expenses.

Comment 5: Allocation of Melamine Powder Rebate

Petitioner argues that Chen Hao Taiwan improperly allocated

melamine powder rebates between its internal consumption and the

material transferred to Chen Hao Xiamen. Petitioner claims that by

assigning the entire amount of the rebate to melamine powder used for

Taiwan consumption, Chen Hao Taiwan undervalued its raw material costs.

Petitioner contends that Chen Hao Taiwan's melamine powder costs for

COP and CV calculations should be recalculated to remove the amount of

the rebate attributable to Chen Hao Xiamen transfers.

Chen Hao Taiwan responds that petitioner is incorrect and that, in

fact, the Department verified that the melamine powder rebates were

allocated equally over all melamine powder purchases.

DOC Position. We agree with Chen Hao Taiwan. We verified that Chen

Hao Taiwan properly allocated the melamine powder rebate over all its

purchases during the POI and thus the per-unit melamine powder cost for

Chen Hao Taiwan's COP and CV calculations properly accounts for the

rebate. However, as we stated in the Chen Hao Taiwan verification

report, ``[t]he values reported for Chen Hao Xiamen's melamine powder

consumption do not include an adjustment for the rebate.'' (Emphasis

added.) Chen Hao Taiwan's melamine powder costs are not in question.

Comment 6: Import Duties on Melamine Powder Costs

Petitioner contends that evidence on the record demonstrates that

Chen Hao

[[Page 1731]]

Taiwan incurred duties on some imported raw materials, but did not

report these duty amounts in its cost response. Petitioner thus argues

that the Department should assume that all raw materials are imported

and increase the costs of materials to include import duties and

related costs.

Chen Hao Taiwan states that the Department verified that Chen Hao

Taiwan correctly accounted for duties in reporting the unit prices of

melamine powder purchased during the POI and that petitioner's

allegation is incorrect. Chen Hao Taiwan further states that the

verification exhibits confirm that the reported costs include the

import duties paid on melamine powder purchased outside of Taiwan.

DOC Position. We agree with Chen Hao Taiwan. We verified that the

reported costs for these inputs included all applicable expenses,

including import duties. Support documentation for Chen Hao Taiwan's

melamine powder costs, such as the operating statement and journal

entries included in the verification exhibits, demonstrates that import

duties, when incurred, are part of the total cost reported to the

Department, and are included in the cost of materials used in our COP

and CV calculations.

Comment 7: Unreconciled Cost Differences

Petitioner claims that Chen Hao Taiwan's cost of manufacturing data

shows an unreconciled difference between the components of operating

costs and the total operating costs. Because Chen Hao Taiwan has not

provided an explanation for this discrepancy, petitioner argues that

the cost of manufacturing should be increased to reflect this

unreconciled cost difference.

Chen Hao Taiwan states that petitioner is incorrect because it

misread a portion of a verification exhibit and thus erroneously

arrived at its total. Accordingly, Chen Hao Taiwan states that its

operating costs reconcile and no adjustment is needed.

DOC Position. We agree with Chen Hao Taiwan. We verified that Chen

Hao Taiwan's operating costs reconciled, as indicated in the operating

statement and trial balance included in the verification exhibits, and

no adjustment is required. As Chen Hao Taiwan has noted, petitioner has

misread the verification exhibit in question and arrived at an

incorrect operating costs total.

Comment 8: Sales of Finished Goods in Cost of Materials Calculation

Based on its analysis of verification exhibits, petitioner claims

that Chen Hao Taiwan included purchases of finished goods that it re-

sold without further processing in its finished goods inventory, thus

including these items in calculating its yield rate. Petitioner asserts

that the yield rate used in COP and CV calculations must be adjusted to

remove the accounting for these finished goods.

Chen Hao Taiwan contends that petitioner misread the relevant

verification exhibit and that these items were not included in its cost

of manufacturing calculation. Accordingly, Chen Hao Taiwan maintains

that no adjustment is necessary.

DOC Position. We agree with Chen Hao Taiwan. We verified that the

resold items were properly excluded from the cost of manufacturing

calculation, as indicated in the cost of operations statement included

in the verification exhibits, and that no adjustment is required.

Comment 9: Arm's-Length Pricing of Loans

Petitioner claims that Chen Hao Taiwan failed to demonstrate that

interest free loans from affiliated parties are made at arm's length.

Accordingly, petitioner argues that Chen Hao Taiwan's financial

interest expense ratio for COP and CV calculations should be adjusted

by adding an estimated market value for these loans based on the

highest interest rate experienced by Chen Hao Taiwan.

