Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices 30309

Company Ad valorem rate

Agritalia, S.r.l. ............................... 2.55

Arrighi S.p.A. Industrie Alimentari 2.44

Barilla G. e R. F.lli S.p.A. ............. 0.65

De Matteis Agroalimentare S.p.A. 2.47

Delverde, S.r.l. .............................. 5.55

F.lli De Cecco di Filippo Fara S.

Martino S.p.A. ........................... 3.37

Gruppo Agricoltura Sana S.r.L. .... 0.00

Industria Alimentare Colavita,

S.p.A. ......................................... 2.18

Isola del Grano S.r.L. ................... 11.23

Italpast S.p.A. ............................... 11.23

Italpasta S.r.L. ............................... 2.44

La Molisana Alimentari S.p.A., ..... 4.17

Labor S.r.L. ................................... 11.23

Molino e Pastificio De Cecco

S.p.A. Pescara .......................... 3.37

Pastificio Guido Ferrara ................ 1.21

Pastificio Campano, S.p.A. ........... 2.59

Pastificio Riscossa F.lli

Mastromauro S.r.L. ................... 6.91

Tamma Industrie Alementari di

Capitanata ................................. 5.55

All Others ...................................... 3.78

We calculated the ad valorem rate for

Agritalia, an export trading company, by

weight averaging, based on the value of

exports to the United States represented

by each of Agritalia’s suppliers, the

adjusted subsidy rate for each supplier

and adding to this rate the subsidy rate

calculated for Agritalia based on

subsidies it received directly. In

performing this calculation, we adjusted

the suppliers’ rates to account for any

mark-up or mark-down by Agritalia, to

adjust prices to reflect Agritalia’s f.o.b.

export prices, and to exclude any export

restitution benefits received by

Agritalia’s suppliers on export sales to

the United States which were earned on

sales made by the producer

independently of Agritalia. We note that

at the time of our preliminary

determination, we lacked information to

adjust the producers’ subsidy rates for

any mark-up or mark-down taken by

Agritalia on sales. The methodology we

have used in our final determination

effectively calculates the f.o.b. subsidy

rate for merchandise sold by Agritalia

during the POI.

Since the estimated net

countervailable subsidy rate for Barilla

and Gruppo is either zero or de minimis,

these companies will be excluded from

the suspension of liquidation.

ITC Notification

In accordance with section 705(d) of

the Act, we will notify the ITC of our

determination. In addition, we are

making available to the ITC all nonprivileged and nonproprietary

information relating to this

investigation. We will allow the ITC

access to all privileged and business

proprietary information in our files,

provided the ITC confirms that it will

not disclose such information, either

publicly or under an administrative

protective order, without the written

consent of the Deputy Assistant

Secretary for Investigations, Import

Administration.

If the ITC determines that material

injury, or threat of material injury, does

not exist, these proceedings will be

terminated and all estimated duties

deposited or securities posted as a result

of the suspension of liquidation will be

refunded or canceled. If, however, the

ITC determines that such injury does

exist, we will issue a countervailing

duty order directing Customs officers to

assess countervailing duties on pasta

from Italy.

Return or Destruction of Proprietary

Information

This notice serves as the only

reminder to parties subject to

Administrative Protective Order (APO)

of their responsibility concerning the

return or destruction of proprietary

information disclosed under APO in

accordance with 19 CFR 355.34(d).

Failure to comply is a violation of the

APO.

This determination is published

pursuant to section 705(d) of the Act.

Dated: June 3, 1996.

Paul L. Joffe,

Acting Assistant Secretary for Import

Administration.

[FR Doc. 96–14734 Filed 6–13–96; 8:45 am]

BILLING CODE 3510–DS–P

DEPARTMENT OF COMMERCE

INTERNATIONAL TRADE

ADMINISTRATION

[A–489–805]

Notice of Final Determination of Sales

at Less Than Fair Value: Certain Pasta

From Turkey

AGENCY: Import Administration,

International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: June 14, 1996.

FOR FURTHER INFORMATION CONTACT: John

Brinkmann, Michelle Frederick or

Sunkyu Kim, Office of Antidumping

Investigations, Import Administration,

International Trade Administration,

U.S. Department of Commerce, 14th

Street and Constitution Avenue, N.W.,

Washington, D.C. 20230; telephone:

(202) 482–5288, (202) 482–0186, or

(202) 482–2613, respectively.

The Applicable Statute

Unless otherwise indicated, all

citations to the statute are references to

the provisions effective January 1, 1995,

the effective date of the amendments

made to the Tariff Act of 1930 (the Act)

by the Uruguay Round Agreements Act

(URAA).

Final Determination

We determine that certain pasta

(pasta) from Turkey is being sold in the

United States at less than fair value

(LTFV), as provided in section 735 of

the Act. The estimated margins are

shown in the ‘‘Suspension of

Liquidation’’ section of this notice.

Case History

Since the preliminary determination

of sales at less than fair value in this

investigation on December 14, 1995, (60

FR 1351, January 19, 1996) (Preliminary

Determination), the following events

have occurred:

On January 22, 1996, the Department

requested that Filiz Gida Sanayii ve

Ticaret (Filiz) and Maktas Makarnacilik

ve Ticaret T.A.S. (Maktas), the two

respondents in this case, submit

additional information relating to level

of trade. Responses were received on

January 31, 1996, as part of their

supplemental Section D questionnaire

responses.

On January 25, 1996, Hershey Foods

Corp., Borden Inc., and Gooch Foods,

Inc. (collectively the petitioners) alleged

ministerial errors in the Department’s

preliminary determination calculations

regarding the two respondents. The

respondents alleged a ministerial error

in the Department’s preliminary

determination on January 26, 1996.

With respect to the petitioners’

allegation, we agreed that errors were

made as alleged and the errors were

found to constitute significant

ministerial errors because the correction

resulted in a difference of at least five

absolute percentage points and was at

least 25 percent greater than the

preliminary margin, for both Filiz and

Maktas. With respect to the

respondents’ allegation, we determined

that the respondents’ allegation did not

constitute a ministerial error. See

Memorandum to Barbara R. Stafford

from the Team dated February 6, 1996.

An amended preliminary determination

was issued on February 12, 1996 (61 FR

6348, February 20, 1996).

We conducted verification of Filiz’s

and Maktas’s sales and cost

questionnaire responses in Turkey in

February and March 1996.

On May 1, 1996, Maktas, at the

request of the Department, submitted
30310 Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices

revised computer tapes that corrected

clerical errors discovered at verification.

Filiz, Maktas and the petitioners

submitted case briefs on April 30, 1996,

and rebuttal briefs on May 3, 1996. At

the request of both the petitioners and

the respondents, a public hearing was

held on May 7, 1996.

On May 8, 1996, the the Embassy of

Turkey requested that the Department

accept into the record a copy of

Maktas’s major shareholder’s 1994

financial statements. The Department

informed the Embassy that it could not

accept any new information into the

record at that point. (See, Memorandum

to File from Barbara R. Stafford, May 8,

1996.)

Scope of Investigation

The scope of this investigation

consists of certain non-egg dry pasta in

packages of five pounds (or 2.27

kilograms) or less, whether or not

enriched or fortified or containing milk

or other optional ingredients such as

chopped vegetables, vegetable purees,

milk, gluten, diastases, vitamins,

coloring and flavorings, and up to two

percent egg white. The pasta covered by

this scope is typically sold in the retail

market, in fiberboard or cardboard

cartons or polyethylene or

polypropylene bags, of varying

dimensions.

Excluded from the scope of this

investigation are refrigerated, frozen, or

canned pastas, as well as all forms of

egg pasta, with the exception of non-egg

dry pasta containing up to two percent

egg white. In the companion

countervailing and antidumping duty

investigations involving pasta from

Italy, we have excluded imports of

organic pasta that are accompanied by

the appropriate certificate issued by the

Associazione Marchigiana Agricultura

Biologica (AMAB). The Department has

determined that AMAB is legally

authorized to certify foodstuffs as

organic for the Government of

Italy(GOI). If certification procedures

similar to those implemented by the

GOI are established by the Government

of Turkey for exports of organic pasta to

the United States, we would consider an

exclusion for organic pasta at that time.

The merchandise under investigation

is currently classifiable under items

1902.19.20 of the Harmonized Tariff

Schedule of the United States (HTSUS).

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

May 1, 1994, through April 30, 1995.

Facts Available

Section 776(a)(2) of the Act provides

that if an interested party or any other

person—(A) Withholds information that

has been requested by the administering

authority, (B) fails to provide such

information by the deadlines for the

submission of the information or in the

form and manner requested, subject to

subsections (c)(1) and (e) of section 782,

(C) significantly impedes a proceeding

under this title, or (D) provides such

information but the information cannot

be verified as provided in section 782(i),

the administering authority * * * shall,

subject to section 782(d), use the facts

otherwise available in reaching the

applicable determination under this

title.

Section 782(c)(1) permits the

Department to modify the requests for

information in its questionnaires if that

party, ‘‘promptly after receiving a

request {from the Department} for

information, notifies {the Department}

that such party is unable to submit the

requested information in the requested

form and manner.’’ The Statement of

Administrative Action (SAA) to the

Uruguay Round Agreements Act

(URAA) makes clear that paragraph

(c)(1) is intended to apply to the

Department’s requests for information in

computerized form. SAA at 865.

Subsection (e) provides that the

Department shall not decline to

consider information that is submitted

by an interested party and is necessary

to the determination but does not meet

all the applicable requirements

established by the Department if—

(1) the information is submitted by

the deadline established for its

submission,

(2) the information can be verified,

(3) the information is not so

incomplete that it cannot serve as a

reliable basis for reaching the applicable

determination,

(4) the interested party has

demonstrated that it acted to the best of

its ability in providing the information

and meeting the requirements

established by the Department with

respect to the information, and

(5) the information can be used

without undue difficulties.

Accordingly, in using the facts

available, the Department may disregard

information submitted by a respondent

if any of the five criteria has not been

met.

A. Filiz

As discussed in the Preliminary

Determination, the Department initiated

a cost of production (COP) investigation

of Filiz on June 8, 1995. In its

questionnaire, the Department requested

that in providing cost data, Filiz’s

valuation of materials used be based

upon current material prices in

accordance with the Department’s

normal methodology in

hyperinflationary cases. (See, Fair Value

Comparisons section.) In its response,

however, Filiz reported its raw materials

costs using last-in, first-out (LIFO)

accounting. Filiz maintained that its use

of LIFO assumptions accurately

reflected the replacement cost

methodology requested in the

questionnaire. However, Filiz’s response

raised questions regarding the accuracy

of its reported material costs, insofar as

LIFO does not require materials used in

production to be valued at costs from

the current period. Instead, LIFO allows

materials consumed to be valued at

costs from both current and prior

periods. Although we informed Filiz

that the valuation of materials and

conversion costs should be based upon

current costs, Filiz provided an

inventory accounting methodology that

valued some semolina at costs from

previous months. This deficiency was

brought to Filiz’s attention in a

supplemental questionnaire and again

during verification, but the company

failed to modify its methodology to

comply with the Department’s

instructions. Furthermore, during

verification, Filiz declined to provide

information necessary to quantify the

understatement of costs associated with

this method.

The results of our investigation, and

the evidence which appears on the

record, indicate that the use of a LIFO

inventory methodology by Filiz has had

a significant distortive impact on its

reported COP data. Accordingly, we

find that Filiz has not provided

adequate data to compute its material

costs. (For a more detailed explanation,

see Memorandum to the File from

Michael Martin and William Jones, May

20, 1996).

In addition, Filiz stated in its

response to our antidumping duty

questionnaire that its annual financial

statements are prepared on an actual

(not constant) currency basis. During

our cost verification, however, we

became aware that Filiz had available

audited 1994 constant currency

financial statements which had not been

disclosed to the Department. We were

informed by company officials that

auditors from an outside accounting

firm had prepared these statements from

Filiz’s normal audited financial

statements (which are prepared in

accordance with Turkish tax law) and

that Filiz personnel would not be able

to answer any questions related to the
Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices 30311

constant currency statements. We

requested that a copy of these financial

statements be introduced as a

verification exhibit, but Filiz denied our

request. Furthermore, although we were

permitted to examine the statements for

a limited time at verification, we were

not permitted to make copies of them,

nor take the statements off the premises.

Nevertheless, our limited review of

these statements gave us reason to

believe that significant distortions exist

in the COP and constructed value (CV)

data submitted by Filiz. Specifically, the

notes to the constant currency financial

statements revealed that adjustments

had been recorded for certain severance

costs, pension liabilities, deferred

salaries, operational expenses and

interest on loans. We were informed

that these adjustments were not

reflected in the financial statements

Filiz used to derive its COP and CV

figures. The nature of the adjustments

suggested that Filiz had excluded

certain expenses incurred during the

POI from its reported COP and CV data,

and also raised concerns about whether

the submitted conversion costs, general

and administrative expenses and

financial expenses accurately reflected

the company’s production costs. During

the public hearing, counsel for Filiz

stated that the adjustments were

recorded to restate Filiz’s submitted

cash-basis financial statements to the

accrual basis required under

international accounting standards.

Filiz’s failure to explain or provide

these financial statements as a

verification exhibit prevents us from

quantifying the magnitude of the

distortions which exist in the submitted

COP and CV data.

The use of LIFO inventory

methodology by Filiz and its failure to

provide the constant currency financial

statements render Filiz’s submitted COP

and CV data unusable for purposes of

margin calculations. Accordingly, the

Department must consider the use of the

facts available in determining a margin

for Filiz, pursuant to section 776(a) of

the Act.

