[Federal Register Volume 62, Number 8 (Monday, January 13, 1997)]
[Notices]
[Pages 1726-1733]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-754]


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DEPARTMENT OF COMMERCE
[A-583-825]


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

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, NW., 
Washington, DC 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 Round Agreements Act (``URAA'').

Final Determination

    We determine that melamine institutional dinnerware products 
(``MIDPs'') from Taiwan 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 Taiwan (61 FR 43341, 
August 22, 1996)), the following events have occurred:
    In September and October 1996, we verified the questionnaire 
responses of respondents Yu Cheer Industrial Co., Ltd. (Yu Cheer) and 
Chen Hao Plastic Industrial Co., Ltd. (Chen Hao Taiwan). On November 
23, 1996, the Department requested Chen Hao Taiwan 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 respondents submitted case briefs on 
November 27, 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 POI is January 1, 1995, through December 31, 1995.

Facts Available

IKEA and Gallant

    We did not receive a response to our questionnaire from either IKEA 
Trading Far East Ltd. (IKEA) or Gallant Chemical Corporation (Gallant). 
Section 776(a)(2) of the Act provides that if an interested party 
withholds information that has been requested by the Department, fails 
to provide such information in a timely manner and in the form 
requested, significantly impedes a proceeding, or provides such 
information but the information cannot be verified, the Department 
shall use the facts otherwise available in reaching the applicable 
determination. Because IKEA and Gallant failed to submit the 
information that the Department specifically requested, we must base 
our determinations for those companies on the facts available.
    Section 776(b) of the Act provides that adverse inferences 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. IKEA's 
and Gallant's failure to respond to our questionnaire demonstrates that 
IKEA and Gallant have failed to cooperate to the best of their 
abilities in this investigation. Accordingly, 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

[[Page 1727]]

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. The Statement of Administrative Action 
accompanying the URAA, H.R. Doc. No. 316, 103d Cong., 2d Sess. (1994) 
(hereinafter, the ``SAA''), states that the petition is ``secondary 
information'' and that ``corroborate'' means to determine that the 
information used has probative value. See SAA at 870.
    In this proceeding, we considered the petition as the most 
appropriate information on the record to form the basis for a dumping 
calculation for these uncooperative respondents. In accordance with 
section 776(c) of the Act, we sought to corroborate the data contained 
in the petition.
    The petitioner based its allegation of both normal value and export 
price in the petition on a market research report which utilized price 
quotations from a manufacturer/exporter of MIDPs in Taiwan. The 
petitioner also submitted a published price list of comparable 
merchandise sold during the POI in Taiwan. The Department has 
determined that the price list corroborates normal value used in the 
petition.
    The export price in the petition is consistent with export prices 
reported by responding companies on the record of this investigation. 
Therefore, we determine that further corroboration of the facts 
available margin is unnecessary.

Fair Value Comparisons

    To determine whether sales of the subject merchandise by Chen Hao 
Taiwan and Yu Cheer 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 
POI-wide weighted-average EPs to weighted-average NVs. 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, above, produced in Taiwan 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

    In the preliminary determination, the Department determined that no 
difference in level of trade existed between home market and U.S. sales 
for either Chen Hao Taiwan and Yu Cheer. Our findings at verification 
confirmed that Chen Hao Taiwan and Yu Cheer performed essentially the 
same selling activities for each reported home market and U.S. 
marketing stage. Accordingly, we determine that all price comparisons 
are at the same level of trade and an adjustment pursuant to section 
773(a)(7)(A) is unwarranted.

Export Price

    We calculated EP, in accordance with subsections 772(a) and (c) of 
the Act, where the subject merchandise was sold directly to the first 
unaffiliated purchaser in the United States prior to importation and 
where CEP was not otherwise warranted based on the facts of record.
    We calculated EP for each respondent based on the same methodology 
used in the preliminary determination, with the following exceptions:

Chen Hao Taiwan

    We added an amount to U.S. sales denominated in U.S. dollars to 
account for bank and currency conversion charges not included in Chen 
Hao Taiwan's reporting, based on information developed at verification 
(see Comment 13).

Yu Cheer

    We made the following corrections, based on our verification 
findings:
    (a) Revised payment dates for certain U.S. sales, for purposes of 
calculating imputed credit; (b) Corrected foreign inland freight; (c) 
revised packing labor expense; and (d) corrected certain packing 
material expenses.
    In order to reflect the corrected payment dates for certain U.S. 
sales, we recalculated credit for all U.S. sales, using verified 
shipment and payment dates and Yu Cheer's reported interest rate. Yu 
Cheer did not provide information to weight-average the different 
packing material purchase prices observed at verification. Accordingly, 
we applied the highest price observed at verification for these 
materials as facts available. This approach was also consistent with Yu 
Cheer's reporting methodology for some of the packing material 
expenses.

