Notice of Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination: Extruded Rubber Thread From Indonesia

DEPARTMENT OF COMMERCE

International Trade Administration

[A-560-803]

Notice of Preliminary Determination of Sales at Less Than Fair

Value and Postponement of Final Determination: Extruded Rubber Thread

From Indonesia

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: November 3, 1998.

FOR FURTHER INFORMATION CONTACT: Russell Morris or Eric B. Greynolds,

Office of AD/CVD Enforcement VI, Import Administration, U.S. Department

of Commerce, Room 4012, 14th Street and Constitution Avenue, N.W.,

Washington, D.C. 20230; telephone (202) 482-2786.

SUPPLEMENTARY INFORMATION:

The Applicable Statue

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''). In addition,

unless otherwise indicated, all citations to the Department's

regulations are to the regulations at 19 CFR part 351 (April 1, 1998).

Preliminary Determination

We preliminarily determine that extruded rubber thread (``ERT'')

from Indonesia is being, or is likely to be, sold in the United States

at less than fair value (``LTFV''), as provided in section 733 of the

Act. The estimated margins of sales at LTFV are shown in the

``Suspension of Liquidation'' section of this notice.

Case History

Since the initiation of this investigation on April 20, 1998 (see

Notice of Initiation of Antidumping and Countervailing Duty

Investigations: Extruded Rubber Thread from Indonesia (63 FR 23267)

(``Notice of Initiation'')), the following events have occurred:

On April 22, 1998, the Department of Commerce (``Department'')

requested information from the U.S. Embassy in Indonesia to identify

producers/exporters of the subject merchandise.

On May 28, 1998, the International Trade Commission (``ITC'')

published its preliminary determination that there is a reasonable

indication that an industry in the United States is being materially

injured, or threatened with material injury, by reason of imports from

Indonesia of the subject merchandise (63 FR 29250).

On May 28, 1998, the Department issued the antidumping duty

questionnaire to the following producers/exporters of ERT: P.T. Bakrie

Rubber Industry (``Bakrie''), P.T. Swasthi Parama Mulya (``Swasthi''),

P.T. Perkebunan Nusantara III (``Persero''), Cilatexindo Graha Alam

P.T. (``Cilatexindo''). The questionnaire is divided into four

sections. Section A requests general information concerning a company's

corporate structure and business practices, the merchandise under

investigation that it sells, and the sales of the merchandise in all of

its markets. Sections B and C request home market sales listings and

U.S. sales listings, respectively. Section D requests information on

the cost of production (``COP'') of the foreign like product and

constructed value (``CV'') of the subject merchandise.

On June 8, 1998 and July 27, 1998, Cilatexindo and Persero,

respectively, stated that it has never directly or indirectly sold ERT

to the U.S. market during the period of investigation. Upon receipt of

Cilatexindo and Persero's statements, the Department consulted with

U.S. Customs to verify each party's respective claim as it pertains to

the period of investigation. The Department was able to confirm that

both Cilatexindo and Persero did not ship the subject merchandise to

the United States. (See Memorandum from Russell Morris to the File,

``Shipments of Subject Merchandise,'' dated August 24, 1998. The public

version is on file in Room B-099, the Central Records Unit, of the

Department of Commerce).

On July 8, 1998, Bakrie and Swasthi submitted their respective

responses to Section A of the questionnaire. On July 21, 1998, Bakrie

submitted Sections B and C of the questionnaire. On July 24, 1998,

Swasthi submitted Sections B and C of the questionnaire. On August 17,

1998, we issued supplemental questionnaires to Bakrie and its

affiliated U.S. reseller, Globe Manufacturing Co. (``Globe'') and

Swasthi. On September 14, 1998, Swasthi submitted its response to the

Department's Section C supplemental questionnaire. On September 25,

1998, Bakrie submitted its response to the Department's supplemental

questionnaire for Sections A, B and C. On September 25, 1998, Bakrie

also submitted its revised Section C questionnaire response which

contained a separate submission of Globe's selling expenses and prices

to its first unaffiliated customer.

On August 3, 1998, the petitioner made a timely request that the

Department postpone the preliminary determination in this

investigation. We did so on August 14, 1998, in accordance with section

733(c)(1)(A) of the Act (see Notice of Postponement of Time Limit for

Antidumping Investigation: Extruded Rubber Thread from Indonesia, 63 FR

43674).

