65 FR 77851 December 13, 2000 A-549-813 98/99 Review Public Document GRP II Off. 5 MEMORANDUM TO: Troy H. Cribb Assistant Secretary for Import Administration FROM: Holly A. Kuga Acting Deputy Assistant Secretary for Group II, Import Administration SUBJECT: Issues and Decision Memorandum for the Final Results of the Antidumping Duty Administrative Review and Final Determination Not to Revoke in Part: Canned Pineapple Fruit from Thailand Summary We have analyzed the case briefs and rebuttals of interested parties for these final results of the antidumping duty review covering canned pineapple fruit (CPF) from Thailand. Comments were received from the petitioners and some of the respondents. We recommend that you approve the positions we have developed in the Department Position sections of this memorandum. Background On August 8, 2000, the Department of Commerce (the Department) published the preliminary results of the antidumping duty review of CPF from Thailand. The period of review (POR) is July 1, 1998 through June 30, 1999. The respondents in this case are: Vita Food Factory (1989) Co., Ltd. (Vita); Siam Fruit Canning (1988) Co., Ltd. (SIFCO); Siam Food Products Public Co. Ltd. (SFP); The Thai Pineapple Public Co., Ltd. (TIPCO); Malee Sampran Public Co., Ltd. (Malee); The Prachuab Fruit Canning Company Ltd. (PRAFT); Thai Pineapple Canning Industry (TPC); and Tropical Food Industries Co., Ltd. (TROFCO) and Kuiburi Fruit Canning Co. Ltd. (KFC). We gave interested parties an opportunity to comment on the preliminary results. On September 7 and 14, 2000, we received case briefs and/or rebuttal briefs, respectively, from the petitioners, (1) SFP, TIPCO, Malee, TPC, and SIFCO. No party requested a public hearing. List of Comments in the Issues and Decision Memorandum I. ISSUES SPECIFIC TO MALEE Comment 1: Revocation Comment 2: Imputed Credit Expenses Comment 3: Export Price (EP) vs. Constructed Export Price (CEP) ISSUES SPECIFIC TO PRAFT Comment 4: Fruit Cost Allocation Comment 5: Direct vs. Indirect Selling Expenses ISSUES SPECIFIC TO SIFCO Comment 6: Correction of Errors in Database Comment 7: Calculation of General and Administrative (G&A) Expense Ratio Comment 8: Calculation of Interest Expense Ratio ISSUES SPECIFIC TO TIPCO Comment 9: Expenses Related to Compliance with the Antidumping Duty Order Comment 10: Foreign Exchange Gains and Losses Comment 11: Calculation of Interest Expense Ratio Comment 12: Offset to G&A Comment 13: Purchase of Input from Affiliated Party Comment 14: Offset to Cost of Manufacturing (COM) Comment 15: Clerical Error Allegation ISSUES SPECIFIC TO TPC Comment 16: Date of Sale Comment 17: EP vs. CEP Comment 18: Allocation of G&A to Arbitrage Activity Comment 19: Allocation of Interest Expense to Arbitrage Activity Comment 20: Clerical Error Allegation VI. ISSUES SPECIFIC TO SFP Comment 21: Clerical Error Allegation DISCUSSION OF ISSUES ISSUES SPECIFIC TO MALEE: Comment 1: Revocation Malee states that, the order should be revoked with respect to its merchandise, arguing that when certain clerical errors are corrected, Malee will have a de minimis margin, and will have satisfied all requirements for revocation of the order. Malee contends that it has satisfied all threshold requirements for revocation set forth in 19 CFR 351.222(b)(2) and 351.222(d) based on consecutive zero or de minimis margins for three years. Furthermore, Malee states that it has provided the appropriate certifications to the Department agreeing to immediate reinstatement of the order, should the Department determine subsequent to revocation that the company is selling at less than normal value. Malee contends that the Department should presume that an antidumping order is no longer necessary based on Malee's demonstration of the absence of dumping for a three year period, adding that the petitioners have put no information on the record showing that the maintenance of the order is necessary. Citing to the discussion in Amended Regulation Concerning the Revocation of Antidumping and Countervailing Duty Orders, 64 FR 51236, 51239 (September 22, 1999) (Amended Regulation) Malee states that the Department "can only retain an antidumping . . . order if there is positive evidence on the record indicating the continued necessity of such an order to offset dumping . . . ." In this regard, Malee suggests that the petitioners' failure to request a review for the 1997-98 period is probative evidence that Malee was not dumping in this period. (2) Malee further asserts that it has satisfied the Department's requirement in 19 CFR 351.222(d) that the subject merchandise to which revocation will apply was shipped in commercial quantities during each of the three consecutive years covered by the revocation request. Although the Department has not defined the meaning of "commercial quantities" in its regulations, Malee notes that the Department stated in Memorandum to Holly Kuga: Determination Not to Revoke in Part the Antidumping Order on Canned Pineapple Fruit from Thailand (July 28, 2000) (Determination Not to Revoke Memorandum) (at 2) that Malee had not satisfied the commercial quantities requirement because Malee's shipments "have declined considerably when compared to shipment levels prior to the imposition of the AD order." Malee disputes the Department's assertion that a simple decline in shipments is conclusive proof that Malee has not shipped in commercial quantities, arguing that neither the regulations nor the statute support this position. Rather, Malee contends that "the Department simply interprets the commercial quantity requirement as an inquiry into whether the respondent meaningfully participated in the U.S. market during those three years." (3) Malee contends that the existence of multiple shipments not only satisfies the commercial quantities requirement, but also serves as a positive indication that the respondent is not likely to resume sales at less than normal value. Malee argues that the Department should interpret the term "commercial" to mean simply that the respondent has made bona-fide transactions in the ordinary course of business, asserting that, if the Department's determination of whether there have been commercial quantities is based on relative volume of shipments before and after the order, it may be difficult for respondents to satisfy this standard, given that shipments of subject merchandise typically decrease due to initial uncertainty about deposits and assessments once an antidumping order is imposed. Malee claims that its U.S. sales during each of the three revocation years involved multiple bona-fide transactions made in the ordinary course of business to U.S. customers. Moreover, Malee argues, the level of its shipments should be considered substantial for the period in light of three other factors: the Thai financial crisis, a severe drought which limited the supply of pineapples, and a significant