[Federal Register Volume 63, Number 50 (Monday, March 16, 1998)]
[Notices]
[Pages 12744-12752]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-6713]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-351-817]
Certain Cut-To-Length Carbon Steel Plate From Brazil: Final
Results of Antidumping Duty Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of final results of antidumping duty administrative
review.
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SUMMARY: On September 9, 1997, the Department of Commerce (the
Department) published the preliminary results of the administrative
review of the antidumping duty order on Certain Cut-to-Length Carbon
Steel Plate from Brazil. This review covers one collapsed entity which
was a manufacturer/exporter of the subject merchandise to the United
States during the period of review (POR), August 1, 1995, through July
31, 1996. We gave interested parties an opportunity to comment on our
preliminary results. Based on our analysis of the comments received, we
have changed the results from those presented in the preliminary
results of review.
EFFECTIVE DATE: March 16, 1998.
FOR FURTHER INFORMATION CONTACT: Samantha Denenberg or Linda Ludwig,
Enforcement Group III, Import Administration, International Trade
Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202)
482-0414 or (202) 482-3833, respectively.
SUPPLEMENTARY INFORMATION:
Background
On July 9, 1993, the Department published in the Federal Register
(58 FR 37091) the final affirmative antidumping duty determination on
Certain Cut-to-Length Carbon Steel Plate from Brazil. We published an
antidumping duty order on August 19, 1993 (58 FR 44164). On September
9, 1997, the Department published in the Federal Register (62 FR 47436)
the preliminary results of the administrative review (Preliminary
Results) of the antidumping duty order on Certain Cut-
[[Page 12745]]
to-Length Carbon Steel Plate from Brazil. On December 24, 1997, we
published in the Federal Register (62 FR 67345) an extension of the
time limit (Extension of Time Limit) for conducting this review. The
Department has now completed this administrative review in accordance
with section 751 of the Tariff Act of 1930, as amended (the Act).
Applicable Statute and Regulations
Unless otherwise stated, all citations to 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 refer to the regulations as codified at 19 CFR
part 353, as they existed on April 1, 1996.
On January 8, 1998, the Court of Appeals for the Federal Circuit
issued a decision in CEMEX v. United States, 1998 WL 3626 (Fed.Cir.).
In that case, based on the pre-URAA version of the Act, the Court
discussed the appropriateness of using constructed value (CV) as the
basis for foreign market value when the Department finds home market
sales to be outside the ``ordinary course of trade.'' This issue was
not raised by any party in this proceeding. However, the URAA amended
the definition of sales outside the ``ordinary course of trade'' to
include sales below cost. See Section 771(15) of the Act. Consequently,
the Department has reconsidered its practice in accordance with this
court decision and has determined that it would be inappropriate to
resort directly to CV, in lieu of foreign market sales, as the basis
for NV if the Department finds foreign market sales of merchandise
identical or most similar to that sold in the United States to be
outside the ``ordinary course of trade.'' Instead, the Department will
use sales of similar merchandise, if such sales exist. The Department
will use CV as the basis for NV only when there are no above-cost sales
that are otherwise suitable for comparison. Therefore, in this
proceeding, when making comparisons in accordance with section 771(16)
of the Act, we considered all products sold in the home market as
described in the ``Scope of Investigation'' section of this notice,
below, that were in the ordinary course of trade for purposes of
determining appropriate product comparisons to U.S. sales. Where there
were no sales of identical merchandise in the home market made in the
ordinary course of trade to compare to U.S. sales, we compared U.S.
sales to sales of the most similar foreign like product made in the
ordinary course of trade, based on the characteristics listed in
Sections B and C of our antidumping questionnaire. We have implemented
the Court's decision in this case, to the extent that the data on the
record permitted.
Scope of this Review
The products covered by this administrative review constitute one
``class or kind'' of merchandise: certain cut-to-length carbon steel
plate. These products include hot-rolled carbon steel universal mill
plates (i.e., flat-rolled products rolled on four faces or in a closed
box pass, of a width exceeding 150 millimeters but not exceeding 1,250
millimeters and of a thickness of not less than 4 millimeters, not in
coils and without patterns in relief), of rectangular shape, neither
clad, plated nor coated with metal, whether or not painted, varnished,
or coated with plastics or other nonmetallic substances; and certain
hot-rolled carbon steel flat-rolled products in straight lengths, of
rectangular shape, hot rolled, neither clad, plated, nor coated with
metal, whether or not painted, varnished, or coated with plastics or
other nonmetallic substances, 4.75 millimeters or more in thickness and
of a width which exceeds 150 millimeters and measures at least twice
the thickness, as currently classifiable in the Harmonized Tariff
Schedule (HTS) under item numbers 7208.40.3030, 7208.40.3060,
7208.51.0030, 7208.51.0045, 7208.51.0060, 7208.52.0000, 7208.53.0000,
7208.90.0000, 7210.70.3000, 7210.90.9000, 7211.13.0000, 7211.14.0030,
7211.14.0045, 7211.90.0000, 7212.40.1000, 7212.40.5000, and
7212.50.0000. Included are flat-rolled products of nonrectangular
cross-section where such cross-section is achieved subsequent to the
rolling process (i.e., products which have been ``worked after
rolling'')--for example, products which have been beveled or rounded at
the edges. Excluded is grade X-70 plate. These HTS item numbers are
provided for convenience and Customs purposes. The written description
remains dispositive.
The POR is August 1, 1995, through July 31, 1996. This review
covers entries of certain cut-to-length carbon steel plate by Usinas
Siderurgicas de Minas Gerais (``USIMINAS'') and Companhia Siderurgica
Paulista (``COSIPA''). These two producers/exporters have been
collapsed (``USIMINAS/COSIPA'') and are being treated as one entity for
the purpose of this review.
Analysis of Comments Received
We gave interested parties an opportunity to comment on the
preliminary results. We received case and rebuttal briefs from the
respondent (USIMINAS/COSIPA) and petitioners (Bethlehem Steel
Corporation; U.S. Steel Company, a Unit of USX Corporation; Inland
Steel Industries, Inc.; Geneva Steel; Gulf States Steel, Inc. of
Alabama; Sharon Steel Corporation; and Lukens Steel Company). Based
upon our analysis of the comments received, we have changed the results
from those presented in the preliminary results of review.
