[Federal Register Volume 62, Number 8 (Monday, January 13, 1997)]
[Notices]
[Pages 1719-1726]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-753]


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DEPARTMENT OF COMMERCE
[A-560-801]


Notice of Final Determination of Sales at Less Than Fair Value: 
Melamine Institutional Dinnerware Products From Indonesia

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

EFFECTIVE DATE: January 13, 1997.

FOR FURTHER INFORMATION CONTACT: Everett Kelly or David J. Goldberger, 
Import Administration, International Trade Administration, U.S. 
Department of Commerce, 14th Street and Constitution Avenue, N.W., 
Washington, D.C. 20230; telephone: (202) 482-4194 or (202) 482-4136, 
respectively.

The Applicable Statute

    Unless otherwise indicated, all citations to the Tariff Act of 
1930, as amended (``the Act'') are references to the provisions 
effective January 1, 1995, the effective date of the amendments made to 
the Act by the Uruguay Rounds Agreements Act (``URAA'').

Final Determination

    We determine that melamine institutional dinnerware products 
(``MIDPs'') from Indonesia are being, or are likely to be, sold in the 
United States at less than fair value (``LTFV''), as provided in 
section 735 of the Act.

Case History

    Since the preliminary determination in this investigation (Notice 
of Preliminary Determination and Postponement of Final Determination: 
Melamine Institutional Dinnerware Products from Indonesia (61 FR 43333, 
August 22, 1996), the following events have occurred:
    In September 1996, we verified the questionnaire responses of P. T. 
Multi Raya Indah Abadi (Multiraya). On November 22, 1996, the 
Department requested Multiraya to submit new computer tapes to include 
data corrections identified through verification. This information was 
submitted on December 5, 1996.
    Petitioner, the American Melamine Institutional Tableware 
Association (``AMITA'), and Multiraya submitted case briefs on November 
26, 1996, and rebuttal briefs on December 3, 1996. The Department held 
a public hearing for this investigation on December 5, 1996.

Scope of Investigation

    This investigation covers all items of dinnerware (e.g., plates, 
cups, saucers, bowls, creamers, gravy boats, serving dishes, platters, 
and trays) that contain at least 50 percent melamine by weight and have 
a minimum wall thickness of 0.08 inch. This merchandise is classifiable 
under subheadings 3924.10.20, 3924.10.30, and 3924.10.50 of the 
Harmonized Tariff Schedule of the United States (``HTSUS'). Excluded 
from the scope of investigation are flatware products (e.g., knives, 
forks, and spoons).
    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 investigation (``POI'') is January 1, 1995, through 
December 31, 1995.

Fair Value Comparisons

A. P.T. Mayer Crocodile

    We did not receive a response to our questionnaire from P.T. Mayer 
Crocodile, an exporter of the subject merchandise during the POI. 
Because P.T. Mayer Crocodile failed to submit information that the 
Department specifically requested, we must base our determination for 
that company on the facts available in accordance with section 776 of 
the Act. 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. Because P.T. 
Mayer Crocodile has failed to respond, the Department has determined 
that, in selecting from among the facts otherwise available, an adverse 
inference is warranted.
    Section 776(c) of the Act provides that where the Department 
selects from among the facts otherwise available and relies on 
``secondary information,'' the Department shall, to the extent 
practicable, corroborate that information from independent sources 
reasonably at the Department's disposal. See The

[[Page 1720]]

Statement of Administrative Action accompanying the URAA, H.R. Doc. No. 
316, 103d Cong., 2d Sess at 870 (1994) (``SAA'').
    In this proceeding, we considered the petition as the most 
appropriate information on the record to form the basis for a dumping 
calculation for this uncooperative respondent. In accordance with 
section 776(c) of the Act, we attempted to corroborate the data 
contained in the petition. Specifically, the petitioner based both the 
export price and normal value in the petition on Multiraya's ex-factory 
prices for nine-inch plates obtained from a market research report. We 
compared the petitioner's submitted price data to actual prices 
reported in Multiraya's questionnaire response for products of the same 
size and shape. We found the Multiraya normal value data from the 
market research report appears to be consistent with the normal value 
data reported in Multiraya's questionnaire response. Thus, we consider 
the normal value data in the petition to have been corroborated and 
will therefore utilize such data in our margin calculation for P.T. 
Mayer Crocodile.
    We did not, however, consider the export price from the petition to 
be corroborated because the Multiraya export price data in the market 
research report was substantially different from the data reported by 
Multiraya in its questionnaire response which was confirmed through 
verification. Therefore, we have not used the export price in the 
petition. In selecting from among the facts otherwise available with 
regard to export price, we have used the lowest ex-factory export price 
reported by Multiraya for a nine-inch plate. We found this information 
to be sufficiently adverse to effectuate the purpose of the statute, 
and we also note that the number of EP sales to select from was small. 
We compared that export price to the ex-factory normal value used in 
the petition in order to calculate a margin for P. T. Mayer Crocodile.