restructuring of Malee's operations. The petitioners respond that Malee has not met the requirements for revocation and, in particular, Malee has not shown that it made sales of the subject merchandise in commercial quantities in any of the three revocation years. The petitioners argue that the Department routinely uses pre-order sale levels as the benchmark for determining whether annual sales levels constitute normal commercial activities, and note that the Department has found that Malee's annual sales fell by 96 to 99 percent from the sales levels in the 12-month period that preceded the antidumping order. (4) In other cases, the petitioners state, the Department has found very similar declines -- i.e. declines of over 95 percent -- to constitute grounds for not revoking, based on the argument that such drastically reduced sales do not provide any meaningful information on the respondent's normal commercial experience. (5) The petitioners contest Malee's explanation that drought, currency devaluation and company restructuring were decisive factors behind its limited U.S. sales activities during the three-year period. Claiming that Malee failed to discuss sales levels in other markets, the petitioners observe that the company's financial statements indicate that 1998 sales dropped about 10 percent vis-a- vis 1997 sales. (6) The petitioners argue that drought and restructuring might account for a 10 or 20 percent decline if declines in the U.S. market were commensurate with declines in other markets. Instead, the petitioners conclude, the more dramatic drops in Malee's U.S. sales can only be attributed to the deterrent effect of the antidumping order. Finally, the petitioners dispute Malee's suggestion that their failure to request an administrative review for Malee in the 1997-98 review period implied a lack of interest on their part, contending that they would have requested a review for that period if Malee had continued shipping to the United States in commercial quantities following the imposition of the antidumping duty order. Department Position: For these final results, we find that Malee does not qualify for partial revocation of the order under section 351.222(b) of the Department's regulations. The Department "may revoke, in whole or in part" an antidumping duty order upon completion of a review under section 751 of the Act. While Congress has not specified the procedures that the Department must follow in revoking an order, the Department has deveiloped a procedure for revocation described in 19 CFR 351.222. Pursuant to 19 CFR 351.222(b)(2), the Department may revoke an order in part if the Department concludes that: (1) one or more exporters or producers covered by the order have sold the merchandise at not less than NV for a period of at least three consecutive years; (2) it is unlikely that those persons will sell the subject merchandise at less than NV in the future; and (3) for any exporter or producer that he Secretary previously has determined to have sold the subject merchandise at less than NV, the exporter or producer agrees in writing to its immediate reinstatement in the order, as long as any exporter or producers is subject to the order, if the Secretary concludes that the exporter of producer, subsequent to the revocation, sold the subject merchandise at less than NV. In addition, 19 CFR 351.222(e) requires that during each of the three consecutive years being considered, the person requesting the revocation must certify that they were shipping in commercial quantities. In this review, we have determined a weighted-average margin of 1.04 percent for Malee. Therefore, Malee does not have three consecutive years of selling at not less than fair value. In addition, we also find that Malee has not shipped in commercial quantities during the same period. The Department has found in earlier cases that, unless a respondent has demonstrated the ability to participate in the U.S. market in a commercially meaningful way without dumping with the discipline of the order, the order remains necessary to offset dumping. (7) We disagree with Malee's characterization of what constitutes commercial quantities for revocation purposes. The Department analyzes the question of whether respondents have shipped in commercial quantities on a case-by-case basis, and considers comparisons between aggregate sales in the relevant review periods and sales in a benchmark period before the imposition of the order to be a valid basis for determining whether a respondent continues to participate meaningfully in the U.S. market. In Polyvinyl Alcohol from Taiwan: Final Results of the Third Administrative Review and Determination not to Revoke, 65 FR 60615 (October 12, 2000), the Department stated that: "[r]evocation determinations are particularly fact-intensive and industry- /company-specific, and the Department's practice has been to make its revocation determinations on a case-by-case basis with a particular focus on the comparative sales volume during the PORs in question and the [period of investigation]. Commercial quantities have not been found where aggregate sales are determined to be of an abnormally small quantity, either in absolute terms or in comparison to an appropriate benchmark period, because there was not a sufficient breadth of information regarding a company's normal commercial practice." (8) Based on the precedents we have referenced, we disagree that Malee has demonstrated meaningful participation in the U.S. market. The question of how many sales are necessary to constitute commercial quantities must be addressed on a case-specific basis, and in this case the wide disparity between the aggregate amounts in the pre-order and post-order periods discredits Malee's argument that the multiple shipments are enough. In our preliminary Determination Not to Revoke Memorandum, we provided analysis of Malee's aggregate sales which showed that during the 1996-97 review period, Malee's volume of U.S. sales was approximately 1.25 percent of the volume of sales during the 12-month period prior to the imposition of the order. For the 1997-98 and the 1998-99 review periods, Malee's volume of U.S. sales was 0.70 percent and 3.54 percent, respectively, of the volume shipped during the 12-month period preceding the imposition of the order. We maintain that this dramatic decline from the pre-order sales level in itself demonstrates that Malee was not meaningfully participating in the U.S. market in a way that would provide a basis for us to evaluate whether revocation of an order with respect to Malee is appropriate. While we do not dispute Malee's suggestion that a reduction of the fresh pineapple inputs due to the drought, or the company restructuring and the financial crisis, would reduce the amount of subject merchandise Malee was able to ship, we find that Malee's failure to discuss export levels in other markets in the same