[Federal Register Volume 62, Number 191 (Thursday, October 2, 1997)]
[Notices]
[Pages 51629-51635]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-26196]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-489-501]
Notice of Final Results of Antidumping Duty Administrative
Review: Certain Welded Carbon Steel Pipe and Tube From Turkey
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
SUMMARY: On May 13, 1997, the Department of Commerce (the Department)
published the preliminary results of its administrative review of the
antidumping duty order on certain welded carbon steel pipe and tube
from Turkey. The review covers shipments of this merchandise to the
United States during the period of review (POR) May 1, 1993, through
April 30, 1994.
Based on our analysis of the comments received, and the correction
of certain ministerial errors, we have changed the preliminary results.
The final results are listed below in the section ``Final Results of
Review.''
EFFECTIVE DATE: October 2, 1997.
FOR FURTHER INFORMATION CONTACT:
Charles Riggle or Kris Campbell, Office of AD/CVD Enforcement II,
Import Administration, International Trade Administration, U.S.
Department of Commerce, 14th Street and Constitution Avenue, N.W.,
Washington, D.C. 20230; telephone: (202) 482-0650 and (202) 482-3813,
respectively.
SUPPLEMENTARY INFORMATION:
Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute and to the
Department's regulations are references to the provisions as they
existed on December 31, 1994.
Background
This review covers two manufacturers/exporters to the United States
of the subject merchandise, the Borusan Group (Borusan) and Yucelboru
Ihracat Ithalat ve Pazarlama A.S. (Yucelboru). On May 13, 1997, the
Department published in the Federal Register the Preliminary Results of
Administrative Review of the Antidumping Duty Order on Certain Welded
Carbon Steel Pipe and Tube from Turkey (62 FR 26286) (Preliminary
Results). We received case and rebuttal briefs from the petitioners \1\
and Borusan on June 19, 1997, and June 26, 1997, respectively.
Yucelboru did not submit a case or rebuttal brief. On August 1, 1997,
we requested comments from Borusan and the petitioners regarding how we
intended to calculate importer-specific ad valorem assessment rates for
Borusan. Since Yucelboru's margin in the preliminary results was de
minimis, we did not request comments from Yucelboru. On August 5, 1997,
we received comments on the assessment rate from the petitioners.
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\1\ The petitioners are Allied Tube & Conduit and Wheatland Tube
Company.
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The Department has now completed this administrative review in
accordance with section 751 of the Tariff Act of 1930, as amended (the
Act).
Scope of the Review
Imports covered by this review are shipments of certain welded
carbon steel pipe and tube products with an outside diameter of 0.375
inch or more but not over 16 inches, of any wall thickness. These
products are currently classifiable under the following Harmonized
Tariff Schedule of the United States (HTSUS) subheadings:
7306.30.10.00, 7306.30.50.25, 7306.30.50.32, 7306.30.50.40,
7306.30.50.55, 7306.30.50.85, and 7306.30.50.90. These products,
commonly referred to in the industry as standard pipe and tube, are
produced to various American Society for Testing and Materials (ASTM)
specifications, most notably A-120, A-53 or A-135.
Although the HTSUS subheadings are provided for convenience and
customs purposes, our written description of the scope of this
proceeding is dispositive.
Comparison of United States Price and Foreign Market Value
For both companies involved in this review, we calculated
transaction-specific U.S. prices (USP) and compared them to foreign
market values (FMV) based on either weighted-average home market prices
or constructed values (CV). For price-to-price comparisons, we compared
identical merchandise, where possible. Where there were no sales of
identical merchandise in the home market to compare to U.S. sales, we
made comparisons of similar merchandise based on the characteristics
listed in the Department's antidumping questionnaire.
Where sales were made in the home market on a different weight
basis from the U.S. market (e.g., theoretical versus actual weight), we
converted all quantities to the same weight basis, using the conversion
factors supplied by the company, before making our fair value
comparisons.
We have determined that Turkey experienced a high rate of inflation
throughout the POR, as measured by the wholesale price index (WPI)
published in International Financial Statistics. (See Comment 1 below).
Therefore, in accordance with our practice, and in order to avoid the
distortions caused by the effects of this level of inflation on prices,
we did not apply the Department's 90/60 day rule if we were unable to
match sales within the same month. Rather, we resorted to CV as the
basis of FMV. See Notice of Final Determination of Sales at Less Than
Fair Value: Certain Steel Concrete Reinforcing Bars from Turkey, 62 FR
9737, 9738 (March 4, 1997) (Rebar from Turkey).
In accordance with 19 CFR 353.58, we made comparisons at the same
level of trade, where possible (see Sales Comment 8 below). For
Borusan, we determined that there was one U.S. level of trade (i.e.,
distributor) and three home market levels of trade: wholesaler/
distributor, retailer, and end-user. Yucelboru had no level of trade
distinctions in either market.
