[Federal Register Volume 64, Number 249 (Wednesday, December 29, 1999)]
[Notices]
[Pages 73143-73155]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-33230]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-427-816]
Notice of Final Determination of Sales at Less Than Fair Value:
Certain Cut-To-Length Carbon-Quality Steel Plate Products from France
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: December 29, 1999.
FOR FURTHER INFORMATION CONTACT: Jim Terpstra or Frank Thomson, Office
4, Group II, Import Administration, International Trade Administration,
[[Page 73144]]
U.S. Department of Commerce, 14th Street and Constitution Avenue, N.W.,
Washington, D.C. 20230; telephone: (202) 482-3965 or (202) 482-4793,
respectively.
The Applicable Statute: Unless otherwise indicated, all citations
to the statute are references to the provisions effective January 1,
1995, the effective date of the amendments made to the Tariff Act of
1930 (``the Act'') by the Uruguay Round Agreements Act (``URAA''). In
addition, unless otherwise indicated, all references are made to the
Department's regulations at 19 CFR Part 351 (1998).
Final Determination: We determine that certain cut-to-length
carbon-quality steel plate products (``CTL plate'') from France are
being, or are likely to be, sold in the United States at less than fair
value (``LTFV''), as provided in section 733 of the Act. The estimated
margins of sales at LTFV are shown in the ``Suspension of Liquidation''
section of this notice.
Case History
Since the preliminary determination in this investigation (Notice
of Preliminary Determination of Sales at Less Than Fair Value: Certain
Cut-To-Length Carbon-Quality Steel Plate from France, (64 FR 41198,
July 29, 1999)) (``Preliminary Determination''), the following events
have occurred:
In September 1999, the Department conducted verification of Usinor
S.A. (``Usinor'') and its affiliates (i.e., Sollac S.A. (``Sollac''),
GTS Industries S.A. (``GTS''), SLPM, Francosteel Corporation
(``Francosteel''), and Berg Steel Pipe Corporation (``Berg'')). A
public version of our report of the results of this verification is on
file in room B-099 of the main Department of Commerce building, under
the appropriate case number.
In November 1999, respondent submitted revised databases at the
Department's request, pursuant to minor corrections discovered at
verification. The petitioners (i.e., Bethlehem Steel Corporation, Gulf
States Steel, Inc., IPSCO Steel Inc., the United Steelworkers of
America, and the U.S. Steel Group (a unit of USX Corporation)) and the
respondent submitted case briefs on November 12, 1999, and rebuttal
briefs on November 23, 1999. At the request of all parties, the
scheduled public hearing was canceled.
Scope of Investigation
The products covered by the scope of this investigation are certain
hot-rolled carbon-quality steel: (1) Universal mill plates (i.e., flat-
rolled products rolled on four faces or in a closed box pass, of a
width exceeding 150 mm but not exceeding 1250 mm, and of a nominal or
actual thickness of not less than 4 mm, which are cut-to-length (not in
coils) and without patterns in relief), of iron or non-alloy-quality
steel; and (2) flat-rolled products, hot-rolled, of a nominal or actual
thickness of 4.75 mm or more and of a width which exceeds 150 mm and
measures at least twice the thickness, and which are cut-to-length (not
in coils). Steel products to be included in this scope are of
rectangular, square, circular or other shape and of rectangular or non-
rectangular cross-section where such non-rectangular cross-section is
achieved subsequent to the rolling process (i.e., products which have
been ``worked after rolling'')--for example, products which have been
beveled or rounded at the edges. Steel products that meet the noted
physical characteristics that are painted, varnished or coated with
plastic or other non-metallic substances are included within this
scope. Also, specifically included in this scope are high strength, low
alloy (HSLA) steels. HSLA steels are recognized as steels with micro-
alloying levels of elements such as chromium, copper, niobium,
titanium, vanadium, and molybdenum. Steel products to be included in
this scope, regardless of Harmonized Tariff Schedule of the United
States (HTSUS) definitions, are products in which: (1) Iron
predominates, by weight, over each of the other contained elements, (2)
the carbon content is two percent or less, by weight, and (3) none of
the elements listed below is equal to or exceeds the quantity, by
weight, respectively indicated: 1.80 percent of manganese, or 1.50
percent of silicon, or 1.00 percent of copper, or 0.50 percent of
aluminum, or 1.25 percent of chromium, or 0.30 percent of cobalt, or
0.40 percent of lead, or 1.25 percent of nickel, or 0.30 percent of
tungsten, or 0.10 percent of molybdenum, or 0.10 percent of niobium, or
0.41 percent of titanium, or 0.15 percent of vanadium, or 0.15 percent
zirconium. All products that meet the written physical description, and
in which the chemistry quantities do not equal or exceed any one of the
levels listed above, are within the scope of these investigations
unless otherwise specifically excluded. The following products are
specifically excluded from these investigations: (1) Products clad,
plated, or coated with metal, whether or not painted, varnished or
coated with plastic or other non-metallic substances; (2) SAE grades
(formerly AISI grades) of series 2300 and above; (3) products made to
ASTM A710 and A736 or their proprietary equivalents; (4) abrasion-
resistant steels (i.e., USS AR 400, USS AR 500); (5) products made to
ASTM A202, A225, A514 grade S, A517 grade S, or their proprietary
equivalents; (6) ball bearing steels; (7) tool steels; and (8) silicon
manganese steel or silicon electric steel.
The merchandise subject to these investigations is classified in
the HTSUS under subheadings: 7208.40.3030, 7208.40.3060, 7208.51.0030,
7208.51.0045, 7208.51.0060, 7208.52.0000, 7208.53.0000, 7208.90.0000,
7210.70.3000, 7210.90.9000, 7211.13.0000, 7211.14.0030, 7211.14.0045,
7211.90.0000, 7212.40.1000, 7212.40.5000, 7212.50.0000, 7225.40.3050,
7225.40.7000, 7225.50.6000, 7225.99.0090, 7226.91.5000, 7226.91.7000,
7226.91.8000, 7226.99.0000.
Although the HTSUS subheadings are provided for convenience and
Customs purposes, the written description of the merchandise under
investigation is dispositive.
Period of Investigation
The period of investigation (POI) is January 1, 1998, through
December 31, 1998.
Product Comparisons
In accordance with section 771(16) of the Act, we considered all
products produced by Usinor covered by the description in the ``Scope
of Investigation'' section, above, and sold in France during the POI to
be foreign like products for purposes of determining appropriate
product comparisons to U.S. sales. We compared U.S. sales to sales made
in the home market, where appropriate. Where there were no sales of
identical merchandise in the home market made in the ordinary course of
trade to compare to U.S. sales, we compared U.S. sales to sales of the
most similar foreign like product made in the ordinary course of trade.
In making the product comparisons, we matched foreign like products
based on the physical characteristics reported by the respondent in the
following order of importance (which are identified in Appendix V of
the questionnaire): painting, quality, grade specification, heat
treatment, nominal thickness, nominal width, patterns in relief, and
descaling.
Because Usinor had no sales of non-prime merchandise in the United
States during the POI, we did not use home market sales of non-prime
merchandise
[[Page 73145]]
in our product comparisons See e.g., Final Determination of Sales at
Less Than Fair Value: Stainless Steel Wire Rod from Sweden (63 FR
40449, 40450, July 29, 1998) (``SSWR'').
Changes From the Department's Preliminary Determination
As a result of verification findings and/or clerical errors
outlined in the comments below, we have made the following changes from
our Preliminary Determination: 1) we have added the additional coating,
girthweld and unloading and stockpiling charges to Berg's gross price,
in addition to its freight revenue, in deriving Berg's total sales
price. See Interested Party Comment 1; 2) for those sales to the United
States that involve Usinor's affiliated freight forwarders, we have
used the average of the international freight expenses that do not
involve Usinor's affiliated freight forwarders. We have used Usinor's
reported domestic brokerage and handling expenses for all sales. See
Interested Party Comment 3; 3) we have disregarded SLPM's reported
indirect selling expenses in our analysis. See Interested Party Comment
6; 4) we have denied Usinor's claimed home market packing expense
adjustment for all SLPM sales. See Interested Party Comment 8; 5) we
have matched certain U.S. products to identical home market products.