Comment 1: Respondent objects to the fact that, in the preliminary
determination, the Department did not deduct PIS and COFINS taxes from
normal value, arguing that while the Department did not state its
reason for denying this adjustment, neither of the reasons it can
conceive of is a valid reason for doing so. USIMINAS/COSIPA states that
the relevant statutory provision, 19 U.S.C. 1677b(a)(6)(B)(iii), calls
for the Department to reduce the starting prices for normal value by
the amount of home market taxes which meet three criteria: (1) they are
``directly imposed'' on the foreign like product or components thereof,
(2) they are rebated or not collected on the subject merchandise, and
(3) they are added to or included in the price of the foreign like
product. Because the second requirement has never been an issue in any
case involving PIS and COFINS, USIMINAS/COSIPA state, the Department
could only refuse to make this adjustment due to concerns as to whether
these taxes were ``directly imposed'' or ``included in the price'' of
the merchandise used to determine normal value.
With respect to the ``directly imposed'' prong, USIMINAS/COSIPA
notes that in Silicon Metal from Brazil, 62 FR 1954, 1968 (Jan. 14,
1997), the Department declined to deduct PIS and COFINS from home
market prices on the grounds that because these taxes are ``gross
revenue taxes'' they are not ``directly imposed.'' Respondent notes
that, prior to the determination in Silicon Metal from Brazil, the
Department had a long history of finding that these taxes were
``directly imposed.'' Further, respondent argues that the Department's
reliance in that case upon the precedent in Silicon Metal from
Argentina, 56 FR 37891, 37893 (Aug. 9, 1991), for the principle that
gross revenue taxes cannot be ``directly imposed'' is misplaced for
three reasons. First, the Argentine tax at issue is distinguishable
from the PIS
[[Page 12746]]
and COFINS taxes. Second, the Argentine notice cites another Brazilian
case (in which PIS and the predecessor of COFINS were adjusted for) as
an example of circumstances in which it would adjust for taxes. Third,
respondent argues that, although these taxes are not itemized on the
invoices, from the standpoint of mathematics, accounting and public
finance there is no difference between a tax imposed on an invoice-
specific basis and one imposed on an aggregate basis when the same rate
is applied to both.
With respect to the ``included in home market price'' prong,
USIMINAS/COSIPA argues that the Department's determinations prior to
January of 1997 support the position that these taxes are included in
home market price, and that the Department has long held that it may,
under the dumping law, presume that a company includes the full amount
of home market taxes in its home market price and thus passes the tax
through to its home market customers. USIMINAS/ COSIPA notes that the
Department has made no finding in this review that such tax pass-
through does not occur, and has not raised this issue in the course of
the review. On February 18, 1998, USIMINAS/COSIPA submitted further tax
legislation, court documentation, and fuller translation of previously
submitted documents, as requested by the Department.
Petitioners argue that the Department correctly did not deduct PIS
and COFINS taxes from the home market prices in calculating normal
value, claiming that they are not ``directly imposed'' on the foreign
like product because they are calculated on all of the gross monthly
receipts of USIMINAS/COFINS. They note that in three recent final
determinations regarding Brazilian products the Department did not
deduct PIS and COFINS taxes from home market price. Silicon Metal from
Brazil, 62 FR 1954, 1968 (1992-1993 review) (Sept. 5, 1996); Silicon
Metal from Brazil, 62 FR 1983 (1993-1994 review) (January 14, 1997);
and Ferrosilicon from Brazil, 62 FR 43,504, 43,508 (Aug. 14, 1997).
Thus, petitioners argue that respondent's reliance on earlier cases is
unwarranted, because it is clear that the Department now recognizes
that taxes that are levied on gross revenues, rather than solely on a
company's sales, are not ``directly imposed'' on home market sales. For
example, they point out that the Brazilian law in effect during the
period of review stated that PIS is to be imposed on financial revenue
as well as sales revenue. Finally, petitioners state that the statutory
language on tax deductions is clear and that respondent was given
adequate opportunity to comment on this approach in their case briefs
by virtue of the Department's position in Silicon Metal from Brazil and
by the position taken in the preliminary determination in this case.
At the request of the Department, the petitioners commented further
on this issue in response to USIMINAS/COSIPA's February 18, 1998 PIS/
COFINS submission. Petitioners reiterate that the Department should not
adjust for PIS and COFINS taxes because, they claim, these taxes are
not directly imposed on the subject merchandise and are not consumption
taxes. Petitioners recall the basis upon which the PIS and COFINS taxes
are levied, highlighting that both are gross revenue taxes. Petitioners
state that as a consequence, the PIS and COFINS taxes are not imposed
directly on the foreign like merchandise. Petitioners also note that
the Department very recently reaffirmed in the 1995-1996 review of
Silicon Metal from Brazil that these taxes cannot be tied directly to
sales and therefore do not qualify for an adjustment. See Final results
of Antidumping Duty Administrative Review: Silicon Metal from Brazil,
63 FR 6899, 6910 (Feb. 11, 1998). Petitioners continue to rely on
section 773(a)(6)(B)(iii) of the Act and the SAA at pg. 827-828
(discussing the requirement that taxes be directly imposed on the
subject merchandise and referring to ``consumption taxes'').
Petitioners cite the Department's determination in the 1993-1994 review
of Silicon Metal from Brazil, 62 FR 1954, 1968 (Jan. 14, 1997) for the
proposition that PIS and COFINS are not ``consumption taxes,'' arguing
that the Court of Appeals for The Federal Circuit has defined
``indirect taxes'' as ``consumption taxes'' in United States v. Zenith
Radio Corp., 562 F.2d 1209, 1233 n.20 (1997).
Department's Position: As in the most recent review of Silicon
Metal from Brazil, the Department has determined that a deduction of
the PIS and COFINS taxes is not correct in the calculation of NV.