Normal Value

Cost of Production Analysis

    In the preliminary determination, based on the petitioner's 
allegation, the Department found reasonable grounds to believe or 
suspect that Chen Hao Taiwan sales in the home market were made at 
prices below the cost of producing the merchandise. As a result, the 
Department initiated an investigation to determine whether Chen Hao 
Taiwan made home market sales during the POI at prices below their 
respective cost of production within the meaning of section 773(b) of 
the Act.
    Before making any fair value comparisons, we conducted the cost of 
production (COP) analysis described below.
A. Calculation of COP
    We calculated the COP based on the sum of Chen Hao Taiwan's 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 financial expenses to exclude foreign exchange gains 
(see Comment 10), and to include the interest expense associated with 
loans from affiliated parties (see Comment 9). We also adjusted factory 
overhead to include an amount for pension expenses (see Comment 11).
B. Test of Home Market Prices
    We used Chen Hao Taiwan'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 
were not at prices which

[[Page 1728]]

permit recovery of all costs within a reasonable period of time. On a 
model-specific basis, we compared the COP to the home market prices, 
less any applicable movement charges and direct selling expenses. We 
did not deduct indirect selling expenses from the home market price 
because these expenses were included in the G&A portion of COP.
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, 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 
Chen Hao Taiwan 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 Chen Hao Taiwan 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.
    In this case, we found that some models had no above-cost sales 
available for matching purposes. Accordingly, export prices that would 
have been compared to home market prices for these models were instead 
compared to constructed value (CV).
D. Calculation of CV
    In accordance with section 773(e) of the Act, we calculated CV 
based on the sum of a respondent's cost of materials, fabrication, 
selling, general, and administrative expenses (``SG&A''), profit and 
U.S. packing costs as reported in the U.S. sales databases. In 
accordance with section 773(e)(2)(A) of the Act, we based SG&A and 
profit on the amounts incurred and realized by Chen Hao Taiwan in 
connection with the production and sale of the foreign like product in 
the ordinary course of trade for consumption in the foreign country. 
Where appropriate, we calculated Chen Hao Taiwan's CV based on the 
methodology described in the calculation of COP above. We made the same 
adjustments to Chen Hao Taiwan's reported CV as we described above for 
COP.

Price to Price Comparisons

Adjustments to Normal Value

    We based normal value on the same methodology used in the 
preliminary determination, with the following exceptions:
Chen Hao Taiwan
    For one of several packing materials used by Chen Hao Taiwan, we 
found a slight discrepancy between the reported consumption and costs, 
and the verified consumption and costs. This discrepancy, however, 
affects only a small part of the overall packing material cost and 
would have an ad valorem effect of less than .33 percent. Consistent 
with 19 CFR 353.59(a), which permits the Department to disregard 
insignificant adjustments, we have not adjusted the reported packing 
materials cost in our fair value comparisons for Chen Hao Taiwan.
Yu Cheer
    We revised packing labor and certain packing material expenses, 
based on verification findings. Yu Cheer did not provide information to 
weight-average the different packing material purchase prices observed 
at verification. Accordingly, we applied the highest price observed at 
verification for these materials as facts available. This approach was 
also consistent with Yu Cheer's reporting methodology for some of the 
packing material expenses.

Price to CV Comparisons

    Where we compared Chen Hao Taiwan's CV to Chen Hao Taiwan's 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.

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, see Change in Policy Regarding 
Currency Conversions 61 FR 9434 (March 8, 1996). Such an adjustment 
period is required only when a foreign currency is appreciating against 
the U.S. dollar. The use of an adjustment period was not warranted in 
this case because the New Taiwan dollar 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 the respondents for use in our final 
determination. We used standard verification procedures, including 
examination of relevant accounting and production records and original 
source documents provided by respondents.

