[Federal Register Volume 62, Number 207 (Monday, October 27, 1997)]
[Notices]
[Pages 55574-55589]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-28408]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-580-809]
Final Results of Antidumping Duty Administrative Review and
Partial Termination of Administrative Review: Circular Welded Non-Alloy
Steel Pipe From the Republic of Korea
AGENCY: International Trade Administration, Import Administration,
Department of Commerce.
ACTION: Final Results of Antidumping Duty Administrative Review and
Partial Termination of Administrative Review: Circular Welded Non-Alloy
Steel Pipe From the Republic of Korea.
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SUMMARY: On July 9, 1997, the Department of Commerce (the Department)
published the preliminary results of its administrative review of the
antidumping duty order on circular welded non-alloy steel pipe from the
Republic of Korea. The review covers the following seven manufacturers/
exporters: Dongbu Steel Co., Ltd. (Dongbu), Korea Iron Steel Company
(KISCO), Korea Steel Pipe Co., Ltd. (KSP), Pusan Steel Pipe Co., Ltd.
(PSP), Dongkuk Steel Mill Co., Ltd. (DSM), Dong-Il Steel Mfg. Co., Ltd.
(Dong-Il), and Union Steel Co., Ltd. (Union). The period of review
(POR) is April 28, 1992, through October 31, 1993. We are also
terminating the review for one company, Hyundai Pipe Co., Ltd., because
the sole request for review of
[[Page 55575]]
this company has been withdrawn in a timely manner.
Based on our analysis of the comments received, we have made
changes, including corrections of certain inadvertent programming and
clerical errors, to the margin calculations. Therefore, the final
results differ from the preliminary results. We have listed the final
weighted-average dumping margins for the reviewed firms below in the
section entitled ``Final Results of the Review.''
EFFECTIVE DATE: October 27, 1997.
FOR FURTHER INFORMATION CONTACT: Michael Panfeld, Mark Ross, Thomas
Schauer, or Richard Rimlinger, 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
Unless otherwise indicated, all citations to the Tariff Act of
1930, as amended (the Tariff Act), are references to the provisions in
effect as of December 31, 1994. In addition, unless otherwise
indicated, all citations to the Commerce Department's regulations are
to the regulations as codified at 19 CFR part 353 (1997).
Background
On July 9, 1997, the Department published in the Federal Register
the preliminary results of its administrative review of the antidumping
duty order on circular welded non-alloy steel pipe from the Republic of
Korea (62 FR 36761). We gave interested parties an opportunity to
comment on our preliminary results. No interested party requested a
hearing.
We are terminating the review with respect to Hyundai Pipe Co.,
Ltd. On March 16, 1994, the petitioners withdrew their request for
review. No other interested party requested a review of this firm.
Scope of Review
The merchandise subject to this review is circular welded non-alloy
steel pipe and tube, of circular cross-section, not more than 406.4mm
(16 inches) in outside diameter, regardless of wall thickness, surface
finish (black, galvanized, or painted), or end finish (plain end,
beveled end, threaded, or threaded and coupled). These pipes and tubes
are generally known as standard pipes and tubes and are intended for
the low-pressure conveyance of water, steam, natural gas, air, and
other liquids and gases in plumbing and heating systems, air-
conditioning units, automatic sprinkler systems, and other related
uses. Standard pipe may also be used for light load-bearing
applications, such as for fence tubing, and as structural pipe tubing
used for framing and as support members for reconstruction or load-
bearing purposes in the construction, shipbuilding, trucking, farm
equipment, and other related industries. Unfinished conduit pipe is
also included in this order.
All carbon-steel pipes and tubes within the physical description
outlined above are included within the scope of this review except line
pipe, oil-country tubular goods, boiler tubing, mechanical tubing, pipe
and tube hollows for redraws, finished scaffolding, and finished
conduit. In accordance with the Department's Final Negative
Determination of Scope Inquiry on Certain Circular Welded Non-Alloy
Steel Pipe and Tube from Brazil, the Republic of Korea, Mexico, and
Venezuela (61 FR 11608, March 21, 1996), pipe certified to the API 5L
line-pipe specification and pipe certified to both the API 5L line-pipe
specifications and the less-stringent ASTM A-53 standard-pipe
specifications, which falls within the physical parameters as outlined
above, and entered as line pipe of a kind used for oil and gas
pipelines is outside of the scope of the antidumping duty order.
Imports of these products are currently classifiable under the
following Harmonized Tariff Schedule (HTS) 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. Although the HTS subheadings are
provided for convenience and customs purposes, our written description
of the scope of this proceeding is dispositive.
Non-Shippers
DSM and Dong-Il responded that they had no shipments of the subject
merchandise during the POR. We confirmed this information for both
companies with the U.S. Customs Service. Therefore, we have terminated
the review with respect to these companies.
Sales Below Cost in the Home Market
The Department performed a test to determine whether respondents
sold pipe in the home market at prices below the cost of production
(see Preliminary Results of Antidumping Duty Administrative Review;
Circular Welded Non-Alloy Steel Pipe from the Republic of Korea, 62 FR
36761, 36763 (July 9, 1997) (Korean Pipe Preliminary Results)). As a
result of that test, the Department disregarded sales below cost for
Dongbu, KSP, PSP, and Union in its analysis for these final results.
Analysis of Comments Received
A. General Issues
Comment 1: Petitioners allege that the Department deducted home
market commissions twice from home market price in calculating foreign
market value.
PSP, KSP, and Dongbu assert that because they reported no
commissions this issue is moot.
Department's Position: We agree with petitioners that we
inadvertently deducted commissions twice from the home market price in
the preliminary results. We changed the final results computer programs
to correct this error. However, because no respondents reported home
market commissions, this change does not affect the calculation of the
dumping margins.
Comment 2: The petitioners contend that, in the less-than-fair-
value (LTFV) investigation, the Department recognized that the
conversion factors the respondents used to translate actual to
theoretical weight were flawed due to wall build-up in the production
process (citing Final Determination of Sales at Less than Fair Value;
Circular Welded Non-Alloy Steel Pipe from the Republic of Korea, 57 FR
42942, 42945 (September 17, 1992) (Korean Pipe LTFV Final)). The
petitioners contend that the Department used the conversion factors in
the LTFV investigation because it could not find evidence that the wall
build-up resulted in understated costs. In the instant review, the
petitioners again argue that the Department should deny an adjustment
to cost of production/constructed value (COP/CV) based on differences
between actual and theoretical weight because (1) the respondents have
not demonstrated the accuracy of this adjustment and (2) the conversion
factors are not consistent with sales data in each response.
The petitioners maintain that the Department attempted to resolve
this matter by requesting sample cost calculations on a length basis.
However, the petitioners contend that the respondents have frustrated
this review by reporting a calculated pipe length based on a
theoretical-weight factor rather than on actual length. Petitioners
further contend that, due to the spot-check nature of verifications, it
is unlikely that the Department would find systematic understatement of
costs. Contrary to the Department's statements in its notice of
preliminary results that it has not found understated costs at
[[Page 55576]]
verification, the petitioners point to proprietary information the
Department collected at verification that they contend proves that wall
build-up does occur and, therefore, argue that the Department should
not accept respondents' adjustment.
In addition, the petitioners contend that the data are inconsistent
and unreliable. The petitioners assert that they conducted an analysis
of the two weight bases (standard actual and theoretical) which
respondents (other than KISCO) used to report home market sales and
costs. According to petitioners, they used the standard actual weight,
theoretical weight and reported length for each sale to calculate a
conversion factor in their analysis. Petitioners conclude from their
analysis of the data that the reported conversion factor differs from
the calculated conversion factor for a significant number of sales and
models. Moreover, the conversion factors respondents used to convert
weight for COP and CV calculations differed from those conversion
factors they used to report sales on a model-specific basis and,
according to petitioners, the range of differences is great. Finally,
petitioners note that some reported conversion factors used for both
sales and costs fall outside industry specifications and, therefore,
are inaccurate. Thus, notwithstanding their argument that respondents'
failed to meet their burden of proof, petitioners conclude that the
Department cannot rely on respondents' data.
The petitioners argue that it is the Department's long-standing
practice that a party requesting an adjustment must prove its
entitlement. Asserting that respondents have failed to properly justify
this adjustment and have failed to respond properly to the Department's
requests for information, petitioners contend that the Department
should deny the adjustment as best information available (BIA) under
section 776(c) of the Tariff Act.
KISCO, Union, Dongbu, PSP, and KSP disagree with the petitioners.
Union maintains that the Department correctly converted its
calculations to a theoretical basis. The other respondents claim that
the Department should perform the same conversion in calculating CV
and, in the case of Dongbu, KSP, and PSP, in performing the sales-
below-cost test by using costs converted to a theoretical-weight basis.
Respondents argue that the Department should use theoretical costs
since the Department will compare these costs to sales reported on a
theoretical-weight basis.
Respondents disagree with the petitioners' conclusion that the
Department should not convert actual-weight-basis costs because
respondents have failed to justify this adjustment. Respondents argue
that they record U.S. sales, home market sales, and production costs on
different quantitative bases. Respondents point to a March 18, 1994,
letter to interested parties from the Division Director of the
Department's Office of Antidumping Compliance that instructed
respondents to report sales and costs on a theoretical-weight basis.
Respondents argue that the theoretical-weight conversion factor is not
an adjustment per se. Rather, they contend, it is merely an attempt to
express production costs, U.S. sales, and home market sales on a
consistent basis so that the Department can make an apples-to-apples
comparison. Therefore, respondents assert, the burden of proof normally
associated with, for example, a circumstance-of-sale adjustment is not
applicable.
Dongbu, PSP, and KSP disagree with the petitioners' conclusion that
their data are inaccurate. Respondents argue that the Department has
verified that the record-keeping and methodologies respondents have
used in recording and reporting costs were accurate and that
petitioners have failed to point out any verification results that show
otherwise. Moreover, respondents claim that the petitioners' analysis
of conversion factors used in the sales and cost databases is flawed.
Respondents maintain that, while they have reported the sales data on a
standard-actual-weight basis, they have reported the costs on an
actual-weight basis. Furthermore, respondents note that standard-actual
weight varies from actual weight when input coil thicknesses vary and
that the record demonstrates this fact. Moreover, respondents contend
that the record does not support petitioners' assumption that
respondents reported costs on a standard-actual-weight basis.
Therefore, respondents conclude, any analysis of these two types of
conversion factors would likely yield differences.
KISCO states that, although the petitioners characterize this as an
issue common to all respondents, they failed to identify any errors in
KISCO's reporting methodologies.
Department's Position: We disagree with the petitioners in part.
The use of theoretical-weight-based sales prices and costs is not a
price or cost adjustment per se but a conversion to a different basis
that allows an apples-to-apples comparison. While respondents kept and
reported their COP on an actual-weight basis, respondents made and
reported their U.S. sales on a theoretical-weight basis. Therefore, a
conversion is necessary to make equitable comparisons.
