Notice of Final Determination of Sales at Less Than Fair Value: Stainless Steel Round Wire from Taiwan

[Federal Register Volume 64, Number 68 (Friday, April 9, 1999)]
[Notices]
[Pages 17336-17342]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-8927]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-583-829]


Notice of Final Determination of Sales at Less Than Fair Value: 
Stainless Steel Round Wire from Taiwan

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

EFFECTIVE DATE: April 9, 1999.

FOR FURTHER INFORMATION CONTACT: Gabriel Adler or Kris Campbell at 
(202) 482-1442 or (202) 482-3813, respectively, Group 1, Office of AD/
CVD Enforcement 2, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW, Washington, D.C. 20230.

The Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute are 
references to the provisions effective January 1, 1995, the effective 
date of the amendments made to the Tariff Act of 1930 (the Act) by the 
Uruguay Round Agreements Act (URAA). In addition, unless otherwise 
indicated, all citations to Department of Commerce (Department) 
regulations refer to the regulations codified at 19 CFR Part 351 (April 
1998).

Final Determination

    We determine that stainless steel round wire from Taiwan is being 
sold, or is likely to be 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

    The preliminary determination in this investigation was issued on 
November 12, 1998. See Notice of Preliminary Determinations of Sales at 
Less Than Fair Value and Postponement of Final Determinations--
Stainless Steel Round Wire From Canada, India, Japan, Spain, and 
Taiwan; Preliminary Determination of Sales at Not Less Than Fair Value 
and Postponement of Final Determination--Stainless Steel Round Wire 
From Korea, 63 FR 64042 (November 18, 1998) (preliminary 
determination). Since the preliminary determination, the following 
events have occurred:
    In January and February 1999, we conducted on-site verifications of 
the questionnaire responses submitted by respondent Tien Tai Electrode 
Co., Ltd. (Tien Tai) and its affiliate 1 Kuang Tai Metal 
Industry Co., Ltd. (Kuang Tai).2
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    \1\ As explained in the preliminary determination, for purposes 
of this investigation we are treating Tien Tai and Kuang Tai as a 
single entity.
    \2\ Verification of respondent Rodex Fasteners Corp. (Rodex) was 
conducted in September and October 1998, prior to the issuance of 
the preliminary determination.
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    The petitioners 3, Tien Tai/Kuang Tai, and Rodex 
submitted case briefs on February 23, 1999, and rebuttal briefs on 
March 2, 1999. We held a public hearing on March 11, 1999.
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    \3\ The petitioners are ACS Industries, Inc., Al Tech Specialty 
Steel Corp., Branford Wire & Manufacturing Company, Carpenter 
Technology Corp., Handy & Harman Specialty Wire Group, Industrial 
Alloys, Inc., Loos & Company, Inc., Sandvik Steel Company, Sumiden 
Wire Products Corporation, and Techalloy Company, Inc.
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Scope of Investigation

    The scope of this investigation covers stainless steel round wire 
(SSRW). SSRW is any cold-formed (i.e., cold-drawn, cold-rolled) 
stainless steel product of a cylindrical contour, sold in coils or 
spools, and not over 0.703 inch (18 mm) in maximum solid cross-
sectional dimension. SSRW is made of iron-based alloys containing, by 
weight, 1.2 percent or less of carbon and 10.5 percent or more of 
chromium, with or without other elements. Metallic coatings, such as 
nickel and copper coatings, may be applied.
    The merchandise subject to this investigation is classifiable under 
subheadings 7223.00.1015, 7223.00.1030, 7223.00.1045, 7223.00.1060, and 
7223.00.1075 of the Harmonized Tariff Schedule of the United States 
(HTSUS). Although the HTSUS subheadings are provided for convenience 
and customs purposes, the written description of the merchandise under 
investigation is dispositive.

Period of Investigation

    The period of the investigation (POI) is January 1, 1997, through 
December 31, 1997. This period corresponds to each respondent's four 
most recent fiscal quarters prior to the month of the filing of the 
petition (i.e., March 1998).

[[Page 17337]]

Fair Value Comparisons

    To determine whether sales of stainless steel round wire from 
Taiwan to the United States were made at LTFV, we compared the export 
price (EP) to the normal value. Our calculations followed the 
methodologies described in the preliminary determination, except as 
noted below and in company-specific analysis memoranda dated April 2, 
1999, which have been placed in the file.

Export Price

    We used the same methodology to calculate EP as that described in 
the preliminary determination.