See Interested Party Comment 10; 6) we have determined appropriate home
market sales for purposes of comparison to three U.S. products whose
specifications were corrected at verification; 7) we have recalculated
Usinor's home market inventory carrying costs based on the revised cost
of manufacturing discussed in Interested Party Comment 16; 8) we have
increased Sollac's and GTS's cost of manufacturing to account for
increased pig iron cost from an affiliated supplier, thus increasing
Usinor's COP and CV. See Interested Party Comment 16; 9) we have
disallowed Usinor's claimed foreign exchange gains offset to its
consolidated financial expense ratio, thus increasing Usinor's
financial expense ratio. See Interested Party Comment 15; 10) we have
used the financial expense information contained in Europipe's
financial statements to calculate the further manufacturing financial
expense ratio. See Interested Party Comment 14; 11) we adjusted Berg's
further manufacturing, per-unit movement costs to reflect a per metric-
ton value. See Interested Party Comment 18; 12) we have deducted home
market imputed credit in calculating constructed value; and 13) we have
excluded home market inventory carrying cost in calculating constructed
value.
Use of Facts Available
In accordance with section 776 of the Act, we have determined that
the use of facts available is appropriate for certain portions of our
analysis of Usinor's data. For a discussion of our application of facts
available, see Comments 3, 6, 8, and 10.
Interested Party Comments
Comment 1: Whether the Department Should Include All Additional Berg
Charges in Calculating the Firm's Prices
Respondent argues that the Department's preliminary margin
calculation erroneously derived the total price for Berg sales by only
adding two of the six relevant data fields, the price for base pipe and
freight revenue, while omitting the other four additional charges
(i.e., ID coating, OD coating, girthweld, and unloading and stockpiling
charges). Respondent asserts that its submitted U.S. sales file, like
Berg's invoices, lists the base price and all additional charges within
separate fields. Therefore, all fields must be summed to reach the
total price.
According to respondent, the Memorandum for Holly Kuga from the
Team, ``Verification of the Responses of Usinor in the Antidumping Duty
Investigation of Certain Cut-To-Length Carbon-Quality Steel Plate From
France (Berg Sales)'' (Oct. 22, 1999) (``Berg Sales Verification
Report'') supports its position. Petitioners did not comment on this
issue.
Department's Position: We agree with respondent that it was
established at the Berg sales verification that, in determining the
total Berg sales price, we should include not only the additional
charge for freight revenue, but also the additional coating, girthweld
and unloading and stockpiling charges. Based upon our findings at
verification, we have included these additional charges in deriving
Berg's total sales price for the final determination.
Comment 2: Whether GTS' French-Format and U.S.-Format Financial
Statements Reconcile
Respondent notes that, in the normal course of business, GTS
prepares both French-and U.S.-format financial statements. Respondent
argues that the Memorandum for Holly Kuga from the Team, ``Verification
of the Responses of Usinor in the Antidumping Duty Investigation of
Certain Cut-To-Length Carbon-Quality Steel Plate From France (GTS,
Sollac, and SLPM)'' (Nov. 3, 1999) (``French Sales Verification
Report'') erroneously states that the GTS U.S.-format does ``not tie to
the French-style format in the GTS financial statements.'' According to
respondent, the financial statements do reconcile, and further, the
financial statements report the same revenue and expenses.
Respondent asserts that the only difference in the two statements
is in the presentation of expenses. According to respondent, GTS'
French-format financial statements are prepared in accordance with
French GAAP, whereby expenses are reported by nature (e.g., salaries,
taxes) and are not categorized as cost of sales, commercial expenses or
general and administrative expenses. The U.S.-format financial
statements, by contrast, are prepared in accordance with U.S. GAAP,
which requires the separation of cost of sales, selling expenses, and
general and administrative expenses. Petitioners did not comment on
this issue.
Department's Position: We agree with respondent. Upon further
review of the data on the record, we find that the French and U.S.
format financial statements do in fact contain the same information.
Comment 3: Whether Usinor Has Demonstrated That Its Foreign Brokerage
and Handling Expenses and Sollac's International Freight Expenses Are
at Arm's Length Prices
Respondent asserts that Usinor's affiliated transport companies
provided freight forwarding and handling services at arm's length
prices. Respondent maintains that, should the Department not agree with
this assertion, it should not resort to petitioners' proposal that we
use, as facts available, the highest foreign brokerage and handling
expense and international freight expense reported by respondent from
all U.S. sales. Respondent claims that only a small fraction of the
brokerage and handling expense incurred by GTS and international
freight expense incurred by Sollac and reported in the relevant fields
is related to fees charged by one of these affiliates.
Respondent takes issue with the French Sales Verification Report
statement that Sollac and GTS failed to provide any evidence, other
than the affiliated transport companies' income statements, that the
charges for brokerage and handling services and international freight
services were at arm's length prices. Respondent maintains this was the
only documentary evidence Sollac and GTS could provide, since Usinor
did not purchase similar services from unaffiliated companies and the
affiliated
[[Page 73146]]
transport companies do not keep track of data that would allow the
calculation of the costs associated with individual shipments.
According to respondent, under the antidumping statute, where an
input is purchased from an affiliated party, the Department is to
evaluate the price charged by the affiliated party against a market
price for that product or service. If the input is a ``major input,''
then the Department is also to evaluate the price charged by the
affiliated party for the input against the cost of the input and use
the highest of the price from the affiliate, the market price, or the
cost of production. See Section 773(f)(3) of the Act and 19 CFR
Sec. 351.407(b). Respondent argues that, in this case, the affiliated
transport companies did not provide the same kind of services to an
unaffiliated company that they provided to Sollac or GTS, and Sollac
and GTS did not purchase similar services from an unaffiliated company.
Consequently, respondent states, it is impossible to make a market
price comparison.
Respondent urges the Department to determine that the transfer
price was greater than or equal to the cost of the input by examining
the affiliated transport companies' financial statements. Specifically,
both companies are involved only with export transactions, and work
almost exclusively for companies affiliated with Usinor. Thus,
according to respondent, the profits listed on the income statements of
these two companies are nearly entirely attributable to export work
conducted for Usinor and its affiliates. According to respondent, since
one company posted a profit for 1998 and the other showed that its
income equaled its expenses, their prices are the same or greater than
the cost of providing the services.
Respondent argues that in evaluating the prices for inputs in
circumstances where no market price is available, the Department
routinely uses the higher of the transfer price or cost. Respondent
asserts that it is clear that the companies are not absorbing costs and
that their prices equal or surpass their costs of providing the
services. Hence, respondent concludes that the Department should use
the affiliated transport companies' prices in the final determination.
Respondent notes that in Notice of Final Determination of Sales at
Less Than Fair Value: Stainless Steel Sheet and Strip in Coils from
France, 64 FR 30,820 (June 8, 1999) (``SSS&S''), the Department stated
that the ``arm's length test compares prices charged by or paid to
affiliated parties with prices which would otherwise be obtained in
transactions with unaffiliated parties.'' The Department then found
that a profit made on services provided by an affiliated freight
forwarder did not prove that the prices for the services were at arm's
length, and accordingly rejected the transfer price data. According to
respondent, the result in SSS&S should not be followed in this case for
three reasons.
First, according to respondent, these affiliated transport
companies perform basically all of their freight services for Usinor
and its affiliates. Their financial statements establish that the
prices charged Usinor are equal to or greater than cost. Second,
respondent argues that the rule applied in SSS&S is more restrictive
than the rule routinely applied by the Department regarding affiliated
suppliers of major inputs in cost of production investigations, where
the Department takes the highest of the price charged by nonaffiliated
suppliers, the transfer price, or the cost. See 19 CFR Sec. 351.407(b).
The Department should not apply a more stringent proof to suppliers of
a minor input (e.g., freight forwarding services), than it applies to
suppliers of major inputs. Third, respondents assert that the ruling in
SSS&S is based upon a case involving entirely different facts. See
Circular Welded Non-Alloy Steel Pipe from the Republic of Korea; Final
Results of Antidumping Duty Administrative Review, 63 FR 32,833, 32,838
(June 16, 1998) (``Circular Welded Non-Alloy Steel Pipe''). In that
case, respondent notes, the Department found an affiliated supplier's
freight charges were equivalent to the prices charged by unaffiliated
suppliers. The Department accordingly rejected evidence that the
affiliate did not always charge a markup when it arranged for third-
party supply. In other words, respondents claim, the Department said
that once it had evidence establishing a market-price benchmark (the
best evidence that the transaction occurred at a market price), proof
of the affiliate's profitability (the second best evidence) was
irrelevant. Respondent argues that the Department's statement that it
will not allow evidence of profitability to overcome market price
information does not mean, however, that the Department cannot rely on
profitability when no market price evidence exists.
Petitioners argue that there is no record evidence to support
respondent's claim that its affiliates provided freight-forwarding and
handling services at arm's length prices. Petitioners argue that
respondent's suggestion that the Department determine that the transfer
price was greater than or equal to the cost of the input by examining
the affiliates' financial statements is incorrect. According to
petitioners, Usinor fails to articulate how the Department could
utilize the affiliates' financial statements to determine that the
transfer price was greater than or equal to the cost of the input.
