[Federal Register Volume 63, Number 52 (Wednesday, March 18, 1998)]
[Notices]
[Pages 13170-13204]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-6883]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-580-815 & A-580-816]
Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat
Products From Korea: Final Results of Antidumping Duty Administrative
Reviews
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Final results of antidumping duty administrative reviews.
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SUMMARY: On September 9, 1997, the Department of Commerce (``the
Department'') published the preliminary results of the administrative
reviews of the antidumping duty orders on certain cold-rolled and
corrosion-resistant carbon steel flat products from Korea. These
reviews cover three manufacturers/exporters of the subject merchandise
to the United States and the period 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 18, 1998.
FOR FURTHER INFORMATION CONTACT: Fred Baker (Dongbu), Steve Bezirganian
(POSCO), Thomas Killiam (Union), Alain Letort, or John Kugelman, AD/CVD
Enforcement Group III--Office 8, Import Administration, International
Trade Administration, U.S. Department of Commerce, 14th
Street and Constitution Avenue, N.W., Washington, D.C. 20230, telephone
202/482-2924 (Baker), 202/482-0162 (Bezirganian), 202/482-2704
(Killiam), 202/482-4243 (Letort), or 202/482-0649 (Kugelman), fax 202/
482-1388.
SUPPLEMENTARY INFORMATION:
Applicable Statute
Unless otherwise indicated, all citations to the statute are
references to the provisions effective January 1, 1995, the effective
date of the amendments made to the Tariff Act of 1930 (``the Act'') by
the Uruguay Round Agreements Act (``URAA''). In addition, unless
otherwise indicated, all citations to the Department's regulations are
references to the provisions codified at 19 CFR part 353 (April 1997).
Although the Department's new regulations, codified at 19 CFR part 351
(62 FR 27296--May 19, 1997) (``Final Rules''), do not govern these
proceedings, citations to those regulations are provided, where
appropriate, to explain current departmental practice.
Background
The Department published antidumping duty orders on certain cold-
rolled and corrosion-resistant carbon steel flat products from Korea on
August 19, 1993 (58 FR 44159). The Department published a notice of
``Opportunity to Request Administrative Review'' of the antidumping
duty orders for the 1995/96 review period on August 12, 1996 (61 FR
41770). On August 30, 1996, respondents Dongbu Steel Co., Ltd.
(``Dongbu'') and Pohang Iron and Steel Co., Ltd. (``POSCO'') requested
that the Department conduct administrative reviews of the antidumping
duty orders on cold-rolled and corrosion-resistant carbon steel flat
products from Korea; respondent Union Steel Manufacturing Co., Ltd.
(``Union'') requested a review of corrosion-resistant carbon steel flat
products only. On the same day, the petitioners in the original less-
than-fair-value (``LTFV'') investigations (AK Steel Corp., Bethlehem
Steel Corporation, U.S. Steel Group--a unit of USX Corporation, Inland
Steel Industries, Inc., Geneva Steel, Gulf States Steel Inc. of
Alabama, Sharon Steel Corporation, and Lukens Steel Company,
collectively referred to as ``petitioners'') filed a similar request.
We initiated these reviews on
[[Page 13171]]
September 13, 1996 (61 FR 48862--September 17, 1996).
On October 7, 1996, the petitioners requested, pursuant to section
751(a)(4) of the Act, that the Department determine whether antidumping
duties had been absorbed by the respondents during the period of review
(``POR''). Section 751(a)(4) provides for the Department, if requested,
to determine, during an administrative review initiated two years or
four years after publication of the order, whether antidumping duties
have been absorbed by a foreign producer or exporter subject to the
order if the subject merchandise is sold in the United States through
an importer who is affiliated with such foreign producer or exporter.
Section 751(a)(4) was added to the Act by the URAA.
The regulations governing these reviews do not address this
provision of the Act. However, for transition orders as defined in
section 751(c)(6)(C) of the Act, i.e., orders in effect as of January
1, 1995, section 351.213(j)(2) of the Department's new antidumping
regulations provides that the Department will make a duty-absorption
determination, if requested, in any administrative review initiated in
1996 or 1998. See 19 CFR Sec. 351.213(j)(2), 62 FR at 27394. As noted
above, while the new regulations do not govern the instant reviews,
they nevertheless serve as a statement of departmental policy. Because
orders on certain cold-rolled and corrosion-resistant carbon steel flat
products from Korea have been in effect since 1993, they are transition
orders in accordance with section 751(c)(6)(C) of the Act. As these
reviews were initiated in 1996, the Department has acceded to
petitioners' request that it conduct a duty-absorption inquiry.
The Act provides for a determination on duty absorption if the
subject merchandise is sold in the United States through an affiliated
importer. In these cases, all reviewed firms sold through importers
that are ``affiliated'' within the meaning of section 751(a)(4) of the
Act. We have determined that the following firms have dumping margins
on the percentages of their U.S. sales, by quantity, indicated below:
------------------------------------------------------------------------
Percentage
of U.S.
affiliate's
Name of firm and class or kind of merchandise sales with
dumping
margins
------------------------------------------------------------------------
Dongbu:
Cold-Rolled.............................................. 65.34
Corrosion-Resistant...................................... 5.82
POSCO:
Cold-Rolled.............................................. 35.54
Corrosion-Resistant...................................... 14.64
Union:
Cold-Rolled.............................................. (1)
Corrosion-Resistant...................................... 8.99
------------------------------------------------------------------------
\1\ No U.S. sales in POR.
We presume that the duties will be absorbed for those sales which
were dumped. This presumption can be rebutted with evidence that the
unaffiliated purchasers in the United States will pay the ultimately
assessed duty. However, there is no such evidence on the record. Under
these circumstances, we find that antidumping duties have been absorbed
by the above-listed firms on the percentages of U.S. sales indicated.
Although we afforded interested parties the opportunity to submit
evidence that unaffiliated purchasers in the United States will absorb
duties, no party availed itself of this opportunity.
On September 9, 1997, the Department published in the Federal
Register the preliminary results of the third administrative reviews of
the antidumping duty orders on certain cold-rolled and corrosion-
resistant carbon steel flat products from Korea (62 FR 47423). The
Department has now completed these administrative reviews in accordance
with section 751 of the Act.
Scope of the Reviews
The review of ``certain cold-rolled carbon steel flat products''
covers cold-rolled (cold-reduced) carbon steel flat-rolled products, of
rectangular shape, neither clad, plated nor coated with metal, whether
or not painted, varnished or coated with plastics or other nonmetallic
substances, in coils (whether or not in successively superimposed
layers) and of a width of 0.5 inch or greater, or in straight lengths
which, if of a thickness less than 4.75 millimeters, are of a width of
0.5 inch or greater and which measures at least 10 times the thickness
or if of a thickness of 4.75 millimeters or more are 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 7209.15.0000, 7209.16.0030, 7209.16.0060,
7209.16.0090, 7209.17.0030, 7209.17.0060, 7209.17.0090, 7209.18.1530,
7209.18.1560, 7209.18.2550, 7209.18.6000, 7209.25.0000, 7209.26.0000,
7209.27.0000, 7209.28.0000, 7209.90.0000, 7210.70.3000, 7210.90.9000,
7211.23.1500, 7211.23.2000, 7211.23.3000, 7211.23.4500, 7211.23.6030,
7211.23.6060, 7211.23.6085, 7211.29.2030, 7211.29.2090, 7211.29.4500,
7211.29.6030, 7211.29.6080, 7211.90.0000, 7212.40.1000, 7212.40.5000,
7212.50.0000, 7215.50.0015, 7215.50.0060, 7215.50.0090, 7215.90.5000,
7217.10.1000, 7217.10.2000, 7217.10.3000, 7217.10.7000, 7217.90.1000,
7217.90.5030, 7217.90.5060, 7217.90.5090. Included in this review 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 from this review is
certain shadow mask steel, i.e., aluminum-killed, cold-rolled steel
coil that is open-coil annealed, has a carbon content of less than
0.002 percent, is of 0.003 to 0.012 inch in thickness, 15 to 30 inches
in width, and has an ultra flat, isotropic surface.
The review of ``certain corrosion-resistant carbon steel flat
products'' covers flat-rolled carbon steel products, of rectangular
shape, either clad, plated, or coated with corrosion-resistant metals
such as zinc-, aluminum-, or zinc-, aluminum-, nickel- or iron-based
alloys, whether or not corrugated or painted, varnished or coated with
plastics or other nonmetallic substances in addition to the metallic
coating, in coils (whether or not in successively superimposed layers)
and of a width of 0.5 inch or greater, or in straight lengths which, if
of a thickness less than 4.75 millimeters, are of a width of 0.5 inch
or greater and which measures at least 10 times the thickness or if of
a thickness of 4.75 millimeters or more are of a width which exceeds
150 millimeters and measures at least twice the thickness, as currently
classifiable in the HTS under item numbers 7210.30.0030, 7210.30.0060,
7210.41.0000, 7210.49.0030, 7210.49.0090, 7210.61.0000, 7210.69.0000,
7210.70.6030, 7210.70.6060, 7210.70.6090, 7210.90.1000, 7210.90.6000,
7210.90.9000, 7212.20.0000, 7212.30.1030, 7212.30.1090, 7212.30.3000,
7212.30.5000, 7212.40.1000, 7212.40.5000, 7212.50.0000, 7212.60.0000,
7215.90.1000, 7215.90.3000,
[[Page 13172]]
7215.90.5000, 7217.20.1500, 7217.30.1530, 7217.30.1560, 7217.90.1000,
7217.90.5030, 7217.90.5060, 7217.90.5090. Included in this review 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 from this review
are flat-rolled steel products either plated or coated with tin, lead,
chromium, chromium oxides, both tin and lead (``terne plate''), or both
chromium and chromium oxides (``tin-free steel''), whether or not
painted, varnished or coated with plastics or other nonmetallic
substances in addition to the metallic coating. Also excluded from this
review are clad products in straight lengths of 0.1875 inch or more in
composite thickness and of a width which exceeds 150 millimeters and
measures at least twice the thickness. Also excluded from this review
are certain clad stainless flat-rolled products, which are three-
layered corrosion-resistant carbon steel flat-rolled products less than
4.75 millimeters in composite thickness that consist of a carbon steel
flat-rolled product clad on both sides with stainless steel in a 20%-
60%-20% ratio.
These HTS item numbers are provided for convenience and customs
purposes. The written descriptions remain dispositive.
The POR is August 1, 1995 through July 31, 1996. These reviews
cover sales of certain cold-rolled and corrosion-resistant carbon steel
flat products by Dongbu, Union, and POSCO.
Verification
As provided in section 782(i)(3) of the Act, we verified
information provided by the respondents using standard verification
procedures, including on-site inspection of the manufacturers'
facilities, the examination of relevant sales and financial records,
and selection of original documentation containing relevant
information. Our verification results are outlined in the public
versions of the verification reports.
Fair-Value Comparisons
To determine whether sales of the subject merchandise from Korea to
the United States were made at less than fair value, we compared the
export price (``EP'') or constructed export price (``CEP'') of the
merchandise to the normal value (``NV''), as described in the ``Export
Price (or Constructed Export Price)'' and ``Normal Value'' sections of
Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products
from Korea: Preliminary Results of Antidumping Duty Administrative
Reviews, 62 FR 47422 (September 9, 1997).
Since the publication of the preliminary review results, however,
we have re-examined the facts of the record of these cases, our prior
practice, and statutory definitions. As a result of our re-examination,
we have concluded that treating certain transactions as indirect EP
transactions is inappropriate. The Act defines the term ``constructed
export price'' as ``the price at which the subject merchandise is first
sold (or agreed to be sold) in the United States before or after the
date of importation by or for the account of the producer or exporter
of such merchandise or by a seller affiliated with the producer or
exporter, to a purchaser not affiliated with the producer or exporter,
as adjusted under subsections (c) and (d).'' In contrast, ``export
price'' is defined as ``the price at which the subject merchandise is
first sold (or agreed to be sold) before the date of importation by the
producer or exporter of the subject merchandise outside of the United
States.'' Sections 772(a)-(b) of the Act (emphasis added). In these
cases, the record clearly establishes that the respondents' affiliates
in the United States were in most instances the parties first contacted
by unaffiliated U.S. customers desiring to purchase the subject
merchandise and also that the sales affiliates in question signed the
sales contracts and engaged in other sales support functions. These
facts indicate that the subject merchandise is first sold in the United
States by or for the account of the producer or exporter, or by the
affiliated seller, and that the sales in question are therefore CEP
transactions.
Factors relevant to that analysis include: (1) Whether the
merchandise was shipped directly from the manufacturer to the
unaffiliated U.S. customer; (2) whether this was the customary
commercial channel between the parties involved; and (3) whether the
function of the U.S. sales affiliate was limited to that of a processor
of sales-related documentation and a communications link with the
unrelated U.S. buyer. Where the facts indicate that the activities of
the U.S. affiliate were ancillary to the sale (e.g., arranging
transportation or customs clearance, invoicing), we treated the
transactions as EP sales. Where the U.S. affiliate had more than an
incidental involvement in making sales (e.g., soliciting sales,
negotiating contracts or prices) or performed other selling functions,
we treated the transactions as CEP sales. For company-specific details
on the application of this methodology, please refer below to the
``Analysis of Comments Received'' section of this notice.
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 the Reviews'' section of this notice, above, 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.
For purposes of these final review results, in accordance with the
Department's regulations and the questionnaire issued to the
respondents at the outset of these reviews, we have used the date of
the invoice to the first unaffiliated purchaser in the United States as
the date of sale, except for transactions where the date of invoice
[[Page 13173]]
occurred after the date of shipment, in which case we used the date of
shipment as the date of sale.
Analysis of Comments Received
We gave interested parties an opportunity to comment on the
preliminary results. We received comments and rebuttal comments from
Dongbu, POSCO, and Union, exporters of the subject merchandise
(``respondents''), and from petitioners. POSCO requested a public
hearing, which was held on November 7, 1997.
General Comments
Comments by Petitioners
Comment 1. Petitioners argue that the Department must deduct actual
antidumping (``AD'') and countervailing (``CVD'') duties paid by
respondents' affiliated importers from the price used to establish EP
or CEP.
Department's Position. We disagree with petitioners. We continue to
adhere to our longstanding practice as articulated in prior segments of
these proceedings, which is not to make a deduction for antidumping
duties. This practice was recently upheld by the Court of International
Trade (``CIT'') in AK Steel Corp., et al. v. United States, CIT Slip
Op. 97-160 (December 1, 1997).
Comment 2. Petitioners contend the Department's duty absorption
determination in the preliminary review results is flawed for two major
reasons.
First, petitioners assert that by inviting the parties to submit
new factual information after verification in order to rebut its
presumption that ``duties will be absorbed for those sales which were
dumped,'' the Department undermined the statutory requirement that all
information used in the final review results be verified. Petitioners
argue that they were placed at a distinct disadvantage by the
Department's decision to allow respondents to place information on the
record which could not be verified. Petitioners argue that the
Department's procedure is at odds with the ruling by the Court of
Appeals for the Federal Circuit (``CAFC'') that ``the burden of
production is properly placed upon the party in control of the
necessary information.'' See Creswell Trading Co. v. United States, 15
F.3d 1054, 1060 (Fed. Cir. 1994). Although petitioners recognize that
their concerns are no longer an issue in these reviews, since no party
submitted information pursuant to the Department's request, they urge
the Department to discard this poorly conceived method and to collect
all relevant duty absorption evidence at the same time as it collects
information necessary to complete its dumping analysis.
Second, petitioners believe the Department's methodology has the
potential to understate the extent to which antidumping duties were
absorbed. The Department's methodology, they argue, can give the casual
reader the mistaken impression that the total amount of duties absorbed
was limited to the dumped sales included in the final antidumping duty
calculated. Because the overall dumping margin is weight averaged,
petitioners contend, the true level of dumping and thus of duty
absorption is significantly greater than the overall margin. To remedy
this problem, petitioners suggest that the Department state its duty
absorption finding as the percentage of sales dumped in conjunction
with the average level of dumping for those sales (emphasis in the
original). For example, if five percent of a respondent's sales were
dumped, and the overall weighted-average dumping margin on the dumped
sales was 40 percent, the Department should state that the respondent
absorbed duties on five percent of sales at a margin of 40 percent.
Petitioners reject the alternative methodology suggested by POSCO,
which would measure duty absorption not on a sale-specific basis but
rather across all sales made during the POR. Petitioners argue that
POSCO's proposal to determine duty absorption by comparing the average
U.S. price to the average normal value is contrary to the statute,
which mandates that, in administrative reviews, dumping margins be
calculated by comparing the U.S. price and normal value of each entry.
Similarly, petitioners argue that POSCO's proposal to include sales
with negative margins in the calculation is contrary to the
Department's long-standing practice of treating such sales as zero-
margin sales. Petitioners maintain that calculating duty absorption
levels on anything other than a transaction-specific basis undermines
the presumption that ``current dumping margins calculated * * * in
reviews may not be indicative of the margins that would exist in the
absence of an order.'' Uruguay Round Agreements Act, Statement of
Administrative Action (``SAA''), H.R. Doc. 103-316, Vol. I, 103rd
Cong., 2nd Sess. (1994) at 885.
Respondents argue that the Department's preliminary duty absorption
determination violates the letter and intent of both the statute and
Article 11.1 of the Agreement on Implementation of Article VI of the
General Agreements on Tariffs and Trade (1994) (``UR Antidumping
Agreement''). It violates the statute, say respondents, because the
statute recognizes that the antidumping law must be implemented in a
fair manner. This is why the Department calculates dumping margins on a
weighted-average basis, and measures dumping over the 12-month period
in order to eliminate the effects of abnormal, outlying instances of
dumping. It violates Article 11.1, assert respondents, because that
article states that antidumping measures shall remain in effect only as
long as and to the extent necessary to counteract injurious dumping.
Respondents maintain that the Department's current duty absorption
methodology, as stated in the preliminary review results, would
unlawfully make it more difficult for antidumping orders to be revoked
by finding that duty absorption has occurred even in cases where the
dumping margin is zero or de minimis. Respondents contend that the
Department's present methodology implies that if a respondent, over a
12-month period, has not engaged in dumping but has one or two outlying
sales which were dumped, then the Department will determine that not
only has the respondent engaged in duty absorption, but at the
magnitude of those one or two sales. Respondents claim that such a
distorted result makes it more likely that the International Trade
Commission (``ITC'') will prolong the existence of the order, in
violation of Article 11.1. Indeed, say respondents, one could envision
a situation where the Department would revoke an order due to three
consecutive years of zero or de minimis margins, yet recommend that the
ITC not grant a ``sunset'' revocation because of duty absorption found
under this distortive methodology.
Respondents therefore recommend that the Department base a duty
absorption determination on a respondent's overall pricing policies and
not on individual, isolated instances of dumping. In addition, they
contend the Department should include a credit for negative margins, in
fulfillment of its Article 11.1 obligations.
Department's Position. After carefully considering petitioners' and
respondents' conflicting views, we have left our duty absorption
methodology unchanged from the preliminary results.
Contrary to petitioners' contention that we violated the statute by
requesting new factual information after verification, our regulations
allow us to request factual information from the parties at any time,
even after verification. Had any party chosen to submit new factual
information in
[[Page 13174]]
response to our request in the preliminary results notice, we would
have afforded the other parties an opportunity to comment in writing on
such information. The issue of whether or not such information would
have been verified is moot since we received no new factual information
on duty absorption pursuant to our request.
We believe the approach suggested by petitioners is inappropriate
because, as respondents point out, it would result in an artificially
inflated duty absorption percentage and could mislead the ITC. In a
hypothetical case where, out of 100 U.S. sales transactions, only one
was dumped, but at a margin of 20 percent, petitioners apparently would
have the Department determine that duty absorption had occurred at a
rate of 20 percent on one percent of sales. We find this approach
distortive and not mandated by either statute or regulation.
We also reject POSCO's suggestion that we offset sales with
positive dumping margins with sales with negative dumping margins
because doing so would disguise the fact that duty absorption may have
occurred, thereby obfuscating our duty-absorption inquiry. In
administrative reviews, negative dumping margins are systematically
disregarded, because there is no basis in the antidumping law to use
negative margins as an offset or a ``credit'' against positive margins.
Accordingly, for purposes of these final review results, we have
left unchanged our duty absorption methodology.
Comment 3. Petitioners assert that in the event the Department
reclassifies certain EP transactions as CEP transactions, it must
ensure that these sales are reviewed in either the third or fourth
administrative review, and not permit certain sales to escape review in
their entirety as a result of the Department's practice of determining
whether or not a sale is subject to review based on the date of sale
rather than the date of entry.
Where reclassifying an EP sale as a CEP sale pushes that sale
forward into the fourth administrative review, petitioners do not
object. Where such reclassification, however, causes certain sales to
be pushed backwards into the completed second review period,
petitioners object strongly, because such sales will escape this
review, which is contrary to the statutory provision that all entries
be reviewed. See Sec. 751(a)(2) of the Act.
Petitioners state that nothing prevents the Department from
reviewing newly reclassified CEP sales even if the reported date of
sale falls within the previous POR, since such transactions were not
previously reviewed and will not be subject to review in the future.
Respondents retort that petitioners are requesting the Department
simultaneously to administer the antidumping law in two different and
mutually exclusive directions. On the one hand, they say, petitioners
ask that the Department reclassify certain EP transactions as CEP
transactions, yet at the same time they ask the Department to ignore
its standard date-of-sale methodology with regard to those sales and
revert to an EP date-of-sale methodology. Respondents affirm that this
argument is internally inconsistent and unsupported by statute or
regulations. If the Department (wrongfully) decides to reclassify the
sales in question as CEP transactions, argue respondents, then it
should use its standard date-of-sale methodology to determine whether
those sales fall within the POR, even at the risk of those sales
falling out of the POR.
Department's Position. We agree with petitioners. Although we have
reclassified most of the respondents' U.S. sales as CEP transactions
for purposes of these final review results, this change has no effect
on the date of sale. As explained elsewhere in this notice (see the
Department's Position to Comment 31, below), we have changed the date
of sale for Dongbu and Union, but for reasons independent of the change
from EP to CEP. There is no ``EP date-of-sale methodology,'' as
respondents claim. Where sales are classified as CEP transactions but
the date of sale occurs prior to importation, we generally cover all
entries during the POR; where sales are classified as CEP transactions
and the date of sale occurs after importation, we generally cover all
sales during the POR. In these cases the earlier of these situations
applies; therefore, we have analyzed all entries during the POR, and no
sales were pushed backward into the completed second review period as a
result of our changing the date of sale.
Company-Specific Comments
Comments by Petitioners
Comment 4. Petitioners argue that the Department erred in its
calculation of Dongbu's U.S. imputed credit by not adding to it the
bank fees for opening letters of credit. (These letter-of-credit fees
are charges that Dongbu incurs on the international letters of credit
for transactions between Dongbu and Dongbu U.S.A.) Furthermore, they
argue that, for two reasons, the Department should use facts available
for the bank fee amounts. First, they argue that certain verification
exhibits demonstrate Dongbu's calculation of its average letter of
credit fees (submitted in exhibit C-20 of its January 31, 1997,
supplemental questionnaire response) grossly misstates the amount of
bank charges. Second, they argue that Dongbu's reported letter of
credit charges failed verification. To support this latter claim,
petitioners cite the following quotation from the U.S. verification
report:
We discussed the bank charges for letter of credit transactions * *
* We asked Dongbu to explain and document, for a sample transaction,
how bank charges were calculated and allocated. Dongbu
representatives were unable to volunteer a cogent explanation of how
these charges were calculated, within a reasonable span of time. We
therefore moved on to the next topic.
See September 16, 1997 verification report (revised and reissued on
November 18, 1997) at 2.
Dongbu argues that its sample letter of credit calculation in
exhibit C-20 of its supplemental questionnaire response did not fail
verification, and that the verification exhibits fully support it.
Furthermore, Dongbu argues that for two reasons the Department should
not adjust the U.S. sales prices for letter of credit fees. First,
Dongbu argues that the letter of credit fees are already included in
Dongbu's reported imputed credit, and that to make an adjustment for
the letter of credit fees in addition to the reported imputed credit
would constitute double-counting an expense. It argues that because the
imputed credit period begins with the date of shipment and ends with
the date of payment, it covers the entire time the merchandise is in
the accounts receivable ledgers of Dongbu, Dongbu Corporation, and
Dongbu U.S.A. Therefore, Dongbu argues, the reported imputed credit
incorporates all expenses associated with financing the intercompany
payment, including the letter of credit charges.