Insofar as Filiz has not raised the

issue of difficulty in providing

information in the informational format

or medium requested by the

Department, section 782(c)(1) does not

apply in this case.

When examined in light of the

requirements of section 782(e), the facts

in this case indicate that Filiz’s cost data

is thoroughly and systematically flawed.

The gaps and inaccuracies in Filiz’s cost

data render its use impossible. First, for

the reasons detailed above, the accuracy

of Filiz’s submitted cost data could not

be verified, as required by section (e)(2).

Second, because of the flaws in its cost

data, Filiz’s submitted cost data ‘‘cannot

serve as a reliable basis for reaching the

applicable determination’’ under section

(e)(3), nor can it ‘‘be used without

undue difficulties’’ under section (e)(5).

Third, in its failure to provide

information based on current material

costs (rather than LIFO) and its refusal

to allow the constant currency financial

statements to be entered into the record

(or even closely examined by the

Department or explained by Filiz itself

at verification), Filiz has not acted to the

‘‘best of its ability’’ in meeting the

Department’s requirements, pursuant to

section 782(e)(4) of the Act.

The use of facts available is also

subject to section 782(d) of the Act.

Subsection 782(d) provides that if the

Department ‘‘determines that a response

to a request for information * * * does

not comply with the request, {the

Department} shall promptly inform the

person submitting the response of the

nature of the deficiency and shall, to the

extent practicable, provide that person

with an opportunity to remedy or

explain the deficiency in light of the

time limits established for completion of

investigations or reviews under this

title.’’ Filiz had ample opportunity to

correct the defects in its submitted cost

data. As indicated above, the deficiency

in Filiz’s submissions regarding

materials costs was brought to its

attention in a supplemental

questionnaire and again during

verification. Filiz, however, failed to

modify its methodology to comply with

the Department’s instructions. Thus,

Filiz has not acted to the best of its

ability during this investigation.

Therefore, in applying the facts

available under section 776, the

Department is acting consistently with

section 782(d).

Furthermore, during verification, Filiz

declined to provide information that

might have remedied the deficiencies:

when the Department became aware at

verification of systematic flaws in Filiz’s

cost data, Filiz refused to enter the

statements into the administrative

record or allow the Department’s

verification team to examine it closely,

thereby ‘‘significantly impeding’’ the

Department’s ability to conduct its

investigation (and verify Filiz’s

submitted data) under section

776(a)(2)(C) of the Act.

For the foregoing reasons, the

Department has determined that, insofar

as Filiz has failed to provide cost data

in the form and manner requested by

the Department, and has ‘‘significantly

impeded’’ this investigation, it is

required by section 776(a) of the Act to

use the facts available with respect to

Filiz’s cost data. However, the

Department must also determine

whether (1) the use of facts available for

Filiz’s cost data renders the rest of

Filiz’s submitted information (i.e., the

sales data) unusable, and (2) whether

the use of adverse information as facts

available is warranted.

First, we have determined that the

resort to facts available for Filiz’s cost

data renders its sales data unusable.

Because of the flawed nature of the cost

data, home market sales cannot be

tested to determine whether they were

made at prices above production cost.

Insofar as the Department can only

make price-to-price comparisons

(normal value to export price) on those

home market sales that are made above

cost, the systematically flawed nature of

the cost data makes these comparisons

impossible. A second problem with

using the home market sales data is the

absence of reliable difference in

merchandise figures (DIFMERS). When

comparing normal value to export price,

the Department is required to account

for the effect of physical differences

between the merchandise sold in each

market. See, section 773(a)(6)(C) of the

Act. Insofar as DIFMER data is based on

cost information, the effect of these

physical differences cannot be

determined by the Department.

In addition, the Department cannot

derive a normal value that can be

compared with U.S. price data. When

home market sales prices cannot be

used, the Department resorts to the use

of constructed value as normal value.

See, sections 773(a)(4), 773(e). However,

the constructed value information

reported by Filiz is part of the cost data

that, because it is systematically flawed,

has been rejected by the Department.

Therefore, the use of facts available for

Filiz’s cost data precludes the use of the

submitted constructed value

information. The Department’s prior

practice has been to reject a

respondent’s submitted information in

toto when flawed and unreliable cost

data renders any price-to-price

comparison impossible. The rationale

for this policy is contained in Notice of

Final Determination of Sales at Less

than Fair Value: Grain-Oriented

Electrical Steel From Italy, 59 Fed. Reg.

33952, 33953–54 (July 1, 1994), (GrainOriented Electrical Steel From Italy),

where the respondent failed the cost

verification. The Department explained

that the rejection of a respondent’s

questionnaire response in toto is

appropriate and consistent with past

practice in instances where a

respondent failed to provide verifiable

COP information:
30312 Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices

If the Department were to accept verified

sales information when a respondent’s cost

information (a substantial part of the

response) does not verify, respondents would

be in a position to manipulate margin

calculations by permitting the Department to

verify only that information which the

respondent wishes the Department to use in

its margin calculation.

That is the situation with Filiz, which

has provided accurate and verified sales

information, but has not provided

accurate and usable cost data and has

hindered verification of its cost data (see

Cost Verification Report). Although

Grain-Oriented Electrical Steel from

Italy was a case involving the Best

Information Available (BIA) under the

‘‘old’’ statute, it demonstrates the

Department practice of regarding

verified sales information as unusable

when the corresponding cost data is so

flawed that price-to-price comparisons

are rendered impossible. Cf. Certain

Corrosion-Resistant Carbon Steel Flat

Products from Korea: Final Results of

Antidumping Duty Administrative

Review, 61 FR 18547, 18559 (April 26,

1996) (the use of total BIA warranted

where reliable price-to-price

comparisons are not possible).

Accordingly, we find that there is no

reasonable basis for determining normal

value for Filiz in this case. As a result,

there is nothing to compare to U.S. sales

to derive a margin calculation. The

Department has resorted, therefore, to

total facts available for Filiz.

The next step is to determine whether

an adverse inference is warranted.

Section 776(b) of the Act provides that,

where the Department ‘‘finds that an

interested party has failed to cooperate

by not acting to the best of its ability to

comply with a request for information

from {the Department} * * * {the

Department} may use an inference that

is adverse to the interests of that party

in selecting from among the facts

otherwise available.’’

As discussed above, Filiz failed to

provide cost data in the form and

manner requested by the Department,

notwithstanding the Department’s

repeated requests. Second, Filiz refused

to allow the constant currency financial

statements to be entered into the

administrative record of this case. We

have thus determined that Filiz has not

cooperated by virtue of not acting to the

best of its ability in this investigation.

Accordingly, consistent with section

776(b)(1) of the Act, we have applied, as

total facts available to Filiz, the higher

of the margin from the petition or the

highest rate calculated for a respondent

in this proceeding, which is 63.29

percent.

Section 776(c) of the Act provides that

where the Department relies on

‘‘secondary information,’’ the

Department shall, to the extent

practicable, corroborate that information

from independent sources reasonably at

the Department’s disposal. The SAA,

accompanying the URAA, clarifies that

the petition is ‘‘secondary information.’’

See, SAA at 870. The SAA also clarifies

that ‘‘corroborate’’ means to determine

that the information used has probative

value. Id. However, where corroboration

is not practicable, the Department may

use uncorroborated information.

In the present case, based on our

comparison of the sizes of the calculated

margin for the other respondent in this

proceeding to the estimated margin in

the petition, we have concluded that the

petition is the most appropriate

information on the record to form the

basis for a dumping calculation.

Accordingly, the Department has based

the margin on information in the

petition. In accordance with section

776(c) of the Act, we attempted to

corroborate the data contained in the

petition. The petitioners based export

prices on U.S. import statistics. We find

that this information has probative

value because it was obtained from an

independent, public source. See, Notice

of Final Determination of Sales at Less

Than Fair Value: Circular Welded NonAlloy Steel Pipe from South Africa 61

FR 94, 24271 (May 14, 1996). The

normal value was based on prices

between a Turkish producer of pasta

and its wholesaler which were obtained

from a market research report.

When analyzing the petition, the

Department contacted the consultant

who prepared the market research

report and confirmed the accuracy of

the data as provided in the petition.

Accordingly, we have corroborated, to

the extent practicable, the data

contained in the petition.

B. Maktas

In our January 16, 1996, supplemental

questionnaire of the Department

requested Maktas to provide a copy of

the 1994 financial statements of its

major shareholder, Piyale-Besin Sanayi

ve Ticaret A.S. (Piyale-Besin). In its

response, Maktas did not provide a copy

of Piyale-Besin’s financial statements,

stating that since ‘‘Piyale-Besin is

merely a shareholder of Maktas, the

financial statements of Piyale-Besin are

irrelevant to this investigation.’’ At the

cost verification, the Department again

requested Piyale-Besin’s 1994 financial

statements. The Department explained

to Maktas that the Department’s normal

practice is to request financial

information from shareholders that own

a significant percentage of a

respondent’s stock. Maktas, however,

declined to provide to the Department

the financial statements of Piyale-Besin.

The failure of Maktas to provide

Piyale-Besin’s financial statements

raises significant questions as to the

accuracy of certain expenses reported to

the Department, namely, interest,

general and administrative (G&A), and

selling expenses. It is the Department’s

practice to require the use of

consolidated group information for the

calculation of interest expenses based

on the fact that the consolidated group’s

controlling entity has the power to

determine the capital structure of each

member of the group. See, e.g., Final

Determination of Sales at Less Than

Fair Value: Certain Small Business

Telephone Systems and Subassemblies

Thereof From Korea, 54 FR 53141,

53149 (December 27, 1989). PiyaleBesin has such power since it owns a

substantial majority of Maktas and its

affiliates. It is the Department’s position

that majority equity ownership is prima

facie evidence of corporate control. See,

e.g., Final Determination of Sales at Less

Than Fair Value: Small Diameter

Circular Seamless Carbon and Alloy

Steel, Standard, Line and Pressure Pipe

From Italy, 60 FR 31981, 31991 (June

19, 1995). However, because Maktas did

not provide Piyale-Besin’s financial

statements, we have no information

about Piyale-Besin’s interest expenses.

Therefore, in accordance with section

776(a) of the Act, we have applied facts

available for Maktas’s interest expenses.

In addition to our lack of information

regarding interest expenses, we are not

able to confirm that Piyale-Besin did not

provide G&A services to Maktas or incur

selling expenses on behalf of Maktas.

Accordingly, we have also applied facts

available for G&A and selling expenses.

Further, Maktas’s refusal to provide

Piyale-Besin’s financial statements

demonstrates that it failed to cooperate

by not acting to the best of its ability to

comply with requests for information,

insofar as Piyale-Besin’s financial

statements do exist and are available.

Indeed, on May 8, 1996, several weeks

after the Department conducted

verification, the Embassy of Turkey

requested that the Department accept

into the record 1994 financial

statements of Piyale-Besin, which the

Embassy of Turkey would provide. The

Department rejected the Embassy’s

request and informed the Embassy that

it was too late to accept new factual

information for the record. Therefore, in

accordance with section 776(b) of the

Act, we have determined that an

adverse inference is warranted in the

selection of the facts otherwise available
Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices 30313

for interest, G&A, and selling expenses.

As adverse facts available, we calculated

an estimate of Piyale-Besin’s interest

expenses by applying the effective

interest rate incurred by Maktas during

1994 to the average amount of Maktas

equity owned by Piyale-Besin during

the year. We then added the calculated

interest expense to the combined

interest expense of Maktas and three

affiliated parties. As in the preliminary

determination, we excluded foreign

exchange gains and adjusted the

monthly interest expense amounts for

inflation using the wholesale price

index. For G&A expenses, we have no

evidence regarding the level of G&A

expense for a company doing business

in Turkey, other than the information

reported by Maktas. Therefore, we

assumed that Piyale-Besin’s G&A would

be at the same level as Maktas. Lastly,

for selling expenses, we treated the

indirect selling expenses Maktas

incurred on its sales to the United States

as a direct selling expense and made a

circumstance of sale adjustment (COS)

for these expenses. (See Comment 2

below.)

Product Comparisons

For purposes of determining

appropriate product comparisons to

U.S. sales, we compared identical

merchandise, or where there were no

sales of identical merchandise in the

home market to compare to U.S. sales,

we made comparisons based on the

characteristics listed in the

Department’s antidumping

questionnaire, as had been applied in

the preliminary determination, and in

accordance with section 771(16) of the

Act.

Level of Trade

As set forth in section 773(a)(1)(B)(i)

of the Act and in the SAA

accompanying the Uruguay Round

Agreements Act, at 829–831, to the

extent practicable, the Department will

calculate normal values based on sales

at the same level of trade as the U.S.

sales. When the Department is unable to

find sales in the comparison market at

the same level of trade as the U.S.

sale(s), the Department may compare

sales in the U.S. and foreign markets at

different levels of trade.

In accordance with section

773(a)(7)(A) of the Act, if sales at

different levels of trade are compared,

the Department will adjust the normal

value to account for the difference in

level of trade if two conditions are met.

First, there must be differences between

the actual selling functions performed

by the seller at the level of trade of the

U.S. sale and the level of trade of the

normal value sale. Second, the

differences must affect price

comparability as evidenced by a pattern

of consistent price differences between

sales at the different levels of trade in

the market in which normal value is

determined.

In implementing these principles in

this case, the Department’s first task was

to obtain information about the selling

activities of the producers/exporters.

Information relevant to level of trade

comparisons and adjustments was

requested in our July 12, 1995

questionnaire, and in supplemental

questionnaires sent on October 23, 1995,

and January 22, 1996. We asked each

respondent to establish any claimed

levels of trade based on the selling

functions provided to each proposed

customer group, and to document and

explain any claims for a level of trade

adjustment.