Further, petitioners contend that the affiliates' financial statements
are not a valid source for the arm's length test because one affiliate
in a few instances performed some services for unaffiliated companies,
indicating that profits may have been derived from transactions with
the unaffiliated parties.
Petitioners state the fact that the affiliates may have been
profitable overall is irrelevant to whether they charged arm's length
prices for foreign brokerage and handling services to a specific entity
because they may have been charging preferential rates to GTS and
Sollac while earning greater profits on sales to other customers or on
sales of non-subject merchandise. Moreover, according to petitioners,
even if the affiliate earned a profit for services provided to GTS and
Sollac with respect to the subject merchandise, this does not mean it
charged arm's length prices for these sales. What is relevant,
petitioners state, is whether the profit earned is as large as the
profit earned on sales to other customers or for other products. Thus,
petitioners conclude, Usinor has failed to demonstrate that it paid
arm's length prices for this service. Petitioners suggest applying the
highest brokerage and handling expense reported by Usinor in the
foreign brokerage and handling field to all U.S. sales.
Petitioners further state that Usinor also failed to demonstrate
that international freight expenses incurred for Sollac's U.S. sales
were at arm's length. Petitioners argue that because Usinor failed to
demonstrate that it reported arm's length prices for Sollac
international freight expenses, the Department should apply, as facts
available for all U.S. sales, the highest international freight
expenses reported by Usinor.
Department's Position: We agree with petitioners in part. As in
SSS&S, it is clear from the record evidence that Usinor was unable to
demonstrate that its affiliated freight forwarder rates (brokerage and
handling) were at arm's length prices. We disagree with respondent's
argument that a profit made on the services the affiliated freight
forwarders provided to GTS and Sollac proves that these services were
at arm's length. The arm's length test for services between affiliated
parties compares prices charged by or paid to
[[Page 73147]]
affiliated parties with prices which would otherwise be obtained in
transactions with unaffiliated parties. See Circular Welded Non-Alloy
Steel Pipe. The level of profit on these services is not a relevant
consideration.
However, we disagree with petitioners' contention that adverse
facts available should be utilized. In accordance with Section 776(b)
of the Act, Usinor acted to the best of its ability to prove that these
transactions were at arm's length. Specifically, the affiliated
transport companies did not provide the same kind of services to an
unaffiliated company that they provided to Sollac or GTS, and Sollac
and GTS did not purchase similar services from an unaffiliated company.
Thus, at verification Usinor provided us with the only information
available with respect to the issue of brokerage and handling cost.
Usinor's attempt, therefore, to prove the arm's length nature of
these transactions by supplying the affiliates' income statements, in
light of the lack of any other information, constitutes a reasonable
attempt to cooperate with the Department's requests. Because Usinor
cooperated fully, but was unable to provide the requested information
in the exact manner requested, adverse facts available is an
inappropriate basis on which to calculate this adjustment. Because we
find that Usinor has acted to the best of its ability with respect to
this adjustment, and because there are no unaffiliated transactions
that we can utilize as facts available, we have used Usinor's domestic
brokerage and handling expense as reported. Finally, we note that for
international freight expenses, the record does contain expenses from
unaffiliated parties. Because Usinor's international freight expenses
from affiliated parties were less than such expenses from unaffiliated
parties, as non-adverse facts available for affiliated transactions we
have used the average of the unaffiliated international freight
expenses.
Comment 4: Whether Usinor Has Adequately Demonstrated Differences in
Levels of Trade (``LOT'')
Petitioners note that in the preliminary determination, the
Department identified two LOTs in France, one comprised of sales by GTS
and Sollac, and a second comprised of sales by SLPM. The Department
found that the LOT of the U.S. sales differed from both of these
because Usinor claimed that it performed fewer selling activities for
U.S. sales than for home market sales at either level. Petitioners
state that at verification, the Department found that it could not
verify Usinor's LOT representations, and accordingly should reject
Usinor's claim for a CEP offset based on different LOTs.
Petitioners quote from the French Sales Verification Report in
regard to GTS: ``Company officials explained the information included
in the [LOT] chart submitted to the Department and provided no
supporting documentation.'' Petitioners quote from the French Sales
Verification Report in regard to Sollac: ``Included in the list of
corrections * * * are minor revisions to the [LOT] chart most recently
submitted to the Department. Company officials explained the
information included in the [LOT] chart and provided no supporting
documentation.'' Petitioners argue that, as the Department was unable
to verify Usinor's information submitted with regard to GTS and Sollac,
there is no basis upon which to presume that home market LOT one is
distinct from the U.S. LOT. Petitioners next state that the Department
also has no basis upon which to conclude that Usinor's second home
market LOT, which involves sales by SLPM, is distinct from the U.S.
LOT, because the Department could not verify SLPM's warehousing
expenses and its indirect selling expenses and selling activities (two
of the activities which led to the preliminary LOT determination.)
Respondent states that, as requested by the Department, Usinor
provided comprehensive charts detailing the various activities
performed by the various companies in each market, including the degree
to which each function was performed. Respondent argues that these LOT
charts reveal that Sollac and GTS conduct more selling activities, and
to a greater degree, in France than they do in the United States
because the U.S. companies are fully engaged in the selling effort and
perform themselves the selling functions that the French companies
undertake at home. Respondent reiterates Usinor's statements from its
initial questionnaire response that: ``Sales in the respective markets
are at different [LOTs]--to end users and service centers in France,
and to a super-distributor, Francosteel, and an affiliated pipe
producer, Berg, in the United States. As such, all sales made by Sollac
and GTS in France are at a different [LOT], representing a more
advanced stage of distribution [than that for U.S. sales]. In the
United States, Francosteel and Berg effectively relieve Sollac and GTS,
as applicable, of virtually all of the selling functions that they bear
in connection with their home market sales.''
Respondent argues that the mode of analysis undertaken by the
Department in evaluating LOTs, as reflected in its July 19, 1999, LOT/
CEP Memorandum and the Preliminary Determination, was proper and in
accordance with the requirements of the law. Respondent argues that
nothing in the French Sales Verification Report raises any question
about the Department's preliminary determination that a CEP offset was
appropriate. Respondent argues that the French Sales Verification
Report does not state that the LOT charts failed to verify, rather, it
stated that respondent did not provide any additional new documentary
evidence at verification on LOT. In fact, respondent contends, the
record contains myriad evidence, verified by the Department,
demonstrating from every possible angle the differences in selling
activities conducted in selling to France versus those for selling to
the United States.
Respondent contends that Sollac Vente France's (SVF)'s and SLPM's
activities, which are conducted solely for sales in France, demonstrate
that a CEP offset is warranted. Respondent asserts that it has
submitted copious data supporting SVF's activities, including French
sales traces demonstrating SVF involvement, a list of SVF's eleven
sales offices, and a certified response elaborating its role in the
sales process. Respondent states that a comparison of the home market
and U.S. sales traces exhibits that SVF does not conduct any activities
regarding sales to or in the United States. For SLPM sales, both SVF
and SLPM provide services, drawing into even starker relief the
differences in the selling activities for France vis-a-vis CEP sales to
Francosteel and Berg for the U.S. market.
According to respondent, further confirmation of the significant
differences in selling activities for respondent's sales in France
compared with its sales to the United States is provided by the
verified selling expenses provided in respondent'' computer files.
Respondent states that the average level of expenses for sales in the
home market is anywhere from 50 to 1200 percent higher than for sales
to the United States.
Respondent argues that the Department was able to orally verify the
LOT charts with the company officials who, by virtue of their daily
involvement in CTL plate sales, are intimately aware of the degree of
selling activities conducted in each country. According to respondent,
the charts were put together by the companies after lengthy
consultations with personnel who have direct, day-to-day involvement in
the sale of CTL plate in the United States and France, and many of
these same people were present and
[[Page 73148]]
available for questioning by the Department at verification.
Respondent further asserts that a CEP offset to reflect the
demonstrated differences in selling activities is warranted in this
case. Respondent states that it provided complete and accurate data
regarding the level of selling activities conducted in each country,
including: information regarding the extensive selling activities of
Sollac, GTS, SVF, and SLPM in France and the substantially less or non-
existent selling activities of those companies for sales to the United
States, including sales traces revealing these differences, addresses
of SVF's commercial offices in France and the lack of such offices in
the United States, addresses and maps of SLPM's commercial offices and
warehouses in France and the lack of such offices in the United States,
verified information regarding warehousing expenses, warranty expenses,
indirect selling expenses, commission expense and inventory carrying
cost incurred for sales in France and for the United States, and
complete access to personnel at all companies who could confirm the
differences in selling activities.
