66 FR 11254, February 23, 2001 A-557-805 Administrative Review POR 10/01/98- 9/30/99 IA: E. Eastwood MEMORANDUM TO: Bernard T. Carreau, fulfilling the duties of Assistant Secretary for Import Administration FROM: Richard W. Moreland Deputy Assistant Secretary, Group 1 Office of AD/CVD Enforcement SUBJECT: Issues and Decision Memorandum for the Antidumping Duty Administrative Review on Extruded Rubber Thread from Malaysia - October 1, 1998, through September 30, 1999 Summary We have analyzed the comments of the interested parties in the 1998-1999 administrative review of the antidumping duty order covering extruded rubber thread from Malaysia. As a result of our analysis of the comments received from interested parties, we have made changes in the margin calculations for one respondent, as discussed in the "Margin Calculations" section of this memorandum. We also 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: 1. Calculation of the Constructed Export Price (CEP) Ratio 2. Calculation of Credit Expenses Background On November 3, 2000, the Department of Commerce (the Department) published the preliminary results of the administrative review of the antidumping duty order on extruded rubber thread from Malaysia. See Notice of Preliminary Determination of Sales at Less Than Fair Value: Extruded Ruber Thread from Malaysia, 65 FR 66232 (Nov. 3, 2000). The product covered by this order is extruded rubber thread. The period of review (POR) is October 1, 1998, through September 30, 1999. We invited parties to comment on our preliminary results of review. In response to the Department's invitation to comment on the preliminary results of this review, Heveafil Sdn. Bhd./Filmax Sdn. Bhd. (Heveafil) and Filati Lastex Sdn. Bhd. (Filati) filed case briefs on November 28, 2000. We did not receive comments from Rubberflex Sdn. Bhd. or the petitioner. Based on our analysis of the comments received, we have changed the results for Filati from those presented in the preliminary results. Margin Calculations We calculated constructed export price and normal value using the same methodology stated in the preliminary results, except as follows: •The Department inadvertently assigned October 30, 2000, as the date of payment for Filati's sales which were paid before the date of the preliminary results. We have corrected this error for purposes of these final results. See Comment 2. Discussion of the Issues Comment 1: Calculation of the CEP Ratio In order to calculate CEP profit for Filati and Heveafil, we first calculated the difference between the total revenue received by each company and its total costs, including all actual selling expenses. We then allocated the total actual profit to individual CEP sales transactions based on the ratio of total U.S. expenses to total expenses. Filati and Heveafil argue that the Department should use both actual and imputed selling expenses when calculating total actual profit. The petitioner did not comment on this issue. Department's Position: In accordance with the Department's practice, we find that it is appropriate to base the CEP-profit ratio on actual expenses as indicated in the wording of section 772(f)(1) of the Act, which directs us to calculate CEP profit on the basis of "total actual profit." (1) As discussed below, the Department's practice with respect to imputed costs is reasonable and supported by recent court decisions. (2) Normal accounting principles only permit the deduction of actual booked expenses, not imputed expenses, in calculating profit. Inventory-carrying costs and credit expenses are imputed expenses, not actual booked expenses, so we have established a practice of not including them in the calculation of total actual profit. See, e.g., Antidumping Duties; Countervailing Duties; Final Rule, 62 FR at 27317, 27354 (May 19, 1997); Import Administration Policy Bulletin number 97/1, issued on September 4, 1997, concerning the Calculation of Profit for Constructed Export Price Transactions, at 3 and note 5; Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From France, et al; Final Results of Antidumping Duty Administrative Reviews and Partial Termination of Administrative Reviews, 62 FR 2081, 2127 (Jan. 15, 1997); Notice of Final Results of Antidumping Duty Administrative Review; Canned Pineapple Fruit from Thailand, 63 FR 7392, 7395 (Feb. 13, 1998); Notice of Final Determination of Sales at Less Than Fair Value: Certain Cut-to-Length Carbon-Quality Steel Plate Products from France 64 FR 73143, 73152 (Dec. 29, 1999); and Notice of Final Determination of Sales at Less Than Fair Value: Porcelain-on-Steel Cookware from Mexico, 65 FR 30068 (May 10, 2000) and accompanying Decision Memorandum at Comment 5. Likewise, since the cost of the U.S. and home market merchandise includes the actual booked interest expenses, it is not appropriate to include imputed interest amounts as well in total expenses. Doing so double-counts this expense to a certain extent and overstates the cost attributed to sales of this merchandise. This overstatement of cost understates the ratio of U.S. selling expenses to total expenses and consequently understates the amount of actual profit allocated to selling, distribution, and further- manufacturing activities in the United States. For further discussion, see Final Results of Redetermination Pursuant to Court Remand, SNR Roulements, et al. v. United States, Slip Op. 00-131 (CIT October 13, 2000) (Court No. 97-10-01825). Consequently, we have continued to use only actual selling expenses in deriving Filati's and Heveafil's total actual profit for purposes of calculating the CEP profit ratio. Comment 2: Calculation of Credit Expenses In accordance with the Department's practice, we intended to assign October 30, 2000, as the date of payment for all sales that remained unpaid as of the date of the preliminary results of this review for purposes of calculating credit expenses. Filati contends that the Department inadvertently assigned October 30, 2000, as the date of payment for each of its U.S. sales during the POR, thereby overstating the credit period for those sales which were paid before the date of the preliminary results. Accordingly, Filati argues that the Department should correct this error for these final results. The petitioner did not comment on this issue. Department's Position We agree with Filati that the Department inadvertently misstated the date of payment for those sales which were paid before the date of the preliminary results. We have adjusted the margin calculations for Filati to correct this error. 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 margin for the reviewed firm in the Federal Register. Agree____ Disagree____ Bernard T. Carreau, fulfilling the duties of Assistant Secretary for Import Administration (Date) _________________________________________________________________________ footnotes: 1. The U.S. Court of International Trade (CIT) has held that the Department's practice of excluding imputed credit expenses from the calculation of total expenses, when imputed credit expenses are included in total U.S. expenses, is contrary to the plain language of section 772(f) of the Act. See SNR Roulements et al. v. United States, Court No. 97-10-01825, Slip Op. 00-131 (Oct. 13, 2000) ("SNR Roulements"); accord FAG Italia S.p.A. et al. v. United States, Court No. 97-02-00260-S, Slip Op. 00-154 (Nov. 21, 2000). The CIT has not entered a final judgment in either of these cases; thus, no decision has yet been made on whether or not to appeal the cases. Consequently, the Department will continue to follow its practice with respect to calculating CEP profit under section 772(f) of the Act so as to exclude imputed credit expenses from total expenses. 2. In SNR Roulements, the CIT ruled that "Commerce improperly excluded imputed inventory and carrying costs from 'total expenses' when it had included these expenses in 'total United States expenses.'" The CIT concluded that, "since Commerce determined that imputed inventory and carrying costs were to be included in 'total United States expenses,' they must be included in 'total expenses' as well." The United States Court of Appeals for the Federal Circuit (CAFC), however, ruled recently that the statute "does not require or even vaguely suggest symmetry between the definitions of 'U.S. expenses' and 'total expenses.'" In fact, the CAFC stated that the statutory definitions themselves "undercut symmetrical treatment of 'total U.S. expenses' and 'total expenses.'" See U.S. Steel Group, et al v. United States, 225 F.3d 1284, 1290 (CAFC 2000); see also, Thai Pineapple Canning Industry Corp., Ltd. v. United States, 2000 Ct. Intl. Trade LEXIS 17 (CIT September 10, 2000) (affirming the Department's method of avoiding double-counting).