Notice of Final Determination of Sales at Less Than Fair Value: Stainless Steel Round Wire from Taiwan

DEPARTMENT OF COMMERCE

International Trade Administration

[A-583-829]

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

Stainless Steel Round Wire from Taiwan

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: April 9, 1999.

FOR FURTHER INFORMATION CONTACT: Gabriel Adler or Kris Campbell at

(202) 482-1442 or (202) 482-3813, respectively, Group 1, Office of AD/

CVD Enforcement 2, Import Administration, International Trade

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

Constitution Avenue, NW, Washington, D.C. 20230.

The Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute are

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

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

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

indicated, all citations to Department of Commerce (Department)

regulations refer to the regulations codified at 19 CFR Part 351 (April

1998).

Final Determination

We determine that stainless steel round wire from Taiwan is being

sold, or is likely to be sold, in the United States at less than fair

value (LTFV), as provided in section 735 of the Act. The estimated

margins are shown in the Suspension of Liquidation section of this

notice.

Case History

The preliminary determination in this investigation was issued on

November 12, 1998. See Notice of Preliminary Determinations of Sales at

Less Than Fair Value and Postponement of Final Determinations--

Stainless Steel Round Wire From Canada, India, Japan, Spain, and

Taiwan; Preliminary Determination of Sales at Not Less Than Fair Value

and Postponement of Final Determination--Stainless Steel Round Wire

From Korea, 63 FR 64042 (November 18, 1998) (preliminary

determination). Since the preliminary determination, the following

events have occurred:

In January and February 1999, we conducted on-site verifications of

the questionnaire responses submitted by respondent Tien Tai Electrode

Co., Ltd. (Tien Tai) and its affiliate 1 Kuang Tai Metal

Industry Co., Ltd. (Kuang Tai).2

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\1\ As explained in the preliminary determination, for purposes

of this investigation we are treating Tien Tai and Kuang Tai as a

single entity.

\2\ Verification of respondent Rodex Fasteners Corp. (Rodex) was

conducted in September and October 1998, prior to the issuance of

the preliminary determination.

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The petitioners 3, Tien Tai/Kuang Tai, and Rodex

submitted case briefs on February 23, 1999, and rebuttal briefs on

March 2, 1999. We held a public hearing on March 11, 1999.

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\3\ The petitioners are ACS Industries, Inc., Al Tech Specialty

Steel Corp., Branford Wire & Manufacturing Company, Carpenter

Technology Corp., Handy & Harman Specialty Wire Group, Industrial

Alloys, Inc., Loos & Company, Inc., Sandvik Steel Company, Sumiden

Wire Products Corporation, and Techalloy Company, Inc.

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Scope of Investigation

The scope of this investigation covers stainless steel round wire

(SSRW). SSRW is any cold-formed (i.e., cold-drawn, cold-rolled)

stainless steel product of a cylindrical contour, sold in coils or

spools, and not over 0.703 inch (18 mm) in maximum solid cross-

sectional dimension. SSRW is made of iron-based alloys containing, by

weight, 1.2 percent or less of carbon and 10.5 percent or more of

chromium, with or without other elements. Metallic coatings, such as

nickel and copper coatings, may be applied.

The merchandise subject to this investigation is classifiable under

subheadings 7223.00.1015, 7223.00.1030, 7223.00.1045, 7223.00.1060, and

7223.00.1075 of the Harmonized Tariff Schedule of the United States

(HTSUS). Although the HTSUS subheadings are provided for convenience

and customs purposes, the written description of the merchandise under

investigation is dispositive.

Period of Investigation

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

December 31, 1997. This period corresponds to each respondent's four

most recent fiscal quarters prior to the month of the filing of the

petition (i.e., March 1998).

[[Page 17337]]

Fair Value Comparisons

To determine whether sales of stainless steel round wire from

Taiwan to the United States were made at LTFV, we compared the export

price (EP) to the normal value. Our calculations followed the

methodologies described in the preliminary determination, except as

noted below and in company-specific analysis memoranda dated April 2,

1999, which have been placed in the file.

Export Price

We used the same methodology to calculate EP as that described in

the preliminary determination.

Normal Value

We used the same methodology to calculate normal value as that

described in the preliminary determination, except that for Tien Tai,

we revised the reported credit expenses to correct an error in the

credit period.