Date of Sale

On September 3, 1998, the petitioner objected to Swasthi's use of

date of invoice as the date of sale. Petitioner argued that given the

actual sales processes of Swasthi, the appropriate date of sale is set

on the purchase order date for U.S. sales, not the date on which the

sale is invoiced as Swasthi has reported. Petitioner noted that there

are no changes in the basic terms of each sale after the negotiation of

the purchase order. The petitioner noted

[[Page 59280]]

that its comment pertaining to the proper date of sale applies to

Bakrie, as well. After a review of the petitioner's comments and the

method by which sales are made in both the home market and U.S. market

by both respondents, we determined that the date of invoice is the

appropriate date of sale in this investigation.

Section 351.401(i) of the Department's regulations states that the

Department will normally use the date of invoice, as recorded in the

exporter's or producer's records kept in the ordinary course of

business, as the date of sale. The preamble to the Final Rules (the

``Preamble'') provides an explanation of this policy and examples of

when the Department may choose to base the date of sale on a date other

than the date of invoice. See 62 FR at 27348-49 (May 19, 1997).

According to Swasthi's response, the product mix, the price, and the

quantity of a customer's original order can change until the date of

shipment which is the same as the company's date of invoice. Based upon

Swasthi's representation, we preliminarily determine that the

appropriate date of sale for Swasthi is the date of shipment. In

determining the date of sale for Bakrie and its affiliated reseller

Globe, the Department is relying on Globe's reported invoice date as

the date of sale and shipment date. (For further discussion see

memorandum to the file, ``Clarification of Globe Manufacturing's

Section C submission,'' dated October, 15, 1998.) We intend to verify

respondents' claims concerning changes between the date of shipment and

the date of invoice. Based upon the outcome of our verification, we

will determine whether it is appropriate to continue to use the date of

invoice as the date of sale. We will consider, among other things,

whether, in fact, there were any changes to the contracted terms

between the original order and the date of invoice. See e.g. Notice of

Final Results of Antidumping Duty Administrative Review: Canned

Pineapple Fruit from Thailand, 63 FR 7392 at 7394-7395 (February 13,

1998).

Cost Investigation

On August 17, 1998, pursuant to section 773(b) of the Act,

petitioner submitted a timely allegation that Bakrie and Swasthi had

made sales in the home market at less than the cost of production. Our

analysis of the allegation indicated that there were reasonable grounds

to believe or suspect that Bakrie and Swasthi both sold ERT in the home

market at prices at less than COP. Accordingly, we initiated COP

investigations with respect to Bakrie and Swasthi pursuant to section

773(b) of the Act on September 10, 1998 (see Memorandum from Team to

David Mueller, Office Director, dated September 10, 1998. The public

version is on file in Room B-099 of the Central Records Unit). As a

result of the Department's COP investigation, the Department requested

that both Bakrie and Swasthi answer Section D of the original

questionnaire; both parties submitted their respective responses to the

Section D questionnaire on October 23, 1998. Because of the timing of

the COP initiation and the receipt of the COP responses, we are unable

to include a COP analysis in this preliminary determination. We intend

to issue COP analysis memoranda for Bakrie and Swasthi prior to

verification and will conduct cost verifications for both respondents.

Parties should include comments, if any, on our COP methodology in

their case briefs.

Scope of the Investigation

For purposes of this investigation, the product covered is ERT from

Indonesia. ERT is defined as vulcanized rubber thread obtained by

extrusion of stable or concentrated natural rubber latex of any cross

sectional shape, measuring from 0.18 mm, which is 0.007 inches or 140

gauge, to 1.42 mm, which is 0.056 inch or 18 gauge, in diameter.

ERT is currently classified under subheadings 4007.00.00 of the

Harmonized Tariff Schedule (``HTS''). Although the HTS subheadings are

provided for convenience and customs purposes, the written description

of the scope of this investigation is dispositive.

Period of Investigation

The period of investigation (``POI'') is January 1, 1997, through

December 31, 1997.

