Federal Register / Vol. 62, No. 190 / Wednesday, October 1, 1997 / Notices 51427

DEPARTMENT OF COMMERCE

International Trade Administration

[A–583–826]

Notice of Final Determination of Sales

at Less Than Fair Value: Collated

Roofing Nails From Taiwan

AGENCY: Import Administration,

International Trade Administration,

U.S. Department of Commerce.

EFFECTIVE DATE: October 1, 1997.

FOR FURTHER INFORMATION CONTACT:

Everett Kelly at (202) 482-4194, or Brian

Smith at (202) 482–1766, Import

Administration, International Trade

Administration, U.S. Department of

Commerce, 14th Street and Constitution

Avenue, NW., Washington, DC 20230.

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 the Department regulations are to 19

CFR Part 353, as the codified on April

1, 1997. Although the Department’s new

regulations, codified at 19 CFR 351 (62

FR 27296 (May 19, 1997) (‘‘Final

Regulations’’), do not govern this

investigation, citations to those

regulations are provided, where

appropriate, as a statement of current

departmental practice.

Final Determination

We determine that collated roofing

nails (‘‘CR nails’’) from Taiwan are

being sold in the United States at less

than fair value (‘‘LTFV’’), as provided in

section 735 of the Act as amended (‘‘the

Act’’). The estimated margins are shown

in the ‘‘Suspension of Liquidation’’

section of this notice.

Case History

Since the preliminary determination

in this investigation (see Notice of

Preliminary Determination and

Postponement of Final Determination:

Collated Roofing Nails from Taiwan, 62

FR 25904 (May 12, 1997)), the following

events have occurred:

In June 1996, we attempted to verify

the questionnaire responses of the

following respondents: Unicatch

Industrial Co. Ltd. (‘‘Unicatch’’), Lei

Chu Enterprises Co., Ltd (‘‘Lei Chu’’),

S&J Wire Products Company, Ltd.

(‘‘S&J’’), and Romp Coil Nail Industries

(‘‘Romp’’).

The Paslode Division of Illinois Tool

Works Inc. (‘‘Petitioner’’), Unicatch, Lei

Chu, and Romp submitted case briefs on

July 30, 1997, and rebuttal briefs on

August 5, 1997. The Department held a

public hearing on August 7, 1997.

Scope of Investigation

The product covered by this

investigation is CR nails made of steel,

having a length of 13⁄16 inch to 113⁄16

inches (or 20.64 to 46.04 millimeters), a

head diameter of 0.330 inch to 0.415

inch (or 8.38 to 10.54 millimeters), and

a shank diameter of 0.100 inch to 0.125

inch (or 2.54 to 3.18 millimeters),

whether or not galvanized, that are

collated with two wires.

CR nails within the scope of this

investigation are classifiable under the

Harmonized Tariff Schedule of the

United States (‘‘HTSUS’’) subheadings

7317.00.55.06. Although the HTSUS

subheadings are provided for

convenience and customs purposes, our

written description of the scope of this

investigation is dispositive.

Period of Investigation

The period of this investigation

(‘‘POI’’) for all respondents is October 1,

1995, through September 30, 1996.

Facts Available

A. K. Ticho

We did not receive a response to our

questionnaire from K. Ticho, an

exporter of the subject merchandise

during the POI. Section 776(a)(2) of the

Act requires the Department to base its

determination on the facts available

when interested parties withhold

information specifically requested by

the Department. Because K. Ticho failed

to submit information that the

Department specifically requested, we

must base our determination for that

company on the facts available. Section

776(b) provides that an adverse

inference may be used against a party

that has failed to cooperate by not acting

to the best of its ability to comply with

a request for information. The

Department has determined that by

failing to respond, K. Ticho has not

acted to the best of its ability to comply

with our request for information and,

therefore, in selecting from among the

facts otherwise available, an adverse

inference is warranted.

Romp

Romp reported sales and cost data

based on unaudited financial

statements. At verification, we were

unable to reconcile Romp’s financial

statements to its tax return or any other

independent source (see Romp Coil Cost

Verification Report, July 18, 1997). In

situations where a respondent does not

have audited financial statements, the

Department may use the company’s tax

return as an independent source to

substantiate the company’s

questionnaire responses (see Final

Results of Antidumping Administrative

Review: Fresh Cut Flowers from Mexico;

60 FR 49569–49572 (September 26,

1995)). In this instance, because we

were unable to reconcile Romp’s

financial statements to its tax return, we

determined that the financial statements

were unreliable and unusable as we

were unable to confirm the quantity and

value reported as well as confirm that

all sales made by Romp during the POI

were reported to the Department.

Section 776(a)(2)(D) of the Act requires

the Department to base its

determination on the facts available

when information, but that information

submitted by a party cannot be verified

as provided in section 782(i).

Accordingly, we must base our

determination for Romp on the facts

available.

Section 776(b) provides that an

adverse inference may be used against a

party that has failed to cooperate to the

best of its ability. We have determined

that by failing to provide us the

financial statements used to prepare

Romp’s tax return for purposes of

testing the reliability and accuracy of

reported costs, expenses, and the value

of sales during the POI, Romp has not

acted to the best of its ability in this

investigation. Further, the information

in the financial statements that Romp

provided to the Department’s verifiers

cannot serve as a reliable basis for our

final determination. While the

Department attempts to work within the

limitations presented by the

respondent’s normal accounting

systems, as a threshold matter, the

Department must ensure that the total

amount of reported sales and costs

during a particular investigation are

fully captured in the information

submitted to the Department. This is

especially so in cases involving cost of

production and constructed value, in

which the Department must ensure that

the total amount of the reported costs

account for all actual costs incurred by

the respondent in producing the subject

merchandise during the period under

examination. Despite prior notice by the

Department of the intended verification

procedures, Romp never notified the

Department that it was unable to

provide a reliable independent source to

substantiate the data contained in its

unaudited financial statements.

Therefore, in light of the importance of

this data to the Department’s

determination, we have determined that

in selecting from among the facts
51428 Federal Register / Vol. 62, No. 190 / Wednesday, October 1, 1997 / Notices

available, an adverse inference is

warranted.

Selection of Adverse Facts Available

Margin

As adverse facts available, we

considered the highest margin

contained in the petition (as

recalculated by the Department at

initiation) as the most appropriate

information on the record to form the

basis for dumping margins for K.Ticho

and Romp. Section 776(c) of the Act

provides that where the Department

selects from among the facts otherwise

available and relies on ‘‘secondary

information,’’ such as the petition, the

Department shall, to the extent

practicable, corroborate that information

from independent sources reasonably at

the Department’s disposal. The

Statement of Administrative Action

accompanying the URAA, H.R. Doc. No.

316, 103d Cong., 2d Sess at 870 (1994)

(‘‘SAA’’), states that ‘‘corroborate’’

means to determine that the information

used has probative value.

To corroborate the data contained in

the petition, we examined the basis for

the estimated margins. The petitioner

based its allegation of export price on

price quotes from two manufacturer/

exporters of CR nails in Taiwan and

import statistics. These price quotations

were adjusted for movement expenses

using customs data and IM–145 Import

Statistics. See Notice of Initiation of

Collated Roofing Nails from Korea,

Taiwan and the People’s Republic of

China, 61 FR at 67307–08. As explained

in Final Determination of Sales at Less

Than Fair Value: Certain Pasta From

Turkey, 61 FR 30309 (June 14, 1996), we

consider information from independent

public sources, such as import statistics,

as having probative value. Furthermore,

the two price quotes in the petition are

consistent with export prices reported

by the respondents on the record of this

investigation. Therefore, we determine

that the export price calculations set

forth in the petition have probative

value.

The petitioner based Normal Value

(‘‘NV’’) on Constructed Value (‘‘CV’’).

See Notice of Initiation. To calculate

CV, the petitioner used manufacturing

costs based on its own production

experience, its 1995 audited financial

statements, and publicly available

industry data. Id. The CV calculations in

the petition are consistent with the CVs

reported by the respondents on the

record of this investigation. As such, we

determine that the NV calculations have

probative value. (see Memorandum,

dated May 5, 1997.)

Based on our reexamination of the

price information supporting the

petition, we determine that the highest

margin in the petition, as recalculated

by the Department corroborated within

the meaning of section 776(c) of the Act.