Chen Hao Taiwan contends that these loans from related parties

served as capital infusion. According to Chen Hao Taiwan, the

transactions in question were additional investments from the owners of

Chen Hao Taiwan of their own money into the company, with these funds

labeled as ``loans'' for purposes of the financial statement. Chen Hao

Taiwan argues that the Department's practice is to disregard such

intracompany transfers, thus any resulting loan interest expense should

be disregarded in the final determination.

DOC Position. Although Chen Hao Taiwan may consider the

transactions in question to serve as equity capital infusions, its

audited financial statement classifies them as long-term loans. Other

than Chen Hao Taiwan's assertions,1, we have no basis on the

record to reclassify these amounts as equity. In such circumstances,

the Department considers the amounts to be long-term loans, consistent

with treatment in the respondent's financial statement (see, Final

Results of Administrative Review: Shop Towels from Bangladesh, 60 FR

48966, 48967, September 21, 1995, and Final Determination of Sales at

Less than Fair Value: Fresh Cut Roses from Ecuador, 60 FR 7019, 7039,

February 6, 1995). Accordingly, we have recalculated Chen Hao Taiwan's

interest expenses to include an interest expense based on the long-term

interest rate experienced by Chen Hao Taiwan during the POI, as

identified in the financial statement.

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

\1\ Chen Hao Taiwan has cited Final Results of Administrative

Review: Fresh Cut Flowers from Colombia (61 FR 42833, August 19,

1996) in support of its position; however this case is not on point.

In that instance, the item in question was interest income, whereas

here, the item is interest expense.

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

Comment 10: Exchange Gains in Financial Expenses

Petitioner contends that the financial expenses for Chen Hao

Taiwan's COP and CV calculations include foreign exchange gains on

export sales, which should be disallowed. Therefore, petitioner states

that the financial expenses should be increased accordingly.

Chen Hao Taiwan does not object to this adjustment but states that

the revised percentage identified in the verification report is

incorrect; thus a corrected adjustment should be used.

DOC Position. We agree with petitioner and have adjusted financial

expenses to exclude foreign exchange gains on export sales. We also

agree with Chen Hao Taiwan that the adjustment percentage identified in

the verification report contains a typographical error; we applied the

correct percentage in our recalculation.

Comment 11: Pension Allowance

Petitioner states that verification revealed that Chen Hao

improperly excluded a pension allowance in its costs.

Chen Hao Taiwan argues that, as the Department verified that no

actual accrual for the pension allowance was made during the POI, costs

should not be adjusted for a theoretically intended amount.

DOC Position. We agree with petitioner. We verified that Chen Hao

Taiwan contributed to its employee retirement fund in the two years

prior to the POI. It did not make the contribution during the POI and

could not provide any satisfactory explanation for this omission.

However, Chen Hao Taiwan reported that it made payments from the

retirement fund during the POI. Based on these facts, we consider that

Chen Hao Taiwan incurred an obligation for its pension plan during the

POI. Accordingly, we have included the pension expense in our COP and

CV calculations.

[[Page 1732]]

Comment 12: Certain Credit Expense Adjustments

Petitioner claims that Chen Hao Taiwan reported certain adjustments

to its credit expenses for some U.S. sales. Petitioner asserts that the

Department does not permit these adjustments and thus the credit

expense for these sales should be disallowed.

Chen Hao Taiwan argues that it properly made these credit

adjustments.

DOC Position. We agree with Chen Hao Taiwan. In such instances as

those identified by parties in the proprietary versions of their

submissions, the Department has added the imputed benefit to the price.

(See, e.g., Final Results of Antidumping Administrative Review:

Mechanical Transfer Presses from Japan (61 FR 52910, October 9, 1996),

where, at Comment 5, we stated that ``[b]ecause payment was made prior

to shipment, [respondent] should receive an imputed benefit for

credit.'')

Comment 13: Unreported U.S. Dollar Charges

Petitioner contends that, as identified in verification documents,

Chen Hao Taiwan did not report charges such as currency brokerage and

bank fees for U.S. sales denominated in U.S. dollars. Accordingly,

petitioner argues that a percentage based on the observed charges

should be added to all U.S. dollar sales.

Chen Hao Taiwan states that it has accounted for all charges and

fees. Citing the verification report, Chen Hao Taiwan asserts that the

Department verified that the sales value for all U.S. sales was

correctly reported, and no discrepancies apart from those identified in

the verification report were found.

DOC Position. We agree with petitioner that Chen Hao Taiwan did not

include certain bank fees incurred on U.S. dollar denominated sales in

its sales reporting. Based on the verification documents, we have

calculated a percentage for these charges and included the result as a

circumstance of sales adjustment.

