98-4695. Notice of Final Determination of Sales at Less Than Fair Value: Steel Wire Rod From Trinidad & Tobago  

  • [Federal Register Volume 63, Number 36 (Tuesday, February 24, 1998)]
    [Notices]
    [Pages 9177-9182]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 98-4695]
    
    
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    DEPARTMENT OF COMMERCE
    
    International Trade Administration
    [A-274-802]
    
    
    Notice of Final Determination of Sales at Less Than Fair Value: 
    Steel Wire Rod From Trinidad & Tobago
    
    AGENCY: Import Administration, International Trade Administration, 
    Department of Commerce.
    
    ACTION: Notice of final determination of sales at less than fair value.
    
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    EFFECTIVE DATE: February 24, 1998.
    
    FOR FURTHER INFORMATION CONTACT: Abdelali Elouaradia or Alexander 
    Braier, Import Administration, International Trade Administration, U.S. 
    Department of Commerce, 14th Street and Constitution Avenue, N.W., 
    Washington, D.C. 20230; telephone: (202) 482-2243 or (202) 482-3818, 
    respectively.
    
    The Applicable Statute and Regulations
    
        Unless otherwise indicated, all citations to the Tariff Act of 
    1930, as amended (the Act), are references to the provisions effective 
    January 1, 1995, the effective date of the amendments made to the Act 
    by the Uruguay Round Agreements Act (``URAA''). In addition, unless 
    otherwise indicated, all citations to the Department's regulations are 
    references to the provisions codified at
    
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    19 CFR Part 353 (April 1997). Although the Department's new 
    regulations, codified at 19 CFR 351 (62 FR 27296, May 19, 1997), do not 
    govern these proceedings, citations to those regulations are provided, 
    where appropriate, to explain current departmental practice.
    
    Final Determination
    
        We determine that steel wire rod (``SWR'') from Trinidad & Tobago 
    is being, or is likely to be, sold in the United States at less than 
    fair value (LTFV), as provided in section 735 of the Act.
    
    Case History
    
        Since the preliminary determination in this investigation 
    (Preliminary Determination of Sales at Less Than Fair Value and 
    Postponement of Final Determination: Steel Wire Rod from Trinidad & 
    Tobago), 62 FR 51581 (October 1, 1997) (``SWR''), the following events 
    have occurred:
        In November 1997, we conducted a verification of the respondent's 
    questionnaire responses. On December 15, 1997, the Department issued 
    its reports on verification findings for Caribbean Ispat, Ltd. (CIL). 
    On December 29, 1997, respondents submitted new computer sales listings 
    which included only data corrections identified through verification. 
    Petitioners and respondents submitted case briefs on December 22, 1997, 
    and rebuttal briefs on January 5, 1998. A public hearing was not held 
    as there were no requests for a hearing.
    