Commerce has determined that since these taxes are levied on total
revenues, except for export revenues, the taxes are direct taxes and
thus akin to taxes on profit or wages. Since the Department has
determined these taxes are not indirect taxes, there is no basis to
deduct them in the calculation of NV, according to section
773(a)(6)(B)(iii) of the Act. The Department finds that it is not the
sale of the merchandise that is being taxed but rather USIMINAS/
COSIPA's revenue, and as such, the PIS and COFINS taxes should not be
adjusted for in the calculation of normal value.
Comment 2: USIMINAS contends that the Department failed to deduct
one component of its home market movement expenses from the gross home
market price. Both USIMINAS and COSIPA originally included an extra
letter in the Department's computer code variable for inland freight.
In its post-verification submission, COSIPA conformed its field name to
the one used by the Department. Thus, the Department's SAS program
correctly deducted the inland freight expense for COSIPA because it
corresponded to the Department's field name.
USIMINAS also used the incorrect variable name in its submissions.
However, unlike COSIPA, USIMINAS did not change the variable name of
this field in its post-verification submission. Consequently, the
Department failed to deduct USIMINAS'' home market freight expense.
USIMINAS urges the Department to revise its computer program so that
inland freight expenses are deducted from the gross home market price.
Department's Position: We agree with USIMINAS and have revised the
computer program so that USIMINAS'' home market inland freight expense
is deducted from the gross unit price in these final results.
Comment 3: USIMINAS believes that the Department incorrectly
deducted related party commissions from the U.S. price. Based on
USIMINAS'' relationship with its wholly-owned subsidiary, USIMINAS
Overseas, the nature of the commissions, and the Department's treatment
of intracompany commissions, USIMINAS believes that the Department's
decision to deduct these commissions was incorrect.
USIMINAS notes that the Department has a long-standing practice of
not deducting commissions to related parties. Pursuant to the Federal
Circuit's decision in LMI-La Metalli Industriale v. United States
(``LMI''), 912 F. 2d 455 (Fed. Cir. 1990), the Department will only
make an adjustment for related party commissions when it is
demonstrated that (1) the commissions are arm's length, and (2) they
are directly related the underlying sale (see Final Determination of
Sales at Less Than Fair Value: Coated Groundwood Paper From Finland
(``Grounwood Paper''), 56 FR 56363, 56372 (Nov. 4, 1991)).
USIMINAS cites two cases in support of its contention that, absent
a demonstration to the contrary, the Department presumes that related
party commissions are not at arm's length (see Outokumpu Copper v.
United States, 850 Supp. 16, 22 (CIT 1994) and Brass
[[Page 12747]]
Sheet and Strip from the Netherlands, 61 FR 1324, 1326 (Jan. 19,
1996)).
USIMINAS suggests that the Department's preliminary determination
to deduct these commissions was incorrect because (1) there were no
allegations by petitioners that the commissions to USIMINAS Overseas
were directly related or made at arm's length; (2) there are no bench
mark commissions to compare to the commissions granted to USIMINAS
Overseas, and (3) the record demonstrates that the commissions are not
directly related to sales.
Petitioners rebut USIMINAS'' claim that related party commissions
should not be deducted from U.S. price. Petitioners state that
documentation presented in USIMINAS'' response to the Department's
questionnaire and the method by which the commissions were calculated
clearly suggest that commissions to USIMINAS Overseas were directly
related to sales. Petitioners further argue that the commissions were
arm's-length transactions, relying upon the holding in LMI that a
commission is at arm's length if the recipient is a bona fide sales
agent. Petitioners state that the Department's practice is to consider
the totality of the circumstances surrounding the commission in order
to determine whether or not the recipient is considered a bona fide
agent (see Groundwood Paper at 56372). Petitioners note that it is the
Department's practice to analyze contracts and agreements between
producers and affiliated agents. An analysis of the proprietary
contract presented to the Department and USIMINAS'' narrative response
to the Department's supplemental questions cause petitioners note that
USIMINAS Overseas has contracted to and assumed multiple duties in
connection with USIMINAS sales. See USIMINAS A/B/C Response to the
Department's Second Supplemental Questionnaire (May 30, 1997), Exh. 15
at 1-2 and narrative at 18-19 (APO Version)). In addition, information
received at the sales verification adds to the list of responsibilities
taken on by USIMINAS Overseas (see USIMINAS Sales Verification Report
at 3-5).
Department's Position: We agree with the respondent. Further
analysis of the related party commission confirms that it should be
classified as an intracompany transfer of funds. Due to the proprietary
nature of the contractual arrangements between USIMINAS and USIMINAS
Overseas, see Final Analysis Memorandum of March 9, 1998, for further
discussion of the Department's rationale with respect to this issue.
Comment 4: The petitioners claim that the respondent improperly
reported home market credit expense for the following reasons: first,
USIMINAS/COSIPA used a tax-inclusive gross unit price as the basis for
its submitted credit calculation; second, USIMINAS/COSIPA made two
improper adjustments to the short-term interest rate reported.
The petitioners note that the Department's longstanding practice is
to exclude taxes from the basis of the home market imputed credit
expense calculation. They cite the final results of the previous review
in support of their position (see, Certain Cut-to-Length Carbon Steel
Plate from Brazil; Final Results of Antidumping Duty Administrative
Review, 62 FR 18486, 18488 (April 15, 1997)). The petitioners request
that the Department follow its longstanding practice in this review,
and recalculate home market imputed credit expense, deducting IPI,
ICMS, PIS, and COFINS taxes from the home market gross unit price
before using it as the basis for this calculation.
The petitioners also maintain that, in calculating home market
credit expense, USIMINAS/COSIPA incorrectly changed the rate actually
received from the bank two times. According to petitioners, by failing
to explain how or why it changed the nominal rate to the discount rate,
USIMINAS/COSIPA has not met its burden of demonstrating why the
adjustment embodied in the credit calculation USIMINAS/COSIPA submitted
should be allowed. Accordingly, the petitioners urge the Department to
reject this adjustment.
