66 FR 65899, December 21, 2001
                                                            A-583-816
                                                  POR: 6/1/99-5/31/00
                                                      Public Document
                                                        IA/III/IX: AV

MEMORANDUM TO: Faryar Shirzad
               Assistant Secretary 
                 for Import Administration

FROM:          Joseph A. Spetrini
               Deputy Assistant Secretary
                 for Import Administration, Group III

SUBJECT: Issues and Decision Memorandum for the Administrative Review of
Stainless Steel Butt-Weld Pipe Fittings from Taiwan: June 1, 1999 through
May 31, 2000

SUMMARY: 

We have analyzed the case and rebuttal briefs of interested parties in
response to Preliminary Results of Antidumping Duty Administrative Review:
Certain Stainless Steel Butt-Weld Pipe Fittings from Taiwan ("Preliminary
Results"), 66 FR 36555 (July 12, 2001). As a result of our analysis, we
have made changes from the Preliminary Results. The specific calculation
changes can be found in our Analysis Memorandum from Alex Villanueva, Case
Analyst to James C. Doyle, Program Manager, Certain Stainless Steel Butt-
Weld Pipe Fittings from Taiwan: Ta Chen Stainless Steel Pipe Co., Ltd.
("Final Analysis Memo"), dated December 10, 2001. We recommend that you
approve the positions we have developed in the "Discussion of the Issues"
section of this Issues and Decision Memorandum. Below is the complete list
of the issues in this administrative review:

General Issues

   Comment 1: Intra-Warehouse Transfer Expenses
   Comment 2: Level of Trade ("LOT")/CEP Offset 
   Comment 3: CEP Profit
   Comment 4: CEP Sales Expenses
   Comment 5: U.S. Short-Term Interest Rate
   Comment 6: U.S. Inventory Carrying Period
   Comment 7: U.S. Indirect Selling Expenses
   Comment 8: Home Market Indirect Selling Expenses
   Comment 9: General and Administrative Expenses
   Comment 10: Reclassification of EP sales to CEP sales

DISCUSSION OF THE ISSUES:

Comment 1: Intra-Warehouse Transfer Expenses (1)

Citing the Memorandum to the File from Alex Villanueva, regarding U.S.
Verification in the Administrative Review of the Antidumping Duty Order on
Certain Stainless Steel Butt-Weld Pipe Fittings from Taiwan: 6/1/99-
5/31/00 ("TCI's Verification Report") dated June 15, 2001, and the
Analysis Memorandum for Certain Stainless Steel Butt-Weld Pipe Fittings
from Taiwan: Preliminary Results of the 1999-2000 Administrative Review of
Certain Stainless Steel Butt-Weld Pipe Fittings from Taiwan ("Preliminary
Analysis Memo"), dated July 12, 2001, Ta Chen claims that TCI openly and
fully answered the Department's questions at verification regarding TCI's
transfer of materials among its U.S. warehouses, which were not reported
in the questionnaire responses. Citing the events at the TCI verification,
respondent argues that TCI provided the Department all the documents
necessary to calculate these expenses. Ta Chen states that its allocation
factor was caculated by dividing the total period of review ("POR") intra-
warehouse expenses over TCI's total POR sales value. 

Moreover, Ta Chen argues that transfers between TCI's warehouses involve
all types of products sold by Ta Chen, not just stainless steel butt-weld
pipe fittings. Ta Chen notes that any given transfer between TCI's
warehouses may involve multiple products and it is not possible to
separate out from records the exact product transferred for a more precise
calculation of the transfer costs per product. Ta Chen claims that the
company documents (e.g., freight invoices) do not clearly indicate the
type of product, but may only refer to stainless steel products. 

Citing the TCI Verification Report and the Preliminary Analysis Memo, Ta
Chen further argues that the Department has stated TCI could not more
accurately allocate intra-warehouse transfer expenses than as done by its
allocation factor and that it is impossible to trace specific movement
costs incurred to get the fitting between TCI warehouses. Therefore, Ta
Chen concludes that these expenses are properly considered indirect. 

According to Ta Chen, at verification, the Department noted no errors in
its allocation factor and the supporting documents provided. Ta Chen
claims that the Department ignored and omitted from the verification
report, the verification of the 0.49 percent. Citing Bowe-Passat v. United
States, 17 CIT 335, 343 (1993), Ta Chen argues that the Department should
have given TCI an opportunity to address any concerns over the information
presented. Furthermore, citing Sigma Corp v. United States, 841 F. Supp.
1255, 1262, 1264, 1267-68, 1273 (CIT 19930), Ta Chen claims that the
Department's lack of notice of concern and opportunity for the respondent
to comment or address them is so fundamentally prejudicial as to be a due
process violation. As further support, Ta Chen cites Usinor Sacilor v.
United States, 893 F. Supp. 1112, 1141 (CIT 1995); Micron Technology Inc.
V. United States, 117 F. 3d. 1386, 1399 (Fed Cir. 1997), Rubberflex v.
United States, Slip Op. 99-68 at 21 (CIT July 23, 1999). According to Ta
Chen, the Department simply may not resort to adverse facts available when
it did not inform the respondent of any deficiencies (e.g., 0.49 percent
presentation). See Mitsui & Co., Ltd. v. United States, 18 CIT 185 (1994).
Citing AK Steel Corp. v. United States, Slip Op. 98-15 at 48-49 (CIT Nov.
23, 1998), Ta Chen argues that the Department did not indicate a problem
with its presented proof at verification and therefore, may not reject
that proof. 

Ta Chen also cites the Department's Antidumping Manual, and argues that
the verifiers "may only discover minor discrepancies which should merely
be noted in the report" but that "major discrepancies are serious flaws in
the database" and if the verifier suspects that major errors exist, he
should advise the exporter, and "should document the existence of the
discrepancy and collect additional information, as time and resources
allow, that will provide alternatives to dealing with the problem."
According to Ta Chen, the verifiers failed to document the true magnitude
of the error and worse yet, failed to put such documentation in their
verification report.

Along these lines, Ta Chen argues that the Department's decision
regarding adverse inferences as to the intra-warehouse transfer expense is
unclear. Ta Chen suggests that perhaps the Department found through
adverse inferences that unreported expenses equal 11.29 percent, ad
valorem, and that the adverse inferences are warranted because a major
cost was not reported. Ta Chen argues that this circular reasoning is not
in accordance with law. Citing Ta Chen Stainless Steel Pipe v. United
States, Slip Op. 01-101 (August 14, 2001), Ta Chen argues that the
Department cannot impose an adverse inference for a major omitted expense
unless there is first evidence of a major omitted expense. According to Ta
Chen, there is no substantial evidence on the record that this is a major
omitted expense. 

Ta Chen further argues that the Department's alleged warehouse transfer
cost figure of 11.29 percent is absurd because Ta Chen would be unable to
make money if it incurred such staggering costs by shuffling products
between its U.S. warehouses. According to Ta Chen, a line item as large as
the 11.29 percent would have appeared on TCI's financial statements as an
itemized overhead expense. Ta Chen claims that the Department allocated
all of TCI's intra-warehouse transfer expenses applicable to all TCI
products to the 3.9 percent of TCI sales which are subject merchandise. Ta
Chen claims that the Department's 11.29 percent is over twenty times
larger than the 0.49 percent and therefore, creates a dumping margin that
did not exist. Given all of this, Ta Chen asserts that the Department did
not offer an explanation for not using the allocation factor, contrary to
the Department's practice. Citing Static Random Access Semiconductors from
Taiwan, 63 FR 8909, 89286, (Comment 120 (1998)), Concrete Reinforcing Bar
from Turkey, 62 FR 9737, 9743, (1997) and Bicycles from China, 61 FR
19026, 19044 (1996), Ta Chen argues that the Department must offer an
explanation for the departure from its own practice, which itself is
contrary to law.

Ta Chen notes that the Department "subtracted the non-subject merchandise
related expenses {inter-warehouse transfers} in order to ensure that the
numerator and denominator of the certain percentage were both calculated
on the same basis to the extent possible, given the data collected at
verification." See Preliminary Results at 18. Ta Chen claims that the
Department failed to fully note the "data collected at verification" in
its verification report or Preliminary Analysis Memo. Moreover, the
Respondent notes that the Department did not undertake a methodology to
"ensure that the numerator and denominator of the certain percentage were
both calculated on the same basis," otherwise the analysis would have
supported the 0.49 percent. Citing Olympic Industrial v. United States,
1998 WL 246378 at 5 (CIT 1998) and NTN Bearing Corp. v. United States, 74
F. 3d 1204, 1208 (Fed Cir. 1995), Ta Chen argues that the Department's
duty is to determine dumping margins "as accurately as possible." 

According to Ta Chen, TCI explained at verification its belief that the
intra-warehouse transfer expense was de minimis and its understanding that
de minimis adjustments did not need to be reported. Ta Chen notes that, at
verification, "TCI stated that the inland freight cost was very small and
was therefore not reported." See TCI Verification Report at 17. Ta Chen
contends that the dumping statute, as well as the Department, accepts the
de minimis concept and that de minimis adjustments need not be reported.
See Section 777A(a)(2) of the Tariff Act of 1930, as amended and 19 CFR
351.413. 

Citing the Steel Authority of India v. United States ("Steel Authority of
India"), Slip Op 2001-60 at 19 & 24 (CIT May 22, 2001), Ta Chen argues
that the Department may use adverse inferences only where a respondent did
not act to the best of its ability. According to Ta Chen, TCI's
misunderstanding, failure to understand or inadvertence does not support a
finding that it did not act to the best of its ability. Ta Chen argues
that TCI was right as to the law, as the law provides for ignoring de
minimis aggregated adjustments which are under 1% of price. Moreover, Ta
Chen suggests that either way, whether TCI misunderstood the law on de
minimis adjustments or TCI was right as to such law, a finding that Ta
Chen did not act to the best of its ability does not warrant an adverse
inference, per Steel Authority of India. The Respondent also cites
Mannesmannrohren-Werke AG v. United States, 77 F. Supp. 2d. 1302, 1316
(CIT 1999), as support for its position that Ta Chen readily volunteered
the requested data, belying a finding of lack of intended cooperation.

