51420 Federal Register / Vol. 62, No. 190 / Wednesday, October 1, 1997 / Notices

DEPARTMENT OF COMMERCE

International Trade Administration

[A–580–827]

Notice of Final Determination of Sales

at Not Less Than Fair Value: Collated

Roofing Nails From Korea

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 (202) 482–1766, Group II, Office

Five, Antidumping Countervailing

Enforcement, Import Administration,

International Trade Administration,

U.S. Department of Commerce, 14th

Street and Constitution Avenue, N.W.,

Washington, D.C. 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 Rounds

Agreements Act (‘‘URAA’’). In addition,

unless otherwise indicated, all citations

to the Department regulations are to the

regulations, as codified at 19 CFR Part

353 (1997).

Final Determination

We determine that collated roofing

nails (‘‘CR nails’’) from Korea are not

being sold in the United States at less

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

section 735 of the Tariff Act of 1930, as

amended (‘‘the Act’’). The estimated

margins are shown in the ‘‘Termination

of Suspension of Liquidation’’ section of

this notice.

Case History

Since the preliminary determination

in this investigation (Notice of

Preliminary Determination and

Postponement of Final Determination:

Collated Roofing Nails from Korea, 62

FR 25895 (May 12, 1997)), the following

events have occurred:

In June 1996, we verified

questionnaire responses for Kabool

Metals (‘‘Kabool’’) and Senco Korea

Company, Ltd., Senco Products

Incorporated, and Je Il Steel Company,

Ltd. (collectively ‘‘SENCO’’). Paslode

Division of Illinois Tool Works Inc.

(‘‘Petitioner’’), respondents, and Stanley

Bostich (‘‘Stanley’’), an interested party

in this investigation, submitted case

briefs on August 7, 1997, and rebuttal

briefs on August 12, 1997. The

Department held a public hearing on

August 13, 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.

Fair Value Comparisons

To determine whether sales of the

subject merchandise by Kabool and

SENCO to the United States were made

at LTFV, we compared the Export Price

(‘‘EP’’) or Constructed Export Price

(‘‘CEP’’) to the Normal Value (‘‘NV’’), as

described in the EP, CEP, and NV

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.

Kabool reported that it had no viable

home market or third country sales

during the POI. Therefore, we made no

price-to-price comparisons for Kabool.

See the NV section of this notice, below,

for further discussion.

Level of Trade and CEP Offset

In the preliminary determination, the

Department determined that no

difference in level of trade (‘‘LOT’’)

existed between home market and U.S.

sales for either Kabool or SENCO. None

of the parties have contested that

determination. Accordingly, the

Department has not investigated further

into this issue. Therefore, we determine

that all of SENCO’s sales are made at a

single LOT and no LOT adjustment or

CEP offset is warranted.

As explained below, we based the NV

for Kabool entirely on constructed value

(‘‘CV’’). The CV LOT is that of the sales

from which we derive SG&A and profit.

We derived selling, general, and

administrative expenses (‘‘SG&A’’) and

profit from Kabool’s sales of all types of

nails in the home market. However, the

record contains insufficient information

to analyze the selling activities

associated with those sales. Therefore,

as facts available, we are drawing the

inference that there is no distinction

between the CV and U.S. LOTs. This

inference is consistent with the fact that

neither petitioner nor Kabool alleged a

difference in LOT. Therefore we

determine that a level of trade

adjustment is not warranted.

Export Price and Constructed Export

Price

Kabool

We used EP in accordance with

section 772(a) of the Act because the

subject merchandise was sold to

unaffiliated customers before

importation and the CEP methodology

was not indicated by the facts of record.

We calculated EP based on the same

methodology used in the preliminary

determination, with the following

exceptions: adjustments to brokerage

expenses; duty drawback; and other

corrections were made based on

verification findings. (For details, see

September 24, 1997, final determination

calculation memorandum for Kabool,

hereafter ‘‘Kabool calculation memo.’’)

SENCO

We used EP in accordance with

section 772(a) of the Act where the

subject merchandise was sold to

unaffiliated customers prior to

importation because the CEP

methodology was not indicated by the

facts of record. We used CEP in

accordance with section 772(b) of the

Act where the subject merchandise was

sold to unaffiliated customers after

importation. We calculated CEP and EP

based on the same methodology used in

the preliminary determination, with the

following exceptions: adjustments to

packing expenses; rebates; early

payment discounts; advertising

expenses; and inland freight were made

based on verification findings. For CEP

we also adjusted reported indirect

selling expenses and inventory carrying

costs to exclude Korean incurred

components and applied them to

transfer prices rather than starting

prices. Furthermore, we are no longer

using facts available for foreign inland

freight expenses.