Moreover, Dongbu argues that its reported imputed credit figure
includes the entire cost of financing receivables by virtue of the use
of the short-term interest rate of Dongbu U.S.A. as the interest rate
in the calculation. The assumption in using Dongbu U.S.A.'s rate,
Dongbu argues, is that it is representative of the cost of financing
receivables during the entire time the receivables are outstanding.
Thus, to add the actual charge for taking out the letter of credit in a
case where credit cost is fully imputed would be tantamount to double-
counting the cost of credit during the time covered by the letter of
credit.
Dongbu further argues that the Department's precedent supports this
[[Page 13175]]
interpretation. It cites a case where the Department stated that
``deducting both the actual [letter of credit] fees and the imputed
costs (which include these fees) would be double counting.'' See Final
Determination of Sales at Less Than Fair Value: Bicycles from the
People's Republic of China, 61 FR 19026, 19044 (April 30, 1996)
(``Bicycles'').
Second, Dongbu argues that the Department should not adjust the
U.S. price for letter of credit fees because the record shows that the
actual cost of the charges associated with the international letters of
credit is such a minor expense that it is unnecessary to adjust the
U.S. price.
Petitioners argue that Dongbu is incorrect in stating that its
letter of credit fees are already included in its imputed credit
calculation, and that in fact the Department verified that these fees
are not included in the imputed credit expense or separately reported
elsewhere in Dongbu's responses. See the September 16, 1997
verification report (revised and reissued on November 18, 1997), at 2
(quoted above).
Petitioners argue that this verification finding is further
supported by other record evidence, such as the fact that Dongbu
receives letters of credit from the Korean Exchange Bank, but this bank
is not listed as a lending institution bank in the credit expense
calculation that Dongbu prepared.
Furthermore, petitioners argue that Bicycles is inapposite. In
Bicycles, an affiliated U.S. importer paid fees to its corporate parent
to cover interest charges on letters of credit, and the fees were
already included in the reported credit expense. Here, petitioners
argue, the Department verified that Dongbu did not include the letter
of credit expenses in the imputed credit expense. Moreover, at issue in
Bicycles were interest charges associated with letters of credit; here
the issue is other types of expenses associated with letters of credit.
Additionally, petitioners argue, at issue in Bicycles was the payment
from the U.S. affiliate to its corporate parent. Here the issue is fees
paid to unaffiliated lending institutions. Accordingly, petitioners
conclude, Bicycles is inapposite.
Therefore, petitioners argue, bank fees associated with letters of
credit must be deducted from U.S. price as direct selling expenses in
accordance with Porcelain-on-Steel Cookware from Mexico; Final Results
of Antidumping Duty Administrative Review, 61 FR 54616, 54618 (October
21, 1996) (``Cookware''). There the Department found that ``bank fees
associated with the letter of credit transactions * * * are a direct
selling expense * * * .'' Similarly, they argue, letter of credit fees
were treated as direct selling expenses and deducted from U.S. price
for both Union and POSCO in the preliminary results of this review, and
therefore the Department must make a similar adjustment for Dongbu.
Petitioners further argue that Dongbu is incorrect in saying that
the adjustment is small. They argue that Dongbu's calculation is flawed
and understates the actual expense associated with letter of credit
fees.
Department's Position. We agree with both parties in part. We agree
with petitioners that we should deduct bank fees for letters of credit
in addition to the calculated imputed credit figure. We do not agree
with Dongbu's argument that an imputed credit figure covering the
entire credit period inherently includes all credit/financing expenses.
Where a respondent pays bank fees to finance a letter of credit related
to a U.S. sale, we must adjust for these fees as they are direct
selling expenses. Moreover, these fees are not implicitly included in
the calculated imputed credit figure simply because the interest rate
used is the interest rate of an American subsidiary.
Furthermore, adjusting for bank fees associated with letters of
credit is consistent with our past practice. As petitioners point out,
Bicycles is inapposite because it dealt with an interest payment
between two affiliated companies. Here the expenses at issue are
charges paid to an unaffiliated bank. As we stated in Cookware, ``[w]e
determined that bank fees associated with the letter of credit
transactions for certain U.S. customers are a direct selling expense
and have made a COS [circumstance-of-sale] adjustment for these fees.''
See Cookware at 45618. We have followed this precedent in these final
results of review, and have adjusted for bank fees as a direct selling
expense. See also Ferrosilicon from Brazil; Amended Final Determination
of Sales at Less Than Fair Value, 59 FR 8598 (February 23, 1994) and
Silicon Metal from Brazil; Final Results of Antidumping Duty
Administrative Review and Determination Not to Revoke in Part, 62 FR
1954, 1969 (January 14, 1997).
However, we do not agree with petitioners that Dongbu's reported
letter of credit fees failed verification, or that it is necessary to
resort to facts available. At verification the Department found no
inconsistencies in Dongbu's computation, which is supported by the
verification exhibits. Therefore, in these final results, we have used
the letter of credit fees as Dongbu reported them.
Comment 5. Petitioners argue that the Department erred in treating
all except one of Dongbu's U.S. sales as EP sales, rather than as CEP
sales. They set forth three arguments to support this contention.
First, they argue that it is Dongbu U.S.A.'s Los Angeles office
(``DBLA''), and not Dongbu, that plays the primary role in setting the
price to the ultimate U.S. customer. They state that the record
demonstrates that virtually all sales contact with the U.S. customer
occurs through DBLA, and that DBLA is actively involved in price
negotiation. The only confirmation of price and product
characteristics, petitioners argue, is the sales contract, which is
signed by DBLA and the unaffiliated U.S. customer. Nothing on the
document indicates Dongbu's or Dongbu Corporation's involvement in the
sale, nor is either entity bound under the contract.
Given this lack of involvement on the part of Dongbu, petitioners
argue, Dongbu's statement that Dongbu approves all sales over the
telephone, but has no written document showing the approval, is
ludicrous. If Dongbu's approval is no more than a telephone approval,
they state, with no written documentation showing the sales transaction
and its terms, it can be no more than pro forma.
Moreover, petitioners dismiss Dongbu's statement that there is
little negotiation regarding price on the part of Dongbu because its
loyal U.S. customers already know the prices based on past experience.
Petitioners also state that it is demonstrably untrue, because over the
course of three administrative reviews, Dongbu's antidumping duty rate
has declined steadily. This means that either prices in the home market
or the U.S. market have changed (or that Dongbu has inaccurately
reported its sales and expenses). In the previous review Dongbu
certified that its home-market prices do not fluctuate and have
remained constant for extensive periods of time. See Certain Cold-
Rolled and Corrosion-Resistant Carbon Steel Flat Products from Korea;
Final Results of Antidumping Duty Administrative Reviews, 62 FR 18404
(April 15, 1997) (``Second Review Final Results'') at 18409. As home-
market prices have remained constant, and Dongbu's antidumping duty has
not, this means, barring the intentional misreporting of data, that
Dongbu's U.S. prices do in fact vary.
The falsity of Dongbu's claim regarding its role in the price
negotiation process, petitioners argue, is
[[Page 13176]]
demonstrated by the fact that Dongbu does not know the final price
charged to the U.S. customer until long after the sale is completed.
Furthermore, petitioners argue, the fact that Dongbu may give DBLA
confirmation that it can produce merchandise ordered does not
demonstrate Dongbu's involvement in the price negotiation.
Petitioners further argue that the only record evidence speaking to
Dongbu's involvement in the sales negotiation relates to two sales
transactions discussed at verification. In the first transaction,
Dongbu rejected a sale ``because the specifications * * * were not
acceptable.'' Petitioners argue that this production issue is
completely irrelevant to the question of Dongbu's role in price
setting. In the second transaction, Dongbu denied a request by an
American customer for a discount due to a delayed shipment. As with the
first transaction, petitioners argue, this denial does not demonstrate
Dongbu's control of the price negotiation.
Petitioners argue that a more notable example of a discounted sale
is observation 454, the sale which Dongbu reported as an EP sale and
which the Department determined to be a CEP sale. There, they argue,
the sales process was identical to all Dongbu's other U.S. sales which
the Department treated as EP. For this sale, petitioners argue, DBLA
located the U.S. buyer, negotiated the price, and arranged all other
aspects of the sale. See Korean verification exhibit 13 at 21-22. Thus,
petitioners argue, if the sales process for this sale qualifies as a
CEP sale, as the Department has found, then the same sales process used
for Dongbu's other U.S. sales must likewise be deemed CEP sales.
Secondly, petitioners argue that in addition to playing a
significant role in the setting of prices, documentation on the record
demonstrates that DBLA is also involved with almost every other stage
of the U.S. transaction. Specifically, they argue, DBLA arranges and
pays for cash deposits for regular duties and for countervailing and
antidumping duties, takes title to the subject merchandise and serves
as importer of record, clears the subject merchandise through customs,
invoices the U.S. customer, collects payment from the U.S. customer,
finances the sale to the U.S. customer, and arranges warehousing and
demurrage in the United States. The extent of DBLA's involvement in the
U.S. sales process, petitioners argue, is also demonstrated by the
value of its indirect selling expenses relative to the value of
Dongbu's indirect selling expenses in Korea on behalf of its home
market and U.S. sales. An analysis of Dongbu's role on behalf of U.S.
sales shows, they argue, that it is limited to confirming the
availability of production capacity and characteristics, arranging
export transportation, and issuing pro forma approvals of DBLA's sales
terms to the unaffiliated U.S. buyer.
Finally, petitioners argue that the Department must classify
Dongbu's U.S. sales as CEP transactions to be consistent with its
analysis in Certain Cut-to-Length Carbon Steel Plate from Germany;
Final Results of Antidumping Duty Administrative Review, 62 FR 18390
(April 15, 1997) (``German Plate''). There the Department identified
seven functions performed by the respondent's U.S. affiliate. The
Department determined that these seven functions warranted classifying
and analyzing the affiliates' resales as CEP transactions. Petitioners
argue that with the possible exception of customer credit checks, DBLA
performs all of those functions as Dongbu's selling affiliate in the
United States. Perhaps more important, petitioners state, record
evidence demonstrates that, like the U.S. affiliate in German Plate,
DBLA plays the central role in negotiating U.S. transaction price.
Dongbu argues that the U.S. sales the Department classified as EP
transactions were correctly classified. First, they argue that the
Department has considered and rejected petitioners' argument in the
first and second administrative reviews of this order, and that nothing
new--either factually or legally--has changed with respect to this
issue since those reviews. Furthermore, they argue that the Department
again examined this issue at the verifications in this review, and
found nothing to support petitioners' argument.
Second, Dongbu argues that petitioners' assertions that DBLA
engages in substantial selling functions, which include price
negotiation, have no basis in the record and are at odds with the
Department's findings in the sales verification reports. It is a matter
of record, Dongbu argues, that the most significant selling activities
related to U.S. sales occur in Korea, including sales negotiation,
production scheduling, shipping scheduling, Korean brokerage, handling,
and loading expenses, Korean inland freight, and ocean freight. Dongbu
states that DBLA has no direct role in these arrangements and that
these expenses are all incurred in Korea.
Furthermore, Dongbu argues that during the verification in Korea
the Department examined and verified multiple transactions that
demonstrated that Dongbu U.S.A. was merely a communications link, and
that Dongbu approved the terms of all sales. One such sale, it argues,
was the sale (cited by petitioners) in which Dongbu denied a requested
discount from an American customer. Dongbu states that after receiving
the request, it wrote directly to the U.S. customer, and explained that
constant requests for discounts could warrant a termination of their
relationship. Nothing could be more illustrative, Dongbu argues, of
Dongbu U.S.A.''s function as a communication link and Dongbu's
authority in setting the terms of sale. Dongbu also identifies
observation 454 as another sale which serves as a prime example of
Dongbu's ultimate authority over U.S. sales: in that transaction,
Dongbu argues, it decided that a discount was appropriate, and
confirmed the sale.
Moreover, Dongbu argues that there are fundamental differences in
the relationship between Dongbu and its subsidiary and the relationship
between the respondent and its sales affiliate in German Plate. In this
regard the U.S. verification report dated December 16, 1997, says (at
2) that Dongbu U.S.A. ``act[s] solely as an intermediary, inasmuch as
headquarters in Korea exercise[s] active authority over pricing and
terms.'' In German Plate, the U.S. sales affiliate played a major role
in negotiating price with customers. Thus, it argues, German Plate
cannot serve as a basis to reclassify Dongbu's transactions as CEP.
Third, Dongbu argues that all of DBLA's sales activities which
petitioners argue warrant reclassifying Dongbu's sales as CEP sales are
consistent with EP classification. To act as importer of record, to
receive purchase orders to forward to Seoul for approval, to issue
sales contracts once the quantities and prices have been approved by
Seoul, to borrow to finance accounts receivable, to handle billing and
accounting functions, and to contact U.S. customers, are all, Dongbu
argues, well within the scope of activities normally associated with
acting as a communications link and document processor. Furthermore,
they argue that the CIT has consistently upheld purchase price (``PP'')
(now called ``EP'') classification in circumstances in which the
related U.S. company undertook activities equal to, or far more
extensive than, those at issue here. Dongbu cites the following four
examples:
PP classification was upheld where U.S. affiliate first
shipped merchandise to independent warehouses whose cost was borne by
U.S. affiliate, U.S. affiliate was importer of record, U.S. affiliate
[[Page 13177]]
paid estimated antidumping duties on the merchandise, U.S. affiliate
retained title prior to sale to the unrelated U.S. party, and U.S.
affiliate received commissions for its role in the transactions.
Outokumpu Copper Rolled Products v. United States, 829 F. Supp. 1371,
1379-1380 (CIT 1993), appeal after remand dismissed, 850 F. Supp. 16
(CIT 1994).
PP classification was upheld where U.S. affiliate received
purchase orders and invoiced related customer, U.S. affiliate was
invoiced for and directly paid shipping company for movement charges,
U.S. affiliate occasionally warehoused, at its own expense, and U.S.
affiliate received ``substantial mark-up'' over price at which it
purchased from exporter. E.I. Du Pont de Nemours & Co., Inc. v. United
States, 841 F. Supp. 1237, 1248-50 (CIT 1993).
PP classification was upheld where U.S. affiliate invoiced
customers, collected payments, acted as importer of record, paid
customs duties, and may have taken title to the goods when they arrived
in the United States. Zenith Electronics Corp. v. United States, 18 CIT
870, 873-874 (1994).
PP classification was upheld where U.S. affiliate
processed purchase order, performed invoicing, collected payments,
arranged U.S. transportation, and served as the importer of record.
Independent Radionic Workers v. United States, CIT Slip Op. 95-45
(March 15, 1995).
For all of these reasons, Dongbu argues, the Department should
reject petitioners' argument.
Department's Position. We agree with petitioners that Dongbu's U.S.
sales should be treated as CEP transactions. In the final results of
the prior reviews, in order to determine whether sales made prior to
importation through Dongbu's affiliated U.S. sales affiliate (DBLA) to
an unaffiliated customer in the United States were EP or CEP
transactions, we analyzed Dongbu's U.S. sales to determine whether the
following three factors were present: (1) whether the merchandise was
shipped directly from the manufacturer (Dongbu) to the unaffiliated
U.S. customer; (2) whether this was the customary commercial channel
between the parties involved; and (3) whether the function of the U.S.
selling affiliate (DBLA) was limited to that of a processor of sales-
related documentation and a communications link with the unrelated U.S.
buyer. We concluded that DBLA was no more than a processor of sales-
related documentation and a communications link, and classified
Dongbu's U.S. sales as EP transactions. Second Review Final Results at
18423.
As explained above in the ``Fair-Value Comparisons'' section of
this notice, to ensure proper application of the statutory definitions,
where a U.S. affiliate is involved in making a sale, we consider the
sale to be CEP unless the record demonstrates that the U.S. affiliate's
involvement in making the sale is incidental or ancillary. The
statement in the verification report, quoted by Dongbu, that Dongbu
U.S.A. ``act[s] solely as an intermediary, inasmuch as headquarters in
Korea exercise[s] active authority over pricing and terms' is not
dispositive. Rather, the totality of the evidence regarding Dongbu's
sales process demonstrates that DBLA's role is more than ancillary to
the sales process.
We base this finding on several factors. First, we note that all of
Dongbu's U.S. sales are made through DBLA, and that Dongbu's U.S.
customers seldom have contact with Dongbu. Furthermore, it is DBLA (and
not Dongbu) that writes and signs the sales contract. Though
respondents claim that Dongbu approves all sales prices by telephone,
such approval does not make DBLA's role in the sales negotiation
process ancillary. Nor can we conclude that Dongbu's control over price
discounts makes DBLA's role in the sales process ancillary. As with
respondent A.G. der Dillinger Huttenwerke (``Dillinger'') in Plate from
Germany, there is no evidence that Dongbu was involved in the sales
process at all until after its U.S. subsidiary made the initial
arrangements.
Furthermore, we find that, in addition to playing a key role in the
sales negotiation process, DBLA played a central role in all sales
activities after the merchandise arrived in the United States. As
petitioners have pointed out, these activities included issuing
invoices, collecting payment, financing the sale to the U.S. customer,
and arranging for warehousing and demurrage in the United States.
Though Dongbu is correct that the CIT has upheld an PP (or EP)
classification despite significant sales activities on the part of the
U.S. subsidiary, that fact does not render these activities irrelevant
in making this determination. These activities carried out by DBLA are
both extensive and significant, as evidenced by the value of the
indirect selling expenses incurred by DBLA relative to the value of the
indirect selling expenses incurred by Dongbu. Further, the existence of
significant selling expenses in the United States itself belies
Dongbu's claim that the role of its U.S. affiliate was not meaningful.
See Dongbu's January 31, 1997 submission, exhibit 22.
In German Plate we stated, ``We consider [the U.S. subsidiary]
Francosteel's extensive involvement in negotiating respondent's U.S.
sale during this review, along with Francosteel's other sales
activities, to warrant classifying this sale as CEP.'' German Plate at
18392. For the same reasons, we have classified Dongbu's U.S. sales as
CEP in these final results.
Comment 6. Petitioners argue that the Department erred with respect
to Dongbu by classifying U.S. sales observation 440 as an EP sale,
rather than a CEP sale. They argue that for three reasons this sale
must be classified as a CEP sale. First, they argue that evidence on
the record suggests it was not sold until after importation. They cite
a statement contained in Dongbu's supplemental questionnaire response
in which Dongbu stated that ``Dongbu U.S.A. generally issues the
invoice and sends it to the customer about a week before the expected
arrival of the merchandise at the port.'' See Dongbu's January 31, 1997
supplemental questionnaire response at 33 (emphasis in original). Based
on this information and documentation contained in verification exhibit
five (the verification exhibit associated with this sale), petitioners
argue that observation 440 must have been sold after entry. Second,
they argue that documents in verification exhibit five contain
discrepancies which render Dongbu's reported contract date (which the
Department used as the sale date in the preliminary results)
demonstrably untrue. Specifically, they argue that the sales contract
in that exhibit does not even pertain to observation 440. Third, they
argue that evidence in verification exhibit five indicates that DBLA
played the primary role in price negotiation.
Furthermore, petitioners argue that the Department should resort to
facts available in determining the warranty and warehousing expenses
for this sale because Dongbu did not report any expenses for warranty
and warehousing, and because information on the record suggests that
Dongbu did not even report the correct sales price on its U.S. sales
tape.
Finally, petitioners argue that the Department should consider
deducting warranty and warehousing expense amounts for all of Dongbu's
U.S. sales. Their basis for this argument is that the Department
discovered at verification that for two of six sales verified, Dongbu
incurred additional, unreported sums for warehousing and warranty
charges for discounts necessitated by late shipments. Petitioners
believe, based on
[[Page 13178]]
proprietary information on the record, that it is not unlikely that
additional sales were canceled, and that Dongbu did not fully report
expenses associated with those sales.
Dongbu argues that the petitioners have misrepresented what Dongbu
reported as the date of sale. Dongbu states that the date it reported
as the date of sale is not the contract date, but the date of the
invoice between Dongbu and Dongbu Corporation. This date, it states, is
before the entry date. Therefore, it argues, petitioners are incorrect
in stating that there is evidence that the merchandise was not sold
until after importation.
With respect to petitioners' second argument, Dongbu argues that
the contract contained in verification exhibit five does cover
observation 440. With respect to petitioners' argument that the
Department should make an adjustment for unreported warehousing and
demurrage charges, Dongbu argues that the Department verified all
expenses for sale 440, and that there is therefore no reason to impose
any additional charges on any of Dongbu's U.S. sales.
Department's Position. We agree with petitioners in part, and
disagree with petitioners in part. As indicated in the Department's
response to Comment 5, we have determined to treat Dongbu's sales as
CEP sales in these final results. Observation 440 is no exception.
However, we disagree with petitioners that we should make additional
deductions from observation 440 or any of Dongbu's other U.S. sales for
allegedly unreported expenses. We find no evidence that this sale was
warehoused or that it incurred warranty expenses, or that Dongbu failed
to report the correct sales price. Thus, there is only one U.S. sale
for which Dongbu failed to report warehousing expenses, and these
expenses Dongbu reported in its supplemental questionnaire response
prior to verification. We found no other unreported expenses at
verification. Therefore, we find no reason to make additional
adjustments for warranty or warehousing expenses (beyond what Dongbu
reported) for any of Dongbu's U.S. sales.
Comment 7. Petitioners argue that the Department erred in the
calculation of Dongbu's U.S. imputed credit by using the bill of lading
date as the start of the credit period, rather than the shipment date
from Dongbu's production facility. They argue that in this review,
unlike prior reviews, information is on the record demonstrating that
there exists a significant time lag between the date of shipment from
the factory and the bill of lading date. Thus, they argue, the
Department is not bound by its decision in previous reviews to utilize
the bill of lading date as the start of the credit period because the
premise of that decision was that no discrepancy existed between the
bill of lading date and the actual shipment date. The existence of the
discrepancy, petitioners argue, distinguishes this case from Melamine
Institutional Dinnerware Products from Indonesia; Determination of
Sales at Less Than Fair Value, 62 FR 1719 (January 13, 1997)
(``Dinnerware''), a case Dongbu has used to support its argument that
the Department should use the bill of lading date as the start of the
credit period. In Dinnerware the Department accepted the bill of lading
date as the date of shipment because it verified that there was ``no
evidence to indicate any difference between the date of factory
shipment and the bill of lading date.'' Dinnerware at 1724. Such is not
the case here, petitioners argue.
Petitioners further argue that it would be especially inappropriate
to use the bill of lading date here because in a supplemental
questionnaire the Department requested that Dongbu calculate imputed
credit based on the actual shipment date, and not the bill of lading
date, but Dongbu refused to do so. They argue that the Department
should not reward such recalcitrance. As an alternative, petitioners
recommend that the Department use the date of the commercial invoice
from Dongbu to Dongbu Corporation as the shipment date. Use of this
date, petitioners argue, would neither reward Dongbu for its
recalcitrance nor be unduly adverse. In addition, petitioners argue,
the Department determined at verification that the commercial invoice
between Dongbu and Dongbu Corporation is ``prepared at the same time
that Dongbu Steel ships the merchandise * * * .'' See the July 8, 1997
verification report at 4. As another possible alternative, petitioners
suggest the Department add to Dongbu's reported imputed credit a credit
amount reflecting the maximum period of time Dongbu estimated as
existing between the date of factory shipment and the bill of lading
date.
Dongbu argues the Department was correct in using the bill of
lading date as the shipment date. It argues, based on the fact that it
reported and the Department accepted the bill of lading date as the
shipment date in all prior reviews of this order, that its action here
was not the product of recalcitrance, but of reliance. It argues
further that it was justified in its action, as explained in its
supplemental questionnaire response, because of the difficulties
associated with specifying shipment dates for particular transactions
of the subject merchandise. The petitioners' appeal to equity, Dongbu
argues, is ironic given that the equities here run plainly in favor of
Dongbu. A change in practice at this stage, it states, would implicate
the specter of arbitrariness in the Department's action.
Department's Position. We agree with petitioners in part. Unlike
prior reviews of this order, the record of this review contains
information that there is sometimes a significant difference between
the date of shipment from the factory and the date of the bill of
lading. Dongbu has stated that the bill of lading is consistently
generated within a few days of actual shipment of the coil from the
factory, but has also stated that the inventory carrying period is
sometimes longer than a few days. See Dongbu's January 31, 1997
submission at 35. Given these facts, we can no longer use the bill of
lading date as the shipment date in the credit calculation.