Fair Value Comparisons

Unicatch, Lei Chu, S&J

To determine whether sales of the

subject merchandise by Unicatch, Lei

Chu, and S&J to the United States were

made at less than fair value, we

compared the Export Price (‘‘EP’’) or

Constructed Export Price (‘‘CEP’’) to the

NV, as described in the ‘‘Export Price’’

and ‘‘Constructed Export Price,’’ and

‘‘Normal Value’’ sections of this notice,

below. In accordance with section

777A(d)(1)(A)(i) of the Act, we

compared POI-wide weighted-average

EPs or CEPs to weighted-average NVs.

In making our comparisons, in

accordance with section 771(16) of the

Act, we considered all products sold in

the home market, fitting the description

specified in the ‘‘Scope of Investigation’’

section of this notice, above, to be

foreign like products for purposes of

determining appropriate product

comparisons to U.S. sales. Unicatch, Lei

Chu, and S&J reported that they had no

viable home market or third country

sales during the POI. We therefore made

no price-to-price comparisons. See the

‘‘Normal Value’’ section of this notice,

below, for further discussion.

Level of Trade and CEP Offset

In the preliminary determination,

where that we used each respondent’s

financial statements to derive SG&A and

profit for the CV calculations, the

Department determined that there was

insufficient evidence on the record to

justify a level of trade adjustment or

CEP offset because we were unable to

isolate the particular selling expenses

associated with each respondent’s NV.

We found no evidence at verification to

warrant a change from that preliminary

determination. Accordingly, we have

not made either a LOT adjustment or

CEP offset for any of the respondents in

this final determination.

Export Price and Constructed Export

Price

We calculated EP and CEP, as

appropriate, in accordance with section

772(a), (c) and (d) of the Act, where the

CR nails were sold directly to the first

unaffiliated purchaser in the United

States prior to importation and where

CEP was not otherwise warranted based

on the facts of record. The calculation

for each respondent was based on the

same methodology used in the

preliminary determination, with the

following exceptions:

Unicatch—We made changes to the

following fields based on Unicatch’s

pre-verification corrections and

verification findings: Payment Date;

Invoice Number; Quantity (Cartons);

Gross Unit Price; Discounts; U.S. Inland

Freight from port to warehouse and

warehouse to customer; warranties;

international freight, brokerage and

handling (Taiwan); port charges; marine

insurance; U.S. duties; Duty Drawback;

Indirect Selling Expenses; Inventory

Carrying Costs; Packing. In addition we

deleted certain sales of non-subject

merchandise and added sales found at

verification. See Valuation

Memorandum dated September 24,

1997.

Lei Chu—We made changes to the

following fields based on Lei Chu’s preverification corrections and verification

findings: Payment Date; Sales Terms;

Port Charges; Bank Charges; Marine

Insurance; Invoice Number; Gross Unit

Price; Sale Date; Taiwan Inland Freight

from plant to port; International freight,

Brokerage and Handling (Taiwan). See

Valuation Memorandum dated

September 24, 1997.

S&J—We made changes to the

following fields based on S&J’s preverification corrections and verification

findings: Inland freight; Brokerage and

Handling, International Freight. In

addition, we included sales reported by

S&J’s affiliate New Lan Luang (see

Comment 17). See Valuation

Memorandum dated September 24,

1997.

Normal Value

In order to determine whether there is

a sufficient volume of sales in the home

market to serve as a viable basis for

calculating NV (i.e., the aggregate

volume of home market sales of the

foreign like product is greater than five

percent of the aggregate volume of U.S.

sales), we compared each respondent’s

volume of home market sales of the

foreign like product to the volume of

U.S. sales of the subject merchandise, in

accordance with section 773(a)(1)(C) of

the Act. Unicatch, Lei Chu, and S&J

reported that they had no home market

sales during the POI. Therefore, we have

determined that none of the respondents

have a viable home market. Because

Unicatch, Lei Chu, and S&J also

reported that they had no viable third

country sales during the POI, we based

NV on CV in accordance with section

773(a)(4) of the Act.

Calculation of CV

In accordance with section 773(e)(1)

of the Act, we calculated CV based on

the sum of each respondent’s cost of

materials, fabrication, Selling, General
Federal Register / Vol. 62, No. 190 / Wednesday, October 1, 1997 / Notices 51429

and Administrative expenses (‘‘SG&A’’),

profit and U.S. packing costs as reported

in the U.S. sales listings. In this case,

none of the respondents had home

market selling expenses or home market

profit upon which to base CV in

accordance with section 772(e)(2)(A).

Section 773(e)(2)(B) of the Act sets

forth three alternatives for computing

profit and SG&A without establishing a

hierarchy or preference among the

alternative methods. We did not have

the necessary cost data for method one

(calculating SG&A and profit incurred

by the producer on the home market

sales of merchandise of the same general

category as the exports in question), or

method two (averaging SG&A and profit

of other investigated producers of the

foreign like product). The third

alternative method (section

773(e)(2)(B)(iii) of the Act) provides that

profit and SG&A may be computed by

any other reasonable method, capped by

the amount of profit normally realized

on sales in the home market of the same

general category of products. The SAA

states that, if the Department does not

have the data to determine amounts for

profit under alternative method one and

two or a profit cap under alternative

method three, it may apply alternative

three (without determining the cap) on

the basis of ‘‘the facts available.’’ SAA

at 841. Therefore, as the facts available

under section 773(e)(2)(B)(iii) of the Act,

for Unicatch and S&J, we are using each

respondent’s overall profit and SG&A

rate associated with its total sales as

recorded in its most recent financial

statement. Because the figures recorded

in the financial statements are companyspecific and contemporaneous with the

POI, we determine this data to be a

reasonable surrogate for SG&A and

profit of the foreign like product. With

respect to Lei Chu, because its financial

statement includes sales of merchandise

not related to the merchandise under

investigation, e.g., not within the same

general category of CR nails products,

we determined that using Lei Chu’s

financial statement is not an appropriate

basis for deriving SG&A and profit.

Therefore, we are using the weighted

average of the profit rate and SG&A of

other respondents in this investigation

for Lei Chu (see Lei Chu Calculation

Memorandum, September 24, 1997). For

a further discussion of this

methodology, see Comment 2 below.

Price to CV Comparisons

Because we based SG&A on

respondents’ financial statements,

where we compared CV to EP, we did

not make any circumstance of sale

adjustments for direct expenses and

commissions as we were unable to

isolate these amounts from total SG&A.

Currency Conversion

We made currency conversions into

U.S. dollars based on the official

exchange rates in effect on the dates of

the U.S. sales as certified by the Federal

Reserve Bank. Section 773A(a) of the

Act directs the Department to use a

daily exchange rate in order to convert

foreign currencies into U.S. dollars

unless the daily rate involves a

fluctuation. It is the Department’s

practice to find that a fluctuation exists

when the daily exchange rate differs

from the benchmark rate by 2.25

percent. The benchmark is defined as

the moving average of rates for the past

40 business days. When we determine a

fluctuation to have existed, we

substitute the benchmark rate for the

daily rate, in accordance with

established practice. Further, section

773A(b) directs the Department to allow

a 60-day adjustment period when a

currency has undergone a sustained

movement. A sustained movement has

occurred when the weekly average of

actual daily rates exceeds the weekly

average of benchmark rates by more

than five percent for eight consecutive

weeks, see Change in Policy Regarding

Currency Conversions, 61 FR 9434

(March 8, 1996). Such an adjustment

period is required only when a foreign

currency is appreciating against the U.S.

dollar. The use of an adjustment period

was not warranted in this case because

the New Taiwan Dollar (NTD) did not

undergo a sustained movement.

Critical Circumstances

The petition contained a timely

allegation that there is a reasonable

basis to believe or suspect that critical

circumstances exist with respect to

imports of subject merchandise. Section

733(e)(1) of the Act provides that the

Department will determine that there is

a reasonable basis to believe or suspect

that critical circumstances exist if: (A)(i)

there is a history of dumping and

material injury by reason of dumped

imports in the United States or

elsewhere of the subject merchandise, or

(ii) the person by whom, or for whose

account, the merchandise was imported

knew or should have known that the

exporter was selling the subject

merchandise at less than its fair value

and that there was likely to be material

injury by reason of such sales, and (B)

there have been massive imports of the

subject merchandise over a relatively

short period.

In the preliminary determination, we

determined that there was no reasonable

basis to believe or suspect that critical

circumstances existed with respect to

imports of CR nails from Taiwan by

Unicatch, Lei Chu, S&J, and Romp. This

preliminary determination was based on

a finding that there was no evidence of

a history of dumping and no basis to

impute knowledge of dumping and

resultant material injury. As no

interested party has challenged this

determination and because the

calculated final dumping margins for

Unicatch, Lei Chu, and S&J do not

exceed the benchmark amounts for

establishing imputed knowledge (e.g.