The petitioners conclude that the respondent's distortion of the
discount rate requires the Department to use an alternative: the ``taxa
referential'' (TR). The petitioners note that this short-term lending
rate is a benchmark similar to the prime rate and was used in the last
administrative review of this proceeding. Therefore, the petitioners
conclude that the Department should use the TR to calculate home market
credit expenses. However, if the Department decides not to use the TR,
the petitioners maintain that it should at least utilize the nominal
rate during the month of the U.S. sale to calculate home market credit
expenses.
Regarding the use of gross price inclusive of taxes in calculating
imputed credit costs, respondent disagrees with petitioners. USIMINAS/
COSIPA points to Stainless Steel Angles From Japan, 60 F.R. 16608
(March 31, 1995) as evidence that the Department has previously
calculated imputed credit costs using a tax inclusive gross price.
USIMINAS/COSIPA states that the Department was incorrect in the
previous review of this case when it dismissed the relevance of the
Japanese case (see Certain Cut-to-Length Carbon Steel Plate from
Brazil, 62 FR 18486, 18487-88 (April 15, 1997)). In the previous
review, the Department found that imputed credit costs should be
calculated on net price, not gross price. USIMINAS/COSIPA maintains
that there is no complication in this review in recognizing that the
seller is extending payment terms for both the underlying goods, and
for tax liability associated with the sale.
USIMINAS/COSIPA also objects to the petitioners' comments on
procedural grounds because they waited a year to object to USIMINAS/
COSIPA's credit methodology and it is too late in the proceeding for
the Department to accept alternative credit costs calculations.
Concerning the petitioners' complaint that USIMINAS/COSIPA used an
overstated interest rate in its home market imputed credit costs
calculations, USIMINAS/COSIPA contends that the petitioners fail to
understand the distinctions between a conventional loan and discounting
receivables. However, USIMINAS/COSIPA agrees with petitioners that it
used incorrect interest rates to the extent that there is no
justification for adjusting the interest rate twice to derive an
effective rate from a nominal rate. Therefore, USIMINAS/COSIPA suggests
that the Department revise imputed credit costs and, if necessary,
inventory carrying costs, using USIMINAS/COSIPA's actual borrowing
experience during the POR, and not the TR, as proposed by the
petitioners.
Department's Position: The Department agrees with petitioners that
imputed credit expense should be calculated on the basis of a price net
of taxes, rather than a gross price basis. The Department has found
previously in several cases that it is impossible for it to determine
the opportunity cost of every expense for each sale reported. For
example, in the Final Determination of Sales at Less than Fair Value:
Sulfur Dyes, Including Sulfur Vat Dyes, from the United Kingdom, 58 FR
3235 (Jan. 8, 1993), Commerce determined that ``[w]hile there may be an
opportunity cost associated with the prepayment of [taxes], that fact
alone is not a sufficient basis for the Department to make an
adjustment in price-to-price comparisons. We note that virtually every
charge or expense associated with price-to-price comparisons is either
prepaid or paid for at some point after the cost is incurred.
Accordingly, for each pre-or post-service payment, there is also an
opportunity cost (or gain).
[[Page 12748]]
Thus, to allow the type of adjustment suggested by respondent would
imply that in the future the Department would be faced with the
impossible task of trying to determine the opportunity cost (or gain)
of every freight charge, rebate and selling expense for each sale
reported in a respondent's database. In order to make a price-to-price
comparison, this exercise would make our calculations inordinately
complicated, placing an unreasonable and onerous burden on both
respondents and the Department.'' See also Final Determination of Sales
at Less than Fair Value: Steel Wire Rope from Korea, 58 FR 11029, 11032
(Feb. 23, 1993); Ferrosilicon From Brazil: Final Results of Antidumping
Duty Administrative Review, 61 FR 59407, 59410 (Nov. 22, 1996); Certain
Cut-to-Length Carbon Steel Plate From Brazil: Final Results of
Antidumping Duty Adminstrative Review, 62 FR 18486, 18487 (Apr. 15,
1997)).
The respondent's reliance on Stainless Steel Angles from Japan is
not on point. As the Department found in the previous review of this
case, ``[t]he comment in the Stainless Steel Angles case cited by the
respondent refers to pre-shipment advance payment for the merchandise,
rather than taxes, and is not contrary to the Department's position
with respect to basing credit calculations on a price net of taxes'
(see Certain Cut-to-Length Carbon Steel Plate from Brazil, 62 FR 18486
(Apr. 15, 1997)).
For these final results, we have recalculated credit expense and
used a price net of taxes for the basis of the recalculation. See Final
Analysis Memorandum of March 9, 1998.
With respect to the selection of interest rates for use in
calculating credit expense, the Department agrees with petitioners that
the nominal rate should be used. The Department does not have
information on the record of this proceeding with respect to nominal
rates for each week of the POR. However, such information was not
requested by the Department. Accordingly, on the basis of the facts
available, we are using the weekly nominal rates for the weeks for
which such information is on the record. For all other weeks, we are
using the simple average of the available weekly nominal rates. Because
the Department finds that USIMINAS/COSIPA has acted to the best of its
ability in providing information relating to credit expenses, we are
not making an adverse inference. See Final Analysis Memorandum of March
9, 1998. Because we are eliminating the adjustments to the interest
rate in question and instead are using the nominal rates, we have not
used the ``taxa referential'' are suggested by petitioners.
Comment 5: The petitioners object to USIMINAS/COSIPA's use of all
plate products, including non-subject merchandise, in calculating its
home market inventory carrying costs. The petitioners state that any
inventory expenses associated with non-subject merchandise ``may not be
used in calculating deductions of expenses from FMV for in-scope
merchandise'' (NSK Ltd. v. United States, 896 F.Supp. 1236, 1272 (CIT,
1995) aff'd in relevant part 115 F. 3d 965, 973 (Fed. Cir. 1997). The
petitioners conclude that if the respondent could not develop a viable
method to separate inventory carrying costs of subject merchandise from
non-subject merchandise, the Department must deny the adjustment
altogether. Petitioners close by stating that if the Department decides
to allow the inventory carrying cost adjustment, the Department should
recalculate the cost using the ``taxa referential'' instead of the
discount rate.