In addition, verification revealed that

SENCO’s CEP sales listing included

non-subject merchandise that SENCO

had purchased from Taiwan and

Mexico. Although SENCO did not

record the country of origin for specific

sales, the Department was able to

determine for each model reported the

percentage of total CR nail purchases

accounted for by subject CR nails and to

adjust SENCO’s sales listing as

appropriate. For example: if for model

‘‘A’’ Senco Products Incorporated

(‘‘SPI’’) purchased 57 percent of its CR

nails from Korea, the Department
Federal Register / Vol. 62, No. 190 / Wednesday, October 1, 1997 / Notices 51421

multiplied the reported quantity by 57

percent for all sales of model ‘‘A’’

within SENCO’s CEP sales listing. (For

details, see September 24, 1997, final

determination calculation memorandum

for SENCO, hereafter ‘‘SENCO

calculation memo.’’)

Normal Value

In order to determine whether there

was 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.

SENCO

SENCO reported that it had no home

market sales during the POI. Therefore,

in accordance with section

773(a)(1)(B)(ii), we based NV for Senco

Korea on sales to its largest third

country market, Canada. We calculated

NV based on the same methodology

used in the preliminary determination,

with the following exceptions:

adjustments were made to packing

expenses; and domestic brokerage and

handling based on verification findings.

In addition, SENCO corrected omissions

in the third country sales listing used

for the preliminary determination. For

purposes of calculating the final margin,

we are no longer applying facts

available for the certain U.S. sales that

had no third country matches. (For

details, see SENCO calculation memo).

Kabool

Kabool reported that it had no viable

home or third country market during the

POI. Therefore, in accordance with

section 773(a)(4) of the Act, we based

NV for Kabool on CV. In accordance

with section 773(e)(1) of the Act, we

calculated CV based on the sum of the

costs of materials, labor, overhead,

SG&A, profit and U.S. packing costs. We

adjusted U.S. packing costs based on

our findings at verification.

Section 773(e)(2)(A) states that SG&A

and profit are to be based on the actual

amounts incurred in connection with

sales of a foreign like product. In the

event such data is not available, 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. The alternative methods are:

(1) calculate SG&A and profit incurred

by the producer based on the sales of

merchandise of the same general type as

the exports in question; (2) average

SG&A and profit of other producers of

the foreign like product for sales in the

home market; or (3) any other

reasonable method, capped by the

amount normally realized on sales in

the foreign country of the general

category of products. In addition, the

Statement of Administrative Action

(‘‘SAA’’) states that, if the Department

does not have the data to determine

amounts for profit under alternatives

one and two, or a profit cap under

alternative three, it still may apply

alternative three (without the cap) on

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

at 841.

In this case, we based Kabool’s SG&A

and profit on the actual amounts

incurred and realized in connection

with the production and of the same

general category of merchandise as

described in alternative one, above (see

Comment 1, below, for further

discussion).

Price to CV Comparisons

Where we compared CV to EP for

Kabool, we made circumstance of sale

adjustments pursuant to section

773(a)(6)(C)(iii) of the Act and 19 CFR

section 353.56(a)(2). We made

circumstance of sale adjustments, where

appropriate, for differences in bank

charges and credit expenses. We

adjusted bank charges based on findings

at verification. (For details, see Kabool

calculation memorandum).

Currency Conversion

We made currency conversions into

U.S. dollars based on the official

exchange rates in effect on the dates of

the U.S. sales as certified by the Federal

Reserve Bank.

Section 773A(a) of the Act directs the

Department to convert foreign

currencies based on the dollar exchange

rate in effect on the date of sale of the

subject merchandise, except if it is

established that a currency transaction

on forward markets is directly linked to

an export sale. When a company

demonstrates that a sale on forward

markets is directly linked to a particular

export sale in order to minimize its

exposure to exchange rate losses, the

Department will use the rate of

exchange in the forward currency sale

agreement.

Section 773A(a) also directs the

Department to use a daily exchange rate

in order to convert foreign currencies

into U.S. dollars unless the daily rate

involves a fluctuation. It is the

Department’s practice to find that a

fluctuation exists when the daily

exchange rate differs from the

benchmark rate by 2.25 percent. The

benchmark is defined as the moving

average of rates for the past 40 business

days. When we determine a fluctuation

to have existed, we substitute the

benchmark rate for the daily rate, in

accordance with established practice.

Further, section 773A(b) directs the

Department to allow a 60-day

adjustment period when a currency has

undergone a sustained movement. A

sustained movement has occurred when

the weekly average of actual daily rates

exceeds the weekly average of

benchmark rates by more than five

percent for eight consecutive weeks.

(For an explanation of this method, see

Policy Bulletin 96–1: 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 neither

the Korean Won nor the Canadian

Dollar underwent 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 this case, our final determination is

negative. Accordingly, a critical

circumstances determination is

irrelevant because there is no possibility

of retroactive suspension of liquidation.