While petitioners contend that the conversion factors respondents
used to translate actual weight to theoretical weight were flawed due
to wall build-up in the production process, we have verified the cost
data KSP, PSP, and Union submitted. We found that, with some minor
exceptions we noted in the respective verification reports, these
respondents' costs and conversion factors were reported properly. Our
verifications generally demonstrated that these respondents captured
and properly assigned all costs to the subject merchandise produced
during the POR. Wall build-up would only have significance if
respondents first calculated a per-metric-ton or per-kilogram cost for
the steel inputs and then applied those costs to a theoretical or
standard-actual weight of the pipe. In this instance, respondents
assigned the cost of one entire coil input to all of the merchandise
produced from that input, which is generally one type of pipe. Thus,
because all costs were captured and because the methodologies
respondents used to assign costs are consistent with the methodologies
they used to record production (i.e., actual weight), the possibility
that wall buildup may occur is inconsequential. Finally, with the
exception of the aberrant conversion factors noted below, we found at
verification that respondents calculated the reported conversion
factors properly by dividing the total actual weight of production of
each model by the theoretical weight of that production.
We also agree with respondents that certain differences among the
weight-conversion factors result when different coil-input thicknesses
are used to make the same product. This is acceptable within industry
standards so long as the ultimate product meets specification
tolerances. Moreover, the petitioners' analysis is flawed because it
compares standard-actual weight to theoretical weight. Respondents
provided the conversion factors to convert their reported actual-
weight-basis costs to theoretical weight (the basis of the United
States prices (USPs)). The standard-actual weights that petitioners use
in their analysis are not the actual weight but rather the standard
weight respondents used in Korea, much as theoretical weight is a
standard weight used in the United States. Therefore, some weight-
conversion disparities are not unusual on a sale-by-sale or sale-to-
[[Page 55577]]
cost basis. However, we have conducted our own analysis of the
reported conversion factors and agree with the petitioners that certain
individual factors are aberrational.
Using the maximum industry-standard tolerance of wall thickness, we
calculated the minimum conversion factor allowable in various grades of
standard pipe. We found that respondents reported model-specific
conversion factors that fall below this minimum. For more information,
see the final results analysis memoranda, dated October 2, 1997.
Because it is impossible to produce a pipe that is within the industry-
standard tolerances yet has a conversion factor below this minimum, we
consider certain reported conversion factors to be aberrational and
unverifiable under 19 CFR 353.37(a)(2). As such, we have disregarded
these aberrational factors and applied BIA in accordance with section
776(c) of the Tariff Act. As BIA, we examined the conversion factors
each respondent reported for the 1992 and/or 1993 costs for the same
model. If these factors were both below the minimum, as BIA we used the
minimum possible conversion factor. If one factor was below and the
other factor was above the minimum, as BIA we used the higher of the
two.
Comment 3: Petitioners contend that, except for Union, all
respondents paid duties on an actual-weight basis while they received
duty drawback on a theoretical-weight basis. Petitioners assert that
the duty drawback respondents received per unit of pipe therefore
exceeds the duties they paid on the inputs for the pipe because the
theoretical weight is greater than the actual weight. Citing section
772(d)(1)(B) of the Tariff Act, petitioners state the Department is to
increase the USP on each sale by ``the amount of import duties imposed
by the country of exportation which have been rebated'' on each of
those sales. Citing Avestra Sheffield Inc. et. al. v. United States, 17
CIT 1212, 1216 (1993) (Avestra Sheffield), petitioners continue that
the Department is not required to accept the full amount of the duty
drawback respondents claimed (as it does not reflect the actual duties
paid) even if it finds the two conditions of the duty-drawback test
enumerated in Far East Machinery Co. v. United States, 699 F. Supp.
309, 312 (1988) (Far East Machinery) have been met (test set forth
below). Thus, to ensure that the duty drawback reflects the duties paid
on materials actually incorporated into the exported product,
petitioners insist that the Department limit respondents' reported duty
drawback by the amount of actual duties paid.
Dongbu, KSP, and PSP contend that the Department's long-standing
practice has been to grant a full duty-drawback adjustment when (1) the
import duty and the pertinent rebate are directly linked to, and
dependent upon, one another, and (2) the company claiming the
adjustment can demonstrate that there were sufficient imports of raw
materials to account for the duty drawback received on the exports of
the manufactured product (citing Far East Machinery at 311). Dongbu,
KSP, and PSP assert that they met both required conditions and are
therefore entitled to their full duty-drawback claim.
Dongbu, KSP, and PSP further contend that, by arguing that
respondents receive more duty drawback than duties paid, the
petitioners are making a claim of subsidy. Citing Far East Machinery,
respondents contend that the Department cannot address subsidy
allegations in an antidumping proceeding.
Finally, Dongbu, KSP, and PSP argue that the petitioners are
requesting a level of precision required neither by common sense nor by
law and that only a reasonable, not an absolute, standard of precision
is required. Respondents contend that the petitioners' reliance on
Avestra Sheffield is misplaced because, respondents assert, that case
required only that the foreign producer demonstrate that it has
imported a sufficient amount of raw materials to account for the
drawback received upon exportation to satisfy the second condition.
KISCO argues that petitioners did not identify any evidence in the
record that supports this assertion with respect to its duty-drawback
claim. KISCO further contends that the Department's verification
directly contradicts the petitioners' assertion, in which the
Department determined that KISCO paid the duties for which KISCO
received duty drawback and that KISCO accurately quantified duty
drawback in its response.
Department's Position: We agree with petitioners in part. Section
772(d)(1)(B) of the Tariff Act directs us to add to USP ``the amount of
any import duties imposed by the country of exportation which have been
rebated, or which have not been collected, by reason of the exportation
of the subject merchandise to the United States' (emphasis provided).
Thus, the plain language of the statute directs us to add to USP the
amount of import duties paid and rebated. That is, we are not to add
the rebate but rather the duties that have been rebated. Therefore, if
the rebate received is greater than the duties paid, we are to increase
USP only by the amount of the actual duties paid.
While it is true that the Court of Appeals for the Federal Circuit
(CAFC) ruled in Far East Machinery that, if petitioners ``are arguing
impliedly that the * * * export rebate system * * * results in
excessive rebates because of lack of adequate controls, such an
allegation is properly made in the context of a countervailing duty
case, not the present antidumping suit,'' the CAFC continued in its
decision to state ``[n]onetheless, ITA is not limited to accepting the
full value of the ``rebate'' as an adjustment * * * even if there is
some linkage and even if the requisite import duties were paid on
suitable goods. That is, in deciding what the proper adjustment should
be when the linkage is broad-based ITA may make its own determination
as to how much of the rebate reflects actual cost elements of the
product under investigation, that is, how much actually represents
drawback.'' See Far East Machinery at 313-14. Thus, even if a
respondent meets both parts of the duty-drawback test set forth in Far
East Machinery, which all respondents in this case did, we are only
required to adjust the USP for the amount of drawback applicable to the
inputs actually used, whereas respondents received revenue pursuant to
a drawback claim based on theoretical weight, which, because it exceeds
the actual weight of the merchandise, includes an amount of drawback
not attributable to the actual input or duties paid on that input. The
second part of the test entitles respondents to a ``duty drawback
adjustment to U.S. price [up to] the amount of import duty actually
paid.'' See Far East Machinery at 312.
We examined the record and determined that petitioners' comment
applies only to duty drawback received under the ``fixed-rate'' duty
drawback provision and not an ``individual-transaction'' duty-drawback
provision. We found that, when respondents received duty drawback under
the individual-transaction duty-drawback provision, companies received
duty drawback based on the duties actually paid on the input of the
exported product. In the fixed-rate duty-drawback provision of Korean
law, companies merely needed to demonstrate that they had sufficient
imports of the input to cover the exports of the finished merchandise
and that they paid duties on the imports of the input. Respondents were
not required to demonstrate to the Korean government that the amount of
the drawback claim did not exceed the amount of duties paid. We also
found that companies
[[Page 55578]]
receiving duty drawback under the fixed-rate provision paid duties on
the basis of the actual weight of inputs imported but received drawback
on the basis of the theoretical weight of merchandise exported to the
United States. Because theoretical weight is generally greater than
actual weight, fixed-rate drawback calculated on a theoretical-weight
basis is greater than that calculated on an actual-weight basis.
Therefore, we conclude that the reported duty drawback of respondents
who received the drawback under the fixed-rate provision exceeds the
duties actually paid. Furthermore, we note that respondents did not
dispute the fact that they received duty drawback in excess of the
duties they paid on imports but, rather, disputed whether this fact is
relevant.
We also disagree with respondents' argument that the petitioners
are requesting a level of precision that neither common sense nor law
requires. While it is true that we require a reasonable, rather than an
absolute, standard of precision, the result in this case is a
reasonable and logical one, as has also been demonstrated by the
interpretation of this provision of the Tariff Act by the Court of
International Trade (CIT) in various cases. See Far East Machinery,
Avesta Sheffield, and Carlisle Tire & Rubber Co. v. United States, 657
F. Supp. 1287 (March 16, 1987).
Finally, we agree with KISCO that it did not receive duty drawback
in the manner that petitioners describe. KISCO received duty drawback
under the individual-transaction provision. Thus, the petitioners'
comment is not applicable to KISCO.
Accordingly, where respondents reported that they received duty
drawback under the fixed-rate provision, we adjusted the drawback claim
to reflect the amount of duty drawback actually paid by multiplying the
reported duty drawback by the factor converting theoretical weight to
actual weight. Because KSP and PSP received drawback under the fixed-
rate provision for the entire POR, we made this adjustment for all
sales. See KSP's April 7, 1994, submission at page 55 and PSP's April
11, 1994, submission at page 64. Because Dongbu received drawback under
the fixed-rate provision prior to April 1993, we made this adjustment
for all of Dongbu's sales made prior to April 1993 and have not
adjusted the drawback that Dongbu reported for sales made as of April
1993. See verification report for Dongbu dated March 18, 1997, at page
8. Because KISCO and Union did not receive duty drawback under the
fixed-rate provision, no adjustment to these companies' reported duty
drawback was necessary.
Comment 4: The petitioners argue that the Department should treat
indirect purchase price (IPP) sales which Union, KISCO, PSP, KSP, and
Dongbu made as exporter's sales price (ESP) sales. The petitioners
assert that the Department uses four criteria to test when a sale can
be classified as purchase price: (1) The sale transaction must occur
prior to importation; (2) the merchandise in question is shipped
directly from the manufacturer to the unrelated buyer without being
introduced into the inventory of the related selling agent; (3) the
transaction represents a customary commercial channel for sales of this
merchandise between the parties involved; and (4) the related agent in
the United States acts only as a processor of sales-related
documentation and a communication link with the unrelated U.S. buyer.
Petitioners assert that respondents have not met two of these criteria
and, therefore, their sales to U.S. affiliates do not qualify as
purchase price transactions.
First, the petitioners contend that, generally, the U.S.
subsidiaries of the respondents take title to the merchandise in Korea
through a bill of lading and relinquish title when the merchandise
clears the U.S. Customs Service. Thus, the petitioners argue, the
merchandise enters the affiliate's inventory and, therefore, the
transactions do not meet the second criterion.
