A-549-835 Investigation Public Document &/Office III: LRL/SB

DATE: August 29, 2018

MEMORANDUM TO: Christian Marsh Deputy Assistant Secretary for Enforcement and Compliance

FROM: James Maeder Associate Deputy Assistant Secretary for Antidumping and Countervailing Duty Operations performing the duties of Deputy Assistant Secretary for Antidumping and Countervailing Duty Operations

SUBJECT: Decision Memorandum for the Preliminary Determination in the Less-Than-Fair-Value Investigation of Rubber Bands from Thailand

I. SUMMARY

The Department of Commerce (Commerce) preliminarily determines that rubber bands from Thailand are being, or are likely to be, sold in the United States at less than fair value (LTFV), as provided in section 733 of the Tariff Act of 1930, as amended (the Act). The estimated weighted-average dumping margins are shown in the “Preliminary Determination” section of the accompanying Federal Register notice.

II. BACKGROUND

On January 30, 2018, we received an antidumping duty (AD) petition covering imports of rubber bands from Thailand,1 filed in proper form on behalf of Alliance Rubber Company (the petitioner). We initiated this investigation on February 20, 2018.2

In the Initiation Notice, we stated that we intended to select respondents based on U.. Customs and Border Protection (CBP) data for certain of the Harmonized Tariff Schedule of the United States (HTSUS) subheadings listed in the scope of the investigation.3 Accordingly, on February

1 See the petitioner’s letter, “Petition for the Imposition of Antidumping and Countervailing Duties on Rubber Bands from Thailand, China and Sri Lanka,” dated January 30, 2018 (the Petition). 2 See Rubber Bands from the People’s Republic of China, Sri Lanka, and Thailand: Initiation of Less-Than-Fair- Value Investigations, 83 FR 8424 (February 27, 2018) (Initiation Notice). 3 Id., 83 FR at 8427.

28, 2018, we released the CBP entry data to all interested parties under an administrative protective order, and requested comments regarding the data and respondent selection.4 On March 7, 2018, we received comments regarding the respondent selection process on behalf of two U.S importers of the subject merchandise, Frank Winne & Son, Inc. (Winne) and Schermerhorn Brothers Company, (Schermerhorn) (collectively, Importers), and one Thai producer and exporter of the subject merchandise, Liang Hah Heng International Rubber Co., Ltd. (Liang Hah Heng).5 On March 15, 2018, we solicited comments on the CBP entry data for the AD investigation on rubber bands from Thailand and the countervailing duty investigations on rubber bands from China and Thailand.6 On March 20, 2018, the petitioner provided a list of additional rubber band exporters/producers from China and Thailand to assist in the respondent selection.7 No other interested party submitted respondent selection comments. On March 27, 2018, we limited the number of respondents selected for individual examination to the two largest publicly identifiable producers/exporters of the subject merchandise by value, Liang Hah Heng and U. Yong Industry Co., Ltd. (U. Yong),8 and issued the initial AD Questionnaire to each respondent.9

Also in the Initiation Notice, we notified parties of an opportunity to comment on the scope of the investigation, as well as the appropriate physical characteristics of rubber bands to be reported in response to the AD Questionnaire.10 On March 30, 2018, the petitioner submitted comments regarding the physical characteristics of the merchandise under consideration to be used for reporting purposes.11 On April 5, 2018, Liang Hah Heng filed rebuttal comments.12 Based on the comments received, we incorporated the physical characteristics proposed by the petitioner and Liang Hah Heng into the AD Questionnaire issued on April 12, 2018.13 We received a number of timely scope comments and scope rebuttal comments on the record of this

4 See memorandum to the file, “Rubber Bands from Thailand: Antidumping Duty Investigation: U.S. Customs Data for Respondent Selection,” dated February 28, 2018 (Customs Data). 5 See Importers’ letter, “Rubber Bands from Thailand: Comments on CBP Data and Respondent Selection,” dated March 7, 2018; and, Liang Hah Heng’s letter, “Rubber Bands from Thailand - Comments on Respondent Selection,” dated March 7, 2018. 6 See memorandum to the file, “Antidumping Duty (AD) Investigation on Rubber Bands from Thailand and Countervailing Duty (CVD) Investigations on Rubbers Bands from the People’s Republic of China (China) and Thailand: Comments on Customs Border and Protection (CBP) Entry Data,” dated March 15, 2018. 7 See the petitioner’s letter, “Petition for the Imposition of Antidumping and Countervailing Duties on Rubber Bands from Thailand and China -Additional Information for Respondent Selection,” dated March 20, 2018. 8 See Memorandum, “Antidumping Duty Investigation of Rubber Bands from Thailand: Respondent Selection,” dated March 27, 2018 (Respondent Selection Memorandum). 9 See our letters to Liang Hah Heng and U. Yong, “Request for Information: Antidumping Duty Investigation: Thailand: Rubber Bands,” each dated April 12, 2018 (AD Questionnaire). 10 See Initiation Notice, 83 FR at 8424-8425. 11 See the petitioner’s letter, “Petition for the Imposition of Antidumping and Countervailing Duties on Rubber Bands from Thailand and China - Comments on Product Characteristics for AD Questionnaires,” dated March 30, 2018. 12 See Liang Hah Heng letter, “Rubber Bands from Thailand - CONNUM Product Characteristics Comments,” dated April 5, 2018. 13 See the AD Questionnaire issued to Liang Hah Heng and U. Yong on April 12, 2018 at pages -8 through B-8 and pages C-7 through C-8.