Verification

As provided in section 782(i) of the

Act, we verified 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.
51422 Federal Register / Vol. 62, No. 190 / Wednesday, October 1, 1997 / Notices

Interested Party Comments

Comment 1: SG&A and Profit

Calculations

Petitioner opposes the Department’s

use of Kabool’s company-wide SG&A

and profit, arguing that the companywide data includes lower export prices,

which decreases the profit rate and,

consequently, artificially lowers

dumping margin. Instead, petitioner

contends that Kabool’s SG&A and profit

should be based only on sales of

merchandise that belong to the same

general category of ‘‘collated nails’’ and

not ‘‘all nails’’ (i.e., collated and noncollated). According to petitioner,

basing SG&A and profit on both collated

and non-collated nails is inappropriate

because collated nails require

significantly different capital

investment and are sold to different

markets.

Stanley agrees with petitioner,

arguing that the use of Kabool’s

company-wide SG&A and profit

artificially lowers the dumping margin.

Stanley also notes that, because of the

significant investment and overhead

costs attributable to CR nails, the same

general category of merchandise cannot

be broader than collated nails for

purposes of calculating profit. Further,

Stanley contends that Kabool has the

ability to separate the profit for collated

nails from the company-wide profit rate,

but simply chose not to do so.

Therefore, Stanley argues that the

Department should apply facts available

in calculating the dumping margin for

Kabool.

Kabool asserts that the Department

should use the profit rate based on

Kabool’s sales of collated and noncollated nails, which was provided in

its April 16, 1997, supplemental Section

D response, as corrected and verified by

the Department at verification. Kabool

argues that both collated and noncollated nails are processed in the same

facility using the same equipment and

the same production processes.

Moreover, Kabool notes that the

Department previously held that the

‘‘class or kind’’ of merchandise in a case

involving steel wire nails included all

steel wire nails—without distinguishing

between collated and non-collated nails.

Finally, Kabool argues that petitioner’s

claim that the Department should use a

profit rate specific to collated nails was

only raised in petitioner’s case brief

and, thus, too late in this proceeding to

request such information. Kabool also

notes that although the Department’s

questionnaire never requested

information regarding the profit on

home market sales of collated and noncollated nails, Kabool submitted

information on its profit for nail

products in the home market. Therefore,

Kabool contends that the Department

should reject petitioner’s and Stanley’s

arguments and determine that the same

general category of merchandise upon

which to base SG&A and profit is

collated and non-collated nails.

DOC Position

We agree with Kabool. Kabool does

not have a viable home market or third

country market for a foreign like

product. Section 773(e)(2)(B) of the Act

states that if actual SG&A and profit

data on home market sales of the subject

merchandise are not available, the

Department may use the SG&A and

profit rates incurred by the producer on

the sales of the same general category of

merchandise as the exports in question

(see Kabool’s NV section for a

discussion of the three alternative

methodologies ). In this instance, we

verified the aggregated SG&A and profit

data on Kabool’s sales in the home

market of both collated and non-collated

nails that it submitted. We determined

that collated and non-collated nails are

of the same general category of

merchandise. (Cf. Certain Steel Wire

Nails From Korea: Final Results of

Changed Circumstances Administrative

Review and Revocation of Antidumping

Duty Order, 50 FR 40045 (Oct. 1, 1985)

(all steel wire nails found to constitute

a single class or kind of merchandise).

Accordingly, consistent with section

773(e)(2)(B), the Department has used

the verified SG&A and profit rate

reported by Kabool on its sales of all

nails in the home market.

Comment 2: Facts Available

Petitioner contends that the

Department should use adverse facts

available for SENCO’s and Kabool’s

dumping margins. Petitioner argues that

the numerous verification corrections,

whether disclosed by the respondents or

found by Department officials, indicate

that both Kabool and SENCO have failed

to act to the best of their abilities.

Petitioner specifies four examples of

problems with SENCO’s responses: (1)

errors in the reporting of purchases of

CR nails from Je Il Steel Company Ltd.

(‘‘JISCO’’); (2) inability to explain

discrepancies in reported trucking

freight charges; (3) discrepancies noted

by the Department when reconciling

quantity and value figures to SPI’s

financial statements; and (4) failure to

include POI sales to Canada in the third

country database. Further, petitioner

argues that SENCO did not provide a

complete explanation of its relationship

with its distributor in Canada.

SENCO states that petitioner correctly

summarizes the instances in which

SENCO’s submissions, prior to the

preliminary determination, warranted

the use of facts available by the

Department. However, SENCO contends

that it has corrected all the deficiencies

in its June 2, 1997, response to the

Department’s second supplemental

antidumping questionnaire. Because the

corrected deficiencies have been

verified by the Department, SENCO

claims that the Department should use

the information provided by SENCO to

make the final determination in this

investigation.

Kabool contends that the petitioner

has not indicated which corrections and

errors actually merit the use of adverse

facts available. Kabool claims that the

corrections it has submitted do not

warrant wholesale rejection of its

responses. Kabool states it was

cooperative in providing information

throughout the investigation. Kabool

further states that petitioner has not

identified a single instance of a pattern

or systematic misstatement of fact in

Kabool’s submissions. Accordingly,

Kabool contends that there is no basis

for the Department to reject Kabool’s

submissions or to rely on adverse facts

available. Rather, Kabool claims that the

Department’s final determination in this

investigation should be based on the

information it has submitted.