Normal Value

    We used the same methodology to calculate normal value as that 
described in the preliminary determination, except that for Tien Tai, 
we revised the reported credit expenses to correct an error in the 
credit period.

Cost of Production

    We used the same methodology to calculate cost of production (COP) 
as that described in the preliminary determination, except in the 
following specific instances:

    1. Rodex
    We corrected two errors made in the preliminary determination 
with respect to a year-end auditor's adjustment to the reported 
labor and overhead costs. See Rodex comment 3.
    2. Tien Tai
    We made an adjustment for wire rod input costs. We included in 
general expenses (1) the value of stock bonuses made to employees 
and directors, (2) R&D expenses, (3) certain foreign exchange gains 
and losses, and excluded from general expenses certain non-operating 
income. Further, we reduced the cost of sales of the companies by 
the verified inter-company transactions. Finally, we eliminated the 
double-counting of packing expenses of Kuang Tai.

Unit of Weight for Tien Tai

    We corrected a clerical error in the margin program for Tien Tai 
involving the unit of weight used to calculate the total amount of 
dumping.

Currency Conversions

    As in the preliminary determination, we made currency conversions 
into U.S. dollars based on the exchange rates in effect on the dates of 
the U.S. sales, in accordance with section 773A of the Act. We relied 
on exchange rates certified by the Federal Reserve Bank.

Interested Party Comments

A. Tien Tai/Kuang Tai
    Comment 1: Costs for Inter-Company Raw Material Purchases. The 
petitioners argue that the extent of Tien Tai's purchases of wire rod 
from Kuang Tai was understated, and not disclosed until verification. 
The petitioners also contend that because Tien Tai and Kuang Tai are a 
single entity for purposes of this investigation, they should have 
reported their respective acquisition cost of the wire rod in question 
rather than the inter-company transfer price. Finally, the petitioners 
argue that there were also critical flaws in the reporting of costs for 
wire rod Kuang Tai obtained from Walsin, an affiliated supplier. 
Specifically, they argue that: (1) the reported costs of manufacturing 
of certain grades of rod supplied by Walsin were understated relative 
to the costs on Walsin's books; (2) Walsin's reported selling, selling, 
general and administrative (SG&A) expenses did not include 
miscellaneous general expenses and contained errors in the allocation 
of selling expenses, and (3) Walsin's reported interest expense did not 
include amounts for long-term interest expense. According to the 
petitioners, these omissions warrant the rejection of the submitted 
cost data in its entirety and the application of adverse facts 
available. In the alternative, the petitioners request application of 
partial facts available with respect to the COP and constructed value 
(CV) data.
    The respondents argue that the application of adverse facts 
available is not warranted. According to the respondents, the 
Department has verified the correct quantity and value of transfers of 
wire rod among Tien Tai and Kuang Tai, as well as the wire rod obtained 
by Kuang Tai from Walsin, and has all the necessary data to value these 
inputs.
    DOC Position: We disagree with the petitioners that the application 
of total facts available is warranted. While the Department found 
discrepancies between the questionnaire responses and the companies' 
records with respect to the transfers of stainless steel wire rod 
between Tien Tai and Kuang Tai, the discrepancies were minor.
    With respect to the valuation of these inputs, we note that section 
773(f) of the Act and section 351.407 of the Department's regulations 
provide that we will normally determine the value of a major input 
obtained from an affiliate based on the higher of transfer price, 
market price or cost of production. However, in cases where the 
transfer of inputs occurs between companies that the Department has 
collapsed (i.e., has determined to treat as a single entity for 
purposes of an antidumping proceeding), the Department does not 
consider the transfer price or market value in the valuation of the 
inputs. Rather, the valuation of transactions between the collapsed 
companies is based on the actual cost to the group as a whole. See 
Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products 
from Korea: Final Results of Antidumping Duty Administrative Reviews, 
62 FR 18404, 18429-18431 (April 15, 1997).4 Under the above 
standard, and because neither Tien Tai nor Kuang Tai is a producer of 
wire rod, the Department's preference in this case would have been to 
rely on the affiliate's acquisition cost of the wire rod inputs. 
Although we discovered at verification that the respondents had not 
submitted these costs, we also determined, by examining purchases of 
several different grades of wire rod, that the reported transfer price 
was consistently greater than or equal to the acquisition cost. See 
Tien Tai/Kuang Tai cost verification report, dated February 12, 1999, 
at exhibits 20, 22, 37, and 38. Therefore, as facts available, we have 
relied on the reported transfer price to value the inputs in question.
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    \4\ We note that our determination was also upheld by the Court 
of International Trade. See AK Steel Corp. v. United States, Slip 
Op. 98-159, 1998 Ct. Intl. Trade LEXIS 182, at *28-32 (Ct. Int'l 
Trade, Nov. 23, 1998).
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    With respect to Walsin, we find that the omissions noted do not 
warrant the use of adverse facts available. These are relatively minor 
errors that are easily corrected based on verified data on the record. 
See memorandum from Peter Scholl to Neal Halper, dated April 2, 1999, 
which has been placed on the record.
    Comment 2: Adjustments to G&A. The petitioners make the following 
arguments with respect to adjusting the respondents' general and 
administrative (G&A) expenses and G&A ratio.
    First, the petitioners argue that Tien Tai has not established 
which foreign exchange gains were associated with manufacturing 
activities. According to the petitioners, the Department's practice is 
to disallow sales-related exchange rate gains from the calculation of 
G&A expenses when these are not shown to be related to manufacturing 
activities, and therefore the Department should disallow the exchange 
gains reported by the respondents. The petitioners add that Tien Tai's 
exchange losses, as well as Kuang Tai's exchange gains and losses, 
should be accounted for as part of total interest expenses.
    Next, the petitioners contend that the Department should disallow 
various claimed offsets to G&A expenses. According to the petitioners: 
(1) an offset for repair income should be rejected because the income 
does not

