Antidumping: Welded stainless steel pipe from Taiwan,
[Federal Register: July 16, 1998 (Volume 63, Number 136)]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
DEPARTMENT OF COMMERCE
International Trade Administration A-583-815
Certain Welded Stainless Steel Pipe From Taiwan; Final Results of Administrative Review
AGENCY: Import Administration, International Trade Administration, Department of Commerce.
ACTION: Notice of final results of administrative review.
SUMMARY: On January 9, 1998, the Department of Commerce (the Department) published in the Federal Register the preliminary results of the 1995-1996 administrative review of the antidumping duty order on certain welded stainless steel pipe from Taiwan (A-583-815). This review covers one manufacturer/exporter of the subject merchandise during the period December 1, 1995 through November 30, 1996.
We gave interested parties an opportunity to comment on the preliminary results. Although, based upon our analysis of the comments received, we have changed the results from those presented in our preliminary results of review, a de minimis dumping margin still exists for Ta Chen's sales of welded stainless steel pipe (WSSP) in the United States. Accordingly, we will instruct the U.S. Customs Service to assess antidumping duties on entries of Ta Chen merchandise during the period of review, in accordance with the Department's regulations (19 CFR 353.6).
EFFECTIVE DATE: July 16, 1998.
FOR FURTHER INFORMATION CONTACT: Robert James at (202) 482-5222 or John Kugelman at (202) 482-0649, Antidumping and Countervailing Duty Enforcement Group III, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 20230.
Applicable Statute and Regulations: Unless otherwise indicated, all citations to the Tariff Act of 1930, as amended (the Tariff Act), are to the provisions effective January 1, 1995, the effective date of the amendments made to the Tariff Act by the Uruguay Round Agreements Act (URAA). In addition, unless otherwise indicated, all citations to the Department's regulations are to the regulations codified at 19 CFR Part 353 (April 1, 1997).
On December 30, 1992, the Department published in the Federal Register the antidumping duty order on welded stainless steel pipe (WSSP) from Taiwan (57 FR 62300). On December 3, 1996, the Department published the notice of ``Opportunity to Request Administrative Review'' for the period December 1, 1995 through November 30, 1996 (61 FR 64051). In accordance with 19 CFR 353.22(a)(1) (1997), respondent Ta Chen Stainless Pipe Co., Ltd. and its wholly-owned U.S. subsidiary, Ta Chen International (collectively, Ta Chen), requested that we conduct a review of their sales. On January 17, 1997, we published in the Federal Register our notice of initiation of this antidumping duty administrative review covering the period December 1, 1995 through November 30, 1996 (62 FR 2647).
Because it was not practicable to complete this review within the normal time frame, on July 24, 1997, we published in the Federal Register our notice of extension of time limits for this review (62 FR 39824). We published the preliminary results of this review in the Federal Register on January 9, 1998 (Certain Welded Stainless Steel Pipe From Taiwan; Preliminary Results of Administrative Review, 63 FR 1437 (Preliminary Results)). We published our notice of extension of time limits for these final results in the Federal Register on March 17, 1998 (63 FR 13032).
Furthermore, on January 12 through January 20, 1998, the Department conducted a verification of Ta Chen's home market sales data at Ta Chen's headquarters in Tainan, Taiwan. We also verified Ta Chen's U.S. sales data at the premises of Ta Chen International on January 26 through January 29, 1998 (see ``Results of Verification,'' below). The full results of our verification are detailed in the Department's verification reports. Public versions of these, and all public documents referenced in this notice, are on file in Room B-099 of the main Commerce building.
Petitioners and Ta Chen timely filedcase briefs on May 14, 1998; Ta Chen replied with its rebuttal brief dated May 21, 1998.
The Department has now completed this review in accordance with section 751 of the Tariff Act.
Scope of the Review
The merchandise subject to this administrative review is certain welded austenitic stainless steel pipe (WSSP) that meets the standards and specifications set forth by the American Society for Testing and Materials (ASTM) for the welded form of chromium-nickel pipe designated ASTM A-312. The merchandise covered by the scope of the order also includes austenitic welded stainless steel pipes made according to the standards of other nations which are comparable to ASTM A-312.
WSSP is produced by forming stainless steel flat-rolled products into a tubular configuration and welding along the seam. WSSP is a commodity product generally used as a conduit to transmit liquids or gases. Major applications for WSSP include, but are not limited to, digester lines, blow lines, pharmaceutical lines, petrochemical stock lines, brewery process and transport lines, general food processing lines, automotive paint lines, and paper process machines.
Imports of WSSP are currently classifiable under the following Harmonized Tariff Schedule of the United States (HTS) subheadings: 7306.40.5005, 7306.04.5015, 7306.40.5040, 7306.40.5065, and 7306.40.5085. Although these subheadings include both pipes and tubes, the scope of this investigation is limited to welded austenitic stainless steel pipes. Although the HTS subheadings are provided for convenience and Customs purposes, our written description of the scope of this order is dispositive.
The period for this review is December 1, 1994 through November 30, 1995. This review covers one manufacturer/exporter, Ta Chen.
Results of Verification
As provided in section 782(i) of the Tariff Act, we verified information provided by the respondent using standard verification procedures, including on-site inspection of Ta Chen's facilities in Tainan, Taiwan and Ta Chen International's headquarters in Long Beach, California, the examination of relevant sales and financial records, and selection of original documentation containing relevant information. Our verification results for the home market and U.S. verifications are outlined in public versions of, respectively, the Home Market Verification Report and the U.S. Verification Report, available to the public in Room B-099 of the main Commerce building. In preparing for verification Ta Chen discovered minor corrections which it presented to the Department's verifiers at the start of the home market and U.S. verifications. In addition, as noted in the ``Analysis of Comments'' section, below, our verifications revealed other minor inaccuracies in Ta Chen's submitted data. Where appropriate, we have adjusted Ta Chen's reported sales data to reflect these corrections.