DOC Position

We agree with both respondents. The

facts on the record of this investigation

demonstrate that the respondents

answered the Department’s

questionnaire to the best of their ability.

The corrections and errors found in the

responses to the Department’s

questionnaire and at verification do not

warrant the use of facts available. The

Department’s practice is to permit

respondents to provide minor

corrections to submitted information at

the commencement of verification. See,

e.g., Notice of Final Determination of

Sales at Less Than Fair Value:

Melamine Institutional Dinnerware

Products From Taiwan, 62 FR 1726,

1729 (January 13, 1997). Kabool and

SENCO provided the Department with

their corrections in a timely manner at

the beginning of their respective

verifications (cost verification report for

Kabool dated July 28, 1997; sales

verification reports for Kabool, Senco

Korea, and SPI dated July 7, 1997, and

July 30, 1997, July 29, 1997,

respectively). In sum, the corrections

submitted by Kabool and SENCO were

typical of the minor corrections

routinely accepted by the Department at

the commencement of verification.
Federal Register / Vol. 62, No. 190 / Wednesday, October 1, 1997 / Notices 51423

Accordingly, we determine that

resorting to facts available is

unwarranted in this particular case. We,

therefore, used all verified information

for both respondents in the final margin

calculations.

Comment 3: Plating Thickness

Petitioner argues that the plating

thicknesses of CR nails 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 the

Department. Therefore, petitioner

contends that the Department should

assume that respondents were aware of

the U.S. building codes and produced

CR nails that complied with the codes.

Petitioner urges the Department to use

the information contained in the

petition to calculate NV based on CR

nails that meet the U.S. building codes.

Kabool argues that petitioner’s

statements regarding plating thickness

are unsubstantiated and do not provide

any basis for rejecting or even

questioning Kabool’s submissions.

Kabool states that, because its NV was

based on CV, there is no question of

incorrect product comparison. Further,

Kabool contends that it reported actual

costs incurred in producing (and

plating) the CR nails exported to the

United States, thereby accounting for all

of its materials and fabrication costs

incurred in the process of plating CR

nails. Kabool also states that the costs

reported by Kabool were verified by the

Department. Accordingly, there is no

basis for rejecting Kabool’s submissions.

SENCO argues that there is no

indication in the petitioner’s case brief

as to where or when the issue of substandard plating thickness of CR nails

was previously raised on the record.

SENCO states that there is nothing on

the record to suggest that its CR nails do

not meet applicable standards.

Accordingly, SENCO contends that

there is no basis for rejecting SENCO’s

submissions.

DOC Position

We agree with Kabool that we have

captured all costs incurred in producing

CR nails. During the cost verification of

Kabool, we examined whether all

material costs (including plating costs)

associated with the subject merchandise

were included 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 report for

Kabool dated July 28, 1997). Thus, we

have verified all of Kabool’s material

costs. With respect to SENCO, we noted

no discrepancies regarding its reported

product characteristics. 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 4: Allocation Methods

Petitioner contends that respondents’

allocation methods were distortive

because they were based on incorrect

and unsupported expenses in the

following areas:

(1) Shipping Expenses. International

freight expenses were improperly based

on gross weight instead of volume.

Because CR nails weigh less per cubic

foot than bulk nails, respondents’

shipping expenses were thus

systematically under-reported.

(2) Production Expenses, Factory

Overhead, and Indirect Selling

Expenses. The allocation method for

production-related expenses, factory

overhead, and indirect selling expenses

should be based on weight that includes

scrap. However, the post-scrap

production expenses, such as packing,

should be allocated based on weight of

the CR nails without scrap.

(3) Duty drawback. The duty

drawback expense allocation method

should be based on the net weight of CR

nails.

(4) Actual Weighing. The Department

should rely on actual physical weighing

of the CR nails, not the reported gross

weight for all allocation methods based

on weight.

In rebuttal, Kabool argues that

petitioner’s assertions, which are

enunciated for the first time in

petitioner’s case brief, are untimely.

Moreover, Kabool emphasizes that the

allocation methods used are consistent

with the Department’s past practice and

the proposed modification would

produce insignificant changes.

Therefore, any modification of Kabool’s

current allocations is without merit.

Specifically, Kabool addresses the

following allocations:

First, Kabool argues that petitioner’s

assumption that Kabool’s shipments

regularly include both bulk nails and CR

nails is inaccurate. Kabool states that it

reported actual ocean freight costs for its

U.S. sales on a shipment-by-shipment

basis. Moreover, Kabool contends that

allocation of ocean freight costs based

on weight, rather than volume, is

consistent with the Department’s

normal practice. Moreover, an

alternative allocation based on volume

would not have been practical since the

documents do not state the volume of

each shipment. Thus, there is no basis

to revise the freight allocations.

