[Federal Register Volume 61, Number 61 (Thursday, March 28, 1996)]
[Notices]
[Pages 13815-13834]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7462]
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DEPARTMENT OF COMMERCE
[A-122-820 (Lead Case Number); A-122-822; A-122-823]
Certain Corrosion-Resistant Carbon Steel Flat Products and
Certain Cut-to-Length Carbon Steel Plate From Canada; Final Results of
Antidumping Duty Administrative Reviews
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of Final Results of Antidumping Duty Administrative
Reviews.
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SUMMARY: On August 16, 1995, the Department of Commerce (the
Department) published the preliminary results of the administrative
reviews of the antidumping duty orders on certain corrosion-resistant
carbon steel flat products and certain cut-to-length carbon steel plate
from Canada. These reviews cover five manufacturers/exporters of the
subject merchandise to the United States and the period February 4,
1993, through July 31, 1994. 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 reviews.
EFFECTIVE DATE: March 28, 1996.
FOR FURTHER INFORMATION CONTACT: John Drury (CCC), Eric Johnson
(Dofasco/Sorevco), Stephen Jacques (Manitoba Rolling Mills), Jim Rice
(Algoma), Gerry Zapiain (Stelco), or Jean Kemp, Office of Agreements
Compliance, Import Administration, International Trade Administration,
U.S. Department of Commerce, 14th Street and Constitution Avenue, N.W.,
Washington, D.C. 20230; telephone: (202) 482-3793.
SUPPLEMENTARY INFORMATION:
Background
On August 16, 1995, the Department published in the Federal
Register (60 FR 42511) the preliminary results of the administrative
reviews of the antidumping duty orders on corrosion-resistant carbon
steel flat products and certain cut-to-length carbon steel plate from
Canada (58 FR 44162, August 19, 1993). The Department has now completed
these administrative reviews in accordance with section 751 of the
Tariff Act of 1930, as amended (the Act).
Applicable Statute and Regulations
Unless otherwise stated, all citations to the statute and to the
Department's regulations are references to the provisions as they
existed on December 31, 1994.
Scope of this Review
The products covered by these administrative reviews constitute two
separate ``classes or kinds'' of merchandise: (1) certain corrosion-
resistant steel and (2) certain cut-to-length plate.
The first class or kind, certain corrosion-resistant steel,
includes 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 Harmonized Tariff Schedule (HTS) under item numbers
7210.31.0000, 7210.39.0000, 7210.41.0000, 7210.49.0030, 7210.49.0090,
7210.60.0000, 7210.70.6030, 7210.70.6060, 7210.70.6090, 7210.90.1000,
7210.90.6000, 7210.90.9000, 7212.21.0000, 7212.29.0000, 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, 7215.90.5000, 7217.12.1000,
7217.13.1000, 7217.19.1000, 7217.19.5000, 7217.22.5000, 7217.23.5000,
7217.29.1000, 7217.29.5000, 7217.32.5000, 7217.33.5000, 7217.39.1000,
and 7217.39.5000. Included are flat-rolled products of nonrectangular
cross-section where such cross-section is achieved subsequent to the
rolling process (i.e., products which have been worked after rolling)--
for example, products which have been beveled or rounded at the edges.
Excluded are flat-rolled steel products either plated or coated with
tin, lead, chromium, chromium oxides, both tin and lead (``terne
plate''), or both
[[Page 13816]]
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 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 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 description remains dispositive.
The second class or kind, certain cut-to-length plate, includes
hot-rolled carbon steel universal mill plates (i.e., flat-rolled
products rolled on four faces or in a closed box pass, of a width
exceeding 150 millimeters but not exceeding 1,250 millimeters and of a
thickness of not less than 4 millimeters, not in coils and without
patterns in relief), of rectangular shape, neither clad, plated nor
coated with metal, whether or not painted, varnished, or coated with
plastics or other nonmetallic substances; and certain hot-rolled carbon
steel flat-rolled products in straight lengths, of rectangular shape,
hot rolled, neither clad, plated, nor coated with metal, whether or not
painted, varnished, or coated with plastics or other nonmetallic
substances, 4.75 millimeters or more in thickness and of a width which
exceeds 150 millimeters and measures at least twice the thickness, as
currently classifiable in the HTS under item numbers 7208.31.0000,
7208.32.0000, 7208.33.1000, 7208.33.5000, 7208.41.0000, 7208.42.0000,
7208.43.0000, 7208.90.0000, 7210.70.3000, 7210.90.9000, 7211.11.0000,
7211.12.0000, 7211.21.0000, 7211.22.0045, 7211.90.0000, 7212.40.1000,
7212.40.5000, and 7212.50.0000. Included are flat-rolled products of
nonrectangular cross-section where such cross-section is achieved
subsequent to the rolling process (i.e., products which have been
worked after rolling)--for example, products which have been beveled or
rounded at the edges. Excluded is grade X-70 plate. These HTS item
numbers are provided for convenience and Customs purposes. The written
description remains dispositive.
