67 FR 46172, July 12, 2002 A-533-813 AR: 2/1/2000-1/31/2001 Public Document IA: I/2/KJ MEMORANDUM TO: Joseph A. Spetrini Acting Assistant Secretary for Import Administration FROM: Richard W. Moreland Deputy Assistant Secretary for Import Administration, Group I SUBJECT: Issues and Decision Memorandum for Final Results of the Antidumping Duty Administrative Review on Certain Preserved Mushroom from India - February 1, 2000, through January 31, 2001. Summary We have analyzed the comments of the interested parties in the 2000-2001 administrative review of the antidumping duty order covering certain preserved mushrooms from India. As a result of our analysis of these comments, we have made changes in the margin calculations as discussed in the "Margin Calculations" section of this memorandum. We recommend that you approve the positions we have developed in the "Discussion of the Issues" section of this memorandum. Below is the complete list of the issues in this administrative review for which we received comments from parties: General Comment: Comment 1: Profit Rate for Constructed Value Company-Specific Comments: Agro Dutch Comment 2: Application of Facts Available for Certain U.S. Sales Comment 3: Treatment of Rejected U.S. Sales Comment 4: Classification of "Expenses Written Off" Comment 5: Classification of Exchange Rate Losses for Notes Payable Comment 6: Agro Dutch Name Change Weikfield Comment 7: Inclusion of Parent Company G&A Expenses in Weikfield's G&A Rate Saptarishi Comment 8: Selection of Facts Available Rate Background On March 7, 2002, the Department of Commerce published the preliminary results of the second administrative review of the antidumping duty order on certain preserved mushrooms from India. See Certain Preserved Mushrooms from India: Preliminary Results of Antidumping Duty Administrative Review, 67 FR 10371 (Preliminary Results). The products covered by this order are certain preserved mushrooms, whether imported whole, sliced, diced or as stems and pieces. The period of review (POR) is February 1, 2000, through January 31, 2001. We invited parties to comment on our preliminary results of review. The petitioners and Agro Dutch Industries Limited (Agro Dutch), formerly Agro Dutch Foods, Limited, filed case and rebuttal briefs on May 10 and May 17, 2002, respectively. Weikfield Foods, Ltd. (Weikfield) filed a rebuttal brief on May 17, 2002. Margin Calculations: Changes from the Preliminary Results We calculated export price, normal value (NV), and cost of production (COP) using the same methodology described in the preliminary results, except as explained below: Agro Dutch • As discussed under Comment 2, we have applied adverse facts available for Agro Dutch's sales to one customer. As adverse facts available, we have applied the highest rate calculated in any segment of this proceeding, 66.24%, to all sales to this customer. • We revised the reported payment date for twelve sales to the final results date as Agro Dutch acknowledged at page 25 of the May 17, 2002, rebuttal brief that it had not yet been paid for these sales. • We recalculated the imputed credit expense as Agro Dutch deducted commissions from the gross unit price in its credit expense calculation (see May 25, 2001, questionnaire response at page C-26). In accordance with Department practice, we normally impute credit based on the gross price less any price adjustments granted at the time of invoicing. As commissions are not considered price adjustments for purposes of calculating imputed credit, and there are no other adjustments to price at the time of invoicing, we recalculated Agro Dutch's imputed credit expense based on the gross price without any deductions. • We recalculated the assessment rates to reflect a rate per unit, rather than a percent of entered value, as Agro Dutch is not the importer of record for the majority of sales and was not able to report the entered value for most of the sales. Weikfield • We revised the reported payment date to the final results date for Weikfield's unpaid sales. • We revised the assessment rate programming to calculate the assessment rates as a rate per unit, rather than as a percent of entered value, as Weikfield is not the importer of record for the majority of sales and was not able to report the entered value for most of the sales. However, as the margin is zero, no assessment rates were calculated. Discussion of the Issues General Issue Comment 1: Profit Rate for Constructed Value As discussed in the Preliminary Results, respondents Agro Dutch and Weikfield did not have viable home or third country markets for the purpose of calculating normal value (67 FR at 10373). Therefore, we used constructed value as the basis for calculating normal value for these two respondents, in accordance with section 773(a)(4) of the Act. Furthermore, because Agro Dutch and Weikfield had no viable home or third country market during the POR, we derived profit and selling expenses for Agro Dutch and Weikfield for the purpose of calculating constructed value in accordance with section 773(e)(2)(B)(iii) of the Act. In its entirety, section 773(e)(2)B) reads: (B) if actual data are not available with respect to the amounts described in subparagraph (A), then (i) the actual amounts incurred and realized by the specific exporter or producer being examined in the investigation or review for selling, general, and administrative expenses, and for profits, in connection with the production and sale, for consumption in the foreign country, of merchandise that is in the same general category of products as the subject merchandise, (ii) the weighted average of the actual amounts incurred and realized by exporters or producers that are subject to the investigation or review (other than the exporter or producer described in clause (i)) for selling, general, and administrative