Cost of Production

We used the same methodology to calculate cost of production (COP)

as that described in the preliminary determination, except in the

following specific instances:

1. Rodex

We corrected two errors made in the preliminary determination

with respect to a year-end auditor's adjustment to the reported

labor and overhead costs. See Rodex comment 3.

2. Tien Tai

We made an adjustment for wire rod input costs. We included in

general expenses (1) the value of stock bonuses made to employees

and directors, (2) R&D expenses, (3) certain foreign exchange gains

and losses, and excluded from general expenses certain non-operating

income. Further, we reduced the cost of sales of the companies by

the verified inter-company transactions. Finally, we eliminated the

double-counting of packing expenses of Kuang Tai.

Unit of Weight for Tien Tai

We corrected a clerical error in the margin program for Tien Tai

involving the unit of weight used to calculate the total amount of

dumping.

Currency Conversions

As in the preliminary determination, we made currency conversions

into U.S. dollars based on the exchange rates in effect on the dates of

the U.S. sales, in accordance with section 773A of the Act. We relied

on exchange rates certified by the Federal Reserve Bank.

Interested Party Comments

A. Tien Tai/Kuang Tai

Comment 1: Costs for Inter-Company Raw Material Purchases. The

petitioners argue that the extent of Tien Tai's purchases of wire rod

from Kuang Tai was understated, and not disclosed until verification.

The petitioners also contend that because Tien Tai and Kuang Tai are a

single entity for purposes of this investigation, they should have

reported their respective acquisition cost of the wire rod in question

rather than the inter-company transfer price. Finally, the petitioners

argue that there were also critical flaws in the reporting of costs for

wire rod Kuang Tai obtained from Walsin, an affiliated supplier.

Specifically, they argue that: (1) the reported costs of manufacturing

of certain grades of rod supplied by Walsin were understated relative

to the costs on Walsin's books; (2) Walsin's reported selling, selling,

general and administrative (SG&A) expenses did not include

miscellaneous general expenses and contained errors in the allocation

of selling expenses, and (3) Walsin's reported interest expense did not

include amounts for long-term interest expense. According to the

petitioners, these omissions warrant the rejection of the submitted

cost data in its entirety and the application of adverse facts

available. In the alternative, the petitioners request application of

partial facts available with respect to the COP and constructed value

(CV) data.

The respondents argue that the application of adverse facts

available is not warranted. According to the respondents, the

Department has verified the correct quantity and value of transfers of

wire rod among Tien Tai and Kuang Tai, as well as the wire rod obtained

by Kuang Tai from Walsin, and has all the necessary data to value these

inputs.

DOC Position: We disagree with the petitioners that the application

of total facts available is warranted. While the Department found

discrepancies between the questionnaire responses and the companies'

records with respect to the transfers of stainless steel wire rod

between Tien Tai and Kuang Tai, the discrepancies were minor.

With respect to the valuation of these inputs, we note that section

773(f) of the Act and section 351.407 of the Department's regulations

provide that we will normally determine the value of a major input

obtained from an affiliate based on the higher of transfer price,

market price or cost of production. However, in cases where the

transfer of inputs occurs between companies that the Department has

collapsed (i.e., has determined to treat as a single entity for

purposes of an antidumping proceeding), the Department does not

consider the transfer price or market value in the valuation of the

inputs. Rather, the valuation of transactions between the collapsed

companies is based on the actual cost to the group as a whole. See

Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products

from Korea: Final Results of Antidumping Duty Administrative Reviews,

62 FR 18404, 18429-18431 (April 15, 1997).4 Under the above

standard, and because neither Tien Tai nor Kuang Tai is a producer of

wire rod, the Department's preference in this case would have been to

rely on the affiliate's acquisition cost of the wire rod inputs.

Although we discovered at verification that the respondents had not

submitted these costs, we also determined, by examining purchases of

several different grades of wire rod, that the reported transfer price

was consistently greater than or equal to the acquisition cost. See

Tien Tai/Kuang Tai cost verification report, dated February 12, 1999,

at exhibits 20, 22, 37, and 38. Therefore, as facts available, we have

relied on the reported transfer price to value the inputs in question.