period makes it difficult for us to conclude that the three factors were the principal cause of the dramatic decrease in shipments of subject merchandise. Therefore, we are not revoking order with regard to Malee. Comment 2: Imputed Credit Expenses The petitioners argue that for Malee's home market sales through Malee Supply, Malee's home market sales subsidiary, the Department should recalculate the imputed credit expense using Malee's reported average interest rate instead of Malee Supply's. The petitioners state that Malee reported imputed credit expenses for sales through Malee Supply based on Malee Supply's average borrowing rate; however, at verification the Department found all of Malee Supply's interest expense amounts to be based on interest payments on loans from Malee. Accordingly, the petitioners argue, the imputed credit expense should be calculated based on interest rates paid on loans from unaffiliated parties. Furthermore, the petitioners state that the interest expenses that Malee Supply paid to Malee were intercompany transactions that were eliminated for the purpose of preparing Malee's 1998 consolidated financial statements because Malee Supply is 99.99 percent owned by Malee, citing Malee's October 29, 1999 questionnaire response at A-9 and at Exhibit A-18, n.6. Malee argues that, while Malee Supply's interest rate on loans from Malee was higher than the rate paid by Malee to unaffiliated bankers, this fact alone does not demonstrate that Malee Supply's loans were not arm's-length transactions. Department Position: We agree with the petitioners. All of Malee Supply's loans were from Malee, and the respondent did not establish that they were made at arm's length. Therefore we have used Malee's short-term borrowing rate to calculate imputed credit expense for all home market sales. (9) Comment 3: EP vs. CEP Malee argues that the Department improperly classified Malee's U.S. sales as CEP sales, and did not explain in detail its rationale for doing so. While the Department's analysis memorandum indicated that the Department chose to treat all of Malee's U.S. sales as CEP sales because the sales to the first unaffiliated customer were made in the United States by Icon Foods, Malee's affiliated reseller, Malee argues that the paper-processing activities performed by Icon Foods do not constitute the "making" of a sale in the United States by Icon Foods. According to Malee, the Department verified that it is Malee, acting out of its Bangkok office, that performs the essential steps in making the final U.S. sale to the ultimate customer, including negotiating the terms of sale with the customer, arranging for shipment to the customer and issuing shipping instructions. Malee claims that the Department also verified that the sale is completed in Bangkok prior to Icon Foods' involvement and, as a result, the Department used as date of sale Malee's bill of lading date rather than Icon Foods' subsequent invoice date in its preliminary results. Malee asserts that the Department is thus precluded from treating Icon Foods' sales as CEP sales under the reasoning by the Court of Appeals for the Federal Circuit (CAFC) in AK Steel v. United States, 203 F.3d 1330 (Fed. Cir. 2000) (AK Steel I). According to Malee, AK Steel I made clear that the statute distinguishes CEP from EP sales based on whether the transaction occurs inside or outside the United States and, as is clear from the Department's verification findings, all material terms of sale were controlled and made by Malee in Bangkok, not by Icon Foods in the United States. Malee argues further that Icon Foods merely memorializes in its own invoices the agreement already reached between Malee in Bangkok and the ultimate customer in the United States, a fact further supported by Malee's shipping of the merchandise before Icon Foods issues its commercial invoice. Treating Malee's U.S. sales as EP sales would be, according to Malee, consistent with the Department's past practice, where the Department has normally required that, as a necessary condition of CEP sales, the U.S. affiliate take some active role in negotiating the sale, or that it inventories the merchandise. While Malee acknowledges that decisions rendered with respect to other companies during prior segments of the instant proceeding predated the CAFC's decision in AK Steel, Malee claims that recent decisions indicate that the Department continues to base its decision on whether to classify a sale as a CEP sale on the U.S. affiliate's involvement in the negotiation of the sales terms. As support Malee cites Circular Welded Non-Alloy Steel Pipe and Tube From Mexico: Final Results of Antidumping Duty Administrative Review, 65 FR 37518, 37520 (June 15, 2000), where the Department determined that CEP was appropriate for an affiliated reseller because the reseller had "negotiate{d} all of the material terms of the sale," and that the foreign parent had "no contact with the customer whatsoever." The petitioners hold that the Department's decision to treat all of Malee's U.S. sales as CEP transactions is consistent with AK Steel Corp. v. United States 226 F.3d 1361 (Fed. Cir. 2000) (AK Steel II), where the CAFC stated "that if the contract for the sale was between a U.S. affiliate of a foreign producer or exporter and an unaffiliated U.S. purchaser, then the sale must be classified as a CEP sale." According to the petitioners, the test enunciated by the CAFC is based on the geographic location of the party that signed the sales agreement with the unaffiliated U.S. customer. The petitioners point out that information in Malee's questionnaire responses demonstrates that the contracts for Malee's U.S. sales were between Icon Foods and the unaffiliated U.S. customer. Furthermore, the petitioners argue, Malee claimed in its October 29, 1999 section A response (at A-23) that the final terms of price and quantity are not always fixed until the invoice date. The petitioners claim that Malee has attempted to downplay the importance of the contract between Icon Foods and the U.S. customer. The petitioners assert that, absent any contracts directly between Malee and the U.S. customer, the contracts between Icon Foods and the U.S. customers were the only written agreements for these sales. Accordingly, the petitioners argue, pursuant to AK Steel, Malee's U.S. sales must be classified as CEP sales. Department Position: The fact pattern of the instant case resembles the facts found in Notice of Final Determination of Sales at Less Than Fair Value: Expandable Polystyrene Resins from the Republic of Korea, 65 FR 69284 (November 16, 2000) (EPS Resin). There is no argument as to the affiliation between Malee and Icon Foods. Icon Foods, for purposes of our dumping analysis, is an affiliate of Malee based in the United States. For sales made through Icon Foods, Malee negotiates the terms of the sale directly with the first unaffiliated