Second, the petitioners allege that the affiliates act as more than
just a processor of documents. With slight variations in each company's
factual situation, petitioners argue generally that the affiliates
purchase the merchandise from the manufacturers and obtain a letter of
credit to pay the manufacturers. Thus, the petitioners conclude, the
affiliates incur carrying costs until they receive payment from the
U.S. customers. Petitioners also contend that the affiliates incur the
obligation to pay U.S. Customs duties, marine insurance, and U.S.
brokerage and handling expenses and they carry accounts receivables on
their books until their U.S. customers settle their accounts.
Therefore, the petitioners contend, the affiliates incur the risk of
extending credit to their U.S. customers and bear the expenses of
carrying accounts receivables. The petitioners argue that these
circumstances lead to the conclusion that the affiliates perform
substantive functions beyond the simple ``processing of documents''
criteria outlined in the Department's purchase price test.
Dongbu, Union, PSP, and KSP argue that the sales-related activities
mentioned by the petitioners, such as incurring expenses, taking
physical and legal ownership, and obtaining and extending credit, ring
hollow when compared with the record evidence and Departmental and
judicial precedents. Moreover, the respondents argue that the
petitioners fail to provide a citation to support their position that
carrying merchandise in a merchandise-in-transit account equals
physical possession or holding merchandise in inventory.
Respondents, citing Certain Corrosion-Resistant Carbon Steel Flat
Products from Korea; Final Results of Antidumping Duty Administrative
Reviews (Carbon Steel from Korea), 61 FR 18547, 18562 (April 26, 1996),
argue that, even assuming that legal control of the merchandise
temporarily passes to the U.S. affiliate to facilitate transportation,
this constitutes a routine selling function because the sale occurs
prior to importation, thus satisfying one of the Department's four
factors to meet purchase price status. Respondents also argue that the
factual situation regarding the relationships and selling activities of
the respondents' affiliates are nearly identical to those in Certain
Cold-Rolled and Corrosion Resistant Carbon Steel Flat Products from
Korea; Final Results of Antidumping Duty Administrative Reviews (Carbon
Steel from Korea II), 62 FR 18404, 18423 (April 15, 1997), and in fact
involved two of the same companies. In that case, respondents contend,
the Department classified these sales as purchase price sales.
Respondents also refer to recent judicial precedents on this
subject. For example, respondents point out that the CIT has upheld the
classification of sales as purchase price sales in circumstances where
the related U.S. company undertook activities similar to, or even more
extensive than, those in this instance (citing, e.g., Outokumpu Copper
Rolled Products v. United States, 829 F. Supp. 1371, 1379-1380 (CIT
1993), E.I. du Pont de Nemours & Co., Inc. v. United States, 841 F.
Supp. 1237, 1248-50 (CIT 1993), and Zenith Electronics Corp. v. United
States, Consol. Ct. No. 88-07-00488, Slip Op. 94-146 (CIT) (Zenith)).
KISCO asserts that the record does not support petitioners' points.
KISCO claims that the Department's verification report confirms that
KISCO's exported merchandise is shipped directly to the unrelated U.S.
customer without entering the inventory of its U.S. affiliate, Dongkuk
International Inc. (DKA). Moreover, KISCO claims that DKA is merely a
processor of sales documents. KISCO
[[Page 55579]]
concludes that sending invoices, receiving payment, and arranging for
U.S. Customs Service clearance are precisely the types of activities
routinely performed by U.S. affiliates in IPP situations.
Department's Position: We disagree with petitioners that we should
treat the sales made through the U.S. affiliates and claimed as IPP
sales as ESP sales. Whenever companies make sales prior to the date of
importation through an affiliated sales entity in the United States, we
classify these sales as purchase price sales if the following
considerations apply: (1) The manufacturer shipped the subject
merchandise directly to an unrelated buyer without the merchandise
being introduced into the inventory of the related shipping agent; (2)
direct shipment from the manufacturer to the unrelated buyer is the
customary channel of the sales transaction between the parties
involved; and (3) the related selling agent in the United States acts
only as a processor of sales-related documentation and a communication
link with the unrelated U.S. buyer. See, e.g., Final Determination of
Sales at Less than Fair Value; Certain Stainless Steel Wire Rods from
France, 58 FR 68865, 68868 (December 29, 1993), and Granular
Polytetrafluoroethylene Resin from Japan; Final Results of Antidumping
Duty Administrative Review, 58 FR 50343, 50344 (September 27, 1993).
The Department first developed this test in response to the CIT's
decision in PQ Corporation v. United States, 652 F. Supp. 724, 733-35
(CIT 1987). The test is used to classify transactions involving
exporters and their U.S. affiliates, and the Department has routinely
applied this test in its determinations. See, e.g., Zenith.
Petitioners do not dispute that the companies made the sales prior
to exportation. Nor do the petitioners dispute that this is a customary
channel of distribution. Therefore, the precondition that these sales
are made prior to importation and one of the three considerations for
classifying the sales as purchase price sales are not at issue. Thus,
we must only determine whether respondents shipped the merchandise
directly to the unaffiliated U.S. customer without entering merchandise
into the affiliate's inventory and whether the affiliate acted as more
than a processor of documents and a communications link.
We agree with respondents that the merchandise does not enter the
inventory of the U.S. affiliate. The terms of sale for these
transactions are ex-dock, duty-paid. In these circumstances,
respondents transfer the merchandise to the unaffiliated U.S. customer
immediately after clearing U.S. Customs. Although the affiliate may
temporarily take title to the merchandise, this amounts to a simple
accounting entry. The existence of a ``merchandise-in-transit'' account
in the affiliates'' accounting records does not indicate that the
merchandise enters the affiliates' inventory.
We also agree with respondents that neither the nature nor the
scope of their affiliates' selling activities in the United States
exceed those types of activities that one would expect an exporter to
undertake in connection with IPP sales. Based on the respondents'
narrative explanation of the sales process and our verification of the
U.S. sales, we conclude that the respondents' U.S. affiliates did not
control the sales-negotiation process or perform other significant
selling functions; rather, they acted as a communication link passing
on the sales documents from the parent to the U.S. unaffiliated
customer. The types of activities which the petitioners allege
constitute an active role do not constitute substantial selling
activities. The U.S. affiliate's role is to function as a processor of
paperwork, not perform significant selling functions. See Carbon Steel
from Korea. Therefore, as in many similar instances, we consider these
sales to be purchase price transactions.
Comment 5: Petitioners allege that respondents in this proceeding
directly paid or reimbursed antidumping duties within the meaning of
Sec. 353.26 (a) of the Department's regulations. To account for
reimbursement, petitioners assert that, in calculating assessment and
duty deposit rates for the final results, the Department must deduct
from USP the amount of antidumping duties determined to be due on sales
made through respondents' affiliated importers.
In support of their reimbursement allegations, petitioners cite to
sales-process and terms-of-sale descriptions on the record in this
review. Petitioners assert that these descriptions imply that
respondents control both the prices their affiliated importers paid and
the prices their affiliated importers charge to unrelated U.S.
customers. Petitioners contend that this price control and the
existence of ``duty paid'' terms of sale allow the affiliated importers
to compensate for the duties by charging higher prices and, therefore,
constitute evidence of reimbursement of antidumping in accordance with
Sec. 353.26(a)(1)(ii) of the Department's regulations.
Petitioners make additional claims in support of the reimbursement
allegations against PSP, KSP, and Union. For PSP, petitioners claim
that a ``contingent liability for antidumping duty deposits'' listed on
the company's 1992 financial statement is evidence of reimbursement.
Petitioners acknowledge that the charge was reversed in the subsequent
year but contend that PSP did not conclusively establish that it did
not continue to be liable for the antidumping duties. For KSP,
petitioners assert that, because its affiliated importer went bankrupt,
KSP will bear any duties the affiliate owes above the amount of
antidumping duty deposited. Petitioners contend that this would
constitute direct payment of antidumping duties in accordance with
Sec. 353.26(a)(1)(i) of the Department's regulations.
Petitioners also contend that the Department should collapse KSP
and PSP with their affiliated importers in accordance with certain
collapsing factors outlined by the Department in Certain Cold-Rolled
Carbon Steel Flat Products From Korea; Preliminary Results of
Antidumping Duty Administrative Review, 60 FR 65284 (December 19, 1995)
(Steel from Korea 1993/94 Review Preliminary Results). Citing to record
evidence, petitioners contend that two of the collapsing factors
outlined by the Department in Steel from Korea 1993/94 Review
Preliminary Results apply to PSP and KSP and their affiliated importers
in this review. According to petitioners, the two collapsing factors
are (1) the level of common ownership and (2) intertwined company
operations (e.g., sharing of sales information, involvement in
production and pricing decisions, sharing of facilities or employees,
and transactions between companies). Petitioners assert that, once the
Department collapses the parties, it must make a finding of
reimbursement, reasoning that in a collapsing situation payment of
antidumping duties by the affiliated importer are essentially the same
as payment by respondents.
As additional support for a finding of reimbursement against Union,
petitioners claim that in examining this respondent in the LTFV
investigation of another proceeding the Department found that Union's
affiliated importer's role in paying antidumping duty deposits is a
relocation of routine selling functions from Korea to the United
States. Petitioners claim that such a scenario amounts to
reimbursement.
Petitioners conclude with a suggestion of how the Department should
apply the reimbursement regulation after making a determination of
reimbursement under Sec. 353.26(a) of the Department's regulations.
Citing
[[Page 55580]]
Color Television Receivers from the Republic of Korea; Final Results of
Antidumping Duty Administrative Review, 61 FR 4408, 4411 (February 6,
1996) (Korean TVS), petitioners claim that in practice the Department
has not always applied the adjustment for reimbursement in accordance
with Sec. 353.26(a) of the Department's regulations. In calculating
assessment and duty deposit rates for the final results of this
administrative review, petitioners request that the Department deduct
from USP the amount of antidumping duties determined to be due on sales
through respondents' affiliated importers.
Respondents claim that petitioners failed to cite any specific
evidence to show that foreign producers have determined to pay the
dumping duties of their affiliated importers or that the importers will
avoid such payment. Respondents rely on Torrington Co. v. United
States, 881 F. Supp. 622, 631-32 (CIT 1995), as support for the premise
that affirmative evidence of record is required to establish
reimbursement. Respondents assert that a mere allegation does not rise
to the enumerated standard and note that they are not aware of any
Departmental findings of reimbursement absent specific evidence of
payment of duties (or agreement to pay) on behalf of the importer.
Regarding petitioners' assertion that foreign producers reimbursed
affiliated importers for antidumping duties by manipulating the prices
charged, respondents contend that the Department has consistently
recognized that the existence of such pricing is not evidence of
reimbursement, even in situations where the transfer prices between the
affiliated parties are so low that they are below cost. Among other
court decisions, respondents cite Torrington Co. v. United States, 960
F. Supp. 339, 342 (CIT 1997), and INA Walzlager Schaeffler KG v. United
States, 957 F. Supp. 251, 269-270 (CIT 1997), in support of this
argument.