The periods of review (POR) are February 4, 1993, through July 31,
1994.
VAT Tax Methodology
In light of the Federal Circuit's decision in Federal Mogul v.
United States, CAFC No. 94-1097, the Department has changed its
treatment of home market consumption taxes. Where merchandise exported
to the United States is exempt from the consumption tax, the Department
will add to the U.S. price the absolute amount of such taxes charged on
the comparison sales in the home market. This is the same methodology
that the Department adopted following the decision of the Federal
Circuit in Zenith v. United States, 988 F. 2d 1573, 1582 (1993), and
which was suggested by that court in footnote 4 of its decision. The
Court of International Trade (CIT) overturned this methodology in
Federal Mogul v. United States, 834 F. Supp. 1391 (1993), and the
Department acquiesced in the CIT's decision. The Department then
followed the CIT's preferred methodology, which was to calculate the
tax to be added to U.S. price by multiplying the adjusted U.S. price by
the foreign market tax rate; the Department made adjustments to this
amount so that the tax adjustment would not alter a ``zero'' pre-tax
dumping assessment.
The foreign exporters in the Federal Mogul case, however, appealed
that decision to the Federal Circuit, which reversed the CIT and held
that the statute did not preclude Commerce from using the ``Zenith
footnote 4'' methodology to calculate tax-neutral dumping assessments
(i.e., assessments that are unaffected by the existence or amount of
home market consumption taxes). Moreover, the Federal Circuit
recognized that certain international agreements to which the United
States is a party, in particular the General Agreement on Tariffs and
Trade (GATT) and the Tokyo Round Antidumping Code, required the
calculation of tax-neutral dumping assessments. The Federal Circuit
remanded the case to the CIT with instructions to direct Commerce to
determine which tax methodology it will employ.
The Department has determined that the ``Zenith footnote 4''
methodology should be used. First, as the Department has explained in
numerous administrative determinations and court filings over the past
decade, and as the Federal Circuit has now recognized, Article VI of
the GATT and Article 2 of the Tokyo Round Antidumping Code required
that dumping assessments be tax-neutral. This requirement continues
under the new Agreement on Implementation of Article VI of the General
Agreement on Tariffs and Trade. Second, the URAA (Uruguay Round
Administrative Action) explicitly amended the antidumping law to remove
consumption taxes from the home market price and to eliminate the
addition of taxes to U.S. price, so that no consumption tax is included
in the price in either market. The Statement of Administrative Action
(p. 159) explicitly states that this change was intended to result in
tax neutrality.
While the ``Zenith footnote 4'' methodology is slightly different
from the URAA methodology, in that section 772(d)(1)(C) of the pre-URAA
law required that the tax be added to United States price rather than
subtracted from home market price, it does result in tax-neutral duty
assessments. In sum, the Department has elected to treat consumption
taxes in a manner consistent with its longstanding policy of tax-
neutrality and with the GATT.
Analysis of Comments Received
We gave interested parties an opportunity to comment on the
preliminary results. We received comments and rebuttal comments from
Algoma Steel Inc. (Algoma), Continuous Colour Coat (CCC), Dofasco Inc./
Sorevco, Inc. (Dofasco), Manitoba Rolling Mills (MRM), Stelco Inc.
(Stelco), exporters of the subject merchandise, (respondents), and from
Bethlehem Steel Corporation, U.S. Steel Group a Unit of USX
Corporation, Inland Steel Industries, Inc., Gulf States Steel Inc. Of
Alabama, Sharon Steel Corporation, Geneva Steel, and Lukens Steel
Company, petitioners. At the request of petitioners, the Department
held a hearing on September 29, 1995.
Algoma
Comment 1: Algoma argues that the Department's margin program fails
to weight-average all appropriate ``most similar'' matches where there
is no identical home market sale to match to a U.S. sale. Algoma's
contention is that the computer program ignores all but the last
possible ``most similar'' match, and then matches that individual
similar home market sale to the U.S. sale. Respondent argues that the
Department should modify the program so the appropriate ``most
similar'' matches are weight-averaged prior to comparison to a U.S.
sale.