Interested Party Comments

Comment 1: Scope of Investigation

    Respondents argue that the scope of investigation should be revised 
to exclude melamine dinnerware that

[[Page 1729]]

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: Acceptance of Chen Hao Taiwan Questionnaire Responses

    Petitioner argues that the Department should reject Chen Hao 
Taiwan's questionnaire responses because the extensive, fundamental 
changes to the responses submitted during the course of the 
investigation render its data unreliable. In particular, petitioner 
objects to Chen Hao Taiwan's submission of allegedly ``minor 
corrections'' at the beginning of verification and submitted for the 
record on October 8, 1996. Petitioner claims that this information is 
untimely under 19 CFR 353.31 as it contains new information, which may 
not be accepted at verification, and should therefore be (wholly or, at 
a minimum, partially) rejected for use in the final determination 
following the precedent in Final Results of Administrative Review: 
Titanium Sponge from the Russian Federation (61 FR 58525, November 15, 
1996) (Titanium Sponge). Further, petitioner claims it was deprived of 
its ability to comment on this data prior to verification.
    Chen Hao Taiwan responds that, by focusing on the absolute number 
of corrections made, petitioner ignores the fact that the changes were 
made to ensure that the most complete and accurate responses were 
submitted for the record and properly verified. According to Chen Hao 
Taiwan, its revisions corrected typographical and data entry errors; 
the corrections related to misreported items, rather than unreported 
items. Chen Hao Taiwan adds that this situation is different from 
Titanium Sponge, where the rejected submission related to previously 
unreported items of which the Department was not alerted, while in this 
proceeding, Chen Hao Taiwan properly advised the Department of its 
corrections. Chen Hao Taiwan states that it responded to the best of 
its ability in this proceeding and, thus, there is no basis to apply 
facts available.
    DOC Position. We disagree with petitioner's description of Chen Hao 
Taiwan's October 8 submission as an extensive and entirely new cost 
submission. Chen Hao Taiwan corrected elements of its labor and factory 
overhead data, which resulted in revised figures for these components 
of its COP and CV calculations. Although the labor and overhead 
expenses for some specific products changed substantially, the effect 
on the total COP and CV was relatively insignificant. Chen Hao Taiwan 
did not revise its methodology for calculating these expenses. The 
corrections submitted by Chen Hao Taiwan prior to verification did not 
include new methodologies or expense claims; there was no new area of 
the response in which the petitioner did not have the opportunity to 
comment. In short, the corrections submitted by Chen Hao Taiwan were 
typical of the minor corrections routinely accepted by the Department 
at the commencement of verification.
    We agree with Chen Hao Taiwan that the submission of these 
corrections is not comparable with the Titanium Sponge example, where 
the Department, rather than the respondent, identified the information 
in the course of verification, and the information discovered was a new 
issue, not previously discussed in the proceeding. Chen Hao Taiwan 
fully apprised the Department of all revisions at the commencement of 
verification. Its revisions corrected data already on the record and 
did not introduce new issues not previously reported on the record.
    Accordingly, we determine that resorting to facts available is 
unwarranted in this particular case. The Department's use of facts 
available is subject to section 782(d) of the Act. Under section 
782(d), the Department may disregard all or part of a respondent's 
questionnaire responses when the response is not satisfactory or it is 
not submitted in a timely manner. The Department has determined that 
neither of these conditions apply. The Department was able to verify 
the response, thus rendering it satisfactory, and the types of 
revisions submitted by Chen Hao Taiwan met the deadline for such 
changes. Under section 782(e), the Department shall not decline to 
consider information that is 1) timely, 2) verifiable, 3) sufficiently 
complete that it serves as a reliable basis for a determination, 4) 
demonstrated to be provided based on the best of the respondent's 
ability, and 5) can be used without undue difficulties. In general, 
Chen Hao Taiwan has met these conditions.
    Accordingly, we find no basis to reject Chen Hao Taiwan's response, 
and thus, no basis to rely on the facts otherwise available for our 
final determination.

Comment 3: Yield Rate

    Petitioner claims that Chen Hao Taiwan improperly reported overall 
yield information for its COP and CV data when it had more accurate, 
product-specific data available. Petitioner alleges that the 
verification exhibits establish that Chen Hao Taiwan maintains product-
specific yield information and, therefore, could have reported its 
costs on this basis, rather than an overall yield figure applied to all 
of its products. Petitioner claims that by reporting overall yield 
figures, Chen Hao Taiwan may be attempting to mask dumping margins 
generated by sharply different yields among products, which is the 
experience of the U.S. industry. Since Chen Hao Taiwan allegedly chose 
instead to report less accurate production data, petitioner contends 
that the Department should reject Chen Hao Taiwan's data as submitted 
and adjust the yield rate by applying the reported yield factor to each 
additional production step that each product undergoes.
    Chen Hao Taiwan disputes petitioner's analysis of its production 
records and states that the Department verified that Chen Hao Taiwan 
does not