Second, Kabool states that petitioner’s

proposed allocations for productionrelated expenses, factory overhead, and

indirect selling expenses are factually

incorrect and contrary to the law.

Kabool claims that most of these items

were not allocated based on weight. For

instance, Kabool’s indirect selling

expenses were allocated based on sales

value. Kabool asserts that the only

overhead allocation based on weight

was the fabrication costs for polishing

and coating. According to Kabool, any

new allocation would result in

insignificant changes.

Third, Kabool argues that it did

allocate duty drawback based on the net

weight of the CR nails.

Finally, Kabool states that it reported

its shipping expenses, productionrelated expenses, factory overhead,

indirect selling expenses, and duty

drawback in accordance with Korea’s

generally accepted accounting

principles (‘‘GAAP’’) and its own cost

accounting system. Kabool claims that

the statute requires the Department to

follow the methodologies used in the

company’s normal accounting system.

Moreover, Kabool argues that to allocate

expenses based on a weight that

includes scrap is nonsensical as this

would result in allocating a portion of

the product costs to scrap and not to the

finished product. Accordingly, there is

no reason to allocate these expenses in

the manner petitioner has proposed.

SENCO claims that petitioner failed to

adequately identify in its case brief what

type of shipping expenses should be

subject to a different allocation

methodology. SENCO also notes that its

methodologies for calculating freight

expenses were verified by the

Department and generally accepted as

appropriate. In addition, SENCO states

that it reported that it received no duty

drawback on the exportation of CR

nails.

DOC Position

The Department normally accepts the

company’s recording of costs, provided

that it reasonably reflects the cost of

producing subject merchandise and it is

in accordance with the home country’s

GAAP. See section 773(f)(1)(A); SAA at

834–35; Final Determination of Sales at

Less Than Fair Value: Large Newspaper

Printing Presses from Japan, 61 FR

38139 (July 23, 1996). We have

determined that the allocations of the

expenses, challenged by petitioner, are

reasonable for the reasons stated below.

(1) Shipping Expenses. We found no

discrepancies with respect to the

allocation methodology used by

respondents. (See Sales Verification

Reports for Kabool at 7 and Senco Korea
51424 Federal Register / Vol. 62, No. 190 / Wednesday, October 1, 1997 / Notices

at 10 dated July 7, 1997, and July 30,

1997, respectively.) Respondents’ cost

accounting systems, which are

consistent with Korean GAAP, only

record the weight of their shipments to

customers, not the volume. Thus, the

allocation method used was the most

specific method feasible. In addition, it

does not cause distortions or

inaccuracies in our calculations.

Therefore, the Department has not

changed the freight methodology for the

final determination.

(2) Production Related Expenses,

Factory Overhead, and Indirect Selling

Expenses. Allocating expenses over the

weight of the finished goods 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.

Further, most of Kabool’s items were

not allocated based on weight. Indirect

selling expenses were allocated based

on sales value. The only overhead

allocation based on weight was the

fabrication costs for polishing and

coating. Therefore, any new allocation

would have been insignificant. Thus, we

reject petitioner’s argument and will

continue to allocate expenses over the

total amount of finished product.

(3) Duty Drawback. As stated in the

sales verification reports dated July 9,

1997, and July 30, 1997, the Department

verified that Kabool allocated duty

drawback on the net weight of the CR

nails and that Senco Korea received no

duty drawback on the exportation of CR

nails.

(4) Physical Weights. At verification,

the Department examined the weights of

the products in order to confirm certain

allocation factors. We found no

discrepancies. We will use each

company’s verified weights in our

calculations.

Respondents reported all of the

aforementioned expenses in accordance

with Korea’s GAAP and their own cost

accounting systems (see Section

773(f)(1) of the Act). The methodologies

for calculating these expenses were

verified by the Department and accepted

as appropriate. Accordingly, the

Department did not change the

allocation methodologies for these

expenses. Further, as noted above,

because few factors were allocated on

the basis of weight any changes in the

allocations would not have a significant

impact.

Comment 5: Constructed Value

Calculation—Kabool

Petitioner argues that Kabool’s cost

methodology for CV was not appropriate

because the cost of materials obtained

from non-affiliated suppliers should be

determined through a price comparison

against independent Korean market

values to ensure that prices are

reasonable.

DOC Position

We disagree with petitioner. The

Department verified Kabool’s cost of

materials. Kabool’s material purchases

constituted arm’s-length transactions

and reported costs were tested against

Kabool’s cost accounting systems.

Because the prices that Kabool paid for

its materials reflect market values, it is

neither necessary nor appropriate for

the Department to benchmark Kabool’s

material costs against other

‘‘independent’’ market values.

Comment 6: Collapsing Senco Korea

and its Affiliate

Petitioner claims that Senco Korea

and its affiliate should be collapsed for

purposes of the final determination.