Next, respondents address petitioners' assertion that the
Department should find reimbursement by collapsing the foreign
producers with their affiliated importers. Respondents claim that
collapsing is irrelevant to the issue of reimbursement. Citing Certain
Circular Welded Non-Alloy Steel Pipe from Mexico; Final Results of
Antidumping Duty Administrative Review, 62 FR 37014, 37023 (July 10,
1997) (Pipe from Mexico), and Brass Sheet and Strip from Sweden; Final
Results of Antidumping Duty Administrative Reviews, 57 FR 2706, 2708
(January 23, 1992), respondents request that the Department continue
its practice of treating the foreign producers and their affiliated
importers as separate entities for purposes of examining reimbursement.
KSP contends that, contrary to petitioners' claim, the bankruptcy
of its affiliated importer does not constitute evidence of
reimbursement. KSP notes that the affiliated importer is the importer
of record and paid the estimated antidumping deposit for entries
subject to review and asserts that, if additional duties are due, U.S.
Customs will request payment from the affiliated importer. KSP claims
that it is uncertain whether it is under any legal obligation to pay
assessments for its affiliated importer and contends that petitioners'
claims to the contrary are pure conjecture.
PSP contends that the antidumping duties listed as contingent
liabilities on its 1992 financial statements do not support a finding
of reimbursement. Citing to the Department's Cost Verification Report,
PSP notes that it mistakenly listed the contingent liability on the
1992 financial statements and that it corrected the error in the
subsequent year. Since the contingent liability was reversed, PSP
contends that there is nothing on the record showing that it is liable
for the payment of antidumping duties.
Department's Position: We agree with respondents. Section 353.26 of
our regulations requires that, in calculating USP, we deduct the amount
of any antidumping duty that the producer or exporter directly paid on
behalf of or reimbursed to the importer. The court has ruled that this
regulation requires ``evidence beyond mere allegation that the foreign
manufacturer either paid the antidumping duty on behalf of the U.S.
importer, or reimbursed the U.S. importer for its payment of the
antidumping duty.'' Federal-Mogul Corp., 918 F. Supp. at 393 (citing
Torrington Co. v. United States, 881 F. Supp. 622, 631 (CIT 1995)). In
Korean TVs, the Department specifically stated that it would not
presume reimbursement between affiliated parties absent specific
evidence that the exporter will pay or reimburse the antidumping duties
due. During this review, the Department found neither evidence of an
agreement between respondents and their affiliated importers for
reimbursement of antidumping duties nor evidence of actual
reimbursement of these duties between the two affiliated parties.
Petitioners are correct that PSP had a contingent liability for
antidumping duties on its 1992 financial statement. However, we found
no evidence that this account was in any way related to the
reimbursement of antidumping duties. Furthermore, as noted by
respondents, we verified that the entry was an error and that the
company corrected the mistake by reversing the entry in the subsequent
year.
We have disregarded the allegation of reimbursement based on the
claim that KSP will pay duties owed above the amount posted by its
bankrupt affiliated importer. First, based upon these final results,
KSP's duty assessments will be significantly lower than the amount
deposited. Even if the assessment had been higher in the final results,
our regulations characterize reimbursement as duties ``paid directly on
behalf of the importer.'' We have found no legal authority that would
substantiate petitioners' claim that the U.S. Customs Service can
pursue the foreign parent for the satisfaction of the bankrupt
importer's antidumping duties. Furthermore, petitioners have not cited
to a specific example in which the U.S. Customs Service was authorized
or obligated to collect duties from the foreign parent of an importer.
There is no evidence on the record indicating that the foreign parent
is legally obligated to take on the bankrupt importer's duty
liabilities. Thus, the petitioners' claim that reimbursement occurs
under the current facts has no merit.
Respondents are also correct in stating that collapsing them with
their affiliated importers for the purposes of reimbursement, as
petitioners advocate, is contrary to our practice. As we have noted
before, while we sometimes treat affiliated parties as a single entity
for purposes of the margin calculation, we treat such parties as
separate entities when examining the question of reimbursement. See,
e.g., Pipe from Mexico at 37023.
For the forgoing reasons, we do not find reimbursement of
antidumping duties within the meaning of Sec. 353.26(a) of our
regulations. However, as a further measure to account for
reimbursement, Sec. 353.26(b) of our regulations requires that
importers provide the U.S. Customs Service a certificate of non-
reimbursement before liquidation of entries. If they do not file that
certificate, we will presume that reimbursement took place and instruct
the U.S. Customs Service to double the antidumping duties due.
Comment 6: Petitioners note that the Department found at the cost
verifications of KSP and PSP that these companies had calculated their
selling, general and administrative expense (SG&A) factors and interest
expense factors using a cost-of-goods-sold denominator that includes
packing
[[Page 55581]]
expenses. They further note that the cost of manufacturing (COM)
respondents used to calculate SG&A and interest expenses does not
include packing. Petitioners contend that KSP and PSP have therefore
understated their SG&A and interest expenses, and they assert that both
Dongbu and Union duplicated this inconsistency. Petitioners argue that
the Department should recalculate SG&A and interest expense by
multiplying the factor by the sum of reported home market packing
expenses and the submitted COM.
KSP, PSP, Dongbu, and Union argue that an adjustment to the
reported expense is not warranted. Respondents assert that they
followed the Department's standard practice, which, according to
respondents, is to calculate these factors by dividing the expenses by
the cost of goods sold from the financial statements. Respondents also
allege that the Department never informed them that it required a
change to the methodology, and they claim that they only learned of
this possible change upon receiving the verification reports.
Therefore, respondents contend, there is no compelling reason to adjust
the data when complete data may or may not be available to make the
adjustment. They also contend that if the Department adjusted these
factors it would be a minimal adjustment.
Department's Position: We agree with petitioners. While we
typically prefer that respondents calculate the SG&A and interest
expense factors using data contained in the financial statements, they
should have calculated the factor on the same cost basis as the COM to
which they applied the factor. As noted by petitioners, respondents'
methodology for calculating the factors understates the reported SG&A
and interest expenses. To correct this problem, we have added packing
expenses to the reported COM for all companies to recalculate SG&A and
interest expenses. This ensures that the factors, and the COM to which
we apply them, are comparable and corrects the under-reporting of SG&A
and interest expenses.
Comment 7: KSP, PSP, Dongbu, and Union assert that the Department
inadvertently double-counted selling expenses in the cost test.
Respondents note that the Department deducted selling expenses from the
home market prices it used in the cost test but then included the
expenses in the COP it used in the cost test. Respondents contend that
this error can be corrected by not including selling expenses in the
COP used in the cost test.
Department's Position: We agree with respondents that we made an
error with regard to the home market selling expenses in the cost test.
We did not, however, correct the error as respondents suggested but,
rather, corrected the error by not deducting selling expenses from the
home market prices we used in the cost test. Our correction effectively
achieves the same result as the correction respondents suggest by
ensuring that we have included and excluded the same expenses in the
prices to which we compare the COP.
Comment 8: Respondents claim that the preliminary results of review
contained the wrong scope description. Respondents assert that the
scope the Department used contains a substantive error in that it
includes mechanical tubing, a product that neither the International
Trade Commission's affirmative injury determination nor the scope of
the antidumping duty order covers. Respondents request that, in the
final results of review, the Department publish the scope language set
forth in the antidumping duty order.
Petitioners agree that the Department should modify the scope
description it published in the preliminary results to exclude
mechanical tubing but contend that the scope description requires only
a minor modification to achieve this. Petitioners also assert that the
scope description should state clearly that standard pipe with
mechanical type applications, such as fence tubing, is included in the
order.
Department's Position: We agree with respondents and petitioners
that the scope description we published in the preliminary results was
incorrect. For the final results, we have adopted respondents'
suggestion and revised the scope description so that it is consistent
with the one published in the notice of antidumping duty order. See
Notice of Antidumping Duty Orders; Certain Circular Welded Non-Alloy
Steel Pipe from Brazil, the Republic of Korea (Korea), Mexico, and
Venezuela, and Amendment to Final Determination of Sales at Less Than
Fair Value; Certain Circular Welded Non-Alloy Steel Pipe from Korea, 57
FR 49453, 49454 (November 2, 1992). We did not adopt the petitioners'
suggestion for correcting the error since the scope description
published in the notice of antidumping duty order states clearly that
standard pipe used for light load-bearing applications, such as fence
tubing, is included in the antidumping duty order.
Comment 9: PSP and KSP contend that the Department miscalculated
their ESP assessment rates by dividing total ESP dumping duties due by
the entered value of all entries of subject merchandise made by their
affiliated importers during the POR. Respondents contend that this
methodology is distortive since the total quantity and entered value of
all POR subject merchandise entries of their affiliated importers are
different from the total quantity and entered value of subject sales
used to determine the dumping duties due on ESP transactions. Citing
Color Picture Tubes from Japan; Final Results of Antidumping Duty
Administrative Review, 62 FR 34201, 34211 (June 25, 1997) (CPTs from
Japan), respondents note that the Department's practice for the
calculation of ESP assessment rates is to divide the total dumping
duties due for ESP sales by the total entered value of the same ESP
sales. To correct the error in the ESP assessment-rate calculation
respondents suggest that the Department calculate an average entered
value based on the total price and quantity of all POR subject entries
made by their affiliated importers, multiply the average entered value
by the quantity of reported ESP sales, and use the resulting total
entered value for ESP sales as the denominator in the calculation of an
ESP assessment rate.
Department's Position: In most cases, we calculate assessment rates
on ESP sales by dividing the total dumping margins for the reviewed
sales by the total entered value of those reviewed sales for each
importer. See, e.g., Antifriction Bearings (Other Than Tapered Roller
Bearings) and Parts Thereof From France, Germany, Italy, Japan,
Singapore, Sweden, and the United Kingdom; Final Results of Antidumping
Duty Administrative Reviews and Partial Termination of Administrative
Reviews, 61 FR 66472, 66475 (December 17, 1996), and CPTs from Japan at
34211. In our questionnaire, we asked respondents to report the entered
value of subject merchandise for their ESP sales. In response to our
request, PSP and KSP explained that they could not provide this
information since they were unable to tie entries to sales. As an
alternative reporting methodology, respondents gave us the total
quantity and value of all POR subject entries of their affiliated
importers. In the preliminary results, we used this information to
calculate assessment rates for ESP transactions. However, we have
reconsidered our use of this data in calculating assessment rates for
the final results.
For situations where the respondent does not know the entered value
of the merchandise for ESP sales, it has been our practice to calculate
either an approximate entered value or an average per-unit dollar
amount of antidumping duty based on all sales examined during
[[Page 55582]]
the POR. See Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof from the Federal Republic of Germany; Final Results
of Antidumping Duty Administrative Review, 56 FR 31692, 31694 (July 11,
1991). For the final results of this administrative review, we have
adopted the latter approach for all transactions subject to review
(i.e., ESP, direct purchase price, and IPP) because this is a more
precise calculation under the circumstances. We calculated a per-unit
dollar amount of antidumping duty by dividing the total antidumping
duties due for each importer/customer by the corresponding number of
units we used to determine the duties due. We will direct Customs to
assess the resulting per-ton dollar amount against each ton of
merchandise on each of the importers'/customers' subject entries during
the review period. This addresses respondents' concerns about the fact
that the entered values do not correspond to the total entered value of
sales we used to determine the dumping duties due.