However, we also accept the argument Dongbu set forth in its
January 31, 1997, supplemental questionnaire response that it would be
an excessive administrative burden to report the shipment date for each
sale because Dongbu does not have an automated system that links
individual shipping invoices to commercial invoices and commercial
invoice line items. Therefore, because its U.S. sales are sometimes
shipped in lots from the plant to the port over a period of days,
Dongbu would have to trace manually from coils reported on individual
shipping invoices to the appropriate line items on commercial invoices.
See Dongbu's January 31, 1997 supplemental questionnaire response at 3-
4. Given the administrative burden of such a task, it would be
inappropriate for the Department to resort to adverse facts available
to represent the credit period.
Because we cannot use the bill of lading date as the shipment date,
and because of the excessive administrative burden of reporting
shipment dates for each sale, petitioners' suggestion that we use the
date of the commercial invoice from Dongbu to Dongbu Corporation as the
factory shipment date is not unreasonable. Our verification report
states, ``At the same time that Dongbu ships the merchandise (or
sometimes immediately thereafter), it prepares a * * * commercial
invoice.'' See July 8, 1997 verification report at 4. Based on this
information, we determine that the commercial invoice date is
sufficiently close to the factory shipment date that it can serve as
the start of the credit period without being adverse to Dongbu.
Therefore, we
[[Page 13179]]
have used this date in the credit calculation in these final results of
review.
Comment 8. Petitioners argue that the Department erred in not
making a deduction from Dongbu's export price for Korean warehousing
expenses incurred on cold-rolled products. They argue that the statute
requires that these expenses be deducted from U.S. price because it
says that the price in the United States must be reduced by the amount
of ``costs, charges, or expenses * * * incident to bringing the subject
merchandise from the original place of shipment in the exporting
country.'' See Sec. 772(c)(2)(A) of the Act. Furthermore, petitioners
argue, according to the SAA, warehousing expenses are included among
movement expenses. It states that the movement expense deduction
includes a deduction for ``transportation and other expenses, including
warehousing expenses * * * .'' SAA at 823. Moreover, the Department
itself, petitioners argue, stated in the comments to the new
regulations that the statute requires the deduction of ``all movement
expenses (including all warehousing) that the producer incurred after
the goods left the production facility.'' See Final Rules at 27345.
Petitioners also argue that the reason the Department gave in prior
reviews for not making the warehousing adjustment is not valid. In
prior reviews, petitioners state, the Department failed to make the
warehousing adjustment because it accepted Dongbu's characterization of
these expenses as cost of manufacturing (``COM'') expenses. Petitioners
argue that neither the statute nor the regulations permit exceptions to
the mandatory nature of the deduction based on how the respondent
characterizes the expenses or records them in its financial records.
For the Department to make an exception here would be particularly
unjust, petitioners argue, because the Department has not captured the
warehousing expenses at issue in any direct price adjustment. To
``capture'' them in cost data, petitioners argue, would never result in
a direct adjustment to price as mandated by the statute.
Dongbu argues that in accordance with its normal accounting
practices which predate the antidumping duty orders, it reported these
warehousing expenses as manufacturing overhead associated with its
Seoul works. The cost of pre-shipment overhead of this kind, it argues,
is no different from overhead expenses associated with temporarily
storing semi-finished products between production lines. Therefore, it
argues, to deduct them from U.S. price even though they are already
accounted for in manufacturing overhead would constitute double
counting. Thus, it states, in the prior review of this order the
Department properly treated these costs as pre-shipment manufacturing
costs, and not as selling expenses.
Dongbu also argues that if the Department does decide to deduct
this expense as a direct expense, it should make the deduction only for
cold-rolled products, and not corrosion-resistant products, because
corrosion-resistant products are never stored in the warehouse. It
further argues that the Department should also adjust the reported cost
of cold-rolled products downward by an offsetting amount to avoid
double-counting of expenses.
Department's Position. We agree with petitioners and Dongbu in
part. We agree that we should make an adjustment to Dongbu's U.S. price
for warehousing expenses incurred after the subject merchandise has
left the Seoul plant. As the SAA specifies at 823, the URAA's mandate
to deduct movement-related expenses specifically includes
``warehousing'' expenses. Further, our new regulations (which, though
not binding on this review, embody our latest practice) state that
``[t]he Secretary will consider warehousing expenses that are incurred
after the subject merchandise or foreign like product leaves the
original place of shipment as movement expenses.'' See 19 CFR
Sec. 351.401(e)(2) (May 19, 1997). Here, the original place of shipment
is Dongbu's Seoul production facility, and the warehouse is in Inchon.
Therefore, because these warehousing expenses are incurred after
leaving Seoul, they must be considered movement expenses, and they must
be deducted from Dongbu's export price.
However, we agree with Dongbu that we should deduct these movement
expenses only from the selling prices of cold-rolled products, and not
corrosion-resistant products, because they are incurred only on cold-
rolled products. Furthermore, we agree with Dongbu that it would be
double-counting to include these expenses as both a movement expense
and overhead. Therefore, in these final results we have deducted them
from Dongbu's COM for cold-rolled products.
Comment 9. Petitioners argue that the Department erred by accepting
Dongbu's calculation of inland freight costs incurred by an affiliated
party in the home market, but not using a comparable formula for
calculating transportation-related costs incurred by an affiliated
party in the U.S. market. In the home market inland freight is incurred
by Dongbu's affiliated entity Dongbu Express. In the U.S. market
Dongbu's affiliate DBLA incurs expenses for arranging U.S. brokerage
and handling, U.S. customs clearance, warehousing certain sales, and
paying customs duties. Both of these entities contract with
unaffiliated entities to perform the services. Petitioners argue that
the Department erred by accepting Dongbu's reported home-market inland
freight costs (which consist of the unaffiliated trucking company's
charge to Dongbu Express plus a markup attributable to Dongbu Express'
estimated overhead and profit), but not making a similar mark-up (and
deducting that markup from U.S. price) for the profit DBLA realizes on
its provision of transportation-related services.
Petitioners argue that, to the extent that DBLA charges amounts in
addition to its costs for the transportation services, these amounts
represent expenses incurred in bringing the merchandise from the place
of shipment to the unaffiliated U.S. customer. Thus, petitioners argue,
the mark-ups DBLA and Dongbu Express charge are identical in substance
even though they may be different in form, and consistency requires
that the Department treat them the same way. Moreover, they argue that
the Department's failure to adjust for the markup is inconsistent with
its treatment of an affiliated-party markup in its analysis of POSCO.
Finally, they argue that because Dongbu has failed to report the amount
of DBLA's markup on these sales, the Department should rely on facts
available. Petitioners suggest that as facts available, the Department
should apply to DBLA the markup percentage that Dongbu Express charges
for its services. As an alternative petitioners argue that, if the
Department refuses to make a markup adjustment in the U.S. market, it
should also not make a markup in the home market.
Petitioners note that in the previous review the Department
rejected this argument, and gave several reasons for this rejection.
None of these arguments, petitioners state, withstand scrutiny. First,
petitioners state, the Department argued that the sums DBLA paid to
unaffiliated companies were already reported on the record. Petitioners
argue that this is true, but irrelevant. Their argument, they state, is
not that the cost to DBLA has not been fully reported, but that the
ultimate cost to Dongbu for these services is understated, because it
does not include the markup charged by DBLA.
Second, petitioners state, the Department argued that because the
U.S. affiliate did not directly perform these
[[Page 13180]]
services, but rather contracted for them, the adjustment should not be
made. Petitioners argue that this statement too, though true, is
irrelevant because neither Dongbu Express in the home market nor DBLA
in the U.S. market directly perform the transportation services, but
rather contract with unaffiliated service providers for them.
Furthermore, POSCO's U.S. affiliates also do not directly perform the
services in question, yet the Department made an additional deduction
from U.S. price to account for markups.
Third, petitioners state that the Department argued that there was
no legal basis for the deduction of profit on these services because
``U.S. profit deductions are allowed only in connection with CEP sales,
and not EP sales.'' Petitioners see two flaws in this argument. First,
they argue that the Department did not apply this argument to the
deductions made for markups by POSCO's affiliates and Dongbu Express.
Second, they state that it misconstrues the statute and petitioners'
argument. They state that they do not seek the CEP deduction for profit
earned in the United States which is provided for in section 772(f) of
the Act. Rather, they ask that the Department fully account for all
movement expenses because the statute requires that they be deducted in
their entirety from U.S. price.
Dongbu argues that the Department rejected petitioners' argument in
the second review of this order, and should do so here as well. It
argues that there the Department determined that Dongbu's transactions
with DBLA and Dongbu Express were not identical in substance, and that
the expenses at issue were fully reflected in the brokerage fees paid
by DBLA, and reported by Dongbu in its response. It argues that given
no change in the factual record or the manner in which Dongbu reported
these expenses, the Department should adhere to its past practice and
reject petitioners' arguments on this issue. It notes too that the
third reason upon which petitioners allege the Department based its
determination (i.e., that U.S. profit deductions are allowed only for
CEP sales) was not a reason the Department gave to support its
determination, but was a statement the Department used to summarize
Dongbu's argument. Dongbu reiterates its position that there is no
legal basis for deducting an amount for ``profit'' on these sales
because U.S. profit deductions are permitted only in connection with
CEP sales.
Department's Position. We agree with petitioners in part, and have
changed our position from the preliminary results of this review and
the final results of the prior review. Because the amounts paid to
Dongbu Express in the home market and to DBLA in the U.S. market are
both for the provision of transportation-related services, we believe
that they are similar in substance. Accordingly, the more reasonable
approach for these final results is to treat these expenses in the same
way.
However, we do not agree with petitioners' preferred approach for
treating the two markups identically. We are not satisfied from the
information on the record that the markups between Dongbu and its
affiliates in either market reflect arm's-length market values. Given
the closeness of the affiliation between Dongbu and the affiliated
entities at issue, we cannot presume the arm's-length nature of the
markups, nor can we be certain that they are not simply intra-company
transfers of funds. However, petitioners' suggestion that we use Dongbu
Express's markup for export services as a surrogate for DBLA's markup
for import services is inappropriate. The use of a surrogate for
missing information is not justified where, as here, we never requested
the respondent to provide the missing information, and where there are
other options. Given the facts of this situation, we have determined
that in this review we will adopt petitioners' alternative suggestion
of not making a markup adjustment in either the U.S. or home markets.
Comment 10. Petitioners argue that the Department erred in granting
Dongbu a home market adjustment which Dongbu allegedly mischaracterized
in its submissions. They base their argument that Dongbu
mischaracterized this adjustment on the following allegations:
The expense is identified differently in Dongbu's
financial statements and in the list of general expenses (contained in
Dongbu's questionnaire response) from the way it is identified in
Dongbu's claim for an adjustment;
The Department's translator translated the name of the
adjustment differently at the Korean verification than Dongbu
translated it in its various submissions;
There is a distinction in how Dongbu treats the expense
with respect to its end-user customers (on the one hand) and its
distributor customers (on the other hand).
Petitioners argue that Dongbu should be held to the way it
characterizes these adjustments in its own financial records and
agreements. Moreover, they argue, where the proper translation of a
particular term is disputed, it is appropriate for the Department to
rely upon its own translator, as it did in the second review of this
order. See Second Review Final Results at 18411. Furthermore,
petitioners argue that Dongbu's stated rationale for the distinction in
treatment is not supported by evidence on the record. At the
verification, Dongbu stated that the rationale behind the distinction
is that distributors tend to buy in larger quantities than do end-
users. See July 8, 1997 verification report at 10. Petitioners'
analysis (submitted in its case brief) allegedly demonstrates that this
rationale is not supported by Dongbu's sales listing. Finally,
petitioners argue that because Dongbu mischaracterized the adjustment,
the Department should use adverse facts available with respect to it.
Dongbu argues that petitioners' argument is not supported by record
evidence. First, it argues that information on the record demonstrates
that it does not, contrary to petitioners' argument, differentiate the
expense at issue by class of customer. Second, it argues that the
record of the review regarding the circumstances surrounding the
expense should dispel any confusion resulting from translation
questions. Third, it argues that petitioners are inconsistent in their
own translation of the name of the expense.
Department's Position. We agree with Dongbu. Based on analysis not
capable of public summary, we have determined that no basis exists in
the record evidence to reject Dongbu's characterization of the
requested adjustment. See the Department's final results analysis
memorandum for additional information.
Comment 11. Petitioners argue, based on information given in the
verification report, that Dongbu has understated its depreciation
expense by not including the expenses related to the revaluation of
depreciable assets. As a result, petitioners argue, Dongbu understated
its cost of production and constructed value. Therefore, petitioners
argue, in the final results the Department should revise Dongbu's costs
upward to reflect the increase resulting from the company's revaluation
of depreciable assets.
Dongbu argues that petitioners have misstated the amount of the
difference as given in the verification report. It argues that given
the insignificance of the difference, the Department correctly
determined that it was appropriate to accept the reported depreciation
expenses without adjustment.
Department's Position. We agree with petitioners in part. We agree
that
[[Page 13181]]
Dongbu's reported depreciation is understated, and should therefore be
adjusted. However, we agree with Dongbu that petitioners' case brief
misstates the amount of the understatement. The correct amount is shown
in the July 8, 1997 verification report at 14-15. In these final
results we have adjusted Dongbu's reported depreciation to reflect the
revaluation of the depreciable assets.
Comment 12. Petitioners argue that there is overwhelming evidence
on the record demonstrating that BUS and POSAM were much more than mere
``processors of sales-related documentation'' or ``communication
links'' for POCOS's and POSCO's U.S. sales. Petitioners note that the
Department, in its preliminary results of German Plate, identified
several functions performed by the respondent's U.S. affiliate that
warranted classifying and analyzing the affiliate's resales as CEP
transactions. Petitioners argue that, with the possible exception of
customer credit checks, both BUS and POSAM performed all of those
functions as POCOS's and POSCO's sales affiliates in the United States,
and other functions as well.
Petitioners state that record evidence and POCOS's and POSCO's own
statements during verification demonstrate that, like Dillinger's U.S.
affiliate, BUS and POSAM play the central role in negotiating U.S.
transaction prices. Regarding BUS, petitioners cite statements in the
Department's report of the verification of the POSCO Group conducted in
Korea (``Korea verification'') that petitioners claim indicate, in
contradiction to later statements made at the verification of BUS
(``California verification''), that BUS could suggest prices to be
charged to the U.S. customer and that BUS was involved in the
establishment of quarterly base prices it would pay for the subject
merchandise. Petitioners cite statements made by company officials and
noted in the Department's California verification report that are
seemingly contradictory: that BUS needed to know the quarterly base
prices in order to be sure that it would not lose money, and that POCOS
decided whether particular sales would be completed, and the prices,
without input from BUS. Petitioners question the extent to which the
U.S. customers are aware of POCOS pricing, given BUS's statement at the
California verification that the U.S. customers were not informed of
the quarterly base prices, and petitioners question how those U.S.
customers could have proposed bid prices that were never rejected
unless they consulted with BUS on the setting of the prices.
Petitioners also argue that the fact that BUS is not controlled by
POCOS provides further support for the conclusion that BUS acts
independently to set transaction prices in the United States, and note
that the respondent provided no tangible evidence of contact between
U.S. customers and POCOS with regard to pricing.
Petitioners argue that POSAM, like BUS, had considerable discretion
in the setting of U.S. prices. Petitioners note that there is no
evidence to suggest that any price proposed by a U.S. customer was ever
rejected by POSCO, even though POSAM claimed at the verification of
POSAM (``New Jersey verification'') that the U.S. customers were not
aware of the quarterly base prices that had been provided to POSAM by
POSCO.
Petitioners argue that the Department's New Jersey verification
report demonstrates that the format of the computer spreadsheet files
containing POSAM's U.S. sale cost breakdowns indicates that POSAM
actively determined the amount of profit it would realize on its sales.
Petitioners argue that this conclusion is supported by the fact that
the profit field amounts were entered into the files as discrete
figures, rather than being calculated by a formula as a residual
between POSAM's selling price and its costs.
Petitioners argue that the record shows that, with the exception of
POSCO sales to one specific U.S. customer, in which it was clear that
POSAM was not included in the sales process, BUS and POSAM had the
primary role with respect to every aspect of each transaction, and
assumed the sole responsibility for the most significant portions of
each transaction. Petitioners state that in addition to having
significant discretion in pricing and active involvement in negotiating
the terms of sale for each transaction, BUS and POSAM also arranged for
a variety of expenses characterized by the Department under the broad
category of movement expenses. Petitioners state that BUS and POSAM
served as the importers of record, took title to the merchandise, and
handled other administrative issues pertaining to the U.S. customers.
Finally, petitioners argue that the levels of involvement of BUS
and POSAM in the U.S. sales are consistent with the substantial amount
of selling, general, and administrative expenses (``SG&A'') these
companies incurred during the POR.
The POSCO Group argues that its U.S. sales should be classified as
EP sales because POSAM and BUS function as communications facilitators
for U.S. sales, and POSCO and POCOS set the terms of sale, including
price, for U.S. sales. The POSCO Group notes that the Department
determined in its second review final results that these entities
operated as communications facilitators, and that the existence of
sales contacts between the U.S. customers and these U.S. affiliates
indicates nothing more than this limited role in the process nor
establishes that the affiliates played any role in the actual setting
of the prices. The POSCO Group also argues that POSAM and BUS did not
participate in negotiation of other key sales terms for U.S. sales,
citing as evidence of this a sale examined at the California
verification for which POCOS required that the product characteristics
of the merchandise requested by the U.S. customer be changed.
The POSCO Group argues that in numerous previous cases, including
the first and second reviews of these orders, respondents' sales were
classified as EP (or formerly purchase price) sales when their U.S.
affiliates undertook activities identical to, or even in addition to,
those undertaken here by POSAM and BUS. See, e.g., Brass Sheet and
Strip from the Netherlands; Final Results of Antidumping Duty
Administrative Review, 61 FR 1324, 1326 (Jan. 19, 1996); Certain
Corrosion-Resistant Carbon Steel Flat Products from Korea: Final
Results of Antidumping Duty Administrative Review, 61 FR 18547, 18551,
18562 (Apr. 26, 1996); Final Determination of Sales at Less Than Fair
Value: Stainless Steel Wire Rods from France, 58 FR 68865, 68869 (Dec.
29, 1993) (``Wire Rod from France''); Final Determination of Sales at
Less Than Fair Value: Coated Groundwood Paper from Finland, 56 FR
56363, 56371 (Nov. 4, 1991); and Notice of Final Determinations of
Sales at Less Than Fair Value: Certain Hot-Rolled Carbon Steel Flat
Products, Certain Cold-Rolled Carbon Steel Flat Products, Certain
Corrosion-Resistant Carbon Steel Flat Products, and Certain Cut-to-
Length Carbon Steel Plate from France, 58 FR 37125, 37133 (July 9,
1993). The POSCO Group argues that functions such as maintaining
contact with customers requesting price quotations, invoicing
customers, collecting payment from the customer, maintaining
relationships with customers, serving as importer of record, arranging
and paying cash deposits for antidumping and countervailing duties,
arranging and paying for brokerage, and minimal roles in U.S.
transportation services, are activities commonly undertaken by an
affiliated selling entity that acts as a
[[Page 13182]]
communications link. The POSCO Group also states that the petitioners'
case brief does not mention numerous functions performed by the Korean
manufacturers in the sales process.
With regard to the setting of prices, the POSCO Group states that
record evidence indicates that negotiations with each customer for each
individual sale typically began in one of two ways: the customer may
suggest a price to POSCO or POCOS in the initial inquiry, which POSAM
or BUS forwards to the Korean manufacturer; or if the customer does not
suggest a price, POSAM or BUS, based on their knowledge of the
quarterly base price already established by POSCO, sometimes suggest a
price to POSCO or POCOS for the sale when transferring the inquiry to
Korea. The POSCO Group states that the record indicates that POSAM and
BUS did not negotiate with U.S. customers, but rather simply
transmitted information to the U.S. customers and to the Korean
entities. The POSCO Group argues that the record shows that U.S.
customers were not notified of the quarterly base prices to POSAM and
BUS, and that U.S. customers' bid prices were based in part not on
those quarterly base prices but, rather, on knowledge of past pricing
by POSCO and POCOS. Given the small number of U.S. customers and their
ongoing, long-term relationship with POSCO and POCOS, the POSCO Group
explains, those customers do not need guidance from POSAM or BUS
regarding what their price offer should be.
The POSCO Group argues that the fact that POSAM and BUS are
informed in advance of the quarterly base price is irrelevant, and that
the record is clear that POSCO and POCOS do not consult with the U.S.
affiliates with regard to the setting of those quarterly base prices.
The POSCO Group states that the U.S. affiliates need to be able to
estimate quarter by quarter the general value of transactions for cash
flow purposes, insuring for example that they have adequate credit
available to support their business. The POSCO Group cites statements
by company officials at the U.S. verifications that neither POSAM nor
BUS provided input to the manufacturers as to the setting of the
quarterly base prices for the U.S. market, and that neither POSAM nor
BUS provided those quarterly base prices to the U.S. customers.
The POSCO Group argues that the fact that a POSAM official
``entered'' the value for the POSAM markups into its cost spreadsheets
is no indication that POSAM has an influence over the magnitude of that
amount, but rather that these markup values were in fact residual
amounts that were calculated elsewhere prior to computer entry.
The POSCO Group states that because there is no commercial reason
to maintain records of an unsuccessful transaction and because POSAM's
and BUS's communications with POSCO and POCOS, respectively, regarding
customer price offers often occur by telephone, the fact that there is
a lack of written proof of a rejection by POSCO or POCOS of a U.S.
customer price offer is not surprising.
The POSCO Group states that the Department's verification report
refers to various instances in which U.S. customers were in direct
contact with POSCO and POCOS. The POSCO Group cites company official
statements made at verifications in Korea and California that a POCOS
official dealt directly with U.S. customers and, therefore,
petitioners' claim that the record contains no evidence of contact
between U.S. customers and POCOS is incorrect.
The POSCO Group challenges what it characterizes as petitioners'
claim that POSCO's sales did not ``go through POSAM'' to the one
specific customer whose sales petitioners state were correctly
classified as EP sales in the preliminary results. The POSCO Group
argues that POSCO's sales to that U.S. customer were no different than
any other U.S. sales and that under petitioners' own logic, therefore,
all of POSCO's U.S. sales are EP sales.
The POSCO Group challenges the petitioners' argument that the
levels of SG&A incurred by POSAM and BUS indicate they are more than a
communications link. The POSCO Group states that sales of subject
merchandise account for only a small fraction of the U.S. affiliates'
total sales, so the bulk of SG&A is clearly related to non-subject
merchandise; that POSAM and BUS are selling entities only, whereas
POSCO and POCOS are both selling and manufacturing entities; and that
petitioners erroneously compare POSAM's and BUS's total SG&A expenses
only to POSCO's and POCOS's selling expenses.
The POSCO Group argues that the key facts that led the Department
to reclassify certain U.S. sales as CEP sales in German Plate are not
present in these reviews. The POSCO Group indicates that in the German
case the affiliate of the respondent Dillinger essentially negotiated
all sales in accordance with the respondent's limited guidelines, that
the U.S. affiliate had the power to negotiate and set the price for the
respondent's single U.S. sale, that the foreign parent only set a
minimum price floor after considering the order information provided by
the U.S. affiliate, and that the U.S. affiliate was the one that
negotiated with the single U.S. customer to try to obtain the best
price. German Plate at 18391-92. The POSCO Group argues that POSAM and
BUS, like the affiliates in other cases cited by the Department in
German Plate as differing from Dillinger's affiliate, did not have or
exercise such authority. See E.I. Du Pont de Nemours & Co. v. United
States, 841 F. Supp. 1237, 1249-50 (CIT 1993), and International
Radionic Workers of America v. United States, CIT Slip Op. 95-45 (March
15, 1995). Finally, the POSCO Group argues that in another case the
Department classified sales as EP sales even though the U.S. affiliate
participated in the sales negotiations with U.S. customers, because the
U.S. affiliate did not have the flexibility to set the price or terms
of sale and acted only as a processor of sales-related documentation.
Wire Rod from France at 68869.
Department's Position. We agree with petitioners that respondent's
U.S. sales (with the exception of those made to one customer) should be
classified as CEP transactions. In the final results of the prior
reviews, in order to determine whether sales made prior to importation
through the POSCO Group's affiliated U.S. sales affiliates (POSAM and
BUS) to an unaffiliated customer in the United States were EP or CEP
transactions, we analyzed the POSCO Group's U.S. sales in light of
three criteria: (1) whether the merchandise was shipped directly from
the manufacturer (POSCO or POCOS) to the unaffiliated U.S. customer;
(2) whether this was the customary commercial channel between the
parties involved; and (3) whether the functions of the U.S. sales
affiliates (POSAM and BUS) were limited to those of processors of
sales-related documentation and communications links with unrelated
U.S. buyers. We concluded that BUS and POSAM were no more than
processors of sales-related documentation and communications links, and
classified the POSCO Group's U.S. sales as EP transactions. Second
Review Final Results at 18433.