Analysis of Comments Received
Comment 1: Export Price Versus Constructed Export Price Sales
Petitioners take issue with the determination in the Preliminary Results to treat all of Ta Chen's U.S. sales as export price (EP) sales, as defined in section 772(a) of the Tariff Act. Rather, petitioners maintain, Ta Chen's so-called ``back-to-back'' sales through Ta Chen International (TCI) properly are considered constructed export price (CEP) transactions. Petitioners assert that the Department customarily examines the activities of the affiliated U.S. importer in determining whether U.S. sales should be classified as EP or CEP sales using a three-prong test: (i) Whether the merchandise is shipped directly from the manufacturer to the unaffiliated purchaser without entering the physical inventory of the U.S. affiliate; (ii) whether direct shipment from the manufacturer to the unaffiliated purchaser is the customary channel of sales for the subject merchandise; and (iii) whether the U.S. selling agent acted merely as a processor of sales- related paperwork and a communication link between the manufacturer and the unaffiliated purchaser. See Petitioners' May 14, 1998 Case Brief (Case Brief) at 2, citing Roller Chain, Other Than Bicycle Chain, From Japan, 63 FR 25450 (May 8, 1998) (Roller Chain). Even if the transactions involving TCI meet the first two prongs of this test, petitioners continue, record evidence establishes that, as to the third point, TCI acted as more than just a paper processor or communications link. Claiming that TCI is ``integrally involved'' with Ta Chen's U.S. sales of subject merchandise, petitioners point out that U.S. customers approach TCI, not Ta Chen, when seeking price quotes. Case Brief at 3, quoting the Department's Home Market Verification Report at 12. The verification report continues by stating that the president of Ta Chen and TCI, Robert Shieh, responds directly to the unaffiliated U.S. customer. According to petitioners, what happens when the customer rejects the initial quote and further price negotiations are required is not clear; petitioners therefore make the ``reasonable inference'' that TCI concludes any such negotiations itself on behalf of Ta Chen in Taiwan. Id. at 4. Further, petitioners argue, Ta Chen ``glosses over'' Mr. Shieh's role in Ta Chen's U.S. sales; as noted, in addition to being president of Ta Chen, Mr. Shieh is also president of TCI, and spends a considerable amount of his time in the United States at TCI's Long Beach headquarters. Petitioners suggest that this indicates that Mr. Shieh is acting as president of TCI, not of Ta Chen in Taiwan, when he negotiates U.S. sales of welded stainless steel pipe.
Petitioners stress that when viewing sales transactions involving a U.S. firm affiliated with the exporter, the Department will presume that the transactions are CEP sales unless the record indicates that the affiliate's role in the sale was ``incidental or ancillary.'' Case Brief at 5, citing Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products From Korea, 63 FR 13170, 13177 (March 18, 1998) (Korean Steel III). When viewed in its totality, petitioners aver, the evidence demonstrates that TCI's role was more than ancillary and, thus, Ta Chen's U.S.
sales should be treated as CEP sales. For example, petitioners argue, TCI purchases subject pipe from Ta Chen and assumes ownership and risk of loss, and TCI, not Ta Chen in Taiwan, actually enters into the sales contract with the unaffiliated U.S. customers. This situation, petitioners maintain, is analogous to that found in Korean Steel III where, as here, the U.S. affiliate acted as the conduit for the foreign parent's U.S. sales, the U.S. affiliate entered into the sales contracts with unaffiliated U.S. customers, the U.S. affiliate played a key role in all sales activities (such as issuing invoices, collecting payment, financing the sale, etc.), and the U.S. affiliate incurred ``significant selling expenses in the United States.'' Case Brief at 6. In light of TCI's ``very meaningful'' role in Ta Chen's U.S. sales, petitioners conclude, the Department should treat all of Ta Chen's sales as CEP transactions.
Ta Chen counters that the Department's treatment of Ta Chen's U.S. sales as EP transactions was the correct interpretation of the statutory definition of EP sales. Furthermore, Ta Chen insists, nothing found at verification contradicted Ta Chen's long-standing assertion that its U.S. sales comprised EP (or, under the pre-URAA statute, ``purchase price'') transactions. Citing Extruded Rubber Thread From Malaysia, 62 FR 33588 (June 20, 1997) (Extruded Rubber), Ta Chen argues that the Department examined a similar fact pattern surrounding so- called ``back-to-back'' sales and concluded that where all three conditions of the Department's test are met (i.e., the merchandise was shipped directly to the unaffiliated U.S. customer, the channel of distribution was normal for the parties involved, and the U.S. selling agent acted as a communication link only), the transactions qualify for treatment as EP sales. According to Ta Chen, Extruded Rubber also noted that the Tariff Act defines EP as ``the price at which the subject merchandise is first sold (or agreed to be sold) before the date of importation by the producer or exporter of the subject merchandise outside of the United States to an unaffiliated purchaser in the United States * * * '' Ta Chen's Rebuttal Brief at 5, quoting Extruded Rubber at 33597 (Ta Chen's emphasis).
Ta Chen submits that all of its sales of subject pipe during this review were shipped directly from Ta Chen's Tainan plant to the unaffiliated U.S. customer. This channel of distribution, Ta Chen avers, has been customary between Ta Chen and its U.S. customers ``since well before the U.S. dumping matter began,'' noting that it employed ``back-to-back'' sales as one of its major channels of distribution prior to the 1991 filing of the antidumping petition.
As to the third test, whether Ta Chen International acted merely as a processor of sales-related documents and communications link between Ta Chen and its U.S. customers, Ta Chen insists that TCI's activities are even less extensive than those typically cited by the Department as possible indicators that a U.S. affiliate played a more substantial part in the sales in question. For example, Ta Chen continues, the Department's January 22, 1998 Antidumping Manual suggests that functions ``such as the administration of warranties, advertising, in- house technical assistance, and the supervision of further manufacturing may indicate that the [U.S.] agent is more than the sales facilitator envisioned for EP sales.'' Rebuttal Brief at 5, quoting Antidumping Manual, Chapter 7 (Ta Chen's emphasis). That TCI engages in none of the activities suggested as indicating sales might be considered CEP transactions, Ta Chen maintains, further supports the Department's preliminary determination that these sales warranted EP treatment.