    Scope of Investigation
    
        The products covered by this investigation are certain hot-rolled 
    carbon steel and alloy steel products, in coils, of approximately round 
    cross section, between 5.00 mm (0.20 inch) and 19.0 mm (0.75 inch), 
    inclusive, in solid cross-sectional diameter. Specifically excluded are 
    steel products possessing the above noted physical characteristics and 
    meeting the Harmonized Tariff Schedule of the United States (``HTSUS'') 
    definitions for (a) stainless steel; (b) tool steel; (c) high nickel 
    steel; (d) ball bearing steel; (e) free machining steel that contains 
    by weight 0.03 percent or more of lead, 0.05 percent or more of 
    bismuth, 0.08 percent or more of sulfur, more than 0.4 percent of 
    phosphorus, more than 0.05 percent of selenium, and/or more than 0.01 
    percent of tellurium; or (f) concrete reinforcing bars and rods.
        The following products are also excluded from the scope of this 
    investigation:
         Coiled products 5.50 mm or less in true diameter with an 
    average partial decarburization per coil of no more than 70 microns in 
    depth, no inclusions greater than 20 microns, containing by weight the 
    following: carbon greater than or equal to 0.68 percent; aluminum less 
    than or equal to 0.005 percent; phosphorous plus sulfur less than or 
    equal to 0.040 percent; maximum combined copper, nickel and chromium 
    content of 0.13 percent; and nitrogen less than or equal to 0.006 
    percent. This product is commonly referred to as ``Tire Cord Wire 
    Rod.''
         Coiled products 7.9 to 18 mm in diameter, with a partial 
    decarburization of 75 microns or less in depth and seams no more than 
    75 microns in depth, containing 0.48 to 0.73 percent carbon by weight. 
    This product is commonly referred to as ``Valve Spring Quality Wire 
    Rod.''
         Coiled products 11 mm to 12.5 mm in diameter, with an 
    average partial decarburization per coil of no more than 70 microns in 
    depth, no inclusions greater than 20 microns, containing by weight the 
    following: carbon greater than or equal to 0.72 percent; manganese 
    0.50-1.10 percent; phosphorus less than or equal to 0.030 percent; 
    sulfur less than or equal to 0.035 percent; and silicon 0.10-0.35 
    percent. This product is free of injurious piping and undue 
    segregation. The use of this excluded product is to fulfill contracts 
    for the sale of Class III pipe wrap wire in conformity with ASTM 
    specification A648-95 and imports of this product must be accompanied 
    by such a declaration on the mill certificate and/or sales invoice. 
    This excluded product is commonly referred to as ``Semifinished Class 
    III Pipe Wrap Wire.''
        The products under investigation are currently classifiable under 
    subheadings 7213.91.3000, 7213.91.4500, 7213.91.6000, 7213.99.0030, 
    7213.99.0090, 7227.20.0000, and 7227.90.6050 of the HTSUS. Although the 
    HTSUS subheadings are provided for convenience and customs purposes, 
    our written description of the scope of this investigation is 
    dispositive.
    
    Exclusion of Pipe Wrap Wire
    
        As stated in the Notice of Preliminary Determination, North 
    American Wire Products Corporation (``NAW''), an importer of the 
    subject merchandise from Germany, requested that the Department exclude 
    steel wire rod used to manufacture Class III pipe wrapping wire from 
    the scope of the investigation of steel wire rod from Canada, Germany, 
    Trinidad and Tobago, and Venezuela. On December 22, 1997, NAW submitted 
    to the Department a proposed exclusion definition. On December 30, 1997 
    and January 7, 1998, the petitioners submitted letters concurring with 
    the definition of the scope exclusion and requesting exclusion of this 
    product from the scope of the investigation. We have reviewed NAW's 
    request and petitioners' comments and have excluded steel wire rod for 
    manufacturing Class III pipe wrapping wire from the scope of this 
    investigation (see, Memorandum to Richard W. Moreland dated January 9, 
    1998 and instructions to Customs dated February 3, 1998).
    
    Period of Investigation
    
        The period of investigation (``POI'') is January 1, 1996 through 
    December 31, 1996.
    
    Fair Value Comparisons
    
        To determine whether sales of steel wire rod sold by CIL to the 
    United States were made at less than fair value, we compared the Export 
    Price (``EP'') to the normal value (``NV''), as described in the ``EP'' 
    and ``Normal Value'' sections of this notice below. In accordance with 
    section 777A(d)(1)(A)(i), we calculated weighted-average EPs for 
    comparisons to weighted-average NVs.
    
    Product Comparisons
    
        In accordance with section 771(16) of the Act, we considered all 
    products produced by the respondent, covered by the description in the 
    Scope of Investigation section above, and sold in the home market 
    during the POI, to be foreign like products for purposes of determining 
    appropriate product comparisons to U.S. sales. Where there were no 
    sales of identical merchandise in the home market to compare to U.S. 
    sales, we compared U.S. sales to the next most similar foreign like 
    product on the basis of the characteristics listed in the antidumping 
    duty questionnaire and the May 22, 1997, reporting instructions.
        Consistent with our practice, we compared prime merchandise sold in 
    the United States to prime merchandise sold in the home market, and 
    secondary merchandise to secondary merchandise. See, e.g., Certain 
    Cold-Rolled Carbon Steel Flat Products from the Netherlands; Final 
    Results of Antidumping Duty Administrative Review, 61 FR 48465, 
    (September 13, 1996).
        On January 8, 1998, the Court of Appeals of the Federal Circuit 
    issued a decision in Cemex, S.A. v. United States, No. 97-1151, 1998 WL 
    3626 (Fed. Cir. Jan. 8, 1998). In that case,
    