In response, USIMINAS/COSIPA characterizes the inventory carrying
cost adjustment as irrelevant in this review because there are no U.S.
commissions and, therefore, no need to calculate a commission offset
which would include inventory carrying costs.
Nevertheless, assuming arguendo that the inventory cost adjustment
is relevant, USIMINAS/COSIPA states that the petitioners have confused
``selling out of inventory'' and ``having an inventory.'' ``Selling out
of inventory,'' from USIMINAS/COSIPA's viewpoint, is based on a
decision by a producer to manufacture and inventory products without a
specific customer request for the products. COSIPA and USIMINAS contend
that having an inventory is a natural consequence of selling to order
for several reasons: (1) export shipments are often held until the
entire order is produced; (2) overruns, a natural consequence in steel
production, are inventoried; (3) materials are held at distribution
warehouses.
Finally, USIMINAS/COSIPA urges the Department to reject the
petitioners' suggestion that the Department deny this adjustment
altogether.
Department's Position: As the Department has determined that there
were no U.S. commissions, there is no need to consider how inventory
carrying costs might affect a commission offset in this case.
Comment 6: The petitioners state that the COSIPA verification team
found that the IPI tax, an indirect home market tax of 5% of the gross
unit price, was incorrectly reported for February through April 1995.
However, the petitioners claim that USIMINAS/COSIPA did not submit the
correct values in a revised database, as instructed by the Department.
Since the Department may deduct taxes from normal value ``only to the
extent that such taxes are added to or included in the price of the
foreign like product'' pursuant to 19 U.S.C. 1677b(a) (6) (B) (iii),
the petitioners urge the Department to recalculate the IPI tax to
reflect the correct amount of 5% of the gross unit price.
USIMINAS/COSIPA counters that the petitioners' comments are based
on a confused understanding of how IPI is calculated and how it is
presented on COSIPA's sales listing. USIMINAS/COSIPA states that
petitioners' proposal that the Department divide the IPI adjustment in
the sales listing by the gross price in the sales listing fails to
account for: (1) the need to adjust the IPI base for the ICMS rate, and
(2) the fact that the IPI base is not net of discounts. The respondent
concludes that the Department should reject petitioners' comments with
respect to the IPI because COSIPA'S IPI adjustments are correct in its
post-verification sales listing.
Department's Position: We agree with the respondent. At the start
of COSIPA's verification, the respondent presented the Department
officials with a list of corrections (see COSIPA Sales Verification
Report, Exhibit 1). The list of corrections makes a brief mention of
miscalculated IPI taxes. This correction was not directed at COSIPA's
sales database. Rather, this correction was directed toward Exhibit 23
of respondent's April 10, 1997 Supplemental Questionnaire Response,
wherein COSIPA misreported the monthly payments of IPI tax for the
months of February through April of 1995. In an effort to provide
accurate information to the Department, COSIPA sought to correct this
mistake in the questionnaire response at the beginning of verification.
No change was made to the IPI tax field as reported in the pre-
verification sales tape because this tax field was never incorrect. As
further proof of this point, Department officials verified the IPI tax
reported from an invoice dated during the February--April period (see
COSIPA Verification Exhibit 7).
Comment 7: The petitioners maintain that the Department must
disallow COSIPA's claimed warranty expenses because they represent
credits to customers for a defective product or a price adjustment.
According to petitioners, COSIPA had the burden of demonstrating which
``warranty''
[[Page 12749]]
expenses related to quality problems and which related to price
adjustments. Since COSIPA could not directly relate the post-sale price
adjustments (``PSPAs'') to specific transactions, the petitioners
believe the Department should disallow COSIPA's claimed ``warranty''
expense. The petitioners argue that since the reported ``warranty''
expense included post-sale price adjustments, COSIPA's warranty claim
should be rejected because while warranty expenses may be allocated,
petitioners argue that post-sale price adjustments may not be
allocated. Petitioners cite Torrington Co. v. United States
(``Torrington''), 82 F.3d 1039, 1050 (Fed. Cir. 1996) and Timken
Company v. United States, 930 F. Supp. 621, 632 (Ct. Int'l Trade 1996).
The respondent states that the Department should dismiss
petitioners' comments because they are tardy, and mischaracterize the
law and Departmental practice. The respondent notes that the
petitioners have waited until the record is effectively closed and
verification has been completed to attack COSIPA's warranty expense and
urge the Department to reject this adjustment. The respondent requests
the Department to discourage such tactics and reject petitioners'
comments on procedural grounds.
The respondent also challenges petitioners' statement that PSPAs
may not be based on allocations. The respondent maintains that the
petitioners' cite to the Federal Circuit's holding in Torrington in
support of their position ignores the Department's application of the
Torrington holding in recent investigations. The respondent notes that
in a final results of Tapered Roller Bearings and Parts Thereof,
Finished and Unfinished, From Japan and Tapered Roller Bearings, Four
Inches or Less in Outside Diameter, and Components Thereof, Final
Results of Antidumping Duty Administrative Reviews and Termination in
Part (``Tapered Roller Bearings''), 62 FR 11825 (March 13, 1997), the
Department rejected the petitioners' interpretation of Torrington and
stated that it would accept adjustments for PSPAs based on allocation
if : (1) The respondent acted to the best of its ability to report the
adjustment in the most specific manner, and (2) the allocation
methodology was not unreasonably distortive. Moreover, the respondent
states that the final antidumping regulations published on May 19,
1997, specifically permit allocations for price adjustments (62 FR
27296, 27410 (section 351.401(g)).
In addition, the respondent states that the Department verified
that COSIPA's warranty calculation was based on the most specific
allocation permitted, given COSIPA's record-keeping system and the
Department did not perceive any distortions in COSIPA's adjustment (see
COSIPA's Sales Verification Report at 16). The respondent concludes
that the Department was correct to allow COSIPA's warranty adjustment
in its preliminary results and should continue to do so in the final
results.