B. Multiraya

    To determine whether Multiraya's sales of the subject merchandise 
to the United States were made at less than fair value, we compared the 
Export Price (``EP'') to the Normal Value (``NV''), as described in the 
``Export Price'' and ``Normal Value'' sections of this notice. As set 
forth in section 773(a)(1)(B)(i) of the Act, we calculated NV based on 
sales at the same level of trade as the U.S. sale. In accordance with 
section 777A(d)(1)(A)(i), we compared the weighted-average EP to the 
weighted-average NV during the POI. In determining averaging groups for 
comparison purposes, we considered the appropriateness of such factors 
as physical characteristics.
(i) Physical Characteristics
    In accordance with section 771(16) of the Act, we considered all 
products covered by the description in the ``Scope of Investigation'' 
section of this notice, produced in Indonesia by Multiraya and sold in 
the home market during the POI, to be foreign like products for 
purposes of determining appropriate product comparisons to U.S. sales. 
Where there were no sales of identical merchandise in the home market 
to compare to U.S. sales, we compared U.S. sales to the next most 
similar foreign like product on the basis of the characteristics listed 
in the Department's antidumping questionnaire. In making the product 
comparisons, we relied on the following criteria (listed in order of 
preference): shape type (i.e., flat, e.g., plates, trays, saucers, 
etc.; or container, e.g., bowls, cups, etc.), specific shape, diameter 
(where applicable), length (where applicable), capacity (where 
applicable), thickness, design (i.e., whether or not a design is 
stamped into the piece), and glazing (i.e., where a design is present, 
whether or not it is also glazed).
(ii) Level of Trade
    Multiraya did not claim a difference in level of trade. Our 
findings at verification confirmed that Multiraya performed essentially 
the same selling activities for each reported home market and U.S. 
marketing stage. Accordingly, we find that no level of trade 
differences exists between any sales in either the home market or U.S. 
market. Therefore, all price comparisons are at the same level of trade 
and an adjustment pursuant to section 773(a)(7)(A) is unwarranted.

Export Price

    In accordance with subsections 772(a) and (c) of the Act, we 
calculated EP for Multiraya where the subject merchandise was sold 
directly to the first unaffiliated purchaser in the United States prior 
to importation and use of constructed export price (``CEP'') was not 
otherwise warranted based on the facts of record (See Comment 17).

Normal Value

Cost of Production Analysis

    As discussed in the preliminary determination, based on the 
petitioner's allegations, the Department found reasonable grounds to 
believe or suspect that Multiraya made sales in the home market at 
prices below the cost of producing the subject merchandise. As a 
result, the Department initiated an investigation to determine whether 
Multiraya made home market sales during the POI at prices below the 
cost of production (COP) within the meaning of section 773(b) of the 
Act.
    Before making any fair value comparisons, we conducted the COP 
analysis described below.
A. Calculation of COP
    We calculated the COP based on the sum of Multiraya's reported cost 
of materials and fabrication for the foreign like product, plus amounts 
for home market selling, general and administrative expenses (``SG&A'') 
and packing costs in accordance with section 773(b)(3) of the Act.
    We adjusted Multiraya's raw material costs to include the change in 
the work-in-process inventory (see Comment 4).
B. Test of Home Market Prices
    We used Multiraya's adjusted weighted-average COP for the POI. We 
compared the weighted-average COP figures to home market sales of the 
foreign like product as required under section 773(b) of the Act, in 
order to determine whether these sales had been made at below-cost 
prices within an extended period of time, in substantial quantities, 
and not at prices which permit recovery of all costs within a 
reasonable period of time. On a product-specific basis, we compared the 
COP to the home market prices, less any applicable movement charges and 
direct selling expenses. As in our preliminary determination, we did 
not deduct indirect selling expenses from the home market price because 
these expenses were included in the G&A portion of COP. We recalculated 
the total material costs by including work-in-process (see Comment 4).
C. Results of COP Test
    Pursuant to section 773(b)(2)(C) of the Act, where less than 20 
percent of a respondent's home market sales for a model are at prices 
less than the COP, we do not disregard any below-cost sales of that 
model because we determine that the below-cost sales were not made 
within an extended period of time in ``substantial quantities.'' Where 
20 percent or more of a respondent's home market sales of a given model 
during the POI are at prices less than COP, we disregard the below-cost 
sales because they are (1) made within an extended period of time in 
substantial quantities in accordance with sections 773(b)(2) (B) and 
(C) of the Act, and (2) based on comparisons of prices to weighted-
average COPs for the POI,