Petitioner states that in identifying the

potential for manipulation of price or

production the Department may

consider the following factors: (1) Level

of common ownership; (2) shared

management; (3) intertwined operations,

shared facilities and/or employees, and

significant transactions between

affiliated parties. Petitioner cites

Sulfanilic Acid From China: Preliminary

Results of Antidumping Duty

Administrative Review, 62 FR 25917

(May 12, 1997), in which the

Department found that two companies

were affiliated when substantial

retooling of either company would not

be necessary to restructure their

collective manufacturing priorities, and

that there was a potential for price

manipulation between the two

producers. Petitioner claims that the

same principle should be applied to

Senco Korea and its affiliates.

SENCO argues that petitioner fails to

identify Senco Korea’s alleged affiliate,

but states that SENCO assumes that

petitioner is referring to JISCO. SENCO

states that it has readily acknowledged

on the record that JISCO is affiliated

with Senco Korea. However, SENCO

contends that because the Department

verified that JISCO had no independent

sales of CR nails, Senco Korea has

reported all of its sales of CR nails.

DOC Position

The Department has treated Senco

Korea, JISCO, and SPI as affiliated

parties throughout the entire

investigation. The companies submitted

a consolidated questionnaire response

and verification revealed no material

errors or omissions that could not be

corrected. See section 771(33)(E) of the

Act and SENCO’s February 28, 1997,

submission of section ‘‘A’’ response to

the Department’s antidumping

questionnaire. Accordingly, the

Department has treated these companies

as one entity. Because we are dealing

with a single producer, the type of

collapsing analysis suggested by

petitioner is not relevant.

Comment 7: SENCO Indirect Selling

Expenses

Petitioner makes two points with

respect to SENCO’s reported indirect

selling expenses. First, petitioner argues

that certain U.S.-incurred indirect

selling expenses, such as salaries and

benefits for the heads of customer

service and distribution services, which

SENCO proposed to exclude from

reported indirect selling expenses,

should be deducted from CEP. However,

petitioner states that ‘‘the Department

should make an offsetting adjustment to

SG&A.’’

Second, petitioner contends that

SENCO inappropriately revised its

reporting of Korean-incurred indirect

selling expenses and inventory carrying

costs by allocating these items over

transfer price instead of gross price.

SENCO claims that it properly

reported and allocated its indirect

selling expenses. Prior to verification,

SENCO revised its indirect selling

expenses to excluding certain expenses

related to selling activities in the United

States. SENCO argues that this

correction was appropriate because

these expenses are incurred in Korea.

SENCO also asserts that SG&A expenses

should not have been included in the

indirect selling expenses incurred in

Korea and that the corrected amounts

were reviewed at verification.

SENCO contends that basing indirect

selling expenses on the transfer price,

rather than the resale price originally

reported, constituted an appropriate

correction that was explained to the

Department at verification.

DOC Position

With respect to petitioner’s first

argument, we agree. We have not

accepted SENCO’s proposal to exclude

from the indirect selling expenses

deducted from CEP certain selling

expenses incurred at SPI because those

expenses relate to economic activity in

the United States. Because Senco

Korea’s margin calculation is based on

a price-to-price comparison, there is no
Federal Register / Vol. 62, No. 190 / Wednesday, October 1, 1997 / Notices 51425

need to correct SG&A as that figure is

not used in the calculation.

With respect to the allocation of

Korea-incurred selling and inventory

carrying expenses, the Department does

not need to address this question

because these expenses have not been

determined to be associated with

economic activity in the United States

and thus are not being deducted from

CEP or otherwise taken into account.

Comment 8: Correct Reporting of

Affiliated Parties

Petitioner contends that sales made

between Senco Korea and its customer

in Canada do not appear to be at arm’s

length. Accordingly, petitioner urges the

Department to use facts available in its

final determination in this investigation.

Stanley claims that SENCO failed to

provide complete information regarding

its affiliations (or ‘‘relationships with its

customers’’). Stanley states that Senco

Korea’s distributor for CR nails in

Canada is affiliated with the corporate

entity that controls SPI. Because of the

lack of complete information with

respect to SENCO’s affiliates, Stanley

contends that the Department is not able

to determine whether Senco Korea’s

reported third country sales are arm’slength transactions. Accordingly,

Stanley contends, the Department is

required to use facts available for

making SENCO’s final determination in

this investigation.

SENCO argues that it has no affiliates

in Canada and that it properly excluded

from its sales listing CR nails sales made

by its unaffiliated distributor. According

to SENCO, its customer in Canada is an

unaffiliated distributor and the

independent relationship of many of

SPI’s various distributors was verified

by the Department.

DOC Position

We agree with SENCO. At

verification, we noted that SPI has a

large number of formal business

relationships with many distributors

and resellers throughout the world and

the majority of these relationships do

not meet the Department’s requirements

for affiliation (see SPI verification report

at 3, July 29, 1997). Specifically, there

was no indication noted by the

Department that SPI was affiliated with

its customer in Canada. Accordingly,

there is no basis to conclude that the

third country sales listing is flawed, and

use of facts available for the

Department’s determination is not

warranted. Moreover, we note that

petitioner and Stanley first raised this

concern in their case briefs—far too late

in this proceeding for a detailed analysis

of potential affiliation between a

supplier and its customer.