Furthermore, Ta Chen continues, in Extruded Rubber the Department found sales to be EP transactions ``irrespective of any involvement in the pricing of these sales by the U.S. subsidiary.'' Rebuttal Brief at 6. In Ta Chen's view the key determinant in the EP versus CEP analysis is the statute's focus on whether the ``subject merchandise is first sold (or agreed to be sold) before the date of importation,'' as is the case in the instant review. Ta Chen submits that for its U.S. transactions the subject merchandise was first sold to the unaffiliated U.S. customer before importation and subsequently shipped directly to that customer, pointing to the purchase orders and shipment dates as confirmation. Thus, Ta Chen argues, the controlling statutory language defines these as EP sales. As to Robert Shieh's involvement in setting prices, Ta Chen argues in both its case and rebuttal briefs that Mr. Shieh ``acts under the direction of Ta Chen Taiwan's Board of Directors'' which has ``directed Mr. Shieh to set U.S. prices based on cost of production in Taiwan and Ta Chen's home market prices * * *'' Ta Chen's Case Brief at 3 and 4; Ta Chen's Rebuttal Brief at 7, quoting Ta Chen's supplemental response at 253. ``Robert Shieh's authority,'' Ta Chen asserts, ``flows from Ta Chen Taiwan,'' and not from TCI. Rebuttal Brief at 9. In any event, Ta Chen concludes, a U.S. affiliate's active participation in the sales process is insufficient grounds for treating sales as EP transactions where the affiliate lacks the ability to set prices or terms of sale. Id. at 8, citing Certain Stainless Steel Wire Rods From France, 58 FR 68865 (December 29, 1993).
Ta Chen also contests several factual conclusions posited in petitioners case brief. According to Ta Chen, TCI passed requests for quotes from U.S. customers to Ta Chen Taiwan, a role consistent with that of a paper processor. Ta Chen also insists that the amount of time Mr. Shieh spends in the United States is a ``personal decision'' relating to his family which is irrelevant to the Department's antidumping analysis. Further, that TCI actually purchases the subject merchandise and then enters into contracts to sell it to unaffiliated U.S. customers (in ``back-to-back'' sales transactions) is the same situation found in Extruded Rubber and Cold-Rolled and Corrosion- Resistant Carbon Steel Flat Products From Korea, 62 FR 18404 (April 15, 1997) (Korean Steel II), where the Department analyzed the sales in question as EP transactions. Finally, Ta Chen rejects petitioners' ``speculative claims'' that TCI takes over and concludes price negotiations for Ta Chen's U.S. sales independently of Ta Chen Taiwan in those cases where a customer rejects Ta Chen's initial price offering.
Furthermore, Ta Chen argues, petitioners reliance on Korean Steel III is misplaced, noting several quantitative and qualitative differences between the activities of TCI when compared to those of the affiliated U.S. resellers in Korean Steel III. Ta Chen suggests that in the latter case, U.S. customers seldom had contact with the foreign producer, nor did the foreign producer set prices for U.S. sales. Furthermore, the U.S. affiliates financed U.S. sales by borrowing to finance accounts receivable. These facts, Ta Chen insists, do not obtain in the instant review.
Assuming, arguendo, that Ta Chen's sales are properly considered CEP transactions, Ta Chen suggests that the record contains sufficient information to make any adjustments to U.S. price and normal value required under a CEP analysis. Furthermore, Ta Chen argues that should the Department elect to treat Ta Chen's sales as CEP transactions, Ta Chen should be granted a CEP offset in lieu of a level-of-trade adjustment, as its home market sales represent a more advanced stage of marketing than the Ta Chen--TCI CEP level of trade. Ta Chen makes further comments regarding the Department's treatment of sales to specific customers in prior review periods. As these customers do not appear in this review, any comments
concerning sales made in prior PORs are thus irrelevant to this review and are not addressed here.
We disagree with petitioners, and agree, in part, with respondent that Ta Chen's U.S. sales in this review warrant treatment as EP transactions. As a threshold matter, while we agree with Ta Chen that its U.S. sales in this review warrant EP treatment, we disagree with Ta Chen's assertions that the statute requires the Department in every instance to treat sales which precede importation as EP sales. Rather, while the statute defines EP as involving sales made prior to importation, the relevant statutory definition of CEP states clearly that
* * *``constructed export price'' means the price at which the subject merchandise is first sold (or agreed to be sold) into the United States before or after the date of importation by or for the account of the producer or exporter of such merchandise or by a seller affiliated with the producer or exporter, to a purchaser not affiliated with the producer or exporter * * *
See Section 772(b) of the Tariff Act (emphasis added).
Thus, nothing in the statute requires the Department to treat as EP transactions all sales which happen to precede the date of importation. Rather, sales taking place prior to importation may be either EP or CEP sales, given the specific circumstances surrounding the transactions. In the instant review, as we stated above, the evidence on record does not support a reclassification of Ta Chen's U.S. sales from EP to CEP transactions. Nothing in the statute, however, precludes the Department from doing so, where appropriate.
To ensure proper application of the statutory definitions, where a U.S. affiliate is involved in making a sale, we consider the sale to be CEP unless the record demonstrates that the U.S. affiliate's involvement in making the sale is incidental or ancillary. See Korean Steel III, 63 FR 13170, 13177 (March 18, 1998). Whenever sales are made prior to importation through an affiliated entity in the United States, the Department applies a three-pronged test to determine whether to treat such sales as EP, as follows: (i) Whether the merchandise was shipped directly to the unaffiliated buyer, without first being introduced into the affiliated selling agent's inventory; (ii) whether direct shipment from the manufacturer to the unaffiliated buyer was the customary channel for sales of this merchandise between the parties involved; and (iii) whether the affiliated selling agent located in the United States acts only as a processor of sales-related documentation and communication link between the foreign producer and the unaffiliated purchaser. See, e.g., PQ Corp. v. U.S., 652 F. Supp. 724, 731 (CIT 1987) and Outokumpu Copper Rolled Products v. United States, 829 F. Supp. 1371, 1379 (CIT 1993). Where all three of these criteria are met, we consider the exporter's sales functions to have been relocated geographically from the country of exportation to the United States, where the sales agent performs them. See, e.g., Large Newspaper Printing Presses and Components Thereof, Whether Assembled or Unassembled, From Germany, 61 FR 38166 (July 23, 1996), New Minivans From Japan, 57 FR 21937 (May 26, 1992), and Certain Internal-Combustion Forklift Trucks From Japan, 53 FR 12552 (April 15, 1988). Furthermore, as we stated in Stainless Steel Wire Rod From Spain, 63 FR 10849 (March 5, 1998) (Preliminary Determination), where ``the activities of the U.S. affiliate are ancillary to the sale (e.g., arranging transportation or customs clearance), we treat the transactions as EP sales. Where the U.S. affiliate is substantially involved in the sales process (e.g., negotiating prices, performing support functions), we treat the transactions as CEP sales.'' 63 FR 10849, 10852; see also Korean Steel III.