15% for CEP sales and 25% for EP

sales), we do not find that critical

circumstances exist for any of these

companies. Regarding all other

exporters, because we do not find that

critical circumstances exist for any of

the investigated companies with

calculated dumping margins, we also

determine that critical circumstances do

not exist for companies covered by the

‘‘All Others’’ rate. Based upon adverse

facts available, however, we do find that

critical circumstances exist with respect

to exports by K. Ticho and Romp. (see

Comment 20).

Verification

As provided in section 782(i) of the

Act, we verified or attempted to verify

the information submitted by

respondents for use in our final

determination. We used standard

verification procedures, including

examination of relevant accounting and

production records and original source

documents provided by respondents.

Interested Party Comments

Comment 1: Indirect Selling Expenses

Unicatch argues that the Department

erroneously deducted its indirect selling

expenses incurred in Taiwan from CEP.

Unicatch states that it calculated its

Taiwan indirect selling expenses as a

percentage of total Unicatch sales

because it was unable to specify

whether any of the indirect selling

expenses were directly related to its

U.S. sales. Unicatch asserts pursuant to

section 772(d) of the Tariff Act of 1930,

as amended, that the Department has an

established practice in which it does not

deduct indirect selling expenses

incurred by a foreign producer in the

exporting country in calculating CEP.

See Notice of Final Determination: Pet

Film from Korea, 62 FR 38064, 38066

(July 16, 1997). Unicatch further

contends that the Department has

codified this established practice in the

final regulations citing, 62 FR 27296,

May 19, 1997 at section 351.402(b)

which states that the Department ‘‘will

not make adjustments for any expense
51430 Federal Register / Vol. 62, No. 190 / Wednesday, October 1, 1997 / Notices

that is related solely to the sale to an

affiliated importer in the United States.’’

As a result, Unicatch contends the

Department should not deduct any such

indirect selling expenses incurred in

Taiwan from CEP in the final

determination.

Petitioner contends the Department

was correct to deduct Unicatch’s

indirect selling expenses in constructing

CEP as all deductions met statutory

requirements. First, petitioner argues

the Department verified that Unicatch’s

sales department provides general sales

support services for U.S. sales including

contacts with affiliates and customers.

Second, petitioner argues that indirect

selling expenses are expenses which do

not result from a direct relationship

with the subject merchandise. Thus,

petitioner argues that Unicatch’s claim

that these expenses are not directly

related to the sale of the subject

merchandise is irrelevant. Finally,

petitioner claims that the Department

verified that the international sales

division dealt with sales to various

export markets, and although there is no

sales division devoted to U.S. sales,

given that a majority of Unicatch’s sales

are to the U.S., these expenses should be

deducted from CEP.

DOC Position

We agree with the respondent and

have not deducted Unicatch’s indirect

selling expenses incurred in Taiwan

from CEP because the record evidence

does not support a finding that these

selling expenses are related specifically

to economic activities in the United

States. Consistent with the SAA and

§ 351.402(b) of the Final Regulations (62

FR 27411), we make deductions under

section 772(d) of the Act only for selling

expenses that relate to economic activity

in the United States, which we deem to

be expenses associated with the sale to

the unaffiliated U.S. purchaser and not

the sale to the affiliated U.S. importer.

See, e.g., PET Film from Korea, 62 FR

38064, 38066 (July 16, 1997); Grey

Portland Cement and Clinker from

Mexico: Final Results of Antidumping

Duty Administrative Review, 62 FR

17148, 17168 (April 6, 1997).

Unicatch’s indirect selling expenses

incurred in Taiwan are comprised of

salary, travel, and entertainment

expenses incurred by its international

and domestic sales divisions. See Sales

Verification Report for Unicatch, July

17, 1997 (‘‘Unicatch Sales Verification

Report’’) at 11. We verified that

Unicatch does not have a sales staff

dedicated entirely to U.S. sales, but

rather its salespeople deal with sales to

various export markets. Id. Further, we

verified that none of the reported

indirect expenses can be tied

specifically to sales to unaffiliated

customers in the U.S. but rather are

incurred by Unicatch to complete the

sale to the affiliated purchaser. Id.

Although Unicatch’s third country sales

are not viable (i.e., greater than 5% of

U.S. sales) for purposes of calculating

NV, we verified that Unicatch did have

POI sales in other export markets, which

further demonstrates that its reported

indirect selling expenses are not

associated solely with U.S. sales to

unaffiliated customers. Therefore, we

disagree with petitioner’s argument that

because the overwhelming majority of

Unicatch’s export sales are to the U.S.,

we should deduct these expenses from

CEP. See Notice of Final Determination

of Sales at Less Than Fair Value: Pasta

from Italy, 61 FR 30326, 30352 (June 14,

1996) (deducting inventory carrying

costs incurred in Italy for enriched pasta

because enriched pasta was sold in the

United States during the POI).

Comment 2: Calculation of SG&A and

Profit for All Respondents

Petitioner disagrees with the

Department’s decision in the

preliminary determination to use each

respondent’s overall SG&A and profit

rates contained in their financial

statements because this data includes

amounts obtained from sales of nonsubject merchandise. Petitioner asserts

that the only data pertaining to SG&A

and profit specific to the product under

investigation is the information

provided by Lei Chu. Petitioner argues

that one of the three alternative methods

to determine SG&A and profit for CV is

to weight-average the actual amounts

realized on sales of the foreign like

product by other producers of the

subject merchandise. Because Lei Chu

was the only company to provide the

data specific to the subject merchandise,

petitioner contends that Lei Chu’s data

is the weighted-average SG&A and profit

rates for all Taiwan producers and

should be used in all respondent’s CV

calculations.

Unicatch and Lei Chu counter that the

profit rate petitioner asserts should be

used in calculating CV was not verified

by the Department. More importantly,

the profit rate is Lei Chu’s

subcontractor’s profit for processing

wire into CR nails and does not reflect

all costs of producing and selling CR

nails. Both respondents contend that the

Department should use the amounts

derived from Unicatch and Lei Chu’s

financial statements because this data

incorporates all appropriate costs and

was verified by the Department.

Moreover, respondents contend that

where actual data is not available,

773(e)(2)(B)(i) of the Act authorizes the

Department to use amounts generated

from the ‘‘general category of products’’

as the subject merchandise. They cite

Shop Towels from Bangladesh 61 FR

65025 (December 10, 1996) and Forged

Steel Crankshafts from the United

Kingdom 62 FR 16768 (April 18, 1997)

as two cases in which the general

category of merchandise was

determined to be all products from

textile mills and all types of crankshafts,

respectively. In this case, Unicatch and

Lei Chu assert the general category of

merchandise encompasses nails and

other fasteners and that both companies

had sales of nails and other fasteners in

the home market. Therefore, the

companies contend, the Department

should use the SG&A and profit from

each company’s financial statement

because the financial statements

encompass products within the same

general category of merchandise.

Lei Chu argues that the Department

erroneously used profit realized by its

subcontractor to calculate the CV of CR

nails in the preliminary determination

of this investigation. Lei Chu contends

the Department should use SG&A and

profit verified by the Department from

Lei Chu’s financial statement to

calculate CV for the sales of the subject

merchandise because Lei Chu qualifies

as the producer of CR nails. Lei Chu

agrees that there were certain

production processes of the subject

merchandise performed by an affiliated

subcontractor. However, Lei Chu states

that the Department has found in past

cases that the party contracting for

processing services was the producer of

the subject merchandise. In such

instances, the Department applied

SG&A and profit realized by the

contracting party to calculate the CV of

the subject merchandise and did not use

the SG&A and profit of the

subcontractor, citing Notice of Final

Determination: Chrome Plated Lug Nuts

from Taiwan, 56 FR 36130, 36131 (July

31, 1991).

According to Lei Chu, the Department

verified that Lei Chu organized the

production of CR nails and performed

certain production processes during the

POI. In addition, Lei Chu states the

Department verified that it purchased

steel wire rods, maintained them as

inventory, retained title over the

materials to produce the CR nails and

retained ownership over the CR nails

throughout the production process.

Further, Lei Chu states that the

Department verified that it never sold or

purchased wire to or from the

subcontractor, and there were no sales

transactions between the two. Lei Chu

claims the Department verified that it
Federal Register / Vol. 62, No. 190 / Wednesday, October 1, 1997 / Notices 51431

only paid a processing fee to the

subcontractor. Finally, Lei Chu argues

that the fee and the profit from the

subcontractors’ financial statement

reflects only the costs of processing wire

into CR nails. Lei Chu believes its

financial statement incorporates the full

costs of CR nails. As a result, Lei Chu

argues that the Department should use

its 1996 financial statements to calculate

profit and SG&A.