expenses, and for profits, in connection with the production and sale of a foreign like product, in the ordinary course of trade, for consumption in the foreign country, or (iii) the amounts incurred and realized for selling, general, and administrative expenses, and for profits, based on any other reasonable method, except that the amount allowed for profit may not exceed the amount normally realized by exporters or producers (other than the exporter or producer described in clause (i)) in connection with the sale, for consumption in the foreign country, of merchandise that is in the same general category of products as the subject merchandise; In the Preliminary Results, the Department applied section 773(e)(2)(B)(iii) of the Act (hereafter Alternative 3) and relied on the profit rates and selling expenses calculated for Agro Dutch and Weikfield, respectively, in the most recent segment of this proceeding. We did not apply the "profit cap" outlined above because we stated that we were unable to determine the amounts that exporters and producers of merchandise that is in the same general category of products as the subject merchandise in the foreign market incurred and realized for selling expenses and profit. As facts available, we relied on Alternative 3 without the profit cap, following the guidance of the Statement of Administrative Action accompanying the URAA, H.R. Doc. No. 103-316, Vol.1 at 841 (1994) (SAA). Both the petitioners and Agro Dutch argue that the selection of the profit rate for the final results should be revised to account for the home market experience. As the profit rate applied under Alternative 3 is based on the previous review period experience, the petitioners contend that Department practice holds that the profit rate should be based on data that is (1) more specific to the foreign like product, and (2) more contemporaneous and thus more accurately reflecting the market during the POR (see Notice of Final Determination of Sales at Less Than Fair Value: Pure Magnesium from Israel, 66 FR 49349 (September 27, 2001) (Magnesium from Israel), and the accompanying Issues and Decision Memorandum at Comment 8). To that end, the petitioners argue that the Department either rely on the POR home market experience of respondent Himalya International Limited (Himalya), which had a viable home market during the POR, and apply section 773(e)(2)(B)(ii) (Alternative 2) for the profit rate, which does not require a profit cap, or continue to apply Alternative 3 and incorporate Himalya's profit rate into a weighted average that also includes either Agro Dutch's data from the previous review, or Indian respondents Techtran Agro Industries, Ltd.'s (Techtran) and Weikfield's home market data from the previous review. The petitioners acknowledge the Department's reluctance to use Himalya's proprietary data in calculating margins for other respondents, but contend that Himalya's data can be masked through the weight-averaging methodology. The petitioners also assert that Himalya's POR profit rate experience may be used in considering the profit cap under Alternative 3. Agro Dutch argues that section 773(e)(2)(B) requires that the profit and selling expense rate be based on expenses computed for the home market. Since Agro Dutch's profit and selling expense rate from the prior review period were based on Agro Dutch's third country sales, and Himalya's POR data cannot be used as it would require disclosure of Himalya's proprietary data to Agro Dutch, Agro Dutch contends that the Department should use the average (and thus non-proprietary) home market profit and selling expense rates calculated in the previous review for respondents Techtran and Weikfield, which were based on home market sales experience. In its rebuttal brief and at the hearing, Agro Dutch revised its position to state that use of home market data is preferable but not required under Alternative 3, but asserts that the Department must apply the constructed value profit cap under that section of the statute. Agro Dutch argues that the profit cap should be computed using the profit rates from three Indian processed food companies' financial statements (i.e., those of the following companies: Foods and Inns Ltd. (FI), Tai Industries Ltd. (Tai), and Chordia Food Products Limited (Chordia)), which Agro Dutch placed on the record of this review (1). Weikfield did not comment on this issue. DOC Position: We have continued to rely on the profit rates and selling expenses calculated for Agro Dutch and Weikfield, respectively, in the 1998-2000 administrative review of this proceeding, in accordance with section 773(e)(2)(B)(iii) of the Act. We have, however, applied the "profit cap" provision of this section, and determined that the profit rates used for the two instant respondents do not exceed the profit cap, as discussed below. Both Agro Dutch and the petitioners have acknowledged that the use of Agro Dutch's and Weikfield's profit rates from the 1998-2000 administrative review meets the statutory requirements of Alternative 3 (see, e.g., Agro Dutch's May 10, 2002, case brief at page 10). In past proceedings, the Department has used a number of reasonable methods under Alternative 3, including non-home market sales (see, e.g., Notice of Final Determination of Sales at Less Than Fair Value: Certain Polyester Staple Fiber From the Republic of Korea, 65 FR 16880, March 30, 2000, Issues and Decision Memorandum at Comment 15, which cites a number of other proceedings where Alternative 3 has been applied for the constructed value profit rate). As noted by the petitioners, in Magnesium from Israel, where the Department also applied Alternative 3 in determining the profit rate, the Department selected the most appropriate profit rate based on several factors, including: (1) the similarity of the potential