As for the first criterion in this case, i.e., direct shipment to the unaffiliated U.S. customer, no party to these proceedings has presented any evidence to challenge Ta Chen's statements that in the instant review Ta Chen shipped the subject merchandise directly to the unaffiliated U.S. customer's location (or to the U.S. port designated by the customer) without first introducing the merchandise into TCI's physical inventory. Further, we discovered no evidence at verification to suggest that the merchandise was shipped in any other fashion.
With respect to the second criterion, i.e., whether direct shipment to the customer is the customary channel of trade, we agree with Ta Chen. No evidence on record contradicts Ta Chen's statement that direct shipment was the normal course of business long before this dumping matter began. See Ta Chen's April 14, 1997, questionnaire response at 5 and 6. In the most-recently-concluded past review, the Department has treated Ta Chen's sales as EP sales based, in part, upon direct shipment from Ta Chen to the U.S. customer. See Certain Welded Stainless Steel Pipe From Taiwan; Preliminary Results of Administrative Review, 62 FR 1435, 1436.
With respect to the third criterion, i.e., whether Ta Chen International (TCI) acted as a processor of sales-related documentation and a communication link with the unaffiliated purchaser, the facts on record indicate that TCI's role is ancillary to the sales process with respect to sales of subject merchandise during this administrative review. In this review TCI did not play a key role in the sales negotiation process, nor did TCI play a major role in the selling activities in the United States. Accordingly, we have continued to accord EP treatment to Ta Chen's sales in this review.
In this case the available evidence of record indicates that Ta Chen in Taiwan is responsible for setting the prices of U.S. sales, acting through its president, Robert Shieh.‹SUP›1‹/SUP› Ta Chen sets base, or minimum, prices using its costs of production in Taiwan. Ta Chen responds to requests for price quotes, and Ta Chen officials in Tainan develop new quotes for any sizes or schedules of pipe not found on Ta Chen's prepared lists. See, e.g., Ta Chen's supplemental response at 79, n. 12, and U.S. Verification Report at 10. Further, Ta Chen knows the final price to the U.S. customer at the time it sets its transfer prices between Ta Chen and TCI, and the record clearly indicates that TCI has no say in the prices of these transactions.‹SUP›2‹/SUP› Thus, the subject merchandise is first sold to the unaffiliated customer in the United States before it is sold to the affiliated distributor, TCI. There is no record evidence, either submitted by the parties or generated at verification, to indicate that TCI has any independent authority to negotiate or set prices for direct sales of subject merchandise in the United States. For example, the Home Market Verification Report at 13 notes that the vice-president of TCI will not quote prices to customers; rather, he defers to Mr. Shieh, whether the latter is in Long Beach or in Tainan. This is decidedly not the case for TCI's sales of non-subject merchandise from its
warehouse facilities. The U.S. Verification Report notes that:
\1\ While we agree with Ta Chen that in setting prices Mr. Shieh is acting principally in his role as president of Ta Chen, rather than as president of TCI, we reject Ta Chen's dictum that he ``acts under the direction of Ta Chen's Board of Directors,'' or that the Board of Directors issues specific instructions to Mr. Shieh as to how to set prices. Rather, the record evidence, including Mr. Shieh's statements at verification, makes abundantly clear that Mr. Shieh acts on his own authority with no direction or input whatever from any other member of Ta Chen's Board.
\2\ That TCI has no say whatever in the profitability of its own sales of subject merchandise, by determining the amount of a price markup, is further evidence that the entire sales process is controlled by Ta Chen in Taiwan. See Korean Steel III at 13183.
[c]ustomers' requests for price quotes are handled by TCI and not forwarded to Ta Chen. A number of officials at TCI are authorized to provide quotes to customers for these sales * * *. The customer's [purchase order] is handed directly to TCI's shipping
department for preparation and shipment.
U.S. Verification Report at 8 (emphasis added).
Moreover, the authority to set prices as indicated above is further evidenced by the ways in which the companies set prices for ``back-to- back'' sales and sales out of TCI's inventory. The prices of TCI's sales from its Long Beach inventory are set on an entirely different basis than prices for direct shipments. Prices for products sold out of inventory are derived from a multiplier of a domestic mill's list prices, whereas prices for direct shipments are computed from Ta Chen's cost of production. Finally, unlike the case of Korean Steel III, in the present case unaffiliated U.S. customers maintain direct contact with the foreign exporter or producer, Ta Chen.
With respect to any subsequent price negotiations that may become necessary when a customer rejects Ta Chen's initial quote, it is clear from the record that in Ta Chen's ``back-to-back'' sales arrangement no official other than Mr. Shieh is authorized to provide prices, grant discounts, or allow credits for damaged or defective goods. After discussions with company officials at verifications in Tainan and Long Beach, it is clear that TCI company officials are not authorized to negotiate prices. See, e.g., Home Market Verification Report at 13 (``Using the same pricing scheme (cost + GNA + profit), Ta Chen Taiwan will provide a price quote''), and U.S. Verification Report at 3 (``While TCI's vice-president, James Chang, is nominally head of the pipe and fittings sales division, Mr. Chang himself averred that Mr. Shieh `handles all the [pipe and pipe fittings] sales' '').
As for petitioners' observation that Ta Chen resumed sales of subject merchandise from inventory immediately following the instant POR, thus supporting a conclusion that Ta Chen's sales in this POR should be considered CEP transactions, we find this fact does not relate to the issue of how direct ``back-to-back'' sales were negotiated during the instant review. As we have noted, sales from inventory follow an entirely different course, and are concluded by different individuals, using different pricing formulae, than are Ta Chen's direct ``back-to-back'' sales.
Further, we did not include in our analysis the fact that TCI did not engage in such activities as warranties, advertising, in-house technical assistance and supervision of further manufacturing, as was the case, for example, in Korean Steel III and Certain Corrosion- Resistant Carbon Steel Flat Products and Certain Cut-to-Length Carbon Steel Plate From Canada, 63 FR 12725 (March 16, 1998). Although these types of activities are clearly selling functions, the issue of who performs such activities is only relevant where such activities are in fact performed for the sale of the subject merchandise. In this case, neither TCI nor Ta Chen engaged in such activities with respect to sales of the subject merchandise.‹SUP›3‹/SUP›
\3\ Ta Chen Taiwan does provide minimal advertising in the form of product brochures; no other advertising medium is employed either by Ta Chen or by TCI.