[[Page 17338]]

stem from the company's core business; (2) Kuang Tai double counted the 
offset for scrap sales by reducing both the cost of manufacturing and 
G&A expenses by the same amount; and (3) miscellaneous other offsets 
are unrelated to production, and should be rejected.
    The petitioners also argue that the respondents failed to include 
certain items in the reported G&A expenses, namely: (1) cash and stock 
bonuses to employees, directors and supervisors, (2) research and 
development (R&D) expenditures, and (3) bad debt. Further, the 
petitioners argue that the Department should reduce the cost of sales 
denominator in the G&A calculation to eliminate the effect of inter-
company transactions. Finally, the petitioners argue that the 
Department should revise the cost of goods sold denominator used to 
calculate the G&A ratio to exclude any packing costs not otherwise 
included in the cost of manufacturing.
    The respondents address some, but not all, of the petitioners' 
points regarding G&A. First, the respondents argue that their reporting 
of scrap revenue is correct, and that no adjustment is necessary to the 
G&A ratio in this regard. Next, the respondents claim that the 
Department verified all income offsets to G&A, and should not reject 
these offsets. The respondents also claim that bad debts are associated 
with third country sales, and should therefore not be allocated to 
subject merchandise. Further, the respondents claim that the Department 
verified the proper classification of reported G&A expenses, including 
R&D expenses.
    With respect to the elimination of inter-company transactions from 
the cost of goods sold denominator used in the calculation of the G&A 
ratio, the respondents argue that the Department should eliminate the 
transactions based on the price paid by Tien Tai and Kuang Tai to 
unaffiliated suppliers for the inputs in question, rather than the 
resale price for those inputs charged by Tien Tai and Kuang Tai to each 
other.
    DOC Position: We address the petitioners' various points in turn. 
First, we agree with the petitioners with respect to foreign exchange 
gains and losses. It is the Department's practice to distinguish 
between exchange gains and losses generated by sales transactions and 
those generated by loans payable and the purchases of production 
inputs. See Notice of Final Results and Partial Rescission of 
Antidumping Duty Administrative Review: Certain Welded Carbon Steel 
Pipe and Tube from Turkey, 63 FR 35190, 35198 (June 29, 1998). The 
Department typically excludes from the COP and CV calculation those 
foreign exchange gains and losses generated by sales transactions 
because we do not consider them to relate to the manufacturing 
activities of the company. See Notice of Final Determination of Sales 
at Less Than Fair Value: Steel Wire Rod from Trinidad and Tobago, 63 FR 
9177, 9182 (February 24, 1998). Even though it was requested by the 
Department in its supplemental Section D questionnaire dated September 
30, 1998, Tien Tai failed to segregate foreign exchange gains between 
those generated by sales transactions, purchase transactions, and loans 
payable. We have therefore excluded all of Tien Tai's foreign exchange 
gains from the calculation of COP and CV. We further agree that Tien 
Tai's foreign exchange losses and Kuang Tai's foreign exchange gains 
and losses should be included in the COP and CV calculations because 
none of these amounts were shown to relate to sales transactions.
    We agree with the petitioners in part concerning their arguments on 
G&A. We agree that machinery repair income is not part of the general 
operations of the company and therefore should be excluded from the 
calculation of G&A expenses. We agree that Kuang Tai double counted the 