According to Ta Chen, the undisputed record evidence is that Ta Chen
could not have allocated their intra-warehouse freight costs in any way
other than it did. Ta Chen contends that the Department's adverse
inference, if based upon the fact that Ta Chen could have allocated the
cost better, is unsupported by record evidence and is not in accord with
law. Citing Olympic Adhesives, Inc. v. United States, 899 F. 2d. 1565,
1573-74 (Fed. Cir. 1990), Ta Chen argues that the Department should not
penalize a party for not providing a document or information which does
not exist. According to Ta Chen, there was no other allocation method than
that which is used. Ta Chen also cites Allied-Signal Aerospace Co. v.
United States, 996 F2d. 1185, 1191 & 93 (Fed. Cir. 1993) and Antidumping
Duties: Final Rule, 62 FR 27296, 27341 (1997) (19 CFR 351.308) in support
of its position that an imposition of adverse inferences against a
respondent for not supplying data that the respondent cannot provide is
unlawful. 

Furthermore, Ta Chen contends that the Department applied an adverse
inference because Ta Chen allegedly failed to consult the Department on
this issue in advance. See Preliminary Results at 17. According to Ta Chen
if a respondent has a misunderstanding, that belies a claim that the
respondent failed to act to the best of its ability. Ta Chen suggests that
a party with a misunderstanding would not have even known to contact the
Department. In support of this position, Ta Chen cites the Steel Authority
of India. 

Ta Chen argues that any particular use of adverse facts available must
still consider the basic goal of the anti-dumping law, which is to
accurately calculate a dumping margin, even when using an adverse
inference to motivate cooperation. Ta Chen cites D&L Supply Co. v. United
States, 113 F. 3d. 1220, 1223, (Fed. Cir. 1997)("D&L Supply") and World
Finer Foods, Inc. v. United States, 2000 Ct. Int'l Trade LEXIS 72, in
support for its argument. According to Ta Chen, the use of 11.29 percent
created a dumping margin when there was no dumping margin. This
contravenes the fundamental goal of the anti-dumping statute to accurately
calculate the dumping margin, per D&L Supply. Ta Chen argues that the
court warns that the Department "must be ever vigilant of abuse of
discretion." See Wheatland Tube Corp. v. United States, 17 CIT 1230, 1236,
841 F. Supp. 1222, 1227 (1993). Ta Chen also cites Technoimpoterexport. v.
United States, 15 CIT 250, 259, 766 F. Supp. 1169, 1178 (1991) noting that
a court may remand an act that is an abuse of discretion and "undermined
the interests of justice." According to Ta Chen, the Department's improper
actions constitute such an abuse of discretion, which does not promote
cooperation, as it casts doubt as to whether the objective is to
accurately calculate a dumping margin.

In their brief, petitioners assert that Ta Chen failed to report U.S.
intra-warehouse transfer expenses in its initial and supplemental
questionnaire responses. Petitioners note that TCI personnel stated that
such inventory transfers were "very common," but that the associated
"inland freight cost was very small and was therefore not reported." See
TCI Verification Report at 6. Petitioners further note that TCI claimed
that "the unreported inland freight costs could not be separated for
subject and non-subject merchandise." See TCI Verification Report at 6.
Petitioners comment that contrary to TCI's statements, the Department
found at verification that TCI's intra-warehouse transfer expenses were
not small. Citing the TCI Verification Report, petitioners claim that TCI
could segregate intra-warehouse transfer expense for subject merchandise
and non-subject merchandise and that these expenses accounted for
approximately 11.29 percent of TCI's CEP sales value. 

Petitioners claim that the adverse facts available methodology
preliminarily chosen by the Department is incorrect, because it failed to
recognize that the intra-warehouse transfer expenses are movement
expenses. Specifically, petitioners argue that the intra-warehouse
transfer expenses are expenses incurred to transfer inventory from one
warehouse to another. Citing Section 772(c)(2)(A) of the Act, petitioners
argue that the starting price for EP and CEP sales shall be reduced by the
same amount included in the price of any additional costs, charges, and
expenses and normal U.S. import duties incident to bringing the
merchandise from the place of shipment in the country of exportation to
the place of delivery in the United States. Thus, according to
petitioners, intra-warehouse expenses are part of the movement of the
merchandise from the place of shipment (in the country of exportation) to
the place of delivery in the United States. Petitioners claim that intra-
warehouse transfers that are related to POR sales would properly be
considered sales-specific movement expenses. Petitioners note that intra-
warehouse transfers for the replenishment of a warehouse's inventory would
not be considered a sales-specific movement expense until the sale
occurred.

Petitioners argue that the Department should consider the full amount of
the intra-warehouse transfer expenses related to movement expenses
because: 1) Ta Chen personnel knew these transfer expenses were very
common; 2) the Department requested these expenses from Ta Chen to no
avail; 3) Ta Chen could have easily identified and reported these
expenses; 4) the transfer expenses could have been easily separated from
non-subject merchandise, and 5) the transfer expenses are significant U.S.
selling expenses. Citing Steel Authority of India v. United States, Slip
Op. 01-60 (May 22, 2001), petitioners note that by considering the
transfer expenses as indirect selling expenses, the Department is allowing
Ta Chen to dilute the effect of these expenses on the dumping calculation.
According to the petitioners, the Department should continue to use the
methodology applied in the Preliminary Results, but it should treat these
expenses as movement costs and make a separate additional deduction for
regular U.S. indirect selling expenses.

In its rebuttal brief, Ta Chen argues that TCI's warehouse freight costs
were under five percent as a percent of sales value. Ta Chen states that
petitioners admit that Ta Chen indicated that such costs were "very small"
and could not be separated between subject and non-subject merchandise,
warranting the allocation over all TCI sales, as in fact they apply to all
TCI sales. 

Contrary to petitioners' claim, Ta Chen argues that the Department did
not find that TCI's intra-warehouse transfer expenses could be segregated
into the portion related to subject and non-subject merchandise. Ta Chen
claims that the Department said that since almost all of the intra-
warehouse freight charges could not be allocated to specific merchandise,
the Department would allocate it all to TCI sales of subject merchandise.

According to Ta Chen, petitioners argue that the intra-warehouse transfer
expenses were not small, but rather 11.29% of sales value. Ta Chen states
that petitioners did not cite supporting evidence, but incorrectly state
that the $667,142 in freight costs are for fittings only. According to Ta
Chen such freight costs are for all TCI sales, of which under 4% relate to
sales of subject merchandise.

Ta Chen agrees with petitioners' statements that the Department has a
legal mandate to calculate the most accurate dumping margin possible. Ta
Chen claims that this can only be done by properly allocating TCI's intra-
warehouse freight costs over all TCI sales. Ta Chen also argues that the
intra-warehouse freight costs were not "common," as petitioners claim.

In their rebuttal brief, petitioners argue that Ta Chen's argument fails
to recognize the fact that Ta Chen intentionally and totally failed to
report any intra-warehouse transfer expenses in its questionnaire
responses, and that these expenses were ultimately discovered by the
Department at verification. According to petitioners this single fact
alone discredits the argument made by Ta Chen that the Department should
make a small, non-punitive adjustment. Petitioners assert that the record
on this issue stands clear: 1) Ta Chen was aware of the existence of these
expenses, and Ta Chen personnel knew that such transfers were very common;
2) the Department requested these expenses from Ta Chen to no avail; 3) Ta
Chen could have easily identified and reported these expenses to the
Department in a timely and accurate manner, as it did in the Department's
two-day verification of TCI; 4) contrary to Ta Chen's statements at
verification, the expenses easily could have been separated into transfer
expenses for subject and non-subject merchandise; and 5) these expenses
are significant U.S. selling expenses. 

Citing Steel Authority of India, Ltd. v. United States, Slip-Op. 01-60,
at 12 (CIT May 22, 2001), petitioners argue that the Department should not
reward Ta Chen's behavior by making a small adjustment to the U.S. price,
as suggested by Ta Chen. Petitioners argue that because these expenses
remained unreported until they were discovered by the Department, Ta Chen
lost its right to any further due process on this issue. 

According to petitioners, Ta Chen's suggested methodology is wrong
because it fails to consider the fact that the unreported intra-warehouse
expenses can be segregated into expenses for subject and non-subject
merchandise. Petitioners argue that a large percentage of the total
unreported transfer expenses were attributable to subject merchandise.
Petitioners claim that following Ta Chen's methodology of allocating total
unreported intra-warehouse transfer expenses over total sales erroneously
dilutes the significance of these expenses to the subject merchandise.
Therefore, petitioners requested that the Department rely on its
preliminary calculation methodology for the unreported intra-warehouse
expenses, deduct the resultant expenses as movements expense costs
(USMOVEU), and make a separate additional deductions for regular U.S. ISEs.

Department's Position:

We disagree with Ta Chen and agree with petitioners in part. 

With respect to Ta Chen's argument that the Department did not indicate a
problem with its documents presented at verification regarding its
calculation of intra-warehouse transfer expenses, and therefore, may not
reject that proof, we disagree. Ta Chen previously submitted its
applicable expenses for United States sales with its original
questionnaire response, but omitted intra-warehouse transfer expenses. See
Ta Chen's Section B, C and D Questionnaire Response ("Section BCD
Response"), dated December 26, 2000 at Exhibit 26. On March 5, 2001, Ta
Chen submitted its response to the Department's supplemental
questionnaire, and again omitted the intra-warehouse transfer expenses.
See Ta Chen's Section B, C and D Supplemental Questionnaire Response
("March BCD Response"), dated March 5, 2001 at Attachment 34. Therefore,
prior to the U.S. sales verification, the Department was not aware of
TCI's intra-warehouse transfer expenses. 