[[Page 1721]]

were at prices which would not permit the recovery of all costs within 
a reasonable period of time in accordance with section
    773(b)(2)(D) of the Act. The results of our cost test for Multiraya 
indicated that for certain home market models less than 20 percent of 
the sales of the model were at prices below COP. We therefore retained 
all sales of the model in our analysis and used them as the basis for 
determining NV. Our cost test for Multiraya also indicated that within 
an extended period of time (one year, in accordance with section 
773(b)(2)(B) of the Act), for certain home market models more than 20 
percent of the home market sales were sold at prices below COP. In 
accordance with section 773(b)(1) of the Act, we therefore excluded 
these below-cost sales from our analysis and used the remaining above-
cost sales as the basis for determining NV.
D. Calculation of Constructed Value (CV)
    In accordance with section 773(e) of the Act, we calculated CV 
based on the sum of Multiraya's cost of materials, fabrication, 
selling, general, and administrative expenses (``SG&A''), and profit, 
plus U.S. packing costs as reported in the U.S. sales database. In 
accordance with section 773(e)(2)(A) of the Act, we based SG&A and 
profit on the amounts incurred and realized by the respondent in 
connection with the production and sale of the foreign like product in 
the ordinary course of trade, for consumption in the foreign country. 
We calculated Multiraya's CV based on the methodology described above 
for the calculation of COP.

Price to Price Comparisons

    Where we compared CV to export prices, we deducted from CV the 
weighted-average home market direct selling expenses and added the 
weighted-average U.S. product-specific direct selling expenses (where 
appropriate) in accordance with section 773(a)(8) of the Act. We 
calculated price-based normal value using the same methodology used in 
the preliminary determination, with the following exceptions: (1) We 
disallowed Multiraya's warranty claim as a circumstance of sale 
warranty claim adjustment (see, Comment 8) and 2) We recalculated home 
market credit to reflect verification findings (see Comment 7).

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 Indonesian 
rupiah did not undergo a sustained movement, nor were there currency 
fluctuations during the POI.

Verification

    As provided in section 782(i) of the Act, we verified the 
information submitted by Multiraya 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: Scope of Investigation

    Respondents argue that the scope of this investigation should be 
revised to exclude melamine dinnerware that exceeds a thickness of 0.08 
inch and is intended for retail markets when such products are 
accompanied by appropriate certifications presented upon importation to 
the United States.
    Petitioner objects to respondents'' scope revision proposal 
because, it believes, it has no legal or factual basis and would result 
in an order that would be very difficult to administer. Petitioner 
further contends that antidumping orders based on importer 
certifications of use, such as the proposal advocated by respondents, 
are difficult to administer and should be avoided where possible. 
Petitioner argues that if respondents want to produce merchandise for 
the retail market that presents no scope issue, respondents can produce 
merchandise of a thinner wall thickness that falls outside of the 
scope.
DOC Position
    We agree with petitioner. Petitioner has specifically identified 
which merchandise is to be covered by this proceeding, and the scope 
reflects petitioner's definition. As we stated in Final Determination 
of Sales at Less Than Fair Value: Carbon and Alloy Steel Wire Rod from 
Brazil (59 FR 5984, February 9, 1994), [p]etitioners'' scope definition 
is afforded great weight because petitioners can best determine from 
what products they require relief. The Department generally does not 
alter the petitioner's scope definition except to clarify ambiguities 
in the language or address administrability problems. These 
circumstances are not present here.
    The petitioner has used a thickness of more than 0.08 inch, not end 
use, to define melamine ``institutional'' dinnerware. The physical 
description in the petition is clear, administrable and not overly 
broad. Thus, we agree with petitioner that there is no basis for 
redefining the scope based on intended channel of distribution or end 
use, as respondents propose.

Comment 2: Alleged Underreporting of U.S. Sales

    Petitioner states that information on Multiraya's U.S. invoices 
reviewed at verification demonstrates that Multiraya seriously 
underreported its U.S. sales because the data taken from the invoices 
establishes that the product weight reported by Multiraya is less than 
that found on the actual invoices. Further, petitioner claims Multiraya 
compounded its underreporting of U.S sales by not providing the 
Department with an explanation during the verification to validate the 
weight discrepancy. Therefore, petitioner asserts the Department should 
rely on adverse facts available for the final margin calculation for 
Multiraya. However, if the Department were to determine that facts 
available should not be applied to Multiraya, petitioner suggests that 
at a minimum, the Department should apply partial facts available and 
treat the unreported quantities as ``free merchandise.''
    Multiraya argues that it did not underreport any U.S. sales, and 
that petitioner's arguments claiming Multiraya has underreported its 
U.S. sales is based on petitioner's misunderstanding of the information 
on the record. Multiraya adds that the

[[Page 1722]]

Department verified that it did not ship anything to the U.S. other 
than the subject merchandise in the quantities listed. Therefore, 
Multiraya argues that petitioner's claim that it has ``ghost'' or 
``free'' merchandise is false. Finally, Multiraya argues that the 
differences in weight do not constitute underreporting of its sales to 
the United States.
DOC Position
    We verified that Multiraya sold subject merchandise by the number 
of pieces and not by weight, and that Multiraya keeps track of its 
sales by the number of pieces sold. Multiraya's sales reporting was 
based on the quantity sold, not on the weight of the merchandise. For 
purposes of responding to the Department's questionnaire, Multiraya 
reported actual weights, which we verified. Thus, the discrepancies in 
the weight actually reported to the Department and the ``standard'' 
weights which were listed on the U.S. invoices for purposes of duty 
drawback payments to the Indonesian government are not evidence of any 
misrepresentation on Multiraya's part. Therefore, we disagree with 
petitioner's allegation that, since the standard weight and the actual 
weight differed, Multiraya actually shipped additional ``free 
merchandise'' to the U.S. Accordingly, we have used Multiraya's 
response for our final determination.