[[Page 51630]]
United States Price
We based USP on purchase price in accordance with section 772(b) of
the Act, because the subject merchandise was sold directly to the first
unrelated purchaser in the United States prior to importation and the
exporter's sales price methodology was not indicated by the facts of
record. We calculated purchase price based on the same methodology used
in the Preliminary Results, with the following exceptions:
Borusan
1. We corrected the gross unit price and quantity reported for one
sales transaction (see Comment 9 below);
2. We added countervailing duties imposed on the subject
merchandise to offset export subsidies, pursuant to section
772(c)(1)(C) of the Act (see Comment 11 below); and
3. We converted certain direct selling and movement expenses from
Turkish lira to U.S. dollars using exchange rates based on the date of
shipment (see Comment 15 below).
Yucelboru
1. We converted certain movement expenses from Turkish lira to U.S.
dollars using exchange rates based on the date of shipment.
Foreign Market Value
Where FMV was based on home market price, we used the same
methodology to calculate FMV as that described in the Preliminary
Results, with the following exceptions:
Borusan
1. We deducted home market direct selling expenses and added U.S.
direct selling expenses as a COS adjustment to FMV (see Comment 14
below); and
2. We indexed home market packing expenses before deducting them
from FMV and indexed U.S. packing expenses before adding them to FMV
(see Comment 13 below).
Yucelboru
1. We deducted home market direct selling expenses and added U.S.
direct selling expenses as a COS adjustment to FMV; and
2. We indexed home market packing expenses before deducting them
from FMV and indexed U.S. packing expenses before adding them to FMV.
Where FMV was based on CV, we used the same methodology for Borusan
as that described in the Preliminary Results, with the following
exceptions:
1. We adjusted the calculated interest expenses to avoid double
counting imputed credit and inventory carrying expenses (see Comment 5
below);
2. We indexed all material costs (see Comment 3 below); and
3. We deducted home market direct selling expenses and added U.S.
direct selling expenses as a COS adjustment to FMV (see Comment 14
below).
Cost of Production
As discussed in the Preliminary Results, we conducted an
investigation to determine whether Borusan or Yucelboru made home
market sales during the POR at prices below its cost of production
(COP) within the meaning of section 773(b) of the Act (see also Comment
2 below). We disregarded individual below-cost sales of models for
which greater than 10 percent and no more than 90 percent of sales were
sold at less than COP over an extended period of time. We disregarded
all sales of models with greater than 90 percent of sales at less than
COP over an extended period of time.
Analysis of Comments Received
We gave interested parties an opportunity to comment on the
preliminary results. We received comments and rebuttal comments from
the petitioners and Borusan, but did not receive any comments from
Yucelboru.
Comment 1: Inflation. Borusan argues that Turkey did not experience
hyperinflation until the last four POR months (January through April,
1994). Accordingly, Borusan argues that the Department should limit the
application of its hyperinflationary methodology to sales made during
these months. Citing Final Determination of Sales at Less Than Fair
Value: Certain Fresh Cut Flowers from Peru, 52 FR 7000, 7002 (March 6,
1987) (Flowers from Peru), Borusan states that the Department that
previously limited its hyperinflationary methodology in this manner
where a country experiences high inflation for a only a few months
during the POR. As support for its position, Borusan claims that
Turkey's inflation rate for 1993 was 56 percent, which is below the
Department's established threshold of 60-65 percent (citing, inter
alia, Import Administration Policy Bulletin Number 94.5, ``Differences
in Merchandise Calculation in Hyperinflationary Economies'' (March 25,
1994) at 1, n.1).
The petitioners respond that the Department appropriately applied
its hyperinflationary methodology to the entire POR. Citing Final
Results of Administrative Review: Certain Fresh Cut Flowers from
Colombia, 61 FR 42833, 42845 (August 19, 1996) (Flowers from Colombia),
the petitioners note that, contrary to Borusan's claim that the
hyperinflationary threshold is 60 percent, the Department recently
stated that economies are considered hyperinflationary where annual
inflation is greater than 50 percent. The petitioners assert,
therefore, that the 56 percent inflation rate for 1993 cited by Borusan
is hyperinflationary.
The petitioners further add that Borusan provided no justification
for why the Department should differentiate between certain months
within the review period and state that no justification exists
because, in this case, the POR inflation rate exceeds 125 percent.
Regarding the precedent cited by Borusan for such a differentiation,
the petitioners note that Flowers from Peru was an investigation and
content that, consequently, the Department's practice of using
aggregate comparison market prices and costs in investigations (as
opposed to monthly prices in reviews) makes investigations more
appropriate proceeding for using a hyperinflationary methodology for
only part of the period.
DOC Position: We agree with the petitioners. Although Import
Administration Policy Bulletin Number 94.5 states that ``an economy is
deemed to be hyperinflationary if its monthly or annual inflation rates
are greater than 5 percent and 60 percent, respectively,'' in recent
cases we have considered inflation rates lower than 60 percent to
warrant application of our high-inflation methodology to avoid the
distortions that may be caused by such inflation. See Flowers from
Colombia, at 42845 and Notice of Final Determination of Sales at Less
Than Fair Value: Certain Pasta from Turkey, 61 FR 30309, 30314 (June
14, 1996) (Pasta from Turkey). Thus, even if we were to split the POR
into 1993 and 1994 segments as requested by Borusan, we would find high
inflation to exist for the entire period, since the inflation rate was
greater than 50 percent during both 1993 and 1994.