offset for scrap sales by both reducing the cost of manufacturing and 
G&A expenses by the same amount. Therefore, we have excluded scrap 
income from the G&A expense calculation. We disagree with the 
petitioners' argument regarding the other items listed as non-operating 
income and expense in the G&A expense calculation, because we find that 
they are related to the company's general operations. See Final Results 
and Partial Rescission of Antidumping Duty Administrative Review: 
Certain Pasta from Italy, 64 FR 6615, 6627 (February 10, 1999) (``G&A 
expenses are those expenses which relate to the general operations of 
the company as a whole rather than to the production process'').
    We agree with the petitioners that it is appropriate to include 
cash and stock bonuses to employees, directors and supervisors. The 
amounts distributed, whether in the form of stock or cash, represent 
compensation for services that the individual has provided to the 
company. Therefore, in accordance with section 773(f)(1)(A) of the Act, 
we have determined that it is appropriate to include these amounts in 
the calculation of COP and CV. We acknowledge that the respondents' 
treatment of these distributions as reductions to equity is in 
accordance with Taiwan GAAP. However, we find that this treatment is 
contrary to the requirements of section 773(f)(1)(A) of the Act, as it 
does not reasonably reflect the respondents' cost of production because 
the stock transferred to employees in exchange for their labor is a 
cost to the company. See Final Determination of Sales at Less Than Fair 
Value: Static Random Access Memory Semiconductors From Taiwan, 63 FR 
8909, 8921-8922 (February 23, 1998)(``amounts distributed * * * whether 
in the form of stock or cash, represent compensation for services which 
the individual has provided to the company'').
    Also, we agree with the petitioners that it is appropriate to 
include R&D expenditures in the COP. R&D are the planned efforts of a 
company to discover new information that will help create a new 
product, process or technique. The R&D projects listed by the 
respondents could benefit subject merchandise and are properly treated 
as period expenses since their future benefit is undetermined.
    We do not agree with the petitioners that Tien Tai's bad debt 
expense should be included in the G&A expense calculation. Bad debt 
expense results from the inability to collect payment from customers 
for sales, and is appropriately accounted for as a selling expense. See 
Final Results of Antidumping Duty Administrative Review: Porcelain-On-
Steel Cookware from Mexico, 63 FR 38373, 38381 (July 16, 1998).
    We agree with the petitioners that it is correct to reduce the cost 
of sales denominator in the G&A calculation to eliminate the effect of 
inter-company transactions. It would be inappropriate to combine the 
cost of goods sold of Kuang Tai and Tien Tai without adjustment, 
because this would in effect double count cost of sales for those 
transactions between the two companies (i.e., inputs sold to one 
company which are used to produce another product would be included as 
cost of sales at the input level and at the level of the final product 
sold). For the final determination, we have eliminated from the cost of 
goods sold denominator the value of sales between Tien Tai and Kuang 
Tai based on the prices charged between the affiliates. See Final 
Results of Antidumping Duty Administrative Review: Certain Cut-to-
Length Carbon Steel Plate from Brazil, 63 FR 12744, 12749 (March 16, 
1998).
    Finally, we agree with the petitioners that it is appropriate to 
revise the cost of goods sold denominator used to calculate the G&A 
ratio to exclude any packing costs not otherwise included in the cost 
of manufacturing, to which the G&A ratio is applied. We have adjusted

[[Page 17339]]