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    based on the pre-URAA version of the Act, the Court discussed the 
    appropriateness of using constructed value (``CV'') as the basis for 
    foreign market value when the Department finds home market sales to be 
    outside the ordinary course of trade. This issue was not raised by any 
    party in this proceeding. However, the URAA amended the definition of 
    sales outside the ``ordinary course of trade'' to include sales 
    disregarded as below cost. See section 771(15) of the Act. Because the 
    Court's decision was issued so close to the deadline for completing 
    this administrative review, we have not had sufficient time to evaluate 
    and apply (if appropriate and if there are adequate facts on the 
    record) the decision to the facts of this ``post-URAA'' case. For these 
    reasons, we have determined to continue to apply our policy regarding 
    the use of CV when we have disregarded below-cost sales from the 
    calculation of NV.
    
    Level of Trade
    
        In accordance with section 773(a)(1)(B) of the Act, to the extent 
    practicable, we determine NV based on sales in the comparison market at 
    the same level of trade (LOT) as the EP or CEP. The NV LOT is that of 
    the starting-price sales in the comparison market or, when NV is based 
    on constructed value (CV), that of the sales from which we derive 
    selling, general and administrative (SG&A) expenses and profit. For EP, 
    the U.S. LOT is also the level of the starting-price sale, which is 
    usually the sale from the exporter to the importer. For CEP, it is the 
    level of the constructed sale from the exporter to the importer.
        To determine whether NV sales are at a different LOT than the EP or 
    CEP, 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 an LOT adjustment under section 
    773(a)(7)(A) of the Act. See Notice of Final Determination of Sales at 
    Less Than Fair Value: Certain Cut-to-length Carbon Steel Plate From 
    South Africa, 62 FR 61731 (November 19, 1997).
        Neither CIL nor petitioners commented on our preliminary level of 
    trade analysis. Furthermore, our verification findings were consistent 
    with our preliminary level of trade analysis. Therefore, consistent 
    with our findings in the preliminary determination, for this final 
    determination we have continued to treat all of CIL's home market and 
    U.S. sales as being at a single level of trade and we have made no 
    level of trade adjustment when matching its U.S. sales to home market 
    sales.
    
    Export Price
    
        We based price in the United States on EP, in accordance with 
    subsections 772 (a) and (c) of the Act because the subject merchandise 
    was sold directly to the first unaffiliated purchaser in the United 
    States prior to importation and CEP was not otherwise warranted based 
    on the facts on the record.
        We calculated EP based on packed prices to the first unaffiliated 
    customer in the United States. We made adjustments, where appropriate, 
    for international ocean freight, marine insurance, U.S. brokerage and 
    handling, U.S. Customs duties and user fees, U.S. inland freight from 
    port to unaffiliated customer, U.S. inland insurance, dock handling and 
    survey fees in both the United States and Trinidad in accordance with 
    section 772(c)(2) of the Act.
        We corrected the CIL's data for certain errors and omissions found 
    at verification and submitted to the Department.
    Normal Value
        In order to determine whether there is a sufficient volume of sales 
    in the home market to serve as a viable basis for calculating NV (i.e., 
    if the aggregate volume of home market sales of the foreign like 
    product is greater than five percent of the aggregate volume of U.S. 
    sales), we compare the respondent's volume of home market sales of the 
    foreign like product to the volume of U.S. sales of the subject 
    merchandise, in accordance with section 773(a)(1)(C) of the Act. Since 
    CIL's aggregate volume of home market sales of the foreign like product 
    was greater than five percent of its aggregate volume of U.S. sales for 
    the subject merchandise, we determined that the home market was viable. 
    Therefore, we have based NV on home market sales.
    
    Cost of Production Analysis
    
        Pursuant to an allegation made by petitioner, we initiated a cost 
    of production investigation in our notice of initiation (62 FR 13854 
    March 24, 1997). Before making any fair value comparisons, we conducted 
    the COP analysis described below.
    