Comment 3: Product Characteristics

    Petitioner states that, based on the Department's verification of 
Multiraya's sales data, Multiraya's reporting of product 
characteristics (i.e., shape, capacity, weight and thickness) is 
replete with errors. As a result, petitioner argues that the errors 
make it impossible for the Department to accurately use home market 
sales data to identify the proper comparisons to U.S. sales. Therefore, 
petitioner claims that the Department should rely on the facts 
available for Multiraya's final margin calculation.
    Multiraya argues that, although certain product characteristics 
were misreported for some products (i.e., capacity and thickness), the 
Department did not find any discrepancies in more determinative 
characteristics such as length, width, and diameter. Multiraya argues 
that such misreporting will have an insignificant effect on model 
matching.
DOC Position
    We agree with petitioner's allegation that Multiraya misreported 
certain product characteristics such as the weight and thickness of the 
product. However, we have concluded that these errors are minor with 
regard to both the product matching criteria and the extent of the 
incorrect reporting. We have corrected those errors accordingly. We 
determined that Multiraya misreported the thickness of some of its 
products because of the point of measurement used for reporting to the 
Department. We did not specify in the Department's questionnaire where 
the appropriate point of measurement would be, hence there were 
differences between the Department's measurement at verification and 
Multiraya's measurement. We have also determined that the more 
determinative product characteristics were, in fact, reported correctly 
(see Memorandum from MIDP Team to Louis Apple, Acting Office Director, 
August 12, 1996). Therefore, we have rejected petitioner's argument 
that facts available are required as a result of the differences in 
Multiraya product matching characteristics.

Comment 4: Work-in-Process Inventory (WIP)

    Petitioner claims that Multiraya underreported its material costs 
by excluding the costs of WIP inventory and points to Multiraya's own 
submission indicating that WIP decreased from the beginning of the year 
to year-end. Petitioner states that Multiraya reported only those 
inputs withdrawn from raw material inventory during the POI, but that 
the change in Multiraya's WIP inventory should also have been included 
as part of the material costs. Since opening WIP is much greater than 
closing WIP, petitioner claims that Multiraya's exclusion of the change 
in WIP significantly distorted the costs. As a result of Multiraya's 
deficient response, and the inability of the Department to verify the 
data completely, petitioner claims that the Department should apply 
total facts available for Multiraya's final margin calculation.
    Multiraya argues that the Department performed numerous tests on 
its production costs at verification and found no information to 
indicate that Multiraya had under-reported its costs due to changes in 
WIP or any other factor. Moreover, Multiraya argues that WIP is 
irrelevant unless raw material costs fluctuate during the year, and the 
Department verified that Multiraya's cost of raw materials did not 
fluctuate during that time period.
DOC Position
    We agree with petitioner that Multiraya's reported production costs 
are understated; however, we disagree with petitioner's suggestion that 
the remedy for this error is to apply total facts available. Multiraya 
reported its per-unit costs based on the cost incurred during the 
period (without considering the WIP balances), allocated over the total 
amount of finished goods produced. Because Multiraya failed to include 
the change in WIP (which represents the costs of semi-finished goods 
that were completed during the period) the reported costs are 
understated. We have corrected for this understatement by allocating 
the net change in WIP balances to all of the goods produced. This 
allocation was accomplished by determining the percentage relationship 
between the change in WIP and the reported material cost.
    Further, we disagree with Multiraya's assertion that the change in 
WIP is only significant when the price of raw materials is fluctuating, 
because the change in WIP represents costs incurred to produce the 
units recorded as finished goods in this period, thus the amount can be 
significant.

Comment 5: Transaction and Product-Specific Yields

    Petitioner contends that verification revealed that Multiraya could 
have calculated product-specific yields for home market sales based on 
stock cards and sales invoices. By Multiraya maintaining its claim that 
it could not calculate more specific yields and thus using an average 
yield, it has in effect minimized its dumping margin. Consequently, 
petitioner argues that this is another reason for the Department should 
apply total facts available.
    Multiraya states that it did not maintain production records in its 
normal course of business that would have enabled it to calculate 
product-specific yields. Multiraya contends that petitioner has 
misunderstood Multiraya's accounting system. Multiraya explains that, 
because it tracks its consumption of imported melamine powder for 
purposes of supporting duty drawback claims with the Indonesian 
government, it can link the purchase of imported melamine powder 
specifically to the production of melamine dinnerware sold for export. 
In so far as, Multiraya does not receive a duty drawback refund for 
domestic melamine, it had no reason to track yields for products that 
use domestic melamine powder. Thus, Multiraya states that it cannot 
link the purchase of domestic melamine powder to specific production 
and sale of melamine dinnerware products. As a result, Multiraya 
asserts that would be unable to calculate product-specific or batch-
specific production yields for products