Department's Position: The Department agrees with respondent. It is
our standard practice to weight-average the most similar matches and we
have corrected our calculations for the final results accordingly.
[[Page 13817]]
Comment 2: Algoma produces subject merchandise on two rolling
mills, a 166'' mill and a 106'' mill. Algoma reported rolling costs
only for the 166'' mill, citing the limitations of its accounting
system and other factors. Petitioner disagrees with this methodology,
and objects to the Department's use of certain information presented by
Algoma to the Department at verification. Petitioner's and respondent's
arguments regarding the various aspects of this issue, as well as the
Department's positions, are found below.
Petitioners contend that even though Algoma acknowledges producing
subject merchandise on its 106'' plate mill, it did not submit this
mill's cost information as part of its response to the Department's
COP/CV questionnaire, but rather, only submitted cost information for
its 166'' plate mill. Petitioners argue that Algoma failed to provide
actual manufacturing cost information as required by the Department's
instructions. Compounding this failure to report all relevant
production costs, petitioners contend that Algoma's presentation of new
factual information regarding the 106'' mill at verification was
improper and untimely. Petitioners argue that the deadline for
submitting new information was March 7, 1994, a full six weeks prior to
the presentation of this new information at verification. In addition,
it is argued that the Department's practice, as explained in Calcium
Aluminate Cement, Cement Clinker and Flux from France, 59 FR 14136,
14140 (1994) has been to not permit the submission of new information
at verification (other than minor corrections). Petitioners also cite
Mechanical Transfer Presses from Germany, 59 FR 9958 (1994), Photo
Albums and Filler Pages from Korea, 50 FR 43754 (1985) and Steel Wire
Rope from Taiwan, 56 FR 46288 (1991).
Moreover, petitioners state that even if the Department does accept
this new information, the information provided is of no use because it
is based upon total production costs of the mill, not just the costs of
producing the subject merchandise. As a result, the utility of this
information is minimal, as there is no way, in the view of petitioners,
to verify that the production costs of subject merchandise associated
with the 106'' mill are lower than the production costs of the 166''
mill, as suggested by Algoma.
Because Algoma did not provide actual production costs as requested
in the Department's questionnaire, and did not notify either
petitioners or the Department of its failure to use its actual
production costs, petitioners argue that the Department should apply
total best information available (BIA). Short of that, petitioners
suggest that since the 106'' mill produces plate with a gauge less than
3/8'' and less that 96'' in width, all home market sales of material
meeting these two physical criteria be deemed to be sold at below cost,
and since a valid constructed value comparison would also be
impossible, all matching identical and similar U.S. sales should be
treated as BIA and be presumed to have been sold at below cost.
Concerning petitioners' contention that Algoma failed to report
costs in accordance with the Department's questionnaire, Algoma asserts
that it properly calculated a rolling cost for subject merchandise.
Algoma contends that because its cost accounting system does not
attribute costs of a particular process directly to different gauges of
steel, it calculated the average cost per ton of the cost center
producing the vast preponderance of the subject merchandise and
attributed these costs to individual products. Algoma also argues that
it possesses no records that would permit direct calculation of costs
incurred at the 106'' mill that relate only to subject merchandise.
Algoma argues that, as demonstrated at verification, the average
rolling cost on the 106'' mill is significantly less than that of the
166'' plate mill, thus Algoma used the most conservative approach
possible in determining the average rolling cost for subject
merchandise. Algoma further argues that this cost information was an
appropriate subject of verification. Finally, Algoma cites Replacement
Parts for Self-Propelled Bituminous Paving Equipment from Canada, 58 FR
15481 (1993) and Floral Trade Council of Davis Cal. v. U.S. 775 F. Supp
1492, 1499 (CIT 1991) for the proposition that the Department may
request information at any time during a proceeding. Thus Algoma
disagrees with petitioner's allegations that Algoma's ``Comparison of
Costs'' exhibit was new factual information presented at verification.
Algoma considers this to be documentation supporting the accuracy and
reasonableness of the information submitted and the methodologies
employed by Algoma in preparing its questionnaire responses.