    Calculation of COP
    
        We calculated the COP based on the sum of respondent's cost of 
    materials and fabrication for the foreign like product, plus amounts 
    for home market general expenses and packing costs in accordance with 
    section 773(b)(3) of the Act. We relied on the submitted COP data, 
    except in the following instances where the costs were not 
    appropriately quantified or valued:
        1. We revised the reported general and administrative expense 
    (``G&A'') rate to include only net foreign exchange losses related to 
    accounts payable. See comment 4.
        2. We used CIL's COP/CV files which assign the cost of purchased 
    billets to specific control numbers. See comment 5.
    
    Test of Home Market Prices
    
        We used the respondent's submitted POI weighted-average COPs, as 
    adjusted (see above). We compared the weighted-average COP figures to 
    home market sales of the foreign like product as required under section 
    773(b) of the Act. In determining whether to disregard home-market 
    sales made at prices below the COP, we examined whether (1) within an 
    extended period of time, such sales were made in substantial 
    quantities, and (2) such sales were made at prices which permitted the 
    recovery of all costs within a reasonable period of time. On a product-
    specific basis, we compared the COP to the home market prices, less any 
    applicable movement charges, rebates, discounts, and direct and 
    indirect selling expenses.
    
    Results of COP Test
    
        Pursuant to section 773(b)(2)(C), where less than 20 percent of 
    respondent's sales of a given product were at prices less than the COP, 
    we did not disregard any below-cost sales of that product because we 
    determined that the below-cost sales were not made in ``substantial 
    quantities.'' Where 20 percent or more of a respondent's sales of a 
    given product during the POI were at prices less than the COP, we 
    determined such sales to have been made in ``substantial quantities,'' 
    and within an extended period of time in accordance with section 
    773(b)(2)(B) of the Act. Where we determined that such sales were also 
    not made at prices which would permit recovery of all costs within a 
    reasonable period of time, in accordance with section 773(b)(2)(D) of 
    the Act, we disregarded the below-cost sales. Where all sales of a 
    specific product were at prices below the COP, we disregarded all sales 
    of that product, and calculated NV based on CV.
    
    [[Page 9180]]
    
    Calculation of CV
    
        In accordance with section 773(e) of the Act, we calculated CV 
    based on the sum of respondent's cost of materials, fabrication, SG&A, 
    U.S. packing costs, interest expenses and profit. As noted above, we 
    assigned the cost of purchased billets to specific control numbers and 
    recalculated Ispat's general and administrative expense amount. In 
    accordance with section 773(e)(2)(A) of the Act, we based SG&A and 
    profit on the amounts incurred and realized by the respondent in 
    connection with the production and sale of the foreign like product in 
    the ordinary course of trade, for consumption in the foreign country.
    
    Price-to-Price Comparisons
    
        For those product comparisons for which there were sales at prices 
    above the COP, we based NV on prices to home market customers. We made 
    adjustments, where appropriate, for physical differences in the 
    merchandise in accordance with section 773(a)(6)(C)(ii) of the Act.
        We calculated NV based on prices to unaffiliated home market 
    customers. We made deductions for discounts, rebates, and inland 
    freight. In addition, we made circumstance-of-sale adjustments or 
    deductions for credit, mark-up by affiliated parties, and warranty, 
    where appropriate. In accordance with section 773(a)(6), we deducted 
    home market packing costs and added U.S. packing costs.
    
    Currency Conversion
    
        For purposes of the preliminary determination, we made currency 
    conversions using the official daily exchange rate in effect on the 
    date of the U.S. sales. The Department's preferred source for daily 
    exchange rates is the Federal Reserve Bank. However, the Federal 
    Reserve Bank does not track or publish exchange rates for Trinidad 
    currency. Therefore, we made currency conversions based on the daily 
    exchange rates from the Dow Jones Business Information Service, as 
    published in the Wall Street Journal. This is consistent with the 
    Department's practice. See, i.e., Final Affirmative Countervailing Duty 
    Determination on Steel Wire Rod From Trinidad and Tobago, (FR cite).
    