surrogate companies' business operations and products to the respondent's; (2) the extent to which the financial data of the surrogate company reflects sales in the United States as well as the home market; and (3) the contemporaneity of the surrogate data to the period of investigation or review. In that proceeding, the Department selected a profit rate derived from the 2000 financial data of an Israeli company that was found to have the most similar production process to the respondent. The other financial data available in that investigation was from 1999 and less contemporaneous with the period of investigation. Applying the same criteria to this review does not change our profit rate selection. The use of the respondent's own data obviously best satisfies the first factor. The Agro Dutch and Weikfield profit rates also are based on sales to the comparison market and not on U.S. sales. As for contemporaneity, the third factor, we note that the profit rate experience from the 1998-2000 review period reflects the time period immediately prior to the instant review. There is no information on the record to suggest that the profit rate experience from that period is so different from the instant period to render those profit rates distortive. Moreover, the specificity of Agro Dutch's and Weikfield's own financial data outweighs the contemporaneity of Himalya's financial data in selecting the most appropriate profit rates. We disagree with the petitioners that the Himalya POR rate can be averaged with Agro Dutch's or Weikfield's 1998- 2000 profit rate without the possibility of disclosing Himalya's proprietary information to Agro Dutch or Weikfield. Further, averaging Himalya's POR data with each of the other respondents' own 1998-2000 data does not necessarily make the resulting average rate a more appropriate rate. There is no information on the record to indicate that the difference between the respondent's 1998-2000 data and Himalya's POR rate is due to contemporaneity rather than differences in business operations and products. On the other hand, Himalya's POR profit rate can be included in determining the profit cap under Alternative 3 without revealing the proprietary data. In order to establish the profit cap, we have also included the profit rates calculated for Weikfield and Techtran in the 1998 -2000 review. However, as section 773(e)(2)(B)(iii) specifically excludes the use of a company's own profit rate for use in the profit cap, we have not included Weikfield's 1998-2000 review profit rate in the Weikfield profit cap. The three preserved mushroom exporter/producer profit rates meet the statutory requirement because the rates reflect the profit normally realized by exporters or producers in connection with the sale, for consumption in India of preserved mushrooms, which, as the subject merchandise, fall within the definition of the same general category of products as the subject merchandise. The statute does not specify the contemporaneity of the data, and we consider the information from the immediately prior review to be sufficiently contemporaneous for this purpose because there is no information on the record to the contrary (i.e., no reason to believe the profit rates are significantly different in this POR than the last). We are not using the profit rates derived from the FI, Tai, or Chordia financial statements in determining the profit cap because their data is less relevant than that of the reviewed companies. In addition, we note that the majority of FI's earnings appear to derive from exports. (2) Thus, in accordance with section 773(e)(2)(B)(iii) of the Act, we compared the 1998-2000 profit rates for Agro Dutch and Weikfield, respectively, to the profit cap. Neither of these rates exceeded the profit cap (i.e., the highest profit rate among those included in the profit cap determination) under Alternative 3. See Constructed Value Profit Rate Cap Comparison, Memorandum to the File dated July 3, 2002. Agro Dutch Comments: Comment 2: Application of Facts Available for Certain U.S. Sales In the preliminary results, the Department applied adverse facts available for the exchange rate and payment date for sales made to a specific customer because Agro Dutch did not report until shortly before the preliminary results that it received monetary advances from this customer in anticipation of future shipments for which the product and price were not determined at the time of the advance. We stated that this information suggested that Agro Dutch may have a long-term contract or sales agreement with this customer, even though Agro Dutch stated specifically in its questionnaire response that it had no binding contracts or agreements with any U.S. customers during the POR. In addition, we pointed out that these payment terms contradicted Agro Dutch's assertion in its questionnaire response that all of its U.S. sales are sold with payment terms of 90 days after the bill of lading date. Finally, we noted that In the previous review, Agro Dutch reported that it had a sales agreement of some sort with this customer, but failed to provide it for the record despite specific requests from the Department. Because the Department could not adequately determine whether Agro Dutch had reported the correct date of sale without reviewing the sales agreement, the Department made an adverse inference in applying facts available to calculation factors affected by the date of sale. See Certain Preserved Mushrooms from India: Preliminary Results of Antidumping Duty Administrative Review, 66 FR 13896, 13899 (March 8, 2001) (1998-2000 Preliminary Results); and Certain Preserved Mushrooms from India: Final Results of Antidumping Duty Administrative Review, 66 FR 42507 (August 13, 2001), and accompanying Issues and Decision Memorandum at Comment 2 (1998-2000 Final Results). We provided Agro