We further note with respect to Borusan's proposal to break the POR
into discrete periods that, although not dispositive of this issue, we
routinely examine the entire review period when determining whether
high inflation exists. Borusan has provided no compelling rationale to
depart from this methodology other than citing inflation rates for the
two periods. See Pasta from Turkey, at 30314, and Notice of Final
Results of Antidumping Duty Administrative Review: Certain Welded
Carbon Steel Pipe and Tube from Turkey, 61 FR 69067, 69068 (December
31, 1996) (the 1994-95 Review). With respect to the one case cited by
Borusan where the Department treated one portion of the period as
inflationary and the other portion as non-inflationary,
[[Page 51631]]
wholesale price index data compiled by the International Monetary Fund
(IMF) indicate that the inflation rate for the period designated as
non-inflationary in that case exceeded 50 percent. As such, the finding
in Flowers from Peru, which was made over ten years ago, conflicts with
our current practice.
Comment 2: Initiation of Cost Investigation. Borusan argues that
the Department improperly initiated a sales-below-cost investigation
because: (1) The petitioners' cost allegation was not submitted until
14 months after the deadline set forth in 19 CFR 353.31(c)(ii); and (2)
the allegation contained serious methodological flaws. With respect to
the issue of timeliness, Borusan contends that, even though the
issuance of the questionnaire and the submission of the response both
occurred after the regulatory deadline for filing COP allegations (120
days after initiation of the review), the petitioners should not be
excused for filing the COP allegation an additional six months after
the submission of the sales questionnaire response (citing Notice of
Final Results of Antidumping Duty Administrative Review: Certain Forged
Steel Crankshafts From the United Kingdom, 60 FR 52150, 52153 (October
5, 1995) (Crankshafts from the U.K.)). Borusan adds that the allegation
was insufficient because it: (1) Deducted credit expenses from the HM
prices while including them in the costs, and (2) excluded downstream
HM sales by related resellers from the analysis. Borusan contends that
because the sales-below-cost investigation was improperly initiated,
the Department should ignore the results of the cost test (citing Koyo
Seiko, Ltd. v. United States, 806 F. Supp. 1008 (1992)).
The petitioners maintain that because the Department did not issue
its questionnaire in this review until 254 days after publication of
the notice of initiation, the 120-day time limit does not apply, and
the Department was free to establish any reasonable date as the
deadline for the sales-below-cost allegation. The petitioners state,
however, that the Department did not establish a new deadline for
filing a COP allegation. The petitioners add that the computerized
version of Borusan's initial sales questionnaire response (filed in May
1995) was unreadable, as acknowledged by Borusan, and state that
Borusan did not submit a readable computer tape until September 1995.
Finally, the petitioners contend that the COP allegation itself is
accurate because: (1) Non-investment interest expenses are in fact not
included in the COPs, and (2) the exclusion of reseller sales is in
accord with Borusan's claims during the POR that the Department should
not consider such sales in its dumping analysis.
DOC Position: We agree with the petitioners. Regarding the
timeliness of the sales-below-cost allegation, section 353.31(c)(1)(ii)
of our regulations authorizes the Secretary to determine a new time
limit beyond the general 120-day limit for alleging sales below cost
if, in the Secretary's view, a relevant response is untimely or
incomplete. In this respect, we find that a number of factors warrant
our acceptance of the petitioners' allegation. The Department delayed
issuance of the sales questionnaire until February 24, 1995, and the
computerized version of Borusan's initial questionnaire response
submitted on May 25, 1995, was unreadable. Therefore, the petitioners
did not initially have the requisite data with which to make the
allegation until a readable computerized version of Borusan's
questionnaire response was submitted on September 29, 1995. Once the
petitioners received the necessary data, they filed their allegation on
January 11, 1996, which was within a reasonable time after receiving
readable computer data under the circumstances of this case. During the
period September 29, 1995, to January 11, 1996, there were closures at
the Department due to the Federal budget crisis and a blizzard (i.e.,
November 15 through 21, 1995, and December 16, 1995, through January
11, 1996). These extenuating circumstances were clearly beyond the
petitioners' control. In addition, the petitioners requested an
extension for filing their allegation. This is unlike the facts in
Crankshafts from the U.K., where the petitioners failed to make an
allegation of sales-below-cost until filing their case brief, even
though they had access to the data that would have enabled them to file
a timely allegation. Id., at 52153.
Regarding the merits of the allegation, section 773(b) of the Act
requires that the Department make a sales below cost determination
whenever it has reasonable grounds to believe or suspect that sales in
the home market have been made at prices below the cost of production.