    Verification
    
        As provided in section 782 (i) of the Act, we conducted a 
    verification of the information submitted by CIL for use in our final 
    determination. We used standard verification procedures, including 
    examination of relevant accounting and sales/production records and 
    original source documents provided by respondents.
    
    Interest Party Comments
    
    Comment 1: Composite Coils
    
        CIL argues that the Department incorrectly treated its sales of 
    composite coil as sales of secondary merchandise rather than prime 
    merchandise. CIL states that a composite coil consists of smaller 
    sections of prime merchandise, which are physically banded together to 
    produce a full coil of prime merchandise. CIL argues that ``[Fo]ot for 
    foot, composite coil is prime merchandise'' (CIL Case Brief at 2) 
    because it shares the identical physical characteristics as prime 
    merchandise. Further, CIL maintains, petitioners have not introduced 
    any evidence that the physical characteristics of composite coils make 
    it a second quality product.
        CIL notes that petitioner's argument that the Department should 
    classify sales of composite coils as secondary merchandise on the basis 
    of price alone is contrary to section 1677(16)(A) of the Act, which 
    states that the preferred ``foreign like product'' is the merchandise 
    ``identical in physical characteristics'' with the subject merchandise 
    (CIL Case Brief at 3). CIL concludes, therefore, that the Department 
    must consider its sales of composite coils to be sales of prime 
    merchandise.
        Petitioners urge the Department to uphold its preliminary 
    determination to treat composite coil sales as non-prime merchandise 
    sales, arguing that (1) the physical characteristics of composite coils 
    are different from prime merchandise, (2) composite coils are much more 
    difficult for wire drawers to process because they are not one 
    continuous piece of wire rod, and (3) therefore, composite coils are 
    priced lower than prime coils because they are less desirable to 
    customers, and not, as CIL contends, because of competitive pressures 
    in the home market. Petitioners assert that the very definition of a 
    composite coil points to the most significant physical difference 
    between it and prime merchandise, the fact that there are one or more 
    breaks in the coil which renders it much more difficult to process and 
    hence less desirable to customers. Petitioners conclude by rebutting 
    CIL's allegation that the Department has based its preliminary finding 
    that composite coils are not prime merchandise only based on price 
    differences. Petitioners state that ``* * * the Department is using the 
    unquestionable physical difference between composite coils and prime 
    merchandise as a matching criterion, not price'' (CIL Case Brief at 3).
    
    DOC Position
    
        We agree with CIL. Section 771(16) of the Act directs the 
    Department to compare sales of home market merchandise which are ``such 
    or similar'' to merchandise sold in the United States. In accordance 
    with section 771(16)(A), the Department first identifies and compares 
    that merchandise which is ``identical'' in terms of physical 
    characteristics, followed by sales of merchandise which is most 
    ``similar'' in physical characteristics. To make these determinations, 
    the Department devises a hierarchy of commercially meaningful 
    characteristics suitable to each class or kind of merchandise. The 
    Department considers merchandise to be identical within the meaning of 
    section 771(16)(A) when all the relevant characteristics match. 
    Composite coils were verified as identical in every way to prime 
    merchandise within each CONNUM (see CIL Sales Verification) (Dec. 15, 
    1997), within the meaning of the statute and the Department's product 
    matching hierarchy. In addition, composite coils are purchased and used 
    by customers as prime merchandise, are used to fill orders of prime 
    merchandise sold, and are used in the same applications as continuous 
    coils. Therefore, as there is no basis for considering them as 
    secondary merchandise, the Department has revised these final results 
    to treat composite coils as prime merchandise.
    
    Comment 2: U.S. Commissions
    
        CIL claims that we made an improper adjustment to the U.S. price, 
    by deducting the mark-up retained by its affiliated parties from the 
    U.S. price. CIL further states that for the U.S. price calculation, in 
    the case of EP sales, the Department should not deduct any selling 
    expenses, direct or indirect, but can adjust normal value to reflect 
    differences in direct selling expenses incurred on U.S. and home market 
    sales through a ``circumstance of sale adjustment''. Furthermore, CIL 
    argues that the mark-up retained by its U.S. affiliates is irrelevant 
    to the dumping calculation, since it represents revenue to the overall 
    Ispat group, not an expense.
        Petitioners argue that this mark-up is commission incurred only on 
    certain U.S. sales, but not in the home market. In addition, 
    petitioners argued that (1) the Department policy is to adjust for 
    commissions to affiliates or employees on EP sales, and (2) the 
    regulations
    
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    permit circumstance of sale adjustments for direct selling expenses.
    