Dutch with an additional opportunity subsequent to the preliminary results to explain further the sales to this particular customer. On March 26, 2002, Agro Dutch reported that the customer had requested Agro Dutch to produce a specific type of preserved mushroom product. In order to assuage Agro Dutch's concerns that if the customer cancelled its request, Agro Dutch would not be able to sell these mushrooms elsewhere, Agro Dutch stated that the customer agreed to provide a large advance payment deposit to act as security for future sales. Agro Dutch states at page 1 of this submission that There is no written agreement, only an oral understanding. Moreover, the advances were provided without regard to definite future sales. Indeed, the whole idea of the advance was to provide a form of security against future orders. There was no corresponding contemporaneous agreement to ship specific quantities to specific customers at specific prices. Agro Dutch continues that as the product was shipped, the customer sought a quick return of its advance payments and won Agro Dutch's agreement to credit the deposits against sales of other products, and also against sales to other customers who agreed to pay the invoiced amounts to this customer rather than Agro Dutch. As Agro Dutch has now explained that it had no long-term contracts or sales agreements relating to sales made during the POR, and that the payment dates were not incorrectly reported, Agro Dutch contends that it has demonstrated its cooperation in this proceeding and that there is no longer any basis for continuing to use adverse facts available. Accordingly, Agro Dutch asserts that, for these sales, the Department should use the exchange rate for the date of sale and calculate the imputed credit expense using the reported date of payment. The petitioners claim that Agro Dutch's newly-provided information demonstrates that continued application of adverse facts available is warranted in this review. The petitioners assert that the evidence on the record of this review indicates that Agro Dutch has engaged in a pattern of intentionally failing to report information and data whose absence seriously undermines the integrity and reliability of these proceedings. The petitioners contend that Agro Dutch's latest revelation calls into question the relationship between Agro Dutch and the customer as well as the appropriate dates of sale and payment. For example, the petitioners suggest that the customer's activities as an agent and payment collector for Agro Dutch imply a stronger affiliation between the companies than Agro Dutch has reported to date, and perhaps a constructed export price methodology, rather than an export price methodology, should be used to determine U.S. price. The petitioners continue that the cumulative effect of Agro Dutch's failure to provide adequate, timely information on this matter has hampered the Department's ability to conduct an accurate and complete analysis of many issues related to this proceeding, and the petitioners's ability to comment on them. Therefore, the petitioners conclude that the Department should apply total facts available for Agro Dutch's margin. If the Department does not apply total facts available, the petitioners argue that the Department should apply more adverse partial facts available for the affected portions of the response, such as the highest exchange rate across all segments of this proceeding, not just the instant review. Agro Dutch responds that the petitioners fail to identify any specific information that Agro Dutch failed to disclose. Agro Dutch contends that there is no basis to apply any facts available information to its data because the necessary information the Department has requested and the petitioners' assertions are based on misunderstanding of the responses or unsupported assumptions. DOC Position: As discussed above, despite specific requests from the Department to Agro Dutch in the instant review to provide documentation and information concerning this specific sales channel, Agro Dutch failed to provide this information until the post-preliminary results March 26, 2002, submission. In this review, Agro Dutch first reported that all of its U.S. sales are sold with payment terms of 90 days after the bill of lading date (see May 25, 2001, Section C questionnaire response at page C-12). It also asserted that it had no binding contracts or sales agreements with any U.S. customers during the POR (see August 30, 2001, supplemental questionnaire response at page 1. Nowhere in the May 7, 2001, Section A response discussion on sales process or any other response does Agro Dutch refer to advance payment sales circumstances involving this customer. Not until the Department sought clarification of Agro Dutch's reported payments, shortly before the due date of the preliminary results, did Agro Dutch first mention these unusual sales circumstances (see February 11, 2002, response at page 2). Only after the preliminary results of this review and another supplemental questionnaire did Agro Dutch provide any details about sales to the customer in question in the March 26, 2002, submission (in full, ten months after the Department first requested Agro Dutch's sales information in its initial questionnaire). However, this belated explanation raises more questions than it answers. Agro Dutch's March 26, 2002, explanation indicates that the customer provided a great deal of money to Agro Dutch merely as a deposit against future orders for which no written agreement or contract was required, nor any guarantees on pricing. To advance such a large amount of money without any further legal commitment or security reflects an unusual business agreement that requires further explanation. If no sales agreement or contract exists beyond an "oral understanding" (see the March 