On May 31, 2001 through June 1, 2001, the Department conducted Ta Chen's
U.S. sales verification. See TCI Verification Report at 1. Prior to
beginning the U.S. sales verification, the Department asked TCI officials
if they had minor corrections to information on the record. The Department
noted that "respondent {TCI} did not submit any corrections to the
Department prior to the beginning of verification." See Id. We noted that
Ta Chen did not present its intra-warehouse transfer expense information
to the Department; only after the Department inquired as to whether any
such expenses existed did TCI present the information. Id at 6. The
Department further noted that "TCI stated that the inland freight cost was
very small and was therefore not reported." See Id. Specifically, TCI
presented the information after the Department asked TCI "if subject
merchandise (fittings) {were} transferred among the warehouses during the
POR." See TCI's Verification Report at 6. 

With respect to Ta Chen's argument that its intra-warehouse transfer
expenses were small and therefore de minimis, we disagree. During
verification, the Department discovered that, in fact, the intra-warehouse
transfer expenses were not small, as argued by Ta Chen. The
U.S.$750,807.47 figure is significant because a majority of the line items
used to calculate the U.S. indirect selling expenses, which TCI claimed
these expenses to be, are smaller than this figure. See TCI's Verification
Report at Exhibit TCI-7. Therefore, contrary to Ta Chen's claim that the
intra-warehouse expense was not a major omitted expense, the evidence on
the record clearly indicates that Ta Chen failed to report a major expense.

With respect to Ta Chen's argument that this was a de minimis adjustment
and should not be reported, we disagree. Ta Chen appears to suggest that
it may decide which adjustments are de minimis and, furthermore, ascertain
whether they should be reported to the Department. Section 777A(a)(2) of
the Act clearly stipulates that the administering authority may "decline
to take into account adjustments which are insignificant in relation to
the price or value of the merchandise." The Act contemplates the
Department as being granted the authority to decline to take into account
such adjustments, not the respondents. Therefore, Ta Chen's implicit
argument that it may decline to take into account such adjustments and
therefore not report them is incorrect. Furthermore, in this instance, Ta
Chen's presumption that the Department would decline to take such an
adjustment into account is especially curious given that the intra-
warehouse expenses in question, when ranked against the other expenses
used to calculate the indirect selling expense, which TCI claimed these
expenses to be, are significantly larger than the majority of other
indirect selling expenses. Consequently, Ta Chen's claim that a relatively
large expense item is de minimis, while reporting several smaller expense
items, further undermines its protestations on this point. 

With respect to Ta Chen's argument that the intra-warehouse transfer
expenses among TCI's warehouses could not be separated because they
involve multiple products, including non-subject merchandise, we agree in
part. At verification, TCI presented the Department with a General Ledger
Detailed Report ("GLDR"), which summarized TCI's inland freight transfer
expenses by month and, where possible, by product. See TCI's Verification
Report at Exhibit TCI-12. The Department noted in the Preliminary Results
that "where we were able to distinguish subject from non-subject expenses
we removed the clearly non-subject indirect selling expenses." See
Preliminary Analysis Memo at 4. Therefore, rather than use the total
US$750,807.47 transfer freight expense for the POR, which included subject
and non-subject freight transfer expenses, we used the "US$667,142, which
only accounts for indirect selling expenses where we could not separate
non-subject merchandise," ensuring that the Department did not include
expenses which were not for subject merchandise. Id. 

Ta Chen also argues that the Department already stated in its Preliminary
Analysis Memo that it is impossible to trace specific movement costs
incurred by a fitting to get the fitting to a TCI warehouse, which would
include intra-warehouse transfer expenses. Ta Chen has misinterpreted the
Department's Preliminary Results regarding movement expenses. In the
Preliminary Analysis Memo, the Department addressed other movement
expenses relating to CEP sales (i.e., ocean freight, broker and handling,
marine insurance etc.). These expenses are associated with transporting
the subject merchandise from Taiwan to the United States, not U.S. inland
intra-warehouse transfer expenses:

     As a result of verification, we have preliminary determined 
     that the methodology used by Ta Chen to report sales expenses 
     for CEP sales is not distorted since reporting movement expenses 
     for all sales is not possible. 

See Preliminary Analysis Memo at 4. The intra-warehouse expenses at issue
here are expenses TCI incurs when transferring its merchandise among its
U.S. warehouses in the United States. For a further discussion of these
CEP sales expense, please see Comment 4 below. 

With respect to Ta Chen's argument that the Department cannot use adverse
facts available because Ta Chen's calculation is accurate, we disagree.
Section 776(a)(2) of the Act provides that if an interested party:

     (A) withholds information that has been requested by the 
     Department; (B) fails to provide such information in a 
     timely manner or in the form or manner requested, subject 
     to subsections 782(c)(1) and (e) of the Act; (C) significantly 
     impedes a determination under the antidumping statute; or (D) 
     provides such information but the information cannot be verified, 
     the Department shall, subject to subsection 782(d) of the Act, 
     use facts otherwise available in reaching the applicable 
     determination.

In our Preliminary Results, we noted that in this case, section
776(a)(2)(A) of the Act applies because, at the U.S. sales verification of
TCI, "we discovered that TCI failed to report expenses incurred to move
inventory among its warehouses, which should properly have been reported
in its calculation of U.S. indirect selling expenses." See Preliminary
Results at 17. Where a party has not cooperated to the best of its
ability, Commerce may employ adverse inferences regarding the missing
information, to ensure that the party does not obtain a more favorable
result by failing to cooperate than if it had cooperated fully. See
Section 776(b) of the Act and The Statement of Administrative Action
accompanying the URAA, H.R. Doc. No. 103-316, 870 (1994) ("SAA"). 

In employing adverse inferences, one factor Commerce will consider is the
extent to which a party may benefit from its own lack of cooperation.
Information used to make an adverse inference may include such sources as
the petition, other information placed on the record, or determinations in
a prior proceeding regarding the subject merchandise. Therefore,
consistent with the Department's practice in cases where a respondent
fails to cooperate to the best of its ability, we have determined that the
use of partial adverse facts available is warranted.

Because Ta Chen knowingly failed to report the intra-warehouse transfer
expenses to the Department, Ta Chen is subject to facts available. Ta
Chen's knowledge of the intra-warehouse transfer expenses and its decision
not to report them to the Department properly warrants the use of adverse
facts available. Ta Chen did not cooperate to the best of its ability with
regard to its responses for requests for information during the course of
the administrative review. It was only at the Department's request at
verification that TCI offered its explanation for not reporting these
expenses earlier. At verification, TCI stated that the inland freight cost
was very small and was therefore not reported. See TCI Verification Report
at 6. Therefore, consistent with Department practice in cases where a
respondent fails to cooperate to the best of its ability, and in keeping
with section 776(b) of the Act, we affirm our preliminary determination
that the use of partial adverse facts available was warranted. 

Ta Chen argues that the Department's adverse inference, if based upon the
fact that Ta Chen could have allocated the costs better, is unsupported by
record evidence and is not in accord with law. Furthermore, Ta Chen argues
that it should not be penalized for not providing a document or
information that did not exist. Ta Chen disagrees with the Department's
statements in TCI's Verification Report that it did not report these
expenses. We disagree with Ta Chen. Ta Chen acknowledged that TCI chose
not to report these expenses even after calculating its allocation factor.
See Preliminary Results at 7. More importantly, Ta Chen's claim that it
cannot be penalized for not providing a document that did not exist is
unsupported by the fact that it had the relevant documents or information,
such as the GDLR, when calculating its U.S. indirect selling expenses at
verification. During verification, TCI did not claim that the intra-
warehouse transfer expenses were not reported because it did not have the
information to calculate them, but stated that the expenses were de
minimis and therefore not reported. 

Ta Chen argues that at verification it attempted to provide the
Department with a calculation showing that the intra-warehouse transfer
expenses were small, specifically equaling 0.49 percent of its total sales
value during the POR. Contrary to Ta Chen's claim that it was harmed by
the Department failure to record relevant information in the verification
report and among the verification exhibits, such is not the case. The
Department took exhibits indicating both the total amount of unreported
intra-warehouse transfer expenses and whether such expenses could be
segregated into subject and non-subject merchandise components. The
Department did not need to take Ta Chen's allocation factor because that
calculation was not material to the total amount of the unreported expense
or whether the expense could be segregated; it merely represents an
argument regarding the proper treatment of the deliberately unreported
expenses, and therefore is suitable for submission in Ta Chen's case and
rebuttal briefs, rather than for inclusion in the verification report. In
any event, the Department notes that Ta Chen did in fact properly include
this argument and calculation in its briefs, so implications that Ta Chen
was prejudiced by this alleged failure are unavailing.

With respect to petitioners' argument that the adverse facts available
methodology preliminarily chosen by the Department is incorrect because it
failed to recognize that the intra-warehouse transfer expenses are
movement expenses and should be considered sales-specific movement
expenses, we agree in part. We first note that our Preliminary Results
confused the identification of the nature of these expenses with the
proper method for calculating them. Petitioners are correct that these
expenses are unquestionably movement expenses, as they arise solely when
Ta Chen moves inventory from one warehouse to another. As such, the
Department must treat these expenses as movement expenses.

In applying facts available for these movement expenses in our
calculation, the Department used a method applied a previous case. In
Notice of Final Results of Antidumping Duty Administrative Review: Certain
Welded Carbon Steel Pipe and Tube from Turkey, ("Pipe and Tube from
Turkey") 61 FR 69067 (December 31, 1996), as adverse facts available, the
Department applied the highest unreported freight rate to those sales with
no freight:

     In this case, Borusan did not act to the best of its ability 
     in responding to our request for such information, pursuant to 
     section 782(e)(4) of the Act, we have therefore drawn an adverse 
     inference under the authority provided by section 776 of the Act. 
     As fact available, we are assigning the highest freight rate per 
     kilogram to those sales with no freight...

See Pipe and Tube from Turkey 61 FR at 69067. 