U.S. customers. Once the terms are negotiated, Icon Foods accepts and confirms the contract. Icon Foods subsequently invoices the unaffiliated customer and collects payment from this customer. Therefore, we find that the first sale to an "unaffiliated purchaser" occurs in the United States and was made by Icon Foods. Based on this fact pattern, consistent with AK Steel II and the Department's recent decision in EPS Resin, we have continued to treat Malee's sales through Icon Foods as CEP transactions. ISSUES SPECIFIC TO PRAFT Comment 4: Fruit Cost Allocation The petitioners argue that the Department should not rely on the fruit cost allocation methodology used in PRAFT's normal books and records. Although the petitioners acknowledge that the methodology is value-based, they contend that the methodology is insufficient to account for the qualitative differences between pineapple parts, because it does not obtain the net realizable value (NRV) at the split-off point (i.e., the point at which it is possible to separate the cost of processing fruit from that of processing juice). The petitioners cite to the investigation in this case where the Department stated that a reasonable fruit cost allocation methodology was to compare the NRV of the fruit used in CPF to that used in pineapple juice, defining NRV as "the predicted selling price in the ordinary course of business less reasonably predictable costs of completion and disposal." See Final Determination of Sales at Less Than Fair Value: Canned Pineapple fruit from Thailand, 60 FR 29553, 29560 (June 5, 1995). PRAFT, the petitioners argue, failed to subtract processing costs and therefore failed to arrive at the NRV. The petitioners contend that, consequently, the Department should reject PRAFT's methodology and base fruit cost allocation on the historical five-year NRV data used in the previous review. PRAFT did not rebut. Department Position: We agree with the petitioners. PRAFT's methodology, while value-based, does not account for the separable costs of processing CPF and pineapple juice and therefore distorts the real cost of the pineapple fruit. The Department's long-standing practice, now codified at section 773(f)(1)(A) of the Act, is to rely on data from a respondent's normal books and records if they are prepared in accordance with home country generally accepted accounting principles (GAAP) and reasonably reflect the costs of producing the merchandise. In the less than fair value (LTFV) investigation, the Department determined that a reasonable fruit cost allocation methodology would reflect the significantly different quality of the fruit parts that are used in the production of CPF versus those used in the production of juice products. Id. at 29560. PRAFT's methodology, although it is value-based, does not capture the actual cost of the pineapple, because it does not deduct processing costs after the split-off point from the revenue earned on CPF in determining the percentage of pineapple cost to assign to CPF. We do not have information on the record that would enable us to deduct the separable processing costs. Therefore, for the final results we have recalculated PRAFT's costs using the five-year historical NRV data that PRAFT filed in response to the Department's supplemental questionnaire in this review. Comment 5: Direct vs. Indirect Selling Expenses The petitioners contend that certain selling expenses incurred by PRAFT are indirect, rather than direct expenses. The petitioners make note of the definition of direct selling expenses included in the antidumping questionnaire: "[d]irect expenses generally must be 1) variable and 2) traceable in a company's financial records to sales of the merchandise under investigation." Of the expenses PRAFT claimed as direct selling expenses (bank charges, shipping expenses, containerization expenses and miscellaneous expenses), the petitioners point out that containerization was the only expense PRAFT was able to trace specifically to sales of CPF. As the other expenses were allocated between CPF and juice, the petitioners contend that they are common costs, not traceable to the merchandise under investigation, and should therefore be treated as indirect selling expenses. PRAFT did not rebut. Department Position: We disagree with the petitioners. Direct expenses are typically expenses that are incurred as a direct and unavoidable consequence of the sale (i.e., in the absence of the sale these expenses would not be incurred), whereas indirect expenses are fixed expenses that are incurred whether or not a sale is made. All of the expenses reported by PRAFT as direct selling expenses, including the miscellaneous expenses (e.g. gate charge, quality control analysis, and bill of lading receiving), would not have been incurred if the sale had not been made. Although PRAFT did not separate the expenses incurred on CPF from those incurred on juice in its accounting records, it did demonstrate that these expenses were incurred for export sales, which included the subject merchandise, with no indication that such expenses were sensitive to specific markets or customers. See Memorandum to the File from Charles Riggle and David Goodman: Verification of the Home Market and Comparison Market Sales Information and the Cost Information in the Response of Prachuab Fruit Canning Co., Ltd. in the 1998-99 Administrative Review of Canned Pineapple Fruit from Thailand, dated July 14, 2000. Therefore, in accordance with 19 CFR 351.410(c), we determine that these expenses result from, and bear a direct relationship to, the particular sales in question. Therefore, we have not recategorized these expenses for the final results. ISSUES SPECIFIC TO SIFCO: Comment 6: Correction of Errors in Database SIFCO claims that a non-subject merchandise sale was inadvertently included in the dumping margin calculation. SIFCO states that the Department should delete observation 1 from the database because it is actually a sale of pineapple juice. SIFCO makes reference to a commercial invoice, bill of lading and customer contract to illustrate that observation 1 is not a subject merchandise sale. (10) Furthermore, SIFCO claims that it found an error in the reporting of several other observations. The gross unit price of these observations was based on sales terms of cost and freight instead of free on board (FOB), and SIFCO had inadvertently not reported the cost of international freight for those sales. In its response, SIFCO had stated that all its sales were made on an FOB basis. As support, SIFCO provided the relevant shipping invoices. In addition, on two sales, the gross unit price had been calculated incorrectly because SIFCO had not taken into account that the shipment contained cases with different actual weights. SIFCO provided the invoices for these sales as well. Pursuant to19 CFR section 351.301(b)(2), the petitioners claim that the Department should