16, 2002, submission at page 1), then such a deal implies either a great deal of trust on the part of the customer, or that the customer has some other form of relationship to Agro Dutch. Not only is the appropriate date of sale and payment date in question, but also other key sales issues, such as the role of the customer as a sales and payment agent, the relationship of the customer to Agro Dutch, and even the price basis for the sales (i.e., Agro Dutch's price to the customer in question, or price that the other customers paid this customer, as noted at page 1 of the March 26, 2002, response). The petitioners suggested in their case brief that sales through this customer may be considered more appropriately as constructed export price sales, rather than EP sales. While the record information does not support this conclusion, we cannot entirely rule out this possibility, given the questions that remain about this sales channel. There is a great deal more to be learned about these sales, but no further opportunity in this proceeding to obtain the information because Agro Dutch failed to provide this sales information until late in the proceeding. Because Agro Dutch withheld information requested by the Department related to these sales, in accordance with 776(a)(2)(A) of the Act, we have determined that facts available is warranted in this instance. The Department's lack of full knowledge about the sales involving this customer, as well as those sales where the customer acted as a payment agent, stems directly from Agro Dutch's lack of cooperation in providing specifically requested information in this review. This information was maintained in Agro Dutch's records and was within its control, but Agro Dutch failed to provide the information in its questionnaire response. Thus, Agro Dutch has not cooperated with respect to providing this information and an adverse inference is warranted in applying facts available for the sales made to the customer in question, in accordance with section 776(b) of the Act. As facts available, we are assigning the highest calculated margin for any respondent in the original less-than-fair-value (LTFV) investigation, the 1998-2000 administrative review, and the instant review, 66.24 percent, to the sales made to this customer. The 66.24 percent margin is applied to the value of all sales to the customer in calculating a weighted-average margin for all of Agro Dutch's sales during the POR. This rate is being applied to (1) the customer code identified by Agro Dutch for this customer; (2) a second customer which the Department believes is affiliated with the customer in question (see Agro Dutch May 25, 2001, questionnaire response at C-8 and C-35); and (3) Agro Dutch's sales to other customers for which payment was credited against the customer's advance payment. We have identified those sales based on the reported payment date. That is, if the reported payment date preceded the date of sale, the payment for the sale was credited against the advance payment (see February 11, 2002, submission at page 2 and March 26, 2002, submission at page 1) and we applied facts available to the sale. Also, see Comment 8, below. Finally, we disagree with the petitioners that total facts available is warranted for Agro Dutch's margin. Although Agro Dutch failed to provide complete and timely information with regard to a specific sales channel, we do not consider its response to be so inadequate that the use of total facts available is justified. Accordingly, we have applied the 66.24 percent margin as described above. Comment 3: Treatment of Rejected U.S. Sales The petitioners argue that Agro Dutch's August 30, 2001, supplemental questionnaire response reports that some subject merchandise it shipped to the United States was rejected after reaching its U.S. destination, and that the merchandise was returned to India for reprocessing and resale. However, because Agro Dutch has not accounted for this merchandise, except in accounting for the additional freight expense in returning the products to India, the petitioners claim that the Department should consider the merchandise as sales losses and treat the cost of these lost sales as a direct selling expense. In addition, the petitioners claim that the Department should deduct the value of the rejected and returned sales from the denominator of the margin and assessment rate calculations. Agro Dutch responds that these shipments did not generate losses, since they were returned to India, reprocessed, and resold. Even if there were losses, Agro Dutch states that the loss would be incurred on the resales, not the instant sales transactions, and would result in a below-cost sale, which is not a selling expense. Finally, citing Final Determination of Sales at Less Than Fair Value: Fresh Cut Roses from Colombia, 60 FR 6980, 6996 (February 6, 1995), in which Agro Dutch states that the Department held that an adjustment for merchandise shipped but not sold is appropriate for assessment purposes, Agro Dutch asserts that the assessment rate must be computed by using the total entered value of all entries, including any unsold merchandise. DOC Position: We agree with Agro Dutch that the cost of these rejected sales should not be treated as a circumstance-of-sale adjustment. Agro Dutch has properly accounted for the movement expenses involved with shipping and returning this merchandise. As Agro Dutch has not reported these items resold to a U.S. customer during the instant POR, we will consider if they were eventually sold to a U.S. customer in a subsequent review. With respect to the margin calculation, we did not include the value of the returned merchandise in the denominator. With respect to the assessment rates, as discussed above, we have calculated these rates on a per-unit basis, rather than a value basis. In doing