Comment 10: Dongbu, PSP, KSP, and Union contend that the model-
match hierarchy the Department used in the preliminary results
improperly places wall thickness above surface finish (black or
galvanized). Respondents argue that the Department's hierarchy defies
commercial reality in that it assumes that a customer who is unable to
obtain galvanized pipe of a particular wall thickness would find a
black pipe of the same wall thickness to be more similar than a
galvanized pipe of a different wall thickness. Respondents reason that
a customer will only incur the significant additional costs associated
with galvanized pipe if there is a sufficient need for the corrosion
resistance afforded by the galvanization.
Department's Position: We disagree with respondents' contention
that surface finish should be placed above wall thickness in the model-
match hierarchy. We acknowledge that galvanization plays a significant
role in the matching hierarchy, but we do not agree that it is more
important than a dimensional characteristic such as wall thickness.
After grade and nominal pipe size, wall thickness is the next most
important criterion in the model match. Wall thickness is a significant
factor of compatibility in pipe applications, especially when dealing
with pipe of a small diameter. For the merchandise subject to this
review, we consider surface finish to be less important than the
dimensional characteristics because users of this merchandise can
freely interchange black and galvanized products if the dimensional
characteristics are the same. The significant difference between
galvanized and black pipe is that the galvanized pipe will last longer
in a corrosive environment.
In this administrative review, the matching hierarchy we applied is
consistent with the one we applied in the LTFV investigation. See
Korean Pipe LTFV Final at 42944. While the hierarchy the Department
used in the LTFV investigation is not binding, respondents have not
provided sufficient facts to warrant a change. Thus, lacking a
compelling reason, we have not changed the matching criteria for the
final results. Furthermore, with respect to our ranking of wall
thickness above surface finish, adopting this position is in the
interest of maintaining a stable and predictable approach to the
antidumping duty margin calculations and is consistent with our
position on the matching hierarchy for other proceedings involving
steel pipe. See, e.g., Appendix VI of the March 22, 1996, questionnaire
for the 1994/1995 administrative review of the antidumping duty order
on circular welded non-alloy steel pipe and tube from Mexico or
Appendix V of the questionnaire for the 1995/1996 administrative review
of the antidumping duty order on certain welded carbon standard steel
pipes and tubes from India.
B. Company-Specific Issues
KSP
Comment 1: Petitioners argue that the Department should ensure that
in KSP's post-verification submission KSP made all corrections the
Department identified in KSP's sales and cost verification reports.
KSP contends that it made all such corrections.
Department's Position: We have reviewed the revised computer tape
submission which we requested that KSP submit and are satisfied that
KSP made all the corrections we identified in our sales and cost
verification reports regarding KSP.
Comment 2: Petitioners assert that the Department should reject
KSP's U.S. and home market sales response because the information it
reported, according to petitioners, is unreliable. Petitioners note
that the Department found the following problems: the date of shipment
for one U.S. sale and the date of payment for a number of U.S. sales
were incorrect; KSP was unable to produce invoices for some
transactions through KSP's U.S. affiliate; KSP could not produce its
affiliate's bank statements demonstrating payment. Petitioners further
observe that KSP's failure to report its home market sales net of
returns and inclusion of returned goods in the home market sales
database may cause distortion. For these reasons, petitioners contend
that the Department should reject KSP's United States and home market
sales responses and calculate KSP's margin using BIA.
KSP argues that the petitioners ignored a significant body of
evidence on the record that confirms the accuracy of KSP's responses
and relied on isolated issues that arose during the sales verification.
With regard to the U.S. sales data to which petitioners refer, KSP
contends that, while it was unable to present the documents the
Department prefers to examine for some sales, the Department was able
to verify the information using alternative methodologies. KSP also
argues that petitioners exaggerate and highlight minor differences on
reported sales dates and payment dates. With regard to the home market
sales data to which petitioners refer, KSP argues that its methodology
is reasonable and the effect that returned goods have on weighted-
average prices would be inconsequential, given the relatively small
quantity of returned goods to home market sales and the stability of
home market prices during the POR. KSP concludes that, because it
cooperated with all of the Department's requests for information and
because its submissions were successfully verified, the application of
BIA to KSP's U.S. sales would be inappropriate.
Department's Position: We agree with respondents. With regard to
the dates of shipment and payment, we found that, of the discrepancies
noted by petitioners, all, with one exception, would have been
disadvantageous to KSP had we not found the discrepancies and allowed
KSP to correct them. With regard to the fact that KSP was unable to
produce certain documents we requested, we note that KSP was able to
present other documentation that supported the data it reported in its
response. We are reviewing a POR that ended in 1993. KSP's U.S.
affiliate filed for bankruptcy proceedings in 1993 and no longer
operates. It is appropriate to recognize the lapse of time since the
POR ended and the fact that the U.S. affiliate is no longer in
operation. In our view, KSP cooperated to the best of its ability,
considering the circumstances. Due to the fact that we were able to tie
the reported information back to other documentation and that, in our
view, the errors to which petitioners refer are not nearly as grave as
petitioners assert, we are satisfied with the accuracy of KSP's U.S.
sales database.
[[Page 55583]]
With regard to home market sales returns, it is impossible to
determine from the record whether any distortion exists or what effect
this hypothetical distortion, if it exists, may have on the margin. As
KSP notes, the quantity of returned goods was very small in proportion
to the volume of home market sales, which would suggest that any
distortion that may exist would have, at best, a minuscule effect on
the margin. Therefore, we have used KSP's home market sales database
because there is no record evidence that KSP's reporting methodology is
distortive. To simply reject KSP's entire home market sales response
because KSP was not able to match returns to sales would be, in our
view, unwarranted and punitive, given the cooperation that KSP
provided.
Comment 3: Petitioners argue that KSP's interest expense must be
recalculated to exclude certain offsets for interest income because KSP
could not demonstrate that the underlying investments were short-term
in nature at verification.
KSP does not object to a modification of its interest expense
factor to account for income that was not proven to be associated with
short-term investments as long as the adjustment is limited to that
income alone.
Department's Position: We agree with petitioners. Short-term-
interest expense may only be offset by short-term-interest income.
Because KSP could not demonstrate that the underlying investments were
short-term in nature at verification, we have disallowed these items of
interest income as an offset to interest expense and recalculated KSP's
interest-expense factor accordingly.
Comment 4: KSP asserts that the Department improperly treated the
schedule of ASTM pipe, i.e., the wall thickness, as a grade
specification in applying the model-match hierarchy. KSP asserts that
the schedule of ASTM pipe represents wall thickness and argues that,
since wall thickness is a distinct characteristic under the
Department's physical-characteristics hierarchy, it should be
disregarded in matching pipe by grade specification.
Department's Position: We agree with KSP. We have corrected this
error for the final results.
Comment 5: KSP argues that the Department should disregard level of
trade in making model matches for KSP because there is no evidence on
the record indicating any correlation between prices or expenses and
levels of trade in the home market in the case of KSP. KSP further
notes that this issue was the subject of litigation in the LTFV
investigation, where the CIT remanded the issue to the Department to
conduct a correlation test to determine whether any correlation between
prices or expenses and levels of trade existed. According to KSP, the
Department found, after conducting this test, that no such correlation
existed and recalculated KSP's margin without regard to level of trade.
KSP also submitted an analysis of prices and selling expenses based on
the home market sales data it previously submitted to demonstrate that
there was no correlation in the current POR.
Petitioners contend that the Department should reject KSP's level-
of-trade analysis because it is untimely and flawed, stating that its
test data cannot be verified or carefully analyzed. Petitioners also
contend that KSP's assertion that the results of the LTFV investigation
compel the same result in this review is incorrect and assert that the
Department's policy is to treat discernable levels of trade as separate
unless a party provides evidence that there is not a significant
correlation between prices and selling expenses on the one hand and
levels of trade on the other.
Petitioners argue that the analysis KSP submitted in its case brief
is flawed with regard to unit prices because it compares aggregate
prices rather than monthly prices and, therefore, may be subject to
other market factors, distorting the analysis. Petitioners further
argue that the analysis is flawed with regard to selling expenses
because the selling expenses KSP uses in its analysis were all
allocated proportionally to all sales in the response regardless of
level of trade.
Department's Position: We agree with petitioners in part and with
KSP in part. Because petitioners are correct in arguing that each
review stands alone, whatever factual pattern may have existed during
the LTFV investigation does not pertain to our findings in this review.
Therefore, to be consistent with the past practice of this case, we
conducted a correlation test to determine whether there is a
significant correlation between prices and levels of trade. In this
test we compared home market prices net of movement and packing
expenses by level of trade. We found that there is no significant
correlation between prices and level of trade for KSP. For a more
detailed discussion of our finding, see KSP's Final Results Analysis
Memorandum, dated October 2, 1997. Furthermore, while it is true that
we cannot conduct a study of the correlation of selling expenses
because KSP allocated its indirect selling expenses proportionally to
all sales, a study of selling expenses is moot because there is a lack
of correlation between prices. Therefore, we conclude that matching
KSP's sales by level of trade in this review is not appropriate and
have modified KSP's margin calculation accordingly.
PSP
Comment 1: Petitioners argue that the Department should use BIA to
calculate foreign inland freight, foreign brokerage, and wharfage on
PSP's direct purchase price sales for which it did not report an
adjustment before verification. Petitioners note that the Department
found at verification that PSP failed to report these per-unit
adjustments for many direct purchase price sales and corrected the
error by providing average amounts based on purchase price sales on
which it had previously reported the transaction-specific amounts.
Petitioners contend that since PSP did not provide the information in a
timely fashion the Department should reject the average adjustments and
instead apply BIA. Petitioners suggest that the Department use as BIA
the highest amount for any sale on which PSP reported adjustments on a
transaction-specific basis.
PSP claims that the use of average amounts instead of transaction-
specific amounts is reasonable and non-distortive because the
differences between the average amounts and the amounts reported are
insignificant. PSP contends that BIA is inappropriate since there is no
evidence that it meant to exclude the transaction-specific adjustments
or attempted to manipulate the data through the reporting of averages.
PSP concludes that manipulation is not possible when the missing
figures represent three minor adjustments on a relatively small number
of sales and that the three charges are exactly the type of charges
that are often reported as averages. PSP asserts, therefore, that the
application of BIA would be inappropriate.
Department's Position: We have disregarded PSP's claim that the use
of average amounts instead of transaction-specific amounts for the
movement adjustments is reasonable and non-distortive because the
company's claims are unsubstantiated and, despite its ability to
provide actual transaction-specific expenses, PSP did not do so.