The circumstances in Pipe and Tube from Turkey are similar to the instant
case such that in choosing among the facts available, the Department used
the highest freight incurred by Borusan and applied it to those sales with
improperly unreported freight. Following the Pipe and Tube from Turkey
principle, we identified the highest monthly intra-warehouse transfer
expense. We then applied that month's amount to the remaining months in
the POR. We then summed each month into a POR total and, in recognition of
Ta Chen's accurate assessment that its records do not permit sales-
specific identification of these expenses, we divided the summed total
amount by TCI's POR net sales figure for all merchandise, both subject and
non-subject. We then multiplied this figure by the gross unit price to
arrive at the amount we deducted from CEP. See Final Analysis Memo at 4. 

Comment 2: LOT/CEP Offset

Ta Chen alleges that the Department's dumping margin calculation
improperly failed to find that Ta Chen sold at different LOTs in the
United States and Taiwan. Citing Koyo Seiko Co. v. United States, 36 F.
3d. 1565, 1573 (Fed. Cir. 1994) and U.S. Steel Group v. United States,
2000 U.S. App. LEXIS 12528 at 14 (Fed. Cir. August 25, 200), Ta Chen
argues that the Department should have made a fair, apples-to-apples
comparison when reaching its Preliminary Results, as sales were compared
across trade levels with no adjustment for the different levels of trade.
Ta Chen further argues that the Department's failure to find its sales
were made at different LOTs, and subsequently grant a CEP offset
adjustment, meant that U.S. prices were reduced for inventory carrying
costs and indirect selling costs, but home market prices were not. 

Ta Chen asserts that it sells to distributors and end-users in Taiwan,
and in the United States, Ta Chen only sells to its affiliate, TCI, a
master distributor who in turn sells to other distributors. Ta Chen claims
that the Preliminary Analysis Memo incorrectly stated that there was no
difference in selling functions as to U.S. and home market sales. As
evidence thereof, Ta Chen cites its Section A Questionnaire Response
("Section A Response"), dated November 27, 2000, which notes that Ta Chen
maintains inventory, incurs seller's risk of non-payment, undertakes
technical service, packing, after-sales service, freight and delivery
arrangements and selling efforts for its home market sales. Ta Chen argues
that none of these selling functions are performed by Ta Chen for the U.S.
market as Ta Chen ships its products to TCI, which takes over these
selling functions. Additionally, Ta Chen states that the record evidence
indicates that Ta Chen has well over one thousand home market sales, but
under 20 invoices to its U.S. subsidiary, TCI, with each Ta Chen-to-TCI
invoice involving, on average, quantities about 500 times greater than the
average home market sale. Citing its March 5, 2001, submission as evidence
of the disparate number of sales and the average Ta Chen to TCI
quantities, Ta Chen argues that there is an enormous difference in level
of effort for Ta Chen as to U.S. and home market sales, implying different
levels of trade exist.

Further, Ta Chen argues that it does not incur inventory costs for its
sales to TCI because the fittings are produced and shipped immediately.
Specifically, Ta Chen argues that it holds products in inventory in Taiwan
for 163 days on average, which is about 4% of the total sales value from
submitted home market data files submitted on December 26, 2000. Ta Chen
argues further that the inventory carrying costs incurred by TCI are
enormous given the extremely long inventory time for fittings, which is
349 days (equal to 8.7% of cost of goods sold). Ta Chen asserts that TCI
negotiates U.S. sales with unaffiliated customers and bears the risk of
nonpayment, relieving Ta Chen of these selling functions with respect to
its U.S. sales.

Ta Chen argues that in other cases, the Department has found a difference
in the level of trade warranting an adjustment in similar circumstances to
Ta Chen's. Specifically, Ta Chen compares it situation with that in
Stainless Steel Sheet and Strip in Coils from Mexico, 64 FR 30790, 30810
(1999) ("SSSS from Mexico"), where the home market LOT was found to be
more advanced than the CEP LOT, under circumstances similar to those in
this case. Ta Chen states that in both cases, selling activities were not
performed or were performed at low level between the foreign parent and
its U.S. subsidiary (i.e., technical services, inventory maintenance, and
prompt delivery). Moreover, Ta Chen asserts that in both cases, because of
the smaller lots sold in the home market, the home market order
processing, price negotiation and payment collection activities were
assumed to be more costly on a per unit basis than the CEP sales between
the foreign parent and its U.S. subsidiary and thus again the home market
sales were at a more advanced stage of marketing. Ta Chen also argues that
freight delivery service activities were held to be more common in the CEP
transactions between the foreign parent and the U.S. subsidiary than
between the foreign parent and its customers located throughout the home
market, reflecting a less advanced stage of marketing as to the U.S.
sales. Citing Gray Portland Cement from Mexico ("Cement from Mexico"), 64
FR 13148, 13161-62 (1999) and Professional Cutting Tools from Japan, 63 FR
30706, 30708 (1998), Ta Chen argues that, while the foreign parent makes
phone calls to the U.S. subsidiary, such calls were assumed to be more
common between the foreign parent and its eight unaffiliated home market
customers. 

Citing Cement from Mexico, SSSS from Mexico and Notice of Final Results
of Antidumping Duty Administrative Review: Antifriction Bearings from
France, 62 FR 54043, 54058 (1997) ("Antifriction Bearings from France"),
Ta Chen claims that the CEP offset provision applies where, as here,
normal value is established at a LOT which constitutes a more advanced
stage of distribution than the level of trade of the CEP and the data
available does not provide an appropriate basis to determine a LOT
adjustment because Ta Chen does not sell in the home market to the same
level of trade it sells to the United States.

In their rebuttal brief, petitioners argue that the record not only
supports the Department's preliminary finding, but actually shows that Ta
Chen provided fewer selling functions that are at a less advanced level
for its home market sales in comparison to its U.S. sales. The petitioners
begin by noting that Ta Chen provided the Department with its selling
functions in both markets. For the home market, Ta Chen provides inventory
maintenance to date of shipment, incurs risk of non-payment, extension of
credit terms, and addresses customer's complaints. The list of selling
functions Ta Chen provides for TCI includes: inventory maintenance to date
of shipment, incurs risk of non-payment, extension of credit terms,
addresses customer's complaints, handles freight and delivery from Ta Chen
to Taiwan port, insures shipment of merchandise, insures shipment of
merchandise overseas, manages brokerage and handling, containerization of
merchandise, and packages merchandise. Petitioners noted that, contrary to
Ta Chen's claims, it did not provide technical service in the home market.
Petitioners also note that the number of sales processed in either market
do not have a bearing on the selling functions performed in those markets.
Petitioners argue that the information submitted by Ta Chen clearly shows
that it provided more selling functions on its U.S. sales than its home
market sales, and is thus not eligible for a CEP offset.

Department's Position:

We disagree with Ta Chen and agree with petitioners. Section 773(a)(7)(B)
of the Act states:

     When normal value is established at a level of trade which 
     constitutes a more advanced stage of distribution than the 
     level of trade of the constructed export price, but the data 
     available do not provide an appropriate basis to determined 
     under paragraph (A)(ii) a level of trade adjustment, normal 
     value shall be reduced by the amount of indirect selling 
     expenses incurred in the country in which normal value is
     determined on sales of the foreign like product but not more 
     than the amount of such expenses for which a deduction is made 
     under Section 772(d)(1)(D). 

The CEP LOT is the level of the constructed sale from the exporter to the
importer. See 19 C.F.R. 351.412(c)(1)(ii).

19 C.F.R.  351.412(f)(1) states that:

     the Secretary will grant a CEP offset only where normal value is 
     compared to CEP, determined at a more advanced level of trade than 
     the level of trade of the CEP price, and despite that fact that a 
     party has cooperated to the best of its ability, the data available 
     do not provide an appropriate basis to determine under paragraph 
     (d) of this section whetherthe difference in level of trade affects 
     price comparability.

The basis of Ta Chen's contention that it is eligible for CEP offset is
contained in its Section A Questionnaire Response ("Section A Response"),
dated November 27, 2000, where it stated that it maintains inventory,
incurs seller's risk of non-payment, undertakes technical service,
packing, after-sales service, freight and delivery arrangements and
selling efforts for home market sales. Ta Chen argues that none of these
selling functions are performed by Ta Chen for U.S. market sales as Ta
Chen ships its products to TCI, which takes over these selling functions.
However, these claims do not withstand close scrutiny. 

Although Ta Chen stated that it undertakes technical services in its
Section A response, later, in its home market sales listing, Ta Chen
reported that technical services "w{ere} not applicable and thus omitted."
See Section BCD Questionnaire Response ("Section BCD Response"), dated
December 26, 2000 at 15. In other words, Ta Chen did not report a unit
cost for technical services for home market sales, flatly contradicting
its earlier submitted section A response, and therefore casting doubt on
this claim. 

Ta Chen stated that it maintains inventory for the home market, but not
for the U.S. sales because all sales go through TCI, which takes over this
function. We agree that TCI maintains its inventory in the United States
for its U.S. sales, but Ta Chen maintains inventory until the date of
shipment for both markets. See Section A Supplemental Questionnaire
Response ("Sec. A. Supp. Response"), dated February 6, 2001 at 6-8. It is
the sale to TCI which is the appropriate focus for the LOT analysis, and
since Ta Chen holds inventory in Taiwan prior to shipment to TCI, as well
as for Taiwan customers, there is no difference in the provision of this
function.

Ta Chen argues that it incurs packing and freight expenses for
merchandise sold in the home market, but not for sales to the United
States through TCI. The evidence on the record indicates that Ta Chen only
incurs packing labor expenses for its sales in the home market. "Ta Chen's
packing expenses simply involves the labor cost of placing the fittings on
the customer's truck. No packing material costs are incurred." See BCD
Response at 18-19. 