As stated in our December 4, 1996, ``Petitioners' Allegation of Sales
Below the Cost of Production Memorandum'' (COP Allegation Memorandum),
we found that the data submitted by the petitioners, which was based on
information contained in Borusan's questionnaire responses, provided
reasonable grounds to believe or suspect that Borusan had made below-
cost sales.
Borusan's claims notwithstanding, we determined that the
methodology used by petitioners gave us reason to suspect that sales
were made below cost. Because petitioners excluded non-investment
interest expenses from the SG&A component of COP, thereby understating
Borusan's actual costs, they made a corresponding adjustment to price
by subtracting credit expenses. Based on this analysis there was a
considerable number of sales made below cost. Furthermore, for a
significant number of these sales the price/cost differential was such
that, even if credit expenses were added back into the price
calculation, we had reason to believe that these would have been below-
cost sales.
Second, we did not include sales made by Borusan's related
resellers in our analysis of the cost allegation because neither we nor
the petitioners could determine from Borusan's response the additional
costs incurred by the related resellers. Therefore, we did not find it
appropriate to include these sales in our analysis of whether to
initiate a below-cost investigation. See COP Allegation Memorandum.
Moreover, the sales we did examine were ``representative of the broader
range of foreign models which may be used to determine FMV for the
various U.S. models'' and our analysis of the below-cost allegation
regarding these sales indicated that there was a sufficient basis to
initiate a below-cost investigation. See Import Administration Policy
Bulletin No. 94/1, ``Cost of Production--Standards for Initiation of
Inquiry'' (March 25, 1994).
Comment 3: Exclusion of Material Costs from WPI Adjustment to COP.
The petitioners allege that the Department erroneously excluded some,
but not all, raw materials from the indexing of the cost of
manufacturing (COM). Specifically, the petitioners claim that the
Department failed to subtract varnish and coupling costs from the total
monthly COM figures before indexing. The petitioners contend that the
Department should index the rest of the COM, calculate a weighted
average, then deflate the average and add direct materials costs,
including the varnish and coupling costs, to calculate the monthly COM.
Borusan concurs with the petitioners that the Department should
subtract varnish and coupling costs before indexing and calculating the
COM.
DOC Position: We disagree with both parties. In cases involving
high inflation, it is our general practice to index all costs, whether
they are reported on a replacement cost or historical cost basis. In
the Preliminary Results, the coil, zinc, varnish and coupling costs all
should have been
[[Page 51632]]
indexed in order to derive indexed weighted-average COMs that include
raw materials costs. In high-inflation cases, it is normally the
Department's practice to request that respondents report their material
costs on a monthly replacement cost basis (i.e., the costs to the
producer to replace the materials in the month consumer). See Final
Results of Antidumping Duty Administrative Review: Ferrosilicon from
Brazil, 61 FR 59407, 59408 (November 22, 1996). This data reflects the
increases in materials costs from month to month due to inflation.
However, in accordance with our practice, we still need to index
all monthly replacement costs forward to the end of the POR in order to
calculate a POR weighted-average COM, which applies to both
inflationary and non-inflationary cases. We then deflate this POR
average COM to derive a cost for each month that is based on a POR
weighted average. This monthly cost is then compared to sales in that
month. It we did not index costs in this manner, our calculations could
be affected by monthly changes, other than inflation, that affect these
costs (i.e., price fluctuations due to material shortages).
Comment 4: Use of Production Quantity. The petitioners maintain
that the Department should use monthly production quantities contained
in Borusan's post-verification data submission rather than sales
quantities to weight-average the indexed COP.
Borusan claims that the Department did in fact use production
quantities to weight average the COP in the preliminary results and
therefore no correction is required.
DOC Position: We agree with Borusan. In the Preliminary Results, we
used the production quantities contained in Borusan's March 31, 1997,
data submission to weight-average COP (see lines 22436, 22437, 22561
and 22562 of Department's SAS margin program used in the Preliminary
Results). The preliminary results calculation memorandum erroneously
stated that we used the sales quantity to weight-average the indexed
conversion costs. See Analysis for Borusan Group (Calculation
Memorandum)(May 8, 1997). We have continued to use the production
quantities to weight-average the COP in the final results.
Comment 5: Interest Expense--Inclusion of Foreign Exchange Gains
and Losses. Borusan claims that the Department should exclude foreign
exchange losses from the interest expense calculation used in the COP/
CV calculations. Maintaining that these losses are primarily losses on
foreign currency loans due to the high inflation experienced in Turkey
and the devaluation of the Turkish Lira, Borusan contends that the
losses should be treated as an inflation adjustment and not as a cost
of production.
The petitioners maintain that Borusan should not be allowed to
exclude foreign exchange losses from its costs on the basis that a
significant portion of the foreign exchange losses resulted from
inflation. The petitioners contend that the Department already adjusts
for the inflation effects of each cost element by using its
hyperinflationary methodology to calculate infation-adjusted costs.
They further contend that the Department's practice, as set forth in
Rebar from Turkey, is to include these losses in the COP/CV financial
expenses even where the economy is considered hyperinflationary. The
petitioners also note that the Department's verification report
indicates that the interest expenses obtained were to be adjusted using
wholesale price indices for the preliminary results but that no
adjustment was made.