The purpose of this portion of the test is to determine which entity performs the primary selling functions pertaining to the sale of the subject merchandise during the POR. Accordingly, that analysis is conducted on a case-by-case basis and is based upon the actual selling functions performed in each case. In the present case the selling activities performed for the sale of this commodity product, for both Ta Chen and TCI combined, appear to be minimal.
Finally, during this review, we note that TCI engaged in the process of issuing invoices, collecting payment, paying antidumping duty deposits, and taking title to the subject merchandise after entry into the United States. We do not find that these activities alone are sufficient to warrant treatment of such sales as CEP transactions. Rather, consistent with our past precedent in these matters, such activities are fully consistent with those of the selling agent that takes over the sales functions which have been ``relocated geographically from the country of exportation to the United States, where the sales agent performs them.'' Large Newspaper Printing Presses and Components Thereof, Whether Assembled or Unassembled, From Germany, 61 FR 38166 (July 23, 1996).
Comment Two: U.S. Packing Costs
Petitioners charge Ta Chen with understating the cost of packing materials (specifically, wooden crates) used to package shipments for export to the United States. According to petitioners, the Department's Home Market Verification Report notes that this understatement occurred on four of the five sales transactions examined at verification. Petitioners urge the Department to make an upward adjustment to Ta Chen's export packing materials equal to the average percentage difference between the reported material expenses and the actual amounts found at verification.
Also understated, petitioners contend, was Ta Chen's packing labor for export sales. Petitioners note that Ta Chen's supplemental questionnaire response and home market and U.S. sales listings contained revised packing labor costs, with labor costs for home market packing considerably higher than that for U.S. sales. Turning to the Department's verification report, petitioners note that Ta Chen derived these figures using estimates provided by Ta Chen's supervisor for packing, but was unable to provide any documentation or worksheets to support the supervisor's estimates. Petitioners suggest that Ta Chen contradicted these estimates when it admitted at verification that ``export shipping, in fact, requires more steps and takes longer per kilogram than home market shipments.'' Case Brief at 8, quoting the Home Market Verification Report at 21 and 22 (petitioners' emphasis omitted). Thus, petitioners insist, by Ta Chen's own admission the actual packing labor costs for U.S. sales exceed actual packing labor costs for domestic shipments within Taiwan. That statement is consistent with the extra steps (such as packing the subject pipe in wooden crates) required for export shipments. To correct this alleged under-reporting of U.S. packing labor, petitioners argue, the Department should use the ratio of U.S. and home market packing material costs as the basis for adjusting upward Ta Chen's U.S. packing labor expenses.
Ta Chen submits that its records do not permit a breakdown of packing labor by market or product type and, therefore, it simply allocated packing costs over the U.S. and home market weights packed. According to Ta Chen, it included revised packing costs based on an estimate of the relative time spent packing home market and export shipments in its supplemental response as instructed by the Department in its supplemental questionnaire. Ta Chen concedes that export shipments require more packing materials and more steps to pack the merchandise than do shipments within Taiwan. On the other hand, Ta Chen continues, the larger quantities of merchandise packed for export work to reduce the per-kilogram packing costs associated with export sales. As for petitioners' comments concerning wooden crate expenses, Ta Chen did not reply.
Noting that it can ``appreciate'' the Department seeking to determine a more accurate method of calculating packing labor costs (by investigating alternative reporting methodologies in its supplemental questionnaire), Ta Chen expresses ``no objections'' to the Department's use of the data originally submitted with Ta Chen's April 14, 1997 response. Ta Chen does, however, object to petitioners' proposal to recalculate packing labor costs based on the ratio of packing material costs for the respective markets, claiming that such an allocation ``makes no sense'' and has no rational connection to actual packing labor time.
We agree with petitioners on both points. During verification we compared the reported export packing material costs for the wooden crates, reported as data field PACKM1P, to the actual per-kilogram expenses as reflected in Ta Chen's ``Packing & Finished Goods Turn-in Reports.'' For four of the five transactions examined Ta Chen's reported packing material expenses were understated (wooden crate costs for the remaining transaction were overstated). We conclude, therefore, that Ta Chen's allocation methodology for reporting these expenses bears little or no relationship to the manner in which these costs are actually incurred. Therefore, we have recalculated Ta Chen's wooden crate expenses using Ta Chen's own data gathered at verification. Based on these data, we have adjusted PACKM1P upward by the average percentage difference between the actual wooden crate costs reflected in Ta Chen's shipping department records and the values reported in Ta Chen's U.S. sales listing. See the Department's Final Results Analysis Memorandum, July 8, 1998, a public version of which is on file in Room B-099 of the main Commerce building.
With respect to packing labor, as noted in the Ta Chen Verification Report, packing for export requires additional steps, additional materials, and, consequently, additional time. However, Ta Chen used an allocation methodology for its packing labor expenses which apportions a significantly greater amount of these expenses to its home market sales, based upon ``an estimate provided by the supervisor of the packing division.'' Home Market Verification Report at 21. The resultant home market and U.S. packing labor factors do not, as the report notes, ``comport with Ta Chen's actual experience in packing subject merchandise for the respective markets.'' That the report also notes ``no discrepancies with this allocation'' cannot be read as the Department's endorsement of the specific allocation methodology selected. Rather, it indicates that Ta Chen used verifiably accurate figures for total labor expense and total shipments in its allocation, not that the allocation methodology itself was appropriate in this case. In fact, as with the wooden crate expenses, Ta Chen's method of reporting its packing labor expenses bears no relationship to the manner in which Ta Chen actually incurred these expenses. Ta Chen's use of an estimate to allocate packing labor expenses ``does not necessarily mean that [Ta Chen] incurred the expenses differently'' due to shipping for the home market versus for the export market. Tapered Roller Bearings and Parts Thereof, Finished and Unfinished From Japan, 63 FR 2558, 2579 (January 15, 1998) (TRBs From Japan). Rather, the sole support for this allocation is the allocation itself. When we asked officials at Ta Chen to provide some support, in the form of internal time studies, worksheets used by the supervisor in devising the estimate, etc., Ta Chen responded that it had no such documentation. Therefore, we have rejected Ta Chen's reporting of packing labor based upon the unsupported estimate of the packing labor supervisor.