Department's Position: We disagree with petitioners that Usinor's
CEP offset should be denied. In accordance with section 773(a)(1)(B)(i)
of the Act, to the extent practicable, we determine NV based on sales
in the comparison market at the same LOT as the EP or CEP transaction.
The NV LOT is that of the starting price sales in the comparison market
or, when NV is based on CV, that of the sales from which we derive SG&A
and profit. For CEP sales, the Department makes its analysis at the
level of the constructed export sale from the exporter to the
affiliated importer.
Because of the statutory mandate to take LOT differences into
consideration, the Department is required to conduct a LOT analysis in
every case, regardless of whether or not a respondent has requested a
LOT adjustment or a CEP offset for a given group of sales. To determine
whether NV sales are at a different LOT than EP or CEP sales, we
examine stages in the marketing process and selling functions along the
chain of distribution between the producer and the unaffiliated
customer. If the comparison market sales are at a different LOT, and
the difference affects price comparability, as manifested in a pattern
of consistent price differences between the sales on which NV is based
and comparison market sales at the LOT of the export transaction, we
make a LOT adjustment under section 773(a)(7)(A) of the Act. Finally,
for CEP sales, if the NV level is more remote from the factory than the
CEP level and there is no basis for determining whether the differences
in the LOTs between the NV and the CEP sales affects price
comparability, we adjust NV under section 773(A)(7)(B) of the Act (the
CEP offset provision). See Certain Cut-to-Length Carbon Steel Plate
from South Africa, 62 FR at 61731.
In the Preliminary Determination, the Department made a CEP offset
adjustment to the normal values that were compared to CEP sales in the
United States, because the Department preliminarily found that all of
Usinor's home market sales were made at LOTs different from and more
advanced than the LOT of Usinor's CEP sales in the United States, and
there was no basis for determining whether the differences in the LOTs
between the NV and the CEP sales affects price comparability. See LOT/
CEP Memorandum, dated July 19, 1999. In particular, the Department
found that Usinor performed fewer and different selling functions in
connection with its CEP sales than in connection with home market sales
to its unaffiliated customers. Further, the Department found that it
was not possible to quantify a LOT adjustment based on the available
data. The fact that Usinor identified a slightly different LOT pattern
at verification than it had in its questionnaire response is not
determinative. As explained above, the Department conducts its own LOT
analysis, rather than merely accepting the assertions of the parties.
The Department is satisfied that it has sufficient reliable information
to reach a decision as to the LOTs at which Usinor and its affiliates
sell subject merchandise. Furthermore, the Department verified the data
used in making this analysis. See the French Sales Verification Report,
which notes that we reviewed the LOT charts with company officials, and
substantiated the claimed LOT differences through documentation such as
that collected in the sample sales traces and verification exhibits
related to the relevant expenses. Although we disagree with
respondent's assertion that SVF's and SLPM's lack of commercial offices
in the United States is relevant, after further examination of the
relevant information on the record, the Department has continued to
make a CEP offset because the facts on the record indicate that
Usinor's CEP LOT is different from and less advanced than Usinor's home
market LOTs, and that the data of record do not permit it to, instead,
make a LOT adjustment based on the effect of the LOT difference on
price comparability.
Comment 5: Whether Usinor Has Failed To Provide Accurate Inventory
Carrying Cost Information for Sollac Home Market Sales
Petitioners argue that the inventory carrying cost information
Usinor has reported for Sollac sales does not reflect the inventory
experience of Sollac for the entire period of investigation, but rather
ignores seventeen percent of the period. Petitioners quote from the
French Sales Verification Report: ``Sollac utilized the daily inventory
balance during the period March 9 through Dec. 31, 1998, because,
according to company officials, Sollac no longer had the information
for the first two months of the year in their system to cover the
entire POI.'' Petitioners state that the Department should not deem
this information accurate or representative, and, accordingly, should
not include Sollac's reported inventory carrying costs as part of that
adjustment.
Respondent contends that the Department verified the accuracy of
the information used to calculate Sollac's average number of days
between production and shipment for the March 9, 1998 through December
31, 1998 period. Respondent states that the earliest date for which
Sollac's database had detailed inventory movement data was March 9,
1998, and that its method of calculating average inventory days is more
precise than the general method.
Respondent contends that the general method used by accountants to
calculate annual average inventory days or turnover is by dividing the
average of beginning and ending inventory balances by average daily
shipments or costs of goods sold during the year. So, according to
respondent, the general method is based upon only two observations.
On the other hand, for each shipment of plate to a customer in
France during the period from March 9, 1998 through December 31, 1998,
Sollac calculated the actual number of days between the date when the
plate entered finished or semi-finished goods inventory and the date
when the plate was shipped to the customer. Thus, according to
respondent, Sollac's calculation was based on 291 observations rather
than the two observations that is the norm for this calculation.
Further, respondent argues, Sollac calculated its average inventory
days specific to the subject merchandise, not on a larger product group
as is typically the case. Respondent asserts that Sollac's calculation
is more representative than the data typically prepared by companies,
and accordingly, the
[[Page 73149]]
Department should reject petitioners' request that the Department not
include Sollac's inventory carrying costs.
Department's Position: We agree with respondent. We verified the
accuracy of the information used to calculate Sollac's average number
of days between production and shipment for the March 9, 1998 through
December 31, 1998 period, and find this period to be an accurate
representation of the POI for purposes of tracking inventory movement.
We found that respondent's explanation for the absence of inventory
information for the first two months of the POI was reasonable, and
noted no discrepancies in tracing the relevant information through
Sollac's books and records. See the French Sales Verification Report.
Comment 6: Whether Usinor Accurately Reported Indirect Selling Expenses
for SLPM's Home Market Sales
Petitioners argue that Usinor's reported indirect selling expenses
for SLPM's home market sales are deficient, and thus the Department
should not include this information in the adjustment to normal value.
Petitioners cite to the SLPM Indirect Selling Expense section of the
French Sales Verification Report in support of their above contention.
Respondent argues that the Department verified the accuracy of
SLPM's indirect selling expenses. Respondent first states that the
discrepancy cited by petitioners that its receivables insurance was
inadvertently included in the calculation of indirect selling expenses
is clearly immaterial and was well known to the Department. Respondent
next disagrees with petitioners' arguments regarding SLPM's allocation
of costs by function. Respondent asserts that SLPM maintains its costs
by nature, which is in accordance with French GAAP (note, an example of
maintenance of cost ``by nature'' as distinguishable from costs ``by
function'' would be tracking total electricity costs rather than
electricity usage by process or factory.) Further, respondent asserts,
SLPM's submitted cost worksheet allocated its costs by nature into the
form requested by the Department and accounts for all costs.
According to respondent, the Department verified that the costs
reported tied to SLPM's 1998 income statement and general ledger, then
requested that SLPM demonstrate the basis for its allocations of these
costs among functions. Respondent states that SLPM provided detailed
worksheets for electricity and the other allocations specifically
reviewed by the Department, and SLPM's controller and financial
director explained how he used his knowledge of the company to make the
allocation judgements. Respondent argues that petitioners do not
question whether all of SLPM's costs and expenses were properly
reported to the Department, but rather whether they were properly
allocated. According to respondent, petitioners point to no contrary
record evidence to buttress their claim that the allocation is
incorrect and to warrant the Department rejecting SLPM's indirect
selling expenses.
Department's Position: We agree with petitioners. As noted in the
French Sales Verification Report, SLPM provided no documentation to
support its estimated allocations used to determine the costs included
in its reported indirect selling expenses. We disagree with
respondent's contention that SLPM provided detailed worksheets for
electricity and the other allocations specifically reviewed by the
verifiers. The worksheets provided by respondent at verification merely
listed the estimates used to derive SLPM's allocations, and did not
offer any supporting documentation on how those estimates were derived.
In conducting verification the burden is on respondents to
demonstrate that the information in their questionnaire response is
complete and accurate. While the verifier asks different questions and
employs different methods to evaluate the reported expenses, it is
respondents who have the most complete knowledge of available
information sources, who must devise a way of demonstrating the
accuracy and completeness of their reported data. For indirect selling
expenses, which by their very nature are general expenses that must be
allocated over relevant sales, it is sometimes difficult to allocate
expenses in a precise manner. Nevertheless, some reasonable and
consistent method has to be developed which can be tested and evaluated
at verification. In the instant case, respondent did not provide a
reasonable or consistent basis for the reported expense, but merely
estimated the relevant amount. We are unable to accept respondent's
estimates without some basis for critically evaluating whether they are
reasonable at verification. Accordingly, we have disregarded SLPM's
reported home market indirect selling expenses.