Petitioner argues that Lei Chu and its

subcontractor should be collapsed and

the Department was correct in using the

profit of Lei Chu’s subcontractor to

calculate CV. Petitioner contends that

the subcontractor is the producer of the

subject merchandise because it performs

more than minor additions needed to

complete the production of CR nails.

Further, petitioner contends the case

cited by Lei Chu, Chrome Plated Lug

Nuts, is not applicable because the two

parties involved in that case were not

affiliated, and the respondent to that

investigation had more production

responsibilities than Lei Chu. Therefore,

petitioner contends the Department

properly calculated CV using the profit

of Lei Chu’s subcontractor.

DOC Position

Neither Lei Chu, Unicatch, nor S&J

had a viable home market upon which

to calculate NV; therefore, none of the

respondents had home market selling

expenses and profit for sales of the

foreign like product upon which to base

CV. As a result, in the preliminary

determination, pursuant to section

773(e)(2)(B)(iii) of the Act and

consistent with the SAA, we used each

respondent’s overall profit and SG&A

associated with total sales as recorded

in its most recent financial statements as

facts available to derive SG&A and

profit.

For Unicatch and S&J, for this final

determination, we have continued to

use the SG&A and profit contained in

their most recent financial statements.

For both companies, we verified that

these amounts reflected expenses and

profit associated with overall sales of

other types of nails and similar steel

products, such as fasteners, which we

deem to be within the same general

category of products as CR nails. We are

satisfied that using the financial

statements is a reasonable methodology

for calculating each company’s SG&A

and profit because this data is companyspecific, contemporaneous with the POI,

and is the most appropriate information

on the record. For the reasons discussed

below, we disagree with petitioner’s

argument that we use the amounts

contained in Lei Chu’s financial

statements for all respondents in lieu of

using this verified company-specific

data.

For Lei Chu’s SG&A in the

preliminary determination, we used its

financial statements and its affiliated

subcontractor’s financial statements (see

Calculation Memorandum dated

September 24, 1997). For Lei Chu’s

profit, we used its subcontractor’s

financial statements. However, our

findings at verification demonstrated

that the amount recorded on the

subcontractor’s financial statements is

not reflective of profit for the sale of the

foreign like product or related

merchandise but rather is a ‘‘tolling fee’’

for its services (see Lei Chu Cost

Verification Report at pg 3). Further, the

SG&A and profit recorded in Lei Chu’s

financial statements are for amounts

generated on sales of merchandise

completed unrelated to the subject

merchandise, e.g., not within the same

general category of CR nails products.

We also note that Lei Chu’s recorded net

profit is zero. Although the URAA and

subsequent revisions to U.S. law

eliminated the use of minimum profit,

we do not believe that it eliminated the

presumption of a positive profit element

in the calculation of CV. Unlike sections

773(e)(2)(A) and 773(e)(2)(B) (i) or (ii),

section 773(e)(2)(B)(iii) specifically

excludes the use of the term ‘‘actual

profit,’’ and instead directs us to use any

other reasonable method that does not

exceed the amount normally realized by

the industry in the same general

category of products. The SAA states

that there is no hierarchy between the

alternatives in section 773(e)(2)(B),

indicating that in some instances, it may

be more appropriate for the Department

to ignore ‘‘actual profit’’ available under

the two other alternatives and opt

instead for some other reasonable

method to obtain a profit amount.

Therefore, if a company has no home

market profit or has incurred losses in

the home market, the Department is not

instructed to ignore the profit element,

include a zero profit, or even consider

the inclusion of a loss; rather, the

Department is directed to find an

alternative home market profit. A clear

reading of the statute indicates that a

positive amount for profit must be

included in CV. See Silicomanganese

from Brazil: Final Results of

Antidumping Duty Administrative

Review, 62 FR 37869, 37877 (July 15,

1997).

Therefore, we reject Lei Chu’s

argument and have not used its

company-wide SG&A and profit rates in

our CV calculations. Instead, as facts

available, we used the weighted average

of the SG&A and profit from the

financial statements of the other

respondents in this investigation (see

Valuation Memorandum dated

September 24, 1997). Because this data

represents POI-wide expenses and profit

associated with sales of merchandise in

the same general category as CR nails

products, we find this data to be the

most appropriate information on the

record to derive Lei Chu’s SG&A and

profit.

Comment 3: Unicatch’s Steel Scrap

Unicatch argues that the Department

should subtract its revenue on steel

scrap sales from the cost of manufacture

(COM) of CR nails as this information

was presented to the Department in a

timely manner at the commencement of

verification. Further, Unicatch states

that the Department was able to verify

all information presented at the

commencement of verification

including revenue from steel scrap and

its values per kilogram per CR nails.

Thus, Unicatch suggests that consistent

with the Department’s past cases, the

value of steel scrap should be subtracted

from normal value, citing Brake Drums

and Rotors from the PRC.

Petitioner contends that the

disclosure by Unicatch of the revenue

from steel scrap was not minor or

timely. However, petitioner suggests

that if the Department makes the

adjustment, and given that the revenue

is so small, it should make an

adjustment in determining allocated

expenses and profit.

DOC Position

We agree with Unicatch that it is the

Department’s practice to deduct from

total COM revenue earned on the sale of

scrap resulting from the production of

the subject merchandise. See Elemental

Sulphur from Canada; Final Results of

Antidumping Administrative Review, 61

FR 8239, 8245 (March 4, 1996). Because

we determined that Unicatch submitted

this data in a timely manner (see

Comment 4) and we were able to verify

these amounts, we have deducted steel

scrap revenue from Unicatch’s total

COM.

Comment 4: Unicatch’s and Lei Chu’s

Corrections and Facts Available

Unicatch and Lei Chu argue that the

Department should incorporate the

corrections submitted at the

commencement of their verifications in

the final margin calculations because

the corrections were submitted in a

timely manner and verified by the

Department. Both respondents contend

that the Department should not use facts

available for two reasons: (1) Making

adverse assumptions and applying facts

available are not synonymous and (2)
51432 Federal Register / Vol. 62, No. 190 / Wednesday, October 1, 1997 / Notices

neither respondent has done anything in

this investigation that would justify

using adverse inferences. Both

respondents argue that there were few

instances in the corrections that the

Department was unable to verify, and,

further, both companies penalized

themselves with errors as often as they

benefitted. Both respondents state that

there is no evidence on the record to

suggest that either failed to cooperate by

not acting to the best of its ability to

comply with Department’s requests for

information. Lei Chu and Unicatch state

that the Department should weigh the

record evidence to determine what type

of change, if any, would be probative of

the issue under consideration. However,

both recommend that if the Department

chooses to use facts available, adverse

inferences not be applied.

Petitioner contends that the

Department should not incorporate

respondents’ corrections because the

corrections are not minor and the

number of errors reported by the

respondents’ raise serious doubts about

whether the companies acted to the best

of their ability to provide accurate

information. In addition, petitioner

notes that the Department discovered

numerous other errors at verification.

Therefore, petitioner suggests that the

Department resort to ‘‘facts available’’

employing ‘‘adverse inferences’’ to

portions of the respondents’

calculations.

DOC Position

We agree with Unicatch and Lei Chu

and have accepted the corrections for

computing the final margin of the

companies. The Department’s practice is

to permit respondents to provide minor

corrections to submitted information at

the commencement of verification. See

Notice of Final Determination of Sales

at Less Than Fair Value: Melamine

Institutional Dinnerware Products From

Taiwan, 62 FR 1726, 1729 (Jan. 13,

1997). Unicatch and Lei Chu provided

the Department with their corrections at

the beginning of their respective

verifications. Lei Chu’s corrections

included sales and production quantity,

material costs, and fixed overhead.

Unicatch’s corrections included

production quantity, plating costs,

scrap, packing, selling expenses and

steel wire costs. These revisions

corrected data already on the record and

did not introduce new issues not

previously reported on the record. In

sum, the corrections submitted by

Unicatch and Lei Chu were typical of

the minor corrections routinely

accepted by the Department at the

commencement of verification.

Accordingly, we determine that

resorting to facts available is

unwarranted in this particular case. The

Department’s use of facts available is

subject to section 782(d) of the Act.