[[Page 1730]]

maintain records in its normal course of business that would permit it 
to report product-specific yield. Chen Hao Taiwan maintains that the 
verification exhibit cited by petitioner does not support petitioner's 
contention that Chen Hao Taiwan was able to report product-specific 
yield data. Chen Hao Taiwan argues that while petitioner may maintain 
product-specific yield information, it does not mean that the 
Department must also assume that respondent must also maintain the same 
information. Chen Hao Taiwan asserts that the Department cannot 
penalize a respondent with facts available for failure to provide 
information which does not exist.
    DOC Position. We agree with Chen Hao Taiwan. The Department's 
preference is to use product specific cost data, including product-
specific yield results, for calculating COP and CV. The Department uses 
the most specific and reasonable allocation methods available, given a 
respondent's normal record keeping system (see Final Determination of 
Sales at Less than Fair Value: Welded Stainless Steel Pipe from 
Malaysia, 59 FR 4023, 4027, January 28, 1994). In this instance, Chen 
Hao Taiwan 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 Chen Hao Taiwan's claim that it does not maintain product-
specific yield data in its normal course of business. We also verified 
that Chen Hao Taiwan was not able to calculate yields for the POI on a 
more specific basis than the yield rate which was reported. The 
accounting records identified by petitioner could arguably be used to 
calculate an average yield for each specific order; however, Chen Hao 
Taiwan does not retain production batch records in its normal course of 
business beyond a short period of time. The examples from the 
verification are from the time of verification, October 1996--well 
beyond the POI. Moreover, Chen Hao Taiwan's financial accounting 
documents, including inventory and production ledgers, do not track 
production information on a product-specific basis. For these reasons, 
we have accepted Chen Hao Taiwan's reported average yield rate 
calculation, which was adequately analyzed at verification.

Comment 4: Home Market Freight Expenses

    Petitioner claims that Chen Hao Taiwan improperly allocated home 
market freight expenses across all products and all customers during 
the POI. Petitioner states that, based on information contained in the 
verification report, Chen Hao Taiwan should be able to report freight 
expenses on a customer-specific basis. Petitioner asserts that Chen Hao 
Taiwan's allocation methodology masks differences in freight expenses 
that may result in a larger freight expense deduction for subject 
merchandise sales than if freight expenses had been reported on a more 
specific basis. Therefore, petitioner contends that the Department 
should deny Chen Hao Taiwan's claimed freight adjustment.
    Chen Hao Taiwan argues that verification indicated that Chen Hao 
Taiwan's freight expense records did not permit reporting on a more 
specific basis.
    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 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. Chen Hao Taiwan allocated all home market 
freight expenses incurred on subject merchandise by weight over all 
home market sales, as demonstrated in the sample calculation submitted 
in the July 19, 1996, supplemental questionnaire response. However, as 
we noted in our verification report, ``we observed that Chen Hao may be 
able to total the amount charged to each customer during the POI, and 
divide that amount by the total shipments to that customer.'' This 
method is preferable to the method used by Chen Hao Taiwan.
    Nevertheless, we note that Chen Hao Taiwan allocated home market 
freight expenses between subject and non-subject merchandise using a 
weight-based methodology, in compliance with the Department's 
supplemental questionnaire request. The Department did not specifically 
request Chen Hao Taiwan to provide a customer-specific allocation. 
Although Chen Hao Taiwan had the means to allocate home market freight 
expenses on a more specific basis, its failure to do so does not 
mandate the application of adverse facts available in this case because 
Chen Hao Taiwan has been responsive to the Department's requests. The 
principal advantage of a customer-specific freight allocation would be 
to take into account the freight distance to the customer, since 
distance is a component of the expense incurred by Chen Hao Taiwan. 
Given the distribution of Chen Hao Taiwan's home market customers, as 
identified in the verification report, and the location of Chen Hao 
Taiwan's principal home market MIDP customer, we find that Chen Hao 
Taiwan's reported home market freight methodology is sufficient. In 
similar circumstances, we have accepted a respondent's methodology if 
it is 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). Chen 
Hao Taiwan's methodology meets these criteria. Consequently, we have 
accepted Chen Hao Taiwan's reported home market freight expenses.

Comment 5: Allocation of Melamine Powder Rebate

    Petitioner argues that Chen Hao Taiwan improperly allocated 
melamine powder rebates between its internal consumption and the 
material transferred to Chen Hao Xiamen. Petitioner claims that by 
assigning the entire amount of the rebate to melamine powder used for 
Taiwan consumption, Chen Hao Taiwan undervalued its raw material costs. 
Petitioner contends that Chen Hao Taiwan's melamine powder costs for 
COP and CV calculations should be recalculated to remove the amount of 
the rebate attributable to Chen Hao Xiamen transfers.
    Chen Hao Taiwan responds that petitioner is incorrect and that, in 
fact, the Department verified that the melamine powder rebates were 
allocated equally over all melamine powder purchases.
    DOC Position. We agree with Chen Hao Taiwan. We verified that Chen 
Hao Taiwan properly allocated the melamine powder rebate over all its 
purchases during the POI and thus the per-unit melamine powder cost for 
Chen Hao Taiwan's COP and CV calculations properly accounts for the 
rebate. However, as we stated in the Chen Hao Taiwan verification 
report, ``[t]he values reported for Chen Hao Xiamen's melamine powder 
consumption do not include an adjustment for the rebate.'' (Emphasis 
added.) Chen Hao Taiwan's melamine powder costs are not in question.