Finally, Algoma also takes exception to petitioner's suggestion
that the Department resort to total BIA if it determines that Algoma's
reported rolling cost data is not appropriate or reasonable. Algoma
asserts that petitioners themselves acknowledge that the data available
to Algoma pertaining to the 106'' strip mill would not have been an
appropriate basis for a COP response. Algoma believes that the approach
it has adopted has been reviewed and verified by the Department, and
represents a reasonable and conservative approach to account for the
rolling costs that were incurred on the 106'' mill.
Department's Position: We agree with respondents. Algoma has two
rolling mills: a 166'' mill and a 106'' mill. While the 166'' mill
produces only subject merchandise, only a very small percentage of the
merchandise produced on the 106'' mill is subject merchandise (the rest
being strip products too narrow to be included in the scope of this
order). Further, an ``overwhelming majority'' of subject merchandise is
produced on the 166'' mill. The Department verified that Algoma could
not separate the costs to produce different gauges of steel on the
106'' mill, thus it could not specifically identify the cost to produce
subject merchandise on that mill. Therefore, because subject
merchandise produced on the 106'' mill is a small percentage of the
total quantity of subject merchandise produced, and because the average
COP of the 106'' mill is lower than the average of the 166'' mill, the
Department finds that it was reasonable for Algoma to use the COP of
the 166'' mill as the basis for the COP of all subject merchandise.
Algoma's reporting of rolling costs incurred at only one of its two
manufacturing facilities is reasonable, considering (1) the nature of
its cost accounting system, (2) Algoma's verified inability to
determine specific rolling costs based upon the gauge of the material
being manufactured at either facility, and (3) the conservative
methodology adopted by Algoma. Algoma stated, and the Department
verified, that Algoma is not capable of specifically determining direct
calculation of rolling costs incurred at the unreported mill on a basis
that would capture costs solely of subject material (which represents a
small percentage of that rolling mill's production). The alternative
methodology used by Algoma is reasonable.
The Department verified the soundness and reasonableness of
Algoma's methodology of calculating rolling costs for all subject
merchandise. As stated in the Department's verification report ``Algoma
demonstrated that costs at the 166'' (plate mill) were significantly
higher than at the 106'' (strip) mill.'' Therefore, this information
indicates that the use of the 166'' mill costs was conservative.
[[Page 13818]]
The Department also notes, as did petitioners, that rolling cost
data from the 106'' strip mill was of limited utility because it is
based upon total production costs and not just the costs of rolling the
subject merchandise. Because of the limitations of Algoma's cost
accounting system, this rolling cost data would have been an
inappropriate basis for determining rolling costs for subject
merchandise produced on the 106'' strip mill.
In addition, the Department does not consider the rolling mill
costs associated with the 106'' strip mill we examined at verification
to be new information. The Department's responsibility at verification
is to verify the accuracy and completeness of the questionnaire
response. In this case, Algoma had clearly stated on the record that
the rolling costs it submitted to the Department, for a variety of
reasons, reflected only those costs incurred at the 166'' plate mill.
Therefore, by verifying all the information available which pertained
to the 106'' strip mill, the Department was merely verifying the
reasonableness and accuracy of a methodology Algoma had already
reported.
Petitioners' citation to Calcium Aluminate Cement, Cement Clinker
and Flux from France is not relevant here because that case refers to
the presentation of new factual information and the Department's
treatment of such information with regard to statutory deadlines. In
this case, the new information at issue represents the type of
supporting documentation which the Department routinely reviews during
the course of a verification.
Petitioners reference to Mechanical Transfer Presses from Germany
is not relevant here because in that instance, the respondent submitted
unsolicited post-verification information which it was unable to
provide during the actual verification. Petitioners also cite to Photo
Album and Filler Pages from Korea and Steel Wire Rope from Taiwan to
support their argument that new information presented at verification
is unacceptable because such acceptance precludes the Department from a
reasonable and thorough analysis of the information and denies
petitioners their right to comment on such information prior to its
acceptance. Again, however, the Department finds that the information
reviewed at verification was not new information, but rather simply
documentation supporting Algoma's contention that it was unable to
report meaningful cost data on one particular rolling mill, that the
vast majority of subject merchandise was produced on that mill and that
the other mill's costs were significantly lower.
Finally, the Department agrees with Algoma that costs associated
with movement to the 106'' mill and with coiling and uncoiling were
properly included in the average 106'' mill costs which were compared
to the 166'' mill costs at verification.
Regarding petitioner's recommendation that the Department apply
total BIA or, alternatively, partial BIA to material meeting the gauge
and width criteria of subject merchandise rolled on the 106'' strip
mill, the Department finds that BIA is not appropriate in this
circumstance where the respondent has provided complete information for
the mill producing the vast majority of the subject merchandise and
supporting documentation for its reported cost.