For U.S. sales through TCI, Ta Chen incurs the packing material (e.g.,
wooden boxes, steel strip, plastic belts, pallets, and nails) expenses.
See Id. at 26. In the home market section of its BCD Response, Ta Chen
stated that inland freight "was not applicable {because} customer picks
up." See Id. at 12. For its U.S. sales, Ta Chen uses an outside
(unaffiliated) trucking company to transport fittings from its factory in
Tainan, Taiwan to the Taiwan port for its U.S. sales. For EP (2) sales Ta
Chen also paid for the freight expense from the plant to the port. See BCD
Response at 35. 

Therefore, the record evidence indicates that Ta Chen did not incur
freight expenses, but only labor packing expenses, in the home market. A
careful analysis of Ta Chen's claim regarding its packing and freight
expenses reveals that Ta Chen did not perform more selling functions for
sales in the home market than sales to the United States. In fact, Ta
Chen's packing and freight selling functions performed for U.S. sales
appear to require more of its resources and efforts than is the case for
home market sales. 

We agree that Ta Chen incurs seller's risk and handles after-sales
service in the home market, but not for sales to the United States, as TCI
incurs this risk. However, this does not outweigh the functions performed
by Ta Chen for TCI sales, so as to warrant a CEP offset. Although Ta Chen
stated on the record that TCI must pay Ta Chen for its sale even if TCI's
customer does not pay, arguably, Ta Chen incurs a smaller risk of non-
payment from TCI. Ta Chen performs extension of credit terms, insures
shipment of merchandise in Taiwan, insures shipment of merchandise
overseas, manages brokerage and handling, containerization of merchandise,
and packing for sales to TCI that it does not perform for home market
sales. See Ta Chen's February 6, 2001 supplemental questionnaire response
at 6. 

Ta Chen cites SSSS from Mexico, 64 FR 30790, 30810 (June 8, 1999) and
Antifriction Bearings from France, 62 FR 54043, 54058 (October 17, 1997)
as support for its argument that the Department has granted a CEP offset
when it finds there is a more advanced stage of distribution. In SSSS from
Mexico, 66 FR at 30810, the Department granted a CEP offset only after a
careful review of the selling functions performed in each LOT:

     taken collectively, the selling activities that Mexinox reported 
     and the way it performs these activities in the two markets support 
     a finding that there is one LOT in the home market and two LOTs in 
     the U.S. market. 

Unlike Ta Chen, Mexinox submitted information on the record that clearly
identified the differences between the LOTs to warrant a CEP offset.
Specifically, the Department concluded that Mexinox had a total of seven
activities performed in the home market that were not performed in the
United States. Ta Chen has not provided the Department with evidence to
support a conclusion similar to that in SSSS from Mexico. In Antifriction
Bearings from France, the Department reached an identical conclusion
because the respondent provided "adequate factual information to concluded
that fewer selling functions were associated with the CEP than are
performed at its home market LOT." See Antifriction Bearings from France,
62 FR at 54060. 

For this final determination we are affirming our preliminary
determination that all sales in the home market and the U.S. market were
made at the same LOT. Therefore, we have not made a LOT adjustment because
all price comparisons are at the same LOT and an adjustment pursuant to
section 773(a)(7)(A) of the Act is not appropriate.

Comment 3: CEP Profit

Ta Chen argues that the calculated CEP profit in the Preliminary Results
grossly overstated the U.S. profit by omitting U.S. costs such as
inventory carrying costs and imputed credit costs. Citing Thai Pineapple
Canning v. United States, Slip Op. 99-42 at 8 (CIT May 5, 1999), Ta Chen
claims that if such expenses represent some real, previously unaccounted
for expenses, they should be considered as to the calculation of CEP
profit. Ta Chen argues that the record indicates that TCI incurs enormous
inventory carrying and imputed credit costs (over 10% ad valorem
combined), therefore, the calculated profit is grossly overstated. Citing
Hot-Rolled Flat Rolled Carbon Quality Steel Products from Brazil, 64 FR
38756, 38770-71 (1999) and Cement from Mexico 62 FR 12764, 12793 (March
16,1998), which state that the Department recognizes that inventory and
credit costs are real costs that must be considered.

Ta Chen states that the SAA, H.R. Doc. No. 103-316 at 824-825 (1994),
emphasizes the need to avoid "distortion in the profit allocable to U.S.
sales." Ta Chen then argues that the courts have noted that "any other
interpretation {of the CEP profit provision} would unduly skew the U.S
profit computation against importers because the computation would exclude
their highest expense category, leaving them with a disproportionately
high dumping margin." See U.S. Steel Group v. United States, 2000 U.S.
App. LEXIS 21528 at 20 (Fed. Cir. August 25, 2000) and NTN v. United
States, Slip Op. 01-76 at 17 CIT June 22, 2001.

Ta Chen argues that only by considering the specific inventory carrying
costs and imputed credit costs incurred by subject merchandise can the
profit thereon be accurately calculated. Citing section 772(a)(f)(D) of
the Act, Ta Chen states that the law is clear that "the term 'total actual
profit' {for CEP profit} means the total profit earned by the foreign
producer, exporter and affiliated parties......with respect to the sale of
the same merchandise for which total expenses are determined under this
subparagraph" (i.e., subject merchandise). Furthermore, citing Import
Administration Policy Bulletin, No. 97.1., "Calculation of Profit for
Constructed Export Price Transactions," dated September 4, 1997, Ta Chen
argues that the Department has stated that profit is "total actual profit
earned by the respondent with respect to sales of the subject merchandise
and the foreign like product." Citing 19 CFR 351.402(d)(1), Ta Chen
states that "in calculating total expenses and total actual profit, the
Secretary normally will use the aggregate of expenses and profit for all
subject merchandise sold in the United States and all foreign like
products sold in the exporting country." Moreover, Ta Chen cites the
Uruguay Round Agreements Act, 103d. Rpt. 826, 103d. Cong., 2d Sess., House
Report 103-826, Part 1, Oct 3, 1994, House Report on section 772, which
states that the "profit deduction is intended to parallel WTO language."
In particular, Ta Chen argues that the committee intends that profit on
subject merchandise be used and there be no distinctions from using
broader product line data.

Ta Chen argues that the sales of subject merchandise are less than 4% of
TCI's total sales such that just allocating total TCI interest costs over
total TCI sales will not yield an accurate estimate of the inventory
carrying costs and credit expenses generated by the subject merchandise.
Ta Chen claims that the record demonstrates that the TCI inventory
carrying costs and imputed credit costs for subject merchandise exceed
overall allocated interest costs by four fold. Ta Chen states that the
Department's practice is to treat costs in the profit and the allocation
factor thereof consistently (i.e., calculate them in the same way). Citing
Certain Welded Non-Alloy Steel Pipe from Korea, 63 FR 39071, 39072 (1998),
Ta Chen states that when applying a profit rate to a cost of production
figure, exclusive of certain selling expenses, and when calculating
constructed value profit, the profit is calculated on a basis exclusive of
the same selling expenses. Therefore, according to Ta Chen, the costs in
the CEP profit allocation factor should include inventory carrying costs
and imputed credit costs.

On a related matter, Ta Chen argues that in the Preliminary Results, the
Department reduced the starting price used to establish Ta Chen's CEP by
profit allocated to expenses incurred by (or for account of) TCI in
selling the subject merchandise in the U.S. market pursuant to 19 U.S.C. 
1677a(f)(2)(B), but failed to include these same amounts in the
calculation of "total expenses" as defined by 19 U.S.C. 1677a(f)(2)(C).
According to Ta Chen, the Department's methodology ignored the plain
language of the antidumping statute and must be corrected to include such
expenses in "total United States expenses," in the calculation of "total
expenses." See U.S. Steel Group v. United States, 2000 U.S. App. LEXIS
21528 at 10,11 & 20 (Fed. Cir. August 25, 2000); SNR v. United States, 118
F. Supp. 1333, 1341, 2000 Ct. Intl. Trade LEXIS 134; Slip Op. 2000-131 at
23 (2000); FAG Italia, S.p.A. v. United States, 131 F. Supp. 2d. 104, 112,
2001 Ct. Intl. Trade LEXIS 13, 17 (CIT 2001), and NTN Bearing Corporation
of America v. United States, 2001 Ct. Intl. Trade LEXIS 79, 80 (2001).

In their rebuttal brief, petitioners argue that the Department
consistently applied its CEP profit calculation and did so pursuant to its
regulations, policy and precedent. Citing the preamble to the regulations,
petitioners argue the Department addressed an argument that it "should
deduct all expenses, including imputed expenses, in calculating the CEP
profit deduction." See Antidumping Duties; Countervailing Duties, 62 Fed.
Reg. 27296, 27354 (May 19, 1997). According to petitioners, the Department
stated that it "does not take imputed expenses into account in calculating
cost. Moreover, normal accounting principles permit the deduction of only
actual booked expenses, not imputed expenses, in calculating profit." Id. 

Petitioners note that the Department's practice of excluding imputed
expenses in the calculation of actual profit is articulated and
demonstrated in the Department's Policy Bulletin No. 97/1. Petitioners
argue that the policy bulletin stated that, in calculating U.S. expenses
in the total actual profit calculation, the Department is to "exclude from
the calculation imputed amounts for credit expense and inventory carrying
costs." See Policy Bulletin No. 97/1: Calculation of Profit for
Constructed Export Price Transactions ("CEP Bulletin"), September 4, 1997.
Petitioners stated that the Department articulated further in its CEP
Bulletin as follows:

     the unit cost figures in (3) and (4) above {cost of U.S. 
     Merchandise, cost of Home Market Merchandise} include net 
     interest expense from the COP and CV data bases. Thus, there 
     is no need to include imputed interest amounts in the profit 
     calculation since we have already accounted for actual interest 
     in computing "actual profit" under section 772(f). In step two 
     below, however, when allocating a portion of the actual profit 
     to each of its U.S. CEP sales, we will include imputed credit 
     and inventory carrying costs as part of the total U.S. expenses 
     allocation factor. This is consistent with section 772(f)(1) 
     which defines the term "total U.S. expenses" as those described 
     under section 772(d)(1) and (2). 