Comment 14: Payment Period on U.S. Sales

Petitioner contends that, based on its analysis of a set of

verification exhibits, Chen Hao Taiwan incorrectly reported the payment

date on U.S. sales by reporting the date that it closed the account

receivable entry in its records, rather than the date the payment was

actually made. Accordingly, petitioner argues that the payment date for

all U.S. sales should be adjusted to reflect the actual payment period,

based on information obtained at verification.

Chen Hao Taiwan responds that petitioner misread the documents in

the sales verification exhibit, and that the payment situation

described by petitioner referred to Chen Hao Taiwan's payment to its

freight company, not payment from the U.S. customer. Accordingly, Chen

Hao Taiwan states that it has correctly reported its payment dates and

no adjustments are required.

DOC Position. We agree with Chen Hao Taiwan. The payment, accounts

receivable, and accounts payable documents included in the verification

exhibit for this transaction confirm that the payment identified by

petitioner does not apply to customer payment, but rather to the

freight expense paid to Chen Hao Taiwan's freight company.

Comment 15: Allocation of Home Market Royalty Expenses

Petitioner alleges that Chen Hao Taiwan misreported royalty

expenses incurred on certain home market sales because it had not

properly accounted for advances paid on royalty expenses owed.

Petitioner contends that the royalty advance payments should be treated

as indirect selling expenses for purposes of the COP test because these

expenses were fixed costs and were incurred regardless of the quantity

sold.

Chen Hao Taiwan states that the Department verified the actual

royalty amount paid and the actual amount of sales subject to royalty

during the POI. In addition, Chen Hao Taiwan states that the Department

verified that royalties applied only to certain products. Accordingly,

Chen Hao Taiwan contends that the Department should continue to treat

royalties as a direct expense and use the verified amount for royalty

amounts to calculate the actual per-unit royalty expense paid during

the POI.

DOC Position. The Department has normally treated royalty expenses

as direct expenses when a respondent incurs this expense upon the sale

of a product covered under a royalty agreement (see, e.g., Final

Results of Antidumping Duty Administrative Review: Industrial Belts and

Components and Parts Thereof, Whether Cured or Uncured, From Japan, 58

FR 30018, May 25, 1993). Consistent with the royalty agreement on the

record, Chen Hao Taiwan incurred a royalty expense liability for home

market sales of the specific type of merchandise covered under the

agreement, as discussed in the verification report. Chen Hao Taiwan

entered into the royalty agreement at the beginning of the POI. Under

the terms of the agreement, which are on the record, certain advance

payments were required during the POI. In order to comply with the

terms of the agreement, Chen Hao Taiwan paid these amounts even though

its sales of the covered products were not at the level at which it

would pay the same amount based on royalty percentages in the

agreement. However, the agreement states that future royalty expenses

incurred may be offset against this advance. Although we verified that

Chen Hao Taiwan does not account for these potential future offsets, we

verified that Chen Hao was in full compliance with the terms of the

agreement. It is clear that the royalty agreement only applies to

certain home market sales and that, after this initial ``startup''

period, its actual royalty expenses will tie directly to the covered

sales. Therefore, this expense is properly classified as a direct

expense.

Allocating POI expenses over POI sales is not appropriate because,

in effect, a portion of the POI expenses is attributable to future

sales. The most appropriate allocation of the expenses is to apply the

royalty percentage in the agreement, which is how Chen Hao Taiwan

reported the expenses, because it reflects the amount of the expense

incurred by a particular sale, after taking into account the eventual

offset of all advances. In this instance, we are allocating expenses

based on the expected eventual royalty expense liability.

Comment 16: Value Added Tax (VAT) on CV Material Costs

Petitioner argues that Chen Hao Taiwan failed to include a 5

percent VAT on its Taiwan material purchases, thus understating the

constructed value of each product. Therefore, petitioner contends that

CV materials costs should be increased to reflect the VAT.

Chen Hao Taiwan states that it followed the Department's

questionnaire instructions and properly reported its material costs

exclusive of VAT. Therefore, Chen Hao Taiwan maintains that CV

materials costs should not be increased by the VAT amount.

DOC Position. In accordance with section 773(e) the Department's

policy is to include in its calculation of CV internal taxes paid on

materials unless such taxes are remitted or refunded upon exportation

of the finished product into which the material is incorporated (see

e.g. Final Determination of Sales at Less Than Fair Value: Certain

Carbon Steel Butt-Weld Pipe Fittings from Thailand, 60 FR 10552,

February 27, 1995). In this case, we observed that Taiwan MIDP

companies are able to credit VAT paid

[[Page 1733]]

on inputs (whether used for domestically sold or exported MIDPs)

against what they owe to the Taiwan government as a result of VAT

collected on domestic sales. More importantly, however, where VAT owed

was less than VAT paid because exports out paced domestic sales, the

companies received from the government a refund of VAT paid on

materials incorporated into exported finished products. As discussed in

the Chen Hao Xiamen verification report in the concurrent MIDPs from

PRC investigation:

Chen Hao [Taiwan] paid VAT on its Taiwan purchases, which

included such items as melamine powder from the principal supplier.