Comment 7: Whether Usinor Accurately Provided Warehousing Expense
Information for Sollac's Home Market Sales to SLPM
Petitioners argue that Usinor did not provide verifiable warehouse
expense information for Sollac's home market sales. Petitioners cite to
the French Sales Verification Report: ``to support its per metric ton
warehouse expense amount, SLPM provided a computer screen print which,
according to company officials, cannot be linked to SLPM's accounting
system . . . SLPM informed us that warehousing information is entered
when received and does not connect to any other information or
accounting system.'' Petitioners claim that, as this expense could not
be tied to SLPM's accounting system, the Department has no way of
ensuring the accuracy of the reported expenses, and thus should not
include Sollac's warehousing expense in the adjustment to normal value
for all SLPM sales.
Respondent disagrees with petitioners' contention that SLPM's
warehousing costs should not be included as an adjustment to normal
value because SLPM could not link the tons warehoused to its accounting
systems. Respondent maintains that accounting systems track revenue and
costs rather than tonnage, so it is understandable that the tons
warehoused were not mentioned in SLPM's accounting system. Respondent
asserts that SLPM appropriately provided the Department with a query of
its inventory database that tracked the number of tons shipped from its
warehouses. Respondent argues that the Department verified that this
database is maintained in the normal course of business, and that SLPM
accurately reported its per-unit cost of warehousing.
Department's Position: We agree with respondent. We verified that
SLPM's inventory database is maintained in the normal course of
business, and traced the relevant information from this database to
SLPM's calculated per-unit cost of warehousing as reported to the
Department.
Comment 8: Whether Usinor Provided Accurate Home Market Packing Costs
for SLPM Sales
Petitioners claim that the French Sales Verification Report
indicates that the packing expenses reported with respect to SLPM sales
do not pertain to the POI. Petitioners quote from the French Sales
Verification Report, ``SLPM acknowledged that its packing costs were
based on May 1998 estimated costs for which it could not provide
detailed specifications.'' Petitioners argue that, as these reported
amounts were estimated and do not pertain to, and thus cannot be linked
to, sales made during the POI, the Department should deny Usinor's
claimed home market
[[Page 73150]]
packing expense adjustment for all SLPM sales.
Respondent disagrees with petitioners' contention that the
Department should deny Usinor's claimed home market packing expense
adjustment for all SLPM sales. Respondent states that petitioners' cite
from the French Sales Verification Report only refers to a small amount
of SLPM's sales, those which are not further processed. Respondent
states that, when SLPM ships product in the same form as received from
the manufacturer, it assigns a Franc per ton charge to the shipment.
Respondent argues that this charge represents a reasonable estimate of
SLPM's handling costs that it has used for its own internal accounting
purposes in the normal course of business. Respondent argues that, for
the other SLPM sales, it provided detailed support for its calculated
packing costs at verification and met its burden of demonstrating that
these expenses were properly reported.
Department's Position: We agree with petitioners. Each pre-selected
sales invoice reviewed and discussed in the French Sales Verification
Report involving SLPM indicated that the subject merchandise was not
further processed by SLPM. The packing type for subject merchandise
that was not further processed by SLPM is that for which SLPM was
unable to substantiate its estimated packing cost. See French Sales
Verification Report at page 37, where we noted that ``SLPM acknowledged
that its packing costs were based on May 1998 estimated costs for which
it could not provide detailed specifications.'' With respect to the
packing types SLPM utilized when it further processed the subject
merchandise, notwithstanding respondent's claim that it ``calculated
packing costs in detail and provided support for its calculation,'' the
respondent provided no documentation on the record to support its cost
breakdown (listed in SLPM verification exhibit 13). We have thus denied
Usinor's claimed home market packing expense adjustment for all SLPM
sales.
Comment 9: Whether Sales of Certain Merchandise Should Be Reclassified
as Non-Prime Sales
Petitioners argue that the Department treated sales of certain
merchandise as prime merchandise in the preliminary determination when,
in fact, Usinor has stated that such merchandise is non-prime.
Petitioners note that Usinor has stated ``GTS guarantees neither the
grade nor the length of this merchandise; it only guarantees
thickness,'' and that the French Sales Verification Report confirmed
this assertion. Petitioners assert that this merchandise is non-prime
material that is priced differently from other CTL plate sold in the
home market, and thus should be treated as non-prime sales in the final
determination.
Respondent contends that the Department should not alter its
Preliminary Determination with respect to this merchandise. Respondent
argues that the only difference between this merchandise and full prime
merchandise is the possibility of changes in the mechanical properties
of the slab over the six-month waiting period. This merchandise,
according to respondent, is superior to non-prime merchandise because
it is warranted except for grade, while non-prime is not warranted at
all. Respondent argues that it would be distortive to treat this
merchandise as non-prime merchandise because it is much closer in
characteristics and price to the prime merchandise sold by GTS.
Department's Position: We agree with respondent that it would be
distortive to treat this merchandise as non-prime. We have stated, in
Notice of Final Determination of Sales at Less Than Fair Value; Certain
Hot-Rolled Flat-Rolled Carbon-Quality Steel Products From Brazil 64 FR
38756 (July 19, 1999) (``Hot-Rolled Steel from Brazil''), that ``to
determine if sales or transactions are outside the ordinary course of
trade, the Department evaluates all of the circumstances particular to
the sales in question. Examples of sales that we might consider outside
the ordinary course of trade are sales involving off-quality
merchandise or merchandise produced according to unusual product
specifications, merchandise sold at aberrational prices or with
abnormally high profits, merchandise sold pursuant to unusual terms of
sale, or merchandise sold to an affiliated party at a non-arm's length
price. See 19 CFR 351.102.''
In this case, the CTL plate described above is not defective in any
way, but is merely prime plate that has been in inventory for a period
long enough to possibly alter some mechanical properties of the
merchandise. See French Sales Verification Report at page 3. Although
the existence of such differences is speculative, in the interest of
full disclosure, respondent identifies this merchandise to customers.
However, we found no evidence at verification that customers actually
treat this merchandise any differently from full prime merchandise.
Thus, unlike that discussed in Hot-Rolled Steel from Brazil, these
products are not off-quality merchandise, and therefore the sales may
be considered within the ordinary course of trade. As such, we have
continued to treat this plate as prime merchandise for purposes of the
final determination.
Comment 10: Whether Usinor Has Provided Complete Information on Product
Specifications
Petitioners argue that the model matching hierarchies provided by
Usinor for two of its U.S. CTL plate specifications do not indicate
identical home market matches, when in fact Usinor sold merchandise
with these exact specifications in its home market. See Final
Calculation Memo, dated December 13, 1999, for a description of these
proprietary specifications. Petitioners assert that the Department
should revise its model match program to permit identical matches
between these U.S. and home market specifications.
Respondent contends that petitioners' argument in this regard is
simply incorrect, and that for these two U.S. CTL plate specifications,
the identical home market specification was sold in the home market and
has been identified.
Department's Position: We agree with respondent that it provided
accurate supplemental model-matching information in its May 25, 1999,
submission. Usinor identified the identical home market specification
for both of these U.S. specifications in its submission. Therefore, for
the final determination, we have matched the relevant U.S. sales to
home market sales with identical specifications.
Comment 11: Whether Usinor Failed to Report Inland Freight Expenses
That Were Incurred for Numerous U.S. Sales
Petitioners assert that for numerous U.S. sales with reported sales
terms that indicate inland freight expenses, Usinor failed to report
freight expense. Petitioners argue that, as facts available, the
Department should deduct the highest reported freight charge from each
of these transactions.
Respondent maintains that these sales were correctly reported as
incurring no freight expenses. According to respondent, the Department
specifically reviewed a transaction at the Francosteel sales
verification where the sales terms were reported as delivered but the
freight expense was zero, and verified that the zero freight expense
was correct. Respondent further argues that the other fields in the
Berg and Francosteel records corroborate that no U.S. freight expense
was incurred.
Department's Position: We agree with respondent. Item 5 of
Francosteel
[[Page 73151]]
verification exhibit 1 (list of corrections) from the ``Verification of
the Responses of Usinor in the Antidumping Duty Investigation of
Certain Cut-To-Length Carbon-Quality Steel Plate From France
(Francosteel Sales)'' (Oct. 22, 1999) (``Francosteel Sales Verification
Report'') contains the list of invoices in which Francosteel
incorrectly labeled the delivery terms ``delivered'' in its previous
sales databases. We verified specific invoice items from this list and
found that Francosteel incurred no freight expense for these invoices.