Under section 782(d), the Department

may disregard all or part of a

respondent’s questionnaire responses

when the response is not satisfactory or

it is not submitted in a timely manner.

The Department has determined that

neither of these conditions apply. The

Department was able to verify the

responses, thus rendering them

satisfactory, and the types of revisions

submitted by Unicatch and Lei Chu met

the deadline for such corrections. Under

section 782(e), the Department shall not

decline to consider information that is

(1) timely, (2) verifiable, (3) sufficiently

complete in that it serves as a reliable

basis for a determination, (4)

demonstrated to be provided based on

the best of the respondent’s ability, and

(5) can be used without undue

difficulties. Lei Chu and Unicatch have

met these conditions. Therefore, we find

no basis to reject Lei Chu’s and

Unicatch’s responses, and thus, no basis

to rely on the facts otherwise available

for our final determination.

Comment 5: Plating Thickness

Petitioner argues that the plating

thicknesses reported by respondents do

not meet U.S. Federal or regional

building codes. Moreover, petitioner

claims that the actual plating

thicknesses were not verified by

Department. Therefore, petitioner

contends that the Department should

assume that respondents were aware of

the building codes and produced CR

nails that did not comply with the

codes. The Department should use the

information contained in the petition to

calculate NV based on CR nails that

meet the U.S. building codes.

Unicatch and Lei Chu contend that

the Department verified that all costs

attributable to plating were included in

the CV database. Therefore, both

respondents argue that whether or not

the subject merchandise complies with

U.S. building codes is irrelevant because

the purpose of this investigation is to

accurately value respondents’

production costs of CR nails, not to

examine the quality of their CR nails.

DOC Position

We agree with Unicatch and Lei Chu

that we have captured all costs incurred

in producing CR nails. During the cost

verifications of all respondents, we

examined whether all material costs

(including plating costs) associated with

the subject merchandise were reported

completely and accurately in the CV

databases. We noted no discrepancies

regarding the material costs with the

exception of minor errors, which have

now been corrected (see Cost

Verification Reports for Lei Chu,

Unicatch, and Romp dated July 18,

1997, and Cost Verification Report for

S&J dated July 23, 1997). Thus, for each

respondent with a calculated dumping

margin we have verified all material

costs. Any alleged misrepresentation

concerning compliance with U.S.

building codes is not within the

purview of the antidumping statute

because such misrepresentation would

have no impact on our calculations.

Comment 6: Allocation Methodologies

Petitioner contends that respondents’

allocation methodologies with respect to

the following expenses were incorrect.

(i) Shipping Related Expenses

Petitioner claims that any shipping

related expenses should be based on

volume because the expenses are

generally incurred based on volume,

rather than on gross packed weight.

Petitioner argues that allocating

shipping expenses based on weight

results in under-reported transportation

costs.

Unicatch and Lei Chu counter that

basing shipping related expenses on

weight is acceptable when volumebased information is unavailable. In this

case, weight is the only allocation factor

on the record. Both respondents cite to

Industrial Belts and Components

Thereof from Japan, 58 FR 30018, 30022

(May 25, 1993) in support of this

position.

DOC Position

We agree with respondents that a

weight-based allocation methodology

for reporting shipping expenses is

acceptable. Although the Department

prefers sale-specific movement

expenses, the Department’s practice is

to accept allocation methodologies for

movement expenses at the most specific

level permitted by the respondent’s

books and records kept in the ordinary

course of business. See Notice of Final

Determination of Sales at Less Than

Fair Value: Melamine Institutional

Dinnerware Products From Taiwan, 62

FR 1726, 1730 (Jan. 13, 1997). Moreover,

where multiple items were included in

a shipment, we instructed each

respondent to report expenses using an

allocation methodology on the basis

incurred, e.g., weight. Both Unicatch

and Lei Chu reported that a weightbased allocation methodology was

necessary because their shipments

included non-subject merchandise. See

Unicatch and Lei Chu’s Section C
Federal Register / Vol. 62, No. 190 / Wednesday, October 1, 1997 / Notices 51433

response dated March 18, 1997. For S&J,

the bill of lading records both weight

and volume figures without

distinguishing between the two.

Therefore, we determine that allocating

freight on weight is acceptable for our

final margin calculation (see S&J Sales

Verification Exhibit 16).

(ii) Production Related Expenses,

Factory Overhead, and Indirect Selling

Expenses

Petitioner argues that the allocation

methodology of production, factory

overhead, and indirect selling expenses

should be revised to reflect the

inclusion or exclusion of scrap,

depending on the processing stage in

which the expense was incurred.

Petitioner suggests, for example, that

post-scrap production stages, such as

packing, should be based on the weight

of the product without the scrap.

Unicatch and Lei Chu counter that

allocating over finished goods, which

includes scrap, only increases the perunit costs. Furthermore, both

respondents argue that petitioner’s

methodology will distort costs

downward by not accounting for scrap.

DOC Position

We agree with respondents that

allocating expenses over the weight of

the finished good necessarily accounts

for all costs related to scrap. If the

Department were to allocate certain

expenses over a weight which included

scrap, the denominator of the

calculation would be greater than the

weight of the finished product and

would result in understating the perunit expense. Thus, we reject

petitioner’s argument and will continue

to allocate expenses over the total

amount of finished product.

(iii) Duty Drawback

Petitioner argues that the duty

drawback allocation should be based on

the net weight of the CR nails.

Unicatch and Lei Chu counter that

they did allocate duty drawback by the

net weight of the CR nails.

DOC Position

We agree with respondents that duty

drawback was properly allocated based

on the net weight of the CR nails. As

stated in the Unicatch Sales Verification

Report at. 8–9, the total duty drawback

associated with shipments to TCI or

Unitech (Unicatch’s affiliated U.S.

importers) were divided by the total net

weight of the shipment to arrive at a

per-unit amount for duty-drawback.

This same methodology was followed

for Lei Chu (see Lei Chu Sales

Verification Report dated June 23,

1997).

(iv) Physical Weights

Petitioner contends that the

Department should physically weigh the

subject merchandise and base all

allocations on physical weights rather

than gross weights reported by the

respondents.

Unicatch and Lei Chu counter that

petitioner’s request is untimely and

unreasonable. Both respondents argue

that the weight-based methodologies

used are reasonable and consistent with

past practice and urge the Department to

reject petitioner’s contention.

DOC Position

At verification the Department

examined the reported product weights

for Lei Chu and Unicatch and noted no

discrepancies. Therefore, we have used

each company’s verified weights in our

calculations.

Comment 7: Value Added Taxes (VAT)

Petitioner argues that the Department

should not assume that all sales and

expenses reported net of VAT were

correct. Accordingly, petitioner believes

unless the Department verified all

figures, the Department must not

assume that all figures are net of VAT.

Lei Chu and Unicatch contend that

the sales reported were net of VAT

because under Taiwan law VAT is

rebated on all export sales. Because all

respondents reported their sales as

being export sales, both respondents

argue that the Department should reject

petitioner’s claim.

DOC Position

In the preliminary determination,

Unicatch or Lei Chu reported brokerage

and handling and international freight

net of VAT. At verification, we found

that both respondents incur five percent

VAT on these expenses (see Unicatch

Sales Verification Report at 7; Lei Chu

Sales Verification Report at 8). Since Lei

Chu and Unicatch were unable to

provide supporting documentation to

show that this VAT had been rebated

according to Taiwan law, we have

applied a five percent VAT to brokerage

and handling and international freight

for all sales by these two companies (see

Valuation Memorandum dated

September 24,1997). However, we found

no indication at verification that VAT

was incurred on export sales for either

Unicatch or Lei Chu.

Comment 8: Multinational Corporation

Rule (MNC)

Petitioner argues that the MNC

provision of the Act should be applied

to Unicatch and Top United (a

manufacturer of CR nails in the People’s

Republic of China). Petitioner cites to

section 773(d) of the Act, alleging that

the conditions outlined are fulfilled by

Unicatch and Top United. Further,

petitioner cites to Melamine

Institutional Dinnerware Products from

the People’s Republic of China 61 FR

43337 (August 22, 1996), in which the

Department determined that the MNC

provision applies to cases involving

non-market economies.

Unicatch counters that the allegation

is untimely and unsupported by

evidence on the record of this

investigation. Finally, Unicatch argues

that the petitioner has failed to

demonstrate that two of the three

conditions necessary to apply the MNC

rule are present, i.e., (1) the petitioner

has failed to demonstrate that the PRC

market is not viable; and (2) petitioner

has failed to demonstrate that the

normal value for Taiwan nails is higher

than the normal value for PRC nails.