so, we did not include the quantity of the returned merchandise in the denominator. Comment 4: Classification of "Expenses Written Off" The petitioners contend that Agro Dutch improperly classified "expenses written off" as part of factory overhead included in the cost of manufacture, rather than in general and administrative (G&A) expenses, which petitioners contend is the Department's normal practice. Accordingly, the petitioners claim that the calculation of G&A expenses should be revised to reclassify these expenses as G&A expenses. Agro Dutch contends that such a revision is unwarranted as Agro Dutch has already accounted for the expense. DOC Position: We agree with Agro Dutch. As indicated in the Department's February 13, 2002, memorandum to the file, this expense item was included in Agro Dutch's reported fixed overhead expense. Thus to add it to G&A calculation would result in double-counting the expense. The petitioners note correctly that the Department's preference is to include such write-offs as part of G&A, rather than fixed overhead expense, so that the expense will not affect the calculation of the variable costs to total cost of manufacture ratio used to determine the most appropriate product match of a foreign market product to the U.S. product. However, in this review, Agro Dutch's U.S. sales are compared only to constructed value. Therefore, it is not relevant in this instance whether the expense is classified as part of overhead or as part of G&A, as long as it is included in Agro Dutch's cost reporting, Accordingly, we continue to accept Agro Dutch's reporting methodology for this expense. Comment 5: Classification of Exchange Rate Losses for Notes Payable Agro Dutch reported an amount of net exchange rate losses generated by notes payable, which it stated was related to long-term loans. It accounted for this expense by adding it to the book value of the associated asset and recognizing the expense through the depreciation expense for the "Plant and Equipment Machinery" asset account. The petitioners claim that these expenses should be recognized as financial expenses and thus the financial expense rate for calculating constructed value should be revised accordingly. Citing, inter alia, Final Determination of Sales at Less than Fair Value: Steel Concrete Reinforcing Bars from the Republic of Korea, 66 FR 33526 (June 22, 2001), Issues and Decision Memorandum at Comment 9, Agro Dutch states that it is the Department's longstanding practice to include only the current portion of foreign exchange gains and losses associated with long-term debt in the cost of production and constructed value. Agro Dutch explains that its accounting treatment of the expense includes the amortized portion of exchange losses on loans as a production expense, and thus it is already incorporated in its reporting. DOC Position: Section 773(f)(1)(A) of the Act states that "costs shall normally be calculated based on the records of the exporter or producer . . . if such records are kept in accordance with the generally accepted accounting principles of the exporting country" and "reasonably reflect the costs associated with the production and sale of the merchandise." As Agro Dutch notes in its February 11, 2002, response at pages 4 -5, Indian Generally Accepted Accounting Principles (GAAP) allows companies to include exchange losses on loans used to purchase capital equipment as part of the capitalization of the cost of the equipment and may be depreciated over the remaining useful life of the equipment. While the Department's normal practice is to include only the current portion of the exchange rate gain or loss over the period of the loan, the difference between these methodologies is the amortization period (i.e., the life of the loan or life of the asset). Agro Dutch's treatment of this exchange loss in its accounting system is consistent with Indian GAAP. We do not find this treatment to be distortive because the life of the associated asset appears to be a reasonable basis for allocation and the cost of the exchange rate loss is captured in Agro Dutch's reported costs through the depreciation expense. Accordingly, we have accepted Agro Dutch's treatment of this exchange rate loss. Comment 6: Agro Dutch Name Change In its March 26, 2002, submission, Agro Dutch informed the Department that its name changed from "Agro Dutch Foods Limited" to "Agro Dutch Industries Limited." Agro Dutch stated that this is a name change only, and that there was no merger, acquisition, change in ownership, or corporate restructuring. In their May 10, 2002, case brief, the petitioners requested that the final results and liquidation instructions issued to the U.S. Customs Service in this segment of the proceeding note that entries processed under either name are subject to the duties imposed by the Department under this order. DOC Position: At the Department's request, Agro Dutch filed additional documentation on July 3, 2002, to support the name change. The name change was effective as of January 8, 2001. Accordingly, we will advise the U.S. Customs Service in the cash deposit and liquidation instructions. Weikfield Comment: Comment 7: Inclusion of Parent Company G&A Expenses in Weikfield's G&A Rate The petitioners contend that the Department should revise the calculation of Weikfield's G&A expense ratio to include costs shifted from Weikfield to its parent corporation. According to the petitioners, Weikfield's parent company, Weikfield Products Co. Ltd. (WPCL), is directly involved in the general administration of the subsidiary's activities and the structure of reported corporate costs demonstrates that WPCL bears a significant portion of G&A expenses on Weikfield's behalf. Citing, e.g., Final Determination of Sales at Less Than Fair Value: Certain Softwood Lumber Products from Canada, 67 FR 