Likewise, while not as egregious, Ta Chen's original packing labor methodology included in its April 14, 1997 response has the effect of understating packing labor costs attributable to export shipments while overstating these costs for home market shipments. We have stated in a different context that we will not reject a respondent's allocation methodologies in favor of the facts otherwise available if (i) a fully- cooperating respondent is unable to report the requested information in a more specific manner and (ii) the selected allocation methodology is not unreasonably distortive. See Antifriction Bearings (Other Than Tapered Roller Bearings), and Parts Thereof, From France, et al., 72 FR 2081, 2090 (January 15, 1997); see also TRBs From Japan, 63 FR 2558, 2566 (January 15, 1998). While we believe that Ta Chen has satisfied the first test (Ta Chen's records kept in its ordinary course of business do not readily permit a breakdown of home market versus export packing labor), we cannot accept a resulting allocation methodology which is unreasonably distortive. Allocating this expense so that home market packing labor is equal to, or greater than, export packing labor, while simultaneously acknowledging that the latter is more labor-intensive, is unreasonably distortive.
As to Ta Chen's suggestion that it merely revised its labor costs in response to the Department's request, we reject that assertion. The Department's inquiry on this point, included in its October 9, 1997 supplemental questionnaire, reads:
It appears as though you have reported the same packing labor costs for both H[ome] M[arket] and U.S. sales while your response indicates that U.S. sales require additional labor (i.e., packing of merchandise into wooden boxes). Please explain and, if necessary, revise your labor costs to reflect this additional service for export sales.
Supplemental Questionnaire at 8.
In response, Ta Chen argued that any differences in packing labor expenses in the two markets would, of necessity, be de minimis, but then proceeded to reallocate these expenses in such a fashion as to actually decrease the portion of Ta Chen's labor expenses relating to export shipments. As indicated above, we find that neither of Ta Chen's selected reporting methodologies reflects its actual experience in the packing and shipping of subject merchandise. Therefore, we have recalculated Ta Chen's U.S. packing labor expenses. As facts available, we relied on Ta Chen's own data submitted on the record of this review. We compared the ratio of home market to U.S. packing material costs and applied the resulting ratio to Ta Chen's reported packing labor. For a discussion of the precise calculation of this revised packing labor factor, please see the Department's Final Results Analysis Memorandum, a public version of which is on file in Room B-099 of the main Commerce building.
Comment Three: Import Duties and Cost of Production
Ta Chen imports stainless steel coil to its customs-bonded factory in Tainan where it fashions the stainless steel into finished pipe subject to the order and other merchandise (for example, stainless steel pipe fittings) which is not subject to the order. It also resells some stainless steel coil in the home market. For finished products subsequently sold in Taiwan Ta Chen is liable for import duties (these duties are forgiven if the finished products are exported). Petitioners note that the Department in its Preliminary Results increased U.S. price by the amount of Taiwan import duties because Ta Chen's home market prices included these duties. If, petitioners suggest, Ta Chen's home market prices included import duties on imported stainless steel coil, Ta Chen's cost of production should also reflect
these home market duties to avoid comparison of duty-inclusive home market prices to duty-exclusive costs of production. Petitioners contend that such an approach would be consistent with the Department's treatment of this identical issue in the final results of the 1994-1995 administrative review. Case Brief at 10 and 11, citing Certain Welded Stainless Steel Pipe From Taiwan; Final Results of Administrative Review, 62 FR 37543, 37555 (July 14, 1997) (Stainless Pipe From Taiwan).
Ta Chen responds by confirming that its home market gross unit prices include Taiwan import duties, and suggests that the Department deduct these duties when calculating the net home market price used for comparison to COP. This approach, Ta Chen avers, ``most accurately determines the true profitability of each individual sale.'' Rebuttal Brief at 17. The alternative, i.e., adding the import duties to Ta Chen's reported costs of production, would, Ta Chen insists, result in double-counting of these duties.
We agree with petitioners and with Ta Chen. As we stated in the final results of the 1994-1995 administrative review, ``[w]e have adjusted our calculation of the net home market price used in our COP test to deduct the amount of the import duties.'' Stainless Pipe From Taiwan 62 FR 37543, 37555 (July 14, 1997).
Consistent with Stainless Pipe From Taiwan, we conducted the cost test on a duty-exclusive basis. Thus, no change is required to our final margin computer program because the preliminary program already deducts import duties from the net price used in the cost test. See the Public Version of the Department's Preliminary Analysis Memorandum, December 29, 1997, at Attachment One, line 148.
Comment Four: Duty Drawback
In addition to their comment regarding the treatment of import duties in Ta Chen's cost of production, petitioners argue that Ta Chen is not entitled to an upward ``duty drawback'' adjustment to EP. Petitioners note that unlike in prior reviews, Ta Chen purchased much of the stainless steel coil used to fabricate subject WSSP from domestic sources; the Home Market Verification Report states that a Taiwanese mill was Ta Chen's single largest coil supplier during the POR. Case Brief at 12, quoting the Home Market Verification Report at 10. Furthermore, petitioners maintain, Ta Chen's own questionnaire response indicated that Ta Chen ``does not pay any Taiwan import duties on material used to make pipe.'' Id., quoting Ta Chen's April 14, 1997 response at 70. Petitioners contend that this issue did not arise in prior reviews when Ta Chen imported all of the stainless steel coil used to produce subject merchandise (and, thus, all home market sales of finished pipe were subject to the Taiwanese import duties). In contrast, petitioners argue, in the instant review the record indicates that a portion of Ta Chen's input stainless steel coil came from Taiwanese mills. In light of this change petitioners urge the Department to ``conduct its standard analysis to determine whether Ta Chen meets the requirements for a duty drawback adjustment.''