Further, we noted no discrepancies at the Berg sales verification when
verifying Berg's freight adjustment factor for its U.S. inland freight
expense.
Comment 12: Whether Usinor Has Failed To Report Warehousing Expenses
for Sales by Berg
Petitioners assert that Usinor's supplemental questionnaire
responses indicate that Berg incurred warehousing expenses on U.S.
sales because Usinor did not address the Department's request that it
explain the apparent contradiction between a statement Usinor had made
``which implies warehousing expenses were sometimes incurred in the
United States.'' Petitioners argue that the Department should apply
facts available to account for possible unreported warehousing expense
for all Berg sales. Petitioners suggest that the Department apply as
facts available the highest reported warehousing expense reported in
the home market.
Respondent maintains that petitioners are incorrect in implying
that there are possible unreported warehousing expenses for Berg sales.
Respondent states that Berg, as it stated in its initial questionnaire
response and as the Department verified, never incurred such warehouse
expense.
Department's Position: We agree with respondent. We found no
evidence of unreported warehousing expenses at the Berg sales
verification, and have therefore utilized Berg's reported expenses. See
Berg Sales Verification Report at sections Accounting Overview and
Reconciliations, Sales Process, U.S. Sales Transactions, and the
various expenses, where no evidence of unreported expenses are noted.
Comment 13: Whether the Department Should Reject Usinor's Most Recent
Dataset
Petitioners argue that a comparison of Usinor's August 23, 1999,
data submission and its most recent, November 10, 1999, data submission
reveals that Usinor made a number of changes to its datasets which the
company fails to acknowledge in its November 10 memorandum. Petitioners
cite the following unacknowledged changes: (1) The number of home
market sales transactions increased; (2) the mean gross unit price for
U.S. sales increased for numerous customers; (3) the mean value for
domestic brokerage and handling for U.S. sales decreased for numerous
customers; and (4) the mean value for international freight for U.S.
sales decreased for numerous customers. Petitioners argue that, because
Usinor has made these unexplained and apparently unauthorized changes
to its data, the Department should utilize the August 23, 1999 data
submission for the final determination.
Respondent argues that petitioners' list of ``unacknowledged and
unauthorized'' changes to the U.S. and home market sales files
submitted on November 10, 1999 in fact were discussed in respondent's
minor corrections filings and presented to the Department on the first
day of each verification. Respondent states that in the letter that
accompanied the files in the November 10 post-verification submission,
it incorporated by reference the minor corrections and verification
exhibits that described these corrections in detail.
Department's Position: We agree with respondent that in the letter
that accompanied the files in the November 10, post-verification
submission, it incorporated by reference the minor corrections and
verification exhibits that described these corrections in detail. At
verification we accepted these minor corrections, and accordingly, we
utilized Usinor's most recently submitted data for the final
determination.
Comment 14: Calculation of Further Manufacturer's Financial Expense
Ratio
Usinor first argues that the Department should not use Europipe
Gmbh's (``Europipe'') (i.e., Berg's parent) financial expense ratio to
calculate Berg's further manufacturing financial expense. Instead,
Usinor believes that Dillinger Hutte's (``Dillinger'') financial
expense ratio should be used because this company is the ultimate
parent of both Berg and Europipe. However, if the Department does
determine that Europipe's financial expense ratio should be used for
the final determination, Usinor requests that the Department make
certain corrections to the calculation of the ratio. First, Usinor
claims that Europipe's financial expenses should be offset by short-
term interest income. According to Usinor, the Department normally
allows such offsets, and cites to the Final Determination of Sales at
Less than Fair Value: Stainless Steel and Strip in Coils from the
United Kingdom, 64 FR 30688, 30710 (June 8, 1999) to support its claim.
Second, Usinor recommends that the Department include Europipe's
product specific research and development (``R&D'') expenses in the
calculation of denominator (i.e., cost of goods sold) that the
Department uses to determine the financial expense ratio. Although
Europipe records this expense as a separate line item on the income
statement, Usinor notes that the Department should consider it as a
cost of manufacturing because the expense is product-specific.
According to Usinor, the Department normally considers product-specific
R&D as a component of cost of goods, citing Final Results of
Administrative Review; Static Random Access Memory Semiconductors from
the Republic of Korea, 63 FR 8934, 8939 (February 23, 1998) to support
its claim.
In contrast, petitioners do not take issue with the use of
Europipe's financial expense ratio to calculate Berg's further
manufacturing financial expense. As for the calculation of the
financial expense ratio, the petitioners believe that Usinor's
suggested changes would misstate the financial expense of Berg.
Petitioners also assert that Usinor has not met the burden of proof in
supporting its claim for either adjustment. Specifically, petitioners
claim that Europipe's financial expense should not be altered because
Usinor has not shown that this income was in fact short-term interest
income. Likewise, the petitioners state that Usinor has not
demonstrated that Europipe's R&D expenses were product-specific.
According to petitioners, the Department considers product-specific or
process-specific R&D as a cost of manufacturing only if the benefits of
the R&D relate to a single product; otherwise, the R&D is considered a
G&A expense. See e.g., Negative Final Determination of Circumvention of
Antidumping Duty Order; Portable Electric Typewriters from Japan; 56 FR
58031, 58040 (November 15, 1991). In addition, the petitioners note
that Europipe's income statement did not classify its R&D as a
manufacturing expense. For these reasons, the petitioners claim that
the Department should not adjust the calculation.
Department's Position: We disagree with respondent that we should
not use Europipe's financial expense ratio to calculate Berg's further
manufacturing financial expenses. In the instant case, Europipe is the
parent company of Berg. Europipe, in turn, is a joint venture owned by
Dillinger (a Usinor affiliate)
[[Page 73152]]
and another company. Berg calculated its financial expense ratio based
on the information contained in the consolidated financial statements
of Dillinger. However, we note that Dillinger includes neither Berg's
nor Europipe's financial results in its consolidated financial
statements. Thus, Europipe's financial statement is the highest level
of consolidation available. As such, we have relied on the information
contained in Europipe's consolidated statements to calculate the
financial expense ratio. This method is consistent with our normal
practice. See Final Determination of Sales at Less Than Fair Value:
Stainless Steel Round Wire From Canada, 64 FR 17324-17336 (April 9,
1999) (the Department relied on the amounts reported in the
consolidated financial statements of the highest level available to
calculate the financial expense ratio); Final Determination of Sales at
Less Than Fair Value: Stainless Steel Sheet and Strip in Coils from
France, 64 FR 30820, 30842-43 (June 8, 1999) (where the Department
agreed with Usinor that it was appropriate to use the highest
consolidation level available to calculate the financial expense
ratio.)
We also disagree with Usinor's suggestion that we make certain
corrections to the calculation of Europipe's financial expense ratio.
Specifically, we have not allowed an offset for interest income because
Usinor did not provide any evidence to substantiate that the amount it
claimed as an offset is short-term interest income. Moreover,
Europipe's audited financial statements did not report any breakdown of
long- vs. short-term investments or interest income. Consistent with
our past practice, we have disallowed Europipe's claimed short-term
interest income offset in the financial expense calculation where
respondents have not substantiated their claim. See, e.g., Final
Results of Antidumping Duty Administrative Review and Determination Not
to Revoke in Part: Silicon Metal From Brazil, 64 FR 6305, 6313
(February 9, 1999), where the Department disallowed the short-term
offset because of lack of supporting evidence.
In addition, we disagree with Usinor that R&D expenses should be
included in the denominator (i.e., cost of sales) used in calculating
the financial expense ratio. In the instant investigation, we did not
include Europipe's R&D expenses in the denominator used to calculate
the financial expense ratio because Usinor did not provide evidence to
substantiate that its R&D is a cost of manufacturing. We note that the
only information on the record that identifies the nature of Europipe's
R&D is a footnote in the company's financial statement. However, this
footnote only provides a generic description of the expense and it does
not identify the R&D as product-specific. In addition, we note that
Europipe's income statement classifies this expense as a period cost
(similar to general expenses) rather than a component of its cost of
goods sold. Thus, we have found that Europipe's R&D expense is not a
product-specific cost of manufacturing. This determination is
consistent with our determination in the Final Results of Antidumping
Duty Administrative Review: Antifriction Bearings (other Than Tapered
Roller Bearings) and Parts Thereof from France, Germany, Italy, Japan,
Singapore, and the United Kingdom; 62 FR 2081, 2112 (January 15, 1997)
(the Department treated R&D as a G&A expense because respondent did not
provide information indicating that the R&D relates to a specific
product). For the final determination, we have not included Europipe's
expense as part of the cost of goods sold for purposes of calculating
the financial expense.