In addition, the petitioners argue that the Department should
disallow Borusan's reported foreign exchange gains as an offset to
interest expense because, contrary to the Department's policy for
allowing this offset, the foreign exchange gains resulted primarily
from export sales and not from the importation of raw materials.
DOC Position: We agree with the petitioners that we should include
Borusan's foreign exchanges losses and exclude Borusan's reported
foreign exchange gains in calculating the COP/CV. With respect to
foreign exchange losses, we have included this expense in our COP/CV
interest expense calculation. The cost verification report notes that
Borusan's foreign exchange losses are incurred on dollar-denominated
debt. Further, as noted by Borusan, these losses are reflected in its
income statement. The Department has clearly established that
translation losses on dollar-denominated loans, as reflected in a
company's income statement, are appropriately included in the cost of
production because they reflect an actual increase in the amount of
local currency that will have to be paid to settle these loans. See
Final Determination of Sales at Less Than Fair Value: Fresh Cut Roses
from Ecuador, 60 FR 7019, 7039 (February 6, 1995)(Roses from Ecuador).
We not that although hyperinflation was largely responsible for the
depreciation of the Turkish Lira, the inflation factor has been
accounted for by indexing the interest expense for inflation using
WPIs. See Calculation Memorandum.
With respect to foreign exchange gains, we have not included such
gains in the interest expense calculation, consistent with our findings
in other segments of this proceeding. See the 1994-95 Review at 69072.
The record evidence demonstrates that the foreign exchange gains at
issue result from export sales transactions. See Exhibit 13 of the cost
verification report. Our practice is to include foreign exchange gains
as an offset to finance expenses if they are related to the cost of
acquiring debt for purposes of financing production operations, and to
exclude this item if it relates to sales. See Rebar from Turkey, at
9741, and Pasta From Turkey, at 30324. In this case, we find that
foreign exchange gains are related to sales, not production; therefore,
they should not be used as an offset for calculating home market
interest expenses.
Comment 6: Imputed Credit Expense in Constructed Value/Offset to
Trade Receivables and Finished Goods Inventory Portion of Interest
Expense. Borusan alleges that the Department failed to adjust the CV
interest expense factor to offset the imputed credit expense with that
portion of actual finance expenses related to the financing of trade
receivables. Borusan maintains that the Department's past practice, as
set forth in Final Determination of Sales at Less Than Fair Value:
Stainless Steel Butt-Weld Pipe Fitting from Taiwan 58 FR 28556, 28560
(May 14, 1993) (Fittings from Taiwan), is to include imputed credit
costs in CV and offset the actual finance expenses by an amount
attributed to financing trade receivables in order to avoid double
counting of finance expenses. Therefore, Borusan contends that the
Department should adjust the interest rate factor used for CV.
The petitioners respond that it is not clear that the Department
included imputed credit expenses in the CV in the preliminary results;
therefore, the Department must first ensure that it has included
imputed credit costs (and inventory carrying costs) in CV before making
any offset for trade receivables financing.
DOC Position: In the Preliminary Results, we correctly included
imputed credit expenses and inventory carrying expenses in the CV. The
inclusion of these imputed expenses in the CV is in accordance with our
established practice prior to the amendments made to the Act by the
Uruguay Round Agreements Act (URAA) effective January 1, 1995. See.
e.g., Final Determination of Sales at Less Than Value: Certain All-
Terrain Vehicles from Japan, 54 FR 4864, 4867 (January 31,
[[Page 51633]]
1989). However, we failed to adjust the interest expense in order to
avoid double counting that portion of the interest expense that
corresponds with the imputed credit expense or with the imputed
inventory carrying expenses, (i.e., financing of trade receivables and
financing of finished goods inventory). For these final results, we
offset the reported interest expense by an amount attributable to
financing trade receivables and finished goods inventory. See Fittings
from Taiwan at 28560. We calculated the offset as a percentage of trade
receivables and finished goods inventory to total assets, using the
balance reported in the audited financial statements. We then used this
ratio to reduce the interest rate used to calculate finance expenses in
our CV calculation.
Comment 7: Depreciation. The petitioners allege that Borusan
incorrectly calculated its depreciation because it did not index its
monthly depreciation expenses forward to equivalent terms. Rather, the
petitioners allege that Borusan calculated this expense by adding the
monthly amounts in its accounting records and then dividing the total
by 12. Instead of calculating a simple average, the petitioners contend
that Borusan should have inflated each monthly depreciation figure to
December 1993 so they would be expressed in equivalent terms. The
inflated figures should have then been summed and the result divided by
12 to obtain an inflation-adjusted monthly average that is then
deflated to derive depreciation costs for each month. The petitioners
further maintain that Borusan incorrectly deflated the simple monthly
average calculated for depreciation, as noted in the Cost Verification
report, and assert that the Department should deflate the monthly
average depreciation using the calculation formula shown in
verification exhibit M1.