In this case, the record shows, and petitioners do not contest,
that the first two criteria have been met. Consequently, the third
criterion, pertaining to the level of affiliate involvement in making
sales or providing customer support, is the determining factor in this
instance. As explained above in the ``Fair-Value Comparisons'' section
of this notice, to ensure proper application of the statutory
definitions, where a U.S. affiliate is involved in making a sale, we
[[Page 13183]]
normally consider the sale to be CEP unless the record demonstrates
that the U.S. affiliate's involvement in making the sale is incidental
or ancillary. The record evidence here suggests that it is POSCO's and
POCOS's roles that may be ancillary to the sales process (except with
respect to one customer of POSCO, as noted below), and that in any case
the record does not demonstrate that the U.S. affiliates' involvement
in making the sales were incidental or ancillary.
We base this finding on several factors. First, we note that POSCO
and POCOS's U.S. sales (with the exception of those to one U.S.
customer) were made through POSAM and BUS, respectively, and that U.S.
customers seldom had contact with POSCO or POCOS. The record
establishes that POSAM and BUS were typically the parties contacted
first by unaffiliated customers desiring to purchase the subject
merchandise and also that POSAM and BUS sign the sales contracts. Such
facts indicate that the subject merchandise is first sold in the United
States by or for the account of the producer or exporter, or by the
affiliated seller, and therefore that the sales in question are CEP
transactions.
In addition to their key involvement in the U.S. sales process, the
U.S. affiliates also played a central role in the sales activities
after the merchandise arrived in the United States, including many of
the criteria cited in German Plate. While the CIT has upheld a PP (or
EP) classification despite such activities on the part of the U.S.
subsidiary, that fact does not render these activities irrelevant in
making this determination. While we disagree with petitioners'
assertion that the record demonstrates that POSAM and BUS acted
independently to set U.S. transaction prices and the other key terms of
sale, the respondent's claim that the U.S. affiliates had no role in
the setting of prices is not demonstrated by the record either.
The respondent's claim regarding the lack of U.S. affiliate
involvement in the negotiation of prices is actually called into
question by various factors. For example, the respondent did not
provide tangible evidence of price rejection by POSCO or POCOS. With
respect to other terms of sale, POCOS's apparent rejection of the
product characteristics proposed by a U.S. customer only suggests that
BUS is not autonomous with respect to the sales process and that BUS
does not have all information regarding the production process, not
that BUS's role in the process is ancillary.
While the fact that the ``markup value'' cell in POSAM's cost
spreadsheets, unlike numerous other values, was entered by hand rather
than as a formula does not appear to be relevant, a possible
interpretation would be that the affiliate does in fact have some type
of input into the magnitude of the markup it earns on the sales. More
importantly, though, neither respondent's submissions nor its
statements at verification explain the inconsistency of statements made
during the California verification with respect to BUS's need to know
the quarterly base prices.
Furthermore, the respondent's claim that the absolute and relative
levels of SG&A incurred by the U.S. affiliates with respect to U.S.
sales of subject merchandise are well below those of their non-subject
merchandise operations is unsupported by the record, at least in part
because the respondent did not provide information concerning selling
expenses incurred in the United States. The POSCO Group chose not to
report the indirect selling expense and inventory carrying cost
information in its U.S. sales response, despite the fact that such
reporting for U.S. sales of subject merchandise was requested in the
Department's original questionnaire. When the Department indicated in a
supplemental questionnaire that it may use facts available to determine
these expenses if they were not reported by the POSCO Group, the POSCO
Group again failed to report those expenses. The POSCO Group's response
was as follows:
``POSCO notes that it is not reporting these expenses because the
Department has not notified POSCO that it believes that the sales at
issue are not export price sales, and it does not want to burden the
record with unnecessary data. POSCO's U.S. sales are export price
sales and the Department ruled in the less than fair value
determination and in the second review preliminary results that they
were export price sales. POSCO has cooperated fully and will
continue to cooperate fully with the Department. If the Department
believes that it might reverse its practice from that in prior
determinations, POSCO is willing to submit these expenses.'' See the
March 3, 1997 supplemental Section C questionnaire response at 21.
The POSCO Group incorrectly assumed that the Department was required to
meet certain preconditions before requesting and obtaining the
information in question. The Department may solicit any information it
reasonably believes may be relevant to its determinations, and is not
obligated to solicit this information three or more times, especially
given that there are statutory deadlines to which we must adhere. At
least in part as a result of the respondent's choice not to report the
information we requested, we cannot determine the extent of U.S.
selling expenses pertaining to sales of subject merchandise. We cannot
presume that the information the POSCO Group failed to provide would
support a conclusion that the operations of POSAM and BUS with respect
to the U.S. sales of subject merchandise were ancillary. Further, we
are using the aggregate information as the basis for estimating the
unreported U.S. indirect selling expenses.
We reject the POSCO Group's claim that the petitioners' admission
that sales by POSCO to one U.S. customer were correctly classified as
EP sales also suggests that all of the POSCO Group's U.S. sales should
be classified as EP sales. For the sales to the one customer in
question, POSAM was clearly not involved in the initial negotiations
and the primary work relating to setting of price and other terms of
sale. Given the information from the record indicating POSCO's
substantial involvement in those sales and a very limited role for
POSAM (see, e.g., Exhibit 45 of the Korea Verification report), we are
not reclassifying sales to that one customer as CEP sales.
Comment 13. Petitioners argue that the Department erred in its
calculation of constructed value in its cold-rolled programming for the
POSCO Group. Petitioners indicate that the Department deducted the
variable representing credit expenses attributable to the gross unit
price of the merchandise (``CRED1CV'') twice in the calculation of CV.
The POSCO Group argues that this point is moot, given that normal
value will not be based upon CV if the Department reverses its
erroneous adjustment for alleged discrepancies in reporting methodology
for cold-rolled product thickness.
Department's Position. We agree with petitioners that the
Department erred in its calculation of CV by deducting CRED1CV twice.
We have corrected the programming to reflect this change.
Comment 14. Petitioners argue that the Department should reverse
its methodology and apply the major input and fair value provisions to
transfers of substrate between POSCO, POCOS, and PSI. Petitioners note
that the collapsing of entities does not negate the applicability of
statutory provisions regarding affiliated persons. Petitioners state
that the statute provides explicitly that the major input and fair
value provisions are to be applied to transactions between affiliated
persons, and that both the legislative history and public policy
support the application of these provisions to all transactions
involving transfers of substrate between affiliates. Petitioners assert
that the
[[Page 13184]]
statute is silent with respect to the collapsing of entities for
purposes of review, and consequently a decision to collapse entities
cannot override the definition of ``affiliated persons'' which is
explicitly mandated by statute.
Petitioners assert that applying the major-input or fair-value
provisions selectively based on the purported extent of affiliation
would be contrary to the express language of the statute and
regulations, would have the effect of reading these provisions out of
the statute in certain cases, and would preclude the transparency and
predictability of the law.
Petitioners argue that collapsing is done when the Department finds
that one party has a sufficient degree of control over another to
create a significant possibility of price manipulation by the
controlling party, and the Department's inherent authority to collapse
two entities stems from several requirements: the need to review an
entire producer or reseller, and not merely part of it; the need to
ensure that antidumping margins are calculated as accurately as
possible; and the need to prevent circumvention of antidumping duty
orders by the establishment of alternate sales channels. See Queen's
Flowers de Colombia et al. v. United States, CIT Slip Op. 97-120
(August 25, 1997), at 7-8. Petitioners conclude that collapsing is done
to ensure that all of a respondent's U.S. sales are included in the
calculation of dumping margins, and that such a determination has no
bearing on the Department's treatment of affiliated party transactions
within the meaning of the fair-value and major-input provisions of the
statute. A determination to collapse entities merely indicates that one
party has sufficient control over another to be in a position to
manipulate the controlled party's pricing decisions, but this does not
mean that the two parties are so closely intertwined that one may be
deemed to be merely a division of the other or that the separate
corporate identities of these two entities suddenly cease to exist.
Petitioners state that when the Department issued regulations to
implement the URAA, it had the opportunity to limit the application of
the major-input and fair-value provisions, but did not. Petitioners
state that the legislative history is silent as to any limitation on
the application of the major-input rule. Petitioners indicate that the
methodology used by the Department in this instance would require in
each case that the Department determine whether affiliated companies
are operated as ``divisions'' of a whole, which would be burdensome,
compared to simply applying the major-input rule and fair-value
provisions to all affiliated parties.
Petitioners note that the statute explicitly precludes use of the
COP to value transfers of substrates between affiliates if the transfer
price is greater than the COP. Therefore, the Department has the
discretion to ignore the transfer price to use a higher market value,
but does not have the discretion to ignore transfer price in order to
employ a lower value.
Petitioners note that the application of the major-input rule would
not result in double-counting. Application of the major-input rule may
result in an increase to a respondent's reported costs, but these
adjusted costs also are used subsequently to calculate respondent's
profits, and to the extent that costs are increased, the calculated
profits are reduced. Furthermore, petitioners state that POCOS's profit
is captured in the input price, and POSCO's profit is captured in the
CV calculation.
Petitioners note that the Department in its analysis completely
ignored the fact that the three companies (POSCO, POCOS, and PSI) are
indisputably separate and distinct legal corporate entities, unlike in
the case of Certain Forged Steel Crankshafts from the United Kingdom;
Final Results of Antidumping Duty Administrative Review, 61 FR 54613
(October 21, 1996) (``Crankshafts''). In that case, the entities in
question were divisions of the same corporation; in this one, POSCO,
POCOS and PSI are indisputably separate corporate entities, and neither
POCOS nor PSI is wholly-owned or controlled by POSCO. Petitioners cite
various examples of factors affected by whether or not entities are
divisions of another company or are separate entities, and which the
Department should take into account if it chooses to ignore the
distinction between these entities: Financing costs; tax impacts on
working capital; and insurance costs.
Petitioners indicate that in applying the major-input and fair-
value provisions, the Department should determine ``fair value'' for
each specific control number (``CONNUM''), based on a comparison of
POSCO's sales to POCOS, and POSCO's sales to all unaffiliated
companies.
Petitioners argue that if the Department continues to wrongly
reject the application of the major-input and fair-value provisions, it
must be consistent and find POSCO and Union Steel to be affiliated. If
the Department treats POCOS and POSCO as one entity, petitioners argue,
it must treat POSCO and Union as affiliated parties, because there is
no doubt that Union and POCOS are affiliated.
The POSCO Group argues that the Department addressed these same
petitioner arguments in the final results of its second reviews, noting
that the POSCO Group (encompassing POSCO, POCOS, and PSI) represents
one producer of subject merchandise, that a decision to treat
affiliated parties as a single entity requires that transactions among
the parties also be valued based on the group as a whole, that
transfers of substrate between the group companies should be valued at
the cost of manufacturing the substrate, and that because the POSCO
Group is one entity for these final results, the major-input rule and
fair-value provisions of the Act cannot apply because there are no
transactions between affiliated persons. See Second Review Final
Results at 18430-31.
The POSCO Group argues that it would be inappropriate to apply the
fair-value and major-input provisions under the unusual circumstances
presented in this case because the Department is reviewing the cost of
transactions within a single entity. The provisions apply only to
transactions between persons, not when the Department is examining one
producer or a single entity. By collapsing the POSCO entity for
purposes of the dumping and cost analysis in this proceeding, the POSCO
Group argues, the Department has determined that there are no
transactions between affiliated persons under the language of the
major-input or fair-value provisions of the statute. The POSCO Group
argues that this is consistent with the Department's decision in
Crankshafts at 54614. The POSCO Group argues that the Department's
practice of collapsing parties into a single entity for its analysis
was a well-known practice that existed before Congress applied the
fair-value provision and major-input rules to the COP, and had Congress
intended for these provisions to apply to transactions within a
collapsed entity, it would have drafted the provisions to cover
transactions between ``affiliated and collapsed persons.'' The POSCO
Group challenges petitioners' argument that the Department has to apply
the major-input and fair-value provisions to a collapsed entity because
the regulations do not proscribe their application in such an instance,
arguing that the regulations by definition serve as general guidelines,
and do not spell out the specific application of every rule contained
in the regulations. Furthermore, the POSCO Group argues that 19 C.F.R.
Sec. 351.407(b) explicitly
[[Page 13185]]
allows for the Department's discretion in the use of these provisions,
and the agency that has the most experience and is most expert in
analyzing these issues recognizes that there are limits to how closely
it should scrutinize transactions within a single collapsed entity. The
POSCO Group also challenges petitioners' assertion that there is a
continuum of affiliation, upon which collapsed entities reside; the
POSCO Group states that under Department case law and common sense,
parties are either unaffiliated, affiliated, or collapsed, and that
these categorizations are mutually exclusive.
The POSCO Group states that petitioners, in challenging the
reliability of the prices paid for inputs transferred among controlled
entities, have in fact provided support for the Department's decision
to value the inputs based on the objectively verifiable cost of the
input. The POSCO Group rejects as irrelevant petitioners' argument that
the provisions should be applied because calculating the COP based on
POSCO's substrate production costs is difficult and requires numerous
allocations between products, cost centers, and divisions.
Regarding the issue of whether or not the application of the major-
input rule would result in double-counting, the POSCO Group argues that
petitioners mischaracterized the POSCO Group's argument that it raised
in the second administrative review. The POSCO Group argues that,
contrary to the assertion of petitioners, profit is not to be included
in the calculation of cost of production. The POSCO Group states that
by using the transfer price from POSCO to POCOS, the Department would
be double-counting SG&A and including an artificial element of profit,
thereby resulting in more home market sales being found to be below
cost than should be the case, and thus affecting the calculation of NV.
The POSCO Group states that using transfer prices to value POSCO
substrate used by POCOS would result in POSCO's profit and SG&A that
are reflected in the sales to POCOS being included in the calculation
of costs applied to POSCO sales, given that costs for each CONNUM are a
weighted-average across each collapsed company. The POSCO Group argues
that this is inappropriate because the statute does not provide for
profit to be included as an element of the COP, and the portion that is
SG&A would already be in POSCO's reported costs in the COP buildup.
Furthermore, the POSCO Group argues, petitioners' methodology would
lead to the illogical result of more sales failing the cost test if
POSCO's internal sales of substrate earned a higher profit, even though
actual costs remain unchanged.
For instances where CV is used as the basis for NV, the POSCO Group
argues, the aforementioned use of transfer prices would distort the
calculation of profit. The POSCO Group states that, in its calculation
of profit for CV, the Department only uses sales that are above the
COP. Because, as argued earlier, costs would be overstated were
transfer prices from POSCO to POCOS to be used (because of allegedly
inappropriate additional amounts of SG&A and profit), the Department
would inappropriately discard lower value home market sales, because of
the cost test, prior to the Department's calculation of CV profit.
Regarding petitioners' assertion that POSCO and Union be treated as
affiliated parties, the POSCO Group argues that petitioners' case brief
makes no factual or legal arguments whatsoever concerning why the
Department should find POSCO to be affiliated with Union. The POSCO
Group notes that the Department, in the second administrative reviews
of the orders, rejected this petitioner assertion and the arguments
upon which it was based, and concluded that this decision was not
inconsistent with its decision not to apply the fair-value and major-
input rules to the collapsed POSCO entity.
Department's Position. In our preliminary results in these reviews,
as in the second administrative reviews, we treated the entire POSCO
Group as one entity for cost purposes. The Department clearly has
discretion in its application of the major-input and fair-value
provisions, as admitted by petitioners with respect to Crankshafts. A
more rigid interpretation of the statute, as proposed by petitioners,
would imply that the Department could not make a distinction for
wholly-owned entities either, as such an entity would also, under the
Department's definition, be ``affiliated'' with its owner.
We recognize that different types of affiliation exist, and that
different treatment of such relationships may be appropriate. The
Department also rejects the POSCO Group's assertion that adjustments to
POCOS costs cannot be acceptable because they affect whether or not
POSCO sales pass the cost test. The nature of collapsing POSCO and
POCOS is that POCOS's costs affect whether or not POSCO sales pass the
cost test, given that each CONNUM's costs are a weighted average of the
costs for that product across all collapsed companies.
However, because we are treating these companies as one entity for
our analysis, intra-company transactions should be disregarded. As
noted in our final results in the second administrative reviews, the
decision to treat affiliated parties as a single entity necessitates
that transactions among the parties also be valued based on the group
as a whole and, as such, among collapsed entities the fair-value and
major-input provisions are not controlling.
As noted by the POSCO Group, the petitioners have not in these
reviews demonstrated why Union Steel should be considered affiliated
with POSCO. The POSCO Group is treated as one entity for various
purposes, but they of course maintain their distinction as separate
legal entities. Unlike the relationship of POSCO to POCOS, there is no
evidence that POSCO or Union control or influence each other's
operations, and there is no indication on the record of any type of
interaction between POCOS and Union Steel relating to subject
merchandise.
Comment 15. Petitioners argue that the POSCO Group failed to
incorporate into its submitted costs general and administrative
expenses associated with severance benefits. Petitioners cite
information in POSCO's U.S. SEC report indicating that POSCO calculated
an estimate of its exposure relating to these benefits, which was still
in litigation, but under Korean generally accepted accounting
principles (``GAAP'') did not need to reflect this estimated expense in
its financial statements.
The POSCO Group argues that POSCO incurred no current expenses for
these unresolved severance benefits claims. The POSCO Group asserts
that the Department made an adjustment for severance benefits in the
final results of the second administrative reviews because POSCO was
required by a final Korean court decision to establish a reserve for
additional severance benefits. The POSCO Group argues that in those
reviews the Department attributed such expenses to G&A even if they
related to years prior to the review in question. The severance
benefits that petitioners argue should be included for the third
reviews have not been incurred, and POSCO has only a future contingent
liability for potential exposure from the unresolved litigation. The
POSCO Group argues that under the plain language of the statute the
Department is not authorized to adjust POSCO's G&A costs based on such
potential exposure, as the costs should be calculated based on records
that ``reasonably reflect the costs associated with the production and
sale of the
[[Page 13186]]
merchandise'' (see section 773(f)(1)(A) of the Act), and the Department
is limited to using ``a method that reasonably reflects and accurately
captures all of the actual costs incurred in producing and selling the
product under investigation or review'' (SAA at 835).
The POSCO Group argues that the Department did not adjust for
similar speculative potential liabilities in another case, where the
Department decided that there was no justification for adjusting costs
to include potential royalty payments which were speculative, that the
respondents were under no legal obligation to pay, and for which the
respondents had incurred no current expenses. See Final Determination
of Sales at Less Than Fair Value: Dynamic Random Access Memories of One
Megabit and Above from the Republic of Korea, 58 FR 15467, 15479 (March
23, 1993) (``Semiconductors'').
Department's Position. We agree with the POSCO Group that we should
not increase the respondent's costs by the potential expenses in
question, as Korean GAAP does not require that they be recorded as
expenses, and it has not been demonstrated that the absence of this
estimated potential expense is distortive. We further believe that it
would be unreasonable to impute to POSCO costs that, depending on the
outcome of the litigation, it may not incur.
Union
Comment 16. Petitioners argue that Union failed to provide complete
information regarding its U.S. affiliates, by failing to identify in
its responses the existence of two different corporate entities, one
being the Union America division of DKA (hereinafter ``UADD''), the
other, which petitioners contend respondent concealed, Union Steel
America Inc. (hereinafter ``UAC''). Petitioners further argue that
Union refused to provide selling expense, financial, or sales
information for UAC. Petitioners argue that the Department should apply
adverse facts available and make a direct adjustment to Union's export
price to account for any expenses incurred by UAC and possible
unreported U.S. sales.
Petitioners argue that ``[t]hroughout this administrative review,
Union Steel hid from the Department the existence of two separate
``Union Americas.' '' Petitioners argue that the distinction between
the two corporate entities, and the existence of UAC as a separate
entity, was not made clear until the home market sales verification in
May of 1997, by which time it was too late, petitioners argue, for the
Department to obtain and verify sales information for UAC specifically.
Petitioners point out that UAC has separate expenses for U.S.
operations from those of UADD, and that these separate expenses were
not duly reported as indirect selling expenses. Petitioners note that
the Department's supplemental questionnaire of April 18, 1997
instructed the respondent to ``[r]evise [its] reported selling expenses
to include expenses, both direct and indirect, incurred by Union
America with respect to Union's U.S. sales.''
Petitioners argue that the Department clearly intended to elicit
information on expenses specifically tied to UAC, as the supplemental
questionnaire followed on petitioners' own notification to the
Department, in a letter of April 9, 1997, that UAC's financial
statements contained expenses that had not been reported by Union.
Petitioners note also that the Department's request asked for copies of
each type of report that respondent submitted to Korean or U.S.
national or local tax authorities, ``for affiliates involved with the
manufacture and sale of subject merchandise in the United States and
Korea,'' as well as the chart of accounts for Union America.
Petitioners contend that by not furnishing these documents as
requested for UAC in addition to UADD, despite multiple opportunities
to do so in the course of the present and the preceding reviews, Union
evaded the Department's request and failed to provide the requested
information.
Because Union only divulged the separate identity of UAC, as
distinct from UADD, during the verification in May, petitioners argue,
sales and expense information of the former remains unverified.
Petitioners state that, respondent's claims notwithstanding, UAC must
have performed functions during the POR, as its financial statements
contain expenses and revenues. Petitioners argue that the revenues must
be presumed to correspond to sales of subject merchandise.
As a result of Union's failure to provide requested information
about UAC's expenses and operations as a separate entity in a timely
manner, petitioners argue, the Department was not able to verify data
pertaining to UAC, still does not know all the facts concerning UAC,
and has been precluded from performing a proper analysis of UAC.
Petitioners argue that because Union failed to report expenses
incurred by UAC despite the Department's requests, the Department, as
facts available, should presume that any SG&A appearing on UAC's
financial statement in 1995 and 1996 were costs incurred within the POR
and were directly related to the subject merchandise.
Petitioners note that Union did provide a printout for UAC's
monthly sales income statement for June and July of 1995, but claim
that there is no evidence that respondent also provided the verifiers
with the documentation necessary to test the accuracy of the document,
either by testing the underlying computer program or tying the printout
to invoices.
Because Union has stated that all its reported sales were made
through UADD, petitioners argue, the Department should assume that any
sales made by UAC were additional, unreported sales of subject
merchandise. The petitioners urge the Department to derive a surrogate
quantity based on the weighted-average value of reported sales, and to
apply to that surrogate quantity a rate of 64.5 percent, the highest
rate from the petition in the LTFV investigation.
In rebuttal, Union argues that it clearly and unequivocally
identified its relationship with UAC and provided the Department with
requested information pertaining to UAC. Union argues that petitioners
have mischaracterized the record, and states that it informed the
Department in its response, at the outset of the review, of its
corporate relationship with UAC and of UAC's lack of a role in the
manufacture and sale of subject merchandise. Union further argues that
the Department verified that UAC and UADD are separate corporate
entities and that the Department confirmed that UAC has no involvement
in the manufacture of subject merchandise. Respondent argues that for
this reason, it had no information to report with regard to any
purported selling activities of the subject merchandise by UAC, and
that the Department should dismiss petitioners' claim.
Referring to its submission of October 1995 submission and other
documents, including a verification report, in connection with the
preceding review, Union argues that the Department clearly understood
the distinction between UAC and UADD at least as early as October 1995.
In the current review, Union argues, it discussed the corporate
relationship between Union and UAC at page 5 of its response, where it
stated that UADD had taken over the selling functions for U.S. sales of
subject merchandise, and that UAC continued to exist as a separate
corporation but had no activity relating to the manufacture and sale of
the merchandise under review.
[[Page 13187]]
Union also points to UAC's 1995 audited financial statement,
submitted with Union's Section A response, and to UAC's 1996 statement,
provided at the Korean verification, as further evidence of timely
disclosure of the corporate identity of UAC and of UAC's complete
disassociation from the manufacture and sale of the subject
merchandise. Thus, respondent argues, it had placed on the record of
the present review in October of 1996 the information which petitioners
claim it withheld, ten months prior to the U.S. sales verification in
August of 1997.