    DOC Position
    
        We disagree with both CIL and petitioners, in part. We disagree 
    with CIL that the Department made an improper adjustment to U.S. price 
    based on the mark-up retained by CIL's U.S. sales affiliates. The 
    program log which was disclosed to all parties at disclosure clearly 
    indicates that no such adjustment relating to this mark-up was made to 
    U.S. price, and CIL's price calculation sheets for U.S. sales (see, 
    i.e. Sales Analysis Memo) (Sept. 24, 1997) clearly demonstrate that 
    this mark-up is incorporated into the gross unit price reported to the 
    Department (See, i.e., CIL Verification Exhibit 7).
        We disagree with petitioners that this mark-up is a commission 
    warranting a circumstance of sale adjustment, because the Department 
    applies a two-pronged test to determine whether an adjustment for 
    related party commissions is appropriate. First, we determine if the 
    commissions are directly related to specific sales and, secondly, we 
    determine whether the commissions are at arm's length (See Final 
    Results of Antidumping Duty Administrative Review; Certain Welded 
    Carbons Steel Standard Pipes and Tubes from India, 57 FR 54360 (Nov. 
    18, 1992). Even though the facts on the record support the allegation 
    that this mark-up is directly related to specific sales, they do not 
    demonstrate that it is at arm's length. Since the preliminary 
    determination, we have reconsidered this issue. The Department's 
    current practice, as well as the stated preference in the finalized 
    regulations, is to use actual expenses incurred by U.S. affiliates. See 
    19 CFR 351.402; and e.g. Granular Polytetrafluoroethylene Resin from 
    Italy, 62 Fed. Reg. 48592, 48593 (September 16, 1997) (Comment 2). The 
    reported expenses incurred by CIL's U.S. affiliate are indirect 
    expenses. Thus, a circumstance of sale adjustment pursuant to section 
    353.56(a) of the Department's regulations is not warranted.
    
    Comment 3: Applicable Exchange Rates
    
        CIL contends that in absence of official Trinidad dollar to U.S. 
    dollar exchange rates from the Federal Reserve Bank, the Department 
    should use the publicly available published rates from the Central Bank 
    of Trinidad and Tobago (``Bank''). CIL argues that these rates are more 
    appropriate than the (Dow Jones rates) rates the Department used in the 
    preliminary determination because the difference between the Bank rates 
    and the preliminary determination rates is significant, and the Bank 
    rates are more reasonable and reflective of commercial reality in 
    Trinidad during the POI. CIL asserts that these rates do not represent 
    ``new factual information'' in the context of the Department's 
    regulations because exchange rates are not provided by respondents, but 
    rather are obtained independently by the Department from publicly 
    availably sources.
        Petitioners argue that CIL's proposition to use the Bank exchange 
    rates should be rejected because (1) the Bank's exchange rates 
    constitute new factual information, and (2) CIL's argument that the 
    Bank's rates are more reflective of commercial reality is predicated on 
    an analysis of only two weeks of data, which is an insufficient sample 
    to determine any significant difference between the two rates during 
    the POI.
    
    DOC Position
    
        The Department's normal practice is to use exchange rates provided 
    by the Federal Reserve Bank. When the Federal Reserve does not provide 
    exchange rates, as in the case of Trinidad, a reasonable alternative is 
    to use rates from the Dow Jones Business Information Services (see 
    Final Determination of Sales at Less Than Fair Value: Certain Steel 
    Concrete Reinforcing Bars From Turkey, 62 FR 9737 (March 4, 1997), and 
    Ferrosilicon From Brazil; Preliminary Results of Antidumping Duty 
    Administrative Review, 61 FR 20793 (May 8, 1996)). The Dow Jones is a 
    well established, reliable source of commercially available exchange 
    rates. Thus it is reasonable to use these rates for this final 
    determination. Furthermore, Ispat provided no evidence that the Bank 
    rate was available to Ispat, or that Ispat used this rate during the 
    POI. For all of these reasons, the Department is continuing to utilize 
    Dow Jones exchange rates for this final determination.
    
    Comment 4: Exchange Gains and Losses
    
        CIL argues that the Department's policy to include exchange gains 
    and losses arising from the purchase of production inputs, but exclude 
    gains and losses arising from other foreign currency denominated 
    accounts, fails to reflect normal commercial business practices. CIL 
    argues that the Department calculated a nonexistent cost by recognizing 
    a foreign exchange loss on purchases transactions (accounts payable), 
    but disregarding foreign exchange gains on sales transactions (cash and 
    accounts receivable). CIL states that in normal financial practices, 
    corporate treasurers do not manage specific accounts, but instead 
    manage the net exposed position of the corporation. For example, if a 
    corporation is holding an accounts receivable (or cash) balance and an 
    accounts payable balance in the same currency maturing on approximately 
    the same date, the treasurer will consider the company hedged. Under 
    these circumstances any change in relative currency values will be 
    offset with no cost to the corporation. CIL claims that this situation 
    is in fact what happened within their organization during the POI.
        CIL explains that the Act requires the Department to use the 
    exchange rate prevailing on the date of the sales transaction to 
    convert foreign currency amounts to U.S. dollars, and any exchange gain 
    or loss incurred when the actual payment is received is ignored. CIL 
    argues that the Department uses the exchange rate as of the date of the 
    sales transaction because the Department does not expect the producer 
    to adjust its sales prices for unforeseeable future favorable or 
    unfavorable exchange rate fluctuations. The Department's current policy 
    for purchase transactions, however, assumes that a producer can foresee 
    favorable or unfavorable exchange rate fluctuations, and can adjust 
    sales prices accordingly. CIL argues that to ensure nonexistent (due to 
    hedging) or unforeseeable (due to exchange rate fluctuations) costs are 
    not included in the cost of production, the Department should either 
    totally ignore the exchange gains and losses (regardless of whether 
    they arise from purchase or sales transactions) or offset the exchange 
    losses from purchase transactions with the exchange gain on sales 
    transactions.
        Petitioners argue that the Department should follow its 
    longstanding practice as outlined in Circular Welded Non-Alloy Steel 
    Pipe and Tube from Mexico, (62 FR 37014, 37026, July 10, 1997) (Final 
    Results of the Administrative Review), where the Department did not 
    include exchange gains and losses on accounts receivables, because 
    these gains and losses relate to selling activities rather than 
    production costs. Petitioners state that the Department should not 
    alter its longstanding policy and should continue to ignore exchange 
    gains and losses on accounts receivables, as it did in the preliminary 
    determination.
    
    DOC Position
    
        We agree with the petitioner that foreign exchange gains and losses 
    arising from sales transactions should not be included in CIL's COP and 
    CV. It is the Department's normal practice to
    
    [[Page 9182]]
    
    distinguish between exchange gains and losses from sales transactions 
    and exchange gains and losses from purchase transactions. See, e.g., 
    Circular Welded Non-Alloy Steel Pipe and Tube from Mexico, 62 FR 37014, 
    37026 (July 10, 1997) (Final Results of the Administrative Review, 
    Comment 31). The Department normally includes in its calculation of COP 
    and CV foreign exchange gains and losses resulting from transactions 
    related to a company's manufacturing operations (e.g., purchases of 
    inputs). See, e.g., Final Determination of Sales Less Than Fair Value: 
    Polyethylene Tenephthalate Film, Sheet, and Ship From the Republic of 
    Korea, 56 FR 16305, 16313 (April 22, 1991) (comment 16). We do not 
    consider foreign exchange gains and losses arising from sales 
    transactions to relate to manufacturing activities of a company. 
    Accordingly, for the final determination we included in COP and CV 
    exchange gains and losses arising from purchase transactions (accounts 
    payable), but disallowed exchange gains and losses arising from sales 
    transactions.
    