According to petitioners, the Department calculated Ta Chen's overall
actual profit on the basis of total actual revenue less total actual costs
(total costs of good sold, total selling expenses, total movement
expenses). Petitioners argue that pursuant to 19 U.S.C.  1677a(f), the
use of actual expenses is the most preferred method for determining total
actual profit, allowing the use of actual, not imputed expenses.

Petitioners stated that the Department's policy of considering actual
expenses and not imputed expenses in the overall profit calculation is
mathematically sound. According to petitioners, the use of imputed
expenses would effectively double-count the company's cost of financing
and would artificially reduce the overall actual profit. Petitioners argue
that the Department has unequivocally stated that it will only consider
actual interest expenses, not imputed interest expenses, in calculating
actual profit.

Moreover, petitioners note that the Department's methodology in the
instant review and as stated in the CEP Bulletin was applied consistently
in other cases. See Certain Stainless Steel Wire Rods from France: Final
Results of Antidumping Duty Administrative Review, 63 Fed. Reg. 30185,
30194 (June 3, 1998). Citing Antifriction Bearings (Other Than Tapered
Roller Bearings) and Parts Thereof from France, Germany, Italy, Japan,
Romania, Sweden, and the United Kingdom: Final Results of Antidumping Duty
Administrative Review ("Bearings: Final Results"), 64 Fed. Reg. 35590,
35623 (July 1, 1999), petitioners note that the Department remarked that,
"it is our practice to exclude imputed selling expenses in calculating the
total actual profit for sales of the subject merchandise and the foreign
like product." According to petitioners, in Bearings: Final Results, the
Department rejected the respondent's argument that it was unlawful to
exclude imputed expenses (credit and inventory carrying costs) from the
calculation of the total actual profit, and then apply the profit ratio to
a value that included imputed expenses to calculate CEP profit. Therefore,
petitioners note that the Department followed its profit calculation
methodology as stated in its CEP Bulletin. 

Petitioners argue that the Department clearly articulated its methodology
for the CEP profit calculation in its margin program. According to
petitioners, the Department stated that in order to "calculate values for
use in CEP profit calculation, we are using actual expenses, not imputed
expenses." See Certain Stainless Steel Butt-Weld Pipe Fittings from
Taiwan: Ta Chen, Calculation Program, Preliminary Results, last updated
July 2, 2001, at lines 490 and 491. Petitioners note that, in the same
margin program, the Department stated that it "calculate{d} INDEXUS - the
sum of U.S. indirect selling expenses incurred in the U.S., including
imputed inventory carrying costs-for use in the CEP profit calculation;
used indirect selling expenses allowed under Section772(d)(1)." Id. 

Moreover, petitioners argue that the Department addressed Ta Chen's
arguments in the most recently completed administrative review of this
case. In the decision memorandum accompanying the final results, the
Department denied Ta Chen's request that the Department consider imputed
expenses as proof of total actual profit in the CEP profit calculation.
See Issues and Decision Memorandum for the Administrative Review of
Certain Stainless Steel Butt-Weld Pipe Fittings from Taiwan: June 1, 1998
through May 31, 1999, at Comment 7. According to petitioners, the
Department stated that its CEP profit calculation does not result in a
distortion of CEP profit and is consistent with its policy; therefore, it
did not consider imputed expenses as part of total actual profit in the
CEP profit calculation. 

Furthermore, petitioners argue that a review of the cases cited by Ta
Chen do not stand for the proposition for which they have been cited.
Petitioners argue that Thai Pineapple Canning Industry Corp. v. United
States, Slip Op. 99-42 (CIT May 5, 1999), the court was considering the
use of a single weighted-average cost of production covering the full 18-
month period of review. Petitioners also note that in U.S. Steel Group v.
United States, 225 F.3rd. 1284 (Fed. Cir. 2000), the majority held that
Commerce reasonably interpreted "total expenses" in the calculation of CEP
profit to include total U.S. and home market movement expenses, even as
the majority allowed "total U.S. expenses" to exclude movement expenses.
According to petitioners, in effect, the majority upheld the Department's
CEP profit methodology. Petitioners also noted that in NTN v. United
States, Slip Op. 01-76 at 17 and 18 (CIT June 22, 2001), the Court denied
respondent's request to sub-divide the CEP profit on a subcategory of the
merchandise. Therefore, petitioners argue that none of the cases cited by
Ta Chen is applicable to or supportive of Ta Chen. 

Department's Position: 

We disagree with Ta Chen and agree with petitioners. It is the
Department's practice to calculate the CEP profit ratio based on actual
expenses, not imputed expenses. In a recent antidumping duty
administrative review, the Department articulated that "normal accounting
principles only permit the deduction of actual booked expenses, not
imputed expenses, in calculating profit. Inventory-carrying costs and
credit expenses are imputed expenses, not actual booked expenses, so we
have established a practice of not including them in the calculation of
total actual profit." See Notice of Final Results for the Administrative
Review of Extruded Rubber Thread from Malaysia: October 1, 1998 through
September 30, 1999, 66 FR 11254 (February 23, 2001) and accompanying
Issues and Decision Memo at Comment 1. The Department acknowledges a CIT
ruling on the CEP profit calculation:

     The Department notes that the CIT in FAG Italia and SNR Roulements 
     v. United States, 118 F. Supp. 2d 1333 (CIT October 13, 2000) 
     ("SNR") directed the Department to "include all expenses included 
     in 'total United States expenses' in the calculation of 'total 
     expenses'." SNR became final on February 23, 2001. See Slip Op. 
     2001-17 (CIT February 23, 2001). 

See Notice of Final Results of Antidumping Duty Administrative Review of
of Circular Welded Non-Alloy Steel Pipe from Mexico: November 1, 1998
through October 31, 1999 ("Pipe from Mexico"), 66 FR 21311 (April 30,
2001) and accompanying Issues and Decision Memo at Comment 4. 

In both SNR and FAG Italia, the Court held that Commerce's CEP
methodology with respect to imputed expenses was not in accordance with
law. The United States has appealed both judgements. However, in Ausimont
SPA v. United States, Slip. Op. 01-92 (CIT August 2, 2001), the Court
sustained Commerce's methodology. Consequently, until such time as these
decisions are final, the Department will continue to apply its current
methodology in excluding imputed expenses when calculating profit. 

Comment 4: CEP Sales Expenses

Petitioners argue that Ta Chen has stated on multiple occasions during
this review that it could not report actual direct selling expenses for
its CEP sales, because TCI's sales from its U.S. warehouses could not be
traced back to specific importations. Petitioners argue that Ta Chen
maintained that it was not able to trace direct sales expenses associated
with movement of product from Taiwan to TCI's U.S. warehouse to specific
CEP sales because multiple shipments may be have the same heat number, and
more than one heat number may be shipped under the same item number for a
given sale {invoice}.

Citing the TCI Verification Report, petitioners argue that the Department
verified Ta Chen's claim that it could report CEP sales-specific expenses
as it found that a large percentage of Ta Chen's sales documentation
sampled at verification demonstrated that Ta Chen could have reported
import-specific sales expenses for its CEP sales. Furthermore, petitioners
state that the Department recognized in its Preliminary Results, that Ta
Chen has the ability to trace CEP sales to import-specific charges, but
decided it was too burdensome for Ta Chen. Petitioners argue that the
Department should base its decision on the record before it and not
speculate as to the burden on Ta Chen. Petitioners assert that Ta Chen did
not state or demonstrate that the exercise of tracing CEP sales to import-
specific charges would be overly burdensome.

Petitioners claim that Ta Chen refuses to trace CEP sales to import-
specific expenses because the reported average CEP direct selling expenses
are very different than identical expenses reported for Ta Chen's EP
sales, which are import specific. As an example, petitioners argue that
the Department's CEP movement variable calculation, which sums up the
reported values for foreign freight to port, foreign brokerage, ocean
freight, marine insurance, and export duties is lower than actual EP
foreign movement costs. Petitioners argue that the Department should not
reward Ta Chen for misleading it during this and prior administrative
reviews. 

In its rebuttal brief, Ta Chen argues that the U.S. movement expenses
(i.e., foreign inland freight to port, foreign brokerage, ocean freight,
marine insurance and export duties) associated with the CEP sales were
properly reported. Citing TCI's Verification Report, Ta Chen argues that
the CEP sales expenses must be allocated because they could not be
calculated on a sale-specific basis. Ta Chen argues that the Department
verified that selected heat numbers for a particular fitting were listed
on eight separate Ta Chen to TCI invoices with no possible means of
knowing which one was the actual invoice for the particular fitting. Ta
Chen also argues that a particular TCI sale of one fitting may have
multiple heat numbers, all of which then might (as in the selected heat
number) trace to eight Ta Chen Taiwan to TCI invoices, with quantities as
to each invoice not stated. Ta Chen notes that TCI reported 25,000 sales
in this review, an enormous volume of sales relative to the US$5 million
of trade involved. Ta Chen argues that the petitioners admitted that the
Department found that tracing of TCI sales back to movement costs from
Taiwan would be "too burdensome" to do, even if possible. 

Ta Chen argues that it did state and show that the exercise of tracing
TCI U.S. warehouse sales to import-specific charges is too burdensome.
According to Ta Chen, the extensive discussion of the tracing issue in Ta
Chen's submissions speaks for itself as to the burden. Ta Chen asserts
that contrary to petitioners assertions, it provided substantial evidence
supporting the Department's finding that tracing of TCI sales is too
burdensome.

Ta Chen argues, with respect to petitioners' statements that the
allocated freight movement costs for TCI's U.S. warehouse sales are less
than the direct shipments from Taiwan to unaffiliated U.S. customers, that
petitioners did not allege any errors with those figures until now. Ta
Chen stated that it submitted worksheets for the allocated warehouse
figures, provided sample documentation, and that the Department verified
the figures and found no errors.