15539 (April 2, 2002)(Softwood Lumber), accompanying Issues and Decision Memorandum at Comment 19, the petitioners assert that the Department's normal practice is to calculate the G&A rate based on a respondent company's unconsolidated operations plus a portion of G&A expenses from the parent company. Accordingly, the petitioners argue that a portion of WPCL's G&A expenses should be allocated to Weikfield on the basis of proportional cost of goods sold. Weikfield responds that there is no evidence of record that WPCL actually provides G&A services to Weikfield. Weikfield rebuts the petitioners' assertion that Weikfield's preserved mushroom operations are supported by the WPCL through WPCL's Agro Products Division by noting that Weikfield had hardly any home market sales of preserved mushrooms during the POR and thus WPCL did not perform G&A services on Weikfield's behalf. Weikfield cites Notice of Final Results of Antidumping Duty Administrative Review: Silicon Metal from Brazil, 64 FR 6305, 6319 (February 9, 1999)(Silicon Metal) as articulating the Department's practice that a portion of a parent company's G&A expense will only be added to the G&A where the parent or affiliated company has provided general or administrative services on behalf of the respondent. Since the record evidence shows that the G&A expense rate calculated for the preliminary results accurately accounted for all G&A expenses, Weikfield argues that the Department should not change its G&A expense rate for the final results. DOC Position: Both Softwood Lumber and Silicon Metal set forth the Department's practice in calculating a company's G&A expense based on a respondent company's unconsolidated operations plus a portion of G&A expenses incurred by affiliated companies on behalf of the respondent if there is evidence that the parent company incurred G&A expenses in support of the subsidiary's activities. Consistent with this stated practice, as well as our practice in the previous review with respect to Weikfield (see 1998- 2000 Final Results and accompanying Issues and Decision Memorandum at Comment 1), we have calculated Weikfield's G&A expense based solely on Weikfield's data, without the addition of any expenses incurred by WPCL because there is no evidence on the record that WPCL incurred G&A expenses in support of Weikfield's activities. Specifically, the Weikfield and WPCL annual reports make no mention of any such expenses or services performed by WPCL. As noted by Weikfield, the Agro Products Division cited by the petitioners is a division of WPCL, and not an organizational heading for the Weikfield group of companies that includes Weikfield. In fact, as the narrative at page 5 and the diagram at Exhibit A-3 indicate, the corporate relationship of WPCL to Weikfield does not appear to be that of parent and subsidiary, but rather of two "sister" companies owned by the same family. Again, as there is no indication that any of the WPCL G&A expenses were incurred in support of Weikfield's activities, we find no basis to adjust the G&A rate used in the preliminary results, which was based solely on Weikfield's expenses. Saptarishi Comment: Comment 8: Selection of Facts Available Rate As discussed in the Preliminary Results, Saptarishi Agro Industries Ltd. (Saptarishi), a respondent in this review, did not to respond to the Department's supplemental questionnaire and informed the Department that it would not participate in this review. Accordingly, the Department determined that it was appropriate to apply adverse facts available to Saptarishi. As adverse facts available, we applied to Saptarishi the highest rate calculated for any cooperative respondent from any prior segment of this proceeding, the 66.24 per cent rate calculated for Techtran in the 1998 - 2000 review. The petitioners argue that the selection of the 66.24 percent rate is inconsistent with the Department's practice. The petitioners cite numerous cases, such as Preliminary Results and Partial Rescission of Antidumping Duty Administrative Review: Certain Forged Stainless Steel Flanges From India, 67 FR 10,358 (March 7, 2002), and Preliminary Results and Rescission in Part of Antidumping Administrative Review: Stainless Steel Plate in Coils from Taiwan;, 67 FR 5789 (February 7, 2002), where the Department assigned the highest margin from any segment of the proceeding to uncooperative respondents. In addition, the petitioners state that the 66.24 percent is insufficiently adverse for application in this review. Thus, the petitioners contend that the rate to be applied to Saptarishi should be the 243.87 percent rate from the less than fair value (LTFV) investigation, which is the highest margin from any segment of the instant proceeding. No other party commented on this issue. DOC Position: The statute provides the Department with broad discretion in making adverse inferences. Section 776(c) of the Act states that, in making an adverse inference, the Department may select from information derived from the petition, the LTFV investigation, a prior review or any other secondary information placed on the record. Additionally, the Statement of Administrative Authority (SAA) accompanying the URAA, H.R. Doc. No. 103- 316, at 870 provides that, where a party has not cooperated, the Department may employ adverse inferences about the missing information to ensure that the party does not obtain a more favorable result by not cooperating than if it had fully cooperated. For the reasons stated in the preliminary results, the Department has applied a total adverse facts available rate to Saptarishi. In the instant review, we continue to apply the 66.24 percent rate, the highest calculated margin from any segment of this proceeding, as the adverse facts available rate. The 243.87 percent rate from the LTFV investigation was not a calculated rate but