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\4\ We note that our determination was also upheld by the Court

of International Trade. See AK Steel Corp. v. United States, Slip

Op. 98-159, 1998 Ct. Intl. Trade LEXIS 182, at *28-32 (Ct. Int'l

Trade, Nov. 23, 1998).

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With respect to Walsin, we find that the omissions noted do not

warrant the use of adverse facts available. These are relatively minor

errors that are easily corrected based on verified data on the record.

See memorandum from Peter Scholl to Neal Halper, dated April 2, 1999,

which has been placed on the record.

Comment 2: Adjustments to G&A. The petitioners make the following

arguments with respect to adjusting the respondents' general and

administrative (G&A) expenses and G&A ratio.

First, the petitioners argue that Tien Tai has not established

which foreign exchange gains were associated with manufacturing

activities. According to the petitioners, the Department's practice is

to disallow sales-related exchange rate gains from the calculation of

G&A expenses when these are not shown to be related to manufacturing

activities, and therefore the Department should disallow the exchange

gains reported by the respondents. The petitioners add that Tien Tai's

exchange losses, as well as Kuang Tai's exchange gains and losses,

should be accounted for as part of total interest expenses.

Next, the petitioners contend that the Department should disallow

various claimed offsets to G&A expenses. According to the petitioners:

(1) an offset for repair income should be rejected because the income

does not

[[Page 17338]]

stem from the company's core business; (2) Kuang Tai double counted the

offset for scrap sales by reducing both the cost of manufacturing and

G&A expenses by the same amount; and (3) miscellaneous other offsets

are unrelated to production, and should be rejected.

The petitioners also argue that the respondents failed to include

certain items in the reported G&A expenses, namely: (1) cash and stock

bonuses to employees, directors and supervisors, (2) research and

development (R&D) expenditures, and (3) bad debt. Further, the

petitioners argue that the Department should reduce the cost of sales

denominator in the G&A calculation to eliminate the effect of inter-

company transactions. Finally, the petitioners argue that the

Department should revise the cost of goods sold denominator used to

calculate the G&A ratio to exclude any packing costs not otherwise

included in the cost of manufacturing.

The respondents address some, but not all, of the petitioners'

points regarding G&A. First, the respondents argue that their reporting

of scrap revenue is correct, and that no adjustment is necessary to the

G&A ratio in this regard. Next, the respondents claim that the

Department verified all income offsets to G&A, and should not reject

these offsets. The respondents also claim that bad debts are associated

with third country sales, and should therefore not be allocated to

subject merchandise. Further, the respondents claim that the Department

verified the proper classification of reported G&A expenses, including

R&D expenses.

With respect to the elimination of inter-company transactions from

the cost of goods sold denominator used in the calculation of the G&A

ratio, the respondents argue that the Department should eliminate the

transactions based on the price paid by Tien Tai and Kuang Tai to

unaffiliated suppliers for the inputs in question, rather than the

resale price for those inputs charged by Tien Tai and Kuang Tai to each

other.

DOC Position: We address the petitioners' various points in turn.

First, we agree with the petitioners with respect to foreign exchange

gains and losses. It is the Department's practice to distinguish

between exchange gains and losses generated by sales transactions and

those generated by loans payable and the purchases of production

inputs. See Notice of Final Results and Partial Rescission of

Antidumping Duty Administrative Review: Certain Welded Carbon Steel

Pipe and Tube from Turkey, 63 FR 35190, 35198 (June 29, 1998). The

Department typically excludes from the COP and CV calculation those

foreign exchange gains and losses generated by sales transactions

because we do not consider them to relate to the manufacturing

activities of the company. See Notice of Final Determination of Sales

at Less Than Fair Value: Steel Wire Rod from Trinidad and Tobago, 63 FR

9177, 9182 (February 24, 1998). Even though it was requested by the

Department in its supplemental Section D questionnaire dated September

30, 1998, Tien Tai failed to segregate foreign exchange gains between

those generated by sales transactions, purchase transactions, and loans

payable. We have therefore excluded all of Tien Tai's foreign exchange

gains from the calculation of COP and CV. We further agree that Tien

Tai's foreign exchange losses and Kuang Tai's foreign exchange gains

and losses should be included in the COP and CV calculations because

none of these amounts were shown to relate to sales transactions.