Comment 6: Import Duties on Melamine Powder Costs

    Petitioner contends that evidence on the record demonstrates that 
Chen Hao

[[Page 1731]]

Taiwan incurred duties on some imported raw materials, but did not 
report these duty amounts in its cost response. Petitioner thus argues 
that the Department should assume that all raw materials are imported 
and increase the costs of materials to include import duties and 
related costs.
    Chen Hao Taiwan states that the Department verified that Chen Hao 
Taiwan correctly accounted for duties in reporting the unit prices of 
melamine powder purchased during the POI and that petitioner's 
allegation is incorrect. Chen Hao Taiwan further states that the 
verification exhibits confirm that the reported costs include the 
import duties paid on melamine powder purchased outside of Taiwan.
    DOC Position. We agree with Chen Hao Taiwan. We verified that the 
reported costs for these inputs included all applicable expenses, 
including import duties. Support documentation for Chen Hao Taiwan's 
melamine powder costs, such as the operating statement and journal 
entries included in the verification exhibits, demonstrates that import 
duties, when incurred, are part of the total cost reported to the 
Department, and are included in the cost of materials used in our COP 
and CV calculations.

Comment 7: Unreconciled Cost Differences

    Petitioner claims that Chen Hao Taiwan's cost of manufacturing data 
shows an unreconciled difference between the components of operating 
costs and the total operating costs. Because Chen Hao Taiwan has not 
provided an explanation for this discrepancy, petitioner argues that 
the cost of manufacturing should be increased to reflect this 
unreconciled cost difference.
    Chen Hao Taiwan states that petitioner is incorrect because it 
misread a portion of a verification exhibit and thus erroneously 
arrived at its total. Accordingly, Chen Hao Taiwan states that its 
operating costs reconcile and no adjustment is needed.
    DOC Position. We agree with Chen Hao Taiwan. We verified that Chen 
Hao Taiwan's operating costs reconciled, as indicated in the operating 
statement and trial balance included in the verification exhibits, and 
no adjustment is required. As Chen Hao Taiwan has noted, petitioner has 
misread the verification exhibit in question and arrived at an 
incorrect operating costs total.

Comment 8: Sales of Finished Goods in Cost of Materials Calculation

    Based on its analysis of verification exhibits, petitioner claims 
that Chen Hao Taiwan included purchases of finished goods that it re-
sold without further processing in its finished goods inventory, thus 
including these items in calculating its yield rate. Petitioner asserts 
that the yield rate used in COP and CV calculations must be adjusted to 
remove the accounting for these finished goods.
    Chen Hao Taiwan contends that petitioner misread the relevant 
verification exhibit and that these items were not included in its cost 
of manufacturing calculation. Accordingly, Chen Hao Taiwan maintains 
that no adjustment is necessary.
    DOC Position. We agree with Chen Hao Taiwan. We verified that the 
resold items were properly excluded from the cost of manufacturing 
calculation, as indicated in the cost of operations statement included 
in the verification exhibits, and that no adjustment is required.

Comment 9: Arm's-Length Pricing of Loans

    Petitioner claims that Chen Hao Taiwan failed to demonstrate that 
interest free loans from affiliated parties are made at arm's length. 
Accordingly, petitioner argues that Chen Hao Taiwan's financial 
interest expense ratio for COP and CV calculations should be adjusted 
by adding an estimated market value for these loans based on the 
highest interest rate experienced by Chen Hao Taiwan.
    Chen Hao Taiwan contends that these loans from related parties 
served as capital infusion. According to Chen Hao Taiwan, the 
transactions in question were additional investments from the owners of 
Chen Hao Taiwan of their own money into the company, with these funds 
labeled as ``loans'' for purposes of the financial statement. Chen Hao 
Taiwan argues that the Department's practice is to disregard such 
intracompany transfers, thus any resulting loan interest expense should 
be disregarded in the final determination.
    DOC Position. Although Chen Hao Taiwan may consider the 
transactions in question to serve as equity capital infusions, its 
audited financial statement classifies them as long-term loans. Other 
than Chen Hao Taiwan's assertions,<SUP>1, we have no basis on the 
record to reclassify these amounts as equity. In such circumstances, 
the Department considers the amounts to be long-term loans, consistent 
with treatment in the respondent's financial statement (see, Final 
Results of Administrative Review: Shop Towels from Bangladesh, 60 FR 
48966, 48967, September 21, 1995, and Final Determination of Sales at 
Less than Fair Value: Fresh Cut Roses from Ecuador, 60 FR 7019, 7039, 
February 6, 1995). Accordingly, we have recalculated Chen Hao Taiwan's 
interest expenses to include an interest expense based on the long-term 
interest rate experienced by Chen Hao Taiwan during the POI, as 
identified in the financial statement.
---------------------------------------------------------------------------

