[Federal Register Volume 64, Number 8 (Wednesday, January 13, 1999)]
[Notices]
[Pages 2173-2192]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-691]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-122-822, A-122-823]
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 To Revoke in
Part
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of final results of the antidumping duty administrative
review of certain corrosion-resistant carbon steel flat products and
certain cut-to-length carbon steel plate from Canada and determination
to revoke in part.
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SUMMARY: On July 10, 1998, the Department of Commerce (``the
Department'') published the preliminary results of its administrative
reviews of the antidumping duty orders on certain corrosion-resistant
carbon steel flat products and certain cut-to-length carbon steel plate
from Canada. These reviews cover six manufacturers/exporters of the
subject merchandise to the United States (three manufacturers/exporters
of corrosion-resistant carbon steel and four manufacturers/exporters of
cut-to-length carbon steel plate), and the period August 1, 1996,
through July 31, 1997. We gave interested parties an opportunity to
comment on our preliminary results. As a result of these comments, we
have changed the results from those presented in the preliminary
results of review.
EFFECTIVE DATE: January 13, 1999.
FOR FURTHER INFORMATION CONTACT: Rebecca Trainor (Dofasco, Inc. and
Sorevco Inc. (collectively, Dofasco)); Eric Scheier (Continuous Colour
Coat (CCC)); Lesley Stagliano (Algoma Inc. (Algoma)); Gideon Katz,
(Gerdau MRM Steel (MRM)), A.J. Forsyth and Co., Ltd. (Forsyth) and
Stelco, Inc. (Stelco) corrosion resistant); Laurel LaCivita (Stelco
plate); or Maureen Flannery, Import Administration, International Trade
Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-
4733.
SUPPLEMENTARY INFORMATION:
The Applicable Statute and Regulations
Unless otherwise indicated, all citations to the Tariff Act of
1930, as amended (the Act), are to the provisions effective January 1,
1995, the effective date of the amendments made to the Act by the
Uruguay Round Agreements Act (URAA). In addition, unless otherwise
indicated, all citations to the Department's regulations are to 19 CFR
part 351 (1998).
Background
On July 10, 1998, we published in the Federal Register (63 FR
37320) the preliminary results of the administrative reviews of the
antidumping duty orders on certain corrosion-resistant carbon steel
flat products and certain cut-to-length carbon steel plate from Canada
(Preliminary Results). We gave interested parties an opportunity to
comment on our preliminary results. We received written comments from
Algoma, CCC, Dofasco, Stelco, and Forsyth, and from the petitioners
(Bethlehem Steel Corporation, U.S. Steel Group (a unit of USX
Corporation), Inland Steel Industries, Inc., Gulf States Steel Inc. of
Alabama, Sharon Steel Corporation, Geneva Steel, and Lukens Steel
Company). We have now completed these administrative reviews in
accordance with section 751(a) of the Act.
Scope of Reviews
The products covered by these administrative reviews constitute two
separate ``classes or kinds'' of merchandise: (1) Certain corrosion-
resistant carbon steel flat products, and (2) certain cut-to-length
carbon steel plate.
The first class or kind, certain corrosion-resistant steel,
includes flat-rolled carbon steel products, of rectangular shape,
either clad, plated, or coated with corrosion-resistant metals such as
zinc, aluminum, or zinc-, aluminum-, nickel- or iron-based alloys,
whether or not corrugated or painted, varnished or coated with plastics
or other nonmetallic substances in addition to the metallic coating, in
coils (whether or not in successively superimposed layers) and of a
width of 0.5 inch or greater, or in straight lengths which, if of a
thickness less than 4.75 millimeters, are of a width of 0.5 inch or
greater and which measures at least 10 times the thickness or if of a
thickness of 4.75 millimeters or more are of a width which exceeds 150
millimeters and measures at least twice the thickness, as currently
classifiable in the HTS under item numbers 7210.30.0030, 7210.30.0060,
7210.41.0000, 7210.49.0030, 7210.49.0090, 7210.61.0000, 7210.69.0000,
7210.70.6030, 7210.70.6060, 7210.70.6090, 7210.90.1000, 7210.90.6000,
7210.90.9000, 7212.20.0000, 7212.30.1030, 7212.30.1090, 7212.30.3000,
7212.30.5000,
[[Page 2174]]
7212.40.1000, 7212.40.5000, 7212.50.0000, 7212.60.0000, 7215.90.1000,
7215.90.3000, 7215.90.5000, 7217.20.1500, 7217.30.1530, 7217.30.1560,
7217.90.1000, 7217.90.5030, 7217.90.5060, 7217.90.5090. Included in
this review are corrosion-resistant flat-rolled products of non-
rectangular cross-section where such cross-section is achieved
subsequent to the rolling process (i.e., products which have been
``worked after rolling'')--for example, products which have been
beveled or rounded at the edges. Excluded from this review are flat-
rolled steel products either plated or coated with tin, lead, chromium,
chromium oxides, both tin and lead (``terne plate''), or both chromium
and chromium oxides (``tin-free steel''), whether or not painted,
varnished or coated with plastics or other nonmetallic substances in
addition to the metallic coating. Also excluded from this review are
clad products in straight lengths of 0.1875 inch or more in composite
thickness and of a width which exceeds 150 millimeters and measures at
least twice the thickness. Also excluded from this review are certain
clad stainless flat-rolled products, which are three-layered corrosion-
resistant carbon steel flat-rolled products less than 4.75 millimeters
in composite thickness that consist of a carbon steel flat-rolled
product clad on both sides with stainless steel in a 20%-60%-20% ratio.
The second class or kind, certain cut-to-length plate, includes
hot-rolled carbon steel universal mill plates (i.e., flat-rolled
products rolled on four faces or in a closed box pass, of a width
exceeding 150 millimeters but not exceeding 1,250 millimeters and of a
thickness of not less than 4 millimeters, not in coils and without
patterns in relief), of rectangular shape, neither clad, plated nor
coated with metal, whether or not painted, varnished, or coated with
plastics or other nonmetallic substances; and certain hot-rolled carbon
steel flat-rolled products in straight lengths, of rectangular shape,
hot rolled, neither clad, plated, nor coated with metal, whether or not
painted, varnished, or coated with plastics or other nonmetallic
substances, 4.75 millimeters or more in thickness and of a width which
exceeds 150 millimeters and measures at least twice the thickness, as
currently classifiable in the HTS under item numbers 7208.40.3030,
7208.40.3060, 7208.51.0030, 7208.51.0045, 7208.51.0060, 7208.52.0000,
7208.53.0000, 7208.90.0000, 7210.70.3000, 7210.90.9000, 7211.13.0000,
7211.14.0030, 7211.14.0045, 7211.90.0000, 7212.40.1000, 7212.40.5000,
7212.50.0000. Included in this review are flat-rolled products of non-
rectangular cross-section where such cross-section is achieved
subsequent to the rolling process (i.e., products which have been
``worked after rolling'')--for example, products which have been
beveled or rounded at the edges. Excluded from this review is grade X-
70 plate. Also excluded is cut-to-length carbon steel plate meeting the
following criteria: (1) 100% dry steel plates, virgin steel, no scrap
content (free of Cobalt-60 and other radioactive nuclides); (2) .290
inches maximum thickness, plus 0.0, minus .030 inches; (3) 48.00 inch
wide, plus .05, minus 0.0 inches; (4) 10 foot lengths, plus 0.5, minus
0.0 inches; (5) flatness, plus/minus 0.5 inch over 10 feet; (6) AISI
1006; (7) tension leveled; (8) pickled and oiled; and (9) carbon
content, 0.3 to 0.8 (maximum).
With respect to both classes or kinds, the HTS item numbers are
provided for convenience and Customs purposes. The written description
remains dispositive of the scope of these reviews.
Fair Value Comparisons
To determine whether sales of subject merchandise from Canada to
the United States were made at less than fair value, we compared the
Export Price (EP) to the Normal Value (NV), as described in the
``Export Price'' and ``Normal Value'' sections of the preliminary
results of review notice. On January 8, 1998, the Court of Appeals for
the Federal Circuit issued a decision in CEMEX v. United States, 133
F.3d 897 (Fed Cir. 1998). In that case, based on the pre-URAA version
of the Act, the Court discussed the appropriateness of using
constructed value (CV) as the basis for foreign market value when the
Department finds home market sales to be outside the ``ordinary course
of trade.'' This issue was not raised by any party in this proceeding.
However, the URAA amended the definition of sales outside the
``ordinary course of trade'' to include sales below cost. See section
771(15) of the Act. Consequently, the Department has reconsidered its
practice in accordance with this court decision and has determined that
it would be inappropriate to resort directly to CV, in lieu of foreign
market sales, as the basis for NV if the Department finds foreign
market sales of merchandise identical or most similar to that sold in
the United States to be outside the ``ordinary course of trade.'' We
will match a given U.S. sale to foreign market sales of the next most
similar model when all sales of the most comparable model are below
cost. The Department will use CV as the basis for NV only when there
are no above-cost sales that are otherwise suitable for comparison.
Therefore, in this proceeding, when making comparisons in accordance
with section 771(16) of the Act, we considered all products sold in the
home market as described in the ``Scope of Review'' section of this
notice, above, that were in the ordinary course of trade for purposes
of determining appropriate product comparisons to U.S. sales. Where
there were no sales of identical merchandise in the home 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, based on the characteristics listed in
Sections B and C of our antidumping questionnaire. We have implemented
the Court's decision in this case, to the extent that the data on the
record permitted.
Determination Not To Revoke in Part: Stelco Cut-to-Length Carbon
Steel Plate and Corrosion-Resistant Carbon Steel Flat Products, and
Determination To Revoke in Part: Algoma Cut-to-Length Carbon Steel
Plate
On August 28, 1997, Algoma submitted a request, in accordance with
19 CFR 351.222(b), that the Department revoke the order covering cut-
to-length carbon steel plate from Canada with respect to its sales of
this merchandise. On August 29, 1997, Stelco submitted a request that
the Department revoke the orders covering cut-to-length carbon steel
plate and corrosion-resistant steel from Canada with respect to its
sales of this merchandise. In accordance with 19 CFR
351.222(b)(2)(iii), these requests were accompanied by certifications
from Algoma and Stelco that they had not sold the subject merchandise
at less than NV for a three-year period, including this review period,
and would not do so in the future. Algoma and Stelco also agreed to
their immediate reinstatement in the relevant antidumping order, as
long as any firm is subject to the order, if the Department concludes
under 19 CFR 351.216 that, subsequent to revocation, they sold the
subject merchandise at less than NV.
The Department conducted verifications of Algoma's and Stelco's
responses for this period of review. In the two prior reviews of this
order we determined that Algoma and Stelco sold cut-to-length carbon
steel plate from Canada at not less than NV or at de minimis margins.
We determine that
[[Page 2175]]
both Algoma and Stelco sold cut-to-length carbon steel plate at not
less than NV during the instant review period.
On August 10, 1998, petitioners submitted argumentation opposing
Algoma's and Stelco's revocation requests. On December 4, 1998, we
placed on the record of this review the results of research that we
conducted to help us determine the likelihood of resumed dumping, and
opened the record for further comment on this issue. See memorandum to
the file, dated December 4, 1998.
In determining whether to revoke an antidumping order in part, we
must conclude pursuant to Sec. 351.222(b)(2), that: (1) The company has
sold subject merchandise at not less than normal value to the United
States in commercial quantities for three consecutive reviews; (2) it
is not likely that the companies eligible for revocation will in the
future sell the subject merchandise at less than NV; and (3) the
company agrees to its immediate reinstatement in the order if the
Department concludes that the company, subsequent to the revocation,
sold the subject merchandise at less than NV.
In the present case, the Department has found that Stelco has had
zero or de minimis dumping margins for three consecutive reviews.
However, in determining whether the three years of no dumping are a
sufficient basis to make a revocation determination, the Department
must be able to determine that the company has continued to participate
meaningfully in the U.S. market during each of the three years at
issue. See Pure Magnesium from Canada, 63 FR 26147 (May 12, 1998). This
practice has been codified by Sec. 351.222(d)(1) of the Department's
regulations, which state that, ``before revoking an order or
terminating a suspended investigation, the Secretary must be satisfied
that, during each of the three (or five) years, there were exports to
the United States in commercial quantities of the subject merchandise
to which a revocation or termination will apply.'' 19 CFR 351.222(d)(1)
(emphasis added). For purposes of revocation, the Department must be
able to determine that past margins are reflective of a company's
normal commercial activity. Sales during the POR which, in the
aggregate, are an abnormally small quantity do not provide a reasonable
basis for determining that the discipline of the order is no longer
necessary to offset dumping.
Based on the current record, we find that Stelco did not sell
merchandise in the United States in commercial quantities during the
second administrative review (one of the three consecutive reviews
cited by Stelco to support its request for revocation). During the POR
covered by that review (August 1994 though July 1995), Stelco made only
one sale in the United States. Moreover, this sale was only for 36 tons
of subject merchandise. By contrast, during the period covered by the
antidumping investigation, which was only six months long, Stelco made
several thousand sales totaling approximately 30,000 tons. In other
words, Stelco's sales for the entire year covered by the second review
period were only 0.12% of its sales volume during the six-months
covered by the investigation. Similarly, during the current POR, Stelco
sold approximately 2000 tons of subject merchandise in the United
States. While this amount is small in comparison to the amount sold
prior to issuance of the order, it is over 50 times greater than the
amount sold during the period covered by the second administrative
review. Consequently, although Stelco received a de minimis margin
during the second administrative review, this margin was not based on
commercial quantities within the meaning of the revocation regulation.
The number of sales and total sales volume is so small, both in
absolute terms, and in comparison with the period of investigation and
other review periods, that it does not provide any meaningful
information on Stelco's normal commercial experience. Therefore, we
find that Stelco does not qualify for revocation from the order on
steel plate under Sec. 351.222(b)(1)(i) and (d)(1).
We find that Algoma has met all of the requirements for revocation
under Sec. 351.222(b)(1) of the Department's regulations. As we
explained in Dynamic Random Access Memory Semiconductors of One
Megabyte or Above From the Republic of Korea, Notice of Final Results
of Antidumping Duty Administrative Review and Determination Not To
Revoke Order In Part, 62 FR 39809, 39810 (July 24, 1997) (DRAMS from
Korea), in evaluating the issue of likelihood, the Department has
considered three years of sales in the United States with no dumping
margins, plus an agreement to reinstatement in the order, to be
indicative of expected future behavior. Absent other evidence, the
Department considers such facts to be determinative of the likelihood
issue.