Comment 15: Offsetting Financial Expenses with Net Foreign Exchange
Gains
Usinor argues that the Department should include its net foreign
exchange gains in the calculation of its financial expenses. Usinor
admits that it could not identify the various components of this gain
because it does not have the necessary information to identify specific
foreign currency gains or losses as having arisen from transactions
involving accounts receivable, loans receivable, accounts payable,
loans payable, other sources, etc. This information, according to
Usinor, could not be provided because the company is made up of more
than thirty companies and does not separately track the foreign
currency transactions conducted for each of these companies. Thus,
Usinor argues that it should not be punished for failing to provide
data that it does not have. Moreover, Usinor claims that section
773(f)(1)(A) of the Act provides that the Department will calculate
costs based on the producer's records if such records are kept in
accordance with GAAP in the producer's home market and reasonably
reflect the costs associated with production and sale of the
merchandise. According to Usinor, its financial statements are prepared
in accordance with French GAAP and, as such, reasonably reflect costs
incurred by the company, including those costs related to foreign
exchange gains and losses.
Petitioners counter that the Department should disallow Usinor's
net foreign exchange gains from the calculation of financial expenses.
According to petitioners, Usinor has not demonstrated that its net
exchange gains resulted from short-term investments or that the gain
excludes amounts related to accounts receivables. According to
petitioners, the Department requires that respondents provide this
distinction, citing to Final Determination of Sales at less than Fair
Value: Hot-Rolled Flat-Rolled Carbon-Quality Steel Products from Japan,
64 FR 24329, 24350 (May 6, 1999) (``it is the Department's normal
practice to distinguish between foreign exchange gains and losses from
other types of transactions''). Petitioners additionally argue that
Usinor does have the information necessary to segregate the gains
related to specific transactions. Thus, petitioners claim that if
Usinor's claimed offset is allowed, the Department would reward Usinor
for failing to provide data that was available. According to
petitioners, these type of gains and losses normally arise on a
transaction-specific basis. Therefore, even if Usinor does not have the
information at the consolidated level, the petitioners claim the
subsidiaries would have it. The petitioners further note that
disallowing this offset does not ``punish'' Usinor, as Usinor claims,
but simply adopts a reasonable adverse inference from Usinor's refusal
to provide information the company has the ability to produce.
Department's Position: We agree with the petitioner that we should
not include Usinor's net foreign exchange gains in the calculation of
its financial expenses. To calculate its reported financial expense,
Usinor offset its financial expenses with the total net foreign
exchange gains realized on all transactions. However, Usinor was unable
to demonstrate the source of these consolidated foreign exchange gains
and losses. Thus, contrary to our normal practice, Usinor did not
distinguish between exchange gains and losses realized or incurred in
connection with sales transactions and those associated with purchase
transactions. Specifically, our normal practice is to include a portion
of these foreign-exchange gains and losses in the calculation of COP
and CV. See, e.g., Notice of Final Determination of Sales at Less Than
Fair Value: Steel Wire Rod from Trinidad and Tobago, 63 FR 9177, 9181
(February 24, 1998) (Steel Wire Rod from Trinidad and Tobago). We
normally include in the calculation of COP and CV the foreign-exchange
gains and losses that result from transactions
[[Page 73153]]
related to a company's manufacturing activities. We do not consider
exchange gains and losses from sales transactions to be related to the
manufacturing activities of the company. See, e.g., Steel Wire Rod from
Trinidad and Tobago and Final Determination of Sales at Less Than Fair
Value: Fresh Atlantic Salmon from Chile, 63 FR 31411, 31430 (June
9,1998).
In addition, we disagree with Usinor's position that this issue
involves or questions the respondent's use of generally accepted
accounting principles (``GAAP''). The issue at hand involves the fact
that Usinor has not shown that the components of this foreign exchange
gain are associated with manufacturing activities of the company.
We agree with petitioners that respondent has the burden of proof
to demonstrate, substantiate and document this type of adjustment. See
e.g., Timken Company v. United States, 673 F. Supp. 495, 513 (CIT
1987); and Final Results of Antidumping Duty Administrative Review:
Gray Portland Cement and Clinker from Japan; 60 FR 43761, 43767 (August
23, 1995); see also 19 CFR Sec. 351.401(b)(1) of our regulations.
Comment 16: Calculation of Depreciation Expense
Usinor claims that it properly excluded the stepped-up basis of an
affiliate supplier's depreciation expense in calculating the cost of
producing pig iron obtained from an affiliate. According to Usinor, the
affiliate is merely a wholly owned subsidiary that was created to hold
the production assets used by the Usinor organization in manufacturing
pig iron. Usinor asserts that this subsidiary does not actually
manufacture or produce pig iron because it is just an accounting entity
that exists for tax purposes. Since the transfer of the ownership of
the assets had only a tax effect, Usinor believes it is appropriate to
exclude the additional depreciation expense associated with the
stepped-up basis. Thus, Usinor claims that the Department should rely
on the depreciation expense as recorded in Usinor's consolidated
financial statements that exclude the adjustment. Petitioners did not
comment on this issue.
Department's Position: We disagree with Usinor that the
depreciation expense associated with its affiliate's revaluation of
assets (i.e., ``stepped-up basis'') should be excluded from the
calculation of COP. Specifically, Usinor obtained pig iron from an
affiliate company and reported the affiliate's cost of production. In
calculating the affiliate's cost of production, Usinor did not include
the depreciation expense reported in the company's normal books and
records. Instead, Usinor included a depreciation expense figure based
on its historical cost of the assets. Our normal practice, however, is
to rely on the depreciation expense recorded in the normal accounting
records. See, e.g., Cinsa S.A. de C.V. v. United States, 966 F. Supp
1230, 1234 (CIT 1997) (upholding the Department's reliance on
depreciation expense reported on the financial statements); Laclede
Steel Co. v. United States, 965 Slip OP 94-160, *24 (CIT 1994)
(upholding the Departments reliance on depreciation expense reported on
the financial statements); see also Final Results of Administrative
Review: Silicon Metal from Brazil, 64 FR, 6305, 6321 (February 9,
1999).
Contrary to Usinor's argument, we also do not find it appropriate
to rely on the depreciation expense of the affiliated supplier as
calculated at the consolidated level because it would circumvent the
major-input rule. See, sections 773(f)(2) and (3)of the Act. Here, the
affiliated company in question is a separate legal entity in France
that maintains its own books and records. Consistent with prior
determinations, we find that the legal form dictates whether we should
use that affiliate's production costs as reported in its books and
records. See, e.g., Notice of Final Results and Partial Rescission of
Antidumping Duty Administrative Review: Certain Pasta From Italy, 64 FR
6615, 6622 (February 10, 1999) (the Department treated an affiliated
supplier as a separate entity for reporting costs because of its legal
form). Therefore, we have adjusted the cost of pig iron to reflect the
affiliate's cost of production in accordance with section 773(f)(3) of
the Act.
Comment 17: Calculation of Reported Costs
Petitioners allege that Usinor uses a standard cost accounting
system but refused to provide variances to the Department. According to
petitioners, Usinor's failure to provide a variance between its
standard and actual costs means that the Department cannot use the
reported CONNUM-specific standard costs. Without this variance, the
petitioners continue that the Department has no assurance that Usinor
has accurately reported product-specific costs. Moreover, petitioners
claim that Usinor has consistently refused to provide this information.
Therefore, petitioners believe that the Department should reject
Usinor's cost data and resort to the use of facts available as it has
done in similar situations in the past, citing Notice of Final
Determination of Sales at Less Than Fair Value: Certain Preserved
Mushrooms from Indonesia, 63 FR 72,268, 72,276 (December 31, 1998).
Petitioners further counter Usinor's explanation that a variance is
not necessary in this case because it used actual costs; according to
petitioners, Usinor has stated both that it had reported actual product
specific costs and that the product specific costs are based on
standards. Thus, petitioners claim that Usinor is obliged to provide
variances because the statute requires that COP and CV be based on the
producer's actual costs. In addition, the petitioners discount the
importance of Usinor's claim that its total aggregate extra and
aggregate base costs equal aggregate actual costs. According to
petitioners, this does not signify that the product-specific costs upon
which the reported COP and CV data are based were accurate. In fact,
petitioners claim that the Department has rejected such arguments in
the past, citing Final Results of Antidumping Duty Administrative
Review: Certain Cut-to-Length Carbon Steel Plate from Mexico, 64 FR
7679 (January 4, 1999). To demonstrate the possible distortions that
may occur with the use of a ``base cost'' system which accounts for
actual costs on an aggregate level, petitioners refer to proprietary
information which cannot be adequately summarized. However, in essence,
petitioners argue that because of the possible differences between
actual costs and potentially erroneous standards, the Department cannot
have confidence that Usinor's base cost system is accurate.