Postponement of Final Determination and Extension of Provisional

Measures

In October 1998, pursuant to section 735(a)(2) of the Act, both

respondents requested that, in the event of an affirmative preliminary

determination in this investigation, the Department postpone its final

determination until not later than 135 days after the date of the

publication of an affirmative preliminary determination in the Federal

Register. On October 27, 1998, respondents amended their request to

include a request to extend the provisional measures to not more than

six months. In accordance with 19 CFR 351.210(b), because (1) our

preliminary determination is affirmative, (2) both Bakrie and Swasthi

account for a significant proportion of exports of the subject

merchandise, (3) no compelling reasons for denial exist, we are

granting the respondents' request and are postponing the final

determination until no later than 135 days after the publication of

this notice in the Federal Register. In addition, we are extending the

provisional measures by not more than six months. Suspension of

liquidation will be extended accordingly.

Fair Value Comparisons

To determine whether sales of ERT from Indonesia to the United

States were made at less than fair value, we compared the export price

(``EP'') or the constructed export price (``CEP'') to the normal value

(``NV''), as described below in the ``Export Price,'' ``Constructed

Export Price,'' and ``Normal Value'' sections of this notice. In

accordance with section 777A(d)(1)(A)(i) of the Act, we calculated

weighted-average EPs and CEPs for comparison to weighted-average NVs.

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 of this notice, produced in Indonesia by the respondents 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 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): gauge, color, and ends. (For further explanation of the

product comparisons, see Memorandum from Anne D'Alauro dated May 22,

1998, on file in the Central Records Unit, Room B-099 of the Department

of Commerce.)

Level of Trade

While neither Swasthi nor Bakrie claimed a difference in level of

trade, Bakrie requested that the Department evaluate whether Bakrie

qualified for a level of trade adjustment. Based upon our review of the

responses submitted by each of the companies, we detected no sales

activities that would differ from the home market to U.S. market, and

therefore determine that each company performed essentially the same

selling activities for all reported home market and U.S. sales.

Accordingly, we find that no level of trade differences exist between

any sales in either the home

[[Page 59281]]

market or U.S. market for either company. Therefore, all price

comparisons are at the same level of trade and an adjustment pursuant

to section 773(a)(7)(A) of the Act is unwarranted.

Export Price

For Swasthi, we used EP methodology, in accordance with section

772(a) of the Act, because the subject merchandise was sold directly to

the first unaffiliated purchaser in the United States prior to

importation and because CEP methodology was not otherwise indicated. We

based EP on the packed prices to unaffiliated purchasers in the United

States. In accordance with section 772(c)(2)(A) of the Act, we made

deductions, where appropriate, from the starting price for foreign

inland freight, international freight, marine insurance, U.S. customs

duty, and brokerage and handling. We also made a deduction, where

appropriate, for rebates.

Constructed Export Price

For Bakrie, we used CEP methodology, in accordance with section

772(b) of the Act, because the first sale of subject merchandise to an

unaffiliated purchaser took place after importation into the United

States. We based CEP on the packed delivered prices to unaffiliated

purchasers in the United States. We made deductions, where appropriate,

for discounts. We also made deductions for the following movement

expenses, where appropriate, in accordance with section 772(c)(2)(A) of

the Act: foreign inland freight, containerization expenses (expenses

for loading the merchandise into the container), foreign brokerage and

handling, international freight (including marine insurance, U.S.

inland insurance, U.S. freight to the affiliated reseller), U.S.

customs duties, letter of credit fees, and freight to U.S. customer. In

accordance with 772(d)(1) of the Act, we deducted selling expenses

associated with economic activities occurring in the United States,

including direct selling expenses (credit cost and technical services),

inventory carrying costs, and other indirect selling expenses. Bakrie

did not make a profit during the POI, therefore, profit was not

deducted in accordance with sections 772(d)(3) and 772(f) of the Act.

In its response, Bakrie converted certain expenses originally

incurred in Rupiah into U.S. dollars using an average exchange rate for

the POI which was reported in its response. Because the company should

have reported the charges in the currency of the transactions, we

reconverted these expenses back into Rupiah using the average exchange

rate used by the company.

In addition, in its initial questionnaire response, Bakrie and

Globe failed to submit to the Department a single integrated Section C

response. On August 17, 1998, we sent a supplemental questionnaire to

both Bakrie and Globe, requesting that they submit a revised Section C

response that integrated Bakrie's transfers of ERT to Globe and Globe's

sales of ERT to its first unaffiliated customer in the United States.