reject SIFCO's case brief because it consists of entirely new factual information which was submitted long after the deadline for submission of new information. First, the petitioners object to SIFCO's claim that its disputed sale is non-subject merchandise. Second, the petitioners object to SIFCO's late submission of sample sales documents with its case brief. Furthermore, the petitioners argue, the Department should not permit SIFCO to make selective changes to its data after the deadline for submission of information. (11) Lastly, the petitioners claim that if the Department were to revise SIFCO's calculations, it would result in an overstatement of the freight costs for these sales because the sale-specific freight costs in SIFCO's case brief were included in the total movement charges that SIFCO used to calculate its reported average freight costs. Department Position: We acknowledge the petitioners' reference to 19 CFR 351.301(b)(2), which states that for the final results of an administrative review, the submission of factual information is due no later than 140 days after the last day of the anniversary month. However, the Department's practice, as discussed in Certain Fresh Cut Flowers from Colombia: Notice of Final Results of Antidumping Duty Administrative Reviews, 61 FR 42833, 42834 (August 19, 1996), is to accept clerical error corrections after the 140 day deadline under the following conditions: 1) the error in question must be demonstrated to be a clerical error, not a methodological error, an error in judgment, or a substantive error; 2) the Department must be satisfied that the corrective documentation provided in support of the clerical error allegation is reliable; 3) the respondent must have availed itself of the earliest reasonable opportunity to correct the error; 4) the clerical error allegation, and any corrective documentation, must be submitted to the Department no later than the due date for the respondent's administrative case brief; 5) the clerical error must not entail a substantial revision of the response; and 6) the respondent's corrective documentation must not contradict information previously determined to be accurate at verification. We believe that SIFCO's submission of information in its case brief generally meets the above standard. We tested SIFCO's changes against the criteria set forth in the aforementioned case and found that they were not substantial, as they affect only a small percentage of the total sales volume. Second, with regard to the sale of juice and the international freight, we consider SIFCO's information reliable because it comes directly from SIFCO's actual sales documents. Third, SIFCO availed itself of the earliest reasonable opportunity to correct the error. Fourth, the clerical error allegation was received by the due date of the case brief. Fifth, the error did not entail a substantial revision of the response. Sixth, SIFCO's revision did not contradict previously submitted information. Therefore, we have accepted SIFCO's clerical revisions with regard to the juice sale and the international freight. However, with regard to the claim regarding the change in gross unit price due to a change in the weight per carton, the only documentation provided was hand-written figures on the invoice indicating the weight per carton. We do not find this to be sufficiently reliable, and therefore, we will not correct this alleged error in reporting. With regard to the petitioners' claim that the freight would be overstated if we were to assign a separate international freight to the sales in question, we find no evidence that SIFCO included any international freight in its calculation of inland freight from the plant to the port, which was the only freight charge reported. We note that SIFCO did not include any brokerage or port charges in the international freight amount shown in its case brief, and that it maintains a separate account for ocean freight in its books. Therefore, we have used the shipment-specific international freight amounts provided by SIFCO. Comment 7: Calculation of G&A Expense Ratio The petitioners state that the Department should correct errors in the G&A expense ratio calculation for SIFCO. According to the petitioners, SIFCO used an incorrect cost of goods sold (COGS) amount in the denominator to calculate its reported G&A expense ratio. SIFCO used the COGS from its financial statement which was inclusive of G&A and interest. The petitioners believe that the correct figure to use was the COGS before the addition of G&A and interest expenses. In addition, the petitioners claim that the Department should revise the preliminary G&A expense calculation for SIFCO to include exchange losses on sales of fixed assets. The petitioners state that SIFCO's chart of accounts demonstrates that some of SIFCO's reported foreign exchange losses were from losses on sales of fixed assets rather than on accounts receivable. Department Position: With regard to the denominator used in the calculation of G&A, we agree with the petitioners. Because we are applying the G&A ratio to a total cost of manufacturing that does not include G&A and interest expenses, it is appropriate to calculate the ratio over a COGS denominator that is also exclusive of G&A and interest expense. We have corrected the error in SIFCO's G&A expense ratio calculations for these final results. However, we did not revise the G&A expense calculations for SIFCO to include alleged losses on sales of fixed assets. The account name mentioned by the petitioners seems to be a translation error, which SIFCO subsequently corrected in its section D response. Lacking evidence to the contrary, we are accepting SIFCO's statement that all of its foreign exchange losses were incurred on accounts receivable. Comment 8: Calculation of Interest Expense Ratio The petitioners state that, as with its G&A calculation, SIFCO used an incorrect denominator to calculate its reported interest expense ratio. The petitioners argue that SIFCO reported an interest expense ratio that was calculated by dividing net interest expense by a COGS inclusive of G&A and interest. The petitioners argue that the Department should correct this error for the final results. Department Position: We agree with the petitioners. For the reasons described in Comment 7, above, we have recalculated SIFCO's interest expense for the final results. ISSUES SPECIFIC TO TIPCO: Comment 9: Expenses Related to Compliance with the Antidumping Duty Order TIPCO argues that the Department improperly included the accounting expenses incurred by its affiliate TIPCO Marketing Company (TMC) as part of its indirect selling expenses. According to TIPCO, the fees paid to the U.S. accounting firm (which, among other things, processed antidumping duty deposits from U.S. Customs antidumping duty refunds), were incurred by TMC solely to assist in complying with antidumping duty laws in the United States. TIPCO points out that in past cases the Department has not deducted business expenses that are incurred solely as the result of the existence of an antidumping duty order. See e.g., Certain Cold-Rolled Carbon Steel Flat Products from The Netherlands; Final Results of Antidumping Duty Administrative Review, 63 FR 13204,13210 (March 18, 1998). Therefore, TIPCO contends that, consistent with Department precedent, these expenses should not be included as selling expenses. The petitioners argue that the verification report states that not all of the duties performed by TMC's accounting firm are directly related to complying with antidumping duty laws. For example, the petitioners point out, the accounting firm files TMC's taxes and prepares its financial statements. See Memorandum to Gary Taverman from Constance Handley and David Layton, Verification of the U.S. and Comparison Market Sales Information and the Cost Information in the Response of The Thai Pineapple Public Company Ltd. in the 1998-99 Administrative Review of Canned Pineapple Fruit from Thailand, dated August 18, 2000, (TIPCO Verification Report) (at 7). Since TIPCO did not segregate accounting fees incurred on activities related to antidumping duties, the petitioners argue that TMC's accounting expenses should continue to be included in its indirect selling expenses. Department Position: We agree with the petitioners. Documentation from TIPCO's accounting firm presented at verification shows that it also performs duties which are not related to complying with the antidumping order. Id. at 7. Since TIPCO did not demonstrate which portion of the fee may be related solely to antidumping compliance, we have continued to include it in TMC's indirect selling expenses. Comment 10: Foreign Exchange Gains and Losses TIPCO argues that the Department did not take its exchange gains and loses, as determined at verification, into account in calculating its interest expenses for the preliminary determination. TIPCO states that using the exchange gain offset determined at verification reduces TIPCO's interest expenses to zero during the 1998 fiscal year. The petitioners contend that TIPCO must show that the exchange gains were directly related to the production of the subject merchandise. They claim that TIPCO failed to do this and that, therefore, the Department should recalculate interest expenses to exclude the offset for exchange gains. Department: Position: We agree with TIPCO. Because the preliminary results were issued before the verification report, they did not reflect all changes made pursuant to verification. We have corrected TIPCO's interest expense factor to reflect the verified interest amount. Consistent with our past practice, we included the exchange gains and losses generated from financial transactions in the calculation of the financial expense rate and included the exchange gains and losses generated from accounts payable in the calculation of the G&A expense rate. See Notice of Final Determination of Sales at Less Than Fair Value: Certain Polyester Staple Fiber From Taiwan, 65 FR 16877 (March 30, 2000) and accompanying Decision Memorandum at Comment 13. For a further discussion of the calculation of TIPCO's interest expense, see Memorandum To the File, Analysis Memorandum for Thai Pineapple Public Co. Ltd. re: Final Results of the Fourth Antidumping Duty Administrative Review, dated December 6, 2000. Comment 11: Calculation of Interest Expense Ratio TIPCO contends that the Department incorrectly disallowed TIPCO's income expense offset for its investment in an associated company. TIPCO argues that interest paid on money borrowed in association with investments in TIPCO Asphalt Co. Ltd. (TASCO) is not related to TIPCO's manufacturing operations. TIPCO believes that inclusion of this amount causes its interest expenses to be overstated. The petitioners point out that the verification report specifically stated that "TIPCO was unable to support its contention that the interest expense was related to [its investment in TASCO]." See TIPCO Verification Report at 27. Therefore, they contend, TIPCO's deduction of the interest allegedly paid on investments in TASCO should be disallowed. Department Position: We agree with the petitioners. As stated in the verification report, TIPCO borrowed money from an overdraft account, which it stated was for the purchase of shares in TASCO. However, regardless of whether TIPCO was able to provide documentation directly linking the loans to the purchase of the shares, it is our practice to use the interest expense of the company as a whole and not to divide interest expense between divisions or among business activities. See Comment 19, below. Therefore, we have continued to include this expense in TIPCO's interest expense calculation. Comment 12: Offset to G&A The petitioners argue that the Department should disallow TIPCO's use of rental income to offset its G&A expenses. The rental income, the petitioners state, is from rental of unused manufacturing space and, therefore, not part of the general operations of the company. The petitioners argue that it is the Department's longstanding practice to exclude from the G&A calculation supplemental income that is not part of the general operations of the company. See Final Determination of Sales at Less Than Fair Value: Stainless Steel Round Wire from Taiwan, 64 FR 17336, 17338 (April 9, 1998). TIPCO maintains that if the Department were to disallow this offset to G&A, its decision would run contrary to its decision in all previous reviews. TIPCO contends that because the rented space is for storage in the manufacturing plant, it is associated with the general operations of the company. Further, TIPCO states that the petitioners have offered no evidence demonstrating why the Department should deviate from its past practice. Department Position: We agree with TIPCO. Consistent with past reviews, we consider the rental of storage space in the factory to be of a general nature, arising from the company's operations, (i.e. the rental of storage space does not constitute a separate line of business). Therefore, we have allowed it as an offset to G&A. See, e.g., Circular Welded Non-Alloy Steel Pipe From the Republic of Korea; Final Results of Antidumping Duty Administrative Review, 63 FR 32833, 32838 (June 16, 1998). In addition, we note that the income is minor. Comment 13: Purchase of Input from Affiliated Party The petitioners argue that the Department should apply facts available to TIPCO's purchases of fuel oil from its affiliate TASCO. According to the petitioners, TIPCO supplied only one invoice as proof that the sales were made at arm's length, and this is insufficient to demonstrate that its purchases from TASCO were made at arm's length. TIPCO states that the one example the petitioners pointed out does demonstrate that the sales were made at arm's-length prices. Further, TIPCO notes that fuel oil prices make up a minuscule portion of total costs, and are not a major input. Department Position: We agree with TIPCO. In addition to the example provided by TIPCO in its response, we examined the relationship between TIPCO and TASCO at verification and retained more examples showing the arm's-length nature of the transactions. See TIPCO Verification Report, Exhibit C-36. Comment 14: Offset to COM The petitioners contend that the Department should disallow TIPCO's claimed offset to COM for service income. They claim that the services provided to related companies, which include storage, telephone, lab tests and water treatment, are not related to the cost of manufacturing CPF, and therefore the offset should be disallowed. TIPCO argues that the income from the services, which are performed at its CPF factory, reduce its overall factory costs, and should, therefore, be deducted from COM. Moreover, TIPCO states that the Department has allowed these offsets in each of the past reviews. Department Position: We agree with TIPCO. The service income is part of the general operations of the company. The types of services TIPCO provides at the factory are related to its running the factory and the costs of providing these services to the affiliate were not deducted from TIPCO's overhead. The service income is therefore permissible as an offset to COM. Comment 15: Clerical Error Allegation The petitioners argue that the Department failed to input the revised COM for certain control numbers. Department Position: We disagree with the petitioners. The revision to the COM was caused by a change in the per-unit juice cost and did not affect all control numbers. The control numbers in question were either packed in syrup and therefore had no change to the COM or, in the case of control numbers petitioners requested be corrected prior to the cost test, not sold in third country market. For further discussion of this issue see TIPCO Analysis Memorandum, dated December 6, 2000. ISSUES SPECIFIC TO TPC Comment 16: Date of Sale The petitioners argue that the Department should use the date of contract as the date of sale for the portion of TPC's EP sales where no changes occurred between date of contract and date of invoice. They further assert that invoice date should be used in lieu of contract date for those sales where the respondent provided evidence of post-contract-date changes. The respondent points out that, in this administrative review, there were numerous changes to the terms of sale after the contract date for EP sales. The company notes that, unlike in past reviews where the Department used contract date as date of sale for this respondent, in this review period TPC was able to demonstrate that the contracted terms did in fact change after the contract date. Department Position: We agree with TPC. Where the material terms of sale have in fact changed after the date of contract, it is established practice for the Department to rely on invoice date as the date of sale. TPC has demonstrated on the record of this review that there were in fact changes to a significant number of EP sales after the date of contract. Regarding the petitioners' suggestion that we rely on date of invoice only for those EP sales where no changes actually occurred, we note that the regulations state that the Department will normally use the date of invoice as the date of sale, unless a different date better reflects the date on which material terms of sale are established. See 19 CFR 351.401(i). We find that the evidence on the record that there were numerous changes to EP sales after the date of contract indicates that TPC's material terms of sale are not firmly set on the contract date. We are therefore relying on invoice date, as we did at the preliminary determination, as the date of sale for all EP sales. Comment 17: EP vs. CEP The petitioners argue that the Department should treat all of TPC's U.S. sales as CEP sales because the selling functions provided by TPC for sales classified by the respondent as EP sales are the same as those selling functions provided for CEP sales. The respondent points out that no affiliated party has any role in the transactions classified as EP sales, and that this fact has been verified in past administrative reviews. Department Position: We agree with the respondent. According to AK Steel II: "sales must be classified as either: (1) between an unaffiliated U.S. purchaser and the producer or exporter, and thus EP; or (2) between the unaffiliated U.S. purchaser and another entity in the United States, that must, by definition, be related to the producer, and thus CEP. Sales in the United States between unaffiliated purchasers and unaffiliated sellers are never at issue; such a sale could never be the first sale to an unaffiliated purchaser." Since the TPC sales in question are direct sales made to unaffiliated U.S. importers, we have continued to classify these sales as EP sales. Comment 18: Allocation of G&A to Arbitrage Activity The petitioners argue that the Department should recalculate TPC's G&A expense ratio using the adjusted COGS from the company's 1998 financial statements. A recalculation is necessary, according to the petitioners, because TPC allocated a sizeable portion of its total G&A expense to interest income from arbitrage, without demonstrating that there is a relationship between arbitrage operations and G&A expenses. TPC asserts that it is Department practice to exclude expenses from G&A that involve unrelated production and investment activities. The company further asserts that it has set forth direct evidence that at least some portion of its G&A expense in 1998 was directly attributable to arbitrage activities and not other operations. Accordingly, TPC argues that at least some portion of its G&A expenses should be attributed to arbitrage. Department Position: We agree with the petitioners. Department practice requires the G&A expense rate to be calculated as the ratio of total company- wide G&A expenses divided by COGS. See EPS Resin, and accompanying Decision Memorandum at Comment 7 (November 8, 2000). This approach recognizes the general nature of these expenses and the fact that they relate to the activities of the company as a whole rather than to a particular production process or business activity. The Department's methodology also avoids any distortions that may result if, for business reasons, greater amounts of company-wide general expenses are allocated disproportionally between divisions. In keeping with Department practice, we are not allocating TPC's G&A between arbitrage and operations. We have recalculated G&A using the rate from the 1998 financial statements. Comment 19: Allocation of Interest Expense to Arbitrage Activity As with G&A expenses noted supra in Comment 18, the petitioners assert that the Department should not allow TPC to