[[Page 1723]]

manufactured from domestic melamine powder. Accordingly, Multiraya 
contends that it is unfair for the Department to apply facts available 
for failure to provide information on product-specific yields that 
cannot be derived from its records.
DOC Position
    The Department's preference is to use product-specific cost data, 
which includes product specific yield results, for calculating COP and 
CV. The Department uses the most specific and reasonable allocation 
methodology possible given the available data (see Final Determination 
at Sales Less Than Fair Value: Welded Stainless Steel Pipe From 
Malaysia, 59 FR 4023, 4027, January 28, 1994). In this instance, 
Multiraya reported its costs based on overall yield information because 
it claimed that its records do not permit it to calculate cost data on 
a more specific basis. Our verification revealed nothing to contradict 
Multiraya's claim that it does not maintain product-specific yield data 
in its normal course of business. The accounting records petitioner 
identified could arguably be used to calculate an average yield for 
each specific order. Nevertheless, compiling and aggregating this data 
would not provide product-specific yield information as petitioner 
claims. Instead, this calculation would result in average yield data, 
which would be no more specific than the information provided by 
Multiraya. Accordingly, we have accepted Multiraya's average yield rate 
calculation which we tested at verification.

Comment 6: Land Rental

    Petitioner claims that Multiraya failed to disclose until 
verification that it leased land from an affiliated party for use in 
its dinnerware business, and that Multiraya was unable to demonstrate 
the arm's length pricing of the land rent. Citing Indonesian financial 
statistics for support its contention that the rent expense is too low, 
petitioner argues that this lease amount must be adjusted to reflect 
the true cost of Multiraya's lease and cites
    Multiraya argues that rental payments as affiliated party 
transactions are merely another form of capital contribution by 
shareholders and the Department's practice is to ignore such 
intracompany transfers, regardless of whether they relate to sales or 
production. Multiraya explains that the land was owned by a company 
official or ``shareholder'' who contributed the land to Multiraya for a 
fixed payment. Thus, according to Multiraya, the rent the shareholder 
receives is equivalent to a dividend or profit sharing amount.
DOC Position
    We verified that Multiraya reported the land rental expense that 
was reflected in its financial statements. We analyzed the amount of 
the recorded expense in relation to the total costs and the overhead 
expense and noted that the reported amount is immaterial. Further the 
effect of adjusting the recorded amount by the inflation rate 
experienced from 1991 until the POI, as requested by the petitioner, is 
also immaterial as petitioner has not shown any substantial link 
between inflation in Indonesia and the land rental costs. Accordingly, 
we have accepted the land rental amount as the figure recorded in the 
financial statement.

Comment 7: Home Market Credit Expenses

    Petitioner states that Multiraya overstated its home market credit 
expenses for most reported transactions. Petitioner argues that the 
Department should either recalculate or disallow entirely the claimed 
credit expense.
    Multiraya argues that the overstatement of home market credit 
expense is directly related to a computer programming error and should 
not warrant applying facts available. Multiraya requests that the 
Department use verified information for its final margin calculation.
DOC Position
    We agree with petitioner that Multiraya's home market credit 
expenses were overstated, and we also agree that it is appropriate to 
recalculate these expenses to correct the error. At verification, the 
Department found that, aside from a computer error, the reported credit 
expenses were accurate. This computer error does not warrant the 
application of facts available. In response to the Department's 
request, Multiraya has resubmitted corrected payment dates. Hence, we 
have recalculated the home market credit expense using the corrected 
information submitted by Multiraya.

Comment 8: Home Market Warranty Expense

    Petitioner claims that Multiraya improperly allocated home market 
warranty expenses over all sales, instead of on a more specific basis. 
According to petitioner, verification demonstrated that Multiraya could 
have calculated this expense on a customer-specific basis. Accordingly, 
petitioner contends the Department should treat the claimed warranty 
amount as an indirect selling expense rather than a direct selling 
expense.
    Multiraya argues that the Department's practice with respect to 
warranty expenses does not require a respondent to report a sale-by-
sale breakdown of direct warranty expenses. Contrary to petitioner's 
claim, Multiraya argues that verification proved its warranty expenses 
are directly related to the subject merchandise because the expenses 
were incurred for melamine institutional dinnerware products. In 
addition, Multiraya argues that given its accounting records, an 
overall allocation methodology was the only feasible method available 
for it to calculate its warranty expense. Multiraya argues that a 
customer-specific methodology would not provide any greater accuracy 
than an overall warranty expense methodology.
DOC Position
    It is the burden of the respondent to demonstrate it is entitled to 
an adjustment under the Act. At verification, Multiraya was unable to 
provide any documentation to support its claim for warranty expenses. 
Rather, the claimed warranty expenses had been derived from Multiraya's 
best estimate and not based on actual results. Because Multiraya was 
unable to meet its burden, we are calculating normal value without 
adjustment for home market warranty expenses.