the cost of goods sold determination accordingly.
    Comment 3: Interest Expenses. The petitioners argue that the 
Department should make the following revisions to the submitted 
interest expense ratio: (1) reduce the cost of goods sold denominator 
by the amount of revenue on the sale of scrap, since the reported cost 
of manufacturing is also net of that revenue; (2) eliminate inter-
company transactions; and (3) revise the cost of goods sold denominator 
to exclude any packing costs not otherwise included in the cost of 
manufacturing.
    The respondents contend that no adjustment is appropriate with 
respect to scrap revenue. With respect to the elimination of inter-
company transfers, the respondents argue that the Department should 
rely on the prices they paid for the inputs in question, rather than 
the transfer prices paid to each other. The respondents do not address 
the petitioners' argument with respect to packing costs.
    DOC Position: We agree with the petitioners that the cost of goods 
sold denominator should be reduced by the amount of revenue on the sale 
of scrap, since the reported cost of manufacturing is also net of that 
revenue. With respect to the elimination of inter-company transactions, 
we also agree with the petitioners, and have eliminated the value of 
sales between Tien Tai and Kuang Tai based on the prices charged 
between the affiliates, for the same reasons explained with respect to 
the calculation of G&A expenses in comment 2 above. Finally, we agree 
with the petitioners that it is appropriate to revise the cost of goods 
sold denominator used to calculate the interest ratio to exclude any 
packing costs not otherwise included in the cost of manufacturing to 
which the interest expense ratio is applied. We have adjusted the cost 
of production denominator accordingly.
    Comment 4: Product/Packing Form. The petitioners argue that the 
Department should incorporate the ``product form'' into the model 
matching hierarchy.5 According to the petitioners, the 
pricing data submitted by Tien Tai and Kuang Tai indicate significant 
price differences in otherwise identical products that are sold in 
different product forms. In particular, the petitioners cite instances 
of individual invoices with multiple transactions, where Tien Tai 
charges consistently higher per-pound prices for small spools of a 
given product than for larger spools of the identical product. The 
petitioners further argue that, across the POI, comparison of weighted-
average prices also show price differences according to variations in 
packing form and size. The petitioners contend that, given these price 
differences, the Department can only achieve ``apples-to-apples'' 
product comparisons by taking product form into consideration in its 
model matching.
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    \5\ As the petitioners define it, the ``product form'' is 
composed of three elements: packing form (e.g., a spool or a coil); 
the packing material (e.g., in the case of a spool, metal or wood), 
and packing size (e.g., in the case of a spool, the weight of the 
spool plus wire).
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    The respondents argue that, with rare exceptions, the ``product 
form'' is generally not taken into consideration in the pricing of 
them, and should therefore not be incorporated as a criterion in the 
Department's model match. According to the respondents, the Department 
confirmed at verification through examination of numerous invoices that 
identical products packed in different forms and sizes had identical 
gross unit prices. The respondents further contend that it is not 
appropriate to infer a form/price relationship from a comparison of 
weighted-average prices since prices can be significantly affected by 
independent variables such as date of sale, customer, and quantity of 
sale.
    DOC Position: Based on the record of this case, we disagree with 