Finally, Ta Chen argues that the individual shipment figure in Ta Chen's
questionnaire responses indicates that Ta Chen's shipments to TCI
warehouses were massive (involving individual quantities of ten to twenty-
five times the individual quantities on indent (i.e., back to back sales
with invoicing through TCI) shipments from Taiwan direct to unaffiliated
U.S. customers). Further, Ta Chen notes that brokerage costs are fixed
costs. According to Ta Chen, for some costs (e.g., brokerage costs), the
greater the quantity shipped, the lower the per unit broker cost. 

Department's Position: 

We agree with Ta Chen and disagree with petitioners in part. The
Department noted in its Preliminary Analysis Memo that although Ta Chen
could report direct sales expenses for a majority of a sample done by the
Department at verification, we determined that this process would be too
burdensome for Ta Chen to make a complete report. Contrary to petitioners'
assertion, the Department did not speculate as to the burden on Ta Chen,
but confirmed the evidence on the record. Prior to verification, Ta Chen
stated that:

     Ta Chen reported about 25, 000 U.S. sales in this review. There 
     is no computer record/date base, sale by sale, of the heat number 
     for each sale. Thus, even if tracing by heat number of each Ta 
     Chen U.S. b/w fitting sale all the way back to Ta Chen Taiwan was 
     viable (it is not), it would have to be done manually for about 
     25,000 sales. In such cases, DOC has permitted the simplifying 
     allocation approach done here, even if a more transaction-specific 
     approach was possible, simply because any other approach is too 
     burdensome (especially in the short time permitted to answer DOC 
     questionnaires) as well as the reasonable allocation approach here 
     causes no apparent distortion to the dumping margin calculation. 

See Ta Chen's May 11, 2001 submission at 5. 

With respect to petitioners' argument that using Ta Chen's current POR
weight-averaged methodology when calculating CEP direct selling expenses
yields a significant percentage difference for movement expenses, we
disagree. Although petitioners argue that the Department's preliminary
calculation for direct CEP movement costs appeared lower than that for EP,
the Department does not know if there were other circumstances affecting
Ta Chen's lower direct CEP movement costs when compared to weight-averaged
EP expenses, such as number of units shipped. More importantly, based on
information on the record, we cannot presuppose which sales could have
been traced and which could not as we did not instruct Ta Chen to trace
those sales which could be traced. Therefore, the Department continues to
determine that the POR weighted-average methodology used by Ta Chen should
not be amended for the purposes of this final determination.

Comment 5: U.S. Short-Term Interest Rate

Petitioners argue that in recalculating the weighted-average borrowing
rate for Ta Chen, the Department inadvertently did not include the
US$400,000 compensating balance from Ta Chen's old loan and the US$111,658
guarantee for the new loan in the cost of credit that Ta Chen had omitted
in the U.S. short-term interest rate calculation. See Ta Chen's Section
BCD Supplemental Questionnaire Response ("Supp. BCD Response"), dated
March 5, 2001 at 27-28. Petitioners argue that the new weighted-average
short term interest rate should be 10.62%, which includes the old and new
loan compensating balances as interest expenses. According to petitioners,
the revised weighted-average short-term interest rate of 10.62% should be
applied to the U.S. imputed credit expenses calculation (IMPRCREDI) and
the U.S. inventory carrying costs (INVCARU).

In its rebuttal brief, Ta Chen rejects petitioners' claim that the
Department should adjust TCI's U.S. short-term borrowing cost by adding
compensating balance requirements and loan guarantees to interest expense
as illogical and unsupported. Citing its Sections A,B,C and D Supplemental
Questionnaire Response ("April 23 Response"), dated April 23, 2001, Ta
Chen argues that the amount of a compensating balance is not an interest
payment nor a loan guarantee. Ta Chen argues that it did not include the
$111,658 loan guarantee in its U.S. dollar, short-term interest rate as
this was a promissory note issued by Ta Chen to TCI. According to Ta Chen,
there were no compensating balance requirements during the POR.

Department's Position:

We disagree with petitioners. Petitioners correctly note Ta Chen's
supplemental questionnaire response in which it stated that "there was a
compensating balance in the amount of US$400,000 on the old loan." See
Supp. BCD Response at 27-28. The compensating balance requirement is a
deposit requirement that Ta Chen must carry on that account at the
relevant financial institution, in order to qualify for the loan. There is
no indication that Ta Chen lost title to any portion of the compensating
balance during the POR. Therefore, contrary to petitioners' claim, the
compensating balance cannot be viewed as an interest payment and therefore
is inappropriate for inclusion in the calculation of the short term
interest rate.

Petitioners also note that Ta Chen stated that "TC {Ta Chen} properly did
not include US$111,658 in its U.S. dollar, short-term interest rate as
this was {a} promissory note issued by TC to guarantee debt of TCIC
{TCI}." See April 23 Response at 8. Ta Chen stated on the record that
"there is no interest bearing on these promissory notes." See Id. For
these final results, the Department is not aware of evidence on the record
to contradict Ta Chen's claim. As Ta Chen paid no interest on the
promissory note amounts, there is no amount to consider in the calculation
of the short term interest rate.

Comment 6: United States Inventory Carrying Period 

Petitioners claim that the Department failed to use the revised number of
days inventory is held in the United States by TCI. According to
petitioners, the correct number of days inventory is held in the United
States by TCI is 405, not 349 days as used by the Department. Petitioners
argue that the INVCARU should be calculated as: INVCARU = TCICOSTU * 405 /
365 * .1062 (proposed weighted-average short-term interest rate by
petitioners (see Comment 5 above)) = .1178 (11.78%).

In its rebuttal brief, Ta Chen argues that petitioners' claim that 11.78%
(as a percent of cost of goods sold) inventory carrying cost is enormous,
when according to Ta Chen, TCI's calculated figure is only 1.4% for
subject merchandise as reported in their December 26, 2000 submission. 

Department's Position:

We agree with the petitioners in part, and disagree with Ta Chen. The
Department's use of 349 days as the number of days inventory is held in
the U.S. by TCI was incorrect. In its original U.S. sales response Ta Chen
stated that it held inventory in the United States for 349 days. After a
careful review of the record evidence, we note that in Ta Chen's March 5,
2001 submission, Ta Chen revised its U.S. indirect selling expense and the
number of days TCI held inventory to 405. For these final results, we used
405 days as the number of days TCI hold inventory. We note that Ta Chen
did not challenge the Department's formula for calculating the inventory
carrying costs in the United States. Consequently, we have changed the
margin calculation accordingly. See Final Analysis Memo at 5. We did not
use further revise the short-term interest rate in our calculation, as
proposed by petitioners, for reasons discussed in Comment 5 above. 

Comment 7: U.S. Indirect Selling Expenses

Petitioners raised two points with regard to U.S. indirect selling
expenses: 1) petitioners argue that the U.S. indirect selling expenses
used by the Department should be based upon Ta Chen's fiscal year 2000
financial statements rather than 1999 and 2) Ta Chen failed to include the
financing expenses of TCI in the same calculation. 

Petitioners argue that by relying on the fiscal year 1999 financial
statements, Ta Chen ignored the Department's longstanding policy of using
the financial statements that most closely represent the POR. See Issues
and Decision Memorandum for the Investigation of Certain Polyester Staple
Fiber from the People's Republic of Korea: April 1, 1998 through March 31,
1999 ("Polyester Fiber from Korea"), dated March 22, 2000, at 14 (Comment
8) and Certain Corrosion-Resistant Carbon Steel Flat Products and Certain
Cut-To-Length Carbon Steel Plate from Canada: Final Results of Antidumping
Duty Administrative Review ("Plate from Canada"), 62 FR 18,488, 18,456
(April 15, 1997). Petitioners note that TCI's fiscal year 2000 represents
seven months of the twelve-month period of review. Citing Badger-
Powhattan, A Div. of Figgie Intern v. United States, 633 F. Supp. 1364,
1373 (CIT1986); appeal dismissed, 808 F. 2d 823 (Fed. Cir. 1986) and Koyo
Seiko Co., Ltd. v. United States, 746 F. Supp. 1108, 1110 (CIT 1990),
petitioners argue that relying on the fiscal year 1999 financial
statements, the Department is unable to carry out its legal mandate to
calculate the most accurate dumping margin possible. Based on a greater
period of time being covered by the 2000 financial statement and based on
their being more recent, petitioners argue that the Department would
calculate the most accurate dumping margin possible by using the fiscal
year 2000 financial statements rather than 1999's financial statements.

With respect to the calculation of U.S. indirect selling expenses,
petitioners assert that Ta Chen failed to include TCI's cost of financing
in the U.S. indirect selling expense calculation. According to
petitioners, in order to correct this, the Department should use Ta Chen's
fiscal year 2000 financial statements and include TCI's 2000 interest
expenses.

In its rebuttal brief, Ta Chen argues that it properly used its operating
costs for the fiscal year ending during the POR, per the Department's
practice in past administrative reviews of Ta Chen and TCI. Ta Chen argues
that TCI's selling efforts before the POR contributed to the POR sales,
whereas later fiscal year operating costs have their affect on sales
covers a period after the POR. 

According to Ta Chen, the Department has used TCI's operating costs for
the most recently completed fiscal year ending in the POR in prior review
periods, so to change its methodology now would not properly reflect costs
over a period of time covering several review periods. Ta Chen argues that
petitioners' results-oriented alternate methodology would increase costs
and these costs would improperly exceed the actual costs incurred.

According to Ta Chen, petitioners are raising a methodological change,
which they should have made long ago. Ta Chen argues that petitioners
suggest a switch in methodology when doing so would increase costs and not
doing so decreases costs. According to Ta Chen, such a contrived, results-
oriented approach over multiple reviews would mean that overall costs
allocated to sales would improperly exceed the actual costs incurred.

Ta Chen also argues that the Department thoroughly reviewed and verified
TCI's reported operating costs in TCI's questionnaire response. Ta Chen
claims that arguing for a new methodology at this point requires that
TCI's operating costs be reduced for direct selling expenses reported
elsewhere in the questionnaire responses, to avoid double counting. Ta
Chen stated that information as to such deductions would have been
submitted and verified by TCI for the appropriate fiscal year already
reported. Ta Chen argues that at this point, the Department does not have
such information as to apportion deductions to the period petitioners now
want to use. 