    Comment 5: Purchased Billet Costs
    
        CIL argues that the Department should not specifically assign the 
    cost of purchased billets to the specific CONNUMs produced from these 
    billets. Instead, CIL maintains that the Department should allocate the 
    cost of the purchased billets over all of CIL's production of subject 
    merchandise. CIL claims that assigning the cost of purchased billets to 
    the specific CONNUM distorts CIL's actual cost of production. CIL 
    states that the company could have produced the purchased billet 
    internally. The decision of which types of billets to purchase, 
    however, was discretionary and driven by revenue and cost 
    considerations, not by the type of billet.
        CIL further claims that the purchase of billets is a departure from 
    the company's normal course of business, in which it internally 
    produces all billets. CIL states that, consistent with section 
    773(f)(1)(B) of the Act, its purchase of billets was a type of 
    nonrecurring cost that benefitted the company's current production. 
    Thus, according to CIL, the Department should adjust costs such that 
    purchased billets are spread across all production.
        Petitioners contend that whenever the Department is able to do so, 
    it should assign costs only to those specific products whose production 
    incurred such costs. Petitioners state that because the costs for 
    purchased billets can be directly tied to specific CONNUMs, the most 
    accurate method of calculating COP is to allocate purchased billet 
    costs to the specific CONNUMs they were used to produce.
    
    DOC Position
    
        We agree with petitioners that the costs incurred for purchased 
    billets should be charged directly to the products produced from these 
    same billets. In fact, in this case, to do otherwise would not result 
    in a product-specific cost since the record clearly demonstrates which 
    products were manufactured by CIL from purchased billets.
        With respect to CIL's characterization of purchased billets as a 
    nonrecurring cost, we consider the company's reliance upon section 
    773(f)(1)(B) of the Act to be misplaced (19 U.S.C. 1677(f)(1)(B)). The 
    billets at issue were purchased as direct material inputs used in the 
    production of specific steel rod products. The statute, on the other 
    hand, envisions nonrecurring costs as indirect costs that, by their 
    nature, can be shown to benefit current or future production and, thus, 
    should be systematically allocated to those products benefitted. As an 
    example of such nonrecurring costs, the Statement of Administration 
    Action (SAA), at page 835, cites preproduction research and development 
    costs. Such costs may be demonstrated to provide a clear but indirect 
    benefit to future production. In that regard, they differ markedly from 
    the cost of purchased billets at issue here since the billets are 
    simply a direct material input for a specific type of finished steel 
    rod.
    
    Suspension of Liquidation
    
        In accordance with section 733(d) of the Act, we are directing the 
    Customs Service to continue to suspend liquidation of all entries of 
    steel wire rod from Trinidad and Tobago, that are entered, or withdrawn 
    from warehouse, for consumption on or after the date of publication of 
    this notice in the Federal Register. The Customs Service will require a 
    cash deposit or posting of a bond equal to the estimated duty margins 
    by which the normal value exceeds the expert 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  
                   Manufacturer/producer/exporter                 percentage
                                                                    margin  
    ------------------------------------------------------------------------
    CIL........................................................        11.85
    All other..................................................        11.85
    ------------------------------------------------------------------------
    
    ITC Notification
    
        In accordance with section 735(d) of the Act, we have notified the 
    ITC of our determination. As our final determination is affirmative, 
    the ITC will determine, within 45 days, whether these imports are 
    causing material injury, or threat of material injury, to an industry 
    in the United States. If the ITC determines that material injury, or 
    threat of material injury, does not exist, the proceedings 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 antidumping duty orders 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 published pursuant to section 735(d) of the 
    Act.
    
        Dated: February 13, 1998.
    Robert S. LaRussa,
    Assistant Secretary for Import Administration.
    [FR Doc. 98-4695 Filed 2-23-98; 8:45 am]
    BILLING CODE 3510-DS-P
    
    
    

Document Information

Effective Date:
2/24/1998
Published:
02/24/1998
Department:
International Trade Administration
Entry Type:
Notice
Action:
Notice of final determination of sales at less than fair value.
Document Number:
98-4695
Dates:
February 24, 1998.
Pages:
9177-9182 (6 pages)
Docket Numbers:
A-274-802
PDF File:
98-4695.pdf