Chen Hao also incurred a VAT liability on sales made in Taiwan.

Export sales were excluded from this liability, which included the

re-sale of the melamine powder to [an affiliated party]. . . . Chen

Hao [Taiwan] paid the difference of VAT collected from its Taiwan

sales and VAT paid on Taiwan purchases. (November 18, 1996,

verification report at pages 8-9, and included on this record in a

December 20, 1996, Memorandum to the File.)

Thus, VAT paid on materials incorporated into exported products is

refunded by reason of export and therefore is not appropriately

included in CV. Accordingly, we have not added VAT to the CV

calculation.

Comment 17: Matching of Certain Products

Petitioner claims that Chen Hao Taiwan assigned certain identical

products different control numbers used for model matching. In turn,

petitioner contends, the Department's model matching program improperly

treated these identical products as different products. Petitioner thus

argues that the Department should either revise its computer program to

ignore Chen Hao Taiwan's control numbers or re-code these products with

identical control numbers.

Chen Hao Taiwan responds that the control numbers in question

relate to physically different products because some differ in color

from the others. Thus, Chen Hao Taiwan contends that the Department

should continue to treat the products as different products with unique

control numbers.

DOC Position. Petitioner is incorrect with regard to its

description of the Department's model matching program. The program

does, in fact, ignore control numbers to determine identical or most

similar products. Color is not a matching criterion in this

investigation; thus, it is appropriate to treat these products, if

otherwise identical, as identical products for purposes of model

matching. In one instance cited by petitioner, we note that the

Department properly compared home market sales of both products in

question to the U.S. sales of this product. In the other instance cited

by petitioner, we did not match the U.S. sales to the second model

identified by petitioner because the difference in merchandise

adjustment for that comparison exceeded the Department's 20 percent

threshold.

Comment 18: Yu Cheer Credit Expenses

Petitioner contends that Yu Cheer incorrectly reported payment

dates on U.S. sales because, until verification, it did not indicate

that it had received payment for at least some sales on multiple dates.

Petitioner states that the record contains no explanation of the

multiple payment date procedure and no information on how often Yu

Cheer's customers use this payment approach. In addition, petitioner

alleges that Yu Cheer has also misreported shipment dates, used to

calculate credit expenses, because Yu Cheer stated at verification that

it sometimes revises shipping documents after shipment, thus calling

into question the reliability of its reported information. Therefore,

petitioner argues that the home market credit adjustment should be

rejected and the U.S. credit expense should be based on the longest

credit period for any reported sale as facts available.

Yu Cheer states that its payment and shipment dates were correctly

reported, as noted in the verification report. Further, Yu Cheer states

that the verification report indicates that the shipment revisions did

not affect Yu Cheer's reported shipment dates. Therefore, Yu Cheer

contends that the discrepancies cited by petitioner fail to provide any

reasonable basis for rejecting Yu Cheer's claimed credit expenses.

DOC Position. We agree with Yu Cheer. Yu Cheer properly reported

the elements of its imputed credit expenses and thus we have accepted

its claimed imputed credit expenses. As we stated in the verification

report, Yu Cheer's shipment revisions do not affect the reported

shipment dates. Where appropriate, we have recalculated the credit

expense using the corrected payment information obtained at

verification.

Continuation of Suspension of Liquidation

In accordance with section 735(c) of the Act, we are directing the

Customs Service to continue to suspend liquidation of all entries of

MIDPs--with the exception of those manufactured/exported by Yu Cheer--

that are entered, or withdrawn from warehouse, for consumption on or

after August 22, 1996, the date of publication of our preliminary

determination in the Federal Register. We will instruct the Customs

Service to require a cash deposit or the posting of a bond equal to the

weighted-average amount by which the NV exceeds the export price, as

indicated in the chart below. This suspension of liquidation will

remain in effect until further notice.

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

Weighted-

average

Exporter/manufacturer margin

percentage

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

Chen Hao Taiwan............................................. 3.25

Yu Cheer.................................................... 0.00

IKEA........................................................ 53.13

Gallant..................................................... 53.13

All Others.................................................. 3.25

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

Pursuant to section 733(d)(1)(A) and section 735(c)(5) of the Act,

the Department has not included zero, de minimis weighted-average

dumping margins, or margins determined entirely under section 776 of

the Act, in the calculation of the ``all others'' rate.

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. 97-754 Filed 1-10-97; 8:45 am]

BILLING CODE 3510-DS-P