Comment 9: Critical Circumstances

Petitioner alleges that the petition

provided a reasonable basis to suspect

that critical circumstances exist with

respect to imports of subject

merchandise. In particular, petitioner

maintains that the revoked antidumping

order on steel wire nails from Korea,

Certain Steel Wire Nails From Korea, 50

FR 40045 (Oct. 1, 1985), provides a

sufficient basis to find a history of

dumping (a requirement of section

733(e)(1)(i) of the Act). Accordingly,

petitioner believes that there is a

reasonable basis to suspect that critical

circumstances exist with respect to

imports of subject merchandise.

Kabool contends the Department

should affirm its preliminary

determination that critical

circumstances do not exist in this case

for Kabool. Kabool asserts that

petitioner neglected to mention three

facts: (1) The steel wire nails final

determination cited by petitioner was

published in 1980, which is more than

15 years ago; (2) the same steel wire

nails antidumping order was revoked in

October 1985; (3) Kabool was not

investigated in that proceeding, and it

was never found to be dumping steel

wire nails or any other product. For the

above reasons, Kabool claims that

petitioner’s argument should be

rejected.

SENCO states that nothing has

changed since the preliminary

determination to alter the Department’s

conclusion that the first prong of section

733(e)(1) pertaining to history of

dumping, or knowledge on the part of

importers, has not been met.

Furthermore, SENCO submits that the

second prong of that provision cannot

be satisfied because the change in the

quantity of shipments of CR nails by

Senco Korea to the United States from

the post-petition period over the prepetition period does not indicate that

imports were massive. Because neither

prong of section 733(e)(1) has been

satisfied, SENCO argues that there is no

basis to find that critical circumstances

exist.

DOC Position

Because our final determination is

negative, it is not necessary to address

whether critical circumstances exist as

there is no possibility of retroactive

suspension of liquidation.

Comment 10: Unverified CEP Expenses

SENCO claims that the Department

should accept its reported data for the

following expenses: U.S. inland freight,

U.S. customs duties, credit expenses,

advertising expenses, and inventory

carrying costs incurred in the United

States. Although the Department was

unable to verify these expenses, SENCO

notes that the verification process was

generally complete. SENCO contends it

demonstrated a willingness to cooperate

with the Department by responding to

the antidumping questionnaires in a

timely manner. Accordingly, the

application of adverse facts available

would be inappropriate.

Petitioner contends that the

Department’s inability to verify the CEP

expenses was not minor. Petitioner

argues that the treatment of these

expenses directly affects the

Department’s calculation methodology

for the final determination. Petitioner

claims that the Department is required

to verify all information relied upon in

its final determination. Accordingly, for

these unverified expenses, petitioner

urges the Department to use facts

available.

DOC Position

Due to limitations of time and

resources, the Department is rarely able

to verify every single piece of data

submitted in a response. See Monsanto

Co. v. United States 698 F. Supp. 275,

281 (1988) (‘‘Verification is a spot check

and is not intended to be an exhaustive

examination of the respondent’s

business.’’) Verification is an

opportunity for the Department to test

the accounting and business systems of

the respondent to a level of detail that

gives the Department a reasonable

indication as to the integrity of the

response. See Micron Technology, Inc.

v. United States, 117 F.3d 1386, 1396

(1997) (ITA performs selective

verification of reported data until it is

satisfied that the data supplied by the

foreign respondent is accurate). For the

information that was verified, the

Department found no significant

problems. While we would have

preferred to have an opportunity to

verify these expenses, based on the

results of verification, we find SENCO’s

data to be reliable overall. Moreover, we

find that the level of SENCO’s

cooperation with our requests for

information would not warrant an

adverse inference. Nor have we found

any reason based on other information

on the record to conclude that the

information in question is erroneous.

Thus, even though not specifically

verified, SENCO’s reported expense

information is the most appropriate

facts available to the Department for the

calculation of SENCO’s margin.

Accordingly, the Department has used
51426 Federal Register / Vol. 62, No. 190 / Wednesday, October 1, 1997 / Notices

SPI’s CEP expenses for purposes of the

final determination.

Comment 11: Treatment of Relocation

Costs for CV

Kabool states that it made a

substantial investment in relocating its

production facilities. Kabool states that

production levels were limited by

technical factors and contends that

production during and immediately

after relocation constitutes a start-up

operation under the statute. Kabool

contends that the Department should

reduce CV to account for this relocation,

either by granting a start-up adjustment

or by determining that these costs are

extraordinary.

Kabool contends that the plant

relocation was clearly unusual in nature

and infrequent in occurrence, thus

satisfying the criteria for an expense to

be considered extraordinary.