Algoma has sold merchandise in the United States at not less than
NV for three consecutive reviews. Moreover, during each of these
periods, Algoma's aggregate sales were made in commercial quantities.
Algoma has also agreed to its immediate reinstatement in the order if
we conclude, subsequent to the revocation, that Algoma has sold the
subject merchandise at less than NV. Finally, no party has argued that
Algoma is not eligible for revocation based on likelihood under
Sec. 351.222(b)(2)(ii), and we find that there is not sufficient
support for such a conclusion. Therefore, based on its consecutive
years of zero or de minimis margins, and reinstatement agreement, and
in the absence of evidence to the contrary, we conclude that it is not
likely that Algoma will sell subject merchandise in the United States
at less than fair value.
Regarding Stelco's request for revocation with respect to
corrosion-resistant steel, we note that in the last two administrative
reviews we determined that Stelco sold corrosion-resistant steel at
less than NV. See Certain Corrosion-Resistant Carbon Steel Flat
Products and Certain Cut-to-Length Carbon Steel Plate From Canada:
Final Results of Antidumping Duty Administrative Reviews, 62 FR 12725
(March 16, 1998) and Certain Corrosion-Resistant Carbon Steel Flat
Products and Certain Cut-to-Length Carbon Steel Plate From Canada:
Final Results of Antidumping Duty Administrative Reviews, 62 FR 18448
(April 15, 1997)(1994/95 Canadian Steel). Although the final results of
these reviews are subject to litigation, that litigation is not yet
complete. Additionally, as discussed below, we have determined that
Stelco sold corrosion-resistant steel at less than NV during the period
covered by this review. Consequently, we determine that because Stelco
does not have three consecutive years of zero or de minimis margins on
corrosion-resistant steel, Stelco is not eligible for revocation of the
order on corrosion-resistant steel under 19 CFR 351.222(b).
Facts Available
As we explained in the preliminary results, we determine that the
use of facts available is appropriate for Forsyth in accordance with
section 776(a) of the Act, because it failed to report all of its home
market sales made during the POR.
Where necessary information is missing from the record, the
Department may apply facts available under section 776 of the Act.
Further, where that information is missing because a respondent has
failed to cooperate to the best of its ability, section 776(b) of the
Act authorizes the Department to use facts available that are adverse
to the interests of that respondent, which may include information
derived from the petition, the final determination, a
[[Page 2176]]
previous administrative review, or other information placed on the
record. Forsyth did not respond to our repeated requests that it report
all of its home market sales; rather, it presented arguments as to why
it could omit many of those sales. As we explained in the preliminary
determination, we disagree with these arguments. Therefore, we conclude
that Forsyth has failed to cooperate to the best of its ability.
As adverse facts available for Forsyth, we are using the highest
dumping margin from any segment of this proceeding, 68.70 percent. This
is the rate used as facts available in the LTFV final determination,
and is found in the petition. See Memorandum to the File ``Preliminary
Results of Cut-to-Length Carbon Steel Plate from Canada; Corroboration
of Antidumping Duty Margin Used as Facts Available for A.J. Forsyth''
July 2, 1998 (Corroboration Memo).
Section 776(c) provides that the Department shall, to the extent
practicable, corroborate ``secondary information'' by reviewing
independent sources reasonably at its disposal. The Statement of
Administrative Action (SAA) accompanying the URAA at 870, clarifies
that ``secondary information'' includes information from the petition
in the LTFV investigation, the final determination, or information from
a previous section 751 review of the subject merchandise. The SAA also
provides that ``corroborate'' means simply that the Department will
satisfy itself that the secondary information to be used has probative
value. Id.
In accordance with this requirement, we corroborated the LTFV
margin to the extent practicable. We examined the basis of the rates
contained in the petition. Petitioners based both U.S. price and normal
value on actual prices from price quotations to U.S. customers and
price lists for plate sold by respondents. See Petition Requesting the
Imposition of Antidumping Duties on Imports of Cut-to-Length Carbon
Steel Plate from Canada, June 30, 1992 and July 14, 1992 (amended
petition). The price lists and price quotes that support the petition
margin are independent sources. Furthermore, the Department did not
receive any information or comment from the respondent or other
interested parties in this review concerning the U.S. prices and normal
values contained in the petition, and is aware of no other independent
sources of information that would enable us to further corroborate the
margin calculated in the petition. We note that the SAA, at 870,
specifically states that where ``corroboration may not be practicable
in a given circumstance,'' the Department may nevertheless apply an
adverse inference. Based on these reasons, the Department considers the
LTFV rate used as adverse facts available to be corroborated.
Changes From the Preliminary Results
The Department is implementing a change in this review in the
calculation of U.S. credit expense for Algoma, CCC, MRM, and Dofasco,
to be consistent with the Department's current practice, as outlined in
Import Administration Bulletin 98.2: Imputed Credit Expenses And
Interest Rate (February 23, 1998) (Policy Bulletin 98.2).
It is the Department's practice to calculate the U.S. credit
expense using a short-term interest rate tied to the currency in which
the sales are denominated. This interest rate should be based on the
respondent's weighted-average short-term borrowing experience in the
currency of the transaction. In cases, such as these, where Algoma,
CCC, MRM and Dofasco have no short-term borrowings in the currency of
the transaction, we will use publicly available information to
establish a short-term interest rate applicable to the currency of the
transaction. Since we are addressing the U.S. dollar transactions for
these companies, for these final results we have used the average
short-term lending rates calculated by the Federal Reserve to impute
credit expenses. Specifically, we have used the Federal Reserve's
weighted-average data for commercial and industrial loans maturing
between one month and one year from the time the loan is made. See
Final Analysis Memoranda for Algoma, CCC, MRM, and Dofasco, on file in
room B-099 of the Commerce Department.
Interested Party Comments
Algoma
Comment 1: Credit Expenses
Petitioners allege that the errors found in the reported credit
expenses at verification indicate that the information cannot be
verified. Petitioners also contend that Algoma did not report credit
expenses to the best of its ability and that, therefore, the Department
should apply adverse facts available. Petitioners argue that the
Department cannot rely on Algoma's data to conclude that the credit
expense errors were isolated because, rather than the Department
verifying this assertion itself, the Department relied on Algoma to
independently verify that there were no other errors in its reporting
of payment dates. Petitioners argue that, unlike in Melamine
Institutional Dinnerware from Indonesia: Final Determination of Sales
at Less Than Fair Value, 62 FR 1719, 1723 (January 13, 1997), where the
Department corrected errors found at verification after verifying that
the errors were isolated, the Department did not verify that the errors
in Algoma's reporting of credit expenses were isolated.
Petitioners contend that the errors discovered by the Department
during verification were significant because Algoma reported credit
expenses where it actually received advance payments. Thus, petitioners
argue, Algoma failed verification, and the Department should apply
facts available, as it did in Stainless Steel Bars from Spain; Final
Results of Admin. Review, 59 FR 66931, 66935 (December 28, 1994),
Circular Welded Non-Alloy Steel Pipe and Tube from Mexico; Final
Results of Admin. Review, 62 FR 37014, 37016 (July 10, 1997), and
Svenskt Stal AV v. United States, Ct. No. 96-05-01372 Slip Op., 97-123
(August 29, 1997). Petitioners also cite section 776(a) of the Act,
which states that if information provided by a respondent cannot be
verified, the Department shall use facts available in reaching its
determination.
Petitioners assert that Algoma failed to report to the best of its
ability at verification because it did not disclose the errors in its
reported credit expenses for the affected home market sales either
prior to, or at the outset, of verification. Citing 19 U.S. C.
1677e(b), petitioners state that if a party fails to cooperate by not
acting to the best of its ability to comply with a request for
information, the Department may draw an adverse inference in its
selection of facts otherwise available. In Cut-to-Length Steel Plate
from South Africa: Final Results of Admin. Review, 62 FR 61731, 61739
(November 19, 1997), the Department applied the highest credit expense
reported on a U.S. sale to all U.S. sales when the respondent failed to
report to the best of its ability.
Algoma disagrees with petitioners. Algoma notes that the Department
found two discrepancies at verification involving reported payment
dates, neither of which was significant. The first error was a
typographical error in the reported date of payment for a pre-selected
home market sale. In the second error, Algoma's accounting department
posted the payment against the date on which the amount was due instead
of the date on which the cash was received for a sale in which there
was an advance payment by the customer. Algoma argues that, contrary to
petitioners' allegation, the other advance payment errors were not
uncovered by the Department's verification team, but were discovered
[[Page 2177]]
when Algoma searched its entire submission for transactions where the
customer prepayment was received. Algoma determined that other errors
of the same type existed and voluntarily disclosed this information to
the Department on its own initiative during verification.
Algoma argues that the Department's Sales Verification Report at
pages 13-14 shows that the Department verified the extent of Algoma's
credit errors by examining the results of a computer query conducted on
the sales database, and verified the corrected information. Algoma
points out that the errors could not have been included in the
corrections memorandum provided at the beginning of verification
because Algoma was not aware of them at that time. Algoma further
argues that the errors at issue were both small in effect and isolated
in scope. Algoma argues that, because the Department corrected the
transactions at issue, verified the remainder of Algoma's file, and
used the corrected information in its preliminary results of review, no
further action by the Department is appropriate or necessary.
Department's Position: We agree with Algoma. At verification, we
reviewed the method by which Algoma searched its database for the
payment date errors, and we examined the full universe of sales in
which these errors occurred. Since all of these credit expense errors
occurred in sales where there were advance payments, we consider these
errors to be isolated in nature. Therefore, we are making no changes to
our calculations for the final results of review other than permitting
Algoma to correct the errors. For further discussion of this issue,
refer to the November 3, 1998 Memorandum to the File: Final Results of
the Antidumping Administrative Review of Cut-to-Length (CTL) Carbon
Steel Plate from Canada (Algoma's Issues Memo).
Comment 2: Freight Expenses
Petitioners argue that there are a number of U.S. sales for which
Algoma reported having received freight revenue but for which it did
not report a corresponding freight expense. Petitioners state that the
Department should apply to these sales the highest U.S. freight expense
reported for any U.S. sale as adverse facts available.
Petitioners argue that it was only after verification was underway
that Algoma ran an ``internal edit check'' and identified deleted
freight expense data for some of these sales. Petitioners argue that
Algoma should have reported this data to the Department before
verification, since the freight charges for these sales were reported
in Algoma's November 21, 1997 sales tape, but were ``inexplicably''
deleted from its later submissions. Petitioners allege that when Algoma
deleted the freight charges from its sales tapes in its subsequent
responses, it did not report the freight expenses to the best of its
ability. As with Algoma's credit expenses, petitioners argue that
Algoma's independent analysis of its database provides no justification
to conclude that the error is ``isolated,'' and that the sample of
sales verified cannot be considered to be representative of Algoma's
reporting as a whole. Petitioners contend that because Algoma failed to
report to the best of its ability, the Department should draw an
adverse inference and apply the highest U.S. freight expense reported
for any U.S. sale to the sales in question. Petitioners cite Welded
Carbon Steel Pipe and Tube from Turkey: Final Results of Administrative
Antidumping Review, 61 FR 69067, 69073 (December 31, 1996), and Foam
Extruded PVC from the United Kingdom: Final Results of Administrative
Antidumping Review, 61 FR 51411, 51414 (October 2, 1996).
Algoma contends that the Department has already rejected
petitioners' argument that U.S. freight expenses were misreported.
Algoma explains that, in unusual instances, a carrier may neglect to
bill Algoma for transport provided. In these instances, Algoma incurs
no freight expense, and the proper accounting treatment is to show no
freight expense. The proper treatment of freight revenue is to report
it whenever the customer pays for freight. Therefore, Algoma claims,
for some of the sales petitioners reference, freight expense and
revenue were correctly reported.
With respect to sales for which a freight expense was incurred but
not reported, Algoma further maintains that it was not aware of the
computer error prior to verification because none of the sales
preselected by the Department raised the issue. Algoma did not discover
the error until it began preparing its response to petitioners'
allegations, after verification commenced. On the night before
verification, it received petitioners' letter asking the Department to
examine certain transactions where no freight charges were reported.
Algoma found that in one of the transactions mentioned in the letter,
freight revenue was reported, but there was no corresponding freight
expense. Algoma then conducted a search to identify other such
transactions. Algoma maintains that the correct information was
verified by the Department and that no ``discrepancy'' existed because
the correct data was on the record prior to verification.
Department's Position: We agree with Algoma. Algoma reported the
freight expense errors to the best of its ability at verification and
disclosed them to the Department on its own initiative. At
verification, we examined the method by which Algoma determined that
the reported freight expense was in error, and found no reason to
believe that the errors were indicative of a corrupt database. We also
found that some of the sales in question were indeed reported
correctly, and that other sales at issue were correctly reported prior
to verification. Finally, reliability of these expenses is enhanced by
the fact that Algoma reported all of them in its initial submission,
which is on the record. The apparently inadvertent omissions only
showed up in later submissions of the same information. Since the
Department found Algoma's database to be reliable, we believe that the
freight expense errors were isolated in nature. Therefore, we will
include the corrected data for the freight expense in our final
calculations. See Algoma's Issues Memo for further discussion of this
issue.
Comment 3: Inclusion of Certain Sales
Petitioners argue that certain sales should be included as part of
the sales database due to a date of sale issue, the details of which
are proprietary.
Algoma contends that the Department should continue to exclude
certain transactions as part of its margin calculation because the
product type and quantity shipped for these sales (under an agreement)
was not fixed until the date of shipment (and invoicing). Algoma states
that these transactions were removed from the original sales tape and
thereafter reported in a separate data file because their dates of sale
(invoice date) fell outside of the contemporaneous reporting window.
Algoma argues that it originally included these sales in its November
21, 1997 sales listing in the belief that they had been made pursuant
to a long-term contract that fixed the material terms of sale (e.g.,
product description, price, and quantity) on the date of initial
agreement between the parties. Algoma alleges, however, that as
demonstrated at verification, the material terms of sale (i.e., the
product description and quantities) were amended several times after
that date.
Algoma maintains that, in accordance with the Department's long-
standing ``date of sale'' methodology, it is improper to use the date
of initial agreement as the date of sale for these
[[Page 2178]]
transactions because the material terms of sale were not established
with finality on that date.
Department's Position: We agree with Algoma. The material terms of
these sales were amended, and the date on which these terms became
fixed (i.e., the date of sale), falls outside of the period of review
(``POR''). Because this issue is not subject to further summarization,
see Algoma's Issues Memo for a more detailed proprietary discussion.