Borusan responds that the Department should not recalculate the
average monthly depreciation figure by expressing it in December 1993
terms because, as noted in Borusan's financial statements, the
depreciation amount is already stated in December 1993 terms. Borusan
contends that the petitioners' recommended approach would result in a
double indexing of this cost. Also, Borusan states that the manner in
which it converted this December 1993 depreciation amount to monthly
POR amounts is correct. With respect to the second point, Borusan notes
that the data used by the Department in the preliminary results, based
on Borusan's March 31, 1997, post-verification submission, already
incorporated the required correction to Borusan's depreciation
adjustment in the manner prescribed in the verification report.
DOC Position: We agree with Borusan. At our request, Borusan
submitted revised COP and CV databases on March 31, 1997, in which the
depreciation adjustment was recalculated in accordance with our
instructions. The revised data were used in the preliminary results.
See Calculation Memorandum, at 4. Furthermore, Borusan's depreciation
expenses were stated in December 1993 terms in accordance with Turkish
law. Note 2 of Borusan's audited financial statements for 1992 and 1993
states that ``Turkish commercial practice and tax legislation require
that financial statements be prepared in accordance with the historical
cost convention with the sole exception of the optional revaluation of
fixed assets on the basis of indices published on an annual basis by
the Ministry of Finance.'' Note 3(f) of the financial statements
indicates that property, plant and equipment were revalued on December
31, 1993 using the Ministry of Finance's officially published index of
58.4 percent. See Exhibit 4 of Borusan's questionnaire response dated
May 8, 1995. Specifically, each month's depreciation expense was
originally reported in December 1993 cost terms, and was then deflated
to each month. See page 25 and Exhibit M-1 of the cost verification
report. Therefore, consistent with our established practice, we have
not adjusted further Borusan's depreciation expense because the
reported depreciation expense had already been adjusted for inflation
when the assets were revalued based on the Ministry's index. See Rebar
From Turkey at 9748.
Comment 8: Level of Trade. Borusan contends that the Department's
decision in the Preliminary Results to collapse certain levels of trade
(LOTs) was in error. Borusan claims that it sells to five separate LOTs
in the home market: (1) direct mill sales to trading companies (LOT 1);
(2) direct mill sales to industrial end-users (LOT 2); (3) downstream
sales to local wholesalers (LOT 3); (4) downstream sales to retailers
(LOT 4); and (5) downstream sales to industrial end-users (LOT 5).
Borusan argues that the Department's decision to collapse LOT 1 with
LOT 3, and to collapse LOT 2 with LOT 5, is based on a fundamental
misunderstanding of Borusan's reported LOTs and cannot be justified by
the evidence contained on the administrative record in the review.
Borusan contends that it met its burden of justifying its claimed
LOTs through the information submitted in its questionnaire response.
Moreover, Borusan maintains that the Department provided insufficient
explanation in the preliminary results for collapsing these LOTs.
Alternatively, if the Department rejects this argument, Borusan
requests that the Department use the same LOTs as it did in the 1994-95
Review.
The petitioners contend that Borusan did not adequately
differentiate or document the asserted five levels of trade, despite a
specific request by the Department in a supplemental questionnaire for
such differentiation and documentation.
DOC Position: We agree with the petitioners. As in the Preliminary
Results, we treated Borusan's reported LOTs 1 and 3 as one LOT, and we
treated reported LOTs 2 and 5 as one LOT.
In determining the number of LOTs under the pre-Uruguay Round
Tariff Act, we examine the function of the respondent's customers and
determine where in the distribution chain the customers fall (i.e.,
wholesaler, retailer, end-user). See Import Administration Policy
Bulletin No. 92/1, ``Matching at Levels of Trade,'' (July 29, 1992), at
2; and Final Results of Antidumping Duty Administrative Reviews:
Certain Corrosion-Resistant Carbon Steel Flat Products and Certain Cut-
to-Length Carbon Steel Plate from Canada, 61 FR 13815, 13825 (March 28,
1996). It is the respondent's responsibility to distinguish its claimed
LOTs in this manner.
Applying this standard to the instant proceeding, the information
provided by Borusan does not indicate that LOTs 1 and 3 are distinct,
nor does it adequately distinguish LOTs 2 and 5. LOT 1 involves direct
sales by Borusan to trading companies. LOT 3 involves related party
resales to wholesalers. Evidence contained in Borusan's February 26,
1996, submission indicates that there is significant overlap in the
functions performed and the place in the chain of distribution for the
customers (trading companies and wholesalers) involved in claimed LOTs
1 and 3. For instance, certain trading companies sell directly to
retailers; these trading companies have the same function in the chain
of distribution as wholesalers, i.e., both function as resellers of the
subject merchandise to retailers. Thus, the fact that claimed LOT 1
involves direct sales while claimed LOT 3 involves resales does not
establish that separate LOTs in fact exist for these sales, absent
evidence that the customers involved in these two groups of sales
occupy different places in the chain of distribution. Because the
information provided by Borusan does
[[Page 51634]]
not indicate such differences in the chain of distribution, we
determined that LOTs 1 and 3 are appropriately considered as one level
for this review.