Comment 3: Petitioners object to Algoma's May 5, 1995, changes to
its reported scrap revenue data. Petitioners contend that this new
information is not supported by any verification documentation and is
inconsistent with existing verification exhibits, and no Departmental
request for a recalculation of scrap revenue exists on the record.
Petitioners also argue that this new information is untimely.
Petitioners further note that although the Department did request
that Algoma submit a revised cost tape following verification, the
Department did not solicit any corrections regarding Algoma's reported
scrap revenue data. Petitioners allege that Algoma submitted this new
information without disclosing it to either petitioners or the
Department. Petitioners contend that this inclusion of unsolicited data
is improper and is in violation of 19 CFR 353.31(a)(i), which sets a
deadline of seven days prior to verification for the submission of
unsolicited factual information. Petitioners urge the Department to
base its margin calculations on verified data only, citing Light-Walled
Welded Rectangular Carbon Steel Tubing from Argentina (54 FR 13913), in
which the Department was requested by respondent to verify a
significant quantity of new information. In addition, in that case,
respondent submitted an unsolicited revised response after the
preliminary determination. All these factors resulted in the
Department's use of total BIA because of the uncertainty of the
veracity of the respondent's information.
Algoma contends that all the changes made by Algoma pursuant to the
post-verification tape were disclosed to the Department. As explained
at verification, Algoma identified a correction for yield loss for
Algoma's No. 1 shearing line and reported this correction to the
Department at the beginning of verification. This correction increased
the calculated generation of scrap, which in turn increased the
resulting scrap revenue data as a simple mathematical function (i.e.,
the higher the yield loss figure, the greater the amount of scrap that
is generated and sold or recycled into the production cycle).
Respondent holds that this is not ``new information.''
Algoma also contends that petitioners' allegation that this scrap
revenue data is inconsistent with the cost verification exhibits and
cannot be the product of the yield loss correction is without merit.
According to Algoma, petitioners do not understand the scrap revenue
calculation and the verification document they cite contains the
erroneous data which Algoma later corrected. Algoma adds that
petitioners' contention that all product categories should have been
revised is incorrect, because only one particular line was affected by
this correction.
Department's Position: We agree with respondent that the post-
verification submission of information related to yield loss (based
upon errors disclosed at the beginning of verification) and the
resultant change in scrap revenue does not constitute new information,
and is not a violation of 19 CFR 353.31(a)(i).
On April 28, 1995, Algoma filed a ``Corrections Memorandum'' with
the Department, which indicated the errors Algoma discovered in its
response during the process of preparing for its COP/CV verification.
One of the errors discovered was an error in its calculation of yield
loss for one of Algoma's production lines. The error, as verified by
the Department, involved an understatement of yield loss, which Algoma
corrected, pursuant to the Department's instructions following
verification. As a result of this correction, in which the yield loss
factor was increased, Algoma discovered that as a function of the yield
loss correction scrap revenue was increased because the increased yield
loss automatically increased the amount of imputed scrap generated, and
thus increased Algoma's scrap revenue figure. For Algoma to have acted
otherwise (i.e., to have corrected only the yield loss data without
having corrected subsequent derivative information) would have been to
knowingly submit erroneous data to the Department, and the Department
would have had to request a correction.
In addition, petitioners' reference to Light-Walled Welded
Rectangular Carbon Steel Tubing from Argentina is
[[Page 13819]]
not directly relevant to this proceeding because the nature and extent
of the respondents' revisions to their responses in that case (at
verification and following the preliminary determination) are far in
excess of any additional or new information presented by Algoma in the
course of this administrative review.
Comment 4: Petitioners allege that Algoma submitted incorrect
revised yield loss data for each of its general product categories, as
the result of having based its calculation on the wrong yield loss per
ton value. Petitioners contend that the correct way to calculate yield
loss is to use the value of the loss at each production stage, in order
to ensure that the total yield loss value actually reflects the value
of the tonnage lost at each stage of production. According to
petitioner, Algoma valued the tonnage lost at each production stage
before it entered that production process, resulting in an
understatement of the value of the total yield loss.
In addition, petitioners argue that Algoma's revised yield loss
data is not supported by any documentation and that there is
insufficient information on the record to correct for the understated
yield loss values. Therefore, petitioners contend that to correct
Algoma's misreported yield data, the Department should increase the
yield loss amounts for Algoma's other product categories, as reported
in their March 27, 1995 cost tape, to correspond to the increase
reported by petitioners in their rebuttal brief.