the petitioners that it is appropriate to incorporate the ``product 
form'' into the model matching characteristics.
    At the outset of this case, interested parties were provided with 
an opportunity to comment on significant product characteristics to be 
incorporated into model matching. Neither the petitioners nor the 
respondents made any mention of ``product form'' in their otherwise 
detailed comments. (Nor, for that matter, did the respondents in the 
companion investigations of round wire from Korea, India, or Canada 
make any reference of product form as a possible matching criterion.) 
Upon receipt and analysis of Tien Tai/Kuang Tai's sales data, the 
petitioners filed a submission noting that for certain U.S. sales of 
identical models on a given invoice there was an unexplained variance 
in unit price, and surmised that the price variance might be due to 
differences in product form. The petitioners did not provide any 
evidence that product form is a pricing consideration in the wire 
industry generally, instead focusing entirely on Tien Tai/Kuang Tai's 
data.
    The Department has sought, through supplemental questionnaires to 
Tien Tai/Kuang Tai on this issue, as well as through extensive 
examination of randomly selected sales documentation at verification, 
to determine whether there was a distinct correlation between product 
form and pricing contained in the sales data submitted by Tien Tai and 
Kuang Tai. With respect to the first two elements of product form 
(packing form and packing material), we have found no clear evidence of 
a correlation with price in either the U.S. or home market.6 
With respect to packing size, we have found that, on some invoices for 
U.S. sales, Tien Tai charged its sole U.S. customer a premium for wire 
sold in small spools relative to wire sold in larger spools. However, 
Tien Tai/Kuang Tai has argued that this pricing pattern is unique to 
the transactions in question, and the record does not suggest 
otherwise. Indeed, counsel for the petitioners themselves conceded at 
the case hearing that there was no conclusive evidence of a 
relationship between packing form and pricing with respect to Tien Tai/
Kuang Tai's home market sales. See Case Hearing Transcript at 132. 
Given the above, we do not believe the record supports the 
incorporation of product form as a matching criterion.
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    \6\ The comparisons provided by the petitioners do not account 
for a number of factors, most notably differences in customers and 
time. Moreover, there are numerous examples on the record, including 
many found through random search at verification, of identical 
products packed in different forms/materials that have the same unit 
price.
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    Comment 5: Reporting of Packing Costs. The petitioners allege that 
the respondents' claim for a home market packing adjustment should be 
denied because Tien Tai/Kuang Tai did not take into account that 
certain packing materials were reused, thus overstating packing costs. 
The petitioners further allege that there were several discrepancies in 
the reported home market and U.S. packing costs.
    The respondents argue that their packing costs were correctly 
reported and verified, and should be relied upon in the final 
determination.
    DOC Position: We disagree with the petitioners' assertion that the 
cost of reusable packing materials in the home market was overstated. 
As noted at verification, Kuang Tai recycled metal bobbins used in home 
market sales. See Tien Tai/Kuang Tai Cost Verification Report at 7 
(referring to Kuang Tai's use of ``metal spools'', i.e., metal 
bobbins). Kuang Tai did not include any cost for the metal bobbins in 
the reporting of home market packing costs. See Sales Verification 
Exhibit KT-15. Thus, if anything, the cost of the Kuang Tai's recycled 
metal bobbins was conservatively understated by the respondents.