Our decision to collapse reported LOTs 2 and 5 is based on the same
principle. Claimed LOT 2 involves direct sales to end users, while
claimed LOT 5 involves related party resales to end users. As with
claimed LOTs 1 and 3, our examination of the record evidence indicates
that there is a significant overlap in the function of the customers in
the chain of distribution for these claimed levels (end users in both
cases). We therefore have collapsed LOT 2 with LOT 5. See Final
Determination of Sales at Less Than Fair Value: Certain Carbon and
Alloy Steel Wire Rod from Canada, 59 FR 18791, 18794 (April 20, 1994).
Finally, as to Borusan's argument that we use the same LOTs used in
the 1994-95 Review, the criteria upon which we examined Borusan's LOT
argument in 1994-95 Review cannot be applied to this review because
those criteria apply to cases administered under the URAA. See also
Statement of Administrative Action (SAA) accompanying the URAA at 829-
831.
Comment 9: Gross Unit Price Correction. The petitioners contend
that the Department should correct the gross unit price reported for
the first sales transaction examined at verification (i.e., SVE M.1)
based on its findings.
Borusan maintains that the Department found at verification that
the gross unit price reported for the sales transaction was correct.
DOC Position: We agree with the petitioners. The gross unit price
reported for the sales transaction at issue is incorrect because that
price is based on an incorrect weight amount noted in the sales
invoice. Although Borusan reported the weight listed in the invoice,
that weight was incorrectly calculated based on formulas used to
convert feet to metric tons. Therefore, we have corrected this error in
the sales database.
Comment 10: Verification Corrections. The petitioners state that
the Department should ensure that the errors noted in Borusan's March
31, 1997, submission have been corrected in the final data used in this
proceeding.
Borusan states that the Department used sales and cost databases
that incorporated data corrections contained in its March 31, 1997,
submission. Therefore, Borusan contends that there is no need for the
Department to make any additional changes to Borusan's sales and cost
information in the final results.
DOC Position: We agree with the petitioners and have ensured that
the sales and costs databases that we are using for the final results
incorporate all corrections from verification. In the course of
examining whether the corrections noted in the March 31, 1997,
submission were in fact included in the sales and cost databases, we
found that certain corrections noted in verification exhibit A1,
regarding customer-specific quantity rebates granted on 1993 sales,
were not included in the home market database. We have corrected this
for the final results.
Comment 11: Countervailing Duty Adjustment. Borusan maintains that
the Department erred in not making an upward adjustment to U.S. price
for countervailing duties as required by section 772(d)(1)(D) of the
Act.
The petitioners did not comment on this issue.
DOC Position: We agree with Borusan. Since the countervailing
duties in question concern export subsidies, we have added to the U.S.
price an amount for said duties (i.e., the actual amount paid in CVD).
This amount was determined by multiplying the 7.26 ad valorem rate by
the C&F value net of ocean freight expenses and CVD. See Exhibit O1 of
the cost verification report.
Comment 12: Imputed Interest on VAT Payments. Borusan argues that
the Department failed to allow a circumstance of sale (COS) adjustment
for financing expenses incurred on making VAT payments in the home
market. Borusan maintains that it must finance its payment of VAT
taxes, and that this expense represents a carrying expense incurred by
Borusan until it receives payment for the invoiced amount (inclusive of
VAT) for sales made to its home market customers. Borusan contends that
there is no discernible difference between adjusting for credit
expenses accrued in connection with sales and financing costs incurred
on VAT payments. Therefore, Borusan states that section 353.56 of the
Department's regulations authorizes the Department to make an
adjustment to account for the carrying costs incurred in financing VAT
payments.
The petitioners respond that the claimed adjustment does not
constitute a COS adjustment as defined in section 353.56 of the
Department's regulations. The petitioners cite to the 1994-95 Review
where the Department disallowed a COS adjustment for the same VAT
drawback claimed by Borusan in the present case.
DOC Position: We agree with the petitioners, and, consistent with
our treatment of this item in other segments of this proceeding, have
disallowed a COS adjustment for imputed interest resulting from delayed
refunds of VAT paid on inputs. See the 1994-95 Review, at 69076.
Allowing Borusan such an adjustment would involve imputing an expense
incurred not between Borusan and its customers, but between Borusan,
its supplier, and the government. ``[W]hile such a[n expense] may
affect the notion of true economic cost to [the respondent], it tells
us nothing about the difference in prices that result from the
different circumstances of sale.'' See Federal-Mogul Corp. v. United
States, 839 F. Supp. 881, 885 (November 30, 1993).
Further, to the extent that Borusan incurs such an expense, it is
incurred regardless of whether Borusan actually makes such a sale. In
other words, there is no direct relationship between the imputed
expense and the sales being examined. Accordingly, there is no basis
for making a COS adjustment.