allocate a portion of its interest expense to arbitrage. Moreover, the petitioners assert that TPC has not substantiated its claim that all of its interest income is short- term. The petitioners therefore propose that the Department recalculate TPC's interest expense by relying on the total interest expense shown in TPC's 1998 financial statements as a percentage of TPC's adjusted COGS. The respondent asserts that interest expense should be allocated to arbitrage activities and, further, that there is no reason to disregard the company's claim that its interest income is short-term. The respondent also notes that, even if the Department were to disallow the allocation of interest expense between interest arbitrage and operations, the change would have no effect on the final results since TPC's interest income more than offsets the interest expense incurred during the period. Department Position: We agree with the petitioners in part and with the respondent in part. Because money is fungible, it is the Department's practice not to allocate gains and losses on interest and foreign exchange gains and losses among divisions. For this reason, we find that interest expense should not be allocated between arbitrage and operations. See, e.g., Gulf States Tube Division of Quanex Corp. v. United States, 981 F. Supp. 630, 650 (Ct. Int'l Trade 1997). Regarding the claim that all of TPC's interest income was short- term, we agree with the respondent that there is no reason for the Department to reject this claim. We therefore are disallowing the segregation of interest from arbitrage and interest from operations, but are accepting TPC's interest expense as submitted in its questionnaire response. We note that this change does not have any effect on the interest expense used in the final results, since TPC's short-term interest income is sufficient to offset interest expense incurred during the period. Comment 20: Clerical Error Allegation TPC asserts that, in the preliminary results, the Department incorrectly adjusted CEP for direct selling expenses incurred by TPC in Thailand and reported in the U.S. direct selling expense field. The company claims that U.S. law limits the CEP adjustment to direct expenses incurred in the United States, and suggests that the Department revise its margin calculation accordingly. The petitioners contend that TPC has failed to provide evidence that the direct selling expenses reported in this field are not connected to commercial activities in the United States. Department Position: We agree with the petitioners. TPC has not shown that the expenses reported in the U.S. direct selling expense field are not associated with commercial activities in the United States. In fact, the respondent stated on the record in its November 23, 1999 questionnaire response (at 47) that this field included "bank fees incurred by TPC for CEP sales." We note that 19 CFR 351.402(b) instructs us to adjust for direct expenses associated with commercial activities in the United States related to the sale to an unaffiliated purchaser "no matter where or when paid." Therefore, in accordance with section 772(d) of the Act, we are continuing to adjust CEP sales for the direct selling expenses reported by the respondent in this field. VI. ISSUE SPECIFIC TO SFP Comment 21: Clerical Error Allegation SFP points out two clerical errors made in the preliminary results margin calculation program. First, SFP states that the Department incorrectly revised variable overhead where it intended to revise fixed overhead by the same amount, leaving variable overhead unchanged. Second, SFP states that the Department failed to revise the variable COM and total COM for all of the reported U.S. sales. SFP notes that, in making revisions to certain components of the COM in the constructed value database, the Department inadvertently revised costs only for products listed in the cost of production (COP) database. The COP database contained cost information for products sold in the United Kingdom. Accordingly, SFP points out that the Department failed to revise the cost for products sold in the United States but not in the United Kingdom. The petitioners did not comment on these issues. Department Position: We agree with SFP and have corrected these clerical errors. Recommendation Based on our analysis of the comments received, we recommend adopting the above positions. If this recommendation is accepted, we will publish the final results in the Federal Register. AGREE____ DISAGREE____ _________________________ Troy H. Cribb Assistant Secretary for Import Administration _________________________ Date _________________________________________________________________________ footnotes: 1. The petitioners in this case are Maui Pineapple Company and the International Longshoremen's and Warehousemen's Union. 2. See Malee Case Brief (September 7, 2000) at 8, footnote 13. 3. See id. at 10. 4. Petitioners cite Determination Not to Revoke at 2-3. 5. Petitioners cite Certain Corrosion-Resistant Carbon Steel Flat Products and Certain Cut-to-Length Carbon Steel Plate from Canada: Final Results of Antidumping Duty Administrative Reviews, and Determination Not To Revoke in Part, 65 FR 742, 752 (January 6, 2000) (Carbon Steel Plate from Canada) and Notice of Final Results of Antidumping Duty Administrative Reviews, and Determination Not To Revoke the Antidumping Order: Brass Sheet and Strip from the Netherlands, 65 FR 742, 752 (January 6, 2000) (Brass Sheet and Strip from the Netherlands) 6. Malee Section Questionnaire Response (October 29, 1999) at Exhibit A-18. 7. See Pure Magnesium from Canada; Final Results of Antidumping Duty Administrative Review and Determination Not To Revoke the Antidumping Duty Order in Part, 65 FR 55503 (September 14, 2000) (Pure Magnesium from Canada) and accompanying Decision Memorandum at Comment 4: Procedural Requirements for Revocation. 8. See Polyvinyl Alcohol from Taiwan: Final Results of the Third Administrative Review and Determination Not to Revoke 65 FR 60615 (October 12, 2000) and accompanying Decision Memorandum at Comment 1a. (October 12, 2000). See, also, Brass Sheet and Strip from the Netherlands, 65 FR 742,750 (January 6, 2000) and Pure Magnesium from Canada, 65 FR 55503 (September 17, 2000)and accompanying Decision Memorandum at Comment 4. 9. As stated in the Malee analysis memorandum, we have corrected certain clerical errors in our margin calculation program to exclude prices for Malee Supply sales from the calculation of the weighted-average monthly normal values used for price-to-price comparisons. Malee Supply sales are not made at the same level of trade as the U.S. sales, and we were able to find matches at the same level of trade for all sales. 10. SIFCO cites to Exhibit 1 of its case brief. 11. The petitioners cite to Pistachio Group of the Ass'n of Food Indus. v. United States, 685 F. Supp. 848, 850 (May 17, 1988)