Algoma argues that its revised yield loss figures are correct and
that petitioners' arguments are based upon a misunderstanding of the
methodology used by Algoma. Apparently, petitioners assume that the
variable HRMYLD (plate rolling mill yield loss) contains not just the
value of raw materials lost in later processes, but also reflects yield
loss of labor and overhead costs added by later processes. In fact, the
HRMYLD figure contains only losses in raw material (slab) value that is
caused by product waste in downstream processes. Other yield losses are
reported as labor, variable overhead, or fixed overhead losses. This
reporting methodology was necessitated by the Department's requirement
that costs be reported on a consistent basis, per ton of finished
plate.
Department's Position: We agree with respondent. Through inspection
of verification documentation, specifically, the slab-to-finished-
plate-processing-cost sheet and Algoma's documentation supporting its
calculation of scrap revenues, and the subsequent corrections submitted
to the Department, the Department is satisfied that Algoma has properly
reported correct yield loss data for its regular sheared plate.
Comment 5: Petitioner contends that Algoma's short-term interest
expense was calculated using an incorrect short-term interest income
offset. According to petitioners, two of the items used by Algoma to
calculate its interest expense do not belong in the calculation because
their interest revenues do not represent income earned from short-term
investments of the company's working capital. See Television Receivers,
Monochrome and Color from Japan, 56 FR 56189, 56192 (1991) (Television
Receivers from Japan).
Specifically, Algoma has failed to demonstrate that there was (1)
an ``investment'', (2) that if there was, that it was short-term, and
(3) that if there was an investment, that it was related to the current
operations of the company. See Dynamic Random Access Memory
Semiconductors of One Megabit and Above from Korea, 58 FR 15467, 15473
(1993) (DRAMS from Korea). Petitioners also cite Certain Hot-Rolled
Carbon Steel flat products, Certain Cold-Rolled Carbon Steel Flat
Products, and Certain Cut-to-Length Carbon Steel Plate from Canada, 58
FR 37099, 37119 (1993), in which a respondent improperly offset
interest expense against interest gained from settlement of a tax case.
Algoma asserts that it properly calculated its interest expense.
Algoma contends that petitioners have misstated the law, and that the
Court of International Trade has held that respondents may offset
against interest expense company interest income ``related to the
general operations of the firm'' (Timken Company v. United States, 852
F. Supp. 1040, 1048 (CIT 1994)). Additionally, it is the Department's
practice ``to accept a reduction of total interest expense by such
short-term interest income because such income is earned from working
capital, which by definition is related to manufacturing and sales
operations.'' See Antifriction Bearings (Other Than Tapered Roller
Bearings) and Parts thereof from France, 60 FR 10900, 10925-26 (1995)
(AFBs from France).
Department's Position: We agree with respondent. Petitioners'
citation to Flat Rolled Steel from Canada does not apply. In that case,
the Department stated only that it agreed with petitioners' point that
a manufacturing line's interest expense ``should be included in the
cost of production * * *.'' This comment did not address, nor did the
Department's response address, the issue of appropriate interest
offsets. Petitioners also cite Television Receivers from Japan and
DRAMS from Korea. In Television Receivers from Japan, the Department
stated that it would allow an offset to interest expense only with
interest income from short-term investments of the company's working
capital. However, we disagree with petitioners that methodology applies
in this review because since that determination was published, the
Department has expanded its view of what constitutes an appropriate
offset to interest expense. In DRAMS from Korea, the Department stated
only that such short-term investments must be ``related to the current
operations of the company.'' More recently, however, the Department
stated in AFB's from France, that ``the interest earned on short-term
deposits, on advance payments to suppliers, and on late payments is
derived from manufacturing and sales operations. The Department's
practice is to accept a reduction of total interest expense by such
short-term interest income because such income is earned from working
capital, which by definition is related to manufacturing and sales
operations. Therefore, we accepted the interest offset as reported by
SNR.'' In light of these recent decisions of what constitutes an
appropriate interest offset, the Department agrees with Algoma that it
properly calculated its interest expense and that all its claimed
offsets are allowable.
Comment 6: Petitioners contend that some of Algoma's product
specifications and suggested model matches are incorrect. According to
petitioners, Algoma made several errors in reporting technical
properties in its suggested model match, and when corrected, it becomes
clear that certain matches are incorrect.