Petitioner contends that Kabool’s

plant relocation does not require special

treatment by the Department. Petitioner

further states that Kabool did not supply

the necessary data to effect the

requested adjustment. Furthermore,

Kabool did not establish (as the statute

requires) that the startup period

extended ‘‘beyond the POI.’’

DOC Position

We agree with petitioner that it is not

appropriate to make an adjustment,

under the startup provision of section

773(f)(1)(C)(ii) of the Act, to account for

the costs incurred by Kabool during the

relocation of its production facility. To

qualify for an adjustment for startup

operations, the producer must show that

(1) it is using new production facilities

or producing a new product that

requires substantial additional

investment, and (2) the production

levels are limited by technical factors

associated with the initial phase of

commercial production. See

773(f)(1)(C)(ii). The SAA explains that

‘‘new production facilities’’ means

substantially complete retooling of an

existing plant that involves a

replacement or rebuilding of nearly all

production machinery. See SAA at 836.

A product is ‘‘new,’’ according to the

SAA, if it requires ‘‘substantial

additional investment,’’ or if the

producer incurs substantial additional

cost because of revamping or

redesigning its existing product. Id.

In this case, Kabool reported in its

April 16, 1997, supplemental section D

response that all of the production

machinery used in Kabool’s new plant

was transferred from its old plant.

Kabool thus did not replace or rebuild

nearly all of its machinery, but merely

relocated its production facility.

Kabool’s technology for producing CR

nails has not changed and there is

nothing on the record to indicate that a

new product is being produced in the

new facility. Because Kabool merely

relocated its production facility without

replacing or rebuilding nearly all of its

machinery, and the record evidence

does not show that the relocation

involved a substantial investment in

connection with the revamping or

redesigning of CR nails, the first

condition for the start up adjustment is

not satisfied.

Because Kabool does not meet the

requirements outlined in the first prong

of the start-up provision, the

Department is not required to address

whether or not Kabool’s production

levels were limited by technical factors

associated with the initial phase of

commercial production during the

relocation of its facilities. In sum, the

Department has determined to reject

Kabool’s claim for startup adjustment

because it did not demonstrate that its

production facility was new, or that it

would involve a production of a new

product under section 773(f)(1)(C)(ii) of

the Act.

As in the preliminary determination,

Department did not make an adjustment

for Kabool’s relocation costs based on

the Department’s practice of adjusting

CV for extraordinary costs. The

Department maintains that additional

expenses stemming from Kabool’s

relocation do not constitute, in the

words of the SAA at page 832, ‘‘an

unforeseen disruption in production,’’

which is beyond the management’s

control.’’ (See also Final Determination

of Sales at Less Than Fair Value: Large

Newspaper Printing Presses, from Japan,

61 FR 38139, 38153, July 23, 1996).

Accordingly, because the relocation was

not an unforseen event, the Department

will include all the expenses associated

with the relocation of Kabool’s nail

production facilities for purposes of

calculating CV.

Comment 12: Indirect Selling

Expenses—Kabool

Kabool claims that the revised homemarket indirect selling expense

calculation set forth in the sales

verification report incorrectly allocates

all of Kabool’s home-market indirect

selling expenses (which related to sales

of all of its products) over the sales of

CR nails sales instead of company wide

sales. Accordingly, the Department

should make the correction of the

calculation error.

Petitioner states that the Department

should include indirect selling expenses

for the same general category of

products (i.e. collated nails) as the

Department should select for SG&A and

profit. Petitioner argues that by

including indirect selling expenses

allocated for sales in the same general

category, the Department will be making

the most precise calculation of CV.

DOC Position

We agree with Kabool. The

Department made a calculation error in

the recalculation of the home-market

indirect selling expense (see the

Department’s July 28, 1997, cost

verification report, page 13).

Accordingly, the Department has

corrected the calculation as illustrated

on page 15 of Kabool’s August 6, 1997,

case brief. For reasons outlined in our

response to comment 1 we are

calculating indirect selling expenses

based on sales of the same general

category of nails as provided by Kabool.

Termination of Suspension of

Liquidation

In accordance with section 735(c)(2)

of the Act, we are directing the Customs

Service to terminate suspension of

liquidation and release any bond or

other security and refund any cash

deposit.

The weighted-average dumping

margins are as follows:

Manufacturer/Producer/Exporter Margin percentage

Senco ........................................ 0

Kabool ....................................... 0

Because our determination is

negative, the investigation will be

terminated upon publication of this

notice and no order will be issued.

International Trade Commission

Notification

In accordance with section 735(d) of

the Act, we have notified the

International Trade Commission of our

determination.

This determination is published

pursuant to section 735(d) of the Act.

Dated: September 24, 1997.

Robert LaRussa,

Assistant Secretary for Import

Administration.

[FR Doc. 97–26047 Filed 9–30–97; 8:45 am]

BILLING CODE 3510–DS–P