DOC Position

We agree with Unicatch that

petitioner’s MNC allegation is untimely.

As stated in the preamble to the final

regulations: ‘‘[t]here are a variety of

analyses called for by section 773 that

the Department typically does not

engage in unless it receives a timely and

adequately substantiated allegation from

a party * * * the Department does not

automatically request information

relevant to a multinational corporation

analysis under section 773(d) of the Act

in the absence of an adequate

allegation.’’ Final Regulations, 62 FR at

27357, citing Certain Small Business

Telephones and Subassemblies Thereof

from Taiwan, 54 FR 31987 (August 3,

1989).

In this case, petitioner alleged for the

first time in its case brief that the

Department should apply the MNC rule

to Unicatch and Top United.

Determining NV under the MNC

provision is a complex analysis that

necessitates collection of information

and calculation of sales and cost data

from companies who may or may not be

subject to investigation. Presenting the

allegation after the preliminary

determination does not allow the

Department sufficient time to collect

and analyze the information necessary

to make a MNC determination at an

appropriate point in the proceeding. For

this reason, the Department has

specifically rejected the notion that

absent a timely and adequate allegation,

we are obligated to examine information

that is quantitatively and/or

qualitatively different from the

information normally gathered as part of
51434 Federal Register / Vol. 62, No. 190 / Wednesday, October 1, 1997 / Notices

its standard antidumping analysis

because to do so would significantly

impair the Department’s ability to

comply with its statutory deadlines. See

Final Regulations, 62 FR at 27357.

Therefore, we reject petitioner’s MNC

allegation as untimely.

Comment 9: Reconciliation of Unicatch

Sales to Financial Statements

Petitioner argues that the Department

was unable to tie: (1) the reported sales

volume totals for all of Unicatch’s sales

directly to the financial statements, and

(2) Unicatch’s general ledger to its 1995

income statement. As a result, petitioner

asserts that Unicatch’s reported sales

should not be deemed reliable as some

sales may have been excluded.

Accordingly, petitioner suggests that the

Department apply facts available with

adverse inferences because of the

potential of unreported sales.

Unicatch contends that because its

CEP and EP sales included the resale of

CR nails by its affiliates, the Department

was unable to complete a total sales

reconciliation using its financial

statement only. Unicatch states that

reconciliation required tying relevant

sales to its affiliates’ financial

statements. Unicatch contends that the

Department verified the quantity and

value of the resales at its affiliates’

headquarters using each affiliate’s

financial statement and was able to

clarify the differences from Unicatch’s

financial statement without any

discrepancies. Therefore, Unicatch

contends that facts available with

adverse inferences is not warranted.

DOC Position

We disagree with petitioner’s

argument that use of adverse facts

available is warranted in this case.

Contrary to petitioner’s claim, we

verified Unicatch’s total sales volume

and value. As stated in its sales

verification report, ‘‘we were unable to

tie the reported sales and volume and

value totals for all of Unicatch sales, or

for its EP sales directly to the financial

statements because the sales value

reported in the financial statement

included the sales values for those sales

to Unicatch affiliated parties.’’ Unicatch

Sales Verification Report at pg 3.

However, when we verified Unicatch’s

affiliates, we were able to tie the

quantity and value reported to their

financial statements, clarifying any

differences in Unicatch’s financial

statement and reported sales volume

(see Unicatch CEP Sales Verification

Report (July 23, 1997)). Therefore, we

have determined there is no evidence on

the record to suggest Unicatch had any

unreported POI sales and resort to facts

available is not warranted.

Comment 10: Reliability of Unicatch’s

Reported Costs

Petitioner argues that the cost

methodologies used by Unicatch were

inappropriate because costs were not

properly determined where steel was

processed through affiliated parties.

Petitioner argues that Unicatch’s cost of

materials should be measured against a

‘‘market value’’ enabling the Department

to determine that prices of the steel are

reasonable. In addition, petitioner states

the Department should assure that all

costs associated with the affiliated

parties’ costs were reported.

Unicatch contends that at the

commencement of verification, it

provided the Department with sufficient

information, including a sales price

from an unaffiliated supplier of wire

rod, that enabled the Department to test

whether the steel price from an

affiliated supplier was reasonable.

Unicatch states that it showed an

example of an unaffiliated supplier’s

price lower than transfer prices charged

by Unicatch’s affiliates, even though the

cost of production for those affiliates

was higher. Therefore, Unicatch

contends that the cost of production for

steel is appropriate for its cost

calculation methodologies. Further,

Unicatch contends that the Department

verified all reported costs associated

with the affiliates’ production of steel

wire (i.e., material, labor, overhead,

SG&A and interest) and did not find any

discrepancies.

DOC Position

We disagree with petitioner and have

determined that there is no evidence of

the record to suggest Unicatch’s cost

calculation methodologies were

incorrect. We verified the two

methodologies used by Unicatch to

determine material costs for steel wire

and welding wire. The first

methodology was based on the transfer

price from its affiliates and the second

methodology was based on the cost of

production for wire purchased from its

affiliates (see Unicatch Cost Verification

Report at 3–4). Although Unicatch had

some purchases of steel wire from an

unaffiliated supplier, we verified that

this unaffiliated purchase price was

lower than the reported transfer prices

charged by its affiliated suppliers. (Id. at

Ver. Exh. 1). Therefore, since the costs

of production from Unicatch’s affiliates

were higher than the transfer prices, in

accordance with section 773(f)(3), we

have used the affiliates’ COP data to

calculate the actual material cost of the

wire inputs.

Comment 11: Corrections to Unicatch’s

Questionnaire Responses

Petitioner argues that the corrections

submitted by Unicatch at the time of

verification are unacceptable because

the Department was not granted time to

review the information and consider the

appropriate methods for verifying it.

Petitioner believes that the Department

should re-examine the following

changes submitted at verification: (1)

interest expenses; (2) SG&A; (3) packing

costs; (4) existence of U.S. affiliates; (5)

ocean freight; (6) warranty expense; (7)

selling expense; (8) inland freight; (9)

duty drawback; and (10) marine

insurance.

Specifically, petitioner states that

Unicatch may have underreported its

interest expense because it may have

been offset by loans or other money

transfers. Further, petitioner claims that

Unicatch’s packing cost should have

been reported separately according to

the Department’s questionnaire, and the

records about Unicatch’s affiliates were

not accurate and thus, cannot be relied

upon by the Department. Therefore,

petitioner suggests that the Department

reject Unicatch’s submissions entirely

based on adverse inferences and apply

the largest expense found to all of

Unicatch’s sales transactions, as adverse

facts available.

Unicatch contends that the

corrections reported at the

commencement of its verification were

not numerous and should not affect the

integrity of its response. Further,

Unicatch states that the Department was

able to verify all corrections submitted.

Unicatch contends that the revisions

submitted were typographical errors and

other minor data entry errors to the sales

databases. Unicatch contends that the

Department should use the interest

expenses recorded in its verified

financial statement to calculate CV and,

since Unicatch did not separate packing

cost, the packing labor percentage

would have been inflated upward

without having a major effect on the

margin calculation. Finally, Unicatch

admits that some errors reported would

warrant the use of facts available but

there is no instance in which adverse

inferences are warranted.

DOC Position

We agree with Unicatch and have

accepted the corrections submitted at

the beginning of verification and the

explanation for the discrepancies. We

verified all corrections submitted and

noted only minor discrepancies. In

addition, we reviewed the allocation

methodologies used by Unicatch to

compute its reported expenses (i.e.,
Federal Register / Vol. 62, No. 190 / Wednesday, October 1, 1997 / Notices 51435

interest expense, warranty expense,

duty drawback) and noted no

discrepancies (see Unicatch Sales

Verification Report at 6–9; Unicatch

Cost Verification Report at 2).

Section 782(e) of the Act states that

the Department shall not decline to

consider information that does not meet

all of its requirements if: (1) The

information is submitted by the

deadline established for its submission,

(2) the information can be verified, (3)

the information is not so incomplete

that it cannot serve as a reliable basis for

reaching the applicable determination,

(4) the interested party has

demonstrated that it acted to the best of

its ability in providing the information

and meeting the requirements

established by the Department with

respect to the information, and (5) the

information can be used without undue

difficulties. Unicatch’s information

meets all of these requirements.

Accordingly, we have no basis to

conclude that the earlier responses

distorted the Department’s analysis and

warrant the use of adverse facts

available.