Algoma argues that one of petitioners' proposed revised model
matches is correct but that the other suggested match is less accurate
than that originally submitted by Algoma, and that Algoma's original
model matching hierarchy be used in that case.
Department's Position: The Department agrees with both parties that
one model match modification suggested by petitioners is correct, and
that model match is reflected in these final results. The Department
also agrees with petitioner that the second disputed model match should
be modified on the basis of petitioners' proposal, because the basis
upon which Algoma determined the model match is not appropriate,
according to the model match hierarchy as laid out in the Department's
instructions. The Department agrees that the petitioners' proposed
model match is a closer match
[[Page 13820]]
than that proposed by Algoma on the basis of comparable chemical
characteristics. See also the Department's Analysis Memo.
Comment 7: Petitioners allege that Algoma's allocation of indirect
selling expenses is incorrect and must be rejected. Specifically, it is
alleged that Algoma failed to properly report its indirect selling
expenses on a market-specific basis.
In calculating its indirect selling expense factors for each
market, Algoma allocated a certain percentage of its indirect selling
expenses exclusively to the home market, with the remainder allocated
between markets, including its home market, based upon sales to the
home market as a percentage of total sales. Algoma claimed it cannot
separately identify U.S. specific indirect selling expenses from
expenses related to other markets. Algoma's records indicate that these
expenses were classified in six cost centers, four of which support
sales in all markets and two supporting sales in Canada only. Thus,
Algoma allocated the Canadian cost centers to the home market and the
other four across all markets.
Petitioners argue that the record clearly indicates that there are
market-specific selling expenses that Algoma could have reported on a
market-specific basis (e.g., the ``U.S. Sales Department'') which
Algoma combined with its indirect selling expenses to all markets.
Petitioners argue that only the percentage of indirect selling expenses
properly identified by Algoma as relating to the home market should be
used in the calculation of home market indirect selling expenses,
citing Steel Jacks from Canada, 50 FR 42577 (1985), wherein the
Department denied respondent's allocation methodology because it was
unable to provide any evidence separating certain selling expenses by
product and market.
Algoma argues that its allocation of indirect selling expenses is
correct given the constraints of its normal business procedures. As
explained by Algoma in submissions and at verification, the ``U.S.
Sales Department'' is, in fact, a misnomer. During the POR, this
department consisted of one employee, who also had other
responsibilities beyond those associated with sales to the United
States. In addition, sales to the United States were also handled by
other personnel. Consistent with this reality, Algoma does not treat
this department as a separate cost center in the normal course of
business and demonstrated this at verification. Instead, Algoma
distinguishes between the costs of selling in the home market, and all
other selling costs to all other markets, and costs in this second
category are not, and cannot be, broken out among specific countries.
Department's Position: We agree with respondent. The Department
verified each of Algoma's indirect selling cost centers, and we
confirmed that although Algoma does maintain some information specific
to home market, United States, and ``off-Shore'' sales (quantity, cost
of sales, etc.), it does not maintain specific information on selling
expenses for each of these three markets. Instead, it maintains some
indirect selling expense information only for home market sales while
other indirect selling expense information cannot be broken out by
market. The former group was only attributed to the home market, while
the latter was allocated over all three markets (home market, U.S., and
off-shore). Thus the Department is satisfied that Algoma has allocated
these indirect selling expenses as specifically as possible given the
limitations of its business records. In addition, Steel Jacks from
Canada is not applicable here because in that case, respondent was not
able to demonstrate that these indirect selling expenses related
``solely to sales in the Canadian market.'' In the case of Algoma, it
has been able to identify and separate Canada-specific indirect selling
expenses from ``other market'' selling expenses, and within the
confines of Algoma's financial accounting system, has properly
allocated its indirect selling expenses among all appropriate markets.
Comment 8: Petitioners allege that the margin program incorrectly
defines U.S. Direct Expense (USDIREXP), and that it fails to include
deductions for U.S. Duty and Brokerage expenses. In addition, the
commission offsets are incorrectly defined. Algoma agrees with
petitioners, and requests that the Department correct these errors in
the final results of review.
Department's Position: We agree with both parties, and the
corrections are reflected in the Department's final results.
CCC
Comment 9: In its response to the Department's questionnaire
concerning the Model Match, CCC did not provide complete physical
characteristics data for all sales. Petitioners assert that the
Department erred in accepting incomplete data from respondent on
physical characteristics for sales in both the U.S. and home markets.