Comment 9: Home Market Inland Freight

    Petitioner claims that Multiraya's reported home market freight 
expense claim could not be verified and contained many discrepancies. 
Specifically that Multiraya's reported freight expenses was deficient 
because it did not reflect: (1) Use of diesel fuel, rather than 
gasoline as reported, (2) lack of documentation to support an 
allocation methodology of how it determined the freight per 
transaction, and (3) inclusion of non subject-merchandise.
    Multiraya argues that its reported home market freight expenses 
were verified. As such, Multiraya states that it has reported its home 
market inland freight expense to the best of its ability, and 
recommends that the Department not apply facts available to its final 
margin calculation.
DOC Position
    The Department's preference is that, wherever possible, freight 
adjustments should be reported on a sale-by-sale basis, rather than an 
overall basis (see, e.g., Final Results of Antidumping Duty 
Administrative Review: Replacement

[[Page 1724]]

Parts for Self-Propelled Bituminous Paving Equipment from Canada 56 FR 
47451, 47455, September 19, 1991). If a respondent does not maintain 
its records to enable freight expense reporting at this level, then our 
preference is to apply an allocation methodology at the most specific 
level permitted by a respondent's records, unless a respondent can 
demonstrate that doing so is overly burdensome or that its alternative 
methodology is representative and non-distortive of transaction-
specific sales. Multiraya allocated all home market freight by weight 
over all home market sales inclusive of subject and non-subject 
merchandise. Verification did not contradict Multiraya's claim that it 
is unable to report freight expenses on a transaction-specific basis. 
The non-subject merchandise included in the freight allocation is all 
melamine products not covered by the scope of this investigation. In so 
far as we find that expense allocation of melamine product weight, it 
is a reasonable approach to account for the inclusion of non-subject 
merchandise in the reported freight expenses. We have accepted a 
Multiraya's methodology as representative and non-distortive of 
transaction-specific sales information (see Final Determination of 
Sales at Less than Fair Value: Oil Country Tubular Goods from Korea, 60 
FR 33561, June 28, 1995).

Comment 10: Understating of U.S. Credit Expenses

    Petitioner claims that Multiraya improperly calculated reported 
credit on U.S. sales by reporting shipment date as the date of ocean 
shipment, rather than as the date of factory shipment. To correct this 
error, petitioner argues that the Department should recalculate credit 
using invoice date as shipment date.
    Multiraya responds that it correctly reported the shipment date for 
this expense based on the date from the bill of lading because it is on 
that date that the merchandise left the factory.
DOC Position
    We have accepted Multiraya's reported credit expense, because at 
verification we found no evidence to indicate any differences between 
the date of factory shipment and the bill of lading date, i.e., 
shipment date.

Comment 11: U.S. Dollar Interest Rate vs Rupiah Interest Rate

    Petitioner states that, although Multiraya invoices its U.S. 
customer in U.S. dollars, it ultimately receives payment in Indonesian 
rupiahs because the bank converts the customer's payment. As a result, 
petitioner claims that Multiraya's opportunity cost is incurred in 
rupiah, not dollars. Therefore, petitioner argues that the Department 
should apply a rupiah interest rate to calculate U.S. credit expenses.
    Multiraya argues that the Department properly applied a U.S. dollar 
rate to the calculation of U.S. credit expenses. Multiraya states that 
the fact that it ultimately receives payment for its dollar-denominated 
sales in rupiahs is not determinative. However, Multiraya states that 
it invoices its customers in U.S. dollars, and its customers pay in 
U.S. dollars via letter of credit. Therefore, its opportunity costs are 
properly associated with U.S. dollars.
DOC Position
    We agree with Multiraya's claim that based on the facts in this 
investigation the opportunity cost experienced by Multiraya was in U.S. 
dollars. The Department's policy is to calculate imputed credit costs 
using a weighted average short term borrowing which reflects the 
currency in which the sale was invoiced. Consistent with the 
Department's practice we have determined no credit cost adjustments are 
warranted. (See, e.g., Final Determination at Sales Less Than Fair 
Value: Pasta from Turkey, 61 FR 30309, 30324 (June 14, 1996)).