Petitioners point to Stainless Steel Bar From India, where the Department stated that any duty drawback adjustment would depend upon a finding that (i) the import duty and rebate are directly linked to, and dependent upon, each other, and (ii) the company claiming the adjustment can demonstrate sufficient imports of raw material to account for the claimed drawback received. Case Brief at 13, quoting Stainless Steel Bar From India; Final Results of Antidumping Duty Administrative Review, 63 FR 13622, 13625 (March 20, 1998). According to petitioners, information gathered at verification concerning Ta Chen's purchases of stainless steel coil from domestic and off-shore mills indicates that Ta Chen's imports of stainless steel coil were not sufficient to account for the drawback applicable to Ta Chen's exports. Furthermore, petitioners continue, it is reasonable to assume that Ta Chen used domestic coil to produce subject pipe for sale in the home market precisely because such coil would not be subject to Taiwan import duties. Because Ta Chen did not meet the Department's requirements for a duty drawback adjustment, petitioners conclude, the Department should deny this adjustment in the final results of this review.
Ta Chen insists it is entitled to a circumstance-of-sale adjustment to account for home market import duties, just as a ``comparable circumstances of sale [sic] adjustment is made for the U.S. import duties Ta Chen pays on its U.S. sales.'' Rebuttal Brief at 17. According to Ta Chen, its section B home market sales listing reflects that, in fact, for most sales the unaffiliated customer paid the duties (and, therefore, Ta Chen reported a value of zero for import duties). In those instances where Ta Chen did pay the duties, it reported these on a per-kilogram basis. Ta Chen notes that its home market gross unit prices are reported inclusive of import duties.
As for petitioners' comments regarding the quantities of stainless steel coil purchased by Ta Chen from domestic and off-shore mills, Ta Chen points out that petitioners failed to note the ``enormous quantity'' of stainless steel coil sold in coil form, i.e., as purchased, by Ta Chen. Furthermore, the figures cited by petitioners demonstrate the stainless steel coil imported by Ta Chen was more than sufficient to account for the volume of pipe Ta Chen sold domestically and for export.
We disagree with petitioners. Welded stainless steel pipe is produced, essentially, from a single raw material: annealed and pickled austenitic stainless steel sheet or plate in coil form. Traditionally Ta Chen sourced all of its stainless steel coil from foreign mills; during the instant period of review as well the vast majority of Ta Chen's coil came from abroad. As Ta Chen's plant is a customs bonded facility, imports of stainless steel coil are not subject to import duties at the time of importation. Import duties are only owed at such time as the finished merchandise enters Taiwan customs territory, i.e., it is sold in the home market. No import duties are collected if the imported raw material is subsequently re-exported, whether in the form of finished pipe or pipe fittings, or in cut-to-length or coil form. Ta Chen's questionnaire responses and the information presented at verification amply demonstrate the nature of these import duties and the manner in which they are assessed. See, e.g., Ta Chen Verification Report at 23 and 24. Further, Ta Chen satisfied the Department as to the amount of such duties (``[w]e traced the total [duties paid] to Ta Chen's monthly import duty for domestic sales report, general ledger, and statement of checking account without discrepancy * * *''). Id. at 15. As the Court of International Trade has consistently held, ``there is no requirement that [a] specific input be traced from importation through exportation before allowing drawback on duties paid * * *'' See, e.g., Far East Machinery Co. v. U.S., 699 F. Supp. 309, 312 (CIT 1988); see also LaClede Steel Co. v. U.S., Slip Op. 94-160 (October 12, 1994) (LaClede Steel). Thus, we are convinced that the import duties and the amount ``not collected by reason of the exportation of the subject merchandise to the United States'' are directly linked to, and dependent upon,
each other. See Section 772(c)(1)(B) of the Tariff Act.
As for the second prong of the test, whether there were sufficient imports of raw materials to account for the drawback received, the record evidence, including data obtained during verification, indicates that Ta Chen more than satisfied this requirement. As Ta Chen notes in its rebuttal brief, petitioners' comment fails to take into account the volumes of stainless steel coil that Ta Chen re-sold in coil form in the home market, or subsequently exported in coil form. Nor do petitioners consider the volume of imported and domestic stainless steel coil used to fabricate non-subject merchandise for the domestic and export markets, such as stainless steel pipe fittings. In this case, we believe that we have, as the Court stated in LaClede Steel, ``verified that [the respondent] imported sufficient raw materials to account for duty drawback received on exports of pipe.''
Finally, with respect to Ta Chen's statement that it ``does not pay any Taiwan import duties on material used to make pipe,'' the record indicates clearly that Ta Chen does not pay these duties at the time of importation of the stainless steel coil. Rather, these duties are due when the finished product (e.g., welded stainless steel pipe) enters Taiwan customs territory. Thus, we find this case analogous to Certain Welded Carbon Steel Pipes and Tubes From India, where a similar import duty scheme was described as presenting ``the rare situation in which, rather than being rebated as is usually the case, the import duties were actually `not collected, by reason of the exportation of the subject merchandise to the United States.' '' 62 FR 47632, 47634 (September 10, 1997). As we concluded in that case, so we conclude here: ``[t]his type of program falls within the express language of section 772(c)(1)(B)'' of the Tariff Act. Accordingly, we have accepted Ta Chen's claimed adjustment for duty drawback for these final results.
Comment Five: Effect of Compensating Balances on U.S. Credit Expenses
According to petitioners, Ta Chen's imputed credit expenses for U.S. sales must be increased to include the costs of compensating balances. Petitioners note that the Department's October 9, 1997 supplemental questionnaire and Ta Chen's October 31, 1997 supplemental response both indicated that Ta Chen's reported imputed credit expenses did not take into account these compensating balances. Further, Ta Chen's supplemental response provided the amounts of these compensating balances and the factor necessary to calculate revised imputed credit expenses for U.S. sales. Petitioners urge the Department to implement this revision for the final results of this review.
Ta Chen offered no rebuttal to this comment.
We agree with petitioners and have made the appropriate correction to U.S. credit costs. We did this by multiplying the reported credit amounts on Ta Chen's U.S. sales listing by the revised factor supplied by Ta Chen to account for compensating balances.
Comment Six: Comments on Verification Reports
Ta Chen insists that the completeness of its U.S. sales listing was fully verified through reconciliation of the reported sales values to Ta Chen's audited financial statements, a process used by Ta Chen and accepted by the Department in the past. Ta Chen takes issue with the tone of the U.S. Verification Report which suggests that Ta Chen failed to provide documentation of its reported U.S. sales quantities. According to Ta Chen, its audited financial statements record total sales value, but do not contain any information concerning sales quantities. The Department, Ta Chen avers, has never insisted on a separate confirmation of its sales quantities, once it had reconciled successfully its overall sales value.