    \1\ Chen Hao Taiwan has cited Final Results of Administrative 
Review: Fresh Cut Flowers from Colombia (61 FR 42833, August 19, 
1996) in support of its position; however this case is not on point. 
In that instance, the item in question was interest income, whereas 
here, the item is interest expense.
---------------------------------------------------------------------------

Comment 10: Exchange Gains in Financial Expenses

    Petitioner contends that the financial expenses for Chen Hao 
Taiwan's COP and CV calculations include foreign exchange gains on 
export sales, which should be disallowed. Therefore, petitioner states 
that the financial expenses should be increased accordingly.
    Chen Hao Taiwan does not object to this adjustment but states that 
the revised percentage identified in the verification report is 
incorrect; thus a corrected adjustment should be used.
    DOC Position. We agree with petitioner and have adjusted financial 
expenses to exclude foreign exchange gains on export sales. We also 
agree with Chen Hao Taiwan that the adjustment percentage identified in 
the verification report contains a typographical error; we applied the 
correct percentage in our recalculation.

Comment 11: Pension Allowance

    Petitioner states that verification revealed that Chen Hao 
improperly excluded a pension allowance in its costs.
    Chen Hao Taiwan argues that, as the Department verified that no 
actual accrual for the pension allowance was made during the POI, costs 
should not be adjusted for a theoretically intended amount.
    DOC Position. We agree with petitioner. We verified that Chen Hao 
Taiwan contributed to its employee retirement fund in the two years 
prior to the POI. It did not make the contribution during the POI and 
could not provide any satisfactory explanation for this omission. 
However, Chen Hao Taiwan reported that it made payments from the 
retirement fund during the POI. Based on these facts, we consider that 
Chen Hao Taiwan incurred an obligation for its pension plan during the 
POI. Accordingly, we have included the pension expense in our COP and 
CV calculations.

[[Page 1732]]

Comment 12: Certain Credit Expense Adjustments

    Petitioner claims that Chen Hao Taiwan reported certain adjustments 
to its credit expenses for some U.S. sales. Petitioner asserts that the 
Department does not permit these adjustments and thus the credit 
expense for these sales should be disallowed.
    Chen Hao Taiwan argues that it properly made these credit 
adjustments.
    DOC Position. We agree with Chen Hao Taiwan. In such instances as 
those identified by parties in the proprietary versions of their 
submissions, the Department has added the imputed benefit to the price. 
(See, e.g., Final Results of Antidumping Administrative Review: 
Mechanical Transfer Presses from Japan (61 FR 52910, October 9, 1996), 
where, at Comment 5, we stated that ``[b]ecause payment was made prior 
to shipment, [respondent] should receive an imputed benefit for 
credit.'')

Comment 13: Unreported U.S. Dollar Charges

    Petitioner contends that, as identified in verification documents, 
Chen Hao Taiwan did not report charges such as currency brokerage and 
bank fees for U.S. sales denominated in U.S. dollars. Accordingly, 
petitioner argues that a percentage based on the observed charges 
should be added to all U.S. dollar sales.
    Chen Hao Taiwan states that it has accounted for all charges and 
fees. Citing the verification report, Chen Hao Taiwan asserts that the 
Department verified that the sales value for all U.S. sales was 
correctly reported, and no discrepancies apart from those identified in 
the verification report were found.
    DOC Position. We agree with petitioner that Chen Hao Taiwan did not 
include certain bank fees incurred on U.S. dollar denominated sales in 
its sales reporting. Based on the verification documents, we have 
calculated a percentage for these charges and included the result as a 
circumstance of sales adjustment.