With regard to whether the information concerning UAC was duly
reported, Union argues that there is no reason under the statute that
Union need submit any further information regarding UAC, because it is
not involved in any way in the production or sale of subject
merchandise. Concerning verification, Union argues that the Department
did verify that UAC in fact does not produce or sell subject
merchandise. Union cites in this regard the Department's Korean
verification report, which addresses the assignment of UAC's former
functions to UADD and the inactive status of UAC.
Regarding whether UAC made sales of subject merchandise, Union
argues that the record shows that all such revenue had been earned on
or before June 30, 1995, prior to the POR, as evidenced by UAC's
financial statements submitted with its response and at the Korean
verification.
Concerning whether the general expenses which UAC showed in its
income statement should be allocated to its U.S. sales in the present
review, Union argues that because UAC's involvement with sales of
subject merchandise ended with the second review, these general
expenses, which it characterizes in any case as ``trivial,'' are not
associated with third review sales of subject merchandise.
Department's Position. We agree with Union. The record demonstrates
that Union revealed the existence of the two corporate entities in
question and did not understate its reportable expenses. On the basis
of Union's submissions and our verification thereof, we are satisfied
that Union shifted the responsibility for selling subject merchandise
in the United States from UAC to UADD, and that the former was not
involved with such sales during the POR.
Comment 17. Petitioners argue that there are numerous instances
throughout Union's sales database in which it failed to report U.S.
warehousing expenses. The first such omission which petitioners allege
concerns sales for which the terms were reported as being
``delivered.'' For all these sales, petitioners argue, a time gap
between reported entry date and date of shipment from the dock
signifies that respondent must have incurred, and must have failed to
report, warehousing or demurrage expenses.
The second omission which petitioners allege Union made concerns
warehousing expenses for sales with terms of sale of ``W&D,'' i.e.,
``warehoused and delivered to customer site.'' Petitioners note that
for a certain subset of this type of sale, there is an apparent
inconsistency: when inland freight expenses were incurred in the United
States, and when merchandise apparently was not picked up for several
or more days, warehousing expenses must also have been incurred and yet
were not reported.
The third omission which petitioners allege concerns sales with
terms different from those mentioned above, and with delays between
entry dates and shipment to the U.S. customer, but for which Union did
not report any warehousing or demurrage expenses. Petitioners argue
that these sales must have involved either demurrage or warehousing
expenses. Petitioners further argue that respondent failed to provide
proof, at verification, that such expenses were not in fact incurred.
Petitioners argue that for all sales with a gap between entry and
U.S. shipment dates, where no warehousing or demurrage and handling
expenses were reported, the Department should calculate a facts
available adjustment, based on the highest per-diem demurrage and
handling expense which the company reported in its response. Further,
petitioners argue that for all sales with terms of W&D, the Department
should, as facts available, account for the possibility that
warehousing expenses might have been incurred after the second shipment
date (which in fact occurred for one particular transaction) by making
a downward adjustment to reported U.S. price based on the highest
reported warehousing expense.
In rebuttal, Union argues that it fully reported its U.S.
warehousing and inland freight expenses, that petitioners are factually
incorrect, and that the Department verified the expenses in question to
the full extent it considered necessary, finding no discrepancies.
Union notes that the Department found no unreported expenses of the
type imagined by petitioners. Union argues that the Department, not
petitioners, determines what constitutes adequate verification, that
petitioners err in thinking verification procedures and documents are
limited to those discussed in the report, and that the explanations
provided at the verification were included in the report precisely to
answer petitioners' concerns on these subjects, as expressed prior to
the verification.
Concerning gaps between entry and invoicing to the U.S. customer
for certain sales, Union states that the free warehousing which it is
allowed accounts for nearly all the sales in question. For one of the
sales with a lengthy gap of this type, Union argues, the Department
investigated and found that there were special circumstances that led
to the greater time period with no warehousing costs.
As for sales with W&D terms, but no warehousing expense indicated,
respondent states that the freight amounts which appear for the 11
sales discussed by petitioners corresponded to actual freight expenses,
that petitioners are wrong to suppose that warehousing expenses must
have been incurred, that the expenses for these sales were correctly
reported, and that warehousing expenses were not incurred for them.
Department's Position. We agree with Union that there is no
evidence that it failed to report the expenses in question. We were
aware of petitioners' interest in establishing that warehousing and
inland freight expenses were reported fully and properly, and their
interest in understanding why such expenses were not incurred in
particular instances. Accordingly, at verification, we examined
relevant records with particular attention to these questions. We found
no evidence that Union failed to report warehousing and inland freight
expenses as incurred. Union's explanations and the documentation we
examined at verification are both consistent with the response data. We
verified that free warehousing was allowed for certain sales as Union
claimed. For the sale with an especially long gap, we examined the
documents supporting Union's explanation of the special circumstances.
Similarly, for the sales made under W&D terms for which respondent
reported no warehousing expenses, we verified that the expenses were
correctly reported and that no warehousing expenses were incurred which
were not reported.
Comment 18. Petitioners argue that Union failed to report U.S.
inland freight expenses for some U.S. sales. Petitioners' point
concerns two data fields for this category of expense, one called
INLFPWU (hereafter ``P''), the other INLFWCU (hereafter ``C'').
Petitioners state that the Department's questionnaire called for
reporting freight expenses as follows.
[[Page 13188]]
For CEP sales, the P column should show freight expenses incurred
on shipments from the U.S. port of entry to the affiliated reseller's
U.S. warehouse or other intermediate location, and the C column should
show expenses incurred on shipments from the affiliated U.S. reseller
to the unaffiliated U.S. customer. For EP sales, petitioners argue, the
P column should show expenses from the port of entry to an intermediate
location and the C column should show expenses incurred on shipments
from the port of entry or an intermediate location to the unaffiliated
U.S. customer.
Petitioners note that Union claimed to conform to the above
requirements in its initial response, and did report that the P column
contained amounts for ``occasional cases in which a customer requests
delivery to a warehouse or its own facility,'' and the C column
contained either freight from port to customer, when sales terms were
``delivered,'' or freight from a warehouse to a customer's location,
when sales terms were ``W&D.'' However, petitioners argue, there are
inconsistencies and omissions in Union's reporting of freight expenses
for certain sales for which the terms were ``DEL'' (delivered) and for
certain others for which the terms were ``W&D'' (warehoused and
delivered). Petitioners argue that certain of respondent's U.S. sales
which would be expected to show expense amounts in both the C and the P
fields by virtue of the terms of sale reported, do not show expense
amounts in the C field.
Petitioners note that the Department requested, in a supplemental
questionnaire, that Union report charges for shipment to the customer
where the terms indicated delivery to the customer was provided.
Petitioners take issue with Union's answer to that request, which was
that for those sales for which no inland freight was reported in the C
column, inland freight was reported in the P column. Petitioners note
that this answer contradicts the response, in which Union held that all
sales for which the terms were ``DEL'' showed freight expenses reported
in the C field. Petitioners argue that it remains totally unclear what
Union has reported with respect to freight expenses for sales with
delivery terms of ``DEL.''
The freight expense reporting for sales with ``W&D'' terms,
petitioners argue, is similarly confused. Petitioners suggest that
record evidence strongly suggests that Union simply neglected to report
freight expenses incurred in delivering merchandise from the warehouse
to the customer. Petitioners assert that Union was unable to provide
documentation at verification to show that it fully reported all U.S.
inland freight expenses. Petitioners question why certain sales with
``W&D'' terms have freight reported in the C column but not the P
column.
Petitioners argue that because respondent failed to provide the
Department with a logical, coherent, and consistent explanation for its
failure to fully report U.S. inland freight expenses, and failed to
produce evidence at verification to support its claims, the Department
should apply adverse facts available for unreported U.S. inland freight
expenses. Petitioners suggest that the Department should apply the
highest reported corresponding per-ton rate incurred to sales where
terms are ``W&D'' and where no expense amount appears in either the C
or P columns. For sales with terms marked ``DEL,'' petitioners argue,
and where Union did not report any amount in either the C or P columns,
the Department should insert the highest reported corresponding per-ton
rate. Finally, petitioners argue that in instances where a significant
number of days elapsed between entry and shipment to the customer, the
Department should make an adjustment for freight to the warehouse, and
from the warehouse to the customer, based on the highest reported rate
for each.
In rebuttal, Union argues that of those sales which petitioners
highlight as having terms that ``should'' imply freight, most had
``DEL'' terms, i.e., were delivered to a warehouse, and did have
freight reported in the ``P'' field, indicating that Union delivered
the merchandise to a warehouse. In its response, Union stated that
``for the occasional cases in which a customer requests delivery to a
warehouse or its own facility, U.S. inland freight has been reported on
a transaction-by-transaction basis.''
For the other sales which petitioners suggest ought to have borne
freight expenses, those with ``DEL'' terms, Union argues that it
reported freight in the ``C'' field. Union explains that the choice of
field depended on whether a sale was delivered to a warehouse or to the
customer's site.
Union states that the only other sales about which petitioners
raise concerns in their brief are transactions with ``W&D'' terms but
no freight in the ``C'' field. Respondent states that these were simply
picked up by customers from the warehouse, as called for in the terms
of sale. Union further states that nothing in the record would support
a reversal of the Department's verification findings.
Union answers petitioners' concerns on the verification of its
sales transactions by observing that petitioners cannot cite one
instance of Union failing to provide requested documents or other
information, nor any evidence of unreported expenses for any of the
sales examined at verification. Union characterizes petitioners'
concerns in this regard as speculation.
Department's Position. We agree with Union. We verified that these
expenses were fully reported, and the record of the review is
consistent with Union's submissions and explanations. Petitioners'
concerns about the possibility of unreported freight and warehousing
expenses are not supported by any instances of verification
discrepancies or documentation problems.
Comment 19. Petitioners raise the following concerns with respect
to six transactions which the Department traced at verification:
Union failed to prove that it did not incur certain
warehousing or demurrage and/or inland freight expenses;
Union failed to provide adequate documentation of its
claims and explanations as to sales terms;
documentation which Union provided at verification raises
the possibility that additional expenses for further processing may
have been incurred but not reported;
there are apparent inconsistencies between the reported
sales terms and the reported expense amounts; from the reported sales
terms it would appear some expenses were incurred but not reported.
Union answers that petitioners' concerns are again merely
speculative. Union further notes that petitioners' concerns come late,
since the home market verification report in question was available
over two months prior to the U.S. verification, so that petitioners
could have requested further investigation of these matters at that
time.
Department's Position. We agree with Union that petitioners'
concerns are speculative in nature and are not supported by the record
evidence, including our verification findings. We are satisfied with
Union's explanations, in its rebuttal brief, of the particular facts
and circumstances of the sales in question. The response data and the
documentary evidence from verification are consistent with Union's
explanations in its rebuttal brief and with its response submissions.
Comment 20. Petitioners argue that Union's U.S. affiliate, UADD,
plays an active and substantive role in the U.S. sales process, that
this role is not only greater than that of a mere processor of
[[Page 13189]]
documents, but greater than that of Union itself with respect to U.S.
sales. Petitioners argue that the Department should therefore classify
all of Union's U.S. sales as CEP sales, rather than EP sales, and,
consistent with that action, deduct all of Union's direct selling
expenses, indirect selling expenses and allocated profits from the
reported gross unit price when calculating CEP.
Petitioners summarize the three criteria for EP sales, as distinct
from CEP sales, as follows: (1) The merchandise is not inventoried in
the United States; (2) the commercial channel at issue is customary;
and (3) the selling agent is not substantively more than a processor of
sales-related documentation, or a communications link. Petitioners
argue that all three of these criteria must be satisfied for a sale to
qualify as an EP sale, then argue that in this case the Department must
focus on the last of the three, i.e., the role of the U.S. affiliate in
the U.S. sales process, and urge the Department to do so in the context
of Union's customary selling practices. Petitioners argue that Union's
U.S. affiliates perform significant selling functions in the United
States and that its U.S. sales must be classified as CEP sales.
Petitioners cite Department precedent and record evidence on the
importance of the role of Union's U.S. affiliates in the U.S. sales
process, and argue that the activities performed by these affiliates
parallels those performed in German Plate by Francosteel, the U.S.
affiliate of the German respondent (Dillinger). Petitioners summarize
the activities performed by Francosteel as these were evaluated by the
Department in that review, citing (1) Price negotiation and
maximization, (2) establishing contact with the customer, (3) providing
credit, (4) obtaining purchase orders, (5) invoicing, (6) taking title,
and (7) acting as the importer of record. Petitioners state that the
Department found in that review that Francosteel performed the above
functions and was thus more than a mere processor of sales documents
and communications link. Petitioners argue that in the instant review
Union's U.S. affiliate performs even more functions than Francosteel.
Petitioners cite a home-market sales verification exhibit, in which
only intra-corporate transfer prices appear, and argue that this
exhibit shows that UADD negotiates price without the Korean parent's
involvement or its knowledge of the prices that were ultimately charged
to the unaffiliated U.S. customers. Petitioners argue that at both the
home-market and the U.S. verifications, the instances which Union
provided as evidence of the Korean parent's control and involvement in
the setting of prices paid by customers were essentially hand-picked
and have not been shown to reflect the normal sales process.
Furthermore, petitioners argue, these examples fail to document the
parent's role in price-setting even for these selected examples.
Petitioners argue that the exhibits thus supplied show only rejections
based on limitations of production capacity, or unsatisfactory intra-
corporate transfer prices.
Petitioners argue that the U.S. verification report, which mentions
further examples of sales that the verifiers examined and where the
parent initially disapproved certain terms, quantities, and prices,
does not make clear what examples were examined, since the verifiers
did not take exhibits for these sales. Petitioners suggest that these
examples may be sales that were refused on the basis of transfer price
or production capacity, not because of the price to the ultimate U.S.
customer.
Petitioners assert that aspects of UADD's commissionaires' roles,
and the role of UADD in appointing commissionaires, as reflected in
commissionaire agreements, shows that UADD has authority over the sales
process, and that UADD establishes the first contact with U.S.
customers. Petitioners argue that the gap in timing between UADD's
payment to Union in Korea and UADD's collections from U.S. customers,
shows that UADD provides credit to U.S. customers.
Petitioners argue that UADD is responsible for handling purchase
orders obtained directly from its U.S. customers, that UADD's
commission agents, according to their contracts with UADD, may
participate in the sales process actively, and that the commissionaires
work directly for UADD. Petitioners also argue that the commission
agent agreements contain clauses suggesting that UADD can make pricing
decisions. Petitioners argue that UADD invoices its U.S. customers.
Petitioners argue that UADD takes title to the subject merchandise,
acts as the importer of record, and in so doing takes on a role so
significant that, like Francosteel in the Dillinger review cited above,
it rises above the role of a mere communications link and processor of
sales-related documentation.
Petitioners argue that UADD's selling functions far outweigh those
performed by Union itself, ``which appear not to include anything more
than producing and shipping the merchandise.'' Petitioners cite the
following functions which UADD performed in the POR:
Certain price agreement negotiations;
Processing sales and import documents;
Processing certain warranty claims;
Paying customs and antidumping duties;
Arranging warehousing and transportation at the customer's
request;
Accepting and reselling returned merchandise; and
Engaging in communications with, and acting as point of
contact for, U.S. customers.
Petitioners further argue that based on certain accounting records
UADD ``may carry inventories of the subject merchandise.'' Petitioners
cite also some additional selling functions, which were ``revealed'' to
have been performed by UADD in the prior review, pertaining to market
research, planning, finding U.S. sales, negotiating purchase terms,
maintaining customer relations, procurement services, and arranging and
paying for post-sale warehousing and transportation to customers.
In rebuttal, Union argues that petitioners fail to come up with any
new arguments on this issue, severely distort the factual record,
mischaracterize Union's sales process, and rely on sheer speculation.
Union points to the final results of the first and second reviews, in
which the Department rejected the same arguments by the petitioners.
Union also points to the verifications, particularly the U.S.
verification, of which the report discusses the Department's
examination of the authority which the Korean-based Export Team
exercised over pricing and sales terms. Union states that nothing has
changed regarding the assignment of selling functions between the
Korean and U.S. affiliates. Union reviews the sales process as
documented in its response and the verification report, and points to
record evidence supporting the claim that UADD has no price negotiating
ability.
Union further argues that no changes in the applicable law
governing EP sales have emerged to alter the Department's position.
Union contends that German Plate had an unusual aspect, in that the
affiliated sales intermediary engaged in extensive price negotiations.
Union cites Exhibit 3 of the U.S. verification report which shows an
instance where Union disapproved a particular price and dictated a
price different from that requested by the U.S. customer, via UADD.
Union cites the U.S. verification report's description of the sales
process as it relates to the determination, by the Export Team in
Korea, of the final price to the unaffiliated U.S. customer. Union
distinguishes these facts from those in
[[Page 13190]]
German Plate, where the Department found the foreign manufacturer's
role in the sales process to be minimal, whereas the affiliated sales
intermediary essentially negotiated all sales. Union points to the
Department's finding at verification that the Union controlled all the
terms of sale, price and otherwise, and notes that the Department
reviewed four months of correspondence to test the accuracy of Union's
statements that it approves prices for all sales. Union notes that the
Department found nothing inconsistent with the responses, and that the
Department found that Union sometimes rejected sales based on price and
other terms.
Concerning selling activities, Union notes that information on the
record in this review confirms that, as the Department found in prior
reviews, the commission agreement which establishes commission rates
was drafted and controlled by Union. Union disputes petitioners'
assertion that for at least one U.S. customer UADD has authority to
adjust prices, and cites to its questionnaire response which states
that Union itself retains that authority in full.
Union argues that UADD's role in accepting payments from U.S.
customers, and arranging for the extension of credit to them, is in
keeping with the Department's definition of a sales processor.
Regarding warehousing and transportation, Union retorts that UADD
arranges for these services but does not directly provide them.
Concerning warranty claims, Union confirms that UADD processes these,
but notes that Union sales personnel in Korea decide all claims. Union
similarly confirms that UADD receives purchase orders, but explains
that, as the Department verified, it then forwards these directly to
Union, which is responsible for approving the sale or proposing
alternative terms or prices.
With respect to the other selling functions enumerated by
petitioners, Union confirms that UADD invoices U.S. customers, takes
title to merchandise, pays duties and fees, and serves as a
communications link and point of contact for U.S. customers. All of
these functions, Union argues, are in keeping with the Department's
definition of a sales processor, as discussed in the final results of
the prior review.
Concerning instances when UADD accepts and resells returned
merchandise, Union states that such instances have properly been
reported as CEP transactions.
Department's Position. We agree with petitioners that Union's U.S.
sales should be treated as CEP transactions. In the final results of
the prior reviews, in order to determine whether sales made prior to
importation through Union's affiliated U.S. sales affiliate (UADD) to
an unaffiliated customer in the United States were EP or CEP
transactions, we analyzed Union's U.S. sales in light of three
criteria: (1) whether the merchandise was shipped directly from the
manufacturer (Union) to the unaffiliated U.S. customer; (2) whether
this was the customary commercial channel between the parties involved;
and (3) whether the function of the U.S. selling affiliate (UADD) was
limited to that of a processor of sales-related documentation and a
communications link with the unrelated U.S. buyer. We concluded that
UADD was no more than a processor of sales-related documentation and a
communications link, and classified Union's U.S. sales as EP. Second
Review Final Results at 18439.
As explained above in the ``Fair-Value Comparisons'' section of
this notice, to ensure proper application of the statutory definitions,
where a U.S. affiliate is involved in making a sale, we normally
consider the sale to be CEP unless the record demonstrates that the
U.S. affiliate's involvement in making the sale is incidental or
ancillary. The totality of the evidence regarding Union's sales process
demonstrates it is Union's role that is ancillary to the sales process,
and not that of UADD.
We agree in large part with petitioners that UADD fulfills several
of the criteria cited in German Plate, including price negotiation,
initial customer contact with respect to individual sales, credit,
purchase orders, invoicing, title and importation. We agree that the
verification results are not dispositive. The few instances which Union
offered of disapproved prices and terms do not establish that UADD's
involvement in the selling functions was ancillary. The authority which
Union's export team exercised over the final terms does not amount, in
the end, to placing all of the primary selling function in Korea.
Indeed, the paucity of evidence that the home office played any role in
the sales process reinforces petitioners' argument as to UADD's active
role, as does the fact that UADD employed the services of independent
agents in the United States. Therefore, we concur with petitioners that
UADD's role in the sales process is more than ancillary.
Union's argument that the U.S. affiliate in German Plate engaged in
extensive price negotiations is true, but does not nullify the fact
that UADD is significantly involved in price negotiations and the other
selling functions discussed above from the onset of client contact in
each sale. We also note that the higher proportion of indirect selling
expenses incurred in the United States in connection with Union's U.S.
sales of subject merchandise, as opposed to those incurred in Korea,
supports petitioners' contentions. Further, the existence of
significant selling expenses in the United States itself belies Union's
claim that the role of its U.S. affiliate was not meaningful. See
Union's February 21, 1997 response at Volume II, Exhibit C-20. For the
foregoing reasons, we have classified Union's U.S. sales as CEP
transactions in these final results.
Comment 21. Petitioners argue that the Department should make
several adjustments to Union's COP and CV data. Because of Union's
affiliation with POSCO, petitioners argue, the Department should make
an adjustment for Union's purchases of substrate from POSCO to ensure
that they reflect fair value and are above POSCO's COP. Petitioners
argue that in the preliminary results the Department wrongly concluded
with respect to POSCO that the fair-value and major-input provisions of
the statute do not apply to POSCO's affiliated transactions with POCOS;
if the Department retains this approach, petitioners argue, then to be
consistent it must also consider Union to be affiliated with POSCO.
Petitioners argue that the substrate which Union purchases from
POSCO represents a major input and so must be assigned a value equal to
the highest of (1) the transfer price from POSCO to Union, (2) POSCO's
production cost, or (3) the market value. Invoking this last provision,
petitioners argue that the Department should adjust Union's substrate
costs by the difference between the price it paid POSCO and market
value, as evidenced by purchases from unaffiliated entities.
Addressing the issue of whether POSCO and Union are affiliated,
Union cites to the final results of the second review, where the
Department determined that POSCO had not been shown to control Union.
Union argues that petitioners offer no new evidence to buttress their
presumption that Union and POSCO are affiliated or to cause the
Department to revise its view on this point.
Department's Position. We agree with Union. We examined the basis
for petitioners' concerns about the possibility of control of Union by
POSCO in the prior review. We found insufficient evidence then in
support of petitioners' assertion that the business relationship
between POSCO and Union satisfies the Act's new affiliation criteria
[[Page 13191]]
at sections 771(33)(EG). Second Review Final Results at 18417-
18. No new evidence or argument has been offered in these reviews, and
we again find that petitioner's assertion is not supported; therefore,
for purposes of these final results, we have again treated Union and
POSCO as unaffiliated. Accordingly, our position with regards to the
fair-value and major-input provisions of the statute is that these do
not apply.
Comment 22. Petitioners argue that the Department should reject
Union's change in depreciation methodology because it is contrary to
longstanding Department precedent and practice and is contrived. Citing
the Department's position in Semiconductors, as well as the decision of
the CIT in Micron Technology, Inc. v. United States, CIT Slip Op. 95-
107 (June 12, 1997) (``Micron''), petitioners argue that a similar fact
pattern is in evidence, that the change in methodology in accounting
for depreciation expense understates respondent's fixed overhead, that
the Department should reject the change for the same reasons as in
Semiconductors, and increase respondent's fixed overhead amounts by a
specific percentage rate. The petitioners suggest a rate, which they
calculate on the basis of net asset value of the assets in Exhibit 9 of
the Korean verification report, multiplied times a standard flat annual
depreciation rate for assets with a remaining useful life of eight
years. Petitioners argue that the Department should use the difference
in percentage derived from this example and apply the differential to
all of Union's fixed overhead expenses.
In rebuttal, Union argues that petitioners' suggested method would
double-count depreciation expenses, and notes that its auditors and the
Korean tax authorities both approved the changes in depreciation
methodology. Union argues that petitioners provide no argument in
support of their thesis that it is distortive to depreciate the
remaining value of assets when such a change in method is adopted.
Union argues that if the Department wishes to use costs based on a
double-declining balance method, the proper costs to use would be those
contained in Union's supplemental response, which were verified, rather
than those which would be obtained by relying on the straight-line
method costs which were submitted later. Union also notes that if the
Department wishes to use the later, straight-line data, petitioners'
suggested ratio is too high, and would need to be decreased to reflect
the actual proportion of depreciation within fixed overhead. Union
supplies the revised factor which it claims the Department would need
to make the adjustments using the correct ratio of depreciation to
total fixed overhead expense.