Comment 4: Date of Sale
Petitioners argue that Algoma's date of sale is the order entry
date rather than the invoice date, because, they claim, both price and
quantity terms of sale are fixed on the order entry date for both U.S.
and home market sales. Petitioners maintain that, under Sec. 351.401(i)
of the Department's regulations, the Secretary may use a date of sale
other than the date of invoice if the Secretary is satisfied that an
alternative date more accurately reflects the date on which the
exporter or producer established the material terms of sale.
Petitioners base their contention on a reference in the Department's
verification report to a chart examined at verification in which Algoma
compared the quantity of merchandise ordered to the quantity of
merchandise shipped. The report stated, ``there does not appear to be a
significant difference between the number of pieces shipped and the
number of pieces ordered.'' (Memorandum to the File: Report on the
Sales Verification of Algoma Steel Corporation in the 8/1/96-7/31/97
Administrative Review of the Antidumping Duty Order on Cut-to-Length
Carbon Steel Plate from Canada (May 22, 1998) (Algoma Sales
Verification Report)). Petitioners also cite Stainless Steel Bar from
India: Final Results, 63 FR 3536, 3537 (January 23, 1998), in which the
Department used the purchase order date as the date of sale because no
material changes occurred between the purchase order date and the
invoice date. Petitioners also cite Canned Pineapple Fruit from
Thailand: Final Results, 63 FR 7392, 7394 (February 13, 1998), and
Circular Welded Non-Alloy Steel Pipe from Korea: Final Results, 63 FR
32833, 32836 (June 16, 1998), in which the Department used the contract
date as the date of sale.
Algoma argues that the Department's presumption in favor of using
the invoice date as the date of sale in the preliminary results notice
is justified. Algoma disagrees with petitioners' argument in favor of
the order entry date because it relies exclusively on a statement made
by the Department in the Algoma Sales Verification Report relating to a
chart that Algoma prepared, and it ignores the facts on which the
Department based its conclusion. Algoma asserts that the verification
report also states that the verifiers ``found no discrepancies with
their (Algoma's) date of sale.'' According to Algoma, the data show
that the quantity shipped differs from the quantity ordered on a
regular basis, which is sufficient to sustain the use of invoice date
in accordance with the Department's practice. Algoma cites the preamble
to the Department's regulations, published in the Federal Register on
May 19, 1997, in which the Department stated:
A preliminary agreement on terms, even if reduced to writing, in
an industry where renegotiation is common does not provide any
reliable indication that the terms are truly ``established'' in the
minds of the buyer and seller. This holds even if, for a particular
sale, the terms were not renegotiated.
62 FR 27349.
Algoma concludes that, because the terms of sale, in particular the
quantity shipped, are commonly subject to further negotiation up to the
date of shipment, the Department's use of the invoice date as the date
of sale is justified in this case.
Department's Position: We agree with Algoma. As stated in
Sec. 351.401(i) of the Department's regulations, we normally use the
invoice date as the date of sale. At verification, we examined a chart
comparing the quantity ordered to the quantity shipped/invoiced for a
certain number of sales, and found that the quantity changed between
the order date and the invoice date for a number of sales; see Exhibit
40, page S6506, of the Algoma Sales Verification Report. Therefore, we
have continued to use Algoma's invoice date as the date of sale in
accordance with our normal practice. See Memorandum to the File:
Analysis for Algoma Steel Inc. for the Final Results of the Fourth
Administrative Review, on file in room B-099 of the Commerce
Department.
Comment 5: Imputed Credit
Algoma argues that the Department should include banking fees in
the Canadian dollar-denominated interest rate used to impute credit
expenses for home market sales, even though Algoma did not include them
in its calculations prior to verification. Algoma points out that, at
the outset of verification, it disclosed to the Department that it had
omitted certain banking fees that were paid in connection with the
short-term revolving credit facility from its calculation of the
Canadian dollar short-term interest expense factor. Algoma claims that
page 36 of the annual report submitted as part of its Section A
Response identifies the following bank charges related to short-term
borrowing made during the POR under Algoma's ``revolving credit
facility'' which opened in 1995: an amortized ``issuance cost,''
``annual fees,'' and ``fees determined by the amount of the unused
portion of the facility during the course of a given month.''
Algoma claims that the Department should not consider this
information as ``new'' because Algoma established on the record well
before verification that it incurred such banking fees as part of its
actual total cost of short-term Canadian borrowings under the credit
facility in question. Algoma claims that it identified the total amount
of such ``interest and fees on operating line'' incurred during the
1997 calendar year (overlapping half of the POR) in its first
supplemental questionnaire response, and reconciled the reported amount
of these bank charges to its audited financial statement in the second
supplemental questionnaire response.
Algoma maintains that petitioners were aware of the credit line,
and specifically asked the Department to examine the issue at
verification, and to place the entire credit agreement on the record.
Furthermore, Algoma argues that the information is not ``new'' because
not only is it on the record, but it was examined at verification.
Algoma cites both the Department's sales verification report and cost
verification report in making its claim that the amount of the bank
fees was verified in order to reconcile the reported interest payment
amounts to Algoma's audited financial statements at verification.
Algoma states that the Department examined and verified the bank fees
in the cost verification for six of the twelve months of the POR.
Algoma adds that the Department's normal practice requires it to
include these costs in Algoma's home market credit expenses, and that
not doing so would understate Algoma's actual cost of short-term
borrowing. Algoma cites Certain Cold-Rolled Carbon Steel Plate Products
from Korea; Final Results of Antidumping Duty Administrative Review,
Comment 2, 62 FR 781801 (January 7, 1998), and Large Power Transformers
from Italy; Final Results of Antidumping Duty Administrative Review, 52
FR 46806 (December 10, 1987), where the Department included bank
charges incurred as part of respondent's credit expense calculation.
Algoma also cites Nylon Impression Fabric from Japan; Final Results, 51
FR 15816 (April 28, 1986).
[[Page 2179]]
Petitioners contend that because Algoma's home market credit
expenses failed verification, whether the bank fees are included in
calculating Algoma's home market credit expenses is irrelevant.
Petitioners also dispute Algoma's contention that the information
regarding bank fees was on the record before verification. Petitioners
claim that the information from Algoma's 1996 Annual Report that was
included in Algoma's Section A Response did not include data for six
months of the POR (January 1997 to July 1997). In addition, petitioners
argue that, in its January 29, 1998 supplemental questionnaire
response, Algoma referred to the data as ``interest and other fees on
the operating line'' without detailing the nature of the ``fees.''
Petitioners also argue that the only figure that was reconciled was
Algoma's ``Net Financing Expenses'' for calendar year 1996, and cite
Algoma's Response to the Department's Second Supplemental Questionnaire
(March 20, 1998) at Attachment D-43.
Petitioners contend that the Department neither accepted the
information on the bank fees, nor verified the data during Algoma's
sales verification. See Algoma Sales Verification Report at 15.
Petitioners state that the Department specifically refused to examine
the fees because they constituted untimely new information, and cite
the Department's Analysis Memorandum for Algoma for the Preliminary
Results of the Fourth Administrative Review of Certain Cut-to-Length
Carbon Steel Plate from Canada for the period August 1, 1996--July 31,
1997 (July 10, 1998). Petitioners argue that the fact that the
Department examined the bank fees during the cost verification is of no
consequence, because the fees were examined solely to confirm Algoma's
net financing expenses during the 1996 calendar year, not to confirm
Algoma's short-term interest expenses during the POR (July 31, 1997
through August 1, 1997).
Department's Position: We agree with Algoma. The Department
considers Algoma's revolving credit facility to be short-term
borrowings. Consequently, the banking fees associated with the
revolving credit facility are part of the total cost to Algoma of
short-term Canadian borrowings and therefore, should be included in the
short-term interest rate used to calculate imputed credit expenses.
Although the banking fees were not included in Algoma's credit expense
calculation prior to verification, information pertaining to the nature
of these banking fees was recorded in Algoma's Annual Reports which
Algoma submitted prior to verification. In addition, we examined these
banking fees during verification. Thus, we do not consider the
information pertaining to the banking fees to be ``new'' information.
We have recalculated Algoma's imputed home market credit expenses to
include these banking fees. When we corrected the home market credit
expense, we noted that there were several missing payment dates in
Algoma's sales tape. For these sales, we applied the verified average
number of days between the shipment date and the payment date.
Comment 7: Clerical Errors
Petitioners claim that the Department made three clerical errors in
the preliminary results, and therefore should correct them in the final
results. These errors pertain to the calculation of certain credit
expenses, the deduction for early payments, and the freight movement
calculation. In the home market credit expense calculation, petitioners
claim that the Department omitted billing adjustments, freight revenue,
and other discounts as part of the gross unit price. Petitioners state
that, in the definition statement of the total discounts and rebates in
the model match program, the Department omitted early payments.
Petitioners point out that, in the margin program, the Department
placed the parenthesis in the wrong part of the calculation string for
movement expenses.
Department's Position: We agree with petitioners regarding all
three ministerial errors. We have corrected these errors for the final
results.
Dofasco
Comment 1: Use of ``Partial'' Freight Data
Petitioners argue that, as in the third review, the Department
should reject the actual freight data Dofasco submitted for some of its
sales in favor of the minimum and maximum freight rates to each
destination, which Dofasco has provided for all sales. Petitioner
contends that the Department's practice is to disregard sales
information reported on a selective basis, as stated in Stainless Steel
Wire Rod from Sweden, 63 FR 40449, 40455 (July 29, 1998) (SSWR from
Sweden). Petitioner adds that using such ``partial'' information would
``encourage (respondent) to selectively disclose only that information
which would benefit its position.'' (Final Results of Administrative
Review; Tapered Roller Bearings and Parts Thereof, Finished and
Unfinished From Japan, and Tapered Roller Bearings, Four Inches or Less
in Outside Diameter, and Components Thereof, from Japan, 63 FR 20585,
20591 (April 27, 1998) (TRBs 1998)). Petitioner also states that, if
the Department used this information, there would be no incentive for
respondents to provide complete information (TRBs 1998, citing Nippon
Pillow Block Sales Co., Ltd. and FYH Bearing Units USA, Inc. v. United
States, 903 F. Supp. 89, 95 (CIT 1995) and Persico Pizzamiglio, S.A. v.
United States, No. 92-11-00783, Slip Op. 94-61 at 23 (April 14, 1994)).
Finally, petitioner claims that the potential for manipulation
requires that the Department reject ``selectively disclosed information
* * * even when there is no direct evidence that such manipulation
actually occurred.'' In support, petitioner cites Final Results of
Antidumping Duty Administrative Review, Tapered Roller Bearings, Four
Inches or Less in Diameter, and Components Thereof, from Japan, 59 FR
56035, 56049 (November 10, 1994) (TRBs 1994), Final Results of
Antidumping Duty Administrative Review; Certain Cold-Rolled Carbon
Steel Flat Products from Germany, 60 FR 65264, 65274 (December 19,
1995) (Steel from Germany), and C.F. Koenig & Bauer-Albert AG v. United
States, No. 96-10-02298, Slip Op. 98-83 (CIT 1998) at 6.
Dofasco argues that the Department does not require respondents to
report freight on an actual sales-specific basis, but in many instances
has allowed respondents to report freight using alternate methodologies
when necessary. Dofasco points out that the questionnaire specifically
allows respondents to report freight on something other than an actual
sale-by-sale basis ``when to do otherwise would create a significant
burden because of the manner in which your (the respondent's)
accounting records are maintained.'' Dofasco adds that, in the third
administrative review of this order, the Department allowed respondents
to report estimated freight expenses as long as they were reasonable
and any differences between the estimated amounts and actual freight
charges were minor. Respondent cites Final Results of Antidumping
Administrative Review; Certain Corrosion-Resistant Carbon Steel Flat
Products and Certain Cut-to-Length Carbon Steel Plate from Canada, 63
FR 12725, 12740 (March 16, 1998) (Third Review Final Results) and Final
Determination of Sales at Less Than Fair Value; Small Diameter Circular
Seamless Carbon and Alloy Steel, Standard, Line and Pressure Pipe from
Italy, 60 FR 31981, 31987 (June 19, 1995).
[[Page 2180]]
Dofasco denies that it has selectively reported actual freight,
arguing that it has been consistently forthcoming with the Department
about its inability to track actual freight for all of its sales.
Dofasco asserts that it has reported actual freight for those carriers
that bill Dofasco through an electronic data interface system, which
enables Dofasco to calculate via computer the actual cost for each coil
shipped to these companies. Because some carriers do not use this
system, Dofasco states, it would be burdensome to report actual freight
for all those carriers not using the system. Furthermore, Dofasco adds,
the Department has verified these facts, and found no discrepancies.
Therefore, petitioners' allegations with respect to ``potential
manipulation'' are misplaced.
Department's Position: We disagree with petitioners. In the third
administrative review, we did not use respondents's actual freight data
because we found that the computerized system it used to bill its
customers for freight was not working properly, and there was nothing
on the record to demonstrate the accuracy of the freight expenses as
reported. See Third Review Final Results, 63 FR at 12739. In the
current review, we verified the accuracy of Dofasco's response
regarding its freight billing system and found no discrepancies. Thus,
we have used Dofasco's reported actual freight expenses for those sales
for which this data was available. Because we verified this expense to
our satisfaction, we do not consider Dofasco's data to be ``selective''
or ``partial,'' nor do we believe that Dofasco attempted to manipulate
the margin outcome by reporting its freight data in the manner that it
did.
We note that in the TRBs cases cited by petitioners, the Department
had reason to believe that the respondents' data was incomplete, unlike
here. In SSWR from Sweden, we found at verification that the respondent
could have reported transaction-specific data, but reported average
figures instead. We therefore rejected the reported average figures in
favor of transaction-specific information. In contrast, we have
concluded that Dofasco has reported transaction-specific data for as
many sales as possible, as stated above. We therefore have not changed
the preliminary results with respect to freight expenses.
Comment 2: EP vs. CEP Sales
Petitioners argue that the Department should treat all sales made
through Dofasco's U.S. subsidiary as constructed export price (CEP)
sales, in accordance with the Department's practice when an affiliate
involved in the sales process as something more than a ``processor of
sales-related documentation'' or a ``communications link.'' In support,
petitioners cite: Final Determination of Sales at Less Than Fair Value;
Stainless Steel Wire Rod from Spain, 63 FR 40391, 40395 (July 29, 1998)
(Stainless Steel Wire Rod from Spain); and Preliminary Results of
Antidumping Duty Administrative Review; Roller Chain Other than Bicycle
from Japan, 63 FR 25457 (May 18, 1998)(Roller Chain from Japan).
Petitioners detail evidence from the proprietary record, specifically
the Department's Report on the Sales Verification of Dofasco Inc. (May
28, 1998) (Dofasco Sales Verification Report), which they claim
demonstrates that Dofasco USA (DUSA) performed sales functions that
render CEP treatment appropriate.
Petitioners point out that, in the Final Results of Antidumping
Duty Administrative Reviews: Certain Cold-Rolled and Corrosion-
Resistant Carbon Steel Flat Products from Korea (Steel from Korea), 63
FR 13170 (March 18, 1998), the Department found that just because the
affiliate's role ``is not autonomous with respect to the sales
process,'' this does not mean that its ``role in the process is
ancillary.'' Thus, petitioners state, even if the Department were to
find that DUSA had no independent sales negotiating authority, that
fact would not be dispositive. Furthermore, petitioners state, the
Department has recently made clear that it will ``consider the sale to
be CEP unless the record demonstrates that the U.S. affiliate's
involvement in making the sale is incidental or ancillary.'' (Steel
from Korea, 63 FR at 13177, 13182-83.) Petitioners conclude that
Dofasco has failed to submit any evidence to support such a finding.
Dofasco argues that the Department correctly determined that
Dofasco properly classified its U.S. sales through DUSA as export price
(EP) sales. Dofasco points out that the Department has made the same
determination in all three previous reviews. As the facts during this
review are almost exactly the same as in the previous reviews, Dofasco
argues, the Department should continue to classify the DUSA sales as EP
sales.
Dofasco cites the preamble to the Department's new regulations,
which states that the Department considers transactions to be EP
whenever: (1) The producer or exporter ships the merchandise directly
to the unaffiliated purchaser without it being introduced into the U.S.
affiliate's inventory; and (2) the affiliated entity acts only as a
processor of documentation and a communication link between the foreign
respondent and the unaffiliated purchaser (62 FR 27296, 27351). Dofasco
maintains that the last factor has been interpreted by the Department
as turning largely upon the extent to which the affiliate is involved
in negotiating the sales, a role which the Department has stated must
be ``incidental or ancillary.'' Steel from Korea at 63 FR 13183.
Furthermore, Dofasco states, the Department has never suggested that
merely signing contracts is sufficient to characterize the U.S.
subsidiary's role as being more than ``incidental or ancillary.''
Rather, the Department has recently elucidated that this threshold is
passed only when the U.S. affiliate is ``substantially involved in the
sales process (e.g., negotiating prices), or if the affiliate ``played
a major role in negotiating and bringing about the sale, from the
bidding stage through the final contract.'' See Roller Chain from
Japan, 63 FR at 25457, and Certain Cut-to-Length Carbon Steel Plate
from Germany, 62 FR 18390, 18391-92 (April 15, 1997), respectively.
Dofasco states that, unlike the respondents in these cases, the
Department consistently has found that DUSA's role in the sales process
is not ``substantial'' or more than ``incidental or ancillary.''
Respondent cites the Dofasco Sales Verification Report at 4. Respondent
argues that petitioners mischaracterized proprietary sections of the
verification report in order to support their position that DUSA's role
in the sales process was substantial enough to warrant CEP treatment.
Dofasco concludes that nothing has changed since the first, second, and
third administrative reviews that should alter the Department's
previous determination that sales through DUSA were EP sales.
Department's Position: We have not changed our preliminary results
with respect to this issue. As we stated in the third review final
results, we do not believe that the criteria for CEP treatment as
stated in Steel from Korea have been met in this case. In that notice,
we explain that CEP treatment is appropriate where certain facts
indicate ``that the subject merchandise is first sold in the United
States by or for the account of the producer or exporter.'' Such a
finding requires that: (1) The merchandise was shipped directly from
the manufacturer to the unaffiliated U.S. customer; (2) this was the
customary commercial channel between the parties; and (3) the function
of the U.S. affiliate is limited to that of a ``processor of sales-
related documentation'' and a ``communications link'' with the
[[Page 2181]]
unrelated U.S. buyer. We also stated that where the factors indicate
that the activities of the U.S. affiliate are ancillary to the sale
(e.g., arranging transportation or customs clearance, and invoicing),
we will treat the transactions as EP sales. Furthermore, when the U.S.
affiliate has more than an incidental involvement in making sales (e.g.
solicits sales, negotiates contracts or prices) or providing customer
support, we treat the transactions as CEP sales. See Third Review Final
Results, discussing Steel from Korea. We do not find that DUSA has more
than an incidental involvement in the sales process.
We agree with petitioners' argument that, pursuant to Steel from
Korea, even if the Department were to find that DUSA had no independent
sales negotiating authority, that fact would not be dispositive that
DUSA's role in the sales process was ancillary. As in Steel from Korea,
we have considered the totality of the evidence regarding Dofasco's
sales process. Unlike in Roller Chain from Japan and Stainless Steel
Wire Rod from Spain, cited by petitioners, we find that the evidence
does not suggest that DUSA's role in the selling process was anything
beyond an ancillary role. In those cases we found that the U.S. selling
agents' involvement in the sales process was extensive when compared to
that of the exporters, and that the majority of selling functions
occurred in the United States. As much of the information regarding
DUSA's selling functions is proprietary, see the Final Results Analysis
Memorandum on file in room B-099 of the Commerce Department.
Finally, we note that petitioners have not presented any new
arguments with respect to this issue, nor is the fact pattern with
respect to sales made through DUSA significantly different from past
reviews. We again verified Dofasco's sales and distribution process,
and found nothing to support petitioners' arguments. Therefore, we have
treated Dofasco's sales to the United States as EP sales in these final
results.
Comment 3: Clerical Error--Movement Expenses
Petitioners argue that, for certain sales, the Department failed to
include, in U.S. movement expenses per unit freight expenses Dofasco
incurred when shipping subject merchandise from a warehouse or
processor to its U.S. customers. For certain sales, Dofasco reported
these freight expenses in the computer field INLFWCU, a variable
petitioners allege the Department failed to include in its calculation
of total movement expenses. Respondents agree with petitioners.
Department's Position: We agree that we failed to account for this
additional freight variable in the calculation, and have made the
necessary correction for the final results of review.
Comment 4: Clerical Error--Freight Expenses
Petitioners claim that, for certain sales, the Department's
computer program incorrectly calculates movement expenses. Petitioner
states that the program is meant to deduct actual freight in lieu of
maximum freight, unless actual freight is set to missing. For certain
observations, however, the program fails to correctly execute this
operation.
Respondent agrees with petitioners, stating that, for both U.S. and
home market variables, Dofasco mistakenly set the actual freight
variables to zero instead of setting them to missing in the computer
program.
Department's Position: We agree, and have revised the computer
program accordingly.
Comment 5: Clerical Error--Packing
Petitioners claim that U.S. packing expenses were twice multiplied
by the rate for conversion to U.S. dollars in the Department's margin
calculation program. Respondent agrees with petitioners.
Department's Position: We agree, and have revised the computer
program accordingly.
CCC
Comment 1: Valuation of Major Input
Petitioners argue that CCC improperly reported the value of steel
substrate purchased from Stelco by reporting transfer prices rather
than market prices, and that the Department should therefore adjust the
value of CCC's steel substrate to reflect market prices. Petitioners
claim that CCC's questionnaire response indicates that CCC purchased
identical substrate from an affiliated and unaffiliated party.
Therefore, petitioners state, section 773(f)(2) of the Act requires the
Department to disregard the transfer price paid for the major input,
and to base the value of the input ``on the information available as to
what the amount would have been if the transaction had occurred between
persons who are not affiliated.'' Petitioners argue that the Department
should therefore adjust the price reported by CCC to reflect the
difference between the transfer and market prices shown on these two
invoices, as it did in Final Determination of Sales at Less Than Fair
Value: Ferrosilicon from Brazil, 61 FR 59411 (November 22, 1996);
Notice of Final Determination of Sales at Less Than Fair Value: Fresh
Atlantic Salmon From Chile (Salmon from Chile), 63 FR 31434 (June 9,
1998); and Final Results of Antidumping Duty Administrative Reviews on
Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts
Thereof From France, Germany, Italy, Japan, Romania, Singapore, Sweden
and the United Kingdom (AFBs January 1997), 62 FR 2081 (January 15,
1997).
Petitioners claim that the evidence on the record shows that the
substrate CCC purchased from Stelco, an affiliated party, and from a
third, unaffiliated party were identical. Petitioners argue that CCC
has neither explained the differences it claims existed between the
Stelco and third-party substrate, nor cited to any part of the record
where the differences are reflected.
CCC argues that, as stated in its January 29, 1998 questionnaire
response, it does not purchase identical merchandise from Stelco and
from other suppliers. CCC claims that the invoices provided in the
questionnaire response were the only two that CCC could find that would
show the comparability of Stelco and third-party substrate, and argues
that one cannot infer from the two invoices alone that all Stelco
substrate was sold at below-market prices. Therefore, CCC argues, the
Department should continue to use transfer prices to value substrate
purchased by CCC.
CCC argues that a closer examination of the two invoices shows that
Stelco offered CCC an allowance or discount on this purchase and that,
without this discount, the Stelco and the third-party invoice prices
are equal. CCC claims that the Department accepted respondent's
argument that a price differential between transfer price and market
price was due to a verified early payment discount, and continued to
calculate costs using the discounted transfer price even though the
transfer price was lower than the related market price in Final
Determination of Sales at Less Than Fair Value: Porcelain-On-Steel
Cookware from Mexico, 63 FR 38373 (July 16, 1998) (Cookware from
Mexico).
Department's Position: We agree with petitioners, in part, and have
adjusted all transfer prices reported by CCC to reflect market prices.
Sections 773 (f)(2) and (3) of the Act stipulate that major inputs
purchased from affiliated parties may be valued at the highest of
market value, transfer price or the affiliate's cost of
[[Page 2182]]
production. In AFBs January 1997, the Department found that ``in the
case of a transaction between affiliated persons involving a major
input, we will use the highest of the transfer price between the
affiliated parties, the market price between unaffiliated parties, and
the affiliated supplier's cost of producing the major input.'' 62 FR
2081; see also 19 CFR 351.407(b).
CCC has argued that the substrates on the two invoices it provided
are not identical and cannot be compared. It is unclear whether the
differences between the products on the invoices are substantial enough
that they cannot be compared without adjustment. However, assuming the
differences between the merchandise on the two invoices is significant,
it is CCC that provided these invoices in order to substantiate its
claim that its transfer price from its affiliate Stelco was equivalent
to a market price. CCC now attempts to impeach the very comparison of
invoices it urged the Department to make. If the differences between
the merchandise covered by the two invoices were significant enough
that the invoice prices should only have been compared after some
adjustment, then CCC should have quantified the difference or provided
some other means for the Department to adjust for the difference and
make the comparison. See Sec. 351.401(b)(1). If the Department cannot
make this comparison, then there is no evidence on the record to
support CCC's claim that its inputs purchased from Stelco were at or
above market value, and this claim must be rejected. If, on the other
hand, petitioners are correct that there are no differences between the
merchandise on the two invoices which would preclude comparison, then a
comparison of the two shows that prices of the Stelco input are lower
than the price from the unaffiliated supplier.
With regard to CCC's claim that we should use the price of the
input from Stelco because, disregarding a discount Stelco granted, the
Stelco price is the same as the price from the unaffiliated supplier,
we disagree. The Department has long recognized that discounts must be
taken into account in determining what the true price is. For example,
in AFBs January 1997, 62 FR at 2090, we explained that, in identifying
the true starting price, the Department must first adjust the gross
price for any discounts, rebates, or other price adjustments. As
discussed in adjusting our final regulation, the Department must
consider discounts in identifying the ``net outlay of funds by the
purchaser.'' See Antidumping Duties, Countervailing Duties; Final Rule,
62 FR 27296, 27300 (Final Rule) and 19 CFR 351.102 (definition of price
adjustment) and 19 CFR 351.401(c). The same principles apply when
identifying the actual transfer price for the major input rule; such
transfer price must reflect any discounts, rebates or other price
adjustments in order to determine CCC's net outlay of funds for the
input.
CCC's reliance on Cookware from Mexico is misplaced. In that case
the Department clearly stated that it was not accounting for price
adjustments because it could only determine that they had been offered,
and not whether they had actually been granted. By contrast, in the
present case it is clear that Stelco actually granted the discount to
CCC.
Since the final price for the Stelco invoice is less than the final
price on the third-party, market price invoice, we have valued CCC's
steel input for these final results by adjusting CCC's reported
transfer prices to reflect the ratio between the final prices on these
two invoices.
Comment 2: Imputed U.S. Credit
Petitioners argue that the surrogate interest rate used by the
Department to value CCC's U.S. credit expense should be increased by a
premium to reflect CCC's actual borrowing experience in the home
market. Petitioners argue that, in LMI-LaMettali Industriale, S.p.A. v.
United States 912 F.2d 455 (Fed. Cir. 1990) (LMI), the Court ruled that
the surrogate U.S. dollar-denominated interest rate used by the
Department to impute U.S. credit expense must conform with ``commercial
reality.'' Petitioners note that the Department's Final Determination
of Sales at Less Than Fair Value: Certain Cut-to-Length Carbon Steel
Plate from Sweden, 61 FR 15772 (April 9, 1996) explains that
determining whether a surrogate rate conforms with commercial reality
takes into account the many ``varied factors that determine at what
rate a firm can borrow funds, such as the size of the firm, its
creditworthiness, and its relationship with the lending bank.''
Petitioners argue that, based on CCC's home market borrowing history
(as explained in CCC's November 17 and January 30 questionnaire
responses), CCC would not have received the prime rate in the United
States, defined by the International Monetary Fund as the ``(r)ate that
the largest banks charge their most creditworthy business customers on
short-term loans.'' Therefore, petitioners argue that basing CCC's
imputed U.S. credit expenses on the prime rate would not conform with
``commercial reality.'' Petitioners argue that the Department should
add a premium to the average U.S. prime rate and recalculate CCC's
imputed U.S. credit expense accordingly. Petitioners state that in the
Final Determination of Sales at Less Than Fair Value: Oil Country
Tubular Goods from Austria, 60 FR 33555 (June 28, 1995) (OCTG), the
Department used the New York State prime rate plus one percent as a
surrogate rate to impute U.S. credit expenses where the respondent had
no U.S. dollar-denominated borrowings.
Finally, petitioners claim that the Department's calculation of the
average U.S. prime interest rate was erroneous. Petitioners argue that
the calculation should be based on a 360-day year, not a 365-day year.
CCC disagrees that the Department should add a premium to CCC's
surrogate interest rate and that the Department should use the average
U.S. prime rate as a basis upon which to calculate CCC's imputed
credit. CCC notes that the Department's Policy Bulletin 98.2 instructs
the Department to use ``the Federal Reserve's weighted-average data for
commercial and industrial loans maturing between one month and one year
from the time the loan is made,'' rather than the prime rate when a
respondent has no short-term borrowings in the United States. CCC adds
that the Department used the Federal Reserve's weighted-average data
for commercial and industrial loans for CCC in the previous review of
corrosion-resistant steel from Canada. CCC argues that use of the
Federal Reserve's weighted-average data for commercial and industrial
loans would conform with petitioners' demands that the rate used
``comport with `commercial reality,' '' as it was the prime rate's
failure to meet with commercial reality that led the Department to
reject its use in the Policy Bulletin, and adopt a more realistic
average of commercial and industrial loan rates.
CCC states that the Department should also reject petitioners'
suggestion to increase the prime rate by a premium. First, CCC argues
that the premium was derived from CCC's proprietary home market
borrowing rate, and therefore has no bearing on what CCC's rate would
be in the United States. CCC cites LMI and the Department's Policy
Bulletin 98.2, which it claims establishes clear guidelines against the
use of an interest rate in the home market as a surrogate for the
calculation of credit in the U.S. market. Further, CCC argues that OCTG
is factually unique in several ways: (1) It was the exporter's U.S.
sales agent who customarily charged customers an interest rate of prime
plus a one percent premium for late revenue; (2) the rate
[[Page 2183]]
had no connection to interest rates offered to the company in the home
market; and (3) this rate represented the rate commonly used in the
United States at that time. CCC also notes that the Department in OCTG
rejected the possibility of using the home market interest rate.
Department's Position: We agree with CCC. For these final results,
we have used the Federal Reserve's weighted-average data for commercial
and industrial loans, instead of the prime rate, which we used for the
preliminary results.
As discussed in Policy Bulletin 98.2, prior to a 1990 ruling by the
Court of Appeals for the Federal Circuit (CAFC) in LMI, the Department
had a practice of using a respondent's home market borrowing rates to
impute both U.S. and home market credit expenses. In LMI, the CAFC
ruled that the cost of credit ``must be imputed on the basis of usual
and reasonable commercial behavior.'' In ruling on the specific facts
of LMI, the CAFC did set forth certain general principles; it stated
that ``the imputation of credit cost * * * is a reflection of the time
value of money,'' that it ``must correspond to a * * * figure
reasonably calculated to account for such value during the gap period
between delivery and payment,'' and that it should conform with
``commercial reality.''
In developing a consistent, predictable policy establishing a
preferred surrogate U.S. dollar interest rate in all cases where
respondents have no U.S. dollar short-term loans, we have employed
three criteria: (1) The surrogate rate should be reasonable; (2) it
should be readily obtainable and predictable; and (3) it should be a
short-term interest rate actually realized by borrowers in the course
of ``usual commercial behavior'' in the United States. The Policy
Bulletin states that the use of unadjusted home market borrowing rates
to impute credit expenses on U.S. sales does not recognize the effect
of currency changes between date of shipment and date of payment on
repatriating revenue and that therefore, unadjusted home market
borrowing rates are not an accurate measure of the value of the loan
made by the seller to the purchaser if the sale (the loan) is made in
U.S. dollars.
In Steel from Sweden and in Certain Corrosion-Resistant Carbon
Steel Flat Products from Australia; Final Results of Antidumping Duty
Administrative Reviews, 61 FR 14049, 14054 (March 29, 1996), the
Department selected the average short-term lending rates calculated by
the Federal Reserve as surrogate U.S. interest rates. Each quarter, the
Federal Reserve collects data on loans made during the first full week
of the mid-month of each quarter by sampling 340 commercial banks of
all sizes. The sample data are used to estimate the terms of loans
extended during that quarter at all insured commercial banks. These
Federal Reserve rates meet the three criteria discussed above. They
represent a reasonable surrogate for respondents' U.S. dollar borrowing
rates because they are calculated based on a variety of actual dollar
loans to U.S. customers, and because they are readily available to all
interested parties and are easy to obtain. Therefore, we have used the
Federal Reserve's weighted-average data for commercial and industrial
loans maturing between one month and one year from the time the loan is
made to impute credit during the POR for CCC.
We disagree with petitioners' argument that CCC's rate should be
increased by a premium based on home market borrowings. In support of
their claim that the rate should be increased by a premium, petitioners
cite to OCTG. However, the methodology used in OCTG has limited
applicability because it was developed using facts specific to that
particular case. In OCTG, the Department found that the New York prime
rate plus one percent reflected the manner in which the respondent's
related U.S. sales agent measured the time value of late revenue as an
ordinary business practice. Additionally, as stated in the Policy
Bulletin, home market borrowings should not be used to impute U.S.
credit.
We disagree with petitioners' argument that the calculation should
be based on a 360-day year rather than a 365-day year. Petitioners made
no substantive argument in favor of a 360-day year or against a 365-day
year. Because the Department has no policy that would compel such a
change, we have continued to calculate imputed credit based on a 365-
day year.
Comment 3: Allocation of Post-Sale Price Adjustments
Petitioners argue that the Department should not accept CCC's post-
sale price adjustments (PSPAs) in either the home market or the U.S.
market. Petitioners argue that PSPAs must be allocated over only those
sales on which they were incurred in order to qualify as an adjustment
to price in the Department's antidumping calculations, and that CCC did
not comply satisfactorily with the Department's information requests.
Petitioners argue that the Department should reject CCC's claim that
its PSPAs have been reported on a transaction-specific basis.
Petitioners argue that CCC has failed to satisfy its burden to document
and support its entitlement to report PSPAs on an allocated basis. They
claim that in some cases CCC allocated PSPAs on invoices or work orders
regardless of whether the adjustment applied to all transactions
recorded on the invoice or work order. Furthermore, petitioners claim
that CCC has failed to demonstrate that it was not feasible to report
the PSPAs on a transaction-specific basis, and has, in fact, tied some
PSPAs to specific sales transactions. Petitioners maintain that because
CCC was able to report some of its PSPAs on a transaction-specific
basis, CCC could therefore have reported all of its PSPAs in this
manner. Because CCC did not do so, petitioners contend that CCC did not
act to the best of its ability in responding to the Department's
request for information. Petitioners argue that CCC failed to
demonstrate its entitlement to those adjustments and, therefore, the
Department should deny the PSPAs sought by CCC to home market and U.S.
prices based on Timken Co. v. United States, 673 F. Supp. at 513
(Timken) and sections 782(d) and (e) of the Act. Petitioners claim that
section 782(d) of the Act allows the Department to disregard
information submitted by a respondent when it does not comply
satisfactorily with a request for information after being informed of
the deficiency and being provided an opportunity to remedy it.
Petitioners also state that section 782(e) of the Act provides that the
respondent must demonstrate that ``it acted to the best of its ability
in providing the information'' and that ``the information can be used
without undue difficulties.'' Petitioners claim that when a respondent
has improperly allocated PSPAs for home market sales, it is the
Department's practice to disallow all claimed adjustments to price for
those sales, as indicated in: Final Results of Antidumping Duty
Administrative Reviews; Antifriction Bearings (Other than Tapered
Roller Bearings) and Parts Thereof from France, Germany, Italy, Japan,
Singapore, and the United Kingdom (AFBs 1996), 61 FR 66472, 66498
(December 17, 1996); Final Results of Antidumping Duty Administrative
Reviews; Antifriction Bearings (Other than Tapered Roller Bearings) and
Parts Thereof from France, 63 FR 33320 (June 18, 1998) (AFBs 1998); and
TRBs 1998.
Petitioners maintain that the Court's decision in AK Steel Corp.,
et al. v. United States, Court No. 96-05-01312, Slip Op. 98-106 (CIT
July 23, 1998) (AK Steel) to uphold CCC's method of
[[Page 2184]]
reporting PSPAs demonstrates the Court's presumption that allocations
of PSPAs are suspect because of the possible distortion to prices and
dumping margins caused by such allocations. Petitioners argue that the
Court upheld CCC's method of reporting PSPAs only after finding that
documentation obtained at verification allowed the Department to
analyze the details of the allocations to determine whether they were
distortive, and that because no such documentation has been provided in
this review, the Department should not allow CCC's reporting
methodology.
Petitioners claim that the ability to report some, but not all,
PSPAs on a transaction-specific basis creates the potential for
manipulation, and cite the CIT's ruling in Koenig & Bauer-Albert AG v.
United States, Court No. 96-10-02298, Slip. Op. 98-83, that the
Department may deny favorable adjustments sought by a respondent based
not only on actual evidence of price manipulation, but also on the
potential for manipulation. Petitioners also cite Steel from Germany
and Tapered Roller Bearings, Four Inches or Less in Diameter, and
Components Thereof, from Japan, 59 FR 56035 (November 10, 1994) to this
effect. Petitioners assert that, for some customers, CCC applied
adjustments across all sales (including subject and non-subject
merchandise) when they could only tie the credit or debit note to a
particular customer. Petitioners claim that this reporting methodology
has increased the potential for distortion.
Petitioners claim that the Department's new regulations (see Final
Rule, 62 FR 27296) concerning allocated PSPAs are contrary to the
Department's longstanding practice and the URAA which, petitioners
state, nowhere permits respondents to report inaccurate prices.
However, petitioners argue that, even under its new regulations, the
Department must continue to deny CCC its claimed PSPAs.
Petitioners claim that an allocation of a PSPA over several sales
or invoices could distort the prices if the sales covered were of
different control numbers (CONNUMs) or were made in different months.
In such a situation, the prices of the sales receiving their share of
the allocated credit would not be weight-averaged in calculating normal
value for a particular month. Thus, all sales that receive an
allocation of credit would have an incorrect gross unit price, which
will in turn distort the dumping margin. Petitioners argue that because
each of the adjustments is a given percentage of the unit price, all
those sales which have had the adjustment allocated to them, even
though they were not in the group of sales to which the adjustment is
correctly attributed, have been modified by that percentage.
Petitioners maintain that the potential for distortion by allowing
credit to be allocated over sales with different CONNUMS or months of
sale is present in CCC's case as well. Petitioners argue that the
criteria applied in AFBs 1998 is flawed because it puts the burden on
the petitioners to prove the existence of distortions.
CCC argues that its reported PSPAs should again be accepted by the
Department as they were in the second and third administrative reviews
because they are allocated as specifically as possible and are not
distortive. CCC notes that the Department rejected petitioners'
arguments concerning CCC's PSPAs in the second and third administrative
reviews. CCC states that the Department verified CCC's methodology in
the second administrative review and found that CCC applied its PSPAs
using the most precise methodology possible, and in a manner not
unreasonably distortive.
CCC disagrees with petitioners' assertion that CCC never explained
why it was able in some instances to tie credit and debit notes to
specific invoices and work orders, and in others it was not. CCC notes
that it stated in its November 17, 1997 questionnaire response, and its
January 29, 1998 and March 23, 1998 supplemental questionnaire
responses, that in instances where a credit or debit note is allocated
over all sales to a customer rather than to a specific invoice or work-
order, it is because the credit or debit note only referenced a
customer and did not reference a work order or invoice. CCC maintains
that its PSPAs are transaction-specific, stating that when a specific
credit or debit note was applied to more than one invoice and/or work
order, it was because the credit or debit note applied to those
invoices and/or work orders, and that the information available to CCC
on the credit or debit note permitted no more specific allocation. CCC
cites Tapered Roller Bearings and Parts Thereof, Finished and
Unfinished, from Japan and Tapered Roller Bearings, Four Inches or Less
in Outside Diameter and Components Thereof, from Japan, 63 FR 2558
(January 15, 1998) as an instance in which the Department accepted
respondent's explanations of why more specific reporting was not
possible as evidence of fact.
CCC maintains that there is no evidence, as petitioners allege,
that CCC is attempting to manipulate that data, and that the record
evidence such as the number of positive adjustments in the home market
and negative adjustments in the U.S. market shows that, on the
contrary, CCC is not trying to manipulate the data. CCC cites the
Department's regulations at Sec. 351.401(g)(1) as stating that the
Department ``may consider allocated expenses and PSPAs when
transaction-specific reporting is not feasible provided (that) * * *
the allocation method does not cause inaccuracies or distortions' and
at Sec. 351.401(g)(3) as stating that ``(i)n determining the
feasibility of transaction-specific reporting or whether an allocation
is calculated on as specific a basis as is feasible, the Secretary will
take into account the records maintained by the party in question in
the ordinary course of business.''
CCC argues that the Department's decision to accept CCC's claimed
PSPAs is consistent with its decisions in numerous other cases,
including AFBs 1998, and Certain Cut-To-Length Carbon Steel Plate From
Brazil: Final Results of Antidumping Duty Administrative Review, 63 FR
12744 (March 16, 1998).
CCC disagrees that the Court in AK Steel upheld the Department's
acceptance of the adjustments only after finding that the documentation
obtained at verification allowed the Department to analyze the details
of the allocations.
Furthermore, CCC argues that such argumentation is moot because it
submitted all of the requested documentation in this review, and
because a verification was not conducted. CCC states that the
Department's methodology was upheld in The Timken Co. v. United States,
Court No. 97-04-00562, Slip. Op. 98-92 (CIT July 2, 1998) (Timken
1998). CCC also disagrees with petitioners that the Department's
current practice is at odds with the URAA, stating that the Department
noted in AK Steel that the URAA reaffirmed the Department's practice of
allowing allocated post-sale PSPAs. CCC argues that in the Timken 1998
case, the Department stated that (1) post-URAA law directs it to accept
information that may not have met its previous requirements and that
(2) it had determined, based in part on previous verifications, that
CCC was incapable of providing data on a transaction-specific basis and
that CCC's reported data was reliable. CCC concludes that, based on
evidence on the record in this proceeding as well as the precedents in
this proceeding and the law, the Department should accept CCC's PSPAs.
Department's Position: We agree with CCC. In light of the
Department's determinations in recent cases and the
[[Page 2185]]
facts on the record, we accept CCC's price adjustments.
Section 351.401(c) of the Department's regulations states that the
Department, ``(i)n calculating export price, constructed export price,
and normal value (where normal value is based on price), will use a
price that is net of any price adjustment, as defined in
Sec. 351.102(b), that is reasonably attributable to the subject
merchandise or the foreign like product (whichever is applicable).''
PSPAs are defined in the regulations at Sec. 351.102(b) as ``any change
in the price charged for subject merchandise or the foreign like
product, such as discounts, rebates and post-sale PSPAs, that are
reflected in the purchaser's net outlay.''
With regard to the fact that CCC allocated these adjustments, we
note that Sec. 351.401(g)(1) of the Department's regulations directs us
to ``consider allocated expenses and PSPAs when transaction-specific
reporting is not feasible, provided (we are) satisfied that the
allocation method used does not cause inaccuracies or distortions.''
This policy has been upheld in Timken 1998. Although CCC allocated
price adjustments on a customer invoice- or work order-specific basis,
we determine that CCC acted to the best of its ability in reporting
this information. While the Department stated in Final Rule 62 FR at
27344 that respondents should not be ``allowed to eliminate dumping
margins by providing PSPAs `after the fact,' '' there is no evidence on
the record in these reviews that demonstrates that this is occurring.
In recent AFBs cases, we addressed the relevance of Torrington Co.
v. United States, 82 F.3d 1039, 1047-51 (Fed. Circ 1996) (Torrington
I), to the allocation of adjustments. We noted that, while the CAFC in
its decision in Torrington I questioned whether PSPAs constituted
expenses (see Torrington I at n.15), the Court maintained that, if the
adjustments were expenses, they had to be treated as direct selling
expenses. Significantly, ``the CAFC did not find that such PSPAs could
not be based on allocations'' (AFBs October 1997 62 FR at 54050).
We have not found CCC's allocation methodologies to be unreasonably
distortive. During the POR, CCC granted credit or debit notes to
certain customers. CCC calculated adjustment factors by dividing the
total price adjustments paid to a given customer by the total POR sales
to that customer. CCC grants these price adjustments to customers in
two ways: (1) On the basis of their overall sales to the particular
customer; or, (2) over a specific invoice to a customer.
Where CCC granted the price adjustment to a customer on the basis
of its overall sales, then there is no distortion in attributing the
adjustment to the sales on which it was earned. See, Final Rule, 62 FR
at 27347 and Smith Corona, 713 F.2d at 1580.
Where CCC granted the price adjustment on an invoice, CCC has
claimed that it cannot tie the credit/debit note to the particular
invoice. Therefore, it has allocated such notes by customer. First,
where a price adjustment is granted on an entire invoice, it is
appropriate to attribute the amount of the adjustment to all
merchandise on the invoice. Where an invoice covers several articles of
merchandise, an adjustment granted on the entire invoice cannot be tied
to any specific article.
Further, where a respondent has acted to the best of its ability,
and cannot provide information about adjustments on a basis more narrow
than customer-specific allocations, the Department has concluded that
such an allocation may be reasonable. See e.g., AFBs January 1997, at
2096 (comment 9).
We disagree with petitioner's interpretation of the applicability
of section 782(d) and 782(e) of the Act to CCC's reporting methodology.
In explaining why it was not able to tie credit notes to individual
transactions, CCC has complied satisfactorily with the request for that
information. Thus, there is no longer a deficiency in CCC's data. CCC
also demonstrated that ``it acted to the best of its ability in
providing the information.'' Lastly, the information can clearly be
used ``without undue difficulties.''
We agree with petitioners that the burden lies with respondents to
place necessary information on the record. It is the responsibility of
the respondent to demonstrate that its methodology is not unreasonably
inaccurate or distortive. However, we believe that CCC has met that
burden with the explanations provided in their submissions for this
review period, and through verification of sales made in the second
administrative review. CCC has stated that adjustments are allocated
across the invoices, work orders, or customers to which they apply, and
that it cannot report adjustments on a more specific basis. There is
nothing on the record to indicate that either of these statements is
not based in fact.
With regards to CCC's allocations of these price adjustments over
nonsubject merchandise, we have in the past accepted allocations over
nonsubject merchandise as provided for in 19 CFR 351.401(g)(4). First,
if a respondent grants and reports a price adjustment as a fixed
percentage of the sales to which it pertains, the fact that this pool
of sales may include non-scope merchandise does not distort the amount
of the adjustment the respondent granted and reported on sales of
subject merchandise because the same adjustment percentage applied to
both scope and non-scope merchandise. Second, with respect to CCC's
price adjustments granted on invoices, CCC's in-scope and out-of-scope
merchandise is sufficiently similar in terms of its value, physical
characteristics, and the manner in which it is sold that we cannot
presume the adjustments would be granted disproportionately between the
two. Consequently, even if an invoice covered out-of-scope merchandise,
CCC's allocation is still reasonable and not distortive. See Final
Rule, 62 FR at 27348 (May 19, 1997).
We disagree with petitioners argument that the Court's decision in
AK Steel upholding CCC's method of reporting PSPAs demonstrates the
Court's presumption that allocations of PSPAs are suspect because of
the possible distortion to prices and dumping margins caused by such
allocations. In AK Steel, the Court upheld the Department's finding
that CCC's allocation of the credit note across sales made pursuant to
the work-order identified on the form was sufficiently specific, and
that based on the facts on the record, a more specific methodology was
not possible. In this review we again conclude, based on the
information on the record, that CCC's allocation of the credit note
across sales made pursuant to the work-order identified on the form was
sufficiently specific.
The Court in AK Steel also disagreed with plaintiff's argument that
the flaw in CCC's allocation methodology caused it to report all sales
involved incorrectly. Plaintiffs in AK Steel claimed there that the
methodology used by CCC had an averaging effect on prices, i.e., the
transactions that did not involve the coil received price reductions
when there was in fact no reduction in price, and the transaction that
did involve the coil did not receive the full amount of the credit.
The Court, however, found plaintiffs' arguments unpersuasive and
agreed with the Department that CCC's PSPA methodology was acceptable
under the circumstances.
We disagree with petitioners' claim that because CCC's allocations
were not verified in this review, they are not acceptable.
The fact that CCC was not verified in this review does not require
an adverse inference in this case. Furthermore, we
[[Page 2186]]
found at verification during the second review that CCC's methodology
was reasonable and not distortive, and that CCC's reporting was as
specific as possible. Since CCC's reporting methodology is the same as
it has been in the past, we are accepting CCC's allocations. This
concurs with the Court's ruling in Timken that the Department may
determine, based in part on institutional knowledge attained in
previous verifications, that a respondent is incapable of providing
data on a transaction-specific basis, and that its data is reliable.
We find that CCC's allocation methodologies are not unreasonably
distortive, nor are they potentially distortive, as we are satisfied
that each adjustment was granted in proportion to the value of each
sale to which it applied.
Comment 4: Currency Conversion Error
Petitioners note that the Department made a currency conversion
error in calculating PACKINGU and, as a result, in the calculation of
CVPROFIT, TOTCV and FUPDOL.
Department's Position: We agree with petitioners and have corrected
the currency conversion accordingly.
Forsyth
Comment 1: Adverse Facts Available
Forsyth claims that the Department's decision to assign the margin
based on total adverse FA did not reflect the level-of-trade
information that Forsyth provided on the record, and did not take into
account any meaningful consideration of either Forsyth's ability to
provide corporate sales-specific data on a large number of small
transactions or Forsyth's request that the Department conduct
verification. Forsyth claims that the Department's rejection of
Forsyth's level-of-trade argument, which characterized Forsyth's
distribution division services as product-related rather than sales-
related, is not supported by the record. Forsyth claims that its
distribution division services are intimately linked to the ability of
those divisions to sell products to a unique class of customers.
Petitioners argue that the Department correctly applied adverse
facts available since Forsyth repeatedly refused to report its
distribution division sales. Petitioners argue that the Department only
excludes home market sales from a respondent's reporting requirements
due to level of trade differences, if ever, in the context of
downstream sales, and that Forsyth's distribution division sales are
not downstream sales. Petitioners cite Certain Cut-to-Length Carbon
Steel Plate From Brazil: Final Results of Antidumping Duty
Administrative Review, 62 FR 18486, 18491 (April 15, 1997).
While petitioners claim that the Department's level-of-trade
analysis was unnecessary, since all home market sales were not
reported, they argue that record evidence supports the Department's
level-of-trade determination. They cite section 773(a)(7)(A) of the Act
and Sec. 351.412 of the Department's regulations to argue that a
difference in level of trade can only exist where there is a difference
in selling functions. Petitioners further cite SSWR from Sweden at
40455, which states that the burden is on respondent to demonstrate
that its categorizations of level of trade are correct.
Department's Position: We agree with petitioners. Forsyth failed to
report a majority of its home market sales of subject merchandise and
did not prove a difference in level of trade between its U.S. sales and
its home market distribution division sales. We have thus continued to
base Forsyth's antidumping duty margin on adverse facts available. See
``Facts Available'' section of this notice, and Certain Corrosion-
Resistant Carbon Steel Flat Products and Certain Cut-to-Length Carbon
Steel Plate from Canada: Preliminary Results of Antidumping Duty
Administrative Reviews and Intent to Revoke in-Part, 63 FR 37320, 37327
(July 10, 1998).
Stelco
Comment 1: The Time Frame for Making a Request for Revocation
Petitioners argue that the Department should deny Stelco's request
for revocation since Stelco did not file its request for revocation
during the anniversary month of the publication of the antidumping
order, as required by Sec. 351.222(e) of the Department's regulations.
Petitioners argue that Sec. 351.222(f) allows the Department to
consider such a request only if the request is timely.
Petitioners argue that Samsung Elec. Co. v. United States
(Samsung), 946 F. Supp. 5, 8 (CIT 1996) establishes the obligation to
request revocation during the anniversary month as a ``mandatory,
bright line requirement.'' (Emphasis added by petitioners.) Petitioners
note that not only did Stelco fail to make its request in a timely
fashion, but that it also failed to request an extension or provide any
explanation for its failure to meet the statutory deadline for a
revocation request. Therefore, since Stelco failed to pass the bright
line test established in Samsung, petitioners argue that the Department
should deny Stelco's request for revocation.
Petitioners point out that the Department highlighted the
importance of submitting timely requests in Electrolytic Manganese
Dioxide from Japan; Final Results of Antidumping Duty Administrative
Review, 58 FR 28551 (May 14, 1993) (EMD). In EMD, petitioners failed to
file a timely cost of production (COP) allegation because the
Department had failed to process their administrative protective order
(APO) application in a timely fashion. Although the Department
acknowledged the delay in processing the petitioners' APO applications,
the Department refused to consider the petitioners' untimely COP
allegation because the petitioners could have preserved their right to
submit a timely COP allegation by requesting an extension of the
regulatory deadline. Since petitioners elected not to request an
extension of the deadline for filing a COP allegation, the Department
did not examine the untimely allegation, but merely enforced the
regulatory deadlines. Petitioners conclude that the Department should
reject Stelco's request for revocation as untimely just as it rejected
petitioners' cost allegation in the EMD case.
Petitioners note that Stelco contends in its June 12, 1998
submission that the Department considered an untimely request for
revocation on the part of Frutopic, a respondent in Frozen Concentrated
Orange Juice from Brazil; Final Results and Termination in Part of
Antidumping Duty Administrative Review; Revocation in Part of the
Antidumping Duty Order, 56 FR 52510 (October 21, 1991) (Orange Juice).
Stelco contends that the untimely request was considered because it was
filed only four days after the regulatory deadline. Petitioners point
out, on the contrary, that Frutopic filed an extension request on the
last day of the anniversary month in question, explained why it needed
the extension, and was granted an ``explicit extension of time to
submit the revocation request.'' See, Orange Juice, 56 FR 52510
(October 21, 1991). Petitioners further point out that Frutopic in
effect demonstrated ``good cause'' when requesting its extension by
explaining in detail why it needed one, even though the regulations
explicitly allowing extensions for ``good cause'' was not introduced
until 1997.
Petitioners argue that the necessity of showing ``good cause'' to
obtain an extension under Sec. 351.302(b) is not a toothless
requirement. Petitioners point out that in Stainless Steel Bar from
India; Final Results of Antidumping Duty Administrative Review, 63 FR
[[Page 2187]]
13622 (March 20, 1998), Mukand, the respondent, requested a one-day
extension to file its case brief on the day the brief was due.
Petitioners note that the Department was not satisfied with Mukand's
explanation that it was not able to file the brief in a timely fashion
due to ``technical difficulties'' and requested and received a more
extensive explanation before granting the extension. Petitioners argue
that the Department should not hold Stelco to a lesser standard for
requesting a revocation than it held Mukand for filing a case brief.
Finally, petitioners contend that Stelco's September 8, 1998
request for revocation should not be considered an ``amendment'' to
Stelco's August 29, 1997 request for an administrative review.
Petitioners point out that the Department's regulations [no cite given]
allow a timely revocation request to be considered to include a request
for administrative review, but there is no similar provision allowing a
request for review to automatically include a revocation request.
Therefore, petitioners contend that the Department cannot ignore
the time limits imposed by its own regulations. Since Stelco did not
comply with the deadlines for requesting a revocation in accordance
with Sec. 351.222(e) or requesting an extension in accordance with
Sec. 351.302(b) of the Department's regulations, petitioners argue that
the Department should reject Stelco's untimely request for a
revocation.
Stelco argues that both the antidumping statute and the
Department's regulations are silent as to the time frame for accepting
requests for revocation. Stelco notes that section 751(d)(1) of the
Act, the only relevant statutory provision, states: ``the
administrative authority may revoke, in whole, or in part, a
countervailing duty or antidumping duty order for finding * * * after a
review under subsection (a) or (b) of this section.'' Therefore, Stelco
argues that Congress did not specify any procedure, or identify any
criteria that must be considered, other than conducting a review, in
determining whether to revoke a particular antidumping duty order.
Stelco claims that the regulations are also silent as to the issue
of how the Department should handle a revocation request made outside
of the anniversary month. They note that Sec. 351.222(e)(1) of the
Department's regulations states: ``During the third and subsequent
anniversary months of the publication of the antidumping order or
suspension of an antidumping investigation, an exporter or producer may
request in writing that the Secretary revoke an order or terminate a
suspended investigation.'' Stelco argues that section provides the
month within which an exporter or producer may choose to request
revocation, and is silent as to how revocation requests received during
other months should be handled. Stelco notes that there are no
requirements in the regulations that the Department reject an untimely
request for revocation.
Stelco argues that the Department has discretion to accept an
untimely revocation request. It notes that Samsung states that
``Commerce has not routinely accepted revocation requests under 19 CFR
353.23 [now 19 CFR 351.222] after the regulatory deadline'' Samsung,
946 F.Supp. at 9 (emphasis added), and interprets this passage to
indicate that on some occasions the Department does accept late
requests for revocation.
Stelco argues that the following cases demonstrate that the
Department has discretion to accept untimely requests for revocation:
Certain Fresh Cut Flowers from Colombia; Final Results of Antidumping
Duty Administrative Reviews, 61 FR 42833, 42863 (August 19, 1996), in
which the Department declined to revoke not because the request was
untimely (emphasis added by Stelco) but because the respondent failed
to meet all substantive criteria for revocation; Polyethylene
Terephthalate Film from Korea: Preliminary Results of Antidumping duty
Administrative Review, Intent to Revoke the Order in Part and
Termination in Part, 61 FR 36032, 36033 (July 9, 1996), in which the
Department permitted the respondent to amend its timely revocation
request one year after making the original request; EMDs, in which
Stelco claims that the Department pointed out that its regulatory
deadline ``is a discretionary, not a mandatory, deadline'' (emphasis
added by Stelco) (see EMDs, 58 FR 2855, 28553 (May 14, 1993).
Finally, Stelco notes that petitioners' contention that the
Department should reject Stelco's request for revocation rests on
procedural technicalities, without providing any substantive factors
which the Department should weigh in deciding whether to accept the
request for consideration. Stelco notes that the request for revocation
was submitted five working days late, and did not pose an
administrative burden since it was submitted well before the
publication of the notice of initiation. Stelco further notes that
petitioners did not raise any objections to the timeliness of the
revocation request until June 5, 1998, nine months after the revocation
was made.
Department's Position: We disagree with petitioners that the
Department should automatically deny Stelco's request for a revocation
solely on the basis that the request for revocation was filed one week
after the end of the anniversary month.
Petitioners argue that Samsung established the obligation to
request revocation during the anniversary month as a ``mandatory,
bright line requirement'' without distinguishing between the facts in
the Samsung litigation and in the current review. However, the Samsung
case involved a revocation request which was four-and-one-half years
late. The underlying rationale for the Court's decision was based on
administrative efficiency. Samsung states ``(t)he burden placed on
Commerce by the submission of factual information after a deadline is
relatively light compared to the administrative burden imposed on
Commerce by an untimely request for revocation.'' The Court goes on to
note that in response to a request for revocation, Commerce must
initiate and conduct an entire investigation and that ``(i)f the
plaintiff could command Commerce to conduct such an investigation at
its whim rather than only once per year, Commerce's administrative
efficiency would be adversely affected.''
Stelco's situation is clearly distinguished from the plaintiff's in
Samsung. Unlike the situation in Samsung, the reviews of this order
have been conducted in a timely fashion. At the time of the initiation
of this fourth review, Stelco had established a history of a zero and a
de minimis margin in the second and third reviews. Both the Department
and petitioners were, and had been, aware of that history, and thus
were aware that Stelco could be eligible for revocation. Stelco amended
its request for review to include a request for revocation five working
days, not four-and-one-half years, after a timely request for review.
The amendment was accepted by the Department and its timeliness was not
even questioned by petitioners until nine months after initiation
(Initiation of Antidumping and Countervailing Duty Administrative
Reviews and Requests for Revocation in Part, 62 FR 50292, (September
25, 1998)). On July 10, 1998, the Department issued its preliminary
results of review, noting that Stelco made a request for revocation in
an amendment to its request for review on September 8, 1998. See
Preliminary Results, 63 FR at 37321. In that notice, we set forth the
arguments and record evidence concerning Stelco's revocation and
expressed our intention to revoke the
[[Page 2188]]
order with respect to Stelco if the preliminary findings were upheld in
the final results of review (Preliminary Results at 37321).
Consequently, by initiating the review without rejecting the
untimeliness of Stelco's request for revocation, and by giving full
consideration to Stelco's request in the preliminary results of review,
the Department effectively granted Stelco an extension of its deadline
to file its request for revocation as permitted under 19 CFR
351.302(b). In addition, because Stelco's request for revocation was
filed well before the review was initiated, it did not impose an
additional burden on the conduct of the administrative review and
petitioners were not deprived of effective notification of Stelco's
request. Finally, the fairness of considering Stelco's untimely request
for revocation in the face of two years of de minimis margins,
outweighs the burden imposed by Stelco's untimely and unopposed request
for revocation.
We disagree with Stelco's contention that both the antidumping
statute and the Department regulations are silent as to the time for
accepting requests for revocation. Section 351.222 of the Department's
regulations clearly specifies that a producer or exporter may request
revocation during the ``third and subsequent annual anniversary months
of the publication of the antidumping order * * *'' (Final Rule, 62 FR
27296 (May 19, 1997).) Section 351.222(f) reinforces the importance of
the timeliness of the request for revocation by stating: ``(u)pon
receipt of a timely request for revocation * * *'' (Final Rule 62 FR at
27400). Samsung further argues that, ``even if the regulation does not
provide a bright line requirement as to the year of filing, it still
provides a bright line test as to the month of filing and Commerce also
would retain discretion to discount stale information.'' Therefore,
both the Department's regulations and practice have established the
anniversary month as the time period in which to file a request for
revocation. In this instance, however, the Department has effectively
granted an extension by accepting Stelco's amended request for review.
Comment 2: The Merits of Stelco's Request for Revocation
Petitioners argue that if the Department considers Stelco's request
for revocation, it should deny the request on the merits of its case.
Petitioners claim that Stelco cannot demonstrate that it is not likely
to sell the subject merchandise at less than NV in the future as
required by section 351(b)(2)(ii) of the Department's regulations.
Petitioners allege that before the Department can conclude that
Stelco is not likely to dump if the order is revoked, Stelco must show
that it can successfully export normal commercial quantities without
resorting to dumping. Petitioners note that the preamble to the
Department's final regulations states: the underlying assumption behind
a revocation based on the absence of dumping or countervailable
subsidization is that a respondent, by engaging in fair trade for a
specified period of time, has demonstrated that it will not resume its
unfair trade practice following the revocation of an order. If the
respondent is not selling in commercial quantities characteristic of
that company for the duration of the specified period, petitioners
argue, this assumption becomes weaker. (See Final Rule, 62 FR 27296,
27326 (May 19, 1997).)
Petitioners additionally point out that Sec. 351.222(d)(1) of the
Department's regulations requires that ``(B)efore revoking an order * *
*, the Secretary must be satisfied that, during each of the three * * *
years, there were exports to the United States in commercial quantities
of the subject merchandise to which a revocation * * * will apply.''
(See Final Rule, 62 FR 27296, 27400 (May 19, 1997).) Petitioners
contend that Stelco cannot demonstrate that it is not likely to resume
dumping in accordance with this regulation because it cannot
demonstrate that it made sales in commercial quantities during each of
the past three years. Petitioners have provided proprietary charts
demonstrating the volume and value of the subject merchandise sold in
the United States during each of the four administrative reviews which
quantify the extreme decline in Stelco's sales since the original
investigation.
Petitioners also note that the Department has refused to revoke an
antidumping duty order with respect to a particular respondent because
that respondent's U.S. sales of the subject merchandise fell
substantially after the imposition of the antidumping duty order. (See
Brass Sheet and Strip from Germany; Final Results of Antidumping Duty
Administrative Review and Determination Not to Revoke in Part (BSS
Germany), 61 FR 49727, 49731 (September 23, 1996) and Pure Magnesium
from Canada; Preliminary Results of Antidumping Administrative Review
and Notice of Intent not to Revoke Order in Part (Pure Magnesium), 63
FR 26147 (May 12, 1998).)
Petitioners point out that the Department's memoranda to the file
show that the Bureau of Labor Statistics producer price index (BLS
index) for carbon steel plate dropped by 3.2 percent from September to
October of this year, and the Statistics Canada producer price index
for carbon steel sheet, strip, and plate dropped 2 percent from August
to September of this year and remained at a depressed level in October.
Petitioners add that this weakening in both the U.S. and Canadian
markets occurred just as Stelco is reportedly completing a substantial
upgrade of its plate mill that will double its current plate production
capacity. Petitioners cite a Calgary Herald newspaper article
describing the project (``Stelco to Revamp Main Hamilton Mill,''
Calgary Herald at D5 (March 19, 1997).) Petitioners claim that Stelco's
doubling of capacity at a time when U.S. and Canadian prices are
falling places pressure on Stelco to dump plate in the U.S. market.
Thus, petitioners argue, revocation of the order would make resumed
dumping likely.
Petitioners claim that Stelco cannot demonstrate that it is not
likely to resume dumping in the future based on the information which
is currently on the record in the instant administrative review.
Consequently, petitioners contend that the Department must solicit
information from petitioners and Stelco concerning: (1) The total
quantity by weight and by value and numbers of Stelco's U.S. plate
sales for the second and third review periods and the period for the
initial investigation; (2) currency movements between the U.S. dollar
and the Canadian dollar; and (3) conditions and trends in the U.S. and
Canadian steel industries.
Stelco disputes petitioners' contention that it did not import
``normal commercial quantities'' over the past three successive review
periods. Stelco claims that each and every one of its sales made after
the imposition of the antidumping order were ``bona fide''
transactions.
Stelco contends that petitioners' argument that the Department must
deny Stelco's revocation request because it did not import ``normal
commercial quantities'' over the past three successive review periods
is incorrect for two reasons. First, Stelco contends that the
Department has never defined ``normal commercial quantities'' and has
held commercial quantities to constitute as little as a single shipment
(See BSS Germany). Second, Stelco argues that a decrease in the volume
of merchandise following the imposition of an antidumping duty order is
relevant only in determining whether a respondent is able to compete in
the
[[Page 2189]]
U.S. market without dumping, and does not automatically require the
Department to reject a revocation request. Stelco argues that the
Department's examination of a respondent's ``ability to compete in the
U.S. market without dumping'' is only one factor in a multi-factor
{revocation} analysis, including the ``respondent's prices and margins
in the preceding periods * * *, the conditions and trends in the
domestic and home market industries, (and) currency movements.'' (See
Brass Sheet and Strip from Canada: Preliminary Results of Antidumping
Duty Administrative Review and Notice of Intent to Revoke Order in
Part, 63 FR 6519, (February 9, 1998) (BSS Canada); BSS Germany, and
Pure Magnesium.
Stelco argues that the Department has often noted that a
respondent's lack of dumping over the course of three years is
``generally predictive of future behavior.'' (See Pure Magnesium, 63 FR
26147, 26149 (May 12, 1998).) However, Stelco admits that in some prior
cases, the Department has also examined other factors when determining
the likelihood of future dumping, such as: (1) Conditions and trends in
the domestic and home market industries, (2) currency movements, and
(3) the ability of a respondent to compete in the U.S. market without
dumping. Stelco argues that the record supports its contention that it
is unlikely to resume dumping in the future.
Stelco contends that factual information and forecasts by industry
analysis on the record demonstrates unequivocally strong demand in the
U.S. and Canadian markets eliminating any economic reason for Stelco to
sell the subject merchandise at depressed prices in the U.S. market.
Stelco also argues that exchange rate information on the record
indicates that the Canadian dollar has been stable or depreciating,
thereby making it unlikely that Stelco will sell merchandise to the
U.S. at dumped prices.
Finally, Stelco argues that its recent pricing trends (i.e. its
three-year history of not dumping), which is also on the record,
indicate that Stelco is able to compete in the U.S. market without
selling at dumped prices.
Additional comments and information regarding the likelihood of
future dumping by Stelco were added to the record on December 4 and
December 9, 1998. See ``Determination Not to Revoke,'' above.
Department's Position: We agree with petitioners that Stelco has
not sold subject merchandise in commercial quantities at not less than
normal value for three consecutive years, as required by
Sec. 351.222(b)(2)(i) and (d)(1) of the Department's regulations.
Therefore, we are not revoking the antidumping order on steel plate
with respect to Stelco. For further details, see the ``Determination
Not to Revoke'' section above.
Stelco's argument that, in BSS Germany, the Department determined a
single sale to be in commercial quantities is not determinative in the
instant case. First, the determination of what constitutes commercial
quantities must be made on a case-specific basis. Here, a single sale
of only 36 tons of steel plate is so insignificant in comparison with
the volume of sales prior to the imposition of the antidumping order,
as well as in comparison with subsequent review periods, as to fail to
constitute a commercial quantity. Second, the determination in BSS
Germany was based on a finding of ``likelihood'' of resumed dumping,
and not on a finding that the company did not have three consecutive
years of sales in commercial quantities at not less than NV.
Stelco has argued that the Department examines a number of items in
determining whether to revoke an antidumping order. However,
respondents must meet the threshold criterion of three consecutive
years of sales in commercial quantities at not less than NV in order to
be eligible for revocation. When that criterion has been met, and the
record contains evidence regarding the likelihood of resumption of
dumping, then the Department looks to additional indicators, such as
the condition of the U.S. and domestic markets. See BSS Germany and BSS
Canada. As noted above, this additional step was not necessary in this
case.
Because Stelco is ineligible for revocation under
Sec. 351.222(b)(2)(i), based on the fact that it has not had three
consecutive years of sales in commercial quantities at not less than
NV, we need not address comments regarding U.S. and Canadian market
conditions, or Stelco's planned mill expansion.
Regarding Stelco's request for revocation with respect to
corrosion-resistant steel, we note that, in the last two administrative
reviews, we determined that Stelco sold corrosion-resistant steel at
less than NV. See Certain Corrosion-Resistant Carbon Steel Flat
Products and Certain Cut-to-Length Carbon Steel Plate From Canada:
Final Results of Antidumping Duty Administrative Reviews, 62 FR 12725
(March 16, 1998) and Certain Corrosion-Resistant Carbon Steel Flat
Products and Certain Cut-to-Length Carbon Steel Plate From Canada:
Final Results of Antidumping Duty Administrative Reviews, 62 FR 18448
(April 15, 1997)(1994/95 Canadian Steel). Although the final results of
these reviews are subject to litigation, that litigation is not yet
complete. Additionally, as discussed below, we have determined that
Stelco sold corrosion-resistant steel at less than NV during the period
covered by this review. Consequently, we determine that, because Stelco
does not have three consecutive years of zero or de minimis margins on
corrosion-resistant steel, Stelco is not eligible for revocation of the
order on corrosion-resistant steel under 19 CFR 351.222(b).
Comment 3: Clerical Errors
Petitioners claim that the model match program used to calculate
the results of review does not account for all plate qualities that
Stelco has reported. Petitioners proposed the addition of two lines of
computer code to remedy the omission.
DOC position: We agree and have corrected the error to include all
qualities of plate that were reported by Stelco.
Comment 4: Major Input Rule
Stelco argues that there is no factual or legal basis for the
Department's decision to increase Stelco's submitted actual costs of
production for painting services supplied by Baycoat for corrosion-
resistant products. Stelco maintains that the Department erroneously
used the transfer price from Baycoat instead of Baycoat's reported cost
of production to value Baycoat's painting services. Stelco asserts that
the WTO Antidumping Agreement and section 773(f)(1) of the Act provide
that the Department must examine and calculate a particular exporter's
cost of manufacture.
Stelco also claims that its actual cost for Baycoat's painting
services is not equal to the total invoice price, but rather that it is
equal to the total invoice price minus half of Baycoat's profits, since
Baycoat is jointly owned by Stelco and Dofasco. Stelco points to a
draft remand determination on this issue in which the Department states
that the return of profit is independent of the number or value of
sales of painting services to Stelco.
Stelco argues that the statutory language of the ``major input
rule'' does not require the Department to increase an affiliated
supplier's actual cost of production in valuing its major inputs.
Stelco claims that in 1994/95 Canadian Steel, the Department determined
that the major input rule required the Department to value inputs
supplied by affiliates at the transfer price provided
[[Page 2190]]
that the transfer price reflects market value and was not below the
cost of production. Stelco also refers to the Draft Remand
Determination for Article 1904 Binational Panel Review USA-97-1904-03
(August 4, 1998), in which the Department stated that ``the normal
application of these provisions dictates that transfer price is the
appropriate basis for Stelco's cost of production with respect to the
Baycoat inputs.'' Stelco argues that in H.R. Rep. No. 40, 100th Cong.,
1st Sess., pt. 1, at 137 (1987), Congress did not intend for this
provision to be used to increase costs beyond a company's actual cost
of production. In addition, Stelco claims that Torrington Co. v. United
States (``Torrington'') (881 F. Supp 622, 642-643 (CIT 1995)) and SKF
USA Inc. v. United States (``SKF'') (888 F. Supp 152, 156 (CIT 1995))
supports its contention that a COP valuation is appropriate when it is
below transfer price.
Stelco further argues that the major input rule does not apply to
affiliated suppliers that are collapsed with the respondent. Stelco
refers to C. Marsh and J. Miller, Use and Measurement of Production
Costs Under U.S. Antidumping Law (September 19, 1995) to illustrate
that pursuant to consolidation rules under generally accepted
accounting principles, companies within a consolidated group record
actual costs incurred for inter-company purchases and sales. Stelco
also refers to Certain Forged Steel Crankshafts from the United
Kingdom, 61 FR 54613, 54614 (October 21, 1996) (Crankshafts) and Steel
from Korea in which the Department did not apply the major input rule
with regard to transactions between divisions of the same corporation.
To show that Department precedent mandates the collapsing of Stelco and
Baycoat, Stelco cites Preliminary Results of Antidumping Administrative
Review: Sulfanilic Acid from the People's Republic of China, 61 FR
25196, 25197 (May 20, 1996); Final Determinations of Sales at LTFV:
Certain Hot-Rolled Carbon Steel Flat Products, Certain Cold-Rolled
Carbon Steel Flat Products, Certain Corrosion-Resistant Carbon Steel
Flat Products, and Certain Cut-to-Length Carbon Steel Flat Products
from Japan, 58 FR 37154 (July 9, 1993); Nihon Cement Co., Ltd. v.
United States, 17 C.I.T. 400 (1993).
Finally, Stelco argues that a June 4, 1998 binational panel ruling
specifically rejected the Department's use of invoice prices from
Baycoat as the value of the painting service that Stelco obtains from
Baycoat. See Decision of the Panel: North American Free Trade
Agreement, Article 1904 Binational Panel Review, USA-97-1904-3 (June 4,
1998) at 10 (Panel Decision) (Public Document).
Petitioners argue that the Department correctly used the transfer
price to value the painting services received from Baycoat. Petitioners
further ague that the statute makes no provision for the rejection of
transfer price where such price exceeds the input's cost of production
and there is no evidence that the transfer price is below market value.
They further argue that the legislative history of the major input rule
shows that the phrase ``amount represented as the value of [the]
input'' refers to the transfer price, and that a conference committee
report gives a similar definition. See H. Conf. Rep. No. 100-576 at
595, reprinted in 1988 U.S.S.C.A.N. 1547, 1628. Petitioners also
contend that the Court of International Trade, has construed
subsections (f)(2) and (f)(3) to require a comparison of market value
and cost with transfer price. See Timken Co. v. United States, Consol.
Court No. 96-12-02686, Slip Op. 97-164 (CIT Dec. 3, 1997) at 30-31.
Petitioners argue that the binational review unequivocally sustained
the discretion of the Department to use the unadjusted Baycoat invoice
price as the valuation of Baycoat's painting services.
Petitioners contend that the transfer price is the appropriate
valuation under the Department's regulations, specifically 19 CFR
351.407(b), which says that the Department will determine the value of
a major input purchased from an affiliated person based on the higher
of the price paid, the market value, or the cost of production.
Furthermore, petitioners argue that there is no provision in the
statute or any precedent that would permit any adjustment for profit
made to the transfer price. Petitioners also note that in the normal
course of business Stelco records its costs for the Baycoat services at
the transfer price.
Petitioners argue that Stelco's assertion that the Department
should treat Stelco and its affiliated suppliers as a single entity is
baseless. Petitioners state that Stelco has failed to establish that
Baycoat is a ``division'' of Stelco, and that the requirements for
collapsing Baycoat and Stelco into one entity have not been satisfied.
Finally, petitioners assert that there is no precedent for any
exceptions to the application of the major input rule.
Department's Position: We agree with petitioners that it is
appropriate to use the transfer price to value Stelco's major inputs.
Under section 773(f)(2) of the Act, the Department's current practice
is to request information on both the transfer price and the market
value of the input and to choose the higher of the two valuations.
Pursuant to section 773(f)(3) of the Act, the Department may alter this
valuation only in those cases where the input is ``major'' and the
value determined under section 773(f)(2) is lower than the COP of the
inputs. All parties agree that the inputs in question are major inputs
within the meaning of section 773(f)(3); we have determined that the
value determined under section 773(f)(2) is not lower than the COP of
the inputs.
In Torrington and SKF, which concerned the calculation of CV, the
Department had not requested or received information on the transfer
prices of the inputs. The CIT did not say that the Department was
prohibited from requesting the transfer prices of the inputs; rather,
it said that the Department was within its discretion to choose to rely
on cost information. Here, because of the Department's current policy,
the Department requested and received the transfer prices of the
inputs. These transfer prices are greater than Baycoat's COP.
The policy applied here was the policy applied by the Department in
the second review of this case and is currently reflected in 19 CFR
351.403(b). The Department held in the second administrative review
that the statute directs it ``to value inputs supplied by affiliated
persons at the transfer price between the entities provided that such a
price reflects the price commonly charged in the market and, for major
inputs, is not below the cost of producing the input.'' See 1994/95
Canadian Steel at 62 FR 18464.
Stelco also argues that it and Baycoat should be treated as a
single entity for determining cost of production. However, Stelco has
not established either that Baycoat is a ``division'' of Stelco or that
the requirements for ``collapsing,'' under 19 CFR 351.401(f), have been
satisfied with respect to Baycoat. In Crankshafts, respondent argued
that because it and its affiliated supplier were ``both unincorporated
operating divisions within a single entity, * * * they are parts of the
same company and share a common steel COP.'' The Department ruled that
the record evidence indicated that they were divisions of the same
corporation, as opposed to distinct, although affiliated, legal
entities, and found that the major input rule did not apply on that
basis. Unlike the respondent in Crankshafts, Stelco does not contend
that Baycoat is an actual division of Stelco with no independent legal
existence. Rather, Stelco contends that it and Baycoat should be
treated as a single entity solely for purposes of the
[[Page 2191]]
major input rule. As petitioners point out, the Department rejected a
similar argument in Mechanical Transfer Presses from Japan 55 FR 335
(January 4, 1990) in which respondent maintained that its wholly-owned
subsidiaries ``function(ed) as divisions.'' The Department noted that
the ``wholly-owned subsidiaries are separate legal entities,'' as
opposed to mere divisions, and thus applied the major input rule. The
subsidiary in question here, Baycoat, is clearly a separate legal
entity and thus the rule of Crankshafts does not apply.
Steel from Korea represents another instance where we have
determined that the major input rule does not apply. In that case we
disregarded the major input rule for transactions between producers of
the subject merchandise where we had determined that such producers
should be collapsed for purposes of analyzing sales. The criteria
applied for determining whether sales collapsing is appropriate do not
apply, however, in cases where the affiliated supplier does not have
the capacity to produce the subject merchandise. See 19 CFR 351.401(f).
In this review, it is clear that Baycoat does not produce subject
merchandise. We agree with petitioners that Stelco has not established
a basis for the treatment of Stelco's affiliated suppliers as
``collapsed'' entities. Furthermore, a year-end profit distribution
does not function as an adjustment to price. The entitlement to a
profit distribution arises from the ownership interest, not from the
sale.
The binational panel agreed with the Department ``that subsection
(f)(3) does not require the rejection of the transfer price'' and ruled
that ``on the face of the statute, the Department is within its
discretion to utilize the transactions between Stelco and Baycoat'' as
the cost for Baycoat's services. See Panel Decision at 10. For these
reasons, the Department has allowed no adjustments to the transfer
price between Stelco and Baycoat.
Comment 5: Clerical Errors
Both Stelco and petitioners claim that the Department made clerical
calculation errors in the preliminary determination. Stelco argues that
the Department failed to apply reported billing adjustments, the CEP
offset adjustment, and appropriate currency conversions for advertising
expenses and inventory carrying costs. With regard to the recalculation
of Stelco's painting costs, Stelco claims that the Department
incorrectly recalculated Stelco's yield loss, used an incorrect TCOM
variable, and did not complete the programming language needed to
ensure that the Baycoat adjustment was applied only to Baycoat orders.
Petitioners claim that the Department neglected to include the home
market interest revenue variable in the arm's length test, incorrectly
defined the DIFFCODE variable used for matching in the model match, and
incorrectly converted U.S. packing expense into U.S. dollars.
Department's Position: We agree with Stelco and with petitioners
and have corrected the clerical errors described above.
Final Results of Review
As a result of our review, we determine the dumping margins (in
percent) for the period August 1, 1996, through July 31, 1997 to be as
follows:
------------------------------------------------------------------------
Margin
Manufacturer/exporter (percent)
------------------------------------------------------------------------
Corrosion-Resistant Steel:
Dofasco.................................................. 0.98
CCC...................................................... 2.26
Stelco................................................... 2.73
Cut-to-Length Plate:
Algoma................................................... *0.23
MRM...................................................... 0.00
Stelco................................................... 0.00
Forsyth.................................................. 68.70
------------------------------------------------------------------------
* De minimis.
The Department will determine, and the U.S. Customs Service shall
assess, antidumping duties on all appropriate entries. For assessment
purposes, we have calculated importer-specific ad valorem duty
assessment rates for the merchandise based on the ratio of the total
amount of antidumping duties calculated for the examined sales during
the POR to the total quantity of sales examined during the POR.
Individual differences between U.S. price and normal value may vary
from the percentages stated above. The Department will issue
appraisement instructions directly to the Customs Service.
Furthermore, the following deposit requirements will be effective
upon publication of these final results for all shipments of the
subject merchandise entered, or withdrawn from warehouse, for
consumption on or after the publication date as provided by section
751(a)(1) of the Act: (1) The cash deposit rate for each reviewed
company will be the rates stated above (except that no deposit will be
required for firms with zero or de minimis margins, i.e., margins less
than 0.5 percent); (2) for exporters not covered in this review, but
covered in the LTFV investigation or a previous review, the cash
deposit rate will continue to be the company-specific rate published
for the most recent period; (3) if the exporter is not a firm covered
in this review, a previous review, or the original LTFV investigation,
but the manufacturer is, the cash deposit rate will be the rate
established for the most recent period for the manufacturer of the
merchandise; and (4) the cash deposit rate for all other manufacturers
or exporters will continue to be the ``all others'' rate established in
the LTFV investigations, which were 18.71 percent for corrosion-
resistant steel products and 61.88 percent for plate (see Amended Final
Determination, 60 FR 49582 (September 26, 1995)). These deposit
requirements, when imposed, shall remain in effect until publication of
the final results of the next administrative reviews.
We are revoking the antidumping duty order on certain cut-to-length
carbon steel plate from Canada with respect to Algoma and Stelco, in
accordance with section 751(d) of the Act and 19 CFR 353.25(a)(2). This
revocation applies to all entries of the subject merchandise from
Canada entered, or withdrawn from warehouse, for consumption on or
after August 31, 1997. The Department will order the suspension of
liquidation ended for all such entries and will instruct the Customs
Service to release any cash deposit or bonds. The Department will
further instruct the Customs Service to refund with interest any cash
deposits on entries made on or after August 31, 1997.
Notification of Interested Parties
This notice also serves as a final reminder to importers of their
responsibility under 19 CFR 351.402(f) to file a certificate regarding
the reimbursement of antidumping duties prior to liquidation of the
relevant entries during this review period. Failure to comply with this
requirement could result in the Secretary's presumption that
reimbursement of the antidumping duties occurred and the subsequent
assessment of double antidumping duties.
This notice also serves as a reminder to parties subject to
administrative protective orders (APOs) of their responsibility
concerning the disposition of proprietary information disclosed under
APO in accordance with 19 CFR 353.34(d)(1)(1997). Timely written
notification of the return/destruction of APO materials or conversion
to judicial protective order is hereby requested. Failure to comply
with the regulations and the terms of an APO is a sanctionable
violation.
These administrative reviews and notices are in accordance with
section
[[Page 2192]]
751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 351.213 and 19
CFR 351.221(b)(5).
Dated: January 4, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-691 Filed 1-12-99; 8:45 am]
BILLING CODE 3510-DS-P