Comment 14: Payment Period on U.S. Sales

    Petitioner contends that, based on its analysis of a set of 
verification exhibits, Chen Hao Taiwan incorrectly reported the payment 
date on U.S. sales by reporting the date that it closed the account 
receivable entry in its records, rather than the date the payment was 
actually made. Accordingly, petitioner argues that the payment date for 
all U.S. sales should be adjusted to reflect the actual payment period, 
based on information obtained at verification.
    Chen Hao Taiwan responds that petitioner misread the documents in 
the sales verification exhibit, and that the payment situation 
described by petitioner referred to Chen Hao Taiwan's payment to its 
freight company, not payment from the U.S. customer. Accordingly, Chen 
Hao Taiwan states that it has correctly reported its payment dates and 
no adjustments are required.
    DOC Position. We agree with Chen Hao Taiwan. The payment, accounts 
receivable, and accounts payable documents included in the verification 
exhibit for this transaction confirm that the payment identified by 
petitioner does not apply to customer payment, but rather to the 
freight expense paid to Chen Hao Taiwan's freight company.

Comment 15: Allocation of Home Market Royalty Expenses

    Petitioner alleges that Chen Hao Taiwan misreported royalty 
expenses incurred on certain home market sales because it had not 
properly accounted for advances paid on royalty expenses owed. 
Petitioner contends that the royalty advance payments should be treated 
as indirect selling expenses for purposes of the COP test because these 
expenses were fixed costs and were incurred regardless of the quantity 
sold.
    Chen Hao Taiwan states that the Department verified the actual 
royalty amount paid and the actual amount of sales subject to royalty 
during the POI. In addition, Chen Hao Taiwan states that the Department 
verified that royalties applied only to certain products. Accordingly, 
Chen Hao Taiwan contends that the Department should continue to treat 
royalties as a direct expense and use the verified amount for royalty 
amounts to calculate the actual per-unit royalty expense paid during 
the POI.
    DOC Position. The Department has normally treated royalty expenses 
as direct expenses when a respondent incurs this expense upon the sale 
of a product covered under a royalty agreement (see, e.g., Final 
Results of Antidumping Duty Administrative Review: Industrial Belts and 
Components and Parts Thereof, Whether Cured or Uncured, From Japan, 58 
FR 30018, May 25, 1993). Consistent with the royalty agreement on the 
record, Chen Hao Taiwan incurred a royalty expense liability for home 
market sales of the specific type of merchandise covered under the 
agreement, as discussed in the verification report. Chen Hao Taiwan 
entered into the royalty agreement at the beginning of the POI. Under 
the terms of the agreement, which are on the record, certain advance 
payments were required during the POI. In order to comply with the 
terms of the agreement, Chen Hao Taiwan paid these amounts even though 
its sales of the covered products were not at the level at which it 
would pay the same amount based on royalty percentages in the 
agreement. However, the agreement states that future royalty expenses 
incurred may be offset against this advance. Although we verified that 
Chen Hao Taiwan does not account for these potential future offsets, we 
verified that Chen Hao was in full compliance with the terms of the 
agreement. It is clear that the royalty agreement only applies to 
certain home market sales and that, after this initial ``startup'' 
period, its actual royalty expenses will tie directly to the covered 
sales. Therefore, this expense is properly classified as a direct 
expense.
    Allocating POI expenses over POI sales is not appropriate because, 
in effect, a portion of the POI expenses is attributable to future 
sales. The most appropriate allocation of the expenses is to apply the 
royalty percentage in the agreement, which is how Chen Hao Taiwan 
reported the expenses, because it reflects the amount of the expense 
incurred by a particular sale, after taking into account the eventual 
offset of all advances. In this instance, we are allocating expenses 
based on the expected eventual royalty expense liability.

Comment 16: Value Added Tax (VAT) on CV Material Costs

    Petitioner argues that Chen Hao Taiwan failed to include a 5 
percent VAT on its Taiwan material purchases, thus understating the 
constructed value of each product. Therefore, petitioner contends that 
CV materials costs should be increased to reflect the VAT.
    Chen Hao Taiwan states that it followed the Department's 
questionnaire instructions and properly reported its material costs 
exclusive of VAT. Therefore, Chen Hao Taiwan maintains that CV 
materials costs should not be increased by the VAT amount.
    DOC Position. In accordance with section 773(e) the Department's 
policy is to include in its calculation of CV internal taxes paid on 
materials unless such taxes are remitted or refunded upon exportation 
of the finished product into which the material is incorporated (see 
e.g. Final Determination of Sales at Less Than Fair Value: Certain 
Carbon Steel Butt-Weld Pipe Fittings from Thailand, 60 FR 10552, 
February 27, 1995). In this case, we observed that Taiwan MIDP 
companies are able to credit VAT paid