Finally, petitioners contend that the Department's testing
performed at verification does not provide assurance that Usinor's
standard costs are accurate. For example, petitioners argue that the
verification step to reconcile the cost of an extra (i.e., the cost
variations associated with a product's unique physical
characteristics), with the amounts used in the cost build up means only
that Usinor adhered to its base plus extra method. Likewise, the
verification step to compare the consistency of the reported extras
with those outside the POI only indicates that the inaccuracies
contained in Usinor's previous figures also appear in the reported
costs.
Usinor argues that petitioners are incorrect in alleging that it
did not report any cost variances and therefore the Department should
reject all product-specific costs. Usinor states that its base-plus-
extra costing system reflects the actual production costs of
[[Page 73154]]
the company. To calculate the reported costs, respondent states that it
calculated the unit cost of the base product, the average extra costs
associated with the base product, and any extras associated with a
product's specifications. It then subtracted the average cost of extras
from the average base product cost and added the extra costs associated
with each unique product which resulted in the actual production costs
for each product. Respondent argues that a similar methodology was
verified and accepted by the Department in two recent cases. See Final
Results of Antidumping Duty Administrative Review: Certain Cold-Rolled
Carbon Steel Flat Products from Germany, 60 FR 65264, 65267 (1995)
(``Certain Cold-Rolled Carbon Steel Flat Products from Germany''); see
also Final Results of Antidumping Duty Administrative Review: Certain
Cold-Rolled Carbon Steel Plate from Finland, 63 FR 2952, 2957 (January
20, 1998) (``Certain Cut-to-Length Carbon Steel Plate from Finland'').
Furthermore, Usinor argues that there is no support for
petitioners' contention that the Department's cost verification
confirms that Usinor's reported costs are based on standard costs and
not actual costs. Rather, Usinor states that the Department recognized
that the base-plus-extra cost system is founded on actual production
costs and not standard costs adjusted to actual. Based upon this
argument, Usinor urges the Department to accept the reported
methodology just as it did in Certain Cut-to-Length Carbon Steel Plate
from Finland. Finally, respondent states that the antidumping law
allows costs to be computed based on the producer's normal accounting
records, provided that it is kept in accordance with GAAP. In the
instant case, respondent argues that the reported costs are kept in
accordance with GAAP and are therefore an accurate basis for the
calculation of COP and CV.
Department's Position: We disagree with petitioners' contention
that we must reject Usinor's submitted COP and CV data for this
investigation. In its normal accounting records, Usinor determines its
product-specific costs by using a ``base plus extras'' method. For
submission purposes, the company relied on this methodology. Contrary
to petitioners' assertions, Usinor does not use a standard cost
accounting system nor does it calculate variances. Instead, the system
begins and ends with actual production costs. Specifically, Usinor's
cost accounting system accumulates the actual costs incurred and actual
tonnages produced by product group. The company then takes these total
costs and deducts the total cost of extras to derive its base product
costs. To calculate the product specific costs, Usinor simply adds the
unique ``extras'' of a model to the base. Usinor used engineering
studies to determine the cost of product-specific extras. Contrary to
petitioners' allegation, we found nothing inherently unreliable or
theoretically unsound about Usinor's underlying cost allocation
methodology. In fact, we note that this method of using base-plus-extra
is quite common for the industry. See, e.g., Certain Cold-Rolled Carbon
Steel Flat Products from Germany and Certain Cut-to-Length Carbon Steel
Plate from Finland. In both of these proceedings, the Department
accepted COP and CV values calculated from the respondent's ``base-
plus-extra'' cost accounting systems used in the normal course of
business. Moreover, the record in the instant case contains the
following factual information that justifies using Usinor's normal
accounting system to calculate the unique cost of a CONNUM.
First, Usinor supported its product-specific costs with source
documentation that was verifiable. For example, in its June 30, 1999,
supplemental section D questionnaire response, Usinor provided
documentation of the detailed calculations used to derive its quality
extras. As noted earlier, Usinor based these calculations on
engineering standards and its production experience. After reviewing
and testing this information, we have no reason to believe that
Usinor's extra cost calculations, which were based on data used by the
company in its normal accounting records, do not reasonably represent
the cost differences incurred to produce individual products.
Furthermore, we note that section 773(f)(1)(A) of the Act specifically
requires that costs be calculated based on the records of the exporter
or producer of the merchandise, if such records are kept in accordance
with the GAAP of the exporting country and reasonably reflect the costs
associated with the production and sale of the merchandise. We have
found that following the GAAP provides the respondent and the
Department with a reasonable, objective and predictable basis by which
to compute costs for the merchandise under investigation. In accordance
with the statutory directive, the Department will accept the company's
``normal'' costs if the cost data can be reasonably allocated to
subject merchandise. In this instant case, we find the Usinor's costs
do reasonably reflect the costs of the merchandise under investigation.
Second, the record contains several overall cost reconciliations
that identify no misstatement or mis-allocations. For example, we
reconciled Usinor's reported product-specific costs to its audited
financial statements and noted no significant discrepancies. See
``Verification Report on the Cost of Production and Constructed Value
Data Submitted by USINOR'' (October 27, 1999) at page 9 through 12,
(``Cost Verification Report''). Thus, we confirmed that Usinor
accounted for all of the manufacturing costs it incurred during the
POI. In addition, we compared per-unit inventory values to reported
per-unit CONNUM values and noted no significant discrepancies.
Furthermore, we confirmed that Usinor's reported costs reasonably
reflected the values as recorded in the ordinary course of business.
Finally, Usinor's product-specific costs are supported by detailed
tests performed by the Department during verification. For example, we
tested Usinor's calculations of weighted-average costs, base costs, and
extra costs. See Cost Verification Report at pages 12 through 18. In
addition, we documented that the costs for extras used by Usinor in the
normal accounting system were in fact based on actual production and
cost data, engineering standards, and company experience. For these
reasons, we have relied on Usinor's base-plus extra costs for the final
determination.
Comment 18: Calculation of Freight Expenses Included in Further
Manufacturing Expenses
Petitioners claim that the Department should correct Berg's
reported movement expenses. According to petitioners, Usinor calculated
and reported the per-unit amount on a short-ton basis and not the
metric-ton basis used for all other costs. Usinor did not comment on
this issue.
Department's Position: We agree with petitioners that we should
correct for this clerical error. As noted by petitioners, Berg reported
its per unit movement expense (i.e., inbound freight from port to
production facility) for plate in short-tons. Usinor reported all other
further manufacturing costs on a metric ton basis. Therefore, we
adjusted the reported per-unit movement costs to reflect a per metric-
ton value for the final determination.
Continuation of Suspension of Liquidation
In accordance with section 735(c)(1)(B) of the Act, we are
directing
[[Page 73155]]
the Customs Service to continue to suspend liquidation of all entries
of subject merchandise from France that were entered, or withdrawn from
warehouse, for consumption on or after July 29, 1999 (the date of
publication of the Department's preliminary determination). The Customs
Service shall continue to require a cash deposit or posting of a bond
equal to the estimated amount by which the normal value exceeds the
U.S. price as shown below. These suspension of liquidation instructions
will remain in effect until further notice. The weighted-average
dumping margins are as follows:
------------------------------------------------------------------------
Weighted-
average
Exporter/manufacturer margin
percentage
------------------------------------------------------------------------
Usinor..................................................... 10.43
All others................................................. 10.43
------------------------------------------------------------------------
ITC Notification
In accordance with section 735(d) of the Act, we have notified the
International Trade Commission (``ITC'') of our determination. Because
our final determination is affirmative, the ITC will, within 45 days,
determine whether these imports are materially injuring, or threatening
material injury does not exist, the proceeding will be terminated and
all securities posted will be refunded or canceled. If the ITC
determines that such injury does exist, the Department will issue an
antidumping duty order directing Customs officials to assess
antidumping duties on all imports of the subject merchandise entered,
or withdrawn from warehouse, for consumption on or after the effective
date of the suspension of liquidation.
This determination is issued and published in accordance with
sections 735(d) and 777(i)(1) of the Act.
Dated: December 13, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-33230 Filed 12-28-99; 8:45 am]
BILLING CODE 3510-DS-P