We agree with the petitioners in part concerning their arguments on

G&A. We agree that machinery repair income is not part of the general

operations of the company and therefore should be excluded from the

calculation of G&A expenses. We agree that Kuang Tai double counted the

offset for scrap sales by both reducing the cost of manufacturing and

G&A expenses by the same amount. Therefore, we have excluded scrap

income from the G&A expense calculation. We disagree with the

petitioners' argument regarding the other items listed as non-operating

income and expense in the G&A expense calculation, because we find that

they are related to the company's general operations. See Final Results

and Partial Rescission of Antidumping Duty Administrative Review:

Certain Pasta from Italy, 64 FR 6615, 6627 (February 10, 1999) (``G&A

expenses are those expenses which relate to the general operations of

the company as a whole rather than to the production process'').

We agree with the petitioners that it is appropriate to include

cash and stock bonuses to employees, directors and supervisors. The

amounts distributed, whether in the form of stock or cash, represent

compensation for services that the individual has provided to the

company. Therefore, in accordance with section 773(f)(1)(A) of the Act,

we have determined that it is appropriate to include these amounts in

the calculation of COP and CV. We acknowledge that the respondents'

treatment of these distributions as reductions to equity is in

accordance with Taiwan GAAP. However, we find that this treatment is

contrary to the requirements of section 773(f)(1)(A) of the Act, as it

does not reasonably reflect the respondents' cost of production because

the stock transferred to employees in exchange for their labor is a

cost to the company. See Final Determination of Sales at Less Than Fair

Value: Static Random Access Memory Semiconductors From Taiwan, 63 FR

8909, 8921-8922 (February 23, 1998)(``amounts distributed * * * whether

in the form of stock or cash, represent compensation for services which

the individual has provided to the company'').

Also, we agree with the petitioners that it is appropriate to

include R&D expenditures in the COP. R&D are the planned efforts of a

company to discover new information that will help create a new

product, process or technique. The R&D projects listed by the

respondents could benefit subject merchandise and are properly treated

as period expenses since their future benefit is undetermined.

We do not agree with the petitioners that Tien Tai's bad debt

expense should be included in the G&A expense calculation. Bad debt

expense results from the inability to collect payment from customers

for sales, and is appropriately accounted for as a selling expense. See

Final Results of Antidumping Duty Administrative Review: Porcelain-On-

Steel Cookware from Mexico, 63 FR 38373, 38381 (July 16, 1998).

We agree with the petitioners that it is correct to reduce the cost

of sales denominator in the G&A calculation to eliminate the effect of

inter-company transactions. It would be inappropriate to combine the

cost of goods sold of Kuang Tai and Tien Tai without adjustment,

because this would in effect double count cost of sales for those

transactions between the two companies (i.e., inputs sold to one

company which are used to produce another product would be included as

cost of sales at the input level and at the level of the final product

sold). For the final determination, we have eliminated from the cost of

goods sold denominator the value of sales between Tien Tai and Kuang

Tai based on the prices charged between the affiliates. See Final

Results of Antidumping Duty Administrative Review: Certain Cut-to-

Length Carbon Steel Plate from Brazil, 63 FR 12744, 12749 (March 16,

1998).

Finally, we agree with the petitioners that it is appropriate to

revise the cost of goods sold denominator used to calculate the G&A

ratio to exclude any packing costs not otherwise included in the cost

of manufacturing, to which the G&A ratio is applied. We have adjusted

[[Page 17339]]

the cost of goods sold determination accordingly.

Comment 3: Interest Expenses. The petitioners argue that the

Department should make the following revisions to the submitted

interest expense ratio: (1) reduce the cost of goods sold denominator

by the amount of revenue on the sale of scrap, since the reported cost

of manufacturing is also net of that revenue; (2) eliminate inter-

company transactions; and (3) revise the cost of goods sold denominator

to exclude any packing costs not otherwise included in the cost of

manufacturing.

The respondents contend that no adjustment is appropriate with

respect to scrap revenue. With respect to the elimination of inter-

company transfers, the respondents argue that the Department should

rely on the prices they paid for the inputs in question, rather than

the transfer prices paid to each other. The respondents do not address

the petitioners' argument with respect to packing costs.

DOC Position: We agree with the petitioners that the cost of goods

sold denominator should be reduced by the amount of revenue on the sale

of scrap, since the reported cost of manufacturing is also net of that

revenue. With respect to the elimination of inter-company transactions,

we also agree with the petitioners, and have eliminated the value of

sales between Tien Tai and Kuang Tai based on the prices charged

between the affiliates, for the same reasons explained with respect to

the calculation of G&A expenses in comment 2 above. Finally, we agree

with the petitioners that it is appropriate to revise the cost of goods

sold denominator used to calculate the interest ratio to exclude any

packing costs not otherwise included in the cost of manufacturing to

which the interest expense ratio is applied. We have adjusted the cost

of production denominator accordingly.

Comment 4: Product/Packing Form. The petitioners argue that the

Department should incorporate the ``product form'' into the model

matching hierarchy.5 According to the petitioners, the

pricing data submitted by Tien Tai and Kuang Tai indicate significant

price differences in otherwise identical products that are sold in

different product forms. In particular, the petitioners cite instances

of individual invoices with multiple transactions, where Tien Tai

charges consistently higher per-pound prices for small spools of a

given product than for larger spools of the identical product. The

petitioners further argue that, across the POI, comparison of weighted-

average prices also show price differences according to variations in

packing form and size. The petitioners contend that, given these price

differences, the Department can only achieve ``apples-to-apples''

product comparisons by taking product form into consideration in its

model matching.

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\5\ As the petitioners define it, the ``product form'' is

composed of three elements: packing form (e.g., a spool or a coil);

the packing material (e.g., in the case of a spool, metal or wood),

and packing size (e.g., in the case of a spool, the weight of the

spool plus wire).

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The respondents argue that, with rare exceptions, the ``product

form'' is generally not taken into consideration in the pricing of

them, and should therefore not be incorporated as a criterion in the

Department's model match. According to the respondents, the Department

confirmed at verification through examination of numerous invoices that

identical products packed in different forms and sizes had identical

gross unit prices. The respondents further contend that it is not

appropriate to infer a form/price relationship from a comparison of

weighted-average prices since prices can be significantly affected by

independent variables such as date of sale, customer, and quantity of

sale.

DOC Position: Based on the record of this case, we disagree with

the petitioners that it is appropriate to incorporate the ``product

form'' into the model matching characteristics.

At the outset of this case, interested parties were provided with

an opportunity to comment on significant product characteristics to be

incorporated into model matching. Neither the petitioners nor the

respondents made any mention of ``product form'' in their otherwise

detailed comments. (Nor, for that matter, did the respondents in the

companion investigations of round wire from Korea, India, or Canada

make any reference of product form as a possible matching criterion.)

Upon receipt and analysis of Tien Tai/Kuang Tai's sales data, the

petitioners filed a submission noting that for certain U.S. sales of

identical models on a given invoice there was an unexplained variance

in unit price, and surmised that the price variance might be due to

differences in product form. The petitioners did not provide any

evidence that product form is a pricing consideration in the wire

industry generally, instead focusing entirely on Tien Tai/Kuang Tai's

data.

The Department has sought, through supplemental questionnaires to

Tien Tai/Kuang Tai on this issue, as well as through extensive

examination of randomly selected sales documentation at verification,

to determine whether there was a distinct correlation between product

form and pricing contained in the sales data submitted by Tien Tai and

Kuang Tai. With respect to the first two elements of product form

(packing form and packing material), we have found no clear evidence of

a correlation with price in either the U.S. or home market.6

With respect to packing size, we have found that, on some invoices for

U.S. sales, Tien Tai charged its sole U.S. customer a premium for wire

sold in small spools relative to wire sold in larger spools. However,

Tien Tai/Kuang Tai has argued that this pricing pattern is unique to

the transactions in question, and the record does not suggest

otherwise. Indeed, counsel for the petitioners themselves conceded at

the case hearing that there was no conclusive evidence of a

relationship between packing form and pricing with respect to Tien Tai/

Kuang Tai's home market sales. See Case Hearing Transcript at 132.

Given the above, we do not believe the record supports the

incorporation of product form as a matching criterion.

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\6\ The comparisons provided by the petitioners do not account

for a number of factors, most notably differences in customers and

time. Moreover, there are numerous examples on the record, including

many found through random search at verification, of identical

products packed in different forms/materials that have the same unit

price.

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Comment 5: Reporting of Packing Costs. The petitioners allege that

the respondents' claim for a home market packing adjustment should be

denied because Tien Tai/Kuang Tai did not take into account that

certain packing materials were reused, thus overstating packing costs.

The petitioners further allege that there were several discrepancies in

the reported home market and U.S. packing costs.

The respondents argue that their packing costs were correctly

reported and verified, and should be relied upon in the final

determination.

DOC Position: We disagree with the petitioners' assertion that the

cost of reusable packing materials in the home market was overstated.

As noted at verification, Kuang Tai recycled metal bobbins used in home

market sales. See Tien Tai/Kuang Tai Cost Verification Report at 7

(referring to Kuang Tai's use of ``metal spools'', i.e., metal

bobbins). Kuang Tai did not include any cost for the metal bobbins in

the reporting of home market packing costs. See Sales Verification

Exhibit KT-15. Thus, if anything, the cost of the Kuang Tai's recycled

metal bobbins was conservatively understated by the respondents.

[[Page 17340]]

With respect to the other miscellaneous discrepancies alleged by

the petitioners, we note that at verification we found evidence of only

a single error, which involved the over-reporting of home market

packing costs for KW 25KG products. We have corrected this error for

the final determination.

Comment 6: U.S. and Home Market Credit Expenses. The petitioners

argue that the respondents misreported their U.S. and home market

credit expenses. According to the petitioners, the Department should,

as facts available, disregard Tien Tai/Kuang Tai's claim for a credit

expense adjustment for its home market sales, and rely on the highest

reported credit expense as facts available for the respondents' U.S.

sales.

The respondents argue that there is no basis for applying facts

available to their credit expenses. They contend that they revised

their U.S. credit expenses in a timely manner at the outset of

verification, and that the mistakes with respect to home market credit

expenses were minor and correctable based on verification findings.

DOC Position: We disagree with the petitioners that the application

of facts available is appropriate. The respondents identified an error

with respect to U.S. credit expenses at the outset of verification, and

provided verifiable corrections. An error with respect to home market

credit expenses was identified at verification, but it can be easily

corrected based on revised data obtained and examined during the

verification. For a detailed explanation of the correction of these

errors, see the Tien Tai/Kuang Tai sales analysis memo from Sanjay

Mullick to Kris Campbell, dated April 2, 1999.

Comment 7: Double-Counting of Packing Costs. Kuang Tai argues that

it inadvertently included packing costs in the pool of manufacturing

costs allocated to all of its products, such that packing costs have

been reported both in the cost of manufacturing and as a separate

packing adjustment. According to the respondent, the error was not

detected at the cost verification, but the exhibits taken during the

verification establish that packing is in fact double counted. Kuang

Tai requests that the Department remedy this double counting by

removing packing from the cost of manufacturing.

The petitioners argue that the verification exhibits do not

establish the error claimed by the respondent, and moreover, that any

such error would call into question the general reliability of the

submitted cost data. Further, the petitioners argue that Kuang Tai's

claim reveals that the respondent did not allocate any overhead to

packing costs. According to the petitioners, the Department should

reject the respondent's request, and apply total adverse facts

available. In the alternative, the petitioners propose that the

Department apply partial facts available with respect to packing

overhead.

DOC Position: We agree with Kuang Tai that the verification record

establishes that packing was double-counted. (For an explanation of our

analysis of the record in this regard, please see the Tien Tai/Kuang

Tai cost analysis memorandum, from Peter Scholl to Neal Halper, dated

April 2, 1999). Therefore, we have eliminated packing expenses from

Kuang Tai's reported cost of manufacturing. As for the petitioners'

argument with respect to packing overhead, we note that Kuang Tai was

unable to allocate any overhead specifically to packing, but did

allocate total overhead to cost of manufacturing, such that the

overhead expenses were nonetheless included in the reported costs.

B. Rodex

Comment 1: Facts Available. The petitioners argue that the

Department should apply facts available for certain omissions and

errors found at verification, namely (1) unreported U.S. and home

market sales; (2) U.S. sales of wire for which no coating had been

reported, but which were coated with Apex, a lubricant; (3) packing

expenses, the reporting of which was found to contain errors; and (4)

duty drawback, the calculation of which contained errors. The

petitioners contend that the Department should not simply correct these

errors by relying on data collected at verification, but rather apply

adverse facts available.

Rodex argues that use of adverse facts available is unwarranted, as

the omissions and errors cited by the petitioners were minor in nature

and corrected at the preliminary determination through use of verified

data on the record.

DOC Position: We agree with Rodex that the application of adverse

facts available is not warranted. Unlike the cases cited by the

petitioners in which the Department applied best information available

(the precursor to facts available under the pre-URAA antidumping

statute), the omissions and errors referenced by the petitioners in

this case were, both individually and in the aggregate, minor in scope

and immaterial. While the general purpose of verification is not to

gather new information, but rather to verify the information already

submitted, it is the Department's practice to correct minor errors

found at verification. See Notice of Final Determination of Sales at

Less Than Fair Value: Static Random Access Memory Semiconductors from

Taiwan, 63 FR 8909, 8929 (February 23, 1998). Moreover, to the extent

that Rodex identified several of the minor errors in question at the

outset of verification, it did so at the Department's specific

instruction to identify any clerical errors at that point. See letter

from the Department of Commerce to Rodex, dated November 15, 1998,

(transmitting sales verification agenda), at 1.

With respect to the first point raised by the petitioners, the

Department noted at verification that the respondent had not reported a

relatively small number of sales, which had dates of sale in the POI

but date of invoice after the POI.7 Because the sales in

question were few in number, the Department collected and verified the

sales data for these transactions. We have continued to rely on the

sales data in question for this final determination.

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\7\ The error was due to a misunderstanding arising from the

Department's supplemental instruction to Rodex to change the basis

for date of sale. In its first questionnaire response, Rodex based

the date of sale on the date of invoice. After determining that the

date of sales confirmation was a more appropriate basis for the date

of sale, the Department instructed Rodex to revise its sales

databases accordingly. Although Rodex complied with this request by

reporting the date of sales confirmation for all previously reported

sales, it did not additionally report certain sales with date of

sales confirmation within the POI and invoice date outside of the

POI.

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The Department also found at verification that four U.S. sales

reported as having no coating had in fact been coated with Apex. We

verified that no other U.S. sales, and no home market sales, were

coated with Apex. See Rodex Sales Verification Report at 4. Because the

omission in question was minor and remedied through verified data,

there is no need for the application of adverse facts available.

With respect to packing costs, we found at verification that a few

home market sales had been shipped in reusable containers. In the

preliminary determination, we set the packing cost for such sales to

zero and increased the reallocated total packing costs to the other

sales, which resulted in a small increase to packing costs. Again, to

the limited extent that the error created any distortion in the margin

calculation, that distortion was fully corrected.

As for duty drawback, the calculation errors in question were also

very minor (accounting for a discrepancy of less than one-tenth of one

percent), and were identified by the respondent at the outset of

verification as a clerical error.

[[Page 17341]]

We have therefore relied on the corrected duty drawback expense

calculation provided by Rodex at verification.

Comment 2: Potential Reimbursement of Antidumping Duties. The

petitioners contend that Rodex agreed to reimburse its customers for

payment of potential antidumping duties. According to the petitioners,

the Department should deduct the amount of calculated duties from the

export price to determine the cash deposit rate to be applied to

Rodex's entries.

Rodex argues that it has not to date reimbursed any customer for

antidumping duties, since there has never been an antidumping duty

order on round wire. Rodex contends that it was unaware of the

Department's regulations at the time that it expressed a willingness to

reimburse its customers for potential antidumping duties, and that in

the event that an antidumping order is imposed, it will not reimburse

any duties.

DOC Position: We disagree with the petitioners that the Department

should adjust the export price for potential reimbursement of

antidumping duties. Section 351.402(f)(1)(i)(B) of the Department's

regulations provides that the Department will deduct the amount of any

antidumping duty which the producer reimbursed to the importer. For

that provision to be triggered, an antidumping duty order must have

been imposed, and antidumping duties levied. Since neither of those

events has occurred to date, the provision is not applicable in this

case. In the event that an antidumping order is imposed pursuant to

this final determination, and administrative reviews of that order are

requested, the Department will closely examine whether Rodex has

reimbursed, or agreed to reimburse, its customers for antidumping

duties in the relevant period of review.

Comment 3: Year-End Auditor's Adjustment. Rodex argues that the

Department made two errors in the allocation of net foreign exchange

losses to wire products. First, Rodex alleges that the Department

transposed the amounts to be allocated with respect to direct labor and

overhead. Second, Rodex alleges that the Department inadvertently

allocated the full amount of the losses to wire products, even though

the company produced other products.

The petitioners do not dispute Rodex's allegation of a

transposition error. However, the petitioners contend that since the

auditor's adjustment had not been reported to the Department and was

found at verification, the Department should make an adverse inference

and allocate the adjustment fully to wire products.

DOC Position: We agree with Rodex. We have corrected the

transposition error, and, since the adjustment in question applies

equally to all of Rodex's products, have reallocated the adjustment to

both wire and Rodex's other product lines.

Comment 4: Net Foreign Exchange Losses.

Rodex argues that the Department incorrectly allocated net foreign

exchange losses only to wire products, rather than to all of Rodex's

products, which include fasteners. Rodex also argues that the

Department erred by applying the amount of foreign exchange losses as

an upward adjustment to raw material cost, rather to G&A expenses,

since the expenses are classified as non-operating general expenses in

the company's records.

The petitioners respond that the Department correctly adjusted for

net foreign exchange losses, and that it is the Department's normal

practice to include foreign exchange gains and losses relating to raw

materials in the calculation of total raw material costs.

DOC Position: We agree with the petitioners. All of Rodex's

products, including both wire and fasteners, are made from wire rod.

Since Rodex suffered net foreign exchange losses in connection with

purchases of rod, we allocated those net losses to all wire rod

purchases, thus increasing equally the material costs of both wire and

fasteners. With respect to the classification of these expenses, we

note that the losses arise directly from purchases of materials, and it

is the Department's practice to adjust material costs for exchange

losses related to purchases of materials. See, e.g., Circular Welded

Non-Alloy Steel Pipe and Tube from Mexico: Final Results of Antidumping

Duty Administrative Review, 62 FR 37014, 37026 (July 10, 1997).

Therefore, we have adjusted material costs, rather than G&A expenses,

for the exchange losses.

Suspension of Liquidation

In accordance with section 735(c)(1)(C) of the Act, we are

directing the Customs Service to suspend liquidation of all entries of

stainless steel round wire from Taiwan produced and exported by Tien

Tai/Kuang Tai that are entered, or withdrawn from warehouse, for

consumption on or after the date of publication of the final

determination in the Federal Register. Also, in accordance with section

735(c)(1)(B) of the Act, we are directing the Customs Service to

continue to suspend liquidation of all entries of stainless steel round

wire from Taiwan from all other producers and exporters that are

entered, or withdrawn from warehouse, on or after November 18, 1998,

the date of publication of the preliminary determination in the Federal

Register. The Customs Service shall require a cash deposit or the

posting of a bond equal to the weighted-average amount by which the

normal value exceeds the EP, as indicated in the chart below. These

instructions suspending liquidation will remain in effect until further

notice. The weighted-average dumping margins are as follows:

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

Weighted-

Exporter/Manufacturer average margin

percentage

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

Rodex................................................... 3.94

Tien Tai/Kuang Tai...................................... 4.75

All Others.............................................. 4.47

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

Section 735(c)(5)(A) of the Act directs the Department to exclude

all zero and de minimis weighted-average dumping margins, as well as

dumping margins determined entirely under facts available under section

776 of the Act, from the calculation of the ``all others'' rate. Since

neither of the calculated margins in this investigation are zero, de

minimis, or based entirely under facts available, we have included both

margins in the calculation of the all others rate.

ITC Notification

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

International Trade Commission (ITC) of our determination. As our final

determination is affirmative, the ITC will, within 45 days, determine

whether these imports are materially injuring, or threaten material

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

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

be terminated and all securities posted will be refunded or canceled.

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

issue an antidumping duty order directing the Customs Service 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 sections 735(d) and

777(i)(1) of the Act.

[[Page 17342]]

Dated: April 2, 1999.

Richard W. Moreland,

Acting Assistant Secretary for Import Administration.

[FR Doc. 99-8927 Filed 4-8-99; 8:45 am]

BILLING CODE 3510-DS-P