Ta Chen also argues that petitioners are wrong in claiming that TCI did
not report interest costs. Ta Chen argues that TCI submitted interest
costs in its December 26, 2000 submission. Ta Chen claims that adjusting
for both TCI financing (interest) costs as well as imputed inventory and
credit interest costs impermissibly double counts interest costs. Ta Chen
notes that the Department's practice has not been to include both actual
and imputed interest costs in the dumping margin because doing so would
improperly double count such costs.

Department's Position:

We disagree with Ta Chen and petitioners in part. In the Preliminary
Results, the Department used TCI's FY 1999 operating costs to calculate
its U.S. indirect selling expenses, which included information for five
months of the POR.

Petitioners suggest that the Department use fiscal year 2000 data to
calculate U.S. indirect selling expenses. Although Ta Chen submitted
fiscal year 2000 financial data, we have not considered any of this data
as the basis for calculating U.S. indirect selling expenses because Ta
Chen has not been given the opportunity to adjust the fiscal year 2000
financial data, as it normally does for antidumping purposes. Therefore,
we have not altered our U.S. indirect selling expense calculation from the
Preliminary Results.

Regarding petitioners' second point with respect to the 2000 interest
expense, we disagree. Because the Department is using fiscal year 1999
financial data as the basis for U.S. indirect selling expenses, we are
using Ta Chen's fiscal year 1999 interest expense.

Comment 8: Home Market Indirect Selling Expenses

Petitioners argue that two salespersons (i.e., a sales manager and a
sales clerk) who manage sales in the home market spend time on home market
sales. Petitioners claim that the sales manager spends 50 percent of his
time on home market sales and a sales clerk spends 100 percent of her time
on home market sales. Petitioners argue that 100 percent of the sales
manager salary should be allocated correctly to the home market indirect
selling expenses. 

Petitioners claim that since the sales manager spends 50 percent of his
time on home market sales, he must spend the other 50 percent on export
sales. According to petitioners, Ta Chen allocated to the home market
sales 50 percent of the sales manager's wage fund, labor insurance, and
insurance benefits, but failed to allocate only 50 percent of the sales
manager's salary, instead allocating the full amount of the manager's
salary, NT$ 46,273 to home market sales. 

In its rebuttal brief, Ta Chen argues that petitioners' equating fifty
percent of the manager's time on export sales to mean that fifty percent
was spent on U.S. sales in particular is not correct. Citing its February
6 submission, Ta Chen argues that the manager is not involved with U.S.
sales. Ta Chen also argues that its December 26, 2000 submission shows
there were no Ta Chen Taiwan indirect selling expenses as far as sales to
TCI, indicating that the expenses questioned by petitioners are properly
considered administrative, not selling. Citing its March 5, 2001
submission, Ta Chen argues that Mr. Kuo's salary, NT$42,000 is not Mr.
Kuo's actual salary, but the portion of his salary used for purposes of
determining benefits.

Department's Position: 

We agree with Ta Chen and disagree with petitioners. Petitioners make two
allegations in this comment. First, they allege that Ta Chen overstated
its home market indirect selling expenses by attributing 100% of the sales
manager's salary to home market sales rather than attributing to home
market indirect selling expenses the amount of time which he spends on
home market sales (50%). Petitioners arrived at this conclusion because
they noted that the sales manager's monthly salary was similar to the
portion of the sales manager's salary which is used to calculate benefits.
By virtue of its speculative nature, however, this comparison in and of
itself cannot outweigh Ta Chen's record statement that it had already made
the 50% allocation. See Supp. BCD Response at 7. Second, petitioners also
speculate that as the sales manager spends 50% of his time on home market
sales, it would be reasonable to presume that he spends the remaining 50%
of his time on U.S. sales. However, there is no factual basis in the
record to support petitioners' allegation, and so, no basis to adjust U.S.
indirect selling expenses on these grounds. Therefore, we did not adjust
any portion of either Ta Chen's reported home market or U.S. indirect
selling expenses. 

Comment 9: General and Administrative Expenses

Petitioners note that Ta Chen's Second Supplemental Questionnaire
Response dated April 6, 2001, shows that Ta Chen paid a total of
NT$18,703,000 in the following categories: "bonus to employees-cash, bonus
to employees-stock, and bonus to directors and supervisors" in its
statement of stockholder's equity. Petitioners argue that it appears the
NT$18,703,000 was not recorded on Ta Chen's profit and loss account.
Petitioners claim that in order for Ta Chen to pay bonuses from
stockholder's equity, Ta Chen would have had to debit the stockholder's
equity and credited the cash account. According to petitioners, this entry
would not be reflected in the profit and loss account, because the
accounting entry would not affect an expense account (such as wages,
bonuses, etc). Citing Notice of Final Determination of Sales at Less Than
Fair Value: Stainless Steel Wire Rod from Japan, 63 Fed. Reg. 40,434,
40,441, (July 29, 1998); Antifriction Bearings (Other Than Tapered Roller
Bearings) and Parts Thereof, from France, Germany, Italy, Japan, Romania,
Singapore, Sweden, and the United Kingdom, 63 Fed. Reg. 33,330, 33,337
(June 18, 1998); Final Determination of Sales at Less Than Fair Value: Oil
Country Tubular Goods from Austria, 60 Fed. Reg. 25,908, 25,914 (May 12,
1997), petitioners argue that the Department has recognized that payments
made to employees that are only reflected in the stockholder's equity
should be considered in the cost of manufacturing, because these payments
represent compensation for services that the employee provided the
company. Petitioners argue that the Department should include the
NT$18,703,000 in Ta Chen's calculation of general and administrative
expenses.

In its rebuttal brief, Ta Chen argues that its general and administrative
expenses are not understated, but properly reported. Ta Chen notes that
petitioners make their argument for the first time ever, after the
completion of the questionnaire process and verification, and based on
information in the record since Ta Chen's first submission of November 27,
2000. As such, Ta Chen had no opportunity to address them factually.

Department's Position:

We agree with Ta Chen and disagree with petitioners. Ta Chen's November
27, 2001, submission at Attachment 23 shows the change in the stock
owner's equity for Ta Chen's FY 1999 as identified by petitioners. We note
that petitioners acknowledge that it 'appears' that the change in
stockowner's equity was made from the company's equity and did not get
recorded in Ta Chen's profit and loss account. While we agree that if the
facts on the record clearly demonstrated the transaction as described by
petitioners, then the facts would warrant making petitioners' suggested
changes. However, after review of the record evidence, there is not
sufficient evidence to determine that the payments were made from the
company's equity, and therefore not a sufficient basis to recalculate the
general and administrative expenses as suggested by petitioners.

Comment 10: Reclassification of EP sales to CEP sales

Citing AK Steel Corp v. United States, 226 F. 3d 1361 at (Fed. Cir. 2000)
("AK Steel Corp."), petitioners argue that the Department should uphold
the Court's decision that "a transaction such as those here, in which both
parties are located in the United States and the contract is executed in
the United States cannot be said to be outside the United States." See Id.
at 1370. Petitioners argue that the Department should continue to consider
all of Ta Chen's U.S. sales as constructed export price transactions and
should continue to make the additional required deductions for CEP sales
(e.g., inventory carrying costs, U.S. indirect selling expenses, CEP
profit, etc.).

Ta Chen did not comment on this issue.

On a related matter, petitioners argue that the Department inadvertently
failed to deduct U.S. indirect selling expenses and U.S. profit from the
originally designated EP transactions that were reclassified as CEP sales.
Petitioners suggest that the Department correct this ministerial error by
inserting the following programming statement in the margin calculation
program: (IF SALEU = 'EP' THEN SALEU = 'CEP'). 

Ta Chen did not comment on this issue. 

Department's Position:

We agree with petitioners. Ta Chen reported both EP and CEP sales to the
United States in its U.S. database. After careful analysis, the Department
preliminarily determined that all of Ta Chen's reported U.S. sales should
be reclassified as CEP sales in accordance with section 772(b) of the Act,
based on our finding that the subject merchandise was first sold by TCI
after having been imported into the United States:

     In the instant case, all of the sales at issue were "back-to-back" 
     sales; that is, Ta Chen sold pipe fittings to Ta Chen's U.S. 
     affiliate, TCI, and then TCI sold the pipe fittings to the 
     unaffiliated U.S. customers at a marked-up price to account for 
     TCI's commission and selling expenses. See Sections B, C, and D 
     supplemental questionnaire response (February 6, 2001) at 5. In 
     addition, the record evidence demonstrates that for sales reported 
     by Ta Chen as EP sales, the sale to the first unaffiliated customer 
     was made between TCI and the unaffiliated customer in the United 
     States. See Sections B, C, and D supplemental questionnaire response 
     database (February 6, 2001). 

See Preliminary Results at 9. As Ta Chen did not comment on this issue,
we continue to consider all of Ta Chen's U.S. sales as CEP sales. 

Secondly, we agree with petitioners' argument that the Department
inadvertently failed to deduct U.S. indirect selling expenses and U.S. CEP
profit from the reported EP transactions that were reclassified as CEP
sales. We have changed the margin calculation accordingly. See Final
Analysis Memo at 5..

RECOMMENDATION:

Based on our analysis of both the comments received and our own findings,
we recommend adopting all of the above changes and positions and adjusting
the model match and margin calculation programs, accordingly. If these
recommendations are accepted, we will publish our final results of review,
including Ta Chen's final weighted-average dumping margin in the Federal
Register.

AGREE____ DISAGREE____

_____________________________________

Faryar Shirzad
Assistant Secretary 
  for Import Administration

_____________________________________
Date

_________________________________________________________________________
footnotes:

1. For purposes of this analysis, we are referring to freight costs that
TCI incurs when transferring inventory among its warehouses in the United
States as intra-warehouse transfer expenses. 

2. The Department reclassified Ta Chen's reported EP sales to CEP (see
Comment 10 below).