2 investigation, as well as on the records of the companion investigations of rubber bands involving the People’s Republic of China (China).14

On March 22, 2018, the U.S. International Trade Commission (ITC) preliminarily determined that there is a reasonable indication that an industry in the United States is threatened with material injured by reason of imports of rubber band imports from Thailand and China.15

Liang Hah Heng and U. Yong submitted timely responses to the AD Questionnaire (sections A through ) from May 10, 2018, through June 11, 2018.16 We issued supplemental questionnaires to each company and received timely responses to these supplemental questionnaires from May 18, 2018, through August 14, 2018.17 During the same time period, the

14 For further identification and discussion of these comments, see “Scope Comments”, section below; see also memorandum to the file, “Rubber Bands from the People’s Republic of China and Thailand: Scope Comments Decision Memorandum for the Preliminary Determination,” dated concurrently with this preliminary determination (Preliminary Scope Decision Memorandum). 15 See Rubber Bands from China, Sri Lanka, and Thailand; Determinations,” 83 FR 12594 (March 22, 2018) (ITC Preliminary Determination). See also International Trade Commission Preliminary Report, “Rubber Bands from China, Sri Lanka, and Thailand,” Investigation Nos. 701-TA-598-600 and 731-TA-1408-1410 (Preliminary), ITC Publication 4700, March 2018. 16 See Liang Hah Heng’s letter, “Antidumping Duty Investigation of Rubber Bands from Thailand: Section A Questionnaire Response,” dated May 10, 2018 (Liang Hah Heng’s AQR); and, Liang Hah Heng’s letter, “Antidumping Duty Investigation of Rubber Bands from Thailand: Sections B, C, and D Questionnaire Response,” dated June 11, 2018 (Liang Hah Heng’s BQR, CQR, and DQR). See also U. Yong’s letter, “Rubber Bands from Thailand: Section A Questionnaire Response,” dated May 10, 2018 (U. Yong’s AQR); U. Yong’s letter, “Rubber Bands from Thailand: Sections B and C Questionnaire Response,” dated June 11, 2018 (U. Yong’s BQR and CQR); U. Yong’s letter, “Rubber Bands from Thailand: Section D Questionnaire Response,” dated June 11, 2018 (U. Yong’s DQR). 17 See Liang Hah Heng’s letter, “Antidumping Duty Investigation of Rubber Bands from Thailand: Supplemental Section A Questionnaire Response.,” dated June 6, 2018 (Liang Hah Heng’s SAQR); Liang Hah Heng’s letter, “Antidumping Duty Investigation of Rubber Bands from Thailand: Supplemental Section ABC Questionnaire Response,” dated June 27, 2018 (Liang Hah Heng’s 2nd SAQR); Liang Hah Heng’s letter, “Antidumping Duty Investigation of Rubber Bands from Thailand: Second Supplemental Sections ABC Questionnaire Response,” dated July 10, 2018 (Liang Hah Heng’s 2nd SQR); Liang Hah Heng’s letter, “Antidumping Duty Investigation of Rubber Bands from Thailand: Supplemental Section D Questionnaire Response,” dated July 10, 2018 (Liang Hah Heng’s SDQR); Liang Hah Heng’s letter, “Antidumping Duty Investigation of Rubber Bands from Thailand: 3rd Supplemental Questionnaire Response,” dated July 20, 2018 (Liang Hah Heng’s 3rd SQR); Liang Hah Heng’s letter, “Antidumping Duty Investigation of Rubber Bands from Thailand: Second Supplemental Section D Questionnaire Response,” dated August 6, 2018 (Liang Hah Heng’s 2nd SDQR); and, Liang Hah Heng’s letter, “Antidumping Duty Investigation of Rubber Bands from Thailand: Third Supplemental Section D Questionnaire Response,” dated August 9, 2018 (Liang Hah Heng’s 3rd SDQR). See U. Yong’s letter, “Rubber Bands from Thailand: First Supplemental Section A Questionnaire Response,” dated June 8, 2018 (U. Yong’s SAQR); U. Yong’s letter, “Rubber Bands from Thailand: Supplemental Section D Questionnaire Response,” dated July 10, 2018 (U. Yong’s SDQR); U. Yong’s letter, “Rubber Bands from Thailand: Second Supplemental Questionnaire for the Sections A, B and C Responses of U. Yong Industry Co., Ltd.,” dated August 1, 2018 (U. Yong’s 2nd SQR); U. Yong’s letter, “Rubber Bands from Thailand: Third Supplemental Questionnaire for Section C Response of U. Yong Industry Co., Ltd.,” dated August 1, 2018 (U. Yong’s 3rd SQR); U. Yong’s letter, “Rubber Bands from Thailand: Second Supplemental Questionnaire for the Section D Response of U. Yong Industry Co., Ltd.,” dated August 3, 2018 (U. Yong’s 2nd SDQR); and, U. Yong’s letter, “Rubber Bands from Thailand: Fourth Supplemental Questionnaire for the Sections A, B and C Responses of U. Yong Industry Co., Ltd.,” (U. Yong’s 4th SQR) dated August 14, 2018.

3

petitioner submitted comments regarding Liang Hah Heng’s and U. Yong’s questionnaire responses. The petitioner provided pre-preliminary comments on August 16, 2018.18

On June 11, 2018, the petitioner requested that the date for the issuance of the preliminary determination in this investigation be extended by 50 days pursuant to section 733(c)(1)(A) of the Act and 19 CFR 351.205(b)(2).19 Thereafter, pursuant to section 733(c)(1)(A) of the Act, we postponed the preliminary determination until no later than August 29, 2018.20

We are conducting this investigation in accordance with section 731 of the Act.

III. PERIOD OF INVESTIGATION

The period of investigation (POI) is January 1, 2017, through December 31, 2017. This period corresponds to the four most recent fiscal quarters prior to the month of the filing of the petition, which was in January 2018.21

IV. POSTPONEMENT OF FINAL DETERMINATION AND EXTENSION OF PROVISIONAL MEASURES

On July 31, 2018, and August 1, 2018, pursuant to 19 CFR 351.210(b)(2)(ii) and 19 CFR 351.210(e)(2), Liang Hah Heng and U. Yong each requested that, contingent upon an affirmative preliminary determination of sales at LTFV, Commerce postpone the final determination, and that provisional measures be extended to a period not to exceed six months.22 In addition, on August 1, 2018, the petitioner also requested us to fully postpone the deadline of the final determination in the instant investigation.23 In accordance with section 735(a)(2)(A) of the Act and 19 CFR 351.210(b)(2)(ii), because: (1) the preliminary determination is affirmative; (2) the requesting exporters account for a significant proportion of exports of the subject merchandise; and (3) no compelling reasons for denial exist, we are postponing the final determination and extending the provisional measures from a four-month period to a period not greater than six

18 See the petitioner’s letter, “Rubber Bands from Thailand - Petitioner’s Pre-Preliminary Determination Comments Based on Data Submitted in the Questionnaire Responses of Respondent Liang Hah Heng International Rubber Co. Ltd.,” dated August 16, 2018 (Petitioner’s Pre-Preliminary Comments for Liang Hah Heng). See also the petitioner’s letter, “Rubber Bands from Thailand - Petitioner’s Comments on the Preliminary Determination Calculations for Respondent U. Yong,” dated August 16, 2018 (Petitioner’s Pre-Preliminary Comments for U. Yong. 19 See the petitioner’s letter, “Petition for the Imposition of Antidumping and Countervailing Duties on Rubber Bands from Thailand and China - Petitioner’s Request for Postponement of the Preliminary Determinations in the Antidumping Duty Cases,” dated June 11, 2018. 20 See Rubber Bands from the People’s Republic of China and Thailand: Postponement of Preliminary Determinations in the Less-Than-FairValue Investigations, 83 FR 29748 (June 26, 2018). 21 See 19 CFR 351.204(b)(1). 22 See Liang Hah Heng’s letter, “Rubber Bands from Thailand: Request to Extend the Deadline for the Final Determination,” dated July 31, 2018 (Liang Hah Heng’s Extension Request); U. Yong’s letter, “Rubber Bands from Thailand: Conditional Request for Extension of Final Determination,” dated August 1, 2018 (U. Yong’s Extension Request). 23 See the petitioner’s letter, “Rubber Bands from Thailand and Chin: Petitioner’s Request for Postponement of Final Determination,” dated August 1, 2018 (Petitioner’s Extension Request).

4

months. Accordingly, we will make our final determination no later than 135 days after the date of publication of this preliminary determination.

V. SCOPE COMMENTS

In accordance with the Preamble to our regulations,24 the Initiation Notice set aside a period of time for parties to raise issues regarding product coverage (i.e., scope).25 Certain interested parties from the companion rubber band investigations commented on the scope of this investigation, as published in the Initiation Notice. For a summary of the product coverage comments and rebuttal responses submitted to the record for this preliminary determination and accompanying discussion and analysis of all comments timely received please see the Preliminary Scope Decision Memorandum. We have evaluated the scope comments filed by the interested parties, and we are preliminarily modifying the scope language as it appeared in the Initiation Notice.26 In the Preliminary Scope Decision Memorandum, we set a separate briefing schedule on scope issues for interested parties. Should we receive comments submitted in the scope case and rebuttal briefs on the Preliminary Scope Decision Memorandum, we will issue a final scope decision on the records of the rubber bands investigations after considering any such comments.

VI. AFFILIATION AND COLLAPSING

For the reasons set forth in the proprietary Affiliation and Collapsing Memorandum, which we incorporate by reference, we preliminarily determine that Liang Hah Heng, a respondent in this investigation, and Hah Shung Heng, a Thai producer of subject merchandise, are affiliated pursuant to section 771(33)(A) and () of the Act.27 Furthermore, based on record evidence and as explained in the proprietary Affiliation and Collapsing Memorandum, we are treating these two affiliated companies as a single entity in this investigation, pursuant to 19 CFR 351.401(f).28

VII. DISCUSSION OF THE METHODOLOGY

Comparisons to Normal Value

Pursuant to section 773(a) of the Act and 19 CFR 351.414(c)(1) and (d), in order to determine whether Liang Hah Heng’s and U. Yong’s sales of subject merchandise from Thailand to the United States were made at LTFV, we compared the export price (EP) to the normal value (NV), as described in the “Export Price,” and “Normal Value” sections of this memorandum.

24 See Antidumping Duties; Countervailing Duties, 62 FR 27296, 27323 (May 19, 1997) (Preamble). 25 See Initiation Notice, 83 FR 8424-8425. 26 See the Preliminary Scope Determination Memorandum. 27 See memorandum, “Less-Than-Fair-Value Investigation of Rubber Bands from Thailand: Affiliation and Collapsing Memorandum Regarding Liang Hah Heng International Rubber Co., Ltd. and Hah Shung Heng Co.,” dated July 20, 2018 (Affiliation and Collapsing Memorandum) at 3-6. 28 Id. at 8-10.

5

A. Determination of the Comparison Method

Pursuant to 19 CFR 351.414(c)(1), we calculate weighted-average dumping margins by comparing weighted-average NVs to weighted-average EPs, i.e., using the average-to-average method, unless the Secretary determines that another method is appropriate in a particular situation. In LTFV investigations, we examine whether to compare weighted-average NVs with the EPs of individual sales, i.e., the average-to-transaction method, as an alternative comparison method using an analysis consistent with section 777A(d)(1)(B) of the Act.

In prior investigations, we have applied a “differential pricing” analysis for determining whether application of the average-to-transaction method is appropriate in a particular situation pursuant to 19 CFR 351.414(c)(1) and section 777A(d)(1)(B) of the Act.29 We find that the differential pricing analysis used in prior investigations may be instructive for purposes of examining whether to apply an alternative comparison method in this investigation. We will continue to develop our approach in this area based on comments received in this and other proceedings, and on our additional experience with addressing the potential masking of dumping that can occur when we use the average-to-average method in calculating a respondent’s weighted-average dumping margin.

The differential pricing analysis used in this preliminary determination examines whether there exists a pattern of EPs for comparable merchandise that differ significantly among purchasers, regions, or time periods. The analysis evaluates all export sales by purchasers, regions, and time periods to determine whether a pattern of prices that differ significantly exists. If such a pattern is found, then the differential pricing analysis evaluates whether such differences can be taken into account when using the average-to-average method to calculate the weighted-average dumping margin. The analysis incorporates default group definitions for purchasers, regions, time periods, and comparable merchandise. Purchasers are based on the reported consolidated customer codes. Regions are defined using the reported destination code, i.e., zip code, and are grouped into regions based upon standard definitions published by the U.S. Census Bureau. Time periods are defined by the quarter within the POI based upon the reported date of sale. For purposes of analyzing sales transactions by purchaser, region, and time period, comparable merchandise is defined using the product control number and all characteristics of the U.S. sales, other than purchaser, region, and time period, that we use in making comparisons between EP and NV for the individual dumping margins.

In the first stage of the differential pricing analysis used here, the “Cohen’s d test” is applied. The Cohen’s d coefficient is a generally recognized statistical measure of the extent of the difference between the mean, i.e., weighted-average price, of a test group and the mean, i.e., weighted-average price, of a comparison group. First, for comparable merchandise, the Cohen’s d coefficient is calculated when the test and comparison groups of data for a particular purchaser, region, or time period each have at least two observations, and when the sales quantity for the

29 See, e.., Xanthan Gum from the People’s Republic of China: Final Determination of Sales at Less Than Fair Value, 78 FR 33351 (June 4, 2013); Steel Concrete Reinforcing Bar from Mexico: Final Determination of Sales at Less Than Fair Value and Final Affirmative Determination of Critical Circumstances, 79 FR 54967 (September 15, 2014); and Welded Line Pipe from the Republic of Turkey: Final Determination of Sales at Less Than Fair Value, 80 FR 61362 (October 13, 2015).

6

comparison group accounts for at least five percent of the total sales quantity of the comparable merchandise. Then, the Cohen’s d coefficient is used to evaluate the extent to which the prices to the particular purchaser, region, or time period differ significantly from the prices of all other sales of comparable merchandise. The extent of these differences can be quantified by one of three fixed thresholds defined by the Cohen’s d test: small, medium or large (0.2, 0.5 and 0.8, respectively). Of these thresholds, the large threshold provides the strongest indication that there is a significant difference between the mean of the test and comparison groups, while the small threshold provides the weakest indication that such a difference exists. For this analysis, the difference is considered significant, and the sales in the test group are found to pass the Cohen’s d test, if the calculated Cohen’s d coefficient is equal to or exceeds the large, i.e., 0.8, threshold.

Next, the “ratio test” assesses the extent of the significant price differences for all sales as measured by the Cohen’s d test. If the value of sales to purchasers, regions, and time periods that pass the Cohen’s d test account for 66 percent or more of the value of total sales, then the identified pattern of prices that differ significantly supports the consideration of the application of the average-to-transaction method to all sales as an alternative to the average-to-average method. If the value of sales to purchasers, regions, and time periods that pass the Cohen’s d test accounts for more than 33 percent and less than 66 percent of the value of total sales, then the results support consideration of the application of an average-to-transaction method to those sales identified as passing the Cohen’s d test as an alternative to the average-to-average method, and application of the average-to-average method to those sales identified as not passing the Cohen’s d test. If 33 percent or less of the value of total sales passes the Cohen’s d test, then the results of the Cohen’s d test do not support consideration of an alternative to the average-to- average method.

If both tests in the first stage, i.e., the Cohen’s d test and the ratio test, demonstrate the existence of a pattern of prices that differ significantly such that an alternative comparison method should be considered, then in the second stage of the differential pricing analysis, we examine whether using only the average-to-average method can appropriately account for such differences. In considering this question, we test whether using an alternative comparison method, based on the results of the Cohen’s d and ratio tests described above, yields a meaningful difference in the weighted-average dumping margin as compared to that resulting from the use of the average-to- average method only. If the difference between the two calculations is meaningful, then this demonstrates that the average-to-average method cannot account for differences such as those observed in this analysis, and, therefore, an alternative comparison method would be appropriate. A difference in the weighted-average dumping margins is considered meaningful if 1) there is a 25 percent relative change in the weighted-average dumping margins between the average-to- average method and the appropriate alternative method where both rates are above the de minimis threshold, or 2) the resulting weighted-average dumping margins between the average- to-average method and the appropriate alternative method move across the de minimis threshold.

Interested parties may present arguments and justifications in relation to the above-described differential pricing approach used in this preliminary determination, including arguments for modifying the group definitions used in this proceeding.

7

B. Results of the Differential Pricing Analysis

Liang Hah Heng

For Liang Hah Heng, based on the results of the differential pricing analysis, we preliminarily find that 57.76 percent of the value of U.S. sales pass the Cohen's d test,30 and confirms the existence of a pattern of prices that differ significantly among purchasers, regions, or time periods. Further, we preliminarily determine that there is no meaningful difference between the weighted-average dumping margin calculated using the average-to-average method and the weighted-average dumping margin calculated using an alternative comparison method based on applying the average-to-transaction method to those U.S. sales which passed the Cohen’s d test and the average-to-average method to those sales which did not pass the Cohen’s d test. Thus, for this preliminary determination, we is applying the average-to-average method for all U.S. sales to calculate the weighted-average dumping margin for Liang Hah Heng.

U. Yong

For U. Yong, based on the results of the differential pricing analysis, we preliminarily find that 84.02 percent of the value of U.S. sales pass the Cohen’s d test,31 and confirms the existence of a pattern of prices that differ significantly among purchasers, regions, or time periods. Further, we preliminarily determine that the average-to-average method cannot account for such differences because the weighted-average dumping margin crosses the de minimis threshold when calculated using the average-to-average method and when calculated using an alternative comparison method based on applying the average-to-transaction method to all U.S. sales. Thus, for this preliminary determination, we are applying the average-to-transaction method to all U.S. sales to calculate the weighted-average dumping margin for U. Yong.

VIII. DATE OF SALE

Section 351.401(i) of our regulations states that, in identifying the date of sale of the merchandise under consideration or foreign like product, we normally will use the date of invoice, as recorded in the exporter or producer’s records kept in the ordinary course of business. Additionally, we may use a date other than the date of invoice if we are satisfied that a different date better reflects the date on which the exporter or producer establishes the material terms of sale.32 Finally, we have a long-standing practice of finding that, where the shipment date

30 See memorandum to the file, “Analysis Memorandum for the Preliminary Determination of the Antidumping Duty Investigation of Rubber Bands from Thailand: Liang Hah Heng International Rubber Co., Ltd. (Liang Hah Heng),” dated concurrently with this memorandum (Liang Hah Heng’s Preliminary Analysis Memorandum), at Exhibit 4, “Margin Program Output,” in the chart entitled, “The Cohen’s d Test Overall Results.” 31 See memorandum to the file, “Analysis Memorandum for the Preliminary Determination of the Antidumping Duty Investigation of Rubber Bands from Thailand: U. Yong Industry Co., Ltd. (U. Yong),” dated concurrently with this memorandum (U. Yong’s Preliminary Analysis Memorandum) at Exhibit 4, “Margin Program Output,” in the chart entitled, “The Cohen’s d Test Overall Results.” 32 See 19 CFR 351.401(i); see also Allied Tube & Conduit Corp. . United States, 132 F. Supp. 2d 1087, 1090 (CIT 2001) (quoting 19 CFR 351.401(i)).

8 precedes the invoice date, the shipment date better reflects the date on which the material terms of sale are established.33

Liang Hah Heng

Liang Hah Heng reported the invoice date as the date of sale for its U.S. and third-country sales as the date on which the terms of the sales are definitively established for all U.S. sales and all third-country sales.34 Accordingly, for this preliminary determination, we used the invoice date as the date of sale for all U.S. and third-country sales.

U. Yong

U. Yong reported the invoice date as the date on which the terms of the sales are definitively established for all U.S. sales and all third-country sales.35 Accordingly, for this preliminary determination, for the date of sale we used the invoice date for U.S. sales and all third-country sales.

IX. PRODUCT COMPARISONS

In accordance with section 771(16) of the Act, we considered all products that respondents produced in Thailand and sold in the third country during the POI that fit the description in the “Scope of Investigation” section of the accompanying Federal Register notice to be foreign like products for purposes of determining appropriate product comparisons to U.S. sales. We compared U.S. sales to sales of foreign like product made in the third-country market, where appropriate.36 Where there were no sales of identical merchandise in the third-country market made in the ordinary course of trade to compare to U.S. sales, we compared U.S. sales to sales of the most similar foreign-like product made in the ordinary course of trade.

In making product comparisons, we matched subject merchandise and foreign like product based on whether the products were prime or non-prime and the physical characteristics reported by Liang Hah Heng and U. Yong in the following order of importance: rubber content, rubber type size in inches, width, and wall thickness. For the respondents’ sales of rubber bands in the United States, the reported control number (CONNUM) identifies the characteristics of rubber bands, as exported by Liang Hah Heng and U. Yong, respectively.

X. EXPORT PRICE

Section 772(a) of the Act defines EP as “the price at which subject merchandise is first sold (or agreed to be sold) before the date of importation by the producer or exporter of the subject

33 See, e.g., Certain Frozen Warmwater Shrimp from Thailand: Final Results and Final Partial Rescission of Antidumping Duty Administrative Review, 72 FR 52065 (September 12, 2007) (Shrimp from Thailand), and accompanying Issues and Decision Memorandum (IDM) at Comment 11; see also Notice of Final Determination of Sales at Less Than Fair Value: Structural Steel Beams from Germany, 67 FR 35497 (May 20, 2002) (Steel Beams from Germany), and accompanying Issues and Decision Memorandum at Comment 2. 34 See Liang Hah Heng’s AQR at A-18, Liang Hah Heng’s BQR at B-16, and Liang Hah Heng CQR at C-12. 35 See U. Yong’s AQR at 16, U. Yong’s BQR at 12, and U. Yong’s CQR at 10. 36 See our discussion for Liang Hah Heng and U. Yong in section XI.A., “Home Market Viability.”

9

merchandise outside of the United States to an unaffiliated purchaser in the United States or to an unaffiliated purchaser for exportation to the United States,” as adjusted under section 772(c) of the Act. Both mandatory respondents reported having only EP sales during the POI.37 In accordance with section 772(a) of the Act, we calculated EP for all of Liang Hah Heng’s and U. Yong’s U.S. sales, because the subject merchandise was first sold to an unaffiliated purchaser in the United States prior to importation. The constructed export price (CEP) methodology was not otherwise warranted based on the facts of the record.

Liang Hah Heng

We calculated EP for Liang Hah Heng based on packed prices to unaffiliated purchasers in the United States. We made deductions, where appropriate, for movement expenses, i.e., inland freight to the port of exportation, domestic brokerage and handling charges, extra charges, and marine insurance, in accordance with section 772(c)(2)(A) of the Act.

U. Yong

We calculated EP for U. Yong based on prices to unaffiliated purchasers in the United States. We made deductions, where appropriate, for movement expenses, i.e., inland freight to the port of exportation, and domestic brokerage and handling charges, in accordance with section 772(c)(2)(A) of the Act.

XI. NORMAL VALUE

Section 773(a)(1)(B)(i) of the Act defines NV as “the price at which the foreign like product is first sold (or, in the absence of a sale, offered for sale) for consumption in the exporting country, in the usual commercial quantities and in the ordinary course of trade and, to the extent practicable, at the same level of trade as the EP.” Alternatively, section 773(a)(1)(B)(ii) of the Act provides that NV may be based on “the price at which the foreign like product is so sold (or offered for sale) for consumption in a country other than the exporting country or the United States.” Section 773(a)(4) of the Act provides that if Commerce determines that NV cannot be determined under section 773(a)(1)(B)(i), then, notwithstanding section 773(a)(1)(B)(ii) of the Act, NV may be based on CV under section 773(e) of the Act.

A. Home Market Viability

In order to determine whether there is a sufficient volume of sales in the home market to serve as a viable basis for calculating NV, i.e., the aggregate volume of home market sales of the foreign like product is equal to or greater than five percent of the aggregate volume of U.S. sales, we normally compare the respondent’s volume of home market sales of the foreign like product to the volume of U.S. sales of the subject merchandise, in accordance with sections 773(a)(1)(A) and (B) of the Act. If we determine that no viable home market exists, we may, if appropriate, use a respondent’s sales of the foreign like product to a third-country market as the basis for comparison market sales in accordance with section 773(a)(1)(C) of the Act and 19 CFR 351.404.

37 See Liang Hah Heng’s CQR at page C-12, and U. Yong’s CQR at page 7.

10

In order to determine whether there was a sufficient volume of sales in the home market or in the third country to serve as a viable basis for calculating NV, we compared Liang Hah Heng’s and U. Yong’s volume of home-market and third-country sales of the foreign like product to the respective volume of U.S. sales of the subject merchandise in accordance with sections 773(a)(1)(B) and (C) of the Act. We found that neither Liang Hah Heng nor U. Yong’s aggregate volume of sales of foreign like product in the home market was greater than five percent of the company’s sales of subject merchandise to the United States. Therefore, in accordance with section 773(a)(1)(C) of the Act, Liang Hah Heng’s and U. Yong’s home market sales are not viable as a comparison market. As a result, we tested Liang Hah Heng’s and U. Yong’s aggregate volume of sales of foreign like product in the largest third-country market, which was Canada for Liang Hah Heng and Nigeria for U. Yong, and found that they were each greater than five percent of each company’s respective sales of subject merchandise to the United States. Therefore, we find Canada to be viable as a comparison market for Liang Hah Heng, and Nigeria to be viable as a comparison market for U. Yong. The appropriate third-country comparison market is generally chosen based on: (1) a more similar foreign like product to the subject merchandise exported to the United States than other third countries; (2) the volume of sales is larger than the volume to other third countries; and (3) other factors as we consider appropriate.38 No interested party argued that we should select a different third-country market on the basis of other factors. Accordingly, we have selected Canada as the comparison market for Liang Hah Heng and Nigeria as the comparison market for U. Yong, for the purposes of this preliminary determination.

B. Affiliated-Party Transactions and Arm’s-Length Test

We may calculate NV based on a sale to an affiliated party only if we are satisfied that the price to the affiliated party is comparable to the price at which sales are made to parties not affiliated with the exporter or producer, i.e., sales were made at arm’s-length prices. We exclude home- market or third-country sales to affiliated customers that are not made at arm’s-length prices from our margin analysis because we consider them to be outside the ordinary course of trade. Consistent with 19 CFR 351.403(c) and (d) and our practice, Commerce “may calculate normal value based on sales to affiliates if satisfied that the transactions were made at arm’s length.”39

During the POI, neither Liang Hah Heng nor U. Yong made sales of rubber bands in the third country to affiliated parties, as defined in section 771(33) of the Act. Consequently, we did not include an arm’s-length test, in accordance with 19 CFR 351.403(c), as part of our margin calculations.

C. Level of Trade

Section 773(a)(1)(B)(i) of the Act states that, to the extent practicable, we will calculate NV based on sales at the same level of trade (LOT) as the U.S. sales. Sales are made at different LOTs if they are made at different marketing stages (or their equivalent).40 Substantial

38 See 19 CFR 351.404(e). 40 See 19 CFR 351.412(c)(2). 40 See 19 CFR 351.412(c)(2).

11

differences in selling activities are a necessary, but not sufficient, condition for determining that there is a difference in the stages of marketing.41 In order to determine whether the comparison market sales are at different stages in the marketing process than the U.S. sales, we examine the distribution system in each market i.e., the chain of distribution, including selling functions and class of customer (customer category), and the level of selling expenses for each type of sale.

Pursuant to section 773(a)(1)(B)(i) of the Act, in identifying LOTs for EP and comparison market sales (i.e., NV based on either home market or third-country prices),42 we consider the starting prices before any adjustments.

When we are unable to match sales of the foreign like product in the comparison market at the same LOT as the EP, we may compare the U.S. sale to sales at a different LOT in the comparison market. In comparing EP sales to sales at a different LOT in the comparison market, where available data make it possible, we make a LOT adjustment under section 773(a)(7)(A) of the Act.

In this investigation, we obtained information from Liang Hah Heng and U. Yong regarding the marketing stages involved in making reported comparison market and U.S. sales, including a description of the selling activities performed by Liang Hah Heng and U. Yong for each channel of distribution.43 Our LOT findings are summarized below.

Liang Hah Heng

Liang Hah Heng reported that it made sales in a single channel of distribution in the both the U.S. and third-country markets: sales direct from the mill (Channel 1).44 According to Liang Hah Heng, it performed the following selling functions for sales to all U.S. and third-country market customers: personnel; advertising; packing; inventory maintenance; order input/processing; direct sales personnel; and freight.45

Selling activities can be generally grouped into four selling function categories for analysis: 1) sales and marketing; 2) freight and delivery; 3) inventory maintenance and warehousing; and 4) warranty and technical support.46 Based on these selling function categories, we find that for all

41 Id.; see also Certain Orange Juice from Brazil: Final Results of Antidumping Duty Administrative Review and Notice of Intent Not to Revoke Antidumping Duty Order in Part, 75 FR 50999 (August 18, 2010) (OJ from Brazil) and accompanying Issues and Decision Memorandum at Comment 7. 42 Where NV is based on CV, we determine the NV LOT based on the LOT of the sales from which we derive selling, general and administrative expenses (SG&A), and profit for CV, where possible. See 19 CFR 351.412(c)(1). 43 See Liang Hah Heng’s BQR at page B-15, and Liang Hah Heng’s CQR at page C-13; Liang Hah Heng’s 2nd SQR, Exhibit SBC-1, “Consolidated Section A Response,” at Exhibit A-8, “LHH Channels of Distribution.” See also U. Yong’s BQR at page 11, U. Yong’s CQR at page 9, and U. Yong’s AQR at Exhibits A-5, “U.S./Foreign Market Sales Flowchart,” and Exhibit A-6, “Selling Functions Chart.” 44 See Liang Hah Heng’s BQR at page B-15, and Liang Hah Heng’s CQR at page C-13; Liang Hah Heng’s 2nd SQR, Exhibit SBC-1, “Consolidated Section A Response,” at Exhibit A-8, “LHH Channels of Distribution.” 45 See Liang Hah Heng 2nd SQR, Exhibit SBC-1, “Consolidated Section A Response,” at Exhibit A-10, “LHH Selling Functions.” 46 See OJ from Brazil and accompanying Issues and Decision Memorandum at Comment 7; and Certain Frozen Warmwater Shrimp from India: Preliminary Results and Preliminary Partial Rescission of Antidumping Duty

12

U.S. and third-country market channels, Liang Hah Heng performed sales and marketing services, and freight and delivery services, inventory maintenance and warehousing, but did not provide warranty and technical support services. Because we find that there were no significant differences in selling activities performed by Liang Hah Heng to sell to either its U.S. or third- country market customers, we preliminarily determine that there is one LOT in the both the U.S. and third-country markets for Liang Hah Heng.

Finally, we compared the U.S. LOT to the third-country market LOT. Because Liang Hah Heng performed all selling functions in the U.S. and third-country market at the same level of intensity, and there were no differences in the selling functions performed in the U.S. and/or Canadian market, we preliminarily find that the selling functions performed for the U.S. and third-country market customers do not differ significantly. Therefore, we preliminarily find that sales to the third-country market during the POI were made at the same LOT as sales to the United States, and, thus, a LOT adjustment is not warranted.

U. Yong

U. Yong reported that it made sales through only one channel of distribution in the third-country market: sales shipped from the factory to a distributor (Channel 1).47 U. Yong explained that it performed the following selling functions for all third-country customers: packing; order input/processing; and freight and delivery service.48 All third-country sales are at the same LOT.

U. Yong reported that it made EP sales through only one channel of distribution in the U.S. market: sales shipped from factory to distributors (Channel 1).49 U. Yong similarly reported U.S. selling functions based on the activities required to sell subject merchandise to its unaffiliated customers in the United States. U. Yong reported that it performed the following selling functions for sales to unaffiliated parties in the United States: packing; order input/processing; and freight and delivery.50

Finally, we compared the U.S. LOT to the third-country LOT and we preliminarily find that the selling functions performed for the U.S. and third-country customers do not differ significantly. Therefore, we preliminarily find that sales to the third country during the POI were made at the same LOT as sales to the United States, and, thus, an LOT adjustment is not warranted.

D. Cost of Production Analysis

Section 773(b)(2)(A)(ii) of the Act requires us to request CV and cost of production (COP) information from respondent companies in all AD proceedings. Accordingly, we requested this

Administrative Review, 74 FR 9991, 9996 (March 9, 2009), unchanged in Certain Frozen Warmwater Shrimp from India: Final Results and Partial Rescission of Antidumping Duty Administrative Review, 74 FR 33409 (July 13, 2009) (Shrimp from India). See also Certain Cold-Rolled Steel Flat Products from the Republic of Korea: Final Determination of Sales at Less Than Fair Value, 81 FR 49953 (July 29, 2016) (CRS from Korea), and accompanying Issues and Decision Memorandum at Comments 9 and 18. 47 See U. Yong’s BQR at 11. 48 See U. Yong’s AQR at Exhibit A-6, “Selling Functions Chart.” 49 See U. Yong’s CQR at 9. 50 See U. Yong’s AQR at Exhibit A-6, “Selling Functions Chart.”

13

information from Liang Hah Heng and U. Yong in this investigation. We have examined their cost data and determined that our quarterly cost methodology is not warranted with respect to Liang Hah Heng, and, therefore, we applied our standard methodology of using annual average costs for Liang Hah Heng. We determined, however, that our quarterly cost methodology is warranted with respect to U. Yong, as discussed further below.

1. Cost Averaging Methodology

As discussed above, Commerce’s normal practice is to calculate an annual weighted-average cost for the POI, which we are using for Liang Hah Heng. However, based on the record evidence, we have used an alternative quarterly cost methodology for the preliminary determination with regard to U. Yong. In determining whether to deviate from our normal methodology of calculating an annual weighted-average cost, we evaluate the case-specific record evidence by examining two primary criteria: (1) the change in the cost of manufacturing (COM) recognized by the respondent during the POI must be deemed significant; (2) the record evidence must indicate that sales during the shorter cost-averaging periods could be reasonably linked with the COP or CV during the same shorter cost-averaging periods.51

a. Significance of Cost Changes

In prior cases, we established 25 percent as the threshold (between the high- and low-quarter COM) for determining that the changes in COM are significant enough to warrant a departure from our standard annual-average cost approach.52 In the instant case, record evidence shows that U. Yong experienced significant cost changes (i.e., changes that exceeded 25 percent) between the high and low quarterly COM during the POI.53 This change in COM is attributable primarily to the price volatility for rubber, the primary input used in the production of rubber bands.54

b. Linkage between Sales and Cost Information

Consistent with past precedent, because we found the changes in costs to be significant, we evaluated whether there is evidence of a linkage between the cost changes and the sales prices during the POI.55 Our comparison revealed that sales and costs for U. Yong showed a reasonable correlation.56 After reviewing this information and determining that changes in selling prices correlate reasonably to changes in unit costs, we preliminarily determine that there is linkage between U. Yong’s changing sales prices and costs during the POI. Thus, we preliminarily

51 See Stainless Steel Sheet and Strip in Coils from Mexico: Final Results of Antidumping Duty Administrative Review, 75 FR 6627 (February 10, 2010) (SSSSC Mexico Final) and accompanying IDM at Comment 6 and Stainless-Steel Plate in Coils from Belgium: Final Results of Antidumping Duty Administrative Review, 73 FR 75398 (December 11, 2008) (SSPC Belgium Final) and accompanying IDM at Comment 4. 52 See SSPC Belgium Final IDM at Comment 4. 53 See Memorandum, “Antidumping Duty Investigation of Rubber Bands from Thailand: Cost of Production and Constructed Value Calculation Adjustments for Preliminary Determination – U. Yong Industry Co., Ltd. (U. Yong),” dated concurrently with this memorandum (U. Yong’s Preliminary Cost Calculation Memorandum). 54 See U. Yong’s DQR at Exhibit D-4. 55 See SSSSC Mexico Final IDM at Comment 6 and SSPC Belgium Final IDM at Comment 4. 56 See U. Yong Preliminary Cost Calculation Memo.

14

determine that a shorter cost period approach, based on a quarterly-average COP, is appropriate for U. Yong.

2. Calculation of COP

In accordance with section 773(b)(3) of the Act, we calculated COP based on the sum of costs of materials and fabrication for the foreign like product, plus amounts for general and administrative (G&A) expenses and interest expenses.

Liang Hah Heng

We relied on the COP data submitted by Liang Hah Heng except as follows:

• We have weight averaged the data reported in Liang Hah Heng’s and Hah Shung Heng’s COP databases to form the combined database for these collapsed entities.57

U. Yong

We relied on the COP data submitted by U. Yong except as follows:58

• We adjusted the reported rubber costs for certain CONNUMs in certain quarters to include the cost of certain semi-finished inventory consumed in production.

• For CONNUMs reported with no rubber cost in a specific quarter, we used a surrogate rubber cost based on the most similar CONNUM produced in the same quarter.

• For CONNUMs reported with a negative total cost of direct materials in a specific quarter, we used a surrogate direct materials cost based on the most similar CONNUM produced in the same quarter.

3. Test of Comparison Market Sales Prices

On a product-specific basis, pursuant to section 773(b) of the Act, we compared the adjusted weighted-average COPs to the third-country sales prices of the foreign like product, in order to determine whether the sales prices were below the COPs. For purposes of this comparison, we used COPs exclusive of selling and packing expenses. The prices were exclusive of any applicable billing adjustments, discounts and rebates, movement charges, actual direct and indirect selling expenses, and packing expenses.

4. Results of the COP Test

In determining whether to disregard third country sales made at prices below the COP, we examined, in accordance with sections 773(b)(1)(A) and (B) of the Act, whether: 1) within an

57 See Liang Hah Heng’s Preliminary Cost Calculation Memorandum. See also Liang Hah Heng’s Preliminary Analysis Memorandum. 58 See U. Yong’s Preliminary Cost Calculation Memorandum.

15

extended period of time, such sales were made in substantial quantities; and 2) such sales were made at prices which permitted the recovery of all costs within a reasonable period of time in the normal course of trade. In accordance with sections 773(b)(2)(B) and (C) of the Act, where less than 20 percent of the respondent’s comparison market sales of a given product are at prices less than the COP, we do not disregard any below-cost sales of that product because we determine that in such instances the below-cost sales were not made within an extended period of time and in “substantial quantities.” Where 20 percent or more of a respondent’s sales of a given product are at prices less than the COP, we disregard the below-cost sales because: 1) they were made within an extended period of time in “substantial quantities,” in accordance with sections 773(b)(2)(B) and (C) of the Act; and, 2) based on our comparison of prices to the weighted- average COPs for the POI, they were at prices which would not permit the recovery of all costs within a reasonable period of time, in accordance with section 773(b)(2)(D) of the Act.

Where we find that more than 20 percent of a company’s third-country sales for a given product were made at prices less than the COP and, in addition, such sales did not provide for the recovery of costs within a reasonable period of time, we excluded these sales and used the remaining sales, if any, as the basis for determining NV, in accordance with section 773(b)(1) of the Act.

E. Calculation of Normal Value Based on Comparison-Market Prices

Liang Hah Heng

For those comparison products for which there was an appropriate number of sales at prices above the COP for Liang Hah Heng, we based NV on comparison market prices. We calculated NV based on delivered prices to unaffiliated customers. We also made deductions from the starting price for movement expenses, including inland freight from plant/warehouse to port of exportation, and domestic brokerage and handling, and extra charges under section 773(a)(6)(B)(ii) of the Act.

We deducted comparison-market packing costs and added U.S. packing costs, in accordance with section 773(a)(6)(A) and (B) of the Act. For comparisons to EP sales, we made adjustments under section 773(a)(6)(C)(iii) of the Act and 19 CFR 351.410 for differences in circumstances of sale. Specifically, we deducted direct selling expenses incurred for third-country sales, i.e., credit expenses and bank charges, and added U.S. direct selling expenses, i.e., credit expenses and bank charges.

When comparing U.S. sales with comparison-market sales of similar, but not identical, merchandise, we also made adjustments for differences in merchandise, in accordance with section 773(a)(6)(C)(ii) of the Act and 19 CFR 351.411. We based this adjustment on the difference in the variable cost of manufacturing for the foreign like products and merchandise under consideration.59

59 See 19 CFR 351.411(b).

16

U. Yong

We based NV for U. Yong on comparison market prices where there was an appropriate number of sales at prices above the COP. We calculated NV based on FOB foreign port to unaffiliated customers. We made deductions from the starting price for movement expenses, including inland freight from the plant to the port of export, brokerage expenses in Thailand, international freight expenses, adjusted by international freight revenue under section 773(a)(6)(B)(ii) of the Act. We offset these movement expenses with reported freight revenue, with the latter capped at no higher than the sum of the movement expenses in accordance with our normal practice.60 We made adjustments for differences in circumstances of sale (imputed credit expenses and bank charges), in accordance with section 773(a)(6)(C)(iii) of the Act and 19 CFR 351.410. We deducted comparison-market packing costs and added U.S. packing costs, in accordance with section 773(a)(6)(A) and 773(a)(6)(B)(i) of the Act. We made adjustments under section 773(a)(6)(C)(iii) of the Act and 19 CFR 351.410 for differences in circumstances of sale. Specifically, we deducted direct selling expenses incurred for third-country sales, i.e., credit expenses and bank charges, and added U.S. direct selling expenses, i.e., credit expenses and bank charges.

When comparing U.S. sales with comparison-market sales of similar, but not identical, merchandise, we also made adjustments for differences in merchandise, in accordance with section 773(a)(6)(C)(ii) of the Act and 19 CFR 351.411. We based this adjustment on the difference in the variable cost of manufacturing for the foreign like products and merchandise under consideration.61

F. Calculation of Normal Value Based on Constructed Value

In accordance with section 773(e) of the Act, we calculated CV based on the sum of U. Yong’s material and fabrication costs, selling, general and administrative expenses (SG&A) expenses, profit, and U.S. packing costs. We calculated the COP component of constructed value as described above in the “Calculation of COP” section of this memorandum. In accordance with section 773(e)(2)(A) of the Act, we based SG&A expenses and profit on the amounts incurred and realized by the respondents in connection with the production and sale of the foreign like product in the ordinary course of trade, for consumption in the foreign country.62

60 See Certain Cold-Drawn Mechanical Tubing of Carbon and Alloy Steel from India: Preliminary Affirmative Determination of Sales at Less Than Fair Value, in Part, Postponement of Final Determination, and Extension of Provisional Measures, 82 FR 55567 (November 22, 2017), unchanged in Certain Cold-Drawn Mechanical Tubing of Carbon and Alloy Steel from India: Final Affirmative Determination of Sales at Less Than Fair Value, 83 FR 16296 (April 16, 2018); Carbon and Alloy Steel Wire Rod from the Republic of Korea: Final Affirmative Determination of Sales at Less Than Fair Value and Final Negative Determination of Critical Circumstances, 83 FR 13228 (March 28, 2018). 61 See 19 CFR 351.411(b). 62 See U. Yong’s Preliminary Analysis Memorandum and Preliminary Cost Calculation Memorandum.

17