On September 25, 1998, Bakrie submitted a revised Section C

questionnaire response. However, Bakrie's revised Section C response

did not integrate its movement and other expenses associated with its

shipments of ERT to Globe with that of Globe's sales of ERT to its

first unaffiliated customer. The lack of an integrated response created

gaps for which we did not have data.

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

or any other person fails to provide such information by the deadlines

for submission of the information or in the form and manner requested,

subject to subsections (c)(1) and (e) of section 782, the administering

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

available in reaching the applicable determination under this title.''

In its August 17, 1998 supplemental questionnaire, the Department

specifically requested that both Bakrie and its affiliated reseller,

Globe, provide ``one integrated response.'' See the Department's

Supplemental Questionnaire dated August 11, 1998, page 5. Both Bakrie

and Globe failed to comply with the Department's request for an

integrated response. On this basis, we determined that use of facts

available is appropriate for certain expenses reported by Bakrie and

Globe. The Department relied on facts available to integrate and adjust

certain selling expenses incurred by both Bakrie and Globe. Therefore,

as facts available, we weight-averaged Bakrie's reported U.S. expenses

for CEP sales and integrated them into Globe's reported response. See

Memorandum from Team to the File ``Normal Value and Constructed Export

Price Adjustments for the Preliminary Determination,'' dated October

27, 1998.

In addition, according to Bakrie, Globe provided some technical

services to its U.S. customers. However, Globe reported these expenses

as part of its indirect selling expenses. Because we are unable to

segregate these technical service expenses from other indirect selling

expenses incurred in the United States as reported by Globe, we are

treating, as facts available, the entire amount as direct selling

expenses.

Normal Value

After testing for home market viability, we calculated NV as noted

in the ``Price-to-Price Comparisons'' section of this notice.

Home Market Viability

In order to determine whether there is a sufficient volume of sales

in the home market to serve as a viable basis for calculating NV (i.e.,

the aggregate volume of home market sales of the foreign like product

is equal to or greater than five percent of the aggregate volume of

U.S. sales), we compared the respondents' volume of home market sales

of the foreign like product to the volume of U.S. sales of the subject

merchandise, in accordance with section 773(a)(1)(C) of the Act. As

respondents' aggregate volume of home market sales of the foreign like

product exceeded five percent of their aggregate volume of U.S. sales

for the subject merchandise, we have determined that the home market is

viable for both of the respondents.

Bakrie

We based NV on packed, delivered prices to unaffiliated customers.

We made deductions, where appropriate, from the starting price for

inland freight, inland insurance, and direct selling expenses (credit

expenses and commissions), pursuant to sections 773(a)(6)(B) and

773(a)(6)(C)(iii) of the Act. We also made deductions, where

appropriate, for discounts. In addition, pursuant to sections 773(a)(6)

(A) and (B) of the Act, we deducted home market packing costs and added

U.S. packing costs.

While Bakrie reported in its response that it sold identical

products in both its home and U.S. markets, identical product sales

were not made during the POI. Thus, we had to match U.S. products to

the most similar product sold in the home market based upon the

matching criteria noted in the ``Physical Characteristics'' section of

this notice. Bakrie, however, failed to provide information which could

be used to make adjustments for physical differences in merchandise

pursuant to section 773(a)(6)(C)(ii) of the Act. Therefore, we compared

Bakrie's sales in the U.S. market to sales in the home market of

products at the next highest gauge, as facts available, because the

prices and costs per unit of weight are higher for the higher gauged

ERT products.

[[Page 59282]]

Swasthi

We based NV on packed, delivered prices to unaffiliated customers.

We made deductions, where appropriate, from the starting price for

inland freight in accordance with section 773(a)(6)(B)(ii) of the Act.

We also adjusted for differences in circumstances of sale for credit

expenses pursuant to section 773(a)(6)(C)(iii) of the Act. In addition,

pursuant to sections 773(a)(6) (A) and (B) of the Act, we deducted home

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

Swasthi reported that it had returns of subject merchandise during

the POI. On certain specific home market sales, it reported the

quantity of the merchandise returned by the customer. Swasthi did not,

however, report any additional expenses it incurred as a result of the

return of defected and rejected merchandise. Therefore, we were unable

to make any adjustments for any expenses incurred under this claim. We

did, however, adjust the reported quantity of the home market sale

based upon the quantity of the merchandise returned by the customer.

Currency Conversion

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

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

the Federal Reserve Bank, in accordance with section 773(A) of the Act.

In the recently completed preliminary determination of Mushrooms

from Indonesia, an issue was raised regarding the use of two averaging

periods for the margin calculations to account for the effect of the

devaluation of the Indonesian Rupiah. See Notice of Preliminary

Determination of Sales at Less Than Fair Value and Postponement of

Final Determination: Certain Preserved Mushrooms From Indonesia, 63 FR

41783 (August 5, 1998) (Mushrooms from Indonesia). The petitioners in

Mushrooms from Indonesia stated that the Department should calculate

the weighted-average export price for two averaging periods--January

through June 1997, and July through December 1997--in order to avoid

distorting dumping margins. In Mushrooms from Indonesia, we

preliminarily found no basis to depart from our practice of calculating

the weighted-average export prices for the entire POI. Although the

issue of using two different averaging periods has not been raised in

the instant investigation, the effect, if any, of the devaluation of

the Rupiah on margin calculations could also be relevant to this

investigation because its POI, calendar year 1997, is identical to that

in Mushrooms from Indonesia. Therefore, we will continue to examine

this issue for our final determination in this instant investigation.

We invite comments from the interested parties on this issue.

Verification

As provided in section 782(i) of the Act, we will verify all

information relied upon in making our final determination.

Suspension of Liquidation

In accordance with section 733(d) of the Act, we are directing the

Customs Service to suspend liquidation of all imports of subject

merchandise that are entered, or withdrawn from warehouse, for

consumption on or after the date of publication of this notice in the

Federal Register. Swasthi is excluded from suspension of liquidation

because its rate is de minimis under section 733(b)(3) of the Act. 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 or constructed export price, as indicated in the

chart below for companies other than Swasthi. These suspension-of-

liquidation instructions will remain in effect until further notice.

The weighted-average dumping margins are as follows:

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

Weighted-

average

Exporter/Manufacturer margin

Percentage

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

Bakrie Rubber Industry..................................... 13.07

P.T. Swasthi Parama Mulya.................................. 0.09

All Others Rate............................................ 13.07

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

Pursuant to section 735(c)(5)(A) of the Act, the Department has

excluded all zero and de minimis weighted-average dumping margins from

the calculation of the ``All Others'' rate. Under section 733(b)(3) of

the Act, a weighted-average dumping margin is de minimis if it is less

than two percent ad valorem.

ITC Notification

In accordance with section 733(f) of the Act, we have notified the

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

the ITC will determine before the later of 120 days after the date of

this preliminary determination or 45 days after our final determination

whether these imports are materially injuring, or threatening material

injury to, the U.S. industry.

Public Comment

Case briefs or other written comments in at least ten copies must

be submitted to the Assistant Secretary for Import Administration no

later than February 3, 1999, and rebuttal briefs no later than February

10, 1999. A list of authorities used and an executive summary of issues

should accompany any briefs submitted to the Department. Such summary

should be limited to five pages total, including footnotes. In

accordance with section 774 of the Act, we will hold a public hearing,

if requested, to afford interested parties an opportunity to comment on

arguments raised in case or rebuttal briefs. Tentatively, the hearing

will be held on February 16, 1999, time and room to be determined, at

the U.S. Department of Commerce, 14th Street and Constitution Avenue,

N.W., Washington, D.C. 20230. Parties should confirm by telephone the

time, date, and place of the hearing 48 hours before the scheduled

time.

Interested parties who wish to request a hearing, or to participate

if one is requested, must submit a written request to the Assistance

Secretary for Import Administration, U.S. Department of Commerce, Room

1870, within 30 days of the publication of this notice. Requests should

contain: (1) The party's name, address, and telephone number; (2) the

number of participants; and (3) a list of the issues to be discussed.

Oral presentations will be limited to issues raised in the briefs. If

this investigation proceeds normally, we will make our final

determination by no later than 135 days after the publication of this

notice in the Federal Register.

This determination is issued and published in accordance with

sections 733(d) and 777(i)(1) of the Act.

Dated: October 27, 1998.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 98-29441 Filed 11-2-98; 8:45 am]

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