Department's Position: We agree with the respondent. At
verification, the Department officials found that COSIPA was unable to
link credit notes to specific notas fiscais (invoices). Therefore,
COSIPA could not link the credit notes to the specific sales of
merchandise, nor discriminate between warranties and post-sale price
adjustments. We found COSIPA's methodology to be reasonable. In the
Tapered Roller Bearings case cited by respondents, the Department
allowed adjustment for post-sale price adjustments that had been
allocated, provided that it was not feasible for the respondent to
report the adjustment on a more specific basis, and provided that the
allocation methodology was not distortive. Department officials
verified that these adjustments could not be more specifically reported
and also verified the allocation methodology for COSIPA. We do not find
it to be distortive. Thus, allowance of COSIPA's PSPAs is consistent
with the Department's practice (see section 351.401(g) of the
Department's new regulations (62 FR 27296, May 19, 1997).
Comment 8: USIMINAS/COSIPA challenges the Department's exclusion of
inter-company transactions between USIMINAS and COSIPA from the
denominator in the calculation of the cost of goods sold of USIMINAS.
Respondent points out that this adjustment is irrelevant for purposes
of the consolidated financial expense ratio, but increases the
consolidated G&A ratio. First, USIMINAS/COSIPA maintains that the
exclusion of inter-company sales is unfounded from an accounting and
economic perspective. In USIMINAS/COSIPA's view, if the manufacture and
sale of a category of products generates any of the expenses in the
numerator, like other sales, there is no justification for excluding
that category from the denominator. USIMINAS/COSIPA argues that its
accounting department must perform its services regardless of whether
the product is manufactured for sale t o an unaffiliated distributor,
an affiliated distributor, or to COSIPA. USIMINAS/COSIPA conjectures
that the Department's concern with including sales to COSIPA may be
based on a suspicion that these sales are not normal. However,
USIMINAS/COSIPA notes that the denominator of the G&A ratio is the cost
of goods sold which is incurred regardless of the ultimate destination
of the product. Therefore, according to USIMINAS/COSIPA, there is no
basis for the exclusion from the cost of goods sold, of the costs
associated with sales of products by USIMINAS to COSIPA.
Secondly, USIMINAS/COSIPA maintains that the Department currently
requests the respondent to calculate financial ratios on a consolidated
basis, while the Department's questionnaire requires respondents to
calculate G&A ratios on a non-consolidated basis (see the Department's
September 19, 1996 Questionnaire at D-21-22). USIMINAS/COSIPA supports
the calculation of the G&A ratio on a non-consolidated basis, stating
that according to Department practice, neither the numerator nor the
denominator in the G&A ratio calculation should be adjusted for the
effects of any consolidation.
Petitioners state that the Department was correct in deducting
costs associated with inter-company transactions from cost of goods
sold. Petitioners state that since the Department has declared USIMINAS
and COSIPA to be affiliated and collapsed them into one entity for the
purposes of this review, their costs must be treated as if they were
consolidated. Therefore, petitioners state that the deduction of costs
associated with inter-company transactions is necessary in order to
avoid double-counting. Petitioners cite Certain Corrosion-Resistant
Carbon Steel Plate From Canada, 62 FR 18464 (Apr. 15, 1997) as evidence
of precedent for the Department's decision.
Department's Position: We agree with petitioners. As indicated in
the preliminary results of this review, we have treated USIMINAS and
COSIPA as a collapsed, single entity for purposes of our antidumping
analysis. Preliminary Results of Antidumping Duty Administrative
Review: Certain Cut-to-Length Carbon Steel Plate from Brazil, 62 FR
47436 (Sept. 9, 1997). We have determined that USIMINAS/COSIPA should
be considered a single producer of certain cut-to-length carbon steel
plate.
The decision to treat affiliated parties as a single entity
necessitates that transactions between such parties also be viewed in
terms of a single, consolidated whole. The Department has determined it
would be inappropriate to combine the cost of goods sold by USIMINAS
and COSIPA without adjustment, because this would
[[Page 12750]]
recognize income/expenses which would not be recognized in the context
of consolidation. When treating companies as consolidated, the
Department eliminates profits/losses from intercompany transactions in
order to recognize profits/losses from transactions only with
unaffiliated companies. For the final results, therefore, the
Department has eliminated intercompany transactions from the
calculation of cost of sales.
Comment 9: USIMINAS notes that in reformulating financial expenses
for USIMINAS and COSIPA, the Department did not deduct financial
expenses associated with exports or home market sales from total
financial expenses. Since the Department found the financial expenses
of both parties to be de minimis, this error is irrelevant. However,
USIMINAS/COSIPA requests that in the event the Department revises its
financial expense calculations, and in the event constructed value
comparisons are used, the Department ensure that it includes these
deductions from financial expenses for purposes of any comparison of
U.S. price to constructed value.
Petitioners state that the Department correctly omitted from its
financial expense recalculation amounts for ``Excluded Export
Expenses'' and ``Excluded Financial Expenses on Sales''. Petitioners
cite Antifriction Bearings (Other Than Tapered Roller Bearings) and
Parts Thereof From France, et al.; Final Results of Antidumping Duty
Administrative Reviews, Partial Termination of Administrative Reviews,
and Revocation in Part of Antidumping Duty Orders, 60 FR 10900 (Feb.
28, 1995), as illustration of the Department's practice in this matter.
Department's Position: This issue is moot because we continue to
find the financial expense rate to be de minimis. However, we disagree
with respondent. The Department's normal practice is to compute the
actual net financial expenses of the entire company in arriving at the
financial expense ratio used in constructed value. The statute directs
Commerce to calculate selling, general and administrative costs,
including interest expenses, based on the actual experience of the
company. See section 773(b)(3)(B) and section 773(e)(2)(A) of the Act
of 1930, as amended.
Comment 10: The petitioners maintain that under section 773(f)(2)
and (3) of the Tariff Act, major inputs purchased from affiliated
parties must be valued at the highest of market value, transfer price,
and the affiliate's cost of production (COP). The petitioners note that
the respondent failed to report the cost of iron ore provided by
Companhia Vale do Rio Doce (CVRD), an affiliate of USIMINAS. Further,
they state that CVRD declined to release the cost of production
information because they claimed it was business proprietary
information, regardless of whether or not they were affiliated with
USIMINAS.
The petitioners state that this same situation existed in the
recent 1994-1995 review of Silicomanganese from Brazil; Final Results
of Antidumping Duty Administrative Review (``Silicomanganese from
Brazil''), 62 FR 37869 (July 15, 1997). According to petitioners, in
that case the Department rejected CVRD's argument that the information
was confidential, noting that the information could have been submitted
directly to the Department. According to petitioners, in
Silicomanganese from Brazil, the Department also rejected CVRD's and
USIMINAS' argument that the profits reported by these parties proved
that they were not transferring major inputs to affiliated parties at
below-cost prices. The Department stated that the record showed that
the company earned an overall profit, but did not establish that
specific products were sold above cost to affiliated parties.
The petitioners note that, in Silicomanganese from Brazil, CVRD's
and USIMINAS/COSIPA's refusal to provide COP data led the Department to
apply adverse facts available with respect to the major input in
question. Petitioners argue that the Department should also apply
adverse facts available in this case.
The petitioners contend that the conditions required by section
776(a) of the statute for the application of facts available have been
met. Specifically, petitioners claim that CVRD's refusal to provide the
requested information on two occasions (i.e., in its response to the
Department's initial questionnaire and in the supplemental
questionnaire) is imputable to the respondent, and that, thus,
respondent has ``withheld information'' within the meaning of section
776(a)(2)(A). Moreover, the petitioners state that under section 782(d)
of the Tariff Act, once notice of a deficiency is provided and the
response is unsatisfactory, the Department may reject all or part of a
respondent's original and subsequent responses subject to the
provisions of section 782(e), which outlines the five criteria under
which the Department cannot decline to consider submitted information.
In the petitioners' view, CVRD and the respondent failed to comply with
one of the criteria when they repeatedly failed to supply the necessary
COP data in response to the Department's requests for information. For
this reason, the petitioners urge the Department to apply adverse facts
available.
The respondent rejects these arguments, stating that petitioners'
analysis is flawed by misinterpretation of the statute and a misplaced
reliance on the Department's recent decision in Silicomanganese from
Brazil, 62 FR 37869 (July 15, 1997). The respondent maintains that the
petitioners fail to recognize that application of the major input
provision requires ``reasonable grounds'' to believe that an input is
being supplied at below cost prices. 19 U.S.C. 1677b(F)(3). The
respondent states that the Department verified that the CVRD prices for
iron ore were above prices from unaffiliated suppliers and that CVRD
was a highly profitable company. According to USIMINAS/COSIPA, this
provides the Department with reasonable grounds to conclude that CVRD
was selling iron ore to the respondent at prices above its costs and
above market prices.
Respondent argues that the major input provision includes a
``reasonable grounds'' requirement identical to the clause that
requires petitioners to submit information that provides sufficient
``reasonable grounds'' to initiate a below cost investigation. The
respondent states that the petitioners did not even attempt to submit
information to establish reasonable grounds to believe that CVRD sold
to USIMINAS or COSIPA at below-cost prices in this proceeding and,
therefore, they are not positioned to argue that the Department should
have invoked its authority under the major inputs provision. Thus, the
respondent states that the record supports the conclusion that there is
no reason to suspect that CVRD is providing iron ore at prices below
its COP, and below market price.
In addition, the respondent claims that the petitioners incorrectly
state that the Department ``must'' use the highest of market value,
transfer price, and cost of production. In the respondent's opinion,
the Department's authority under the major input provision is
discretionary because the statute states plainly that even if there are
reasonable grounds to believe that below cost sales of a major input
exist, the Department ``may'' seek an affiliated suppliers' COP for
major inputs and use that value in lieu of transfer prices for the
inputs at issue.
Department's Position: We agree, in part, with both the petitioners
and respondent. Pursuant to sections 773(f)(2) and (3) of the Act, the
[[Page 12751]]
Department may value major inputs purchased from affiliated suppliers
at the higher of market value, transfer price or the affiliated
supplier's cost of production. In the Department's original
questionnaire, supplemental questionnaires and at verification,
officials requested CVRD's cost of production information for iron ore,
which is a major input in carbon steel plate.
USIMINAS/COSIPA argues that the petitioners did not provide
``reasonable grounds'' for the Department to invoke the major input
rule and therefore to seek cost information on this input. However, it
is the Department's position that a separate sales-below-cost
allegation need not always be filed and accepted before we can
investigate whether prices of major inputs purchased from affiliated
suppliers were below COP. Specifically, in those instances in which we
conduct an investigation of sales below cost under section 773(b) of
the Act, it is our practice to analyze production-cost data for major
inputs purchased by a respondent from its affiliated suppliers (see,
Certain Corrosion-Resistant Carbon Steel Flat Products and Certain Cut-
to-Length Carbon Steel Plate from Canada: Final Results of Antidumping
Duty Administrative Reviews, 62 FR 37871 (Apr. 15, 1997)). In such
situations, the ``reasonable grounds'' provision of section 773(f)(3)
of the Act is met by the evidence on record that the respondent may be
selling below cost in the home market, since this may be linked to
major inputs obtained at below cost transfer prices from affiliated
parties. Because a COP investigation was properly initiated with
respect to USIMINAS/COSIPA in this review, Commerce properly requested
that USIMINAS/COSIPA provide cost of production data for the iron ore
it obtains from its affiliate CVRD.
Of the three elements which may be compared in determining the
value of major inputs supplied by affiliates (transfer price, market
value and cost of production), USIMINAS/COSIPA provided the transfer
price of iron ore from CVRD to USIMINAS/COSIPA in its submissions. In
addition, at verification, the respondent provided market price data
from unaffiliated iron ore suppliers. In most instances, the market
price was much lower than the transfer price from the affiliated
supplier.
The Department has determined that USIMINAS/COSIPA did attempt to
obtain cost of production information from its affiliate, CVRD, and
otherwise complied with the Department's information requests. Further,
the Department has determined that, due to the nature of its
affiliation with CVRD, USIMINAS/COSIPA could not compel CVRD to provide
such information to the Department. Thus, the Department will not
impute CVRD's refusal to provide the requested cost information to
USIMINAS/COSIPA. In Silicomanganese from Brazil, the Department
determined that USIMINAS and CVRD, which together wholly owned the
respondent Ferro Ligas Group, were to be considered ``interested
parties'' to the case. Given these facts, the Department held that the
burden of supplying information to the Department fell not only to the
wholly owned subsidiary, but also to these ``parent'' companies. The
Department stated, ``[b]ecause the Department requires such data and
because the business of the parent entity is clearly affected by its
ability to ensure that its subsidiary avoids or lessens the effect of
antidumping duties on U.S. sales, the consolidated or parent entity
must be considered an ``interested party'' for purposes of responding
to requests for information.'' The current proceeding is distinguished
from Silicomanganese from Brazil by the degree of ownership involved.
Public data on the record of the current proceeding indicates that CVRD
holds only 15 percent of USIMINAS' stock, and CVRD's interest in
USIMINAS constitutes only a small portion of CVRD's total operation.
Thus, USIMINAS/COSIPA could not compel CVRD to supply its cost of
production information, nor is CVRD an interested party as in
Silicomanganese from Brazil. Instead, CVRD holds only a minor interest
in USIMINAS. See Roller Chain, Other Than Bicycle, From Japan: Notice
of Final Results and Partial Recission of Antidumping Duty
Administrative Review, 62 FR 60472 (Nov. 10, 1997), in which the
Department determined that a respondent could not compel an affiliate
to supply downstream sales information due to similar ownership
circumstances. Adding to the difficulty faced by USIMINAS/COSIPA in
obtaining CVRD's cost information was the fact that CVRD was in the
process of privatization throughout most of this review. Some aspects
of the privatization may have prevented CVRD from releasing cost
information even to the Department, let alone to USIMINAS/COSIPA. In
addition, USIMINAS' major competitor in Brazil, CSN, was part of the
group involved in the privatization of CVRD.
Finally, as the petitioners point out, the fact that USIMINAS/
COSIPA submitted the profitable financial statements of CVRD at
verification does not negate the possibility that CVRD was selling
major inputs to USIMINAS and COSIPA at prices below CVRD's cost of
production (see Silicomanganese from Brazil). However, at verification,
Department officials noted that CVRD's metals mining line of business
appeared to be profitable. We note that, while not dispositive, the
fact that not only CVRD as a whole, but also its metals mining
division, were profitable during the period during which USIMINAS/
COSIPA purchased iron ore from CVRD, constitutes some evidence that
CVRD's sales of iron ore to the respondent likely were at above-cost
levels.
Because USIMINAS/COSIPA did not provide CVRD's cost of production
data, the Department has made a determination with respect to the
appropriate value for iron ore on the basis of the facts available.
Because the Department finds that USIMINAS/COSIPA has acted to the best
of its ability in attempting to obtain the CVRD cost data, however, we
will not make an adverse assumption in selecting from the facts
available. Therefore, because the transfer prices for iron ore are
generally higher than the market prices for iron ore, and because the
record contains no indication that the cost of production of the iron
ore would be higher than the transfer prices for that input, we are
using the reported transfer prices for this major input as facts
available in these final results. Therefore, we made no changes to the
major input calculations employed in the preliminary determination,
which were also based on the use of transfer prices.
Final Results of Review
As a result of our review, we have determined that the following
margin exists:
------------------------------------------------------------------------
Margin
Manufacturer/exporter Time period (percent)
------------------------------------------------------------------------
USIMINAS/COSIPA......................... 8/1/95-7/31/96 11.54
------------------------------------------------------------------------
[[Page 12752]]
The Department shall determine, and the Customs service shall
assess, antidumping duties on all appropriate entries. Individual
differences between United States price and foreign market value may
vary from the percentages stated above. The Department will issue
appraisement instructions directly to the Customs Service.
We will calculate importer-specific duty assessment rates on a unit
value per pound basis. To calculate the per pound unit value for
assessment, we summed the margins on U.S. sales with positive margins,
and then divided this sum by the entered pounds of all U.S. sales.
Furthermore, the following deposit requirements will be effective
upon publication of this notice of final results of review for all
shipments of plate from Brazil entered, or withdrawn from warehouse,
for consumption on or after the publication date, as provided for by
section 751(a)(1) of the Act: (1) the cash deposit rates for the
reviewed company will be the rate for that firm as stated above; (2)
for previously reviewed or investigated companies not listed above, the
cash deposit rate will continue to be the company-specific rate
published for the most recent period; (3) if the exporter is not a firm
covered in this review, or the original less than fair value (LTFV)
investigation, but the manufacturer is, the cash deposit rate will be
the rate established for the most recent period for the manufacturer of
the merchandise; and (4) if neither the exporter nor the manufacturer
is a firm covered in this review, the cash rate will be 36.00 percent.
This is the ``all others'' rate from the LTFV investigation. See
Antidumping Duty Order and Amendment of Final Determination of Sales at
Less Than Fair Value: Certain Cut-To-Length Carbon Steel Plate From
Germany, 58 FR 44170 (August 19, 1993). These deposit requirements,
when imposed, shall remain in effect until publication of the final
results of the next administrative review.
This notice serves as a final reminder to importers of their
responsibility under section 353.26 of the Department's regulations to
file a certificate regarding the reimbursement of antidumping duties
prior to liquidation of the relevant entries during this review period.
Failure to comply with this requirement could result in the Secretary's
presumption that reimbursement of antidumping duties occurred and the
subsequent assessment of double antidumping duties.
This notice also serves as a reminder to parties subject to
administrative protective order (APO) of their responsibility
concerning the disposition of proprietary information disclosed under
APO in accordance with section 353.34(d) of the Department's
regulations. Timely notification of return/destruction of APO materials
or conversion to judicial protective order is hereby requested. Failure
to comply with the regulations and the terms of an APO is a
sanctionable violation.
This administrative review and this notice are in accordance with
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and section 353.22
of the Department's regulations.
Dated: March 9, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-6713 Filed 3-13-98; 8:45 am]
BILLING CODE 3510-DS-P