[[Page 17340]]

    With respect to the other miscellaneous discrepancies alleged by 
the petitioners, we note that at verification we found evidence of only 
a single error, which involved the over-reporting of home market 
packing costs for KW 25KG products. We have corrected this error for 
the final determination.
    Comment 6: U.S. and Home Market Credit Expenses. The petitioners 
argue that the respondents misreported their U.S. and home market 
credit expenses. According to the petitioners, the Department should, 
as facts available, disregard Tien Tai/Kuang Tai's claim for a credit 
expense adjustment for its home market sales, and rely on the highest 
reported credit expense as facts available for the respondents' U.S. 
sales.
    The respondents argue that there is no basis for applying facts 
available to their credit expenses. They contend that they revised 
their U.S. credit expenses in a timely manner at the outset of 
verification, and that the mistakes with respect to home market credit 
expenses were minor and correctable based on verification findings.
    DOC Position: We disagree with the petitioners that the application 
of facts available is appropriate. The respondents identified an error 
with respect to U.S. credit expenses at the outset of verification, and 
provided verifiable corrections. An error with respect to home market 
credit expenses was identified at verification, but it can be easily 
corrected based on revised data obtained and examined during the 
verification. For a detailed explanation of the correction of these 
errors, see the Tien Tai/Kuang Tai sales analysis memo from Sanjay 
Mullick to Kris Campbell, dated April 2, 1999.
    Comment 7: Double-Counting of Packing Costs. Kuang Tai argues that 
it inadvertently included packing costs in the pool of manufacturing 
costs allocated to all of its products, such that packing costs have 
been reported both in the cost of manufacturing and as a separate 
packing adjustment. According to the respondent, the error was not 
detected at the cost verification, but the exhibits taken during the 
verification establish that packing is in fact double counted. Kuang 
Tai requests that the Department remedy this double counting by 
removing packing from the cost of manufacturing.
    The petitioners argue that the verification exhibits do not 
establish the error claimed by the respondent, and moreover, that any 
such error would call into question the general reliability of the 
submitted cost data. Further, the petitioners argue that Kuang Tai's 
claim reveals that the respondent did not allocate any overhead to 
packing costs. According to the petitioners, the Department should 
reject the respondent's request, and apply total adverse facts 
available. In the alternative, the petitioners propose that the 
Department apply partial facts available with respect to packing 
overhead.
    DOC Position: We agree with Kuang Tai that the verification record 
establishes that packing was double-counted. (For an explanation of our 
analysis of the record in this regard, please see the Tien Tai/Kuang 
Tai cost analysis memorandum, from Peter Scholl to Neal Halper, dated 
April 2, 1999). Therefore, we have eliminated packing expenses from 
Kuang Tai's reported cost of manufacturing. As for the petitioners' 
argument with respect to packing overhead, we note that Kuang Tai was 
unable to allocate any overhead specifically to packing, but did 
allocate total overhead to cost of manufacturing, such that the 
overhead expenses were nonetheless included in the reported costs.
B. Rodex
    Comment 1: Facts Available. The petitioners argue that the 
Department should apply facts available for certain omissions and 
errors found at verification, namely (1) unreported U.S. and home 
market sales; (2) U.S. sales of wire for which no coating had been 
reported, but which were coated with Apex, a lubricant; (3) packing 
expenses, the reporting of which was found to contain errors; and (4) 
duty drawback, the calculation of which contained errors. The 
petitioners contend that the Department should not simply correct these 
errors by relying on data collected at verification, but rather apply 
adverse facts available.
    Rodex argues that use of adverse facts available is unwarranted, as 
the omissions and errors cited by the petitioners were minor in nature 
and corrected at the preliminary determination through use of verified 
data on the record.
    DOC Position: We agree with Rodex that the application of adverse 
facts available is not warranted. Unlike the cases cited by the 
petitioners in which the Department applied best information available 
(the precursor to facts available under the pre-URAA antidumping 
statute), the omissions and errors referenced by the petitioners in 
this case were, both individually and in the aggregate, minor in scope 
and immaterial. While the general purpose of verification is not to 
gather new information, but rather to verify the information already 
submitted, it is the Department's practice to correct minor errors 
found at verification. See Notice of Final Determination of Sales at 
Less Than Fair Value: Static Random Access Memory Semiconductors from 
Taiwan, 63 FR 8909, 8929 (February 23, 1998). Moreover, to the extent 
that Rodex identified several of the minor errors in question at the 
outset of verification, it did so at the Department's specific 
instruction to identify any clerical errors at that point. See letter 
from the Department of Commerce to Rodex, dated November 15, 1998, 
(transmitting sales verification agenda), at 1.
    With respect to the first point raised by the petitioners, the 
Department noted at verification that the respondent had not reported a 
relatively small number of sales, which had dates of sale in the POI 
but date of invoice after the POI.7 Because the sales in 
question were few in number, the Department collected and verified the 
sales data for these transactions. We have continued to rely on the 
sales data in question for this final determination.
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    \7\ The error was due to a misunderstanding arising from the 
Department's supplemental instruction to Rodex to change the basis 
for date of sale. In its first questionnaire response, Rodex based 
the date of sale on the date of invoice. After determining that the 
date of sales confirmation was a more appropriate basis for the date 
of sale, the Department instructed Rodex to revise its sales 
databases accordingly. Although Rodex complied with this request by 
reporting the date of sales confirmation for all previously reported 
sales, it did not additionally report certain sales with date of 
sales confirmation within the POI and invoice date outside of the 
POI.
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    The Department also found at verification that four U.S. sales 
reported as having no coating had in fact been coated with Apex. We 
verified that no other U.S. sales, and no home market sales, were 
coated with Apex. See Rodex Sales Verification Report at 4. Because the 
omission in question was minor and remedied through verified data, 
there is no need for the application of adverse facts available.
    With respect to packing costs, we found at verification that a few 
home market sales had been shipped in reusable containers. In the 
preliminary determination, we set the packing cost for such sales to 
zero and increased the reallocated total packing costs to the other 
sales, which resulted in a small increase to packing costs. Again, to 
the limited extent that the error created any distortion in the margin 
calculation, that distortion was fully corrected.
    As for duty drawback, the calculation errors in question were also 
very minor (accounting for a discrepancy of less than one-tenth of one 
percent), and were identified by the respondent at the outset of 
verification as a clerical error.