rather was based on information from the petition and revised in part with constructed value data from LTFV investigation respondents. We acknowledge that, in a number of similar cases, as cited by the petitioners, the Department's practice has been to apply the highest rate from any segment of a proceeding, not simply the highest calculated rate, as adverse facts available. For purposes of the final results, we considered whether the petition-based 243.87 percent rate was appropriate for application in this review. In accordance with the statute, we attempted to corroborate this rate as applied to Saptarishi. Under section 776(c) of the Act, when corroborating secondary information rather than information obtained in the course of the current review, the Department shall, to the extent practicable, corroborate that information from independent sources that are reasonably at its disposal. See also the SAA at 870. To corroborate secondary information, the Department will, to the extent practicable, examine the reliability and relevance of the information used. While the Department corroborated the 243.87 percent rate in the LTFV investigation, finding it both reliable and relevant, we have concerns that this rate is not sufficiently relevant to Saptarishi in this review. The 243.87 percent rate relied on the average unit value of U.S. imports of the subject merchandise from a period preceding the filing of the petition in January 1998 to determine the U.S. price. Normal value for this rate was based on constructed value from information in the petition and from questionnaire response data obtained during the LTFV investigation, and the value was converted from Indian rupees to U.S. dollars using the exchange rate from that period, as provided in the antidumping petition. The average unit value of Indian imports during the POR, and the POR-average currency exchange rate were substantially different from the data underlying the 243.87 rate. In addition, none of the respondents' actual data in this review support the 243.87 percent rate. We further note that Saptarishi is not now nor has been previously subject to the 243.87 percent rate or any comparable or higher rate. As Saptarishi has never been examined, it is and has been subject to the "all others" rate of 11.30 percent. In light of these circumstances, we question the relevance, and hence the probative value, of this rate with respect to Saptarishi in this review. Given these circumstances, we examined whether the next highest rate, which is 66.24 percent, is sufficiently adverse and can be corroborated. The petitioners offered no support for their contention that the 66.24 percent rate is not sufficiently adverse. When compared to the range of other margins throughout the history of this proceeding, with most rates falling in the single digit range, and the rate currently applicable to Saptarishi, 11.30 percent, we find that a 66.24 percent rate is sufficiently adverse. Section 776(c) of the Act directs the Department to corroborate, to the extent practicable, secondary information used as facts available. To corroborate secondary information, the Department will, to the extent practicable, examine the reliability and relevance of the information used. However, unlike other types of information, such as input costs or selling expenses, there are no independent sources for calculated dumping margins. The only source for margins is an administrative determination. Thus, in an administrative review, if the Department chooses as total adverse facts available a calculated dumping margin from a prior segment of the proceeding, it is not necessary to question the reliability of the margin from that time period. See, e.g., Elemental Sulphur from Canada: Preliminary Results of Antidumping Duty Administrative Review, 62 FR 971 (January 7, 1997). As to the relevance of the margin used for adverse facts available, the Department stated in Tapered Roller Bearings from Japan: Final Results of Antidumping Duty Administrative Review, 62 FR 47454 (September 9. 1997), that it will consider information reasonably at its disposal as to whether there are circumstances that would render a margin irrelevant. Where circumstances indicate that the selected margin is not appropriate as adverse facts available, the Department will disregard the margin and determine an appropriate margin. See also, Fresh Cut Flowers from Mexico: Preliminary Results of Antidumping Duty Administrative Review, 60 FR 49567 (September 26, 1995). We have determined that there is no evidence which would indicate that the rate is irrelevant or inappropriate as an adverse facts available rate in the instant review. Therefore, we have continued to apply the 66.24 percent rate to Saptarishi, as well as to the sales discussed in Comment 2, above. Recommendation Based on our analysis of the comments received, we recommend adopting all of the above positions. If these recommendations are accepted, we will publish the final results of review and the final weighted-average dumping margins for the reviewed firms in the Federal Register. Agree ___ Disagree ____ _____________________ Joseph A. Spetrini Acting Assistant Secretary for Import Administration _____________________ (Date) __________________________________________________________________________ footnotes: 1. Agro Dutch placed the financial data of a fourth food processing company, ADF Foods Limited (ADF), on the record, but at page 12 of its May 17, 2002, rebuttal brief, Agro Dutch acknowledged the petitioners' case brief objections that ADF would not be appropriate for inclusion in the calculation of the profit cap because ADF's business is largely export oriented. 2. Compare the "Earnings in Foreign Currency" at page 18 (Schedule 'L', note 22) of the FI financial statement with the sales income reported at page 13.