Department's Position. We agree with petitioners that Union's
change in depreciation methods understates overhead and that there are
similarities in the instant case with the facts of Semiconductors and
the related court decision, Micron. We also agree that, even if Union's
change in methodology is made according to local accounting standards,
the Department may still find the change to be distortive and decline
to use the revised costs. We note that the CIT in Micron found that:
Commerce was entirely justified in concluding that Samsung's
methodology, as implemented, distorted depreciation expense during
the POI to the extent that Samsung used the full useful life of the
asset rather than the remaining useful life at the time of the
change in depreciation method.
Union's adoption of a new depreciation method similarly would
entail a restatement of asset values and depreciation expenses over
multiple years, including years for which an investigation and
subsequent reviews have already been conducted. The restatement would
therefore also mean that ``greater costs were attributed to products
manufactured before the change than subsequent to the change.''
Semiconductors at 15479. Thus, here, as in Semiconductors, we find that
``the basis used for the financial statement, even if stated in
accordance with Korean GAAP at the time of the change, would be
distortive for purposes of our antidumping analysis.'' Id.
Accordingly, we have determined not to accept Union's reported
depreciation expense. Instead, for purposes of these final review
results, we applied petitioners' suggestion, in part, by compensating
for the accounting change; we also took into account Union's concern
that we reflect the accurate proportion of depreciation within
overhead, and used the amount indicated by multiplying Union's fixed
overhead expenses times the ratio of straight-line (non-restated)
depreciation in fixed overhead.
Comment 23. Petitioners argue that the Department should reduce
Union's claimed offset for revenue from the sale of scrap, which Union
based on theoretical amounts related to its production yield ratios, to
reflect instead Union's actual scrap generation rate. Petitioners base
their argument on verification results which indicated, petitioners
argue, that the recovery rate which Union used was not accurate.
Petitioners suggest a percentage by which they urge the Department to
adjust the scrap offset to reflect the difference they describe.
Union answers that the difference in the numbers compared by
petitioners can be accounted for by changes in work-in-process
(``WIP'') inventory. Union argues that scrap temporarily stored on the
floor, prior to entering inventory, would not be accounted for
immediately as it is produced, and that any change in the amount of
scrap WIP inventory between the beginning and the end of the cost
reporting period would not be captured in the production figures
reviewed at verification. Union argues that the Department's test was a
reasonableness check, not an attempt to recalculate the quantity of
scrap through another means, and Union believes that the amount noted
at verification falls within reasonable limits for such a by-product.
Alternatively, Union argues, if the Department determines it should
reduce the reported scrap quantity, then it should adjust yield rates
simultaneously, multiplying each by a factor of 0.84, then re-compute
COP and CV based on the revised scrap and yield totals.
Department's Position. We agree with petitioners that it is more
appropriate to use the corrected scrap recovery rate as discovered at
verification. Accordingly, for these final results, we have adjusted
the scrap rate as petitioners suggest; we have also revised the yield
rate in keeping with Union's concern regarding the need for consistency
in these two factors.
Comment 24. Petitioners argue that, as in the second review, the
Department should revise Union's submitted costs to account for
differences between submitted costs and actual costs of manufacturing
(costs based on Union's financial statements).
Union argues that the difference in costs is less than petitioners
assert once the change in accounting methodology is accounted for.
Union also argues that the difference between the two sets of costs,
i.e., its questionnaire response costs and its financial statement
costs, are trivial, and the Department's tests at verification were
only to determine the reasonableness of Union's submissions.
Department's Position. We agree with petitioners. The record shows
that there is a noticeable difference between the actual manufacturing
costs (from the audited financial statements) and the manufacturing
costs submitted by Union. The difference is not trivial since we
disagree with the change in depreciation method which Union argues
would narrow the cost difference. Our verification test is not
[[Page 13192]]
only a test of the reasonableness of a respondent's submissions but
also a check on accuracy. When we find, as we did here, that submitted
costs are less than actual costs, and when the information which would
allow us to use the more accurate cost figure is on the record and is
easily incorporated into our analysis, we have no reason not to use the
more accurate figure. Accordingly, we have applied the corrected cost
figure as suggested by petitioners.
Comment 25. Petitioners argue that the Department should account
for the difference between costs which Union incurred during its fiscal
period and the higher costs it incurred during the POR. Petitioners
note that the Department allowed Union to report costs based on its
corporate record-keeping period provided that this methodology did not
distort the calculation of costs. Petitioners argue that the analysis
which Union provided demonstrates that its methodology has a
``noticeable'' impact on the calculation of costs, reducing them by a
percentage difference which petitioners assert is significant, unlike
the difference in the same costs in the prior review. Petitioners urge
the Department to revise Union's submitted costs to include a specific
adjustment for the effect of Union's use of its record-keeping period.
In rebuttal, Union argues that for the sake of consistency with
past practice, and relative ease of submission and of verification,
Union requested that the third review cost reporting be on the same
basis as the prior reviews, July through June, a difference of one
month from the August-July POR. Union argues that it gave evidence
showing that this method would not distort costs and that the
Department did not find the method distortive, though Union concedes
that the Department also later requested it to submit its costs for the
POR itself rather than for the fiscal year.
Union argues that petitioners are wrong in at least two respects,
since they have not supported their claim that the change in reporting
period had a noticeable effect on submitted costs, and since the
Department concluded previously that the choice of periods was not
distortive. Concerning the magnitude of the difference in average unit
costs, Union explains that it could be due to a change in the product
mix, even if all unit costs remained unchanged. Union argues that the
case has proceeded on the basis that the change in periods was not
distortive, and petitioners cannot now claim differently.
Department's Position. We agree with petitioners that the POR costs
are indeed higher than the fiscal-year costs, as is shown by Union's
own information. When we allowed Union to report on the basis of a
different period we also requested the information which would permit
us to compare the reported numbers to those of the POR and to apply the
latter if these were different enough to affect the results of our
analysis, as we found they were. We disagree with Union's argument that
petitioners failed to support their claim that the change in reporting
period had a noticeable effect, and we disagree with the
characterization of the change as less than noticeable. Finally, the
argument that the difference in costs could have arisen from a
difference in product mix is unpersuasive: the potential effect of the
change is noticeable, and we find it is therefore more reasonable to
revert to the actual POR data. Accordingly, for purposes of these final
results, we based our margin calculations on the POR costs rather than
on the fiscal period costs.
Comment 26. Petitioners argue that the Department should revise
Union's submitted interest expense to account for expenses incurred by
the Dongkuk Steel Mill (``DSM'') group. Petitioners argue that it is
the Department's longstanding policy to employ the financial expense
incurred by the consolidated entity, not the unconsolidated entity, in
calculating the interest expense component of COP and CV. Petitioners
note that the Department obtained the necessary consolidated rate
information from Union but failed to apply it in the preliminary
results. Accordingly, petitioners argue that, for purposes of these
final results, the Department should substitute the consolidated rate
for the rate initially supplied by Union.
In rebuttal, Union concedes that it is Department policy to use the
interest expense of the entity at the highest level of consolidation,
but argues that Union is not further consolidated with any other
entity, and its financial statements represent the highest level of
consolidation. Union notes that at the petitioners' request, it
provided the financing costs for DSM and DKI in its supplemental
response, but that this does not signify that Union's interest costs
are in any way consolidated with those of the other two firms. Union
argues that the Department correctly applied its practice in the
preliminary results and should continue to do so in the final results.
Department's Position. As in the prior review, where the same issue
arose (though in the prior review the issue concerned all general and
administrative expenses (``G&A'') rather than merely interest
expenses), we agree with petitioners. The ownership and affiliation
ties at issue have not substantially changed. It is our practice to
include a portion of the G&A expense incurred by the parent company on
behalf of the reporting entity. We disagree with Union's arguments that
Union's financial statements reflect the highest level of
consolidation. Since Union is affiliated with the DSM group, we agree
with petitioners that a portion of the interest expenses for the DSM
group should be allocated to Union's costs. Accordingly, for these
final results, we applied the interest expense ratio suggested by
petitioners.
Comment 27. Petitioners note that the Department recently changed
its policy regarding the calculation of interest expense for CV, and no
longer includes imputed credit expenses or inventory carrying cost
expenses in its calculation of CV, but uses the same interest expense
ratio as it does for COP. In support of this argument, petitioners cite
Notice of Final Results of Antidumping Duty Administrative Review:
Certain Welded Carbon Steel Pipe and Tube from Turkey, 61 FR 69067,
69075 (December 31, 1996) and Notice of Final Results of Antidumping
Duty Administrative Review and Determination Not To Revoke Order In
Part: Dynamic Random Access Memory Semiconductors of One Megabyte or
Above from the Republic of Korea, 62 FR 39809, 39822 (July 24, 1997).
Accordingly, petitioners argue, for the final results the Department
should ensure that the interest expense ratio used for CV reflects this
new policy. Union offers no rebuttal.
Department's Position. We agree with petitioners and have amended
our calculations accordingly for these final results.
Comment 28. Petitioners argue that the Department asked Union to
``provide an analysis that compares year-end adjustment amounts
provided in [its] responses to the amounts reported in [its] audited
financial statement,'' but that the Union failed to provide this
analysis. Petitioners note that such an analysis would have enabled the
Department to determine whether the submitted costs reflect the year-
end adjustments which are included in the financial statements, but
which are not always incorporated in the normal accounting system.
Petitioners argue that since Union neglected to provide the analysis,
``the Department should apply facts available and increase Union's
submitted costs by 8 percent (or \1/12\).''
In rebuttal, Union argues that the July 1995-June 1996 costs which
it
[[Page 13193]]
submitted included the full year-end adjustments for 1995 in accordance
with Department practice. Union later supplied audited year-end 1996
adjustments when these became available. Union argues that petitioners
have not claimed any significant changes from 1995 to 1996 in kind or
in number, other than the change in depreciation method, to which
petitioners have objected. Union argues that petitioners' claim that it
failed to provide relevant information has no support in the record.
Union further points out that the Department verified its
responses, including 1996 year-end adjustments, with its full
cooperation.
Department's Position. We agree with Union. Union provided the
information we requested as it became available, and the year-end
adjustments in question were duly verified. We see no need for the
application of facts available in this instance.
Comment 29. Petitioners note that in its deficiency questionnaire,
the Department requested that Union revise its submitted G&A and
interest expense calculations to make them consistent with the
Department's final results in the second administrative review, with
respect to the scrap revenue offset. Petitioners argue that Union
failed to do so, causing a critical inaccuracy in the Department's
analysis. Petitioners urge the Department to apply facts available and
to use the financial statement entries for ``Sales--Other'' and ``Non-
operating Income `` Miscellaneous'' as offsets to the cost of sales.
Union argues that to be consistent with the Department's
calculation of costs on a per-unit basis, a different, lower,
adjustment would be called for, but that, if the Department begins
adjusting the denominator for the cost of manufacturing, it must also
take into account the fact that the denominator includes an offset for
duty drawback, which unit costs do not include. Union suggests that
there is a rough balance between the scrap and drawback adjustments,
but that if both are made, the cost of manufacturing would decrease.
Department's Position. We agree in part with each party. We agree
with petitioners that Union failed to make the adjustments to the G&A
and interest expense calculations we requested. We agree with Union
that for consistency, all relevant factors must be duly reflected in
the revised expense ratios. For these final results, therefore, we have
used revised expense ratios that are consistent with the prior review
and which incorporate the relevant adjustments suggested by Union.
Comment 30. Petitioners urge the Department to increase Union's
submitted G&A expenses to take account of corporate overhead expenses
of DSM, as in the final results of the second review. In rebuttal,
Union argues that nothing in the record suggests that DSM provides
goods or services to Union, and that petitioners' argument should be
rejected.
Department's Position. We agree with petitioners. It is our
practice, as we stated in the final results of the prior reviews, and
as mentioned above in the Department's Position on Comment 26 in
connection with interest, to include a portion of the G&A incurred by
the parent company on behalf of the reporting entity. For these final
results, therefore, we allocated a portion of DSM's G&A to Union's G&A.
Respondents' Comments
Comments by Dongbu and Union
Comment 31. Dongbu and Union argue that the Department erred in
using the contract date, rather than the commercial invoice date, as
the date of sale for their U.S. sales. They base this argument on
several considerations. First, they argue that the Department's stated
rationale for using the contract date as the date of sale is
fallacious. In the preliminary results the Department stated:
The questionnaire we sent to the respondents on September 19, 1997
(sic) instructed them to report the date of invoice as the date of
sale; it also stated, however, that ``[t]he date of sale cannot
occur after the date of shipment.'' Because in these reviews the
date of shipment in many instances preceded the date of invoice, we
cannot use the date of invoice as the new regulations prescribe.
Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products
from Korea; Preliminary Results of Antidumping Duty Administrative
Review, 62 FR 47422, 47425 (September 9, 1997) (``Preliminary
Results''). Dongbu and Union state that this rationale is factually
incorrect. They state that for Dongbu there are no instances in which
shipment date preceded invoice date. As for Union, it acknowledges that
only three line items in the U.S. data base have a shipment date prior
to the invoice date, but state that this reporting was a trivial data
input error which the Department should ignore. Furthermore, it states
that these three line items all pertain to a single shipment, and that
the reported shipment date preceded the invoice date by only one day.
Second, Dongbu and Union state that using the contract date as the
date of sale was inconsistent with the Department's regulations and
recent case law, citing 19 CFR Sec. 351.401(i):
In identifying the date of sale of the subject merchandise or
foreign like product, the Secretary normally will use the date of
invoice, as recorded in the exporter or producer's records kept in
the ordinary course of business. However, the Secretary may use a
date other than the date of invoice if the Secretary is satisfied
that a different date better reflects the date on which the exporter
or producer establishes the material terms of sale.
Dongbu and Union argue that the invoice date is presumptively the date
of sale, and that exceptions to this presumption must be narrowly
drawn. Furthermore, they argue that the preamble to the regulations
makes explicit the Department's intent to restrict the exceptions to
the presumption when it says that the regulations put parties ``on
notice'' that ``in the absence of information to the contrary, the
Department will use date of invoice as the date of sale.'' Final Rules
at 27349.
Furthermore, they argue that recent case law demonstrates the
Department's intention to restrict the exceptions to the presumption.
As an example, they cite Stainless Steel Wire Rod from India; Final
Results of New Shipper Antidumping Review, 62 FR 38976 (July 21, 1997)
(``Wire Rod from India''), in which the Department rejected a
petitioner's argument that the Department should use the purchase order
date, rather than the invoice date, as the date of sale. There the
petitioner based his argument on the allegation that there was too long
an interval--presumably several months--between the purchase order date
and the invoice date. However, the Department, citing its proposed
regulations, stated that alternatives to invoice date are acceptable
where there are long-term contracts or where there is an
``exceptionally long lag time between date of invoice and shipment
date.'' See Wire Rod from India at 38979. In Wire Rod from India,
however, the Department noted that there were no long-term contracts
and the lag between purchases and invoices during the period of review
is not considered exceptionally long. Dongbu and Union note, however,
that if in this instance the Department uses the contract date as the
date of sale, there is a much longer lag between the sale date and
invoice date.
As a further demonstration of recent Departmental practice, Dongbu
and Union cite to Seamless Pipe from Germany; Preliminary Results of
Antidumping Duty Administrative Review, 62 FR 47446 (September 9,
[[Page 13194]]
1997) (``Seamless Pipe''). There the Department rejected a respondent's
use of the date of invoice as the date of sale in the home market and
the ``date of order confirmation'' as the date of sale in the U.S.
market. Instead, the Department used the shipment date and stated that
``[s]ince there can be several months between order confirmation and
shipment, using shipment date in both markets puts home market and U.S.
sales on the same basis for date of sale.'' Dongbu and Union argue that
the Department's date of sale determination in the preliminary results
of this review cannot be reconciled with its determination in Seamless
Pipe because there it used the shipment date as the date of sale in the
home market and the contract date as the date of sale in the U.S.
market, and thus placed home market and U.S. sales on entirely
different bases.
Third, Dongbu and Union argue that the Department's determination
to use contract date as the date of sale is inconsistent with its
determination to use date of shipment as the date of sale for POSCO.
They argue there is no apparent justification for treating Union and
Dongbu differently from POSCO. Both Union and POSCO have a shared sales
channel. They argue that the Department has not articulated any reason
that the contract should be used as the date of sale for Union, but
that the shipment date should be used as the date of sale for POSCO.
Fourth, Dongbu and Union argue that the Department's determination
with respect to Union in this review is inconsistent with its
determination in the first administrative review of this order. There
the Department determined that it was inappropriate to use the date of
contract as the date of sale, and instead used the date of shipment,
basing its decision on the fact that quantities changed between order
and shipment. Moreover, Dongbu and Union note that unlike this review,
the Department in the first review had stated no preference for using
invoice date as date of sale.
For all of these reasons Dongbu and Union state that the Department
should use the invoice date as the date of sale. For those limited
instances in which the date of shipment preceded the date of invoice,
they argue, the Department should use shipment date as the date of
sale, as this most clearly implements the Department's narrowly
construed exceptions to the invoice date preference.
Petitioners argue that the Department was correct in using the
contract date as the date of sale for both Union and Dongbu.
They argue, first, that Dongbu and Union misinterpreted the
Department's statement in the preliminary results notice (cited above)
that there were many instances in which the date of shipment preceded
the date of invoice. Petitioners claim that this statement referred
not, as Dongbu and Union believe, to the date of invoice between Dongbu
and Union and their U.S. affiliates, but between their U.S. affiliates
and their U.S. customers. Thus, petitioners argue that Dongbu's and
Union's comments regarding the lag time between contract dates and
invoice dates are inapposite.
Second, petitioners argue that the proposed regulations give the
Department the latitude to use a date other than the invoice date as
the date of sale. The proposed regulations state that the invoice date
``may not be appropriate in some circumstances'' for use as the date of
sale. See Notice of Proposed Rulemaking and Request for Public Comment,
61 FR 7308, 7330 (February 27, 1996) (``Proposed Regulations'').
Petitioners argue that one such circumstance would be where the
potential for manipulation exists; that potential, they argue, exists
where, as here, the invoices are between affiliated parties. Indeed,
given the Department's traditional scrutiny of affiliated-party
transactions, petitioners argue, it is not unreasonable to assume that
the preference stated in the Proposed Regulations for using the invoice
date as the date of sale applies only to invoices between unaffiliated
parties.
Third, petitioners argue that reliance on Dongbu's reported date of
invoice would be particularly unwise. The Department's verification
report, petitioners argue, indicates that the commercial invoice from
Dongbu Steel to Dongbu Corporation (which Dongbu reported as its date
of sale) is not a formal accounting record, but is prepared for purely
collateral purposes, such as securing payment on letter of credit
sales. This invoice, therefore, is not corroborated by reference to
unaffiliated parties or even by reference to Dongbu Steel's own
internal accounting records. Thus, petitioners argue, the date
reflected on this invoice cannot be verified from Dongbu's accounting
records, and does not meet the Department's verification requirements.
Fourth, petitioners argue that the Department should reject, with
respect to Dongbu, Dongbu's and Union's proposal that the Department
use the shipment date as the date of sale if it refuses to use the
invoice date as the date of sale. Petitioners argue that because Dongbu
reported the bill of lading date as the date of shipment, and not the
date of shipment from its manufacturing plant, the reported shipment
date is subsequent to the invoice date, which even Dongbu acknowledged.
Therefore, petitioners argue, the Department cannot use it as the date
of sale. Thus, with respect to Dongbu, petitioners argue that there was
no other date on the record that the Department could use as the date
of sale other than the contract date.
Fifth, petitioners note that the Department's determination
regarding the correct date of sale is consistent with its determination
in the most recently completed review of this order. See Certain Cold-
Rolled and Corrosion-Resistant Carbon Steel Flat Products from Korea;
Preliminary Results of Antidumping Duty Administrative Review, 61 FR
51882, 51885 (October 4, 1996).
Department's Position. We agree with Dongbu and Union that we
should use the invoice date as the date of sale. While petitioners are
correct that the Proposed Regulations give the Department the latitude
to use a date other than the date of invoice as the date of sale,
Dongbu and Union are also correct that our current practice with
respect to the selection of the date of sale adheres to the our
regulations and recent case law. Our current practice, in a nutshell,
is to use the date of invoice as the date of sale unless there is a
compelling reason to do otherwise. The reason underlying this
preference is that typically the material terms of sale are established
on that date. See 19 CFR 351.401(i).
In these cases, there is no record evidence indicating that a date
other than the invoice date is the date after which the essential terms
of the sale could not be changed. Moreover, the fact that Dongbu's
reported invoice date is not a ``formal accounting record'' does not,
contrary to petitioners'' argument, make it unverifiable. We are not
using the date of invoice between affiliated parties, but rather the
date of invoice to the first unaffiliated purchaser in the United
States, as the date of sale. In light of the foregoing, after
reconsidering our use of the contract date as the date of sale in the
preliminary results, we now find no compelling reason to deviate, in
these cases, from the Department's current practice of using the
invoice date as the date of sale.
Comments by Dongbu
Comment 32. Dongbu argues that the Department erred in determining
that one of its U.S. sales was a CEP transaction rather than an EP
[[Page 13195]]
transaction. The sale at issue is one in which the U.S. customer who
ordered the material canceled the purchase while the material was on
the water en route from Korea to the United States. Dongbu subsequently
resold the material to another customer (for a discount) after it
entered U.S. customs territory. Between the time of its arrival and its
subsequent resale, DBLA incurred warehousing and demurrage charges on
this shipment.
Dongbu argues that for two reasons the Department should classify
this sale as an EP sale for the final results. First, it argues that
information gathered at verification conclusively demonstrates that
Dongbu (and not DBLA) bore the cost of all the warehousing and
demurrage charges and the discount, and was thus ultimately responsible
for the disposition of the merchandise.
Second, Dongbu argues that the sale was not in Dongbu's normal
business channel. Thus, classifying this sale as a CEP sale, Dongbu
argues, is inconsistent with Seamless Pipe in which the Department
considered the role that unusual transactions should play in
determining whether an exporter sells on an EP or CEP basis. In
deciding the proper classification, the Department examined the four
criteria consistently applied in making this determination. The first
two criteria, and the ones relevant to this discussion, Dongbu states,
are: (1) Whether the merchandise is shipped directly to the
unaffiliated buyer without being introduced into the affiliated selling
affiliate's inventory, and (2) whether this procedure is the customary
sales channel between the parties. In Seamless Pipe the Department
found that application of these criteria was an insufficient basis to
classify sales as CEP sales. The Department stated:
In applying the first two criteria to the present review, we found
that for the majority of sales, the merchandise was shipped directly
to the unaffiliated U.S. customer without being introduced into
MPS's [the respondent's affiliated sales agent's] inventory. We
found that MPS occasionally buys for its own inventory, but we did
not find any subject merchandise purchased for inventory during the
POR. In addition, several sales were warehoused upon arrival in the
U.S. when the original customer canceled its order * * *. The
Department verified that the terms of sale during the POR were CIF
duty paid to a port of entry near the customer's plant, and that MPS
did not take physical possession of the shipment, except in the
unusual instance described above.
Seamless Pipe at 47448. In Seamless Pipe the Department ultimately
determined, based on the third and fourth criteria, that the sales were
all CEP. However, Dongbu states that what this citation shows is that
the existence of a few unusual transactions was not sufficient evidence
to classify the U.S. sales as CEP sales. It argues that the decision in
Seamless Pipe to consider the way the majority of sales were made is a
much more reasonable application of the criteria, particularly
considering that the ultimate responsibility for the sale was borne by
Dongbu.
Petitioners argue that the Department correctly classified the sale
at issue as a CEP sale. They cite the statutory definitions of EP and
CEP sales:
[T]he term ``export price'' means the price at which the subject
merchandise is first sold (or agreed to be sold) before the date of
importation * * *. Section 772(a) of the Act.
[T]he term ``constructed export price'' means the price at which the
subject merchandise is first sold (or agreed to be sold) in the
United States before or after the date of importation. Section
772(b) of the Act.
Petitioners argue that Dongbu's argument ignores these statutory
definitions under which all sales made after importation must be
classified as CEP transactions. They argue further that even if it were
appropriate for the Department to consider selling functions in making
this determination, the sale would still be a CEP sale because all
relevant sales activity occurred in the United States.