[[Page 1733]]

on inputs (whether used for domestically sold or exported MIDPs) 
against what they owe to the Taiwan government as a result of VAT 
collected on domestic sales. More importantly, however, where VAT owed 
was less than VAT paid because exports out paced domestic sales, the 
companies received from the government a refund of VAT paid on 
materials incorporated into exported finished products. As discussed in 
the Chen Hao Xiamen verification report in the concurrent MIDPs from 
PRC investigation:

    Chen Hao [Taiwan] paid VAT on its Taiwan purchases, which 
included such items as melamine powder from the principal supplier. 
Chen Hao also incurred a VAT liability on sales made in Taiwan. 
Export sales were excluded from this liability, which included the 
re-sale of the melamine powder to [an affiliated party]. . . . Chen 
Hao [Taiwan] paid the difference of VAT collected from its Taiwan 
sales and VAT paid on Taiwan purchases. (November 18, 1996, 
verification report at pages 8-9, and included on this record in a 
December 20, 1996, Memorandum to the File.)

    Thus, VAT paid on materials incorporated into exported products is 
refunded by reason of export and therefore is not appropriately 
included in CV. Accordingly, we have not added VAT to the CV 
calculation.

Comment 17: Matching of Certain Products

    Petitioner claims that Chen Hao Taiwan assigned certain identical 
products different control numbers used for model matching. In turn, 
petitioner contends, the Department's model matching program improperly 
treated these identical products as different products. Petitioner thus 
argues that the Department should either revise its computer program to 
ignore Chen Hao Taiwan's control numbers or re-code these products with 
identical control numbers.
    Chen Hao Taiwan responds that the control numbers in question 
relate to physically different products because some differ in color 
from the others. Thus, Chen Hao Taiwan contends that the Department 
should continue to treat the products as different products with unique 
control numbers.
    DOC Position. Petitioner is incorrect with regard to its 
description of the Department's model matching program. The program 
does, in fact, ignore control numbers to determine identical or most 
similar products. Color is not a matching criterion in this 
investigation; thus, it is appropriate to treat these products, if 
otherwise identical, as identical products for purposes of model 
matching. In one instance cited by petitioner, we note that the 
Department properly compared home market sales of both products in 
question to the U.S. sales of this product. In the other instance cited 
by petitioner, we did not match the U.S. sales to the second model 
identified by petitioner because the difference in merchandise 
adjustment for that comparison exceeded the Department's 20 percent 
threshold.

Comment 18: Yu Cheer Credit Expenses

    Petitioner contends that Yu Cheer incorrectly reported payment 
dates on U.S. sales because, until verification, it did not indicate 
that it had received payment for at least some sales on multiple dates. 
Petitioner states that the record contains no explanation of the 
multiple payment date procedure and no information on how often Yu 
Cheer's customers use this payment approach. In addition, petitioner 
alleges that Yu Cheer has also misreported shipment dates, used to 
calculate credit expenses, because Yu Cheer stated at verification that 
it sometimes revises shipping documents after shipment, thus calling 
into question the reliability of its reported information. Therefore, 
petitioner argues that the home market credit adjustment should be 
rejected and the U.S. credit expense should be based on the longest 
credit period for any reported sale as facts available.
    Yu Cheer states that its payment and shipment dates were correctly 
reported, as noted in the verification report. Further, Yu Cheer states 
that the verification report indicates that the shipment revisions did 
not affect Yu Cheer's reported shipment dates. Therefore, Yu Cheer 
contends that the discrepancies cited by petitioner fail to provide any 
reasonable basis for rejecting Yu Cheer's claimed credit expenses.
    DOC Position. We agree with Yu Cheer. Yu Cheer properly reported 
the elements of its imputed credit expenses and thus we have accepted 
its claimed imputed credit expenses. As we stated in the verification 
report, Yu Cheer's shipment revisions do not affect the reported 
shipment dates. Where appropriate, we have recalculated the credit 
expense using the corrected payment information obtained at 
verification.

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--with the exception of those manufactured/exported by Yu Cheer--
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
------------------------------------------------------------------------
Chen Hao Taiwan.............................................        3.25
Yu Cheer....................................................        0.00
IKEA........................................................       53.13
Gallant.....................................................       53.13
All Others..................................................        3.25
------------------------------------------------------------------------

    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, or margins determined entirely under section 776 of 
the Act, in the calculation of the ``all others'' rate.

ITC Notification

    In accordance with section 735(d) of the Act, we have notified the 
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. 97-754 Filed 1-10-97; 8:45 am]
BILLING CODE 3510-DS-P