[[Page 17341]]

We have therefore relied on the corrected duty drawback expense 
calculation provided by Rodex at verification.
    Comment 2: Potential Reimbursement of Antidumping Duties. The 
petitioners contend that Rodex agreed to reimburse its customers for 
payment of potential antidumping duties. According to the petitioners, 
the Department should deduct the amount of calculated duties from the 
export price to determine the cash deposit rate to be applied to 
Rodex's entries.
    Rodex argues that it has not to date reimbursed any customer for 
antidumping duties, since there has never been an antidumping duty 
order on round wire. Rodex contends that it was unaware of the 
Department's regulations at the time that it expressed a willingness to 
reimburse its customers for potential antidumping duties, and that in 
the event that an antidumping order is imposed, it will not reimburse 
any duties.
    DOC Position: We disagree with the petitioners that the Department 
should adjust the export price for potential reimbursement of 
antidumping duties. Section 351.402(f)(1)(i)(B) of the Department's 
regulations provides that the Department will deduct the amount of any 
antidumping duty which the producer reimbursed to the importer. For 
that provision to be triggered, an antidumping duty order must have 
been imposed, and antidumping duties levied. Since neither of those 
events has occurred to date, the provision is not applicable in this 
case. In the event that an antidumping order is imposed pursuant to 
this final determination, and administrative reviews of that order are 
requested, the Department will closely examine whether Rodex has 
reimbursed, or agreed to reimburse, its customers for antidumping 
duties in the relevant period of review.
    Comment 3: Year-End Auditor's Adjustment. Rodex argues that the 
Department made two errors in the allocation of net foreign exchange 
losses to wire products. First, Rodex alleges that the Department 
transposed the amounts to be allocated with respect to direct labor and 
overhead. Second, Rodex alleges that the Department inadvertently 
allocated the full amount of the losses to wire products, even though 
the company produced other products.
    The petitioners do not dispute Rodex's allegation of a 
transposition error. However, the petitioners contend that since the 
auditor's adjustment had not been reported to the Department and was 
found at verification, the Department should make an adverse inference 
and allocate the adjustment fully to wire products.
    DOC Position: We agree with Rodex. We have corrected the 
transposition error, and, since the adjustment in question applies 
equally to all of Rodex's products, have reallocated the adjustment to 
both wire and Rodex's other product lines.
    Comment 4: Net Foreign Exchange Losses.
    Rodex argues that the Department incorrectly allocated net foreign 
exchange losses only to wire products, rather than to all of Rodex's 
products, which include fasteners. Rodex also argues that the 
Department erred by applying the amount of foreign exchange losses as 
an upward adjustment to raw material cost, rather to G&A expenses, 
since the expenses are classified as non-operating general expenses in 
the company's records.
    The petitioners respond that the Department correctly adjusted for 
net foreign exchange losses, and that it is the Department's normal 
practice to include foreign exchange gains and losses relating to raw 
materials in the calculation of total raw material costs.
    DOC Position: We agree with the petitioners. All of Rodex's 
products, including both wire and fasteners, are made from wire rod. 
Since Rodex suffered net foreign exchange losses in connection with 
purchases of rod, we allocated those net losses to all wire rod 
purchases, thus increasing equally the material costs of both wire and 
fasteners. With respect to the classification of these expenses, we 
note that the losses arise directly from purchases of materials, and it 
is the Department's practice to adjust material costs for exchange 
losses related to purchases of materials. See, e.g., Circular Welded 
Non-Alloy Steel Pipe and Tube from Mexico: Final Results of Antidumping 
Duty Administrative Review, 62 FR 37014, 37026 (July 10, 1997). 
Therefore, we have adjusted material costs, rather than G&A expenses, 
for the exchange losses.

Suspension of Liquidation

    In accordance with section 735(c)(1)(C) of the Act, we are 
directing the Customs Service to suspend liquidation of all entries of 
stainless steel round wire from Taiwan produced and exported by Tien 
Tai/Kuang Tai that are entered, or withdrawn from warehouse, for 
consumption on or after the date of publication of the final 
determination in the Federal Register. Also, in accordance with section 
735(c)(1)(B) of the Act, we are directing the Customs Service to 
continue to suspend liquidation of all entries of stainless steel round 
wire from Taiwan from all other producers and exporters that are 
entered, or withdrawn from warehouse, on or after November 18, 1998, 
the date of publication of the preliminary determination in the Federal 
Register. The Customs Service shall require a cash deposit or the 
posting of a bond equal to the weighted-average amount by which the 
normal value exceeds the EP, as indicated in the chart below. These 
instructions suspending liquidation will remain in effect until further 
notice. The weighted-average dumping margins are as follows:

------------------------------------------------------------------------
                                                             Weighted-
                  Exporter/Manufacturer                   average margin
                                                            percentage
------------------------------------------------------------------------
Rodex...................................................            3.94
Tien Tai/Kuang Tai......................................            4.75
All Others..............................................            4.47
------------------------------------------------------------------------

    Section 735(c)(5)(A) of the Act directs the Department to exclude 
all zero and de minimis weighted-average dumping margins, as well as 
dumping margins determined entirely under facts available under section 
776 of the Act, from the calculation of the ``all others'' rate. Since 
neither of the calculated margins in this investigation are zero, de 
minimis, or based entirely under facts available, we have included both 
margins in the calculation of the all others rate.

ITC Notification

    In accordance with section 735(d) of the Act, we have notified the 
International Trade Commission (ITC) of our determination. As our final 
determination is affirmative, the ITC will, within 45 days, determine 
whether these imports are materially injuring, or threaten material 
injury to, the U.S. industry. 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 the Customs Service 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 sections 735(d) and 
777(i)(1) of the Act.


[[Page 17342]]


    Dated: April 2, 1999.
Richard W. Moreland,
Acting Assistant Secretary for Import Administration.
[FR Doc. 99-8927 Filed 4-8-99; 8:45 am]
BILLING CODE 3510-DS-P