For the final results, we have disregarded the weighted-average
per-unit adjustments PSP provided at verification. Instead, we made the
adjustment based on partial BIA. Section 776(c) of the Tariff Act
requires that we use BIA ``whenever a party or any other person refuses
or is unable to produce information requested in a
[[Page 55584]]
timely manner and in the form required, or otherwise significantly
impedes an investigation.'' Despite PSP's claim to the contrary, we
find there are a significant number of sales on which the firm did not
provide the transaction-specific movement adjustments. Our examination
of freight records at verification revealed that PSP could have
provided transaction-specific amounts instead of averages. Since we are
not satisfied that PSP reported the adjustments to the best of its
ability, our application of partial BIA is warranted. In Antifriction
Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From
France, et al.; Final Results of antidumping Duty Administrative
Reviews, Partial Termination of Administrative Reviews, and Revocation
in Part of Antidumping Duty Orders, 60 FR 10900, 10907 (February 28,
1995), we applied partial BIA in similar situations.
Thus, for the direct purchase price sales where PSP did not report
transaction-specific movement adjustments, as partial BIA we applied
the highest amount for any purchase price sale on which PSP reported
transaction-specific values for foreign inland freight, foreign
brokerage, and wharfage. We note that, even in a partial BIA situation,
BIA is intended to be adverse. This induces respondents to provide
timely, complete, and accurate information. In this situation, we are
making an adverse inference that the unreported adjustments would have
been higher than the weighted-average movement adjustments PSP
provided.
Comment 2: Citing PSP's sales verification report, petitioners
contend that PSP misallocated adjustments for U.S. duties, U.S.
brokerage, and U.S. handling charges since it incurred the charges
based on product value but allocated the charges on a theoretical-
weight basis. Petitioners assert that PSP's methodology results in
distortions where an entry covers merchandise of varying values, i.e.,
allocation by weight disregards the fact that some products are more
expensive than others and, therefore, a weight-based allocation may
assign lower charges than required. To correct this problem, the
petitioners request that the Department multiply the entered value of
the merchandise by the duty rate to determine U.S. duties and by the ad
valorem charges for brokerage and handling to determine U.S. brokerage
and U.S. handling.
PSP contends that petitioners misunderstand the methodology it used
to calculate U.S. duties, U.S. brokerage, and U.S. handling and request
that the Department dismiss the arguments. PSP explains that, for
situations where an entry covered more than one type of merchandise, it
employed a two-step allocation process to derive the reported per-
metric-ton movement expenses. PSP explains that in the first step it
allocated the total charge for an entry (which is based on an ad
valorem duty rate and total value of all products on the entry) to
individual products based on the cost-and-freight value of each
individual product divided by the total value of all products on the
entry. In the second step, PSP states, it calculated the reported per-
metric-ton expense by dividing the value from the first step by the
total weight of the individual product. PSP asserts that petitioners
focused on the second step of the calculation mistakenly in reaching
their assumption that the allocation methodology is based solely on
weight and would result in distortions where the entry consists of
merchandise that varies in value.
Department's Position: We agree with PSP. The description of the
allocation methodology that the petitioners cite from our verification
report only applies to situations where the entry covered a single type
of merchandise. For entries covering more than one type of merchandise
PSP employed a two-step allocation process. The first step in the
allocation process assigns expenses to individual products based on
value and, by that, avoids the distortions which petitioners allege.
Comment 3: PSP contends that the Department neglected to add duty
drawback to its ESP sales.
Petitioners note that PSP paid the duties on an actual-weight basis
and received drawback on a theoretical-weight basis. Citing to the
arguments on this issue elsewhere, petitioners contend that if the
Department grants PSP a drawback adjustment it must reduce the claimed
adjustment by the amount of the conversion factor.
Department Position: We agree with PSP that we neglected to add
duty drawback to its ESP sales. However, we also agree with petitioners
that the claimed duty-drawback adjustment must be reduced by the amount
of the conversion factor before adding the adjustment to USP (see our
response to Comment 5 in the ``General Issues'' section of this notice
for a complete summary of the interested parties' arguments and the
Department's position on adjusting duty drawback). Accordingly, we
added the duty drawback to USP up to the amount of the actual duty
paid.
Comment 4: Petitioners assert that PSP did not follow the
methodology the Department required for calculating factors to use to
derive the per-unit general and administrative (G&A) expenses and
interest expenses reported in the COP and CV datasets. Petitioners
argue that, because PSP failed to report its data in the manner the
Department requested, the Department should use the ten-percent
statutory minimum for SG&A as BIA. Petitioners contend that, if the
Department does not base PSP's SG&A on BIA, it must recalculate the G&A
expense and interest expense factors using the methodology the
Department identified in its November 8, 1996, supplemental
questionnaire and based on a cost-of-goods-sold denominator that is
exclusive of packing expenses and all non-operating incomes.
PSP contends that it calculated the factors for G&A expenses and
interest expenses properly and requests that the Department use the
values it reported for the final results. PSP claims that the
Department's factor-calculation methodology double-counts G&A expenses
associated with resales by its affiliates because it increases the
total expense in the numerator to include the additional expenses
associated with resales by PSP's affiliates but does not
correspondingly increase the cost of sales in the denominator. PSP also
asserts that the methodology it utilized is acceptable since it is
consistent with methodology the Department accepted for POSCO in the
LTFV investigations involving steel products from Korea. PSP also
claims that the G&A expense factor is approximately the same regardless
of the methodology employed.
Petitioners argue that PSP is incorrect about the Department's
factor-calculation methodology double-counting G&A expenses associated
with resales by its affiliates. Petitioners assert that the cost of
sales in the denominator of the factor calculation does not need to
include the cost of sales connected with the affiliates' resales of
PSP's merchandise because PSP bore the cost of the sales, not the
affiliates. Petitioners also contend that the methodology the
Department applied to POSCO should be ignored and request that
Department decide the methodology to apply based on the facts of the
current review. Finally, petitioners assert that, if the G&A expense
factors truly are similar regardless of the methodology employed, then
PSP should have no objection to using the Department's methodology.
Department's Position: We agree with petitioners in part. As
petitioners assert, the cost of sales in the denominator of the
expense-factor calculations does not need to include the cost of sales
connected with the affiliates' resales of
[[Page 55585]]
PSP merchandise. This is because PSP bore the cost of the sales, not
the affiliates. Our factor-calculation methodology therefore does not
result in double-counting but, rather, results in a more reasonable
estimate of PSP's per-unit G&A expenses and interest expenses for use
in calculating COP than PSP's methodology. Thus, for the final results,
we have recalculated the G&A expense and interest expense factors using
the methodology we required in our November 8, 1996, supplemental
questionnaire. We also adjusted the numerator in the factor calculation
to account for the fact that the cost-of-goods-sold denominator
includes packing expenses. See our response to Comment 6 in the
``General Issues'' section of this notice for a more detailed
explanation of this adjustment. Contrary to petitioners' suggestion, we
did not need to adjust the factor calculations for non-operating income
since we verified that PSP properly excluded all such income. After
making these adjustments, PSP's reported SG&A expenses are above the
ten-percent statutory minimum and, therefore, we used the actual SG&A
expenses for calculating CV.
Dongbu
Comment 1: Petitioners contend that the Department's failure to
verify Dongbu's cost response violates the statute. Citing section
776(b) of the Tariff Act, petitioners claim that the statute requires
the Department to verify Dongbu's cost response since it ``relied
upon'' this information in calculating the margin. Petitioners claim
that, since significant corrections were either presented to, or found
by, the Department at the cost verifications of other respondents and
at the sales verification of Dongbu, it is likely the same would have
occurred if the Department verified Dongbu's cost submission. Finally,
the petitioners cite their January 17, 1997, comments on Dongbu's COP
and CV submission in support that ``good cause'' existed for a
verification.
Dongbu asserts that in accordance with section 776(b)(3) of the
Tariff Act the Department was under no legal obligation to verify any
part of its submission. Citing Timken Co. v. United States, 852 F.
Supp. 1122, 1130 (CIT 1994), Dongbu contends that the courts have
interpreted the statutory provision as not requiring verification of a
respondent during the first administrative review even if the
respondent at issue was not subject to the original investigation.
Dongbu notes that in this review the Department verified its sales data
and contends that the results of that verification are a sufficient
basis for concluding that its entire response is accurate and complete.
Dongbu also contends that the result of its sales verification or cost
verification of other respondents is irrelevant to a determination of
whether its cost data are accurate.
Department's Position: We agree with Dongbu. For an administrative
review, section 776(b)(3)(B) of the Tariff Act states that we will
verify all information upon which we rely if ``good cause'' exists or
we conducted no verification during the two immediately preceding
reviews. Since this is the first administrative review, the latter
requirement was not a consideration in deciding whether to verify
Dongbu's cost data. We did however take into consideration whether
``good cause'' exists for the verification of this information. We took
all of the petitioners' comments into consideration and, where we
decided it was necessary, we requested or made corrections. Given the
analysis we performed and our time, resources, and other constraints,
we decided not to verify Dongbu's cost data. Furthermore, contrary to
petitioners' assertion, we found no discrepancies at Dongbu's sales
verification or the cost verifications of other respondents that
suggest Dongbu's cost data is unreliable. Since we are satisfied with
Dongbu's cost data, we find no ``good cause'' to require a cost
verification and relied upon Dongbu's information for these final
results.
Comment 2: Petitioners assert that the Department should
recalculate the home market interest rate Dongbu used to impute credit
expenses for its home market sales in order to account for short-term
usance loans that relate to production. Petitioners argue that it is
the Department's policy to treat all short-term loans as fungible for
the calculation of a weighted-average short-term interest rate. Without
evidence that the loans were not used to finance sales, petitioners
contend that the Department must use the usance loans to recalculate
Dongbu's home market short-term interest rate. However, petitioners
assert that such a recalculation is not possible because Dongbu did not
provide accurate information on the usance loans. Therefore, in
recalculating the home market short-term interest rate for the final
results, petitioners suggest that as BIA the Department weight-average
the lowest reported usance-loan interest rate with the home market
weighted-average short-term interest rate used for the preliminary
results based on the ratio of Dongbu's usance loans to its total short-
term borrowings.
Dongbu contends that the Department should not make the change
petitioners request. Dongbu asserts that the Department verified its
weighted-average short-term interest rate fully in this review. In
addition, Dongbu asserts that the Department has accepted its
methodology in the administrative reviews of the antidumping duty
orders on cold-rolled and corrosion-resistant steel from Korea. Dongbu
argues that the Department should not account for the usance loans in
the calculation of its home market weighted-average short-term interest
rate because they relate specifically to the financing of raw-material
purchases. Dongbu also argues that the petitioners' suggestion for
adjusting the interest rate for usance loans based on BIA is
unwarranted. Dongbu asserts, however, that if the Department applies
this methodology, the Department should not use petitioners' data for
weight-averaging the lowest reported usance loan with the borrowing
rate used to impute credit expenses for the preliminary results. Dongbu
contends that petitioners mistakenly weight-averaged the two rates
using the ratio of the U.S. affiliate's, Dongbu Corporation's, usance
loans to its total short-term borrowings instead of the ratio
applicable to Dongbu Steel Co., Ltd. Dongbu therefore requests that if
the Department weight-averages the two rates to account for usance
loans it must use Dongbu Steel Co., Ltd.''s borrowing experience as the
basis of this calculation.