Comment 13: Indexation of Packing Expenses. Borusan contends that
the Department should have indexed the packing expenses in connection
with home market and U.S. sales because the Department found that
Turkey experienced hyperinflation during the POR.
The petitioners argue that the Department should not index packing
expenses because the packing costs contain a large component of raw
materials which are already reported on a replacement cost basis.
DOC Position: We agree with Borusan and have indexed Borusan's
packing expenses in both markets. Because the timing of packing
materials purchases in a hyperinflationary economy may result in an
over- or under-statement of net prices, our practice is to index all
packing costs in the manner done for COM. See Pasta From Turkey, at
30323, and the 1994-95 Review, at 69071.
Moreover, as noted above in Comment 3, in accordance with our
practice, all costs, including materials, are indexed in
hyperinflationary economy cases. Therefore, we do not accept the
petitioners' argument that packing costs should not be indexed because
some of the packing expenses are reported on a replacement cost basis.
Comment 14: Direct Selling Expenses. Borusan argues that the
Department incorrectly deducted direct selling expenses from U.S. price
and added these expenses to FMV, thus double counting the expenses.
Borusan cites to section 773(a)(4) of the Act in support of its
argument.
The petitioners did not comment on this issue.
[[Page 51635]]
DOC Position: We agree with Borusan and have corrected this error
in the final results. To make the COS adjustment, we have deducted home
market direct selling expenses from FMV and then added U.S. direct
selling expenses to FMV.
Comment 15: Conversion of Certain Direct Selling and Movement
Expenses. Borusan contends that the Department incorrectly converted
certain direct selling and movement expenses from Turkish Lira to U.S.
dollars by using exchange rates based on dates of sale rather than on
dates of shipment.
The petitioners did not comment on this issue.
DOC Position: We agree with Borusan. In accordance with our
practice, we have corrected the error by using exchange rates based on
the date of shipment to convert expenses from Turkish lira to U.S.
dollars. See Final Determination of Sales at Less Than Fair Value:
Silicon Metal From Brazil, 56 FR 26977, 26980 (June 12, 1991) (Comment
3).
Comment 16: Assessment Rate. On August 1, 1997, we informed Borusan
and the petitioners that we intended to calculate importer-specific ad
valorem assessment rates on entered value. Since our antidumping
questionnaire did not request Borusan to submit entered values in its
questionnaire response, we informed the parties that we would calculate
entered values by subtracting international freight charges from the
gross unit prices reported in the U.S. sales database.
The petitioners contend that to calculate the entered values the
Department should also subtract from the gross unit prices the discount
that Borusan grants its customers.
Borusan did not comment on this issue.
DOC Position: We agree with the petitioners. We have removed all
discounts from gross unit prices to calculate entered values.
Final Results of Review
As a result of our review, we determine that the following margins
exist for the period May 1, 1993, through April 30, 1994:
------------------------------------------------------------------------
Margin
Manufacturer/exporter Review period (percent)
------------------------------------------------------------------------
Borusan.................................... 5/1/93-4/30/94 4.01
Yucelboru.................................. 5/1/93-4/30/94 0.00
------------------------------------------------------------------------
The Department shall determine, and Customs shall assess,
antidumping duties on all appropriate entries. The Department will
issue appraisement instructions directly to Customs.
For Yucelboru, a cash deposit rate of zero will be effective for
all its shipments of the subject merchandise entered, or withdrawn from
warehouse, for consumption on or after the publication date of these
final results of this administrative review, as provided by section
751(a) of the Act.
For Borusan, the cash deposit rate will continue to be 2.57
percent, the rate effective since May 16, 1997, which was published in
the Notice of Amended Final Results of Antidumping Duty Administrative
Review: Certain Welded Carbon Steel Pipe and Tube from Turkey, 62 FR
27013 (May 16, 1997).
For merchandise exported by manufacturers or exporters not covered
in this review but covered in the original less-than-fair-value (LTFV)
investigation or a previous review, the cash deposit will continue to
be the most recent rate published in the final determination or final
results for which the manufacturer or exporter received a company-
specific rate; if the exporter is not a firm covered in this or a prior
review or the original investigation, but the manufacturer is, the cash
deposit rate will be that established for the manufacturer of the
merchandise; and if neither the exporter nor the manufacturer is a firm
covered in this or any previous review, the cash deposit rate will be
14.74 percent, the ``all others'' rate established in the LTFV
investigation.
These deposit requirements shall remain in effect until publication
of the final results of the next administrative review.
This notice also serves as final reminder to importers of their
responsibility 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 antidumping
duties occurred and the subsequent assessment of double antidumping
duties.
This notice is the only reminder to parties subject to
administrative protective order (APO) of their responsibility
concerning the return or destruction of proprietary information
disclosed under APO in accordance with 19 C.F.R. 353.34(d). Failure to
comply is a violation of the APO.
This administrative review and notice are in accordance with
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 C.F.R.
353.22.
Dated: September 25, 1997.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 97-26196 Filed 10-1-97; 8:45 am]
BILLING CODE 3510-DS-M