Comment 12: Duty Drawback Claim

    Petitioner claims that Multiraya improperly included as an offset 
to costs, drawbacks on duties paid prior to the POI. Petitioner argues 
that the Department should deny Multiraya's duty drawback claim 
entirely. Petitioner argues that Multiraya's duty amount should be 
lowered because: (1) Multiraya did not include duties associated with 
opening WIP, ( 2) Multiraya recorded material costs inclusive of 
duties, and (3) Multiraya's WIP that was incorporated in materials was 
not included in reported material costs. Finally, petitioner states 
that Multiraya did not demonstrate a tie between the quantity of 
imported melamine powder on which the duty was paid and the quantity of 
exports of imported melamine upon which the drawback was received. For 
the above-mentioned reasons, petitioner argues that the Department 
should reject Multiraya's claim for a duty drawback in its final margin 
calculation.
    Multiraya argues that it reported its duty drawback refund based on 
duties paid before the POI in an effort to reflect actual refunds 
received during the POI. Further, Multiraya argues that petitioner's 
claim with regard to unreported duty on the change in WIP is irrelevant 
to the reported duty drawback amount because the Department requires a 
respondent to report duty drawback claims on the same basis as it 
receives duty drawback refunds. Multiraya states that the absence of 
WIP costs and quantities from its calculation of reported costs is not 
beneficial to its final margin calculation. Multiraya states that, at 
verification, the Department confirmed that all imported melamine was 
indeed used in exported melamine production during the POI.
DOC Position
    As discussed in Comment 4, we believe that the change in WIP should 
be included in the total material costs, and we have adjusted the total 
cost of melamine production to take this into account. However, we do 
not agree with petitioner that Multiraya has not demonstrated that it 
is entitled to a duty drawback. We verified Multiraya's duty drawback 
process, its method of tracking total duties paid and weights and 
quantities of production and determined it was appropriate. 
Accordingly, there is no basis to deny Multiraya's duty drawback claim 
(See Verification Report at page 11 and Cost Verification Exhibit 109).

Comment 13: Exclusion of Excise Tax From Material Costs

    Petitioner argues that Multiraya's claim of an income tax credit 
for excise taxes paid on exported melamine products is incorrect and 
should not have been reported as duty drawback because said excise tax 
is not supported by a link between imports and exports. In addition, 
petitioner states that Cost Verification Exhibit 111 indicates that the 
income tax is allocated over a large number of products, including 
domestic products. Petitioner claims that there is no information on 
the record to suggest that this tax credit is directly linked to export 
or export quantities exclusively. Since the burden of proof to support 
its claim is with Multiraya, petitioner argues the Department must deny 
Multiraya's duty drawback claim for an income tax credit for paid 
excise taxes.
    Multiraya argues that Cost Verification Exhibit 109 clearly details 
that import duties and value added tax paid on imported melamine powder 
were eventually recovered via a tax credit on exported melamine 
dinnerware products. Thus, Multiraya argues, the Department should 
accept the duty drawback claim.

[[Page 1725]]

DOC Position
    We agree with Multiraya. We verified that Multiraya's excise tax 
was imposed on imported melamine powder (which was used to produce MIDP 
for export) and was credited through the income tax return upon export 
of the finished product. Accordingly, the claimed drawback amount was 
properly classified (see Cost Verification Exhibit 111).

Comment 14: Foreign Inland Freight

    Petitioner claims that Multiraya improperly reported a U.S. sale 
without including the foreign inland freight expense incurred on that 
sale based on the Department's verification information. Because of 
this exclusion petitioner contends that the Department should apply 
facts available and assign the highest amount of foreign inland freight 
to this sale in the calculation of Multiraya's final margin.
    Multiraya argues that it properly reported foreign inland freight 
for all its U.S. sales. Multiraya contends that foreign inland freight 
should not have been applied to the U.S. sale at issue because it in 
fact was not shipped via ground transportation.
DOC Position
    We agree with Multiraya. We verified that foreign inland freight 
was properly applied to U.S. sales and, for the sale in question, we 
find that foreign inland freight expenses were not incurred (see 
Verification Exhibit 13 and 19).

Comment 15: U.S. Warranty Expenses

    Petitioner contends that Multiraya failed to report warranty 
expenses incurred on U.S. sales. Petitioner states that the 
Department's verification of sales documents and customer files 
revealed that although Multiraya did not have a formal warranty policy, 
it allowed customers to return unsatisfactory merchandise, which is the 
equivalent of a warranty expense. Consequently, petitioner contends 
that the Department should apply facts available to Multiraya's final 
margin calculation.
    Multiraya responds that it did not incur any warranty expenses on 
U.S. sales. Multiraya states that the Department verified that it did 
not grant any warranty-related claims during the POI. In addition, 
Multiraya contends that the Department's reconciliation of U.S. sales 
to Multiraya's financial statements at verification proved that its 
U.S. customer did not receive any credits toward its payment to 
Multiraya.
DOC Position
    Although the Department's verification report indicates that 
Multiraya's customers are able to return unsatisfactory merchandise, at 
verification we did not find any evidence to suggest that Multiraya is 
contractually obligated to provide credit or any other redress for 
unsatisfactory merchandise. Therefore we do not consider this informal 
return policy to constitute a warranty obligation associated with 
Multiraya's sales. Accordingly we determined that Multiraya does not 
incur warranty expenses and application of facts available is not 
warranted.

Comment 16: U.S. Containerization Costs

    Petitioner states that Multiraya failed to report containerization 
expenses on U.S. sales. Therefore, petitioner contends that the 
Department should estimate the expense to be equal to labor costs for 
packing or use the public record figure for Indonesian containerization 
and include this amount in the final determination margin calculations.
    Multiraya argues that the costs of containerization are included in 
Multiraya's reported expenses.
DOC Position
    We agree with Multiraya. We verified that costs associated with 
containerization are included in Multiraya's packing expenses. (See 
Verification Exhibit 17).