Finally, petitioners argue that Seamless Pipe is inapposite. There,
they state, the vast majority of U.S. sales were sold prior to
importation, and the Department thus applied its three-prong test to
determine whether those sales were properly classified as EP or CEP
transactions. There is no indication in the notice, petitioners state,
that the Department applied that test to those sales which had been
sold after importation. Rather, in its discussion of the three-prong
test, the Department noted that the only incidences of warehousing
involved those sales which had been resold due to customer
cancellations.
Department's Position. We disagree with Dongbu. As indicated above
in the Department's response to Comment 5, we have treated all of
Dongbu's U.S. sales as CEP sales in these final results. Therefore,
Dongbu's argument that the sale at issue was an ``unusual transaction''
is moot. Furthermore, the statutory definition of a CEP sale requires
that the sale at issue be classified as a CEP sale because it was sold
after importation into U.S. customs territory. That it was Dongbu,
rather than Dongbu U.S.A., that bore the costs of the U.S. warehousing
and demurrage is not determinative.
Comments by POSCO
Comment 33. The POSCO Group argues that in its preliminary results
the Department erroneously disallowed an adjustment for post-sale
warehousing expenses incurred in connection with certain sales made
through the Pohang Service Center (``PSC''). The POSCO Group claims
that the Department verified the calculation of this allocated expense
in its review of a pre-selected home market sale, and the Korea
verification report does not indicate that any of the data reviewed
with respect to this sale, including that relating to post-sale
warehousing expenses, was not verified or otherwise raised concerns for
the Department.
Department's Position. As noted by the POSCO Group, pages 20 and 21
of Korea verification Exhibit 29 contain information detailing how a
calculation of the expense in question was made. Neither the
information in this exhibit, nor the Department's writeup of its review
of this transaction in its verification report, indicates whether the
values and per/ton calculated amounts are based on POSCO's payment to
PSC, or, alternatively, on the expenses actually incurred by PSC. As
noted by the Department in its September 2, 1997, preliminary analysis
memorandum at 6, ``it is not clear from the record what that amount
represents.'' Furthermore, the Department had not been made aware of
even the basic information relating to these alleged expenses prior to
verification, although the Department's original questionnaire asked
for a complete explanation of all parties involved in the provision or
receipt of post-sale warehousing with respect to the respondent's home
market sales, as well as other information pertaining to such services.
By introducing this topic for the first time during the Department's
review of the pre-selected sale in question, the POSCO Group prevented
the Department from conducting a timely inquiry into the nature of
these transactions, including whether or not the warehousing services
allegedly provided by PSC were at arm's length. Consequently, we are
continuing to disallow this adjustment for the final results.
Comment 34. The POSCO Group argues that the Department should not
have disallowed a portion of reported post-sale warehousing provided
for certain home market sales by a company in which POSCO owns a small
stake. The POSCO Group argues that there is no evidence on the record
to support the Department's apparent assumption that the expense was
not made at arm's
[[Page 13196]]
length, and that the Department should correct its calculation of post-
sale warehousing by eliminating the reduction to that expense utilized
in the preliminary review results for the transactions in question.
Petitioners argue that the absence of information on the record is
due to the POSCO Group's failure to supply information demonstrating
that the transaction was at arm's length, despite the fact that the
Department had made a similar downward adjustment to this expense in
the previous review. Petitioners argue that it is the POSCO Group's
burden to demonstrate the arm's-length nature of such transactions, and
consequently the Department should maintain the adjustment that it made
in its preliminary results.
Department's Position. We agree with petitioners. The record does
not demonstrate the arm's-length nature of a certain part of the
reported post-sale warehousing expense for transactions involving the
affiliated party in question. In our preliminary results, we reduced
this reported expense by only a small portion of the part of the
expense associated with the affiliated party, to reflect POSCO's
ownership stake in that company. We have continued to make this
adjustment in our final results. See Preliminary Results Analysis
Memorandum for the POSCO Group, September 2, 1997, at 6.
Comment 35. The POSCO Group argues that it reported all movement
expenses associated with U.S. sales, and that the Department should not
deduct from U.S. price any portion of the markups charged by AKO and
BUS. The POSCO group states that these deductions contradict the plain
language of the statute and the Department's uniform practice in prior
cases, including all prior steel cases, and that, if accepted, the
Department's reasoning reflects a major shift in practice that would
have to be applied in all instances in cases where sales are made
through affiliated parties, including Union and Dongbu.
The POSCO Group argues that the Department's deduction of a portion
of the markups charged by AKO and BUS constitutes a reduction of the
price of EP sales for profit, which is contrary to the law, and if
adopted would impact the vast bulk of the Department's dumping cases.
The POSCO Group states that the law only allows for a deduction for
profit from CEP. The POSCO Group states that it is not aware of a
single other instance involving the steel industry or any other
industry in which the Department deducted profit earned by affiliated
parties on the purchase and resale of subject merchandise.
The POSCO Group argues that the Department's long-standing policy
concerning EP sales is to utilize the price paid by the first
unaffiliated U.S. customer, and to deduct only direct selling expenses
from that price, and that the Department disregards transactions
between affiliated parties, such as between POCOS and AKO and BUS, when
calculating EP. The POSCO Group cites as an example Certain Iron
Construction Castings from Canada: Final Determination of Sales at Less
Than Fair Value, 51 FR 2412 (January 16, 1986) (``Castings''), where
the Department rejected petitioners' request that a markup earned by a
related U.S. distributor be deducted from purchase (now export) price.
The POSCO Group notes that AKO and BUS perform no movement services
themselves but pay unaffiliated customs brokers to perform the services
at issue. The POSCO Group states that in the final results of the
second review and the preliminary decision in this review, the
Department refused to deduct any portion of markup earned by U.S.
affiliates for Dongbu or Union sales because those affiliates,
likewise, did not provide movement services themselves but utilized
customs brokers or other unaffiliated parties to perform movement
services. The POSCO Group notes that in the final results of the second
administrative reviews the Department determined that Union's U.S.
affiliate did not directly perform the brokerage and handling services
but rather employed brokers to do so, that all U.S. brokerage and
handling expenses incurred by the affiliate on behalf of Union were
fully reported, and that there is no legal basis for deducting an
amount for U.S. profit on these sales because U.S. profit deductions
are only allowed in connection with CEP sales, not EP sales. See Second
Review Final Results at 18441. The POSCO Group states that for Dongbu
the Department noted that the cost of arranging for U.S. brokerage and
handling, U.S. Customs clearance, payment of customs duties, and for
being the importer of record, are reflected in the brokerage fees paid
by the U.S. affiliate, Dongbu USA.
The POSCO Group states that BUS paid the customs broker a fixed fee
that covers the customs brokers' administrative and overhead costs
incurred in arranging for and paying those expenses, and that applying
a markup to those expenses to allegedly reflect BUS's overhead in
effect improperly double counts those overhead expenses because the
flat fee already paid to the customs broker includes any overhead and
general expenses incurred in arranging for and paying for those
expenses. Furthermore, the POSCO Group states that the Department
deducted a portion of the markup purportedly relating to inland freight
costs, and that this was factually incorrect because BUS in fact
performed no U.S. inland freight services, nor did it even arrange for
those services.
The POSCO Group argues that the Department's purported
justification for the deduction is incorrect because the Department
never asked for information relating to other supposed expenses
incurred by AKO and BUS that the Department is associating with
movement services. The POSCO Group indicates that the Department
refused such information at verification that allegedly showed that no
adjustment was necessary because the purported expenses, like those
incurred by POSTRADE and POSAM in relation to U.S. sales, were de
minimis.
Similarly, the POSCO Group argues that the Department's apparent
reasoning that AKO's entire markup should be deducted because AKO only
performs movement services is incorrect because AKO performs no
movement services. The POSCO Group states that AKO performed the same
services and played the same role for POCOS as POSTRADE did for POSCO.
The POSCO Group alleges that the Department verified that POSTRADE
incurs no additional expenses for movement services, and that the
Department as a result determined that POSTRADE's markup should not be
deducted, citing the Department's statement in its preliminary analysis
memorandum that POSTRADE and POSAM ``incurred virtually no additional
expenses as a result of the services in question.'' Furthermore, the
POSCO Group asserts that there is no information on the record
contradicting its assertion in its Section C supplemental questionnaire
response at 25 that AKO was not involved in any activities associated
with the movement of subject merchandise to POCOS's U.S. customers, but
rather that AKO only helps generally to facilitate communications
between POCOS and the U.S. customers, transferring documents between
BUS and POCOS, and that AKO took title to the merchandise for U.S.
sales and relinquished it in back-to-back transactions by issuing
invoices to BUS. Therefore, the POSCO Group concludes, there is no
rationale for the Department's deduction of the markup earned by AKO.
The POSCO Group argues that the Department's reasoning that AKO's
and BUS's markups should be deducted because they are only indirectly
[[Page 13197]]
affiliated with POCOS, while POSTRADE and POSAM are wholly-owned by
POSCO, creates an artificial distinction between wholly-owned and
affiliated firms that has no legal or factual basis. The POSCO Group
also states that the Department made no such distinction for indirect
affiliation for Union in either the final results of the second
administrative reviews or in the preliminary results of these reviews,
choosing not to make any adjustment for markups earned by its U.S.
affiliate. The POSCO Group states that there is no basis in the law for
the notion that profits should be deducted from ``indirectly''
affiliated parties, whereas they should not be deducted for
transactions between wholly-owned parties. The POSCO Group claims that
if this rationale is accepted, the Department would need to create an
entirely new methodology for something called ``indirectly affiliated''
parties, a distinction which the statute does not make. The POSCO Group
states that two parties either are or are not affiliated, and the
``degree'' of affiliation is irrelevant to the dumping analysis. The
POSCO Group claims that the Department's decision in Certain Internal
Combustion Industrial Forklift Trucks from Japan; Final Results of
Antidumping Duty Administrative Review, 57 FR 3167, 3179 (January 28,
1992) (``Forklifts'') to deduct the markups made by an affiliated
trading company was due to the fact that the markups represented actual
expenses relating to movement of the subject merchandise, a situation
which the POSCO Group asserts is not the case in these proceedings.
The POSCO Group states that the Department uniformly looks at the
costs to the collapsed entity consisting of affiliated parties rather
than to the transfer prices between affiliated parties. For example,
the Department routinely disregards commissions between affiliated
parties because it considers such commissions to be mere intra-
corporate transfers of funds. See Final Determination of Sales at Less
Than Fair Value: Fresh Cut Roses from Colombia, 60 FR 6980 (February 6,
1995) (``Roses''). The POSCO Group states that in Timken v. United
States, 630 F.Supp. 1327, 1342 (CIT 1986) (``Timken''), the CIT held
that the statutory deduction for commissions did not require the
Department to also deduct the profit earned by a U.S. subsidiary. The
POSCO Group states that the Department's decision to deduct the entire
markup earned by AKO and a portion of the markup earned by BUS flies in
the face of this logic and constitutes the deduction of profit earned
by related parties on EP sales.
In any case, the POSCO Group argues that the Department's resort to
an adverse facts available calculation based upon a third party's data
is highly inappropriate because it did not request such information for
AKO and BUS, that it refused such information when it was supplied at
verification, and because the Department verified that the alleged
``unreported movement expenses'' for POSAM and POSTRADE were de
minimis, and therefore should have used this information as the most
accurate and reasonable ``facts available'' for the AKO/BUS purported
``unreported movement expenses.'' Furthermore, the POSCO Group states
that the Department, in utilizing information from Dongbu Express as
the basis for the adjustment for BUS, erred in that BUS, unlike Dongbu
Express, is not a freight forwarder. The POSCO Group asserts that
Dongbu Express actually performs transportation services, while BUS
does not.
Furthermore, in applying the Dongbu Express data to BUS, the POSCO
Group asserts that the Department utilized an inappropriate
methodology, and suggests several alternatives that utilize Dongbu
Express public information from the record. Finally, the POSCO Group
asserts that the Department, in applying the Dongbu Express data to
BUS, utilized incorrect calculations, and presents what it
characterizes as more reasonable alternative applications utilizing
Dongbu Express public information from the record.
Petitioners retort that the Department properly deducted from U.S.
price the markups charged by AKO and BUS for their role in arranging
for the provision of movement-related services. Petitioners cite Final
Determination of Sales at Less Than Fair Value: Certain Internal-
Combustion, Industrial Forklift Trucks from Japan, 53 FR 12552 (April
15, 1988), and Second Review Final Results at 18433-18435, as
precedents for such a deduction from U.S. price. Furthermore,
petitioners note that the precedent was in fact established in the
first administrative reviews of these orders with respect to Dongbu
Express, a party affiliated with Dongbu Steel, for instances involving
home market sales of that respondent. Petitioners argue that the POSCO
Group is correct in its determination that the Department acted
inconsistently across respondents on this issue in its preliminary
results, but was wrong in its prescription for eliminating the
inconsistency. Petitioners indicate that this inconsistency should be
rectified not by dropping the adjustment for AKO and BUS, but by
deducting from U.S. prices the markups charged by all of the
respondents' Korean and U.S. affiliates to the extent that they can be
linked to movement-related services.
Petitioners argue that even if it is assumed that the affiliates in
question do not function as freight forwarders or customs brokers, they
do act as intermediaries between the producers and the independent
providers of movement-related services for U.S. sales. Contrary to
certain claims of the POSCO Group, petitioners state, these affiliates
do incur additional expenses and earn profit for performing this type
of liaison and coordination function pertaining to movement services.
Petitioners note that the Department previously has determined that
intermediaries between the respondent and independent providers of
movement-related services, such as Dongbu Express, incur expenses and
earn profits that constitute legitimate movement-related expenses.
Petitioners note that given that the affiliates of POSCO and of POCOS
serve as intermediaries in a manner substantially identical to that of
Dongbu Express, their markups charged for arranging for movement-
related services also are legitimate movement expenses that must be
included among the others for U.S. sales.
Petitioners state that the record establishes that the affiliated
Korean and U.S. trading companies do perform movement-related services
and incur expenses in the process in addition to what they are billed
by the independent providers of movement-related services. Petitioners
also state that it is clear that POSAM and BUS act as intermediaries
between POSCO and POCOS and the independent movement-related service
providers, and as such are integrally involved in the movement of
subject merchandise. Consequently, the POSCO Group's characterization
of the markups of the trading companies as solely intra-company profit
is incorrect, because they also capture actual expenses. Petitioners
argue that the record does not establish that the expenses incurred by
AKO and BUS in providing movement-related services were de minimis.
Regardless of the magnitude of those expenses, though, petitioners note
that the entire portion of the markup that can be attributed to such
services, including both profit and expenses, should be deducted from
U.S. price. The Department has included in its deduction from home
market price for Dongbu the entire payment to Dongbu Express,
reflecting both the amounts paid by Dongbu Express to independent
providers and its markup (which itself
[[Page 13198]]
includes additional Dongbu Express expenses and Dongbu Express profit).
Consequently, petitioners argue, the Department should deduct the
entire markup on movement-related services for POSAM, POSTRADE, AKO,
and BUS, as a proxy for the amount of markup that the respondent would
have to pay if it employed an independent party to arrange for
movement-related services.
Petitioners argue that the Department should deduct POSAM's markups
from POSCO's U.S. selling prices. Petitioners note that the Department,
in its preliminary results, concluded that the amount of actual
expenses incurred by POSAM in arranging for the provision of movement-
related services, after the elimination of ``internal transfers''
between POSAM and POSCO, was not sufficiently material to warrant the
calculation of an adjustment. Petitioners argue that this conclusion
apparently is based on POSCO's flawed calculation during verification
of the amount of actual expenses POSAM purportedly incurred in
arranging for movement-related services. Petitioners argue that POSCO
provided no explanation of how it determined the total expense pool
used in the calculation of POSAM's markup, and therefore the Department
should use POSAM's total SG&A as the appropriate basis for the
calculation. Petitioners also question as unsupported by the record the
percentage factor POSCO claimed at the Korea verification as the
appropriate basis for determining the portion of the total expense pool
to be attributed to the expenses in question. Finally, petitioners
question the POSCO Group's cited total quantity of steel used to
determine the per-ton expense, indicating that the quantity used was
significantly larger than the total quantity of subject merchandise
(cold-rolled and corrosion-resistant) reported in the databases.
The POSCO Group, responding to petitioners' arguments regarding the
POSAM markup, states that petitioners' arguments are moot because there
is no basis for the deduction of any markup for the affiliated parties
in question. Nevertheless, the POSCO Group argues that the portion of
the markup that constitutes an internal transfer cannot possibly be
deducted from U.S. price, and the POSCO Group asserts that POSAM did
not incur any movement expenses that it did not report in its tape
submission. The POSCO Group argues that even under the Department's
``stretched rationale,'' the only direct movement expenses even
theoretically at issue would be those de minimis telephone and fax
charges incurred by POSAM to contact customs brokers, and the
Department's Korea verification Exhibit 41, its Korea verification
report, and its preliminary analysis memorandum demonstrate these
expenses were in fact de minimis. The POSCO Group argues that
petitioners' challenge to the data in verification Exhibit 41 is based
on the faulty assumption that the costs indicated in that exhibit
should be compared to POSAM's overall SG&A expenses, when sales of
subject merchandise account for only a small portion of POSAM's sales,
and petitioners' incorrect assumption that indirect expenses indicated
in verification Exhibit 41 should be relevant, when in fact the
Department is only concerned with direct expenses if it is trying to
estimate movement expenses. The POSCO Group says it obviously was not
able to segregate out telephone and fax charges relating solely to
imports of subject merchandise versus imports of all merchandise, so
the total pool of expenses is for imports of all merchandise, and the
corresponding quantity figures used in the calculation of the per-ton
expense are for all imports.
Department's Position. We examined at verification the actual
additional unreported movement expenses incurred by POSCO's affiliates
(e.g., expenses associated with telephone calls from POSAM to customs
brokers). Because the actual unreported movement expenses are
insignificant in relation to the prices of each respondent's
merchandise, we are making no special adjustment to U.S. price for
them. See section 777A(a)(2) of the Act. There is no evidence that
POCOS's affiliates had any substantive unreported movement expenses,
either. In any case, such unreported movement expenses for POSCO and
POCOS will be accounted for in the additional deductions made from U.S.
price resulting from our reclassification of all of the POSCO Group's
U.S. sales (except for those made to one customer, as also noted
earlier) as CEP sales, as such expenses are reflected in the trading
companies' SG&A expenses that we are using as a basis for estimating
the U.S. indirect selling expense variable.
With respect to the profit earned by those affiliates, we have
determined those profits should be disregarded as an internal transfer.
There is nothing unique about the affiliations between the
manufacturers and the trading companies that would warrant a departure
from this standard practice. Consistent with our practice in cases such
as Roses, for purposes of these final results we are treating the
profits earned by the affiliates as a result of these back-to-back
transactions as intracorporate transfers of funds, and are thus making
no adjustments to CEP to account for them.
Comment 36. The POSCO Group argues that the Department erred in
adjusting POSCO's reported cold-rolled costs for alleged discrepancies
in thickness. First, the POSCO Group states that its submitted costs
accurately reflect the Department's required thickness product
characteristic. POSCO's RPG system tracks products' thicknesses in
bands that overlap various Department model-match characteristic
thickness bands, and for instances where more than one RPG thickness
band crossed into a Department thickness band, the POSCO Group says it
reported costs reflecting each RPG thickness included in that
Department thickness band.
The POSCO Group asserts that the Department erred in its conclusion
that POSCO had been inconsistent in its application of this
methodology. The Department's assertion that the POSCO Group had failed
to include the costs of one RPG thickness band group of products in the
calculation of costs for a certain CONNUM (possessing a specific
Department thickness band) was based on the Department's failure to
take into account that while POSCO sells products and tracks cost data
on a nominal basis, the Department's thickness bands are specified in
the questionnaire in actual terms. The POSCO Group notes that exhibit
SD-12 of the March 3, 1997, supplemental submission indicates that the
RPG system is based on nominal thickness.
The POSCO Group also argues that the Department, even if it
persists in incorrectly characterizing the situation as a reporting
inconsistency, was not justified in applying an adverse adjustment to
the reported costs for the CONNUM in question, that the Department had
not requested the necessary information and cannot penalize a
respondent because it does not maintain its records in a manner in
which the Department would prefer, and that the Department had access
to data that would allow a less unreasonable adjustment.
Petitioners argue that the Department should make additional
adjustments to POSCO's submitted cost information consistent with its
sampling methodology. Petitioners argue that a large proportion of the
CONNUMs reviewed contained problems involving understatements of cost
to the POSCO Group's benefit. They cite, in addition to the example
noted by the Department in its preliminary results, an example where
the POSCO Group followed its
[[Page 13199]]
stated methodology so that a thicker, and hence probably a less costly,
RPG grouping that barely overlapped into a Department thickness
category was utilized in that calculation of costs for CONNUMs
possessing thicknesses in that Department thickness category band.
Because this is an indication that the problem may be pervasive,
petitioners argue, the Department should make additional adjustments to
CONNUMs exhibiting similar overlapping of RPG and Department thickness
categories for both cold-rolled and corrosion-resistant products.
The POSCO Group reiterates that petitioners, like the Department,
have failed to convert POSCO's nominal thickness information to an
actual-thickness basis. The POSCO Group also argues that the
petitioners have suggested that the POSCO Group should have altered its
reporting methodology for certain unspecified instances. The POSCO
Group argues that such an approach would have been subjective and would
undoubtedly have raised concerns precisely because it would be ripe for
manipulation. The POSCO Group argues that there is no evidence
supporting petitioners' observation that a thinner RPG is more
expensive to produce than a thicker RPG, and that the record
demonstrates that the differences in costs between individual RPGs may
not be due solely to differences in thickness. The POSCO Group argues
that there is no basis for such an adjustment to corrosion-resistant
CONNUMs either, and that there is no basis for any adverse adjustment
such as that suggested by petitioners.
Department's Position. We agree with the POSCO Group that in its
preliminary results the Department failed to account for the fact that
POSCO's thickness groupings are based upon nominal thickness, as was
noted in Exhibit SD-12 of the March 3, 1997, submission. When
conversions are made to account for this, it is clear that there was in
fact no discrepancy, and that the Department erred in making any
adjustment to the POSCO Group's costs with respect to the thickness of
cold-rolled merchandise. For the final results, we have removed the
programming language that adjusted the costs for the CONNUMs at issue.
The parties' other arguments, therefore, are moot.
Comment 37. The POSCO Group argues that the Department should
reduce POSCO's reported costs by the amount of the requested startup
adjustment for extraordinary costs associated with the startup phase of
a facility. The POSCO Group states that the statute requires the
Department to make an adjustment for startup operations where the
producer is using new production facilities or producing a new product
that requires substantial additional investment, and where production
levels are limited by technical factors associated with the initial
phase of commercial production.
The POSCO Group argues that a substantial investment was required
to increase significantly its capability of producing a certain range
of products. The POSCO Group claims that it has demonstrated it was
using new facilities and manufacturing new products at those facilities
during the POR, and as such POSCO met the first prerequisite for a
startup adjustment under the statute.
The POSCO Group argues that the second prerequisite, that
production levels during the POR were limited by technical factors
associated with the startup, was also fulfilled, as demonstrated by
data provided on the record. The POSCO Group asserts that POSCO's Korea
verification exhibit 37 indicates at 3 that production was limited
during the initial months so that the products would meet required
stringent quality standards before full production ensued. The POSCO
Group argues that it is clear that other factors unrelated to startup,
such as demand, business cycles, chronic production problems, or
seasonality do not account for the limited production quantities. It
argues that demand was consistently high, with POSCO's other lines
operating at full capacity and that production from the new line rose
steadily throughout the startup period. POSCO noted that it was clear
as of October 1996 that it had reached full capacity.
The POSCO Group states that the costs for products manufactured on
this line were allocated over only a very small amount of production,
and that this naturally resulted in abnormally high unit production
costs for the affected merchandise. The production from the facility
during the POR accounted for only a small percentage of total
production of the general type of product, but, the POSCO Group notes,
the Department requires that respondents provide a single weighted-
average CONNUM-specific cost, regardless of the facility; consequently,
the POSCO group states, it provided data showing the impact on the
CONNUM-specific cost. The POSCO Group asserts that based on facts
essentially identical to those in this case the Department recently
granted a startup adjustment. See Notice of Preliminary Determination
of Sales at Less Than Fair Value and Postponement of Final
Determination: Static Random Access Memory Semiconductors from Taiwan,
62 FR 51442, 51448 (October 1, 1997). The POSCO Group states that the
adjustment factors listed in Korea verification Exhibit 1 should be
used to reduce the reported costs.