Department's Position: Dongbu calculated the home market weighted-
average short-term interest rate to measure its cost of extending
credit on home market sales when it sold merchandise on account. In
calculating this rate, we agree with petitioners that Dongbu should
have included its short-term usance loans. As petitioners assert, it is
the Department's practice to treat short-term loans, or the cost of
working capital, as fungible. See, e.g., Ferrosilicon From Brazil;
Notice of Final Results of Antidumping Duty Administrative Review, 62
FR 43504, 43512 (August 14, 1997) (Department's practice recognizes the
fungible nature of invested capital resources), and Gray Portland
Cement and Clinker From Mexico; Final Results of Antidumping Duty
Administrative Review, 62 FR 17148, 17160 (April 9, 1997) (the
Department indiscriminately included all interest expenses incurred in
acquiring debt in the calculation of production costs). While Dongbu
obtained the usance loans to finance the purchase of raw materials used
in production, these borrowings may have
[[Page 55586]]
relieved Dongbu of the need to borrow money to cover other operating
costs. Therefore, we are concerned with all of Dongbu's home market
loans that relate to short-term working capital. Thus, to measure
Dongbu's cost of extending credit accurately, we must base the
calculation on Dongbu's overall short-term borrowing experience, which
includes usance loans.
For the final results, we recalculated Dongbu's home market
weighted-average short-term interest rate to account for usance loans
by applying an adjustment methodology similar to the one petitioners
suggest. However, due to the reasons explained by Dongbu above, we did
not use the same data as petitioners for performing this calculation.
Instead, we took the simple average of the interest rates Dongbu
reported for usance loans and weight-averaged this rate with the
reported rate based on the ratio of Dongbu Steel Co., Ltd.'s usance
loans to its total short-term borrowings. See Dongbu's Final Results
Analysis Memorandum dated October 2, 1997, for a detailed illustration
of this calculation. We used the new rate to recalculate imputed credit
expenses for home market sales for these final results.
Comment 3: Dongbu contends that the Department made a clerical
error that resulted in the comparison of home market prices expressed
on an actual-weight basis to USPs expressed on a theoretical-weight
basis. Dongbu requests that for the final results the Department use
home market prices expressed on a theoretical-weight basis.
Petitioners request that the Department base Dongbu's price
comparisons on the weight basis on which it made sales in each market.
Petitioners assert that the home market theoretical-weight-based prices
Dongbu reported are inaccurate because the conversion factors used to
derive these prices from actual-weight-based prices are inaccurate and
unverified. (See Comment 2 of the ``General Issues'' section for
further details on petitioners' argument.)
Department Position: We agree with Dongbu. For the final results,
we corrected the clerical error noted by Dongbu so that the home market
prices in our price comparisons are expressed on a theoretical-weight
basis.
Regarding petitioners' allegation of inaccuracies in the conversion
factor used to derive home market prices, we find that this assertion
is misplaced. Dongbu did not use conversion factors to derive the
theoretical-weight-based prices it reported. To calculate the prices on
a theoretical-weight basis Dongbu divided the total sales value of a
transaction (the home market sales occurred on an actual-weight basis)
by the theoretical weight of the transaction. See Dongbu's December 13,
1996, supplemental questionnaire response at page 18. Thus,
petitioners' assertion is incorrect.
Union
Comment 1: The petitioners argue that the Department should apply
adverse BIA to Union because the Department could not verify the
accuracy of Union's COP and CV data, there is insufficient information
on the record to correct these costs, and Union failed to cooperate to
the best of its ability. Specifically, petitioners cite to the
Department's finding at verification that Union's finished-goods
inventory, which Union used to allocate certain sub-materials costs and
fabrication costs, was a mixture of theoretical- and actual-weight-
based values. This finding, petitioners allege, is contrary to Union's
narrative response, citing Union Steel Manufacturing Co., Ltd.'s June
2, 1997, COP verification report at page 2. Moreover, the petitioners
allege that Union refused to provide a breakout of the finished-goods
inventory that would allow the Department to evaluate the extent of the
inaccuracy.
For the preliminary results, the petitioners state, the Department
attempted to correct this inaccuracy by converting the coil-input
costs, but not the sub-materials costs or the fabrication costs, to a
theoretical-weight basis. Petitioners allege that this approach is
inadequate because all costs, which petitioners contend should include
coil costs, are allocated based on the weights recorded in the
finished-goods inventory. Therefore, petitioners argue, at a minimum
the Department should treat coil costs the same as the fabrication and
sub-materials costs. However, the petitioners also argue that merely
disallowing the conversion of coil costs to a theoretical-weight basis
is not enough because the mixed-weight system will skew the difference-
in-merchandise (difmer) calculations.
Petitioners argue that, for matches of ``similar'' rather than
``identical'' merchandise, the Department will calculate the difmer on
a different basis than the U.S. sale if it uses the mixed-weight
system. Because Union refused to provide a report segregating the
export and domestic sales quantities, petitioners allege that the
Department cannot determine how much the difmer adjustment will be
skewed. For this reason, petitioners contend that the Department cannot
perform a difmer test nor is there sufficient data on the record to
correct the amounts.
In conclusion, the petitioners state that the Department could not
verify the accuracy of Union's cost data and Union refused to cooperate
with the Department's request to investigate this error. Union,
petitioners argue, should not be allowed to manipulate its margin by
selectively providing information, citing, e.g., Olympic Adhesives Inc.
v. United States, 899 F. 2d 1565, and Rhone Poulenc, Inc. v. United
States, 710 F. Supp 341, 346 (CIT 1989), aff'd 899 F. 2d 1185 (CAFC
1990). For the foregoing reasons, petitioners conclude, the Department
should base the final results on total and adverse BIA pursuant to
sections 776(b) and (c) of the Tariff Act.
Union argues that the petitioners fail to cite any factual evidence
that the cost-data error extended beyond the types of costs that the
Department corrected at the preliminary results. Union argues that it
was fully cooperative with the verification process, it conceded its
error, and the Department correctly applied BIA to an appropriate part
of its response. Union asserts that it is a well-established
Departmental practice to apply a partial BIA only to that part of a
response that is deemed deficient, citing Ad Hoc Committee of AZ-NM-TX-
FL Producers of Gray Portland Cement v. United States, 865 F. Supp. 857
(CIT 1994). Moreover, Union contends that the Department does not
consider the level of cooperation when applying partial BIA, citing
National Steel Corporation v. United States, 870 F. Supp. 1130, 1135
(CIT 1994). Thus, Union concludes, there is no factual or legal basis
for the Department to resort to total BIA.
Department's Position: We agree with petitioners in part. We have
reexamined the record and conclude that we should recalculate the
difmer adjustment in the same manner as Union's other costs for these
final results. See Union's Final Analysis Memorandum, dated October 2,
1997. However, we disagree that any additional effort to correct
Union's data is necessary.
We disagree with the petitioners' conclusion that Union's response
is unusable. We verified Union's home market and U.S. sales and found
Union's reporting to be largely correct. In addition, we verified that
Union's cost data was essentially correct with respect to hot-coil
costs and to most other elements included in its COP. We determined
that any errors we noted in the verification reports were limited,
correctable, and did not apply to hot-coil costs.
We agree with the petitioners that information does not exist on
the record
[[Page 55587]]
to enable us to correct Union's response. We also agree with the
petitioners that Union was uncooperative regarding our request that
Union provide a detailed breakout of its finished goods inventory. In
correcting Union's sub-materials and fabrication costs, we used an
adverse inference. Although Union could have provided data that would
have enabled us to calculate a more accurate COP, the data would have
lowered Union's weighted-average margin because any conversion to a
theoretical-weight basis would result in a lower per-unit cost. Thus,
by not converting these costs to a theoretical-weight basis, we applied
an adverse inference, obviated the need for more accurate data, and
responded appropriately to Union's limited failure to report accurate
data.
Comment 2: The petitioners allege that, for proprietary reasons,
the Department should consider Union and KISCO to be related firms and
assign these firms a single weighted-average margin to prevent the
possibility of manipulation of pricing and production decisions.
Petitioners argue that, in determining whether to collapse related
parties, the Department considers the following factors: (1) The level
of common ownership; (2) the existence of interlocking boards of
directors; (3) the existence of similar production facilities that
would not require significant retooling; and (4) closely intertwined
operations, citing Certain Cold-Rolled Carbon Steel Flat Products from
Korea, 60 FR 65284 (December 19, 1995). Petitioners allege that these
conditions have been met.
Union and KISCO argue that the Department should reject
petitioners' allegation as untimely and unsubstantial. Both firms note
that the record facts have been available to petitioners as early as
April 1994 and that the petitioners have had ample opportunity to raise
this issue before the Department in a more timely manner. By raising
this issue at the last possible moment, respondents assert that
petitioners did not allow the Department sufficient time to focus on
this issue and to take steps that would allow the Department to
calculate a meaningful single weighted-average margin. For example,
Union and KISCO note that, because the Department conducted a sales-
below-cost investigation with respect to Union but not with respect to
KISCO, the record does not contain KISCO's production-quantity data.
Thus, both firms argue that the Department will be unable to weight-
average difmer data. Union and KISCO also argue that the control
numbers for each company are different, thereby forcing the Department
to make various assumptions and hinder its ability to make correct
product matches. Union contends that these problems will lead to
distortive results and that the Department should reject petitioners'
arguments on this ground alone.
Notwithstanding these logistical problems, Union argues that the
facts on the record do not support a finding that Union and KISCO
should be considered one entity. Union notes that the Department did
conduct an inquiry into the relationship between Union and KISCO
through a supplemental questionnaire and verification and that the
Department did consider factors that it would have analyzed in a
collapsing decision. However, Union observes, the Department did not
collapse Union and KISCO in the preliminary results. Union asserts that
it and KISCO do not have an interlocking board of directors. Moreover,
Union contends the board members common to KISCO and Union through a
third party are ``non-standing'' members and, thus, do not participate
in the day-to-day operation and management of the companies. Union also
argues that there is no record evidence that the two firms are closely
intertwined. Union argues that, in the past, the Department has stated
that this condition is the most important decision in its collapsing
analysis, citing the January 18, 1994, memorandum from Joseph A.
Spetrini to Susan G. Esserman on the record for the antidumping duty
order on certain corrosion-resistant carbon steel flat products from
Korea. Union indicates that petitioners' only evidence for such a
conclusion is that Union sold a small amount of subject merchandise to
KISCO and both companies exported subject merchandise through two
affiliated parties. In contrast, Union claims that it and KISCO are
competitors in both the domestic and U.S. markets and operate as
separate and distinct entities. For the foregoing reasons, Union
requests that the Department reject the petitioners' allegations as
untimely and meritless.
KISCO argues that the petitioners' arguments are misguided and
should be rejected. KISCO argues that at least two of the Department's
four collapsing criteria it uses in collapsing decisions have not been
met by the companies. First, KISCO asserts that there is no evidence
that the two companies share sales information, make joint production
or pricing decisions, or share facilities or employees. Second, KISCO
asserts that there is no interlocking management.
KISCO also asserts that, by strategically withholding this
collapsing argument until after the record was closed, KISCO was
deprived of the opportunity to address these allegations in detail
during verification or to otherwise develop a factual record that would
serve to prove to the Department that it acts as an entirely
independent entity.
Finally, KISCO notes that, because the Department did not collapse
the companies at the preliminary results, KISCO will be denied an
opportunity to comment on the Department's methodology used in
calculating a consolidated dumping margin. For the reasons listed
above, KISCO requests that the Department deny the petitioners' request
to collapse.
Department's Position: We agree with petitioners. We have examined
the relationship between Union and KISCO and have determined that there
is a significant potential for price and cost manipulation. For these
final results, we have calculated a weighted-average margin for this
collapsed entity based on the costs and sales of Union and KISCO.
As we have noted before, ``[i]t is the Department's long-standing
practice to calculate a separate dumping margin for each manufacturer
or exporter investigated.'' Final Determinations of Sales at Less than
Fair Value; Certain Hot-Rolled Carbon Steel Flat Products, Certain
Cold-Rolled Carbon Steel Flat Products, and Certain Corrosion-Resistant
Carbon Steel Flat Products From Japan, 58 FR 37154, 37159 (July 9,
1993) (LTFV Japanese Steel Final). Because we calculate margins on a
company-by-company basis, we must ensure that we review the entire
producer or reseller, not merely a part of it. We review the entire
entity due to our concerns regarding price and cost manipulation.
Because of this concern, we examine the question of whether companies
``constitute separate manufacturers or exporters for purposes of the
dumping law.'' Final Determination of Sales at Less than Fair Value;
Certain Granite Products from Spain, 53 FR 24335, 24337 (June 28,
1988). Where there is evidence indicating a significant potential for
the manipulation of price and production, we will ``collapse'' related
companies; that is, we will treat the companies as one entity for
purposes of calculating the dumping margin. See Nihon Cement Co., Ltd.
v. United States, Slip Op. 93-80 (CIT May 25, 1993).
To determine whether to collapse companies, we make three
inquiries. First, we examine whether the companies in question are
related within the meaning of section 771(13) of the Tariff Act. See
Notice of Final
[[Page 55588]]
Determination of Sales at Less Than Fair Value and Final Negative
Critical Circumstances Determination; Disposable Pocket Lighters From
Thailand, 60 FR 14263, 14268 (March 16, 1995) (declining to collapse
non-related companies). Second, we examine whether the companies in
question have production facilities similar enough to enable the
shifting of production from one company to another without significant
retooling. See Certain Corrosion-Resistant Carbon Steel Flat Products
and Certain Cut-to-Length Carbon Steel Plate From Canada; Preliminary
Results of Antidumping Duty Administrative Review, 60 FR 42511 to 42512
(August 16, 1995) (Steel from Canada 1993/94 Preliminary Results of
Review). Third, we examine whether other evidence exists indicating a
significant potential for the manipulation of price or production. The
types of factors we examine to determine whether there is a significant
potential for manipulation include the following: (1) The level of
common ownership; (2) the existence of interlocking officers or
directors (e.g., whether managerial employees or board members of one
company sit on the board of directors of the other related parties);
and (3) the existence of intertwined operations.
Union and KISCO are related to each other within the meaning of
section 771(13) of the Tariff Act. See Memorandum from Laurie Parkhill
to Richard Moreland, dated October 2, 1997 (Collapsing Memorandum).
Second, the two companies have similar production facilities. These
companies produce a similar range of pipe sizes in a similar manner
and, thus, the companies would not need to engage in major retooling to
shift production. Third, other proprietary evidence indicates that
there is a significant potential for price or cost manipulation among
these companies. In general, this additional evidence of intertwined
operations consists of proprietary information establishing the
following: (1) The level of common ownership; (2) the existence of
interlocking directors; (3) the shipment of subject merchandise through
a common exporter to the United States; (4) a joint U.S. sales effort;
(5) an intertwined marketing effort; (6) intertwined financial
operations; and (7) inter-company transactions of the subject
merchandise. See Collapsing Memorandum.
Our determination whether to collapse is based on the totality of
the circumstances. See Steel from Canada 1993/94 Preliminary Results of
Review at 42512. We do not use bright-line tests in making this
finding. Rather, we weigh the evidence before us to discern whether the
companies are, in fact, separate entities or whether they are
sufficiently intertwined as to properly be treated as a single
enterprise to prevent evasion of the antidumping order via price, cost,
or production manipulation. Here we find that such potential for
manipulation exists for the companies in question. Therefore, have
collapsed Union and KISCO and treated them as one entity for purposes
of these final results.
We disagree with respondents' argument that the petitioners'
collapsing argument is untimely. In fact, the purpose of releasing
preliminary results is to invite comment from interested parties (see
Sec. 353.38(c)(2) of our regulations). Petitioners' argument
appropriately concerns how we applied the law to the facts of record
for the preliminary results. We also disagree with respondents that
they did not have the opportunity to establish a factual record on this
matter. In January 1997, we issued a supplemental questionnaire to both
Union and KISCO eliciting the kind of factual information that we
consider in our collapsing analysis. Respondents were aware at that
time that the Department was analyzing the affiliations among KISCO,
Union, DSM, and DKI, and had previously collapsed Union and DKI in
another proceeding. See Steel from Korea 1993/94 Review Preliminary
Results at 65284. Respondents were also aware that the Department had
``collapsed'' DSM's, Union's, and DKI's financial expenses in Steel
from Korea 1993/94 Review Preliminary Results because it had determined
that Union, DSM, and DKI were not independent companies. We also
reviewed the corporate relationships and related-party transactions at
verification in this administrative review. See Union's verification
report, dated March 20, 1997, at pages 2-3, and KISCO's verification
report, dated March 18, 1997, at page 1. Thus, we did not deprive Union
and KISCO of any opportunity to build a factual record supporting their
claims of independence. Moreover, both firms had an opportunity to
rebut petitioners' assertions after the preliminary results of review.
Respondents point to the logistical difficulties in combining their
data. We recognize these potential problems and have considered
respondents' concerns in calculating a single weighted-average margin.
Specifically, we are not subjecting KISCO's home market sales to a
below-cost-of-production examination. Instead, we have excluded Union's
below-cost sales from Union's home market database before combining
these sales with KISCO's home market sales. In addition, we have
ignored the different control numbers each firm used. Instead, we have
created a new and unique set of control numbers based on our model-
matching criteria. In this way, we have avoided any logistical
difficulties in combining the respondent's data. Therefore, for
purposes of calculating margins, we have collapsed Union and KISCO and
will apply the resulting single weighted-average margin to all subject
merchandise produced by these firms and exported to the United States.
Comment 3: Petitioners assert that the Department should not allow
dividend income, rental income, and the reversal allowance for
investment securities income as offsets to SG&A because Union was not
able to tie these items to its operations at verification. Petitioners
further contend that the Department should exclude income for dross and
scrap sales as offsets to SG&A because Union already accounted for
these items in its reported COM.
Department's Position: We agree with the petitioners. However, we
disallowed these offsets for the preliminary results and, therefore, no
change is necessary.
KISCO
Comment 1: KISCO argues that the Department failed to make
contemporaneous matches. KISCO requests that the Department correct
this error by adjusting the product-matching concordance section of the
program so that contemporaneous months are assigned the same value.
The petitioners agree that the Department should use a consistent
system for determining dates throughout the margin programs.
Department's Position: We agree with both parties and have altered
our program to match contemporaneous sales correctly.
Comment 2: KISCO argues that the Department did not read the home
market packing costs from its data tape properly. KISCO requests that
the Department reload the correct data or adjust the programming to
account for the incorrect decimal placement.
The petitioners agree that the Department did not read the home
market packing data correctly and request that the Department correct
the error. In addition, petitioners request that the Department confirm
that it transferred the other data fields correctly.
Department's Position: We have corrected this data error for the
final results. We checked to confirm that there were no other errors in
the reading
[[Page 55589]]
of KISCO's data and found that the variable cost of manufacturing and
the total cost of manufacturing reported in KISCO's U.S. sales data set
were also misread. Therefore, we also have corrected these fields for
the final results.
Comment 3: KISCO argues that the Department failed to adjust USP
for the interest revenue it earned as a result of the charges its U.S.
subsidiary made to late-paying customers. KISCO maintains that it is
the Department's long-standing practice to offset interest income
earned on sales of subject merchandise against imputed credit costs in
calculating the credit expense adjustment to USP.
Department's Position: We agree with KISCO and have corrected our
USP calculations to account for interest revenue.
Final Results of Review
We determine that the following percentage weighted-average margins
exist for the period April 28, 1992, through October 31, 1993:
------------------------------------------------------------------------
Margin
Company (percent)
------------------------------------------------------------------------
Dongbu Steel Co., Ltd........................................ 1.71
Korea Iron & Steel Co., Ltd./Union Steel Co., Ltd............ 1.53
Korea Steel Pipe Co., Ltd.................................... 3.15
Pusan Steel Pipe Co., Ltd.................................... 6.00
------------------------------------------------------------------------
The Department shall determine, and the U.S. Customs Service shall
assess, antidumping duties on all appropriate entries. Because the
inability to link sales with specific entries prevents entry-by-entry
assessments, we will calculate wherever possible an exporter/importer-
specific assessment value.
With respect to assessment for ESP, purchase price, and IPP
transactions, for the reasons explained in the ``General Issues''
section of this notice, we calculated a per-unit dollar amount of
dumping duty by dividing the total dumping duties due for each
importer/customer by the corresponding number of units used to
determine the duties due. We will direct Customs to assess the
resulting per-ton dollar amount against each ton of merchandise on each
of the importers'/customers' subject entries during the review period.
Furthermore, the following deposit requirements will be effective
upon publication of these final results of review for all shipments of
subject merchandise entered, or withdrawn from warehouse, for
consumption on or after the date of publication, as provided by section
751(a)(1) of the Tariff Act: (1) The cash deposit rates for the
reviewed companies will be the rates outlined above; (2) for previously
investigated companies not listed above, 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 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 4.80 percent, the
``All Others'' rate made effective by the amended final determination
of the LTFV investigation published on November 3, 1995. See Circular
Welded Non-Alloy Steel Pipe from Korea; Notice of Final Court Decision
and Amended Final Determination, 60 FR 55833 (November 3, 1995).
This notice also serves as a reminder to importers of their
responsibility under Sec. 353.26 of the Department's regulations 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 also serves as the only reminder to parties subject to
administrative protective order (APO) of their responsibility
concerning the disposition of proprietary information disclosed under
APO in accordance with 19 CFR 353.34(d) of the Department's
regulations. 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 terms of an APO
is a violation which is subject to sanction.
This administrative review and this notice are in accordance with
section 751(a)(1) of the Tariff Act (19 U.S.C. 1675(a)(1)) and
Sec. 353.22 of the Department's regulations.
Dated: October 20, 1997.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 97-28408 Filed 10-24-97; 8:45 am]
BILLING CODE 3510-DS-P