Comment 12: Whether Lei Chu and its

Affiliate Should Be ‘‘Collapsed’’

Petitioner argues that Lei Chu and its

affiliate are sufficiently intertwined and

should be collapsed and treated as one.

Petitioner states that Lei Chu has

submitted information on the record

that it is affiliated with the Taichung

Production Division (‘‘TPD’’) and one of

its suppliers and controls the sales and

production activities of its suppliers.

Petitioner believes that if the

Department does not collapse the two

companies Lei Chu could shift all of its

production and exports of the subject

merchandise to TPD or TPD’s supplier.

Further, petitioner argues that since the

two companies should have been

collapsed, Lei Chu should have

submitted a consolidated response to

the Department’s questionnaire, and

their failure to do so mandates the use

of facts available.

Lei Chu argues that if the Department

determines that it should be collapsed

with its affiliate, the Department must

use Lei Chu’s profit to calculate the

profit of other Taiwan respondents

because it reflects the consolidated

performance of Lei Chu.

DOC Position

We determine that the facts in this

case do not warrant resort to our

collapsing practice because neither TPD

nor Lei Chu’s affiliated CR nails

supplier are separate producers. First,

TPD is merely a production division of

Lei Chu, not a separate entity. Lei Chu

Sect. A Supp. QR, April 14, 1997, at 1.

Although Lei Chu has ceased

production of CR nails at its TPD

division, the evidence on the record

demonstrates that Lei Chu continues to

produce CR nails through a

subcontractor. Pursuant to the

contractual arrangement, Lei Chu

purchases wire rod and drawing

materials and provides these materials

to its subcontractor who then produces

the CR nails (see Lei Chu Cost

Verification Report, at 3). Lei Chu pays

this affiliate a processing fee and

maintains title over the raw materials

and completed CR nails throughout the

production process. Id. By its own

admission, Lei Chu controls the sales

and production activities of this entity.

Further all CR nails production by the

subcontractor is the property of Lei Chu

and is sold by Lei Chu. Thus, consistent

with the Department’s current practice

with respect to tolling operations (see

e.g., section 351.401(h) of the Final

Regulations, 62 FR at 27411), the

subcontractor is not considered the

producer. Lei Chu is the producer of CR

nails. In essence, the subcontract

relationship represents a single,

vertically integrated production

operation rather than two separate

producers in a position to potentially

evade a potential antidumping duty

order by shifting production from one

facility to another.

Comment 13: Lei Chu Sales Below Fair

Value

Petitioner argues that since Lei Chu’s

1996 financial statement does not show

a profit during the POI, Lei Chu sold the

subject merchandise at less than fair

value.

Lei Chu contends that there is nothing

in the statute or the Department’s past

determinations that supports

petitioner’s view and as a result, the

Department should reject, petitioner’s

argument.

DOC Position

We disagree with petitioner because

there is nothing stated in the statute or

in past determinations to suggest that a

company not showing a profit is

necessarily selling the subject

merchandise at less than fair value.

Comment 14: Lei Chu’s Packing List

Weights Are Not Reliable

Petitioner argues that the Department

should not rely on the packing list

weights to determine the weights of the

subject merchandise for Lei Chu,

because they are not accurate.

Therefore, petitioner suggests the

Department weigh the subject

merchandise and use the results to

compute CV.

Lei Chu contends the packing weights

reported by Lei Chu are reliable and

were verified by the Department, citing,

Lei Chu Cost Verification report at 8.

Therefore, Lei Chu suggests that the

Department reject petitioner’s argument

and continue to use the verified packing

list weights to compute CV.

DOC Position

We disagree with petitioner and have

determined there is no evidence on the

record to suggest the weights reported

on the packing list are unreliable. In

addition, we reviewed Lei Chu’s

packing methodologies and did not note

any discrepancies (see Lei Chu Cost

Verification Report at 8–9). Therefore,

we will use Lei Chu’s reported weights

to compute CV.

Comment 15: S&J Untimely Submissions

Petitioner argues that during the

investigation, S&J failed to provide

copies of all of its submissions to all

interested parties. Further, petitioner

claims S&J submitted documents

incorrectly according to the

Administrative Protective Order (APO)

regulations. Therefore, petitioner

suggests that the Department reject S&J

submissions in total and employ

adverse inferences and use facts

available.

DOC Position

We disagree with petitioner. We have

determined that there is no indication or

evidence on the record to suggest that

S&J did not serve all documents to

interested parties in a timely manner or

according to APO regulations.

Comment 16: S&J Omissions and Errors

to the Questionnaire Responses

Petitioner argues that S&J made

numerous omissions and errors in its

questionnaire responses according to

the Department’s verification report.

These errors included unreported sales

and unaccountable bank charges.

Therefore, petitioner suggests that in

view of the large number of errors and

omissions, the Department should reject

S&J’s submission in its entirety or apply

facts available with adverse inferences

to the unreported sales.

DOC Position

We disagree with petitioners. We

verified that S&J did not include bank

charges in its Section C response

because it was unable to separate bank

changes from the other miscellaneous

charges included in the general ledger

category (‘‘Export Expense’’) (see S&J

Sales Verification Report at 10). We
51436 Federal Register / Vol. 62, No. 190 / Wednesday, October 1, 1997 / Notices

applied a bank charge percentage to all

of S&J sales (see Valuation

Memorandum dated September 24,

1997). Therefore, although certain

discrepancies and omissions in S&J’s

reported sales and cost data were

discovered during verification, the

discrepancies and omissions do not

warrant the use of adverse facts

available. It is acceptable to address and

correct such errors individually, as was

done in this case, where appropriate.

Such errors were addressed and

corrected individually. (See, e.g.,

Certain Corrosion-Resistant Carbon

Steel Flat Products from Korea; Final

Results of Antidumping Duty

Administrative Review 61 FR 18558

(April 26, 1996).)

Comment 17: Collapsing of S&J and

New Lan Luang

Petitioner argues that the Department

should collapse S&J and New Lan Lung

because the parties effectively operate as

one. Further, petitioner contends that if

the Department does not collapse the

two companies it would provide a

loophole for future investigations.

DOC Position

In order for the Department to

collapse two producers, i.e., treat them

as a single entity, (1) the producers must

be affiliated under section 771(33) of the

Act, (2) the producers must have

production facilities that are sufficiently

similar so that a shift in production

would not require substantial retooling,

and (3) there must be a significant

potential for manipulation of price or

production. See Grey Portland Cement

and Clinker From Mexico: Final Results

of Antidumping Administrative Review,

62 FR 17148, 17155 (April 9, 1997);

section 351.401(f) of the Final

Regulations, 62 FR at 27410. When

based on a review of the totality of the

circumstances, the Department

determines that two affiliated producers

are sufficiently related so as to warrant

treatment as a single enterprise,

collapsing these entities prevents

evasion of the antidumping duty order.

See Certain Fresh Cut Flowers From

Colombia; Final Results of Antidumping

Duty Administrative Reviews, 61 FR

42833, 42853 (Aug. 19, 1996). Applying

the criteria of our collapsing inquiry as

set forth above, we find (1) S&J and New

Lan Luang are affiliated under § 771(33)

of the Act, (2) a shift in production

would not require substantial retooling,

and (3) there is a significant potential

for price or production manipulation

due to, among other factors, evidence of

intertwined business operations and

common management of the production

and sales decisions of both companies.

Based on this an analysis of the record

evidence, we have determined that it is

appropriate to treat S&J and New Lan

Luang as a single entity for purposes of

calculating a dumping margin in this

investigation.

First, we find that because S&J owns

greater than 5% of New Lan Luang,

these companies are affiliated under

§ 771(33)(E) of the Act. Second, the

record evidence demonstrates that

although not a current producer of CR

nails (New Lan Luang ceased

production of CR nails in 1994), New

Lan Luang is capable of producing CR

nails. See S&J Sect. A Supp. QR, April

8, 1997, at 12; S&J Verification Report,

at 2. Based on these facts, it is

reasonable to infer that a substantial

retooling of New Lan Luang’s

production facilities would not be

necessary if S&J were to shift production

to New Lan Luang.

We also determine that the third

criterion of our collapsing inquiry is

met. In determining whether there is a

significant potential for manipulation of

price or production, the Department

considers factors such as (1) the level of

common ownership, (2) interlocking

board of directors and common

management, and (3) intertwined

business operations as evidenced by

shared sales information, involvement

in production and pricing decisions, or

significant transactions between the two

enterprises. See Certain Welded Carbon

Steel Pipes and Tubes From India; Final

Results of New Shippers Antidumping

Duty Administrative Review, 62 FR

47632, 47638 (Sept. 10, 1997) (‘‘Pipes

and Tubes from India’’); § 351.401 (f) of

the Final Regulations, 62 FR at 27410.

All of these criteria need not be met in

a particular case, but rather serve as a

reliable basis on which the Department

may judge whether the affiliated

producers are sufficiently related to

create the potential of price or

production manipulation. Pipes and

Tubes from India, 62 FR at 47638.

S&J’s General Manager is also in

charge of New Lan Luang. See S&J Sect.

A Supp. QR, at 2; S&J Verification

Report, at 2. S&J explained that its

General Manager is responsible for sales

and production decisions and

determines the prices of S&J’s CR nails.

See S&J Sect. A QR, Feb. 26, 1997, at 5.

At verification we discovered that the

Chairman of New Lan Luang is also the

founder, former general manager, and

current advisor to S&J. See S&J

Verification Report, at 2. This

individual is also the father of the S&J’s

current General Manager. Id.

Additionally, S&J officials explained

that the two entities share employees

and S&J has on occasion transferred

sales order to New Lan Luang for

completion. Id. The totality of the

circumstances presented by these facts

indicate that the two companies operate

under common control of the same

individual/family with respect to sales

and production decisions. Although

both S&J’s General Manager and New

Lan Luang’s Chairman are only minority

shareholders in both companies, we

conclude that their positions of legal

and operational control in their

respective companies create a

significant potential for price or

production manipulation. We therefore

have treated S&J and New Lan Luang as

a single entity for purposes of

calculating a dumping margin in this

investigation.

To construct a consolidated sales

response for S&J/New Lan Luang, we

have included New Lan Luang’s POI

sales in our final margin calculations.

S&J reported New Lan Luang’s total

quantity and value data for its U.S. sales

during the POI; however, because we

did not specifically request S&J to report

additional information on New Lan

Luang’s POI sales, we do not have a

complete sales database upon which to

calculate a dumping margin. Therefore,

it is necessary to resort to facts available

in accordance with section 776(a)(1) of

the Act for this missing information. As

facts available, we have used a simple

average of the amounts reported for the

fields not included in the sales database

(i.e. exchange rate, foreign inland

freight, brokerage) (see Calculation

Memorandum dated September 24,

1997).

Additionally, at verification, we

discovered additional POI sales by New

Lan Luang that S&J failed to report. (see

S&J Sales Verification Report at 2). For

those sales, we have applied adverse

facts available because we deem S&J’s

failure to provide us with complete

information that we specifically

requested as a failure to cooperate to the

best of its ability within the meaning of

section 776(b) of the Act. Accordingly,

for these unreported sales, we used the

highest margin calculated for any

individual product (see Calculation

Memorandum dated September 24,

1997).

Comment 18: S&J Unaudited Financial

Statements

Petitioner argues that the absence of

audited financial statements means that

S&J’s financial information is not

reliable. Petitioner argues that the

reliance on the accounting system used

for the preparation of the audited

financial system is a vital part of the

Department’s determination that the

company’s sales and constructed value
Federal Register / Vol. 62, No. 190 / Wednesday, October 1, 1997 / Notices 51437

data are credible. Therefore, the

Department should rely on adverse facts

available for S&J.

DOC Position

At verification we were able to

reconcile S&J unaudited financial

statements to its 1996 tax return (see S&J

Cost Verification Report (July 23, 1997)).

Therefore, because we were able to tie

S&J’s financial statements to an

independent outside source, we have

determined that there is no evidence on

the record to indicate the information

on the financial statements is unreliable.

See Mexican Flowers, 60 FR at 49569.

Comment 19: Non-Mandatory

Respondents

Petitioner suggests that the

Department calculate a margin for nonmandatory respondents using the results

of each of the four mandatory

respondents, except those with zero

dumping margins.

DOC Position

Non-mandatory respondents will be

subject to the ‘‘all others’’ deposit rate,

which we have calculated based on the

weighted average of margins calculated

for mandatory respondents—excluding

zero and de minimis margins. (see

March 13, 1997, Decision Memo)

Comment 20: Critical Circumstances

Petitioner argues that the Department

should find that critical circumstances

exist with respect to K. Ticho. Petitioner

contends that a timely allegation of

critical circumstances was made in the

petition and that K. Ticho failed to

respond to the Department’s

questionnaire. Therefore, as facts

available, the Department should

determine that critical circumstances

exist with respect to K. Ticho.

DOC Position

We agree with petitioner. Because K.

Ticho failed to respond to the

Department’s questionnaire, we have

used the facts available as the basis for

determining whether critical

circumstances exist. The facts available

margin (40.28%) exceeds the threshold

for imputing knowledge of dumping to

the importers of the merchandise. In

addition, we have adversely inferred, as

the facts available, a massive increase in

imports from K. Ticho. We, therefore,

determine that critical circumstances

exist for K. Ticho, and will issue

appropriate instructions to the Customs

service.

We also determine that critical

circumstances exist for Romp. As with

K. Ticho, the final dumping margin for

Romp exceeds 15%, the minimum

benchmark established sales to impute

importer knowledge of dumping and

resultant injury. Also, because we have

determined that the reported quantity

and value of POI sales are unreliable, we

are also adversely inferring, as facts

available, a massive increase in imports

from Romp.

Continuation of Suspension of

Liquidation

In accordance with section 733(d)(1)

and 735(c)(4)(B) of the Act, we are

directing the Customs Service to

continue to suspend liquidation of all

entries of CR nails from Taiwan, that are

entered, or withdrawn from warehouse,

for consumption on or after May 12,

1997 (the date of publication of the

preliminary determination in the

Federal Register), except as noted

below. With respect to entries of CR

nails from Taiwan, manufactured and

exported by K. Ticho or Romp in

accordance with section 735(c) of the

Act, we are directing Customs Service to

continue suspension of liquidation on

all entries that are entered, or

withdrawn from warehouse, for

consumption on or after February 10,

1997, which is 90 days prior to the date

of publication of the preliminary

determination. The Customs Service

shall continue to require a cash deposit

or posting of a bond equal to the

estimated amount by which the normal

value exceeds the export price as shown

below.

In accordance with section 735(a)(4)

of the Act, because we have calculated

zero or de minimis rates for Unicatch,

and Lei Chu, we will instruct Customs

to terminate suspension of liquidation

of entries of CR nails manufactured by

these companies and to liquidate such

entries without regard to antidumping

duties. We note that pursuant to 19 CFR

353.21, these companies will be

excluded from any antidumping order

resulting from an affirmative finding of

material injury by the International

Trade Commission. These suspension of

liquidation instructions will remain in

effect until further notice.

The weighted-average dumping

margins are as follows:

Manufacturer/producer/exporterMargin

percentage

Critical circumstances

Unicatch ................ 0.00 No.

Lei Chu .................. 0.07 (De

Minimis)

No.

S&J ........................ 5.36 No.

Romp ..................... 40.28 Yes.

K. Ticho ................. 40.28 Yes.

All Others .............. 5.36 No.

Pursuant to section 733(d)(1)(A) and

section 735(c)(5) of the Act, the

Department has not included zero or de

minimis weighted-average dumping

margins, or margins determined entirely

under section 776 of the Act, in the

calculation of the ‘‘all others’’ rate.

ITC Notification

In accordance with section 735(d) of

the Act, we have notified the

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

Customs officials to assess antidumping

duties on all imports of the subject

merchandise entered for consumption

on or after the effective date of the

suspension of liquidation.

This determination is published

pursuant to section 735(d) of the Act.

Dated: September 24, 1997.

Robert S. LaRussa,

Assistant Secretary for Import

Administration.

[FR Doc. 97–26045 Filed 9–30–97; 8:45 am]

BILLING CODE 3510–DS–P

DEPARTMENT OF COMMERCE

International Trade Administration

[A–580–828]

Notice of Preliminary Determination of

Sales at Less Than Fair Value and

Postponement of Final Determination:

Static Random Access Memory

Semiconductors From the Republic of

Korea

AGENCY: Import Administration,

International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: October 1, 1997.

FOR FURTHER INFORMATION CONTACT:

Robert Blankenbaker or Rebecca

Woodings, Office of AD/CVD

Enforcement II, Import Administration,

International Trade Administration,

U.S. Department of Commerce, 14th

Street and Constitution Avenue, N.W.,

Washington, D.C. 20230; telephone:

(202) 482–0989 or (202) 482–0651.

The Applicable Statute

Unless otherwise indicated, all

citations to the Tariff Act of 1930, as