Petitioners argue that the Department should reject the POSCO
Group's claim for a startup adjustment because, contrary to the POSCO
Group's assertions, it has not met the statutory requirements for
receiving such an adjustment, which are to demonstrate that it is using
new production facilities or producing a new product that requires
substantial additional investment, and that the production levels
associated with the startup are limited by technical factors associated
with the initial phase of commercial production. See section
773(f)(1)(C) of the Act.
Regarding the first prong, petitioners state that evidence on the
record clearly demonstrates that POSCO's purported ``startup''
operations do not constitute ``new production facilities,'' nor do they
result in production of a ``new product'' that requires substantial
additional investment. Petitioners note that the SAA at 836 defines
``new production facilities'' to include ``the substantially complete
retooling of an existing plant,'' and that ``[m]ere improvements to
existing products or ongoing improvements to existing facilities will
not qualify for a startup adjustment.'' Petitioners state that the
addition is simply of one line amidst others in the same facility, ``a
mere addition to an already existing facility,'' and that the POSCO
Group has not shown that the new line is comprised of different
machinery requiring different technicians or workers, or whether the
production process differs from that of other lines.
Petitioners characterize the expansion of capacity resulting from
the line as insufficient grounds for a startup adjustment, as the SAA
states at 836 that an expansion of the capacity of an existing
production line could be considered for a startup adjustment only if
the expansion constitutes such a major undertaking that it requires the
construction of a new facility, and that it results in a depression of
production levels below previous levels due to technical factors
associated with the initial phase of commercial production of the
expanded facilities. The petitioners state that no new facility was
constructed, and that the POSCO Group admits that overall production
levels did not decrease during the POR.
[[Page 13200]]
Petitioners argue that the POSCO Group also failed to demonstrate
that its purported ``startup'' operations resulted in production of a
``new product.'' Petitioners note that the SAA at 836 defines a ``new
product'' to include ``one requiring substantial additional investment,
including products which, though sold under an existing nameplate,
involve the complete revamping or redesign of the product.''
Petitioners state that while the POSCO Group claims that the new line
produces or is capable of producing products with different physical
characteristics for a specific class of end-users, the POSCO Group
admitted at verification that its other lines could also be used to
manufacture products with those same characteristics and for the same
end-users. Petitioners state that the POSCO's Group's reported sales
databases indicate that it produced substantial quantities of products
with such physical characteristics prior to the operation of the new
line. Petitioners also note that POSCO's product brochures pre-dating
the new line explicitly indicate that the products with the
characteristics in question were previously available, and thus should
not be considered ``new'' to respondent's production. Furthermore,
petitioners argue that the magnitude of the investment in the new line,
relative to that of POSCO's total value of property, plant, and
equipment, was not a ``substantial additional investment,'' as is
required by the SAA in order for the startup adjustment to be
considered in the context of a ``new product.'' Finally, petitioners
argue that the SAA at 836 indicates that improved or smaller versions
of a product will not render the product a ``new product,'' and that
the products to which the POSCO Group refers would be disqualified on
this basis.
Regarding the second prong, petitioners state that evidence on the
record clearly demonstrates that POSCO's production levels were not
affected by its ``startup'' operations, and that the POSCO Group failed
to demonstrate that ``technical factors'' negatively affected
production. As noted earlier, petitioners argued that production levels
were not depressed, and in fact they note that information on the
record demonstrates that the difference between the monthly average
production for the startup period as defined by the POSCO Group and the
monthly production level for the line in question at the end of this
period only represents a very small percentage of total estimated
production of corrosion-resistant products. With regard to the
influence of technical factors upon production levels, petitioners
argue that the POSCO Group, in its own case brief, acknowledged that
POSCO experienced no chronic production difficulties, and that it
experienced no significant technical difficulties preventing it from
bringing the line in question to commercial production levels in
relatively short order.
Petitioners state that the SAA provides that to the extent
necessary the Department would consider other factors, such as
historical data reflecting producers' experiences in producing the same
or similar products, and whether factors unrelated to startup
operations may have affected the volume of production, such as market
conditions of supply and demand, or seasonality or business cycles. SAA
at 836-7. However, petitioners argue, the POSCO Group provided no such
support, but rather only unsupported claims. For example, petitioners
challenge the POSCO Group's assertion in its case brief that POSCO's
substantial experience in starting up similar operations is relevant in
helping explain what might be characterized as low initial production
levels in this instance.
Petitioners argue that if a startup adjustment is granted, it
cannot cover a period beyond May 1996, given the reported production
levels for June 1996 and the POSCO Group's statement in its March 3,
1997, Supplemental Section D response at 31 that the company completed
test production at the end of May 1996 and followed this testing period
with commercial production. Petitioners also argue that any such
adjustment would need to be limited to the specific operation in
question, and that, because such information is not available on the
record, the actual amounts of the adjustment cannot be calculated.
Department's Position. We agree with petitioners that the POSCO
Group failed to demonstrate that it is entitled to a startup adjustment
for the line in question. The POSCO Group's assertions regarding the
output of the line constituting a ``new product'' are contradicted by
the record. For example, the POSCO Group's databases and product
brochures indicate that the POSCO Group manufactured products such as
those produced from the new equipment prior to its installation. The
POSCO Group indicated at verification ``that the new line is capable of
processing thinner and narrower merchandise than its other galvanizing
lines, and that the intended uses of steel produced on the new line
were for home appliances'' produced by companies such as two Korean
manufacturers, but the POSCO Group conceded upon later questioning
``that the galvanized steel produced on its other lines could also be
used for home appliances.'' June 27, 1997, Korea verification report at
2. The information noted at verification also indicates that the
product range of the line in question is basically comparable to that
of other POSCO Group lines with respect to dimensions.
If the products in question were truly new, as the POSCO Group has
argued, assertions regarding the consistently high demand for POSCO's
other products and its high capacity utilization at other lines would
be irrelevant with respect to the second prong of the startup cost
test, which requires that the production levels were limited by
technical factors. The demand and supply associated with POSCO's other
galvanizing lines could be unrelated to the supposedly thinner products
being manufactured for appliance manufacturers on the new line.
Furthermore, if the products were in fact new, there is no reason for
distributing an adjustment concerning products in CONNUMs allegedly
targeted to Korean appliance manufacturers to all galvanized products,
including products in other CONNUMs purchased by U.S. customers. As
noted by petitioners, such line-specific information is not available
on the record.
In addition, it is not clear that the new line in question
constitutes a new facility, as required by the new startup adjustment
provision. The line is one of many producing merchandise similar to
that manufactured on numerous other lines by POSCO and POCOS. The POSCO
Group provides no convincing evidence that the new line should be
considered ``new production facilities'' or ``the substantially
complete retooling of an existing plant.''
The POSCO Group's assertion that it met both prongs of the
requirement fails on other grounds. Even accepting that the general
demand for POSCO galvanized merchandise, relative to overall capacity,
was high, the POSCO Group has not demonstrated that production levels
on the new line were limited by technical factors. At verification in
Korea, the Department ``requested additional information pertaining to
the claimed startup adjustment'' (June 27, 1997, Korea verification
report at 2), and the POSCO Group provided what is contained in Korea
verification Exhibit 37. The POSCO Group is incorrect in its assertion
that that exhibit indicates at 3 that production was limited during the
[[Page 13201]]
initial months so that the products would meet required stringent
quality standards before full production ensued. That page provides no
information detailing the reasons for the variations in monthly output.
Furthermore, even assuming that production levels were limited by
technical factors (as also noted by petitioners), it is not clear from
the record when commercial production levels were reached.
Because the POSCO Group has not met both conditions for being
granted a startup adjustment, we have not made such an adjustment in
the final results.
Comment 38. The POSCO Group argues that the Department erred when
it adjusted POCOS's reported costs for quality. The POSCO Group argues
that POCOS's cost accounting system does not track the quality of the
input, so an adjustment was not warranted. The POSCO Group argues that,
when reporting costs, the Department requires that companies rely on
the actual costs as recorded in the normal accounting system if that
system is in accordance with the foreign country's GAAP and it is clear
that the figures do not distort the dumping calculations. See
Ferrosilicon from Brazil; Final Results of Antidumping Duty
Administrative Review, 61 FR 59407, 59409 (November 22, 1996)
(``Ferrosilicon''). The POSCO Group notes that in many cases where
respondents have not relied on their normal accounting system to report
costs, the Department has applied adverse facts available. See Certain
Cut-to-Length Carbon Steel Plate from Sweden; Preliminary Results of
Antidumping Duty Administrative Review, 61 FR 51898, 51899 (October 4,
1996) (``Swedish Plate''). The POSCO Group argues that the Department
has only adjusted a respondent's reported costs which are based on its
normal accounting system where the Department determined that those
normal practices resulted in an unreasonable allocation of production
costs. Semiconductors at 15472. The POSCO Group argues that in cases
where a company has been unable to provide costs at the level of detail
requested by the Department, the Department has accepted the reported
costs where it was satisfied that those costs nonetheless reasonably
reflected the actual costs of producing the subject merchandise during
the POR. 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, 61 FR 13815, 13817 (March 28,
1996). The POSCO Group characterized cost differences between
commercial, drawing, and deep drawing products as ones ``perceived'' by
the Department. Finally, based on a reference elsewhere to the
Department's preliminary adjustment for coating weight costs, the POSCO
Group seemingly characterized the adjustments made by the Department
for quality as the use of adverse facts available.
Petitioners argue that the facts in these reviews for this issue
are identical to those in the second administrative reviews, where the
Department made a similar adjustment to the POSCO Group's reported
costs. Petitioners argue that the adjustment in question is not
adverse, though the Department would have been justified in making the
adjustment based upon adverse facts available because the POSCO Group
did not provide product-specific cost information as requested by the
Department and, in not doing so, it did not act to the best of its
ability to comply with the Department's request for information. See
section 776(b) of the Act.
Petitioners' argue that the POSCO Group's reference to Ferrosilicon
is inapposite because the Department's decision to use the respondent's
reported costs in that case was based upon the conclusion that the
figures did not distort the dumping calculations, which clearly is not
so in this case. Petitioners argue that submitted cost data for POSCO,
which accounts for quality differences, suggest that failure to account
for quality differences may lead to significant understatement of
certain products' costs. Petitioners state that the POSCO Group's
reference to Swedish Plate is also inapposite, because the Department
resorted to facts available in that case not because the respondent
failed to rely on its normal cost accounting system or developed a new
cost system just for purposes of reporting, but rather ``[b]ecause the
company was unable to reconcile the submitted cost data to its normal
accounting books and records.'' Id. at 51899.
Furthermore, petitioners argue that the Department's use of facts
available in Certain Hot-Rolled Carbon Steel Flat Products, Certain
Cold-Rolled Carbon Steel Flat Products, Certain Corrosion-Resistant
Carbon Steel Flat Products, and Certain Cut-to-Length Carbon Steel
Plate from Brazil, 58 FR 37091 (July 9, 1993) (``Flat-Rolled Steel from
Brazil'') supports the Department's preliminary decision in these
reviews. In the Brazilian case, petitioners note, the Department found
that the respondent had improperly aggregated its production costs
based on certain product characteristics, and submitted production
costs which included the average cost of extras, with the result that,
according to the Department, the respondent's submitted costs, as
averaged over several different products, ``did not appropriately
specify the cost of individual extras, as required by the Department.''
Id. at 37097.
Finally, petitioners note that if POCOS is selling products with
different quality characteristics, it presumably would take this fact
into account in pricing its products.
Department's Position. The Department has relied upon POCOS's
normal accounting system, except to the extent that it determined that
doing so would result in an unreasonable allocation of production costs
and a possible distortion of dumping margins. The apparent inability of
POCOS to distinguish costs on the basis of quality indicates that its
reported costs do not reflect the actual costs of producing the subject
merchandise at the level of detail desired by the Department. The
quality characteristic is relatively high in the Department's model-
matching hierarchy, and the POSCO Group companies distinguish between
qualities in their selling practices. The presence of non-trivial
differences between costs of CONNUMs produced by POSCO that differ in
terms of the Department's hierarchy only for quality supports the
contention that this is a characteristic for which differences should
be reflected in costs, and the Department's approach in Ferrosilicon
would not be appropriate here.
As noted in the Department's September 2, 1997, preliminary
analysis memorandum at 7, the adjustment made to the costs for POCOS
commercial, drawing, and deep-drawing qualities reflected a methodology
comparable to that used in the final results of the second
administrative reviews. At no time during these reviews did the POSCO
Group suggest an alternative methodology, even though the Department's
questionnaire indicated that the POSCO Group should report a single
weighted-average cost for each unique product as represented by a
specific CONNUM. However, because POCOS does not track costs based on
quality, and because the Department did not insist that the POSCO Group
devise a methodology to estimate differences in POCOS costs for
quality, the use of adverse facts available, such as that used in
Swedish Plate and in Flat-Rolled Steel from Brazil, would not be
appropriate. The non-adverse nature of the adjustment the Department
made in its preliminary results is demonstrated by the fact that the
Department utilized data from POSCO CONNUMs that were chosen based on
their aggregate
[[Page 13202]]
production quantity, rather than on the magnitude of the differences in
cost, and upon the fact that the methodology utilized resulted in the
costs of some CONNUMs being decreased, while the costs of others were
increased. Id. at 8. Furthermore, the Department's use of POSCO data to
adjust the costs of POCOS production for quality is reasonable because
the Department has collapsed these companies. The POSCO Group, in fact,
urged the Department to base POCOS's substrate input costs upon POSCO's
actual costs of producing that input, and the use of POSCO's costs as a
basis for adjusting reported POCOS costs for quality is consistent with
this approach.
Comment 39. The POSCO Group asserts that the Department, in its
preliminary results, penalized the POSCO Group for submitting average
costs for merchandise with different coating weights. The POSCO Group
states that these average costs reflect the treatment of coating weight
in POSCO's normal accounting system, that the Department had no basis
for applying adverse facts available for different coating weights, and
that the same arguments that it made for the Department's adjustments
for quality apply to this issue. The POSCO Group argues that the costs
reported were consistent with POSCO's accounting system. The POSCO
Group states that based upon its experience in the distribution of
produced coating weights, the product distribution of POSCO galvanized
products is ``skewed toward one value,'' and cites figures that it
alleges are based upon reported home market sales information.
Consequently, the POSCO Group argues, its decision not to track such
costs is reasonable and its normal system not distorting. The POSCO
Group argues that average costs for specific costs are often reported
to and accepted by the Department.
The POSCO Group argues that the Department's methodology for
calculating the adjustment for coating weight of POSCO products is
erroneous, in that it was based upon information derived from POCOS
production. The POSCO Group argues that even if one were to assume that
coating weight cost differences at POCOS are the same as at POSCO, the
Department's applied cost differentials for each coating weight
implicitly assumes that POSCO's distribution of production of coated
products is identical to that of POCOS. The POCOS Group argues that if
the Department continues to adjust for POSCO coating weight
differences, it should base its cost differential adjustments upon the
distribution of production of POSCO coated products.
Petitioners argue that, as in the case of the adjustment for
quality, the Department's adjustment for the POSCO Group's failure to
account for the distribution of coating weight costs across different
products was appropriate. Petitioners state that the POSCO Group did
not report to the best of its ability, and that its reported costs
distort the dumping analysis. Petitioners state that reported data for
POCOS, which tracks costs by coating weight, indicate that the costs of
certain products may be significantly understated if coating weight is
not taken into account. Petitioners contest the POSCO Group's assertion
regarding the distribution of POSCO production by coating weight, and
the POSCO Group's conclusions from these data regarding the
acceptability of the reported costs for POSCO products and the
appropriateness of the Department's adjustment based upon POCOS
production.
Petitioners counter the POSCO Group's statement that the Department
often accepts the use of average costs for various items, such as
labor, overhead, and SG&A, noting that it is the Department's clear
practice to reject averages in cost reporting where it prevents the use
of product-specific costs in its margin calculations, and that the
Department usually prefers weighted averages to simple averages.
Finally, petitioners note that if POSCO is selling products with
different coating weights, it presumably would take this fact into
account in pricing its products.
Department's Position. The Department has relied upon POSCO's
normal accounting system, except to the extent that it determined that
doing so would result in an unreasonable allocation of production costs
and a possible distortion of dumping margins. The apparent inability of
POSCO to distinguish costs on the basis of coating weight indicates
that its reported costs do not reflect the actual costs of producing
the subject merchandise at the level of detail desired by the
Department. The coating weight characteristic is relatively high in the
Department's model-matching hierarchy, and the POSCO Group companies
distinguish between coating weights in their selling practices. The
presence of non-trivial differences between costs of CONNUMs produced
by POCOS that differ in terms of the Department's hierarchy only for
coating weights supports the contention that this is a characteristic
for which differences should be reflected in costs, and the
Department's approach in Ferrosilicon would not be appropriate here.
As noted in the Department's September 2, 1997, preliminary
analysis memorandum at 8, the adjustment made to the costs for POSCO
coating weights reflected a methodology comparable to that used in the
final results of the second administrative reviews. At no time during
these reviews did the POSCO Group suggest an alternative methodology,
even though the Department's questionnaire indicated that the POSCO
Group should report a single weighted-average cost for each unique
product as represented by a specific CONNUM. However, because POSCO
does not track costs based on coating weight, and because the
Department did not insist that the POSCO Group devise a methodology to
estimate differences in POSCO costs for coating weight, the use of
adverse facts available, such as that used in Swedish Plate and in
Flat-Rolled Steel from Brazil, would not be appropriate. The non-
adverse nature of the adjustment the Department made in its preliminary
results is demonstrated by the fact that the Department utilized data
from POCOS CONNUMs that were chosen based on their aggregate production
quantity, rather than on the magnitude of the differences in cost, and
upon the fact that the methodology utilized resulted in the costs of
some CONNUMs being decreased, while the costs of others were increased.
Id. at 8-9.
The Department's use of POCOS data to adjust the costs of POSCO
production for coating weight is reasonable because the Department has
collapsed these companies. The POSCO Group in fact urged the Department
to base POCOS's substrate input costs upon POSCO's actual costs of
producing that input, and the use of POCOS's costs as a basis for
adjusting reported POSCO costs for coating weight is consistent with
this approach. Basing an adjustment upon a distribution of POSCO
products, as the POSCO Group requests, is not feasible for the simple
reason that POSCO does not track costs for coating weight. A completely
neutral redistribution of costs relating to coating weights is not
possible. Furthermore, basing an adjustment to costs upon verified cost
information such as the Department did in its preliminary results is
preferable to basing one upon unsubstantiated assertions about
production that the respondent has founded upon ambiguous references to
sales data and introduced late in the proceedings in its case brief.
The POSCO Group could have proposed alternative methodologies
earlier in the process, and in fact did not
[[Page 13203]]
immediately provide all of its information pertaining to POSCO tracking
of coating weights. In its original questionnaire response, the POSCO
Group failed to identify the meaning of certain digits in the POSCO RPG
product code. Asked about those digits in a supplemental questionnaire,
the POSCO Group stated that they related to coating weight and were not
utilized for cost purposes (see the March 3, 1997, Section D
supplemental questionnaire response at 22-23), but this explanation
significantly understated the extent to which such information had been
previously utilized. Id. and the June 27, 1997, Korea verification
report at 10-11.
Comments by Union
Comment 40. Union contends that the Department improperly
classified Union's post-sale warehousing expenses as indirect selling
expenses, instead of as movement expenses, contrary to Department
practice.
Department's Position. We agree with respondent and have adjusted
our analysis accordingly for these final results.
Comment 41. Union asserts that the Department improperly
reclassified certain EP sales as CEP sales on the basis of some
reported expenses, which appeared to suggest that further processing
had been incurred, whereas the amounts in question merely reflected
demurrage and handling, a fact which was reported in Union's response.
Petitioners do not agree that the Department can conclude that
there was no further processing done on subject merchandise in the
United States. Petitioners mention that Exhibit 29 of Union's home-
market verification report, in which a warehousing provider enumerated
its policies, together with the absence of certain warehousing-related
charges on a sale examined at verification, suggests that further
processing must have been performed. Petitioners also reiterate their
argument that all of Union's U.S. sales should be reclassified as CEP
sales due to the active role it alleges UADD played in selling subject
merchandise.
Department's Position. This comment is moot as a result of our
reclassification of most of Union's U.S. sales as CEP transactions, as
explained above in the ``Fair-Value Comparisons'' section of this
notice and in the Department's Position in response to Comment 20.
Final Results of Reviews
As a result of these reviews, we determine that the following
margins exist for the period August 1, 1995 through July 31, 1996:
------------------------------------------------------------------------
Weighted-
average
Producer/manufacturer/exporter margin
(percent)
------------------------------------------------------------------------
Certain Cold-Rolled Carbon Steel Flat Products
------------------------------------------------------------------------
Dongbu...................................................... 1.21
POSCO....................................................... 0.63
------------------------------------------------------------------------
Certain Corrosion-Resistant Carbon Steel Flat Products
------------------------------------------------------------------------
Dongbu...................................................... 0.60
POSCO....................................................... 0.53
Union....................................................... 0.39
------------------------------------------------------------------------
The Department shall determine, and the U.S. Customs Service shall
assess, antidumping duties on all appropriate entries. As discussed
above, because the number of transactions involved in this review and
other simplification methods prevent entry-by-entry assessments, we
have calculated exporter/importer-specific assessment rates. With
respect to both EP and CEP sales, we divided the total dumping margins
for the reviewed sales by the total entered value of those reviewed
sales for each importer. We will direct the U.S. Customs Service to
assess the resulting percentage margins against the entered customs
values for the subject merchandise on each of that importer's entries
under the relevant order during the review period. While the Department
is aware that the entered value of the reviewed sales is not
necessarily equal to the entered value of entries during the POR
(particularly for CEP sales), use of entered value of sales as the
basis of the assessment rate permits the Department to collect a
reasonable approximation of the antidumping duties which would have
been determined if the Department had reviewed those sales of
merchandise actually entered during the POR.
Furthermore, the following deposit requirements shall be effective
upon publication of this notice of final results of review for all
shipments of certain cold-rolled and corrosion-resistant carbon steel
flat products from Korea 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 rate for the
reviewed companies will be the rates stated above, except for Union,
which had a de minimis margin, and whose cash deposit rate is therefore
zero; (2) for merchandise exported by manufacturers or exporters not
covered in these reviews but covered in a previous segment of these
proceedings, the cash deposit will be the company-specific rate
published for the most recent segment; (3) if the exporter is not a
firm covered in this review or the LTFV investigation, but the
manufacturer is, the cash deposit rate will be that established for the
manufacturer of the merchandise in the most recent segment of these
proceedings; and (4) if neither the exporter nor the manufacturer is a
firm covered in this review or the LTFV investigation, the cash deposit
rate will continue to be 14.44 percent (for certain cold-rolled carbon
steel flat products) or 17.70 percent (for certain corrosion-resistant
carbon steel flat products), which were the ``all others'' rates
established in the LTFV investigations. See Flat-Rolled Final at 37191.
Article VIpara.5 of the GATT (cited earlier) provides that ``[n]o
product * * * shall be subject to both antidumping and countervailing
duties to compensate for the same situation of dumping or export
subsidization.'' This provision is implemented by section 772(d)(1)(D)
of the Act. Since antidumping duties cannot be assessed on the portion
of the margin attributable to export subsidies, there is no reason to
require a cash deposit or bond for that amount. Accordingly, the level
of export subsidies as determined in Final Affirmative Countervailing
Duty Determinations and Final Negative Critical Circumstances
Determinations; Certain Steel Products from Korea (58 FR 37328--July 9,
1993), which is 0.05 percent ad valorem, will be subtracted from the
cash deposit rate for deposit purposes.
These deposit requirements shall remain in effect until publication
of the final results of the next administrative review.
This notice also serves as final reminder to importers of their
responsibility to file a certificate regarding the reimbursement of
antidumping duties prior to liquidation of the relevant entries during
this review period. Failure to comply with this requirement could
result in the Secretary's presumption that reimbursement of antidumping
duties occurred and the subsequent assessment of double antidumping
duties.
This notice also is the only reminder to parties subject to
administrative protective order (``APO'') of their responsibility
concerning the return or destruction of proprietary information
disclosed under APO in accordance with section 353.34(d) of the
Department's regulations (19 CFR 353.34(d)). Timely notification of
return/destruction of APO materials or conversion to judicial
protective order is
[[Page 13204]]
hereby requested. Failure to comply is with the regulations and the
terms of an APO is a sanctionable violation.
These administrative reviews and 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 (19 CFR 353.22).
Dated: March 9, 1988.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-6883 Filed 3-17-98; 8:45 am]
BILLING CODE 3510-DS-P