Our review of these submissions

shows that Maktas has identified levels

of trade based on channels of

distribution. In order to determine

whether separate levels of trade actually

existed within or between the U.S. and

home markets, we reviewed the selling

functions attributable to the customer

groups claimed by Maktas. Pursuant to

section 773(a)(1)(B)(i) of the Act, and

the SAA at 827, in identifying levels of

trade for directly observed (i.e., not

constructed) export price and normal

value sales, we considered the selling

functions reflected in the starting price,

before any adjustments. Whenever sales

within a customer group were made by

or through an affiliated company or

agent, we ‘‘collapsed’’ the affiliated

parties before considering the selling

functions performed. The selling

functions and activities examined for

each reported customer group were:

(1) The process used to establish the

terms and conditions of sale (‘‘sales

process’’); (2) whether the sale was

produced to order or filled from normal

inventory (‘‘inventory maintenance’’);

(3) whether the customer was serviced

from a forward warehouse (‘‘forward

warehousing’’); (4) freight and delivery

provided or arranged by the

manufacturer/exporter (‘‘freight’’); (5)

manufacturer provided or shared direct

advertising or in-store promotion

expenses (‘‘advertising’’); and (6)

warranty service program or after-sales

service provided by producer

(‘‘warranties’’).

In reviewing the selling functions

reported by Maktas for each customer

group, we considered all types of selling

functions, both claimed and unclaimed,

that had been performed. Where

possible, we further examined whether

the selling function was performed on a

substantial portion of sales within the

relevant customer group. In analyzing

whether separate levels of trade exist in

this investigation, we found that no

single selling function in the pasta

industry was sufficient to warrant a

separate level of trade (see, Notice of

Proposed Rulemaking and Request for

Public Comments, 61 FR 7307, 7348

(February 27, 1996)) (Proposed

Regulations).

In determining whether separate

levels of trade existed in or between the

U.S. and home markets, the Department

considered the level of trade claims of

Maktas, but the ultimate decision was

based on the Department’s analysis of

the selling functions associated with the

customer groups reported by Maktas.

To the extent practicable, we

compared normal value at the same

level of trade as the U.S. sale. For

Maktas, we compared the level of trade

in the U.S. market to the sole home

market level of trade and found them to

be dissimilar in aggregate selling

functions. Therefore, we established

normal value at a level of trade different

than the U.S. sales.

We then examined whether a level of

trade adjustment was appropriate for

Maktas when comparing its U.S. level of

trade to its home market level of trade.

However, because there was only a

single home market level of trade, there

was no basis for making a level of trade

adjustment based on a demonstration of

a consistent pattern of price differences

between the home market levels of

trade. The SAA states that ‘‘if

information on the same product and

company is not available, the

adjustment may also be based on sales

of other products by the same company.

In the absence of any sales, including

those in recent time periods, to different

levels of trade by the exporter or

producer under investigation,

Commerce may further consider the

selling experience of other producers in

the foreign market for the same product

or other products.’’ SAA at 830. The

alternative methods for calculating a

level of trade adjustment for Maktas

were examined. However, we do not

have information which would allow us

to examine pricing patterns based on

Maktas’s sales of other products at the

same level of trade as the home market

sales and there are no other respondents

with the same levels of trade as those

found for the home market sales of

Maktas. Therefore, we were unable to

calculate a level of trade adjustment for

Maktas based on these alternative

methods. Accordingly, Maktas’s U.S.

sales were compared to home market

sales based solely on the product

characteristics of the merchandise.
30314 Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices

As noted below in the ‘‘Comparison

Methodology’’ section of this notice,

where there were distinct price

differences within different levels of

trade in the case of Maktas, we

considered the customer category in

creating the averaging groups for our

comparisons.

Fair Value Comparisons

To determine whether sales of pasta

by Maktas 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. In accordance

with section 777A(d)(1)(A)(i) of the Act,

we calculated weighted-average EPs for

comparisons to weighted-average NVs.

As discussed in the Preliminary

Determination, we determined that

Turkey’s economy experienced

hyperinflation during the POI.

Accordingly, to avoid the distortions

caused by the effects of hyperinflation

on prices, we calculated EPs and NVs

on a monthly average basis, rather than

on a POI average basis.

Export Price

We calculated EP in accordance with

section 772(a) of the Act, because the

subject merchandise was sold directly to

the first unaffiliated purchase in the

United States prior to importation and

Constructed Export Price (CEP)

methodology was not otherwise

warranted based on the facts of this

investigation. We calculated EP based

on the same methodology used in the

preliminary determination. We made

the following additional adjustment,

based on information obtained at

verification; we included export

customs commission expenses as part of

brokerage and handling expenses and

made deductions for these expenses

from the starting price (gross unit price).

Normal Value

In accordance with section

773(a)(1)(B) of the Act, we based NV on

home market sales, or, where

appropriate, on CV. We compared all

home market sales to the COP, as

described below. Where home market

prices were above the COP, we

calculated NV based on the same

methodology used in the preliminary

determination, with the following

exceptions:

1. As discussed above, we applied

facts available for selling expenses. As

facts available, we treated the indirect

selling expenses Maktas incurred on its

sales to the United States as a direct

selling expense and made a COS

adjustment for these expenses. Indirect

selling expenses as reported were

revised based on information obtained

at verification.

2. We made an additional COS

adjustment for bank charges incurred on

U.S. sales, based on information

obtained at verification.

3. We used revised home market

short-term interest rates obtained at

verification for computing imputed

credit expenses for home market sales.

For the month of August 1994, in which

Maktas did not report a short-term

borrowing rate, we used the average of

the short-term borrowing rates for July

and September 1994.

4. For sales made through Andas Gida

Dagitim ve Ticaret A.S. (Andas), one of

Maktas’s two affiliated distributors in

the home market, we made no

deductions for inland insurance because

it was found at verification that Andas

did not actually incur any expense for

inland insurance during the POI.

Cost of Production Analysis

As discussed in the preliminary

determination notice, the Department

conducted an investigation to determine

whether Maktas made home market

sales during the POI at prices below

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 Maktas’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. As

noted in the Preliminary Determination,

we used the respondent’s reported

monthly COP figures which were based

on the current production costs incurred

during each month of the POI. This was

done in order to avoid the distortive

effect of inflation on our comparison of

costs and prices. We relied on the

reported COP amounts with the

following exceptions:

1. As discussed above in the Facts

Available section, we applied facts

available for interest and G&A expenses.

2. Based on information obtained at

verification, we recalculated fixed

overhead costs by including certain

depreciation expenses. See, Comment 7

below.

3. We recalculated packing costs for

certain products. See, Comment 6

below.

B. Test of Home Market Prices

As stated in the Preliminary

Determination, we used the

respondent’s adjusted monthly COP

amounts and the wholesale price index

published by the Government of

Turkey’s State Institute of Statistics to

compute an annual weighted-average

COP for the POI. We compared the

adjusted 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 at prices that did not 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, discounts, rebates,

packing, and direct and indirect selling

expenses.

C. Results of COP Test

Pursuant to section 773(b)(2)(C) of the

Act, where less than 20 percent of sales

during the POI of a given product were

at prices less than the COP, we did not

disregard any below-cost sales of that

product because the below-cost sales

were not made in substantial quantities

within an extended period of time.

Where 20 percent or more of sales of a

given product were at prices less than

the COP, we disregarded only the

below-cost sales because such sales

were found to be made within an

extended period of time, in accordance

with section 773(b)(2)(B) of the Act, and

at prices which would not permit

recovery of all costs within a reasonable

period of time, in accordance with

section 773(b)(2)(D) of the Act. Where

all sales of a specific product were at

prices below the COP, we disregarded

all sales of that product, and calculated

NV based on CV, in accordance with

section 773(a)(4) of the Act.

We found that, for certain pasta

products, more than 20 percent of

Maktas’s home market sales were sold at

below COP prices within the POI.

Further, these sales did not provide for

the recovery of costs within a reasonable

period of time. We determined,

therefore, that these below cost sales

were made in substantial quantities

within an extended period of time and

we excluded these sales and considered

the remaining above-cost sales in

determining NV, if such sales existed, in

accordance with section 773(b). For

those pasta products for which there

were no above-cost sales in the ordinary

course of trade, we compared export

prices to CV.

D. Calculation of CV

In accordance with section 773(e)(1)

of the Act, we calculated CV based on
Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices 30315

the sum of Maktas’s cost of materials,

fabrication, SG&A and U.S. packing

costs as reported in the U.S. sales

database. In accordance with sections

773(e)(2)(A), 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.

Where appropriate, we calculated CV

based on the methodology described

above in the calculation of COP and

added an amount for profit. For selling

expenses, we used the weighted-average

home market selling expenses.

Comparison Methodology

In accordance with section

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

calculated weighted-average EPs for

comparison to weighted-average NVs.

The weighted averages were calculated

and compared by product

characteristics and, where appropriate,

level of trade and/or price averaging

groups. The SAA states that in

determining the comparability of sales

for inclusion within a particular

average, ‘‘Commerce will consider

factors it deems appropriate, such as

* * * the class of customer involved,’’

SAA at 842. The Department, not the

respondents, determines which

customers may be grouped together for

product comparison purposes. Cf.,

N.A.R., S.p.A. v. U.S., 741 F. Supp. 936

(CIT, 1990). Based on the chain of

distribution for the pasta industry, we

have identified the following five

distinct customer categories that

represent different points in the chain of

distribution: (1) Other pasta

manufacturers (Pastificios) who

purchase and resell pasta; (2)

distributors; (3) wholesalers; (4)

retailers; and (5) consumers. Each of

these customer categories was defined

by functions commonly associated with

each category of customer in the areas

of: (1) category of the supplier; (2)

contractual relationship with the

supplier; (3) exclusivity of sales

territory; (4) exclusivity of product

range; (5) sales practices; and (6)

downstream customer category.

For Maktas, based on our analysis, we

found that there were consistent price

differentials among the customer

categories in the home market.

Therefore, the weighted-average prices

were calculated and compared by

product characteristics and by customer

category.

Currency Conversion

The Department’s preferred source for

daily exchange rates is the Federal

Reserve Bank. However, the Federal

Reserve Bank does not track exchange

rates for the Turkish lira. Therefore, we

made currency conversions based on the

daily exchange rate from the Dow Jones

Service, as published in the Wall Street

Journal. As discussed below under

Comment 12, we used the actual daily

exchange rates for the final

determination.

Verification

As provided in section 782(i) of the

Act, we verified information provided

by Maktas using standard verification

procedures, including the examination

of relevant sales and financial records,

and selection of original source

documentation containing relevant

information.

Interested Party Comments

Comment 1 Use of Facts Available

for Filiz: The petitioners argue that Filiz

failed verification and, therefore, the

Department should base its final

determination on total adverse facts

available. Specifically, the petitioners

claim that Filiz significantly impeded

the investigation and acted in an

uncooperative fashion by: withholding

its constant currency financial

statements; failing to report materials

costs in accordance with the

Department’s instructions; and refusing

to provide consolidated financial

information.

With respect to the constant currency

financial statements, the petitioners

argue that Filiz’s submitted cost data is

flawed due to the absence of

adjustments which were observed by

the verifiers in notes to these financial

statements. Furthermore, the petitioners

argue that Filiz was uncooperative by

not allowing the constant currency

financial statements as an exhibit and

by failing to provide adequate

explanations for concerns which were

raised by the Department regarding the

adjustments found in the statements.

Moreover, the petitioners claim that

Filiz was instructed by the Department

to report its material costs based upon

current material prices, rather than a

LIFO (last-in, first-out) methodology,

but failed to do so. Finally, the

petitioners assert that, insofar as Filiz

failed to provide the Department with

its consolidated 1994 financial

information, the Department must use

adverse facts available.

According to the petitioners, if the

Department determines not to use total

facts available, it must adjust Filiz’s

costs for errors and correct its final

margin calculations to account for

inaccuracies and omissions in the

reported costs and expenses that the

Department discovered during

verification.

Filiz urges the Department to reject

the petitioners’ assertion that facts

available should be used for the final

determination. Contrary to the

petitioners’ contention, Filiz asserts that

it was entirely cooperative throughout

the investigation and that its costs were

fully verified. Specifically, Filiz claims

that the constant currency financial

statements are irrelevant to this

investigation, that it reported material

costs as reflected in its accounting

system, and that it was an impossible

task to provide the Department with

consolidated financial information. Filiz

suggests that the Department should use

its submitted costs, adjusted for a few

clerical errors, for the final

determination.

Filiz argues that the Department did

not need to utilize the constant currency

statements because they are irrelevant to

this investigation, insofar as they are

adjusted for inflation, were prepared in

accordance with international

accounting standards, and reflect the

consolidation of Filiz and Filiz

Pazarlama (its affiliate).

In furtherance of its contention that

the Department did not need to make

use of the constant currency financial

statements, Filiz argues that its

independent accountants did not, in

fact, perform an audit on Filiz’s 1994

financial statement, but rather prepared

a consolidated, inflation-adjusted report

from the financial statements of the two

corporations (Filiz and Filiz Pazarlama).

Moreover, according to Filiz the

adjustments which were noted in the

constant currency statements were not

required under Turkish tax law and all

pertinent costs of production are

captured in the financial statements

which were submitted to the

Department. Filiz suggests that the

constant currency statements may not

be used in this investigation since

consolidated financial statements

prepared in Turkey do not eliminate

intragroup transactions, and argues that

this renders such consolidated financial

statements valueless for antidumping

purposes since the Department holds

that intragroup sales must be eliminated

from a consolidated statement.

In addition, Filiz argues that it

properly reported material costs in

accordance with the Department’s

instructions and that the apparent

underreporting described by the

petitioners is merely a phenomenon

caused by the high level of

sophistication in Filiz’s cost accounting

system. According to Filiz, it properly

replaced semolina costs with the

average purchase price for the month
30316 Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices

and used a LIFO inventory assumption

thereafter. Filiz claims that it could not

have taken any action to avoid the

consequence discussed in the

Department’s verification report without

severing the linkage between the

company’s normal accounting

procedures and its reported costs.

Therefore, Filiz argues that the

Department should accept its reported

costs as they reconcile to its cost

accounting system and have been fully

verified.

Finally, Filiz notes that it submitted

the stand-alone financial statements of

its parent company and argues that it is

prohibited by Turkish tax law from

consolidating the financial statements of

the 40 or so affiliated parties in its

group. Filiz maintains that it provided

a group-wide interest expense ratio in a

supplemental response and that this

figure should be used by the Department

for the imputation of any expenses. In

the absence of any evidence of financial

transactions between Filiz and its

affiliated parties, Filiz asserts that there

is no justification for amending its

reported interest expenses.

DOC Position: Our decision to use

facts available for the final

determination is discussed in detail in

the Facts Available section. In this

section we respond to additional

comments by Filiz which were not

addressed therein.

Based upon our limited review of

Filiz’s constant currency financial

statements, we agree with Filiz that they

were adjusted for inflation, prepared in

accordance with international

accounting standards, and reflect the

consolidation of Filiz and an affiliated

distributor of pasta. However, none of

these characteristics mitigate questions

raised by the ‘‘major adjustments’’ we

observed in a note to the financial

statements. These adjustments, which

were not recorded by Filiz in its

submitted financial statements, cause us

to question whether Filiz’s reported

conversion costs, G&A expenses, and

financial expenses accurately reflect the

company’s production costs.

The fact that these consolidated

financial statements were inflationadjusted and prepared in accordance

with international accounting standards

does not reduce our concerns. Although

Filiz claims that these adjustments arise

from differences between Turkish tax

law and international accounting

standards, it does not explain why these

differences were not taken into account

during its preparation of the COP and

CV data. As noted in the cost

verification report, Price Waterhouse

has stated that the differences between

these two sets of accounting rules

(Turkish and international) are

significant and, in fact, the constant

currency financial statements would

present a more accurate picture of

Filiz’s costs: ‘‘In general, lack of clearly

defined commercial accounting

principles and the predominance of tax

law mean that reports prepared in

accordance with Turkish law should be

treated with extreme caution and the

framework of fair presentation under

IASC ‘Standards Recommended by the

International Accounting Standards

Committee’ is preferred.’’ (Doing

Business in Turkey by Price Waterhouse

(1993), page 101.)

Additionally, Filiz’s counsel stated

during the public hearing that the

financial statements used by Filiz to

calculate its reported costs were

prepared on a cash basis. The potential

effect of calculating production costs on

a cash basis, rather than an accrual

basis, is especially significant due to the

hyperinflation which existed in Turkey

during 1994 (inflation totaled 121.24

percent, according to the IMF’s

International Financial Statistics).

The suggestion at verification by

counsel for Filiz that the company’s

management and staff were unable to

answer any questions about the constant

currency statements because they were

prepared by the company’s auditors, is

not supported by international

accounting standards. As noted in the

cost verification report, and as

confirmed by Filiz, the constant

currency statements were prepared in

accordance with standards issued by the

International Accounting Standards

Committee (IAS). According to the IAS,

‘‘The management of an enterprise has

the primary responsibility for the

preparation of the financial statements

of the enterprise.’’ (Framework for the

Preparation and Presentation of

Financial Statements, International

Accounting Standards Committee (July

1989) at paragraph 11.) Accordingly, it

is reasonable to expect that Filiz

personnel should have been able to

answer the Department’s questions

about these statements. Moreover, Filiz

management had ample opportunity to

consult with its auditors, if they

believed it was necessary to do so, for

a proper understanding of the

statements. Instead, Filiz chose to

withhold the statements and

explanations.

Additionally, Filiz appears to

contradict itself when it argues that the

constant currency financial statements

do not eliminate intragroup

transactions. Filiz claims that certain

companies in Turkey produce

consolidated financial statements in

which ‘‘no elimination of intragroup

transactions or unrealized intercompany

profits is possible.’’ (Doing Business in

Turkey, page 106.) We note, however,

that if these statements were prepared in

accordance with IAS standards, as

claimed, then, such transactions would

not have been included: ‘‘intragroup

balances and intragroup transactions

and resulting unrealized profits should

be eliminated in full.’’ (Consolidated

Financial Statements and Accounting

for Investments in Subsidiaries,

International Accounting Standards

Committee (April 1989) at paragraph

30.)

Regarding the LIFO methodology, the

Department provided clear instructions

to Filiz that the ‘‘valuation of materials

used should be based upon current

material prices.’’ (See, July 12, 1995

questionnaire at D–13 and October 13,

1995 supplemental questionnaire at 3.)

Furthermore, the respondent was

instructed to contact the Department if

there were any questions regarding its

computation of costs.

With regard to Filiz’s comments

regarding its consolidated financial

information, these issues became moot

when the Department decided to base

its final determination on total adverse

facts available.

Comment 2 Use of Facts Available for

Maktas: The petitioners argue that the

Department should use total facts

available for Maktas in the final

determination because: (1) Maktas failed

to provide the Department with critical

information; (2) the Department made

repeated requests for such information;

(3) Maktas ignored these requests and

provided no explanation why it would

not provide the requested information;

and (4) without this information, the

Department cannot rely on or properly

verify other information provided by

Maktas. Specifically, petitioners note

that Maktas refused to provide the

Department with the 1994 financial

statements of its major shareholder,

Piyale-Besin, and the monthly financial

statements of Mafer Ambalaj Sanayi ve

Ticaret Ltd. Sti (Mafer), one of Maktas’s

affiliated companies. Without the

financial statements of these two

companies, the petitioners contend that

the Department could not confirm the

accuracy of the information provided in

both the COP/CV and sales verifications,

and, thus, the Department cannot

calculate an appropriate normal value or

perform accurate sales comparisons.

According to the petitioners, Maktas’s

failure to provide financial statements

for Piyale-Besin results in a failure by

the Department to verify whether

Piyale-Besin has provided Maktas with

any assistance or absorbed any costs

related to administration, finance,
Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices 30317

accounting, selling, marketing, or

advertising of pasta. Additionally, the

petitioners contend that without PiyaleBesin’s financial information, the

Department could not properly verify

sales information for Maktas and its

affiliates. In particular, the petitioners

raise questions about Maktas’s claim

that, with the exception of Maktas’s two

affiliated distributors in the home

market (i.e., Tumgida Dagitim ve Ticaret

Ltd. Sti. and Andas), none of the

affiliated companies of Maktas,

including Piyale-Besin, is engaged in

the production or sale of pasta.

Moreover, the petitioners note that

Maktas failed to provide the Department

with monthly financial information for

Mafer, which was requested in a

supplemental questionnaire.

Accordingly to the petitioners, without

the monthly financial statements of

Mafer, the Department could not verify

Maktas’s claim that Mafer is an inactive

company. The petitioners in particular

question whether Mafer, who is related

to Maktas, has provided Maktas with

any packaging materials for pasta

which, if true, could result in

discrepancies in the reported packaging

costs.

In support of its position for

application of total facts available, the

petitioners cite Grain-Oriented

Electrical Steel From Italy, where the

Department concluded that ‘‘without

verified COP/CV data’’ the Department

has no basis to calculate an appropriate

normal value and cannot perform sales

comparisons. Therefore, the Department

used total facts available in that case.

Similarly, the petitioners urge the

Department to use total facts available

for Maktas in the final determination.

Furthermore, the petitioners argue

that the Department should apply

adverse facts available because the

respondent failed to cooperate by not

acting to the best of its ability to comply

with a request for information. The

petitioners claim that Maktas’s refusal to

provide the financial information of

Piyale-Besin and Mafer demonstrates

that Maktas has been uncooperative and

has significantly impeded this

investigation. Accordingly, the

petitioners contend that the Department

should select as facts available the

highest margin contained in the petition

for use in the final determination.

Maktas argues that the application of

facts available is unwarranted. In the

absence of significant intercompany

transactions between Piyale-Besin and

itself, Maktas claims that it would be

improper to presume that expenses of

Piyale-Besin and itself should be

consolidated for purposes of margin

calculation. In support of its argument,

Maktas cites Final Determination of

Sales at Less Than Fair Value:

Ferrosilicon from Brazil, 59 FR 732, 737

(January 6, 1994) (Ferrosilicon from

Brazil).

According to Maktas, even though the

Department was not able to examine the

financial statements of Piyale-Besin, it

had full access to all of Maktas’s

financial records from which to verify

that there were no significant

transactions between Piyale-Besin and

Maktas. Maktas submits that, in fact,

there was one small sales transaction

between Piyale-Besin and Tumgida

during the POI, which was reported in

its response and subsequently excluded

from the preliminary margin

calculation. Maktas maintains that the

Department, through its examination of

Maktas, Andas, and Tumgida’s sales

records, verified that no other

transactions between Piyale-Besin and

the respondent occurred during the POI.

Accordingly, Maktas argues that it

should not be subjected to facts

available by reason of not providing the

financial statements of Piyale-Besin.

With respect to Mafer, Maktas

maintains that Mafer was inactive

during the POI. Mafer’s 1994 year-end

financial statement, which was

provided to the Department in its

November 13, 1995, submission, reports

a small amount of gross sales and cost

of services. Maktas asserts that such

small financial figures are indicative of

an inactive company. Therefore, Maktas

contends that it should not be subjected

to any facts available by reason of not

providing the monthly financial

statements of Mafer.

DOC Position: We disagree with the

petitioners’ claim that we should use

total adverse facts available for Maktas

in the final determination. With respect

to Piyale-Besin, we do not believe that

Maktas’s refusal to provide PiyaleBesin’s financial statements warrants

the application of total adverse facts

available. However, as discussed above

in the Facts Available section of the

notice, we conclude that the application

of facts available for certain elements of

cost and sales data (i.e., interest, G&A

and selling expenses) is appropriate for

our final determination.

Regarding the petitioners’ reliance on

Grain-Oriented Electrical Steel From

Italy in support of its request for total

facts available, we note that

circumstances as presented in that case

are distinct from those in this

investigation. Unlike in Grain-Oriented

Electrical Steel From Italy, there were

no significant problems found in

Maktas’s reported materials, labor, and

overhead costs. While it is true that

Maktas’s failure to provide the financial

statements of Piyale-Besin raises

questions as to the accuracy of certain

reported expenses, Maktas was able to

substantiate much of the remaining

information contained in its COP/CV

database. Therefore, the application of

total adverse facts available would be

inappropriate.

Furthermore, with respect to the

petitioners’ assertion that without

access to Piyale-Besin’s financial

statements we could not verify Maktas’s

claim that Piyale-Besin is not engaged in

the sale of pasta, we refer to the Dun and

Bradstreet ‘‘Business Information

Report’’ (BIR) on Piyale-Besin which we

independently obtained for the record

on January 24, 1996. The BIR states that

Piyale-Besin is an ‘‘investment

company’’ with five employees, which

supports Maktas’s contention that

Piyale-Besin is only a holding company.

Further, the BIR lists ‘‘affiliates’’ of

Piyale-Besin. Based on information on

the record, we are satisfied that none of

the active affiliates listed in the BIR,

other than Maktas, Tumgida and Andas,

are engaged in the production or sale of

pasta. Thus, we believe that it is

reasonable to conclude that Maktas has

completely reported its sales of pasta.

Turning to Maktas’s argument, we

note that Maktas’s reliance on

Ferrosilicon from Brazil in support of its

position that consolidation of interest

expense (or any other expenses) is

required ‘‘only after it has been

established that the holding company

and the respondent have significant

financial transactions with each other’’

is misplaced. In that case, the

Department clearly stated its position

that ‘‘the cost of capital is fungible,

therefore, calculating interest expenses

based on consolidated statements is the

most appropriate methodology.’’ Id. at

732. With respect to Mafer, we agree

with Maktas that the evidence on the

record supports its claim that Mafer is

inactive.

Comment 3 Level of Trade: Comment

3A Whether the Department Should

Consider the Class of Customer and/or

Channel of Distribution in Determining

Whether Separate LOTs Exist: The

petitioners and Maktas argue that the

level of trade (LOT) methodology

adopted by the Department in its

preliminary determination is flawed and

should be substantially revised in the

final determination. Specifically, the

petitioners and Maktas assert that the

Department improperly focused solely

on selling functions and ignored the

customer groups and/or channels of

distribution identified by each

respondent as potentially different

points in the chain of distribution.
30318 Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices

The petitioners assert that it has been

long recognized by the Department and

the Court of International Trade (CIT)

that LOTs reflect ‘‘an attempt to

reconstruct prices at a specific,

‘common’ point in the chain of

commerce * * *’’), Smith Corona v.

United States, 713 F.2d 1568, 1571–72

(Fed. Cir. 1983). Claiming that the new

statute, the SAA, and the Department’s

Proposed Regulations do not define LOT

or establish criteria for determining

separate LOTs, the petitioners argue that

the fundamental concept of LOT has not

changed under the new statute.

Therefore, they each contend that the

definition of LOT still reflects the Court

of Appeals’ and the Department’s

longstanding interpretation of that term

(i.e., that LOT refers to different points

in the chain of distribution). (See, e.g.,

Import Administration Policy Number

92/1 at 2 (July 29, 1992), (‘‘In asking for

LOT information, the Department is

trying to determine where in the

distribution chain the respondents’

customer falls (end user, distributor,

retailer).’’) Certain Carbon and Alloy

Steel Wire Rod from Canada, 59 FR

18,791, 18,794 (April 20, 1994),

(‘‘Comparisons are made at distinct,

discernable levels of trade based on the

function each level of trade performs,

such as end-user, distributor, and

retailer.’’)).

Although the petitioners recognize

that the new statute contains certain

refinements to the LOT concept, the

petitioners argue that the amendments

to the law made by the URAA did not

alter the fundamental definition of LOT

as noted above. Consequently, they

argue that the starting point for

determining whether different LOTs

exist is whether the sales take place at

different points in the chain of

distribution. The petitioners cite Certain

Stainless Steel Wire Rods from France:

Preliminary Results of Antidumping

Duty Administrative Review, 61 FR

8915, 8916 (March 6, 1996) (French

Rod) as a recent case where, in

analyzing potential LOTs, the

Department relied upon the distinctions

the respondents identified between

channels of distribution. (‘‘Respondents

reported two channels of distribution in

the home market * * *. We examined

and verified the selling functions

performed in each channel * * *.

Overall we determine that the selling

functions between the two sales

channels are sufficiently similar to

consider them one level of trade in the

home market.’’)), French Rod, 61 FR

8916. Therefore, the petitioners assert

that the Department should consider the

potential LOTs identified by the

respondents, in terms of channels of

distribution or customer groups, in

determining whether separate LOTs

exist.

DOC Position: While neither the Act

nor the SAA provides an explicit

definition of LOT or establishes criteria

for determining whether separate LOTs

exist, the SAA does specify that the

Department requires evidence that

‘‘different selling activities are actually

performed at the allegedly different

levels of trade’’ before recognizing

distinct LOTs. SAA at 829. This is

confirmed again by the SAA in the

discussion of the required pattern of

price differences for the LOT

adjustment, where it states that ‘‘where

it is established that there are different

levels of trade based on the performance

of different selling activities * * *,’’

Commerce will make a LOT adjustment.

SAA at 830. Thus, the Act and the SAA

have identified selling activities as a key

factor in determining LOTs; however,

the statute does not require that this

analysis begin and end with the selling

activities of the producer/exporter.

In the preliminary determination, the

Department stated that it would

continue to examine its policy for

making LOT comparisons and

adjustments. After reviewing the

comments we received on this issue as

well as the Department’s recent practice

for determining the existence of LOTs,

we have determined that certain

modifications to the LOT methodology

used in the preliminary determination

are warranted. As described in the

‘‘Level of Trade’’ section of this notice,

above, in order to determine whether

distinct LOTs exist, we have examined

the full array of selling functions

provided to each of the customer groups

alleged by Maktas. As noted in

Comment 3C below, we believe that this

approach will allow us to consider all

types of selling functions, both claimed

and unclaimed, that had been actually

performed in determining the LOT and

avoid instances where a single selling

function difference on individual sales

transactions warrants the finding of a

distinct LOT. Finally, by reviewing the

selling functions within each of the

alleged customer groups, we expect that

the analysis will capture any possible

differences in the mix of selling

activities provided for each customer

group.

Comment 3B Whether the Selling

Functions of a Respondent Should be

Considered in Determining Whether

Separate LOTs Exist: Maktas argues that

the functions or services performed by

the respondents are not determinative of

whether different LOTs exist and should

not be taken into consideration in the

Department’s LOT analysis. Maktas

asserts that Section 773(a)(7)(A) of the

new statute provides for a LOT

adjustment ‘‘if the difference in LOT

* * * involves the performance of

different selling activities.’’

Accordingly, Maktas asserts that the

selling activities of the respondent

cannot be part of the definition of LOT

and only become relevant after it is

determined that separate LOTs, in fact,

exist. Therefore, Maktas argues that the

question of whether the seller performs

different selling functions is only

relevant in determining whether a LOT

adjustment is warranted.

The petitioners argue that the SAA is

clear in stating that selling functions are

intended to be an integral part of

establishing whether different LOTs

exist. (‘‘Commerce will grant {LOT}

adjustments only where: (1) There is a

difference in the LOT (i.e., there is a

difference between the actual functions

performed by the sellers at the different

levels of trade in the two markets)). SAA

at 829. The petitioners contend that the

SAA’s reference to a ‘‘difference

between the actual functions

performed’’ clearly implies that a

distinction in LOT should not be made

without a finding of functional

differences. In addition, the petitioners

claim that the SAA implies that

something more than a mere reference

to the class of customer would be

needed to identify separate LOTs {

‘‘[n]ominal reference to a company as a

‘wholesaler,’ for example, will not be

sufficient’’ in determining LOT}. SAA at

829. Therefore, the petitioners argue

that a selling function analysis is

relevant in determining whether

separate LOTs exist and that the

Department should continue to examine

the selling functions of the respondents

in its final determination. The

petitioners cited French Rod as a recent

case where the Department examined

the selling activities of the respondent

in determining whether there were

separate LOTs (‘‘In order to identify

LOTs, the Department must review

information concerning the selling

functions of the exporter,’’ French Rod,

61 FR 8916 (March 6, 1996).

DOC Position: We agree with the

petitioners. The SAA states that,

‘‘Commerce will require evidence from

the foreign producers that the functions

performed by the sellers at the same

level of trade in the U.S. and foreign

markets are similar, and that different

selling activities are actually performed

at the allegedly different levels of trade

* * *. On the other hand, Commerce

need not find that the two levels involve

no common selling activities to
Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices 30319

determine that there are two levels of

trade.’’ SAA at 159, and Cf., Proposed

Regulations at 7348. Thus, as noted in

Comment 3A above, information about

the selling activities of the producer/

exporter is essential to the identification

of LOTs.

Comment 3C Whether the

Department Should Reject The Four

Selling Function Coding System Used in

the Preliminary Determination: In the

event the Department determines it is

appropriate to define LOTs based on

selling function distinctions, the

petitioners argue that the LOT coding

methodology used in the preliminary

determination should be rejected

because it is inconsistent with law and

commercial reality. First, the petitioners

assert that the Department’s LOT coding

system resulted in a finding that a

difference in any one selling function is

sufficient to define a separate LOT. The

petitioners argue that this methodology

is at odds with the Department’s

Proposed Regulations which specifically

reject the notion that a difference in one

selling function alone would be

sufficient to define an entirely separate

LOT in most instances. Cf., e.g., Notice

of Proposed Rulemaking and Request

for Public Comments, 61 FR 7308, 7348

(February 27, 1996) (Proposed

Regulations) at 7348.

Second, the petitioners argue that the

selling function categories used in the

preliminary determination are

unreasonable and overly narrow. Given

the different combinations of the four

selling function categories used in the

preliminary determination, there were

16 possible LOT combinations in each

market. The petitioners assert that

because LOT is used as a matching

criterion, the overly-narrow LOT

segments resulted in large amounts of

home market sales not being used to

determine whether dumping was

occurring.

Finally, the petitioners argue that the

extent or cost of the function provided

should not be used to distinguish selling

activities. The petitioners assert that

while expenses for services to some

customers may be more than to others,

the expense difference may not reflect a

true difference in selling activities or

services, but instead represent the costs

associated with sales shipped in larger

or smaller quantities or to different

geographic locations. In addition, the

petitioners note that because the

Department did not request data

concerning the degree to which any

selling activity is performed, there is no

basis for the Department to perform

such an analysis in this case.

DOC Position: In the preliminary

determination, the Department stated

that it would continue to examine its

policy for making LOT comparisons and

adjustments. After reviewing the

comments we received on this issue as

well as the Department’s recent practice

for determining the existence of separate

LOTs, we agree with the petitioners that

certain modifications to the LOT

methodology utilized in the preliminary

determination are warranted.

Specifically, we find that: (1) The

preliminary coding methodology

measured LOTs based on the existence

of individual selling functions, rather

than basing LOTs on the collective array

of selling activities performed by the

seller; and (2) the coding system led to

the result that a difference in just one

selling function on any given sale

necessarily justified a difference in LOT.

Although neither the Act nor the SAA

provide explicit guidelines for

identifying LOTs, the preamble to the

Proposed Regulations reflects our

practice and states that ‘‘small

differences in the functions of the seller

will not alter the level of trade.’’

Proposed Regulations at 7348. Although

the Proposed Regulations provide that a

single function may be so significant as

to constitute the existence of a separate

LOT, we have determined that no single

selling function in the pasta industry

warrants the finding of a separate LOT.

Therefore, as noted in the ‘‘Level of

Trade’’ section of this notice, above, we

have revised the LOT methodology used

for the final determination. In order to

determine whether separate LOTs

existed within or between the U.S. and

home markets, we have reviewed the

full array of selling functions, in the

aggregate, provided to each of the

customer groups alleged by Maktas. In

addition, because we have determined

that no single selling function in the

pasta industry is so significant as to

alter the LOT, we have no longer

considered a single difference in selling

function to justify the finding of a

separate LOT.

Comment 3D Which Selling Functions

Should be Considered in Determining

Whether Separate LOTs Exist: In lieu of

the LOT methodology adopted in the

preliminary determination, the

petitioners argue that the Department

should examine the full array of selling

functions, in the aggregate, provided to

each potential LOT to determine

whether separate LOTs exist. The

petitioners assert that this methodology

was adopted by the Department in the

French Rod case where the Department

examined the collective array of selling

activities performed for each channel of

distribution and found that minor

differences between the home market

sales examined did not justify

segmenting the sales into different LOTs

(‘‘{we} found that the two sales

channels provided many of the same or

similar selling functions including:

strategic planning, order evaluation,

warranty claims, technical services,

inventory maintenance, packing and

freight and delivery. We found some

differences between the two channels of

trade in advertising, customer contacts,

computer systems (order input/invoice

system), and administrative functions.

Overall, we determine that the selling

functions between the two sales

channels are sufficiently similar to

consider them as one level of trade in

the home market’’). 61 FR at 8916.

Specifically, the petitioners assert that

the following selling functions are

relevant to the Department’s LOT

analysis for the U.S. and Italian pasta

markets: (1) Freight and delivery; (2)

customer sales contacts; (3) advertising;

(4) technical services; (5) warranties; (6)

inventory maintenance (pre-sale); (7)

post-sale warehousing; and (8)

administrative functions. In addition,

the petitioners contend that in

performing the selling function analysis,

the Department should ensure that the

selling activity is consistently applied to

all, or at least the vast majority, of

customers at each potential LOT

identified. The petitioners claim it

would be inappropriate to consider a

selling function applicable to a

particular LOT where the function was

not provided to all customers, or on

some but not all sales.

Finally, the petitioners argue that the

Department should not attempt to

define LOTs based on the following

factors because they do not relate to

differences in selling activities:

(1) Quantities/Volumes Sold: The

petitioners assert that the SAA states

that differences based on quantities sold

are not a legitimate basis for defining

LOTs or LOT adjustments. SAA at 830.

(2) Geographical Location of the

Customer: The petitioners claim that the

fact that two customers may be located

in physically distinct geographical areas

does not, in and of itself, demonstrate

that different LOTs exist.

(3) Which Selling Entity Performs the

Functions: The petitioners assert that

whether a selling function is performed

by an unaffiliated sales agent, an

affiliated sales agent or the

manufacturer, the same function is

provided and the costs to the seller are

the same. Therefore, the petitioners

argue that the Department should not

differentiate LOT based on which entity

performs the selling function.

(4) Commissions: The petitioners

argue that commissions are merely
30320 Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices

payments to an agent to perform the

same function that would otherwise be

incurred by the manufacturer directly.

Accordingly, the petitioners argue that

commissions are an invalid basis to

distinguish LOT.

(5) Discounts and Rebates: The

petitioners argue that discounts and

rebates are pricing mechanisms, not

selling functions or activities, and that

the presence of a discount or rebate has

no bearing on the point in the chain of

distribution at which the transaction

occurs. In addition the petitioners

contend that the dumping calculations

recognize that discounts and rebates are

a function of price by deducting them as

‘‘price adjustments’’ rather than ‘‘COS

adjustments.’’ Proposed Regulations at

7381. For all of these reasons, the

petitioners argue that discounts and

rebates should not be included as a

selling function distinction for LOT

purposes.

(6) Distinctions Between Customers

Based on Price: The petitioners assert

that the statute does not suggest that

LOT distinctions can be based on price

differentials. (For a further discussion of

this issue, see Comment 4D below.)

DOC Position: We agree with the

petitioners that the Department’s LOT

analysis should consider the full array

of selling functions in the aggregate, and

ensure that the selling function was

consistently applied to at least the vast

majority of customers and sales in each

LOT. As stated in the ‘‘Level of Trade’’

section of this notice, above, no single

selling function in this industry

warranted a separate LOT and, wherever

possible, we examined whether the

selling function was performed on a

substantial portion of sales within the

customer groups reported by Maktas. A

company specific description of the

selling functions assigned to the level(s)

of trade for Maktas is provided in

Comment 3E, below. In determining

whether a selling function was

applicable to a substantial portion of

customers in the reported customer

group, we relied on Maktas’s narrative

responses and sales transaction data, as

well as information obtained during

verification.

Section 773(a)(1)(B)(i) of the statute

states that normal value will be based

on ‘‘the price at which the foreign like

product is first sold * * * and to the

extent practicable, at the same LOT as

the export price or constructed export

price.’’ The SAA specifies that normal

value will be calculated ‘‘at the same

LOT as the constructed export price or

the starting price for export sales.’’ SAA

at 827. Therefore, in identifying LOTs

for export price and normal value sales,

we considered the selling functions

reflected in the starting price, before any

adjustment, for the customer group

reported by Maktas.

We agree, in part, with the petitioners

regarding the types of selling functions

that should or should not be considered

in defining LOTs. The selling functions

to be considered in establishing whether

separate LOTs exist were based on the

nature of the pasta industry. The five

selling functions used by the

Department to establish the LOTs in this

investigation are reflective of the

functions and activities incurred in the

sale of pasta to the U.S. and in the home

market. These functions have been

identified in the ‘‘Level of Trade’’

section of this notice, above. However,

we disagree with the petitioners that

technical services or post-sale

warehousing should be included in the

selling function analysis; these activities

did not occur in the pasta industry.

Regarding the other selling functions,

we were generally in agreement with the

petitioners’ recommendations regarding

which selling functions to include in

determining LOTs.

Comment 3E Company-Specific

Analysis of Selling Functions: The

petitioners argue that a review of the

selling functions undertaken by Maktas

to the U.S. and home market customers,

based on the collective approach to

analyzing selling functions utilized in

French Rod, shows that there are few, if

any, functional differences between the

U.S. and home market sales of pasta.

Therefore, petitioners claim that the

Department should determine that

different LOTs do not exist for Maktas

within the U.S. or Turkish markets or

between the U.S. and Turkish markets.

Insofar as the Department has

conducted its own selling function

analysis to determine whether separate

LOTs exist, many of the arguments

presented by the petitioners are now

moot and, therefore, have not been

specifically addressed. Therefore, the

Departmental Position for each

respondent reflects the results of the

Department’s selling function analysis.

The selling function analysis utilized by

the Department is described in the

‘‘Level of Trade’’ section of this notice,

above.

The petitioners argue that Maktas’s

request for differentiating LOTs on must

be rejected for two reasons: (1) Maktas

has not demonstrated which sales are in

which channel of distribution

identified, or even that all sales within

a channel are shipped as described, and

(2) the selling functions examined by

the Department provide no basis for

distinguishing home market LOTs.

Further, the petitioners argue that an

examination of the selling functions

used by the Department at the

preliminary determination provides no

basis to find different LOTs in the U.S.

or home market. Therefore, the

petitioners argue that the Department

should continue to compare U.S. sales

to all home market sales for the final

determination.

DOC Position: We agree with the

petitioners, in part. Based on our own

analysis of the selling functions

performed by Maktas, as described in

the ‘‘Level of Trade’’ section of this

notice, above, we found that all U.S. and

home market sales were made at a single

LOT. However, we determined that the

U.S. LOT was different from the home

market LOT.

Maktas reported one customer group

in the U.S. market. For the home

market, Maktas reported seven customer

groups. We found these customer

groups to be similar in that Maktas

performed the following selling

functions for certain customer groups:

sales process, inventory maintenance,

forward warehousing, freight,

advertising and warranties. We found

these customer groups to be different in

how Maktas performed forward

warehousing for certain customer

groups. Overall, we determined the

selling functions between these seven

customer groups to be sufficiently

similar to consider them one LOT.

We then compared the LOT in the

U.S. market to the home market LOT

and found the selling functions

performed for certain customer groups

in the areas of freight, forward

warehousing, and warranties to be

similar. We found the selling functions

performed for certain customer groups

in the areas of sales process, inventory

maintenance, forward warehousing, and

advertising to be dissimilar. Overall,

these factors warrant finding the U.S.

and home market sales to be made at

different LOTs.

Comment 3F LOT Adjustments: To

the extent the Department finds LOT

distinctions between U.S. and home

market sales, the petitioners argue that

there is no justification for a LOT

adjustment for any of the respondents in

this investigation. Specifically, the

petitioners assert that Section

773(a)(7)(A) of the Act states that LOT

adjustments are permissible only to the

extent that it has been demonstrated

that the difference between EP and

normal value reflects differences in

LOTs involving the performance of

different selling functions and ‘‘a

pattern of consistent price differences

between sales’’ at the different LOTs in

the home market. In addition, the

petitioners assert that the SAA states

that ‘‘if a respondent claims an
Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices 30321

adjustment to decrease normal value, as

with all adjustments which benefit a

responding firm, the respondent must

demonstrate the appropriateness of such

adjustment.’’ SAA at 829. Therefore, the

petitioners argue that by law, the

respondents bear the burden of

demonstrating entitlement to a LOT

adjustment and that Maktas has not met

this burden.

DOC Position: We agree with the

petitioners, in part. As described in the

‘‘Level of Trade’’ section of this notice,

above, we found no basis for making a

LOT adjustment for Maktas. In light of

the fact that we did not make a LOT

adjustment, we regard the petitioners

argument concerning the burden on

respondent to demonstrate entitlement

to a LOT adjustment to be moot.

Comment 4A Whether to Take

Customer Category into Account in

Creating the Weighted-Average Groups

used for Product Comparisons: The

petitioners argue that neither the law

nor the facts of this investigation

support making product comparisons

based on customer classes unless it is

demonstrated that the difference

between customer classes reflect a

difference in the LOT. Citing Section

773(a)(1)(B) of the Act, the petitioners

contend that normal value is defined

based on price comparisons reflecting

the same physical characteristics and,

where possible, the same LOT, as the

export or constructed export price.

Therefore, the petitioners assert that

absent a finding of different LOTs

among the various customer categories,

the Department cannot make product

comparisons based on customer

categories or channels of distribution.

Although the petitioners recognize

that the SAA refers to ‘‘the class of

customer involved’’ as a factor that the

Department may consider in creating

averaging groups, the petitioners

contend that the Department’s Proposed

Regulations emphasize that the use of

averaging groups was intended to apply

only to U.S. prices, and was not meant

to affect the calculation of normal value.

(‘‘In applying the average-to-average

method, the Secretary will identify

those sales* * * to the United States

that are comparable, and will include

such sales in an ‘‘averaging group.’’ ‘‘An

averaging group will consist of subject

merchandise* * * that is sold to the

United States at the same LOT. In

identifying sales to be included in an

averaging group, the Secretary also will

take into account, where appropriate,

the region of the United States in which

the merchandise is sold* * *.’’).

Proposed Regulations at 7386 (section

351.414(d)). (Emphasis added).

The petitioners contend that normal

value is still defined in the law based on

price comparisons reflecting the same

product characteristics and, where

possible, the same LOT. Therefore, the

petitioners argue that the Department

does not have the authority under the

new statute to subdivide home market

sales into separate groups based on

customer classes unless it is first

demonstrated that the difference

between customer classes reflects a

difference in LOT. The petitioners claim

that to do otherwise would effectively

be using the product averaging concept

to re-define normal value.

Finally, the petitioners argue that the

Department’s recent practice of

considering either the class of customer

or the channel of distribution as a factor

in the averaging group without first

finding distinct LOTs is unlawful and

inconsistent. Specifically, the

petitioners assert that in Polyvinyl

Alcohol the Department created product

averaging groups based on customer

categories stating that it found

‘‘significantly different prices,

depending on the customer category.’’

61 FR at 14070. The petitioners contend

that in French Rod and Kiwifruit the

Department relied on channels of

distribution, rather than customer

categories, in determining the averaging

groups and further identified no pricing

distinctions between the channels

examined. In all three cases the

petitioners assert that the Department

made no statutory citations and

provided little or no explanation for its

actions.

DOC Position: We disagree with the

petitioners. Section 777A(d)(1)(A)(i) of

the Act states that the Department will

determine whether the merchandise is

being sold in the United States at less

than fair value ‘‘by comparing the

weighted average of the normal values

to the weighted average of the export

prices (and/or constructed export

prices) for comparable merchandise.’’ In

addition, the SAA specifies that in order

to ensure that the weighted-averages are

meaningful, ‘‘Commerce will calculate

averages for comparable sales of subject

merchandise’’ sold in both the U.S. and

foreign markets. ‘‘In determining the

comparability of sales for inclusion

within a particular average, Commerce

will consider factors it deems

appropriate, such as * * * the class of

customer involved.’’ SAA at 842. See

also, Proposed Regulations at 7349.

Although we agree with the

petitioners that the Proposed

Regulations refer to the term ‘‘averaging

groups’’ only in the context of U.S.

sales, we do not agree with the

petitioners’ assertion that the use of

averaging groups was intended to apply

only to U.S. prices, and was not meant

to affect the calculation of normal value.

As noted above, the statute directs the

Department to compare weighted

average normal values to weightedaverage export prices/constructed

export prices. In addition, the SAA

states that for inclusion within a

particular average, the Department will

consider factors it deems appropriate.

Therefore, in order to ensure a fair

comparison, customer category is a

factor that may be used in both the

calculation of export price and/or

constructed export price and normal

value.

As noted in the ‘‘Comparison

Methodology’’ section of this notice,

above, and Comment 4B, below, it is the

responsibility of the Department, not

respondents, to determine which

customers may be grouped together for

product comparison purposes.

Accordingly, consistent with the SAA

and our practice in Polyvinyl Alcohol,

we have relied on the revised customer

categories in calculating the weightedaverage values used for sales

comparisons in instances where: (a) We

found that distinct customer categories

existed, and (b) we determined that

there was a consistent and uniform

pattern of pricing differences among the

customer categories. (For a further

discussion on price averaging and the

calculation of the weighted average

prices for each respondent, see the

‘‘Comparison Methodology’’ section of

this notice, above.)

Comment 4B Whether to Accept the

Customer Classifications or Channels of

Distribution Alleged by the

Respondents: The petitioners argue that

in the event the Department determines

it is appropriate to create averaging

groups based on customer categories or

channels of distribution, it is up to the

Department, not the respondents, to

determine which customers may be

grouped together. Timken Co. v. United

States, 630 F. Supp. 1327 (Ct. Int’l Trade

1986) (the Court held that the

Department is obligated to choose the

home market models for comparison

and may not delegate this role to

respondents). In addition, the

petitioners cite to the SAA in support of

their contention that the Department

should not accept a respondent’s

‘‘nominal reference to customer classes’’

without requiring evidence of actual

class differences based on the selling

functions of the respondent. SAA at 829.

To the extent the Department rejects

reliance on selling functions as a means

of distinguishing customer categories,

the petitioners argue that the

Department should, at a minimum,
30322 Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices

determine whether different customers

exist at different points in the chain of

commerce. Citing PETs from Singapore,

the petitioners assert that it is not the

Department’s practice to accept, without

question, the respondents’

characterizations of its customer classes

as the basis for determining its product

comparisons groups. (See, e.g., Final

Determination of Sales at less Than Fair

Value: Certain Portable Electric

Typewriters from Singapore, 58 FR

43334, 43338–43339 (August 16,

1993)(PETs from Singapore) (stating that

all retailers had the same function and,

thus, no distinction between the

claimed customer categories was

justified.)

DOC Position: We agree with the

petitioners that it is the responsibility of

the Department, not respondents, to

identify which customers may be

grouped together for product

comparison purposes. This has been our

consistent practice and policy. Cf.,

N.A.R., S.p.A. v. United States, 741 F.

Supp. 936 (Ct. Int’l Trade 1990). (Insofar

as a foreign manufacturer, given the

opportunity of selecting which product

comparisons should be used, would

most likely make a choice that is most

advantageous to itself, the identification

of product comparisons are made by the

Department.) See also, United

Engineering & Forging v. United States,

779 F. Supp. 1375, 1381 (Ct. Int’l Trade

1991); See Final Determination of Sales

at Less than Fair Value: Certain HotRolled Carbon Steel Flat Products and

Certain Cold-Rolled Carbon Steel Flat

Products from the Netherlands, 58 Fed.

Reg. 37199, 37202 (July 9, 1993).

Therefore, as noted in the

‘‘Comparison Methodology’’ section of

this notice, above, it is the responsibility

of the Department, not respondents, to

determine which customers may be

grouped together for product

comparison purposes. Based on the

chain of distribution for the pasta

industry, we reclassified the customer

groups identified by Maktas into two

distinct customer categories

representing distinct points in the chain

of distribution. For a further discussion,

see the ‘‘Comparison Methodology’’

section of this notice, above.

Comment 4C Whether to Use

Customer Category or Channel of

Distribution in Defining the Averaging

Groups used for Product Comparisons:

The petitioners argue that to the extent

a respondent has claimed distinctions in

home market sales based on channels of

distribution, the Department should

reject these distinctions and instead rely

on customer categories in creating the

product comparison groups. The

petitioners assert that nothing in the

new statute, the SAA, or the Proposed

Regulations permits the Department to

consider channels of distribution in

making product comparisons. As case

precedent for their position, the

petitioners cite PETS from Singapore

where the Department explicitly

rejected the respondent’s request that it

rely on channels of distribution as a

comparison criteria, finding no support

in the law for such an approach.

(‘‘Furthermore, channel of distribution

is not a proper merchandise comparison

criterion * * * there is no regulatory

basis for comparing identical channels

of distribution.’’) Id. at 43338.

DOC Position: We agree with the

petitioners that channels of distribution

are not an appropriate basis for creating

product averaging groups. As noted in

Comment 4A above, the SAA states that

in determining which sales to include

within a particular average, ‘‘Commerce

will consider factors it deems

appropriate, such as the physical

characteristics of the merchandise, the

region of the country in which the

merchandise is sold, the time period,

and the class of customer involved.’’

SAA at 842. See also, Proposed

Regulations at 7349. The SAA does not

contemplate the use of channels of

distribution as a basis for creating an

averaging group.

In addition, it has been the

Department’s past policy and practice,

as outlined in Import Administration

Policy Bulletin Number 92/2

(‘‘Matching at Levels of Trade’’), to

consider the customer category, not

channel of distribution, to determine

whether the respondent’s customers

exist at distinct points in the chain of

distribution (e.g., end-user, distributor,

retailer). Therefore, we have not relied

on Maktas’s reported channels of

distribution in creating the weightedaverage prices used for product

comparisons in this final determination.

Comment 4D Whether the Department

Can Rely on Price Differences as a

Method for Distinguishing Customer

Categories: If the Department

determines it is not necessary to

establish that there are different selling

functions as a means of distinguishing

customer categories, the petitioners

argue that the Department should not

define customer categories based on

price distinctions as it did in Polyvinyl

Alcohol. The petitioners assert that if

price distinctions were all that was

needed to define customer category,

respondents would have a ‘‘field day’’

manipulating the dumping law by

grouping its low-priced home market

sales together and requesting that the

Department compare its U.S. sales to

this group of low-priced sales. Although

the petitioners recognize that price

distinctions may be relevant to a

determination of whether product

comparisons should be segmented by

customer category, the petitioners argue

that prices themselves cannot be the

sole criterion. In order to establish that

there are separate customer categories,

the petitioners argue that the

Department must first determine that

different customers exist at different

points in the chain of commerce.

DOC Position: We agree with the

petitioners that price distinctions can

not be a basis for determining the

existence of customer categories. As

noted in the ‘‘Comparison

Methodology’’ section of this notice and

Comment 4A, above, in order to

determine whether the customer groups

proposed by Maktas actually

represented different customer

categories, we considered whether the

alleged customer groups represented

distinct points in the chain of

distribution. Therefore, price

distinctions were not considered a

relevant factor in defining the existence

of customer categories. The existence of

consistent price differences, however,

was considered in determining whether

customer categories should be taken

into consideration in creating the

product averaging groups.

Comment 5 Cost Test: Maktas states

that the Department should conduct its

80/20 cost test on a monthly basis rather

than over the POI. Maktas argues that

the use of the POI to determine the

extent of below cost sales for each

control number sometimes results in

normal values that are based on only a

few above-cost sales. According to

Maktas, the comparisons involving

these above-cost sales ‘‘drive’’ the

dumping margins for certain control

numbers in certain months. Maktas

refers to these above-cost sales as

outliers and argues that the Department

should delete the outliers from the sales

database in performing its margin

calculations. Furthermore, Maktas

claims that, in a hyperinflationary

economy, the Department has the

discretion to determine that a single

month is an extended period of time

and, therefore, the 80/20 cost test

should be conducted on a monthly basis

for this investigation.

The petitioners argue that the

methodology used by the Department to

determine whether sales should be

disregarded is in accordance with the

law. They state that the statute and the

SAA direct the Department to use a

below-cost test that includes the full

POI and argue that the Act does not

provide for an exception from this rule

for hyperinflationary economies.
Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices 30323

Accordingly, the petitioners argue that

the Department properly used the POI to

determine whether it should disregard

respondents’ below-cost sales. The

petitioners also claim that the

Department’s use of the few remaining

above-cost sales as a basis for normal

value in certain months is in accordance

with the law. According to the

petitioners, the SAA directs the

Department to resort to constructed

value only if there are no above-cost

sales in the ordinary course of trade in

the foreign market under consideration.

DOC Position: We disagree with

Maktas. The Department’s practice is to

apply the 80/20 test on a POI basis since

the SAA directs us to ‘‘examine belowcost sales occurring during the entire

period of investigation or review, as

opposed to a shorter time period.’’

Although Maktas argues that the

Department has the discretion to

determine that, in a hyperinflationary

economy, we should conduct the 80/20

test on a single month, it has not

provided any basis as to why we should

depart from our general practice of

applying the cost test over the entire

POI. The only reason offered by Maktas

is a belief that such a deviation might

reduce the effect of so-called ‘‘outlier

sales.’’ Moreover, section 773(b)(2)(B) of

the Act defines the extended period of

time in which we are to conduct the

cost test as ‘‘normally one year, but not

less than six months.’’

Finally, despite the concerns raised

by Maktas with regard to basing normal

value on ‘‘outliers,’’ the petitioners are

correct in stating that the law requires

us to use any sales found to be above

cost in the ordinary course of business

before resorting to CV as the basis for

normal value.

Comment 6 Indexing of Costs: Maktas

objects to the Department’s use of an

index to restate submitted monthly

production costs. While the use of such

an index to adjust costs may smooth out

the effects of inflation, Maktas argues

that the law’s focus on exporter

behavior precludes the Department from

performing such an adjustment.

Additionally, Maktas contends that the

Department has not determined whether

prices of below-cost sales allow for the

recovery of costs in a reasonable period

of time.

The petitioners did not comment on

this issue.

DOC Position: We disagree with

Maktas and have calculated the

company’s COM following the same

methodology as used in our preliminary

determination. (See, memorandum from

William H. Jones and Michael P. Martin

to Christian B. Marsh, dated December

13, 1995.) The Department’s normal

practice in non-hyperinflationary cases

has been to calculate a single weightedaverage COM, mitigating the effects of

monthly cost fluctuations. Such

fluctuations may result from the timing

of expenses and production runs. We

have determined that, where the data

permits, it is also appropriate to

calculate an annual weighted-average

cost in hyperinflationary cases.

However, since the value of the local

currency (Turkish lira) changed

significantly during the POI, the

nominal value of costs incurred at

different times are not comparable. As a

result, it is necessary to restate the

average cost into equivalent terms.

To calculate a meaningful, periodaverage COM, it was first necessary to

restate each month’s cost of

manufacturing in equivalent terms.

After each month’s cost of

manufacturing was restated in

equivalent terms, they were added

together and divided by the quantity

produced during the POI to obtain an

annual weighted-average COM

expressed in period-end currency.

Because this figure is stated in the

currency value at the end of the POI, it

is necessary to apply the index again to

restate it in each month’s respective

currency value. The resulting monthly

COM amounts are used as the basis for

monthly COP and CV figures.

Finally, we disagree with Maktas’s

assertion that we failed to perform the

recovery of cost test, as required under

section 773(b)(2)(D) of the Act. We

compared each home market price to

the weighted-average per-unit

production costs stated in the value of

the month of sale. This approach

properly tests whether the prices of

below-cost sales allow for the recovery

of costs in a reasonable period of time.

Comment 7 Packing Costs: Maktas

argues that its reported packing costs

should be adjusted for inflation to avoid

understating packing costs for certain

home market sales, inflating normal

values and increasing dumping margins.

Maktas suggests that this problem can

be solved by removing certain smallvolume products from the sales

database. Alternatively, Maktas argues

that the Department should use

production information on the

administrative record to identify

products which were not produced in

every month and that the Department

should index the reported packing costs

from previous months by means of the

wholesale price index.

The petitioners argue that the

Department should not attempt to adjust

Maktas’s reported packing costs as there

is no consistent pattern for the

discrepancies noted in Maktas’s

reported packing costs during the cost

verification. Additionally, the

petitioners argue that the Department

cannot make a proper inflation

adjustment to Maktas’s reported packing

costs without information regarding

purchases of packing materials during

the POI.

DOC Position: The timing of packing

materials purchases in a

hyperinflationary economy may result

in an over-or under statement of net

home market prices. We have

determined, therefore, that it is

appropriate to adjust packing costs as

suggested by Maktas and have indexed

its reported packing costs for certain

products which were not produced in

each month of the POI. Although a more

accurate solution to the timing problems

would be achieved by indexing all

packing costs, in a manner similar to

that by which we adjusted COM for our

preliminary determination, the

petitioners are correct in their assertion

that the information necessary for such

an adjustment is not on the record.

Comment 8 Depreciation Expenses:

Maktas argues that its audited

depreciation figures should not be

revised by the Department. According to

Maktas, its depreciation expenses were

recorded in accordance with Turkish tax

law and that there is no evidence that

its treatment of depreciation distorts

‘‘real’’ costs.

The petitioners claim that Maktas

failed to include certain POI

depreciation costs associated with its

annual fixed asset revaluation, current

year additions, and holiday shut-down

periods during the POI. They note that

these amounts were identified by the

Department in Maktas’s financial

statements, but were not included by

Maktas in its reported costs. Further,

since Maktas failed to provide financial

statements for its parent company, the

petitioners argue that there may be

unreported depreciation expenses in

addition to those identified during

verification. Therefore, the petitioners

claim that the Department cannot rely

on Maktas’s reported depreciation

expenses and also cannot obtain an

appropriate depreciation figure by

adjusting for the unreported amounts

which were identified by the

Department.

DOC Position: We agree with the

petitioners that Maktas understated its

reported costs by improperly excluding

certain depreciation expenses and we

have adjusted COP and CV by adding

these amounts to Maktas’s reported

fixed overhead costs. Maktas has not

offered any explanation as to why these

depreciation expenses should not be

included in its COP or CV.
30324 Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices

The depreciation costs associated

with the annual fixed asset revaluation

were classified by Maktas as ‘‘other

operating expenses’’ in the company’s

financial statements. Depreciation costs

related to current year fixed asset

additions were classified as

‘‘extraordinary expenses,’’ along with

depreciation costs incurred during

normal, recurring holiday shut-down

periods. All of these costs are necessary

to obtain a fair measurement of costs

incurred by Maktas during the POI for

its production assets and, thus, these

amounts should be included in its COP

and CV.

We are satisfied that the adjustments

described above will result in an

appropriate depreciation expense figure

for Maktas’s production assets. As to the

petitioners’ concern regarding possible

unreported expenses incurred by

Maktas’s parent, Piyale-Besin, we have

determined that facts available should

be applied for the calculation of G&A

expenses for Maktas. See, Facts

Available discussion above.

Comment 9 Tax Assessments: Maktas

argues that the taxes identified by the

Department’s cost verification team are

not part of the company’s cost of

production and were appropriately

excluded from its reported costs.

The petitioners claim that the

Department normally includes

extraordinary expenses in its cost of

production calculations. The petitioners

argue that, if the Department decides to

recalculate Maktas’s reported costs, it

should include the tax assessments

which were excluded by the

respondent.

DOC Position: We agree with the

petitioners that these taxes should be

included in COP and CV. Maktas has

classified as extraordinary expenses

certain taxes which were calculated on

the value of company assets. Maktas

also excluded other asset-based taxes

which it believes will be recovered from

the Turkish government pursuant to

ongoing litigation. The Department’s

practice has been to allow a respondent

to exclude certain costs if they

demonstrate that such costs are both

unusual in nature and infrequent in

occurrence. See, e.g., Final

Determination of Less Than Fair Value:

Certain Hot-Rolled Carbon Steel Flat

Products, Certain Cold-Rolled Carbon

Steel Flat Products, and Certain Cut-toLength Carbon Steel Plate from Belgium,

58 FR 37083,37088 (July 9, 1993).

Maktas has not demonstrated that the

taxes assessed on asset values are

unusual in nature nor has it

demonstrated that they are infrequent in

occurrence. Certain business and

property taxes are a normal expense of

operating a business and, as such, are

appropriately included in COP and CV.

Furthermore, the Department does not

normally consider income taxes, based

on the profit/loss of a corporation, to be

a cost of producing the product. (See,

e.g., Final Determination; Rescission of

Investigation and Partial Dismissal of

Petition: High Information Content Flat

Panel Displays and Display Glass

Therefor from Japan, 56 FR 32376,

32392 (July 16, 1991).) However, taxes

based on asset values have been

included by the Department in COP.

See, e.g., Final Determination of Sales at

Less Than Fair Value: Oil Country

Tubular Goods from Argentina, 60 FR

33539, 33550 (June 28, 1995). Therefore,

we have included the taxes in Maktas’s

production costs.

Comment 10 Foreign Exchange Gains:

Maktas argues that all of its foreign

exchange gains which resulted directly

from export sales should be applied as

an offset against interest expense, since

it incurs interest expense to produce

and sell merchandise. In support of its

position, Maktas cites Final

Determination of Sales at Less Than

Fair Value: Certain Carbon and Alloy

Steel Wire Rod from Canada, 59 FR

18791 (April 20, 1994) (Wire Rod from

Canada), in which the Department

allowed a respondent to offset interest

expense with dividend income received.

Maktas also cites to Final Determination

of Sales at Less Than Fair Value: Fresh

Cut Roses from Ecuador, 60 FR 7019

(February 6, 1995) (Roses from

Ecuador).

The petitioners argue that interest

expenses are a normal part of the

Department’s cost of production

calculation. The petitioners contend

that foreign exchange gains resulting

from export sales of finished pasta are

unrelated to the cost of producing pasta

in Turkey. Therefore, the petitioners

claim that the Department should

continue to exclude foreign exchange

gains from its cost of production

calculation for the final determination.

DOC Position: We agree with the

petitioners. Maktas’s foreign exchange

gains relate to export sales transactions

and, thus, are calculated on the

accounts receivable balances associated

with such sales. It is the Department’s

normal practice to exclude exchange

gains and losses on accounts receivable

because the exchange rate used to

convert home market sales to U.S.

dollars is that in effect on the date of the

U.S. sale. See, e.g., Final Determination

of Sales at Less Than Fair Value: Small

Diameter Circular Seamless Carbon and

Alloy Steel, Standard, Line and Pressure

Pipe from Italy, 60 FR 31991 (June 19,

1995).

With regard to Maktas’s reliance on

Wire Rod from Canada, the respondent

provided no explanation as to why it

believes foreign exchange gains are the

equivalent of dividend income.

Moreover, the facts in Wire Rod from

Canada are quite different from the facts

in the instant investigation. In Wire Rod

from Canada, the respondent

demonstrated that its dividend income

was directly linked to the interest

expense to which it was applied. Maktas

has not demonstrated any direct link

between its foreign exchange gains and

its production costs and, in fact, has

argued that they are unrelated.

Therefore, we excluded Maktas’s

exchange gains from the interest

expense rate calculation. Furthermore,

the Department’s position in Roses from

Ecuador is contrary to Maktas’s

argument and represents an example of

our normal practice, i.e., to disallow the

application of foreign exchange gains on

sales transactions as offsets to financial

expenses.

Comment 11 Short-Term Interest

Rate: The petitioners argue that the

Department should use the same shortterm interest rate to calculate imputed

credit expenses for Maktas’s U.S. and

home market sales. The petitioners

argue that since the short-term

borrowings that Maktas actually used to

finance the credit period for its sales in

Turkey were also the short-terms

borrowings that Maktas used to finance

the credit period for its U.S. sales, the

interest rates used to calculate imputed

credit expenses should be the same for

U.S. and home market sales.

Maktas objects to the petitioners’

request and asserts that the Department

should not use the same interest rates in

computing imputed credit expenses for

U.S. and home market sales.

DOC Position: We disagree with the

petitioners. The Department’s policy is

to calculate imputed credit costs using

a weighted average short-term

borrowing rate which reflects the

currency in which the sale was

invoiced. See, Final Determination of

Sales at Less Than Fair Value: Canned

Pineapple Fruit from Thailand, 60 FR

107 (June 5, 1995); Final Determination

of Sales at Less than Fair Value: Certain

Carbon Steel Butt-Weld Pipe Fittings

from Thailand, 60 FR 10552 (February

27, 1995). Consistent with the

Department’s practice, we have

continued to apply Maktas’s actual

Turkish lira denominated short-term

borrowing rates for all home market

sales. For sales to the United States, all

of which were denominated in U.S.

dollars, we applied a U.S. dollar shortterm interest rate obtained from public

information because Maktas did not
Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices 30325

have any U.S. dollar denominated

borrowings during the POI.

Comment 12 Exchange Rate

Conversion: Maktas asserts that the

currency conversion methodology used

at the preliminary determination should

be discarded for the final determination.

Specifically, Maktas disagrees with the

Department’s policy of using a 40-day

period to establish a benchmark rate for

purposes of defining fluctuations and

sustained movement in the exchange

rate. Maktas argues that a 30-day period

would be more appropriate than a 40-

day period.

More importantly, the respondent

submits that given the extreme

depreciation of the Turkish lira against

the U.S. dollar in 1994, the Department

should use actual daily rates in making

currency conversions.

The petitioners argue that the

Department should continue to use the

currency conversion methodology used

in the preliminary determination for the

final margin calculation.

DOC Position: We believe that it is

more appropriate in this case to use

actual daily exchange rates for currency

conversion purposes. As noted in Policy

Bulletin 96–1: Currency Conversions, 61

FR 9434 (March 8, 1996), the

Department is continuing to examine

the appropriateness of the currency

conversion policy in situations where

the foreign currency depreciates

substantially against the dollar over the

POI. In those situations, it may be

appropriate to rely on daily exchange

rates. When the rate of domestic price

inflation is significant, as it is in this

case, it is important that we use as a

basis for NV home market prices that are

as contemporaneous as possible with

the date of the U.S. sale. This is to

minimize the extent to which calculated

dumping margins are overstated or

understated due solely to price inflation

that incurred in the intervening time

period between the U.S. and home

market sales. For this reason, as noted

above in the Fair Value Comparisons

section, we calculated EPs and NVs on

a monthly average basis. This need for

a high degree of contemporaneity

applies not only to home market sales,

but to the exchange rate as well, since

the dollar value of pasta that Maktas

sells in its home market—upon which

the calculated margin ultimately rests—

depends on (1) the lira price of that

pasta, and (2) the dollar price of the lira.

Since the dollar value of the lira tends

to fall over time—when the rate of

domestic price inflation is significant—

it is just as important to use

contemporaneous exchange rates as it is

to use contemporaneous (liradenominated) home market prices. For

this reason, we have used the daily

exchange rates for currency conversion

purposes.

Comment 13 Inventory Carrying Cost

and Indirect Selling Expenses: Maktas

argues that the Department should make

an adjustment to NV for inventory

carrying costs and indirect selling

expenses. With respect to inventory

carrying costs, the respondent claims

that inventory carrying costs should be

treated in the same manner as imputed

credit expenses, and that no distinction

can be drawn between EP and CEP sales

for purposes of application of inventory

carrying cost. Specifically, Maktas

submits that adjustments for both

imputed credit expenses and imputed

inventory carrying costs are based on

‘‘opportunity cost’’ rationale. As with

imputed credit expenses, Maktas argues

that the opportunity cost of holding

inventory is a real expense that should

be adjusted for regardless of whether the

sales transaction is EP or CEP.

Further, Maktas notes that ‘‘the new

legal requirement of section 773 of the

Act that a ‘fair comparison shall be

made between the export price or

constructed export price and normal

value’ requires that like economic

elements be treated in a like manner.’’

Given the analogy between imputed

credit expenses and inventory carrying

costs, Maktas urges the Department to

adjust normal value for inventory

carrying costs in the same manner as

imputed credit expenses.

Additionally, Maktas asserts that, in

order to make such a ‘‘fair comparison’’,

the Department should adjust normal

value for the difference in indirect

selling expenses attributable to the U.S.

and home market sales.

The petitioners submit that the statute

does not allow the Department to make

the type of adjustments requested by the

respondent. With respect to inventory

carrying costs, the petitioners note that

the respondent fails to recognize an

important difference between imputed

credit expense and inventory carrying

cost which is that while imputed credit

expense is a COS adjustment that

typically can be calculated on a sale-bysale basis, inventory carrying cost

represents indirect selling expenses that

are not tied to any particular sales.

Regarding indirect selling expenses, the

petitioners note that because Maktas’s

U.S. sales are based on export price, no

adjustment to normal value for indirect

selling expenses is permitted.

DOC Position: We agree with the

petitioners that the statute does not

allow the Department to make the type

of adjustments for inventory carrying

costs and indirect selling expenses

requested by Maktas. In export price

sales, it is the Department’s practice to

make an adjustment for inventory

carrying costs or indirect selling

expenses if the respondent claims a

commission adjustment to export price.

Because Maktas’s U.S. sales are based

on export price and no commissions

were reported for either the home or

U.S. market, there is no basis for making

an adjustment for inventory carrying

costs or indirect selling expenses.

Moreover, the deduction of inventory

carrying costs or indirect selling

expenses is not one of the enumerated

requirements under Section 773 of the

Act, which provides for adjustments to

normal value to achieve a fair

comparison between the export price

and normal value.

Regarding Maktas’s assertion the

inventory carrying costs should be

treated in the same manner as imputed

credit expenses, we disagree with

Maktas that the two items are analogous.

Imputed credit expenses represent a

direct selling expense which can be tied

to particular sales. Inventory carrying

costs, on the other hand, represent

indirect selling expenses that would be

incurred regardless of whether

particular sales were made.

Comment 14 Goodwill: Maktas

submits that the Department should

make an adjustment for the ‘‘goodwill’’

which Maktas’s products enjoy in the

domestic market. Specifically, Maktas

notes that its products, which are sold

under the ‘‘Piyale’’ brand name, are well

known throughout Turkey and have

higher value than they enjoy elsewhere.

In the United States, Maktas sells to

importers who, in turn, sell under their

own brand name. Accordingly, Maktas

asserts that an adjustment should be

made in the margin calculation for the

brand recognition it commands in the

domestic market.

The petitioners oppose Maktas’s

request for an adjustment for

‘‘goodwill’’.

DOC Position: We disagree with

Maktas. When making price

comparisons, the Department makes

adjustments to account for any

differences in the prices resulting from

verified differences in circumstances of

sales. The ‘‘goodwill’’ Maktas described

is not an expense item and, therefore

does not qualify as a COS adjustment.

Moreover, such ‘‘goodwill’’ is not

susceptible to verifiable quantification.

Therefore the Department has no basis

to make an adjustment for it.

Comment 15 Corrections Found at

Verification: Maktas requests that a

number of corrections presented at, and

found during, the sales verification

should be incorporated into the
30326 Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices

Department’s calculations of the final

margins.

DOC Position: All corrections as

confirmed on-site at the sales

verification were incorporated in the

Department’s calculation of the final

margin.

Continuation of Suspension of

Liquidation

In accordance with section 733(d) of

the Act, we are directing the Customs

Service to continue to suspend

liquidation of all entries of pasta from

Turkey, as defined in the ‘‘Scope of

Investigation’’ section of this notice, that

are entered, or withdrawn from

warehouse for consumption, on or after

January 19, 1996, the date of publication

of our preliminary determination in the

Federal Register. Article VI.5 of the

General Agreement on Tariffs and Trade

(GATT) provides that ‘‘[n]o product

* * * shall be subject to both

antidumping and countervailing duties

to compensate for the same situation of

dumping or export subsidization.’’ The

Department has determined, in its Final

Affirmative Countervailing Duty

Determination: Certain Pasta from

Turkey, that the product under

investigation benefitted from export

subsidies. Normally, where the product

under investigation is also subject to a

concurrent CVD investigation, we

would instruct the U.S. Customs Service

to require a cash deposit or posting of

a bond equal to the weighted-average

amount by which the normal value

exceeds the export price (as shown

below), minus the amount determined

to constitute an export subsidy. (See,

Antidumping Order and Amendment of

Final Determination of Sales at Less

Than Fair Value: Extruded Rubber

Thread from Malaysia, 57 FR 46150

(October 7, 1992)). However, in this

investigation, Filiz has not cooperated

with the Department and has not acted

to the best of its ability in providing the

Department with necessary information.

This has prevented the Department from

making its normal determination of

whether the subsidies in question may

have affected the calculation of the

dumping margin. Thus, as indicated

above, Filiz’s margin is based on total

adverse facts available, taken from the

petition. Insofar as the dumping margin

for Filiz is not a calculated margin, there

is no way to determine the portion of

the antidumping duty which is

attributable to the export subsidy. For

that reason, and to prevent Filiz from

benefitting from its non-cooperation in

this investigation, we have not

subtracted the amount of any export

subsidy from that margin. For Maktas,

we are subtracting for deposit purposes

the cash deposit rate attributable to the

export subsidies found in the

countervailing duty investigation (12.61

percent) from the antidumping bonding

rate for Maktas. We are also subtracting

from the ‘‘All Others’’ rate the cash

deposit rate attributable to the export

subsidies included in the countervailing

duty investigation for All Others.

This suspension of liquidation will

remain in effect until further notice.

The weighted-average dumping

margins are as follows:

Exporter/manufacturer

Weightedaverage

margin percentages

Deposit percentages

Filiz .................... 63.29 63.29

Maktas ............... 56.87 44.26

All Others .......... 56.87 47.49

Pursuant to section 735(c)(5)(A) of the

Act, the Department has excluded

Filiz’s margin from the calculation of

the All Others rate because it was

determined entirely under section 776

of the Act.

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 whether these imports

are causing material injury, or threat of

material injury, to the industry within

45 days. 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: June 3, 1996.

Paul L. Joffe,

Acting Assistant Secretary for Import

Administration.

[FR Doc. 96–14735 Filed 6–13–96; 8:45 am]

BILLING CODE 3510–DS–P

International Trade Administration

[A–475–818]

Notice of Final Determination of Sales

at Less Than Fair Value: Certain Pasta

From Italy

AGENCY: Import Administration,

International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: June 14, 1996.

FOR FURTHER INFORMATION CONTACT: John

Brinkmann or Michelle Frederick,

Office of Antidumping Investigations,

Import Administration, International

Trade Administration, U.S. Department

of Commerce, 14th Street and

Constitution Avenue, N.W.,

Washington, D.C. 20230; telephone:

(202) 482–5288 or (202) 482–0186,

respectively.

THE APPLICABLE STATUTE: Unless

otherwise indicated, all citations to the

statute are references to the provisions

effective January 1, 1995, the effective

date of the amendments made to the

Tariff Act of 1930 (the Act) by the

Uruguay Round Agreements Act

(URAA).

Final Determination

We determine that certain pasta

(‘‘pasta’’) from Italy is being sold in the

United States at less than fair value

(LTFV), as provided in section 735 of

the Act. The estimated margins are

shown in the ‘‘Suspension of

Liquidation’’ section of this notice.

Case History

Since the publication of the

preliminary determination of sales at

less than fair value in this investigation

on December 14, 1995, (60 FR 1344,

January 19, 1996) (Preliminary

Determination) the following events

have occurred:

In January 1996, the Department

received letters from the AFI Pasta

Group, Pastaficio Guido Ferrara

(interested parties), and Hershey Foods

Corp., Borden Inc., and Gooch Foods,

Inc. (collectively ‘‘the petitioners’’)

regarding the provisional antidumping

measures in this investigation and

whether the suspension of liquidation

affected entries of the subject

merchandise 120 days after the

Department’s preliminary

determination. The Department

determined that the requests for an

extension of the final determination

contained an implied request to extend

the provisional measures period, during

which liquidation is suspended, to six

months (see Extension of Provisional

Measures memorandum dated February

7, 1996).