Ta Chen also maintains that it provided ample documentation at verification to demonstrate that certain U.S. sales of pipe entered the United States prior to the instant POR and, therefore, properly were excluded from Ta Chen's section C U.S. sales listing.
Contrary to statements in the Ta Chen Verification Report, Ta Chen submits, its packing personnel did not have difficulty bundling and weighing subject pipe and, in any event, the weight figures reported to the Department were taken from records kept in Ta Chen's normal course of business.
With respect to home market sales to one affiliated customer, Blossum, Ta Chen intimates that these sales represented an insignificant portion of Ta Chen's home market sales and, thus, Blossum's downstream sales would not be required for the Department's analysis.
Ta Chen also commented on our description of the verification of home market freight expenses. Ta Chen attributes the uncertainty of one company official as to home market shipping distances to that ``high- level'' official's unfamiliarity with the minutiae of domestic shipping patterns; when the responsible company official addressed the issue, no uncertainty remained. Also, Ta Chen sold its company-owned flatbed truck at the midpoint of this POR. While Ta Chen's home market freight expenses were not reduced by the value of refunded vehicle plate taxes for the six months after Ta Chen sold its truck, Ta Chen suggests that (i) the data exist to permit a recalculation and (ii) any such revision would have a de minimis effect. As to fuel costs, Ta Chen takes issue with the Home Market Verification Report's comment that Ta Chen could not document these costs. According to Ta Chen, there were no outstanding, unanswered requests for gasoline receipts or other documentation at the close of verification.
Finally, Ta Chen makes a number of suggestions to correct typographical errors in the reports.
While we agree in essence with many of Ta Chen's comments, we stand by the verification reports as written. With respect to the completeness test, we were unable to verify separately the quantities reported in Ta Chen's U.S. sales listing. However, we did fully reconcile the reported U.S. sales value to Ta Chen's and TCI's audited financial statements and, furthermore, noted no discrepancies in an unusually extensive random check of invoices and purchase orders issued throughout the POR. The Department considers Ta Chen's home market and U.S. sales quantities fully verified. We also agree with Ta Chen that it satisfied the verifiers that certain sales of pipe entered the United States prior to the POR, and that no outstanding questions on this issue remained at the close of verification.
As for the comment on the facility with which Ta Chen's packing personnel handled pipe at the scale, Ta Chen claimed at verification that the weights reported for its home market and U.S. sales listings were based on transaction-specific actual weights obtained, Ta Chen claimed, by weighing each shipment of pipe as it was prepared for dispatch. We asked to see this process in operation and returned to Ta Chen's pipe mill. There Ta Chen personnel mishandled the pipe, had difficulty gathering the proper number of pieces in a single bundle, struggled to fasten the scale's sling to the scale's lift, and, using a two-button switch box, nonetheless lowered the scale when they meant to raise it, and raised it when they meant to lower it. Thus, we
stand by our characterization of this process as ``difficult.''
Ta Chen provided exhaustive explanations of its sales transactions involving Blossom. We have no basis for rejecting Ta Chen's sales to Blossom or for requiring that Ta Chen report Blossom's subsequent home market sales. Similarly, we did not use the downstream U.S. sales through one U.S. customer, Team Alloys, that Ta Chen subsequently acquired, even though Ta Chen reported these downstream sales in a separate section C computer file.
As for home market shipping expenses, we have used the expenses as reported by Ta Chen, and have made no corrections in light of our findings at verification.
Finally, the Department agrees with Ta Chen's suggested typographical clarifications.
Final Results of Review
Based on our review of the arguments presented above, for these final results we have made changes in our margin calculations for Ta Chen. After comparison of Ta Chen's EP to normal value (NV), we have determined that Ta Chen's weighted-average margin for the period December 1, 1994 through November 30, 1995 is 0.10 percent.
The Department shall determine, and the U.S. Customs Service shall assess, antidumping duties on all appropriate entries. Individual differences between U.S. price and NV may vary from the percentage stated above. The Department will issue appraisement instructions directly to Customs.
Furthermore, the following deposit requirements will be effective upon completion of the final results of this administrative review for all shipments of WSSP from Taiwan entered, or withdrawn from warehouse, for consumption on or after the publication of the final results of this administrative review, as provided in section 751(a)(1) of the Tariff Act:
(1) The cash deposit rate for Ta Chen will be zero percent, in light of its de minimis weighted-average margin;
(2) For previously reviewed or investigated companies other than Ta Chen, the cash deposit rate will continue to be the company-specific rate published for the most recent period;
(3) If the exporter is not a firm covered in this review, a prior review, or the LTFV investigation, but the manufacturer is, the cash deposit rate will be the rate established for the most recent period for the manufacturer of the merchandise; and
(4) If neither the exporter nor the manufacturer is a firm covered in this or any previous review conducted by the Department, the cash deposit rate will be 19.84 percent. See Amended Final Determination and Antidumping Duty Order; Certain Welded Stainless Steel Pipe From Taiwan, 57 FR 62300 (December 30, 1992). These deposit requirements, when imposed, shall remain in effect until publication of the final results of the next administrative review.
All U.S. sales by the respondent Ta Chen will be subject to one deposit rate according to the proceeding. The cash deposit rate has been determined on the basis of the selling price to the first unrelated customer in the United States. For appraisement purposes, where information is available, we will use the entered value of the subject merchandise to determine importer-specific appraisement rates.
This notice also serves as a final reminder to importers of their responsibility under 19 CFR 353.26 to file a certificate regarding the reimbursement of antidumping duties prior to liquidation of the relevant entries during this review period. Failure to comply with this requirement could result in the Secretary's presumption that reimbursement of the antidumping duties occurred and the subsequent assessment of double antidumping duties.
This notice also serves as a reminder to parties subject to administrative protective orders (APOs) of their responsibility concerning the disposition of proprietary information disclosed under APO in accordance with 19 CFR 353.34(d). Timely written notification of the return or destruction of APO materials, or conversion to judicial protective order, is hereby requested. Failure to comply with the regulations and the terms of an APO is a sanctionable violation.
This determination is issued and published in accordance with sections 751(a)(1) and 777(l)(1) of the Tariff Act.
Dated: July 8, 1998. Richard W. Moreland, Acting Assistant Secretary for Import Administration.
[FR Doc. 98-18882Filed7-15-98; 8:45 am]
BILLING CODE 3510-DS-P