Comment 17: U.S. Sales Treated as Affiliated Party Sales

    Petitioner claims that information on the record indicates a close 
supplier relationship between Multiraya and its sole U.S. customer. 
Consequently, petitioner states Multiraya's failure to provide all the 
information to the Department relevant to its affiliation is equivalent 
to Multiraya submitting a seriously deficient response. Further, 
petitioner states that the Department verified all U.S. sales are made 
to one customer and would fall within the definition of affiliated 
party set forth in Section 771(33) of the Tariff Act. In addition, 
petitioner argues that there is clearly an exclusive seller/purchaser 
relationship with respect to shipments of the subject merchandise from 
Indonesia to the United States. As a result of Multiraya's failure to 
provide the Department with the information required to calculate CEP 
for its U.S. sales, petitioner suggests that the Department apply facts 
available, as set forth in the petition, to the final margin 
calculation for Multiraya.
    Multiraya states there is not an affiliation with its sole U.S. 
customer, as neither has the authority or is in the position to 
exercise restraint or discretion over the other. Multiraya states that 
Multiraya and its customer do not have an exclusive business 
relationship, as Multiraya is not the only supplier of the subject 
merchandise for the U.S. customer. Multiraya states that the Department 
reviewed supporting documentation that demonstrated that Multiraya, in 
fact, has sought new business and other customers. In addition, 
Multiraya states that there is no corporate relationship between it and 
its U.S. customer. Multiraya states that the Department reviewed its 
corporate documentation and did not find any reference to the U.S. 
customer's owners, directors, or managers.
DOC Position
    We disagree that Multiraya's U.S. sales should be classified as CEP 
sales because we do not find that the evidence establishes that the 
sole U.S. importer and Multiraya are affiliated parties. Section 
771(33)(G) of the Act provides, inter alia, that parties will be 
considered affiliated when one controls the other. A person controls 
another person if the person is ``legally or operationally in a 
position to exercise restraint or direction over another person.'' SAA 
at 838. The SAA further states that a company may be in a position to 
exercise restraint or direction through, among other things, ``close 
supplier relationships in which the supplier or buyer becomes reliant 
upon the other.'' Id.
    Pursuant to section 771(33) of the Act, we reviewed Multiraya's 
relationship with its U.S. importer. The evidence indicates that there 
is no corporate or family relationship between the two companies. The 
Department requested Multiraya to provide evidence to support its 
assertion that it was not under the control of its sole U.S. customer 
and it freely negotiated its U.S. prices for the subject merchandise. 
Multiraya submitted written documentation between Multiraya and this 
U.S. customer which demonstrated that negotiations occurred between 
Multiraya and its sole U.S. customer regarding melamine product prices, 
and that Multiraya was not controlled by the customer in setting the 
price of the subject merchandise (See Multiraya's June 7, 1996, 
Supplemental Questionnaire Response at Exhibit 1 and 2). We verified 
that the negotiated prices reflected the prices reported in Multiraya 
U.S. sales listing. The evidence on the record also

[[Page 1726]]

demonstrates that Multiraya does not have an exclusive supplier 
relationship with its U.S. customer as it attempted to solicit business 
from other U.S. companies (See Multiraya's July 15, 1996, Supplemental 
Questionnaire Response at Exhibit 3). Therefore, we have determined 
that the evidence on the record supports the claim that Multiraya is 
not affiliated with its U.S. customer.

Continuation of Suspension of Liquidation

    In accordance with section 735(c) of the Act, we are directing the 
Customs Service to continue to suspend liquidation of all entries of 
MIDPs that are entered, or withdrawn from warehouse, for consumption on 
or after August 22, 1996, the date of publication of our preliminary 
determination in the Federal Register. We will instruct the Customs 
Service to require a cash deposit or the posting of a bond equal to the 
weighted-average amount by which the NV exceeds the export price, as 
indicated in the chart below. This suspension of liquidation will 
remain in effect until further notice.

------------------------------------------------------------------------
                                                              Weighted- 
                                                               average  
                   Exporter/manufacturer                        margin  
                                                              percentage
------------------------------------------------------------------------
P. T. Mayer Crocodile......................................        12.90
P. T. Multi Raya Indah Abah................................         8.10
All Others.................................................         8.10
------------------------------------------------------------------------

    Pursuant to section 733(d)(1)(A) and section 735(c)(5) of the Act, 
the Department has not included zero, de minimis weighted-average 
dumping margins, and 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 
ITC of our determination. As our final determination is affirmative, 
the ITC will determine, within 45 days, whether these imports are 
causing material injury, or threat of material injury, to an industry 
in the United States. 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, 
or withdrawn from warehouse, 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: January 6, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-753 Filed 1-10-97; 8:45 am]
BILLING CODE 3510-DS-P