Petitioners further state that the use of these missing variables for
the purposes of the model match is inconsistent with past practice and
contrary to existing statute. Specifically, petitioners assert that 19
U.S.C 1677(16) requires comparisons with identical physical
characteristics and that the Department's practice is not consistent
with that requirement. In addition, petitioners believe that the
methodology violates 19 U.S.C. 1677b(a)(4) in that no diffmers are used
to adjust for potentially different physical characteristics.
Petitioners insist that the Department use BIA in cases where sales are
reported with missing physical characteristics values. Petitioners
request that the Department apply either a regular second-tier BIA (the
highest calculated rate in either the investigation or the review,
18.71%), or the highest non-aberrant margin found on any CCC sale.
Petitioners conclude that the Department must use BIA if the
respondent is unable to provide the adequate information. By failing to
report full product characteristics for a number of prime home market
and U.S. sales, petitioners state that CCC made it impossible to
accurately perform the model match with respect to these sales or to
determine accurate costs of these products. Petitioners reason that the
Department is required to use BIA whenever a party or any other person
refuses or is unable to produce information requested in a timely
manner and in the form required, or otherwise significantly impedes an
investigation. Petitioners recommend that to ensure that respondents
are encouraged to provide complete information, the Department should
apply to the relevant transactions either the higher of a calculated
margin found in the investigation or review, or the highest non-
aberrant margin found on any CCC sale.
Respondents state that the law does not require identical matches
to mean identical in every respect, and that the Department can make
reasonable interpretations of the term ``identical.'' In addition,
respondents assert that petitioners have already accepted the
proposition that the Department may depart from product matching
criteria. To support this assertion, respondents note that the
Department used the exact same methodology in its treatment of missing
physical characteristics for seconds produced by Dofasco as outlined in
a policy paper dated April 19, 1995, and that petitioners did not
object to that policy. Respondents claim that the same policy is
applicable to CCC.
Respondents also note that CCC is not a steel substrate
manufacturer, but purchases substrate from others, and as such does not
know many of the characteristics of the underlying
[[Page 13821]]
substrate. In particular, CCC contends that substrate purchased from
service centers often lacked specific physical characteristic
information and that CCC was unable to obtain said information. CCC
argues that its customers are unconcerned with many of the
characteristics of the steel substrate which underlies its coated steel
products.
Department's Position: We disagree with Petitioners. The Department
has the authority to determine what merchandise qualifies as such or
similar for the purposes of the statute. United Engineering & Forging
v. United States, 779 F. Supp. 1375, 1380-82 (CIT 1991); NTN Bearing
Corp. v. United States, 747 F. Supp. 726, 735-36 (CIT 1990); Kerr-McGee
Chem. Corp. v. United States, 741 F. Supp. 947, 951-52 (CIT 1990);
Monsanto Co. v. United States, 698 F. Supp. 275, 277-278 (CIT 1988);
Timken Co. v. United States (Timken I), 630 F. Supp. 1327, 1338 (CIT
1986).
The market for the specific products manufactured by CCC is unlike
the market for other corrosion-resistant steel products in certain
respects. Because CCC's specialized customers are unconcerned with
certain characteristics of the steel, CCC has no need to record those
characteristics. Moreover, unlike other respondents, CCC does not
manufacture steel substrate. Rather, it either paints or galvanizes
substrate purchased from other sources. Therefore, for those sales with
missing product characteristics, CCC does not possess, or cannot
obtain, all of the product characteristics requested in the
Department's model match criteria, since some of the criteria in
question are only available to the original manufacturer of the
substrate. Most importantly, however, because both CCC's U.S. and home
market customers are unconcerned with the missing characteristics,
there is no reason those characteristics should be used to determine
which sales should be compared. Finally, the Department verified that
the missing characteristics are not random in nature. Rather, CCC could
not report specific sets of characteristics depending upon the type of
seller of the original substrate (e.g. steel service centers). As such,
the Department determines that any given set of missing characteristics
in a sale are the result of a purchase from a particular type of seller
of the substrate and not as a result of ``selective reporting'' by the
respondent.
In light of the circumstances contained in this review, we believe
that the Department's decision to accept a modified matching hierarchy
for some sales is proper. The Department is using a similar modified
hierarchy for the purposes of comparing certain of Dofasco's such or
similar merchandise, in the same administrative review of carbon steel
flat products from Canada. Specifically, the methodology used by the
Department for CCC is similar to that used for the comparison of non-
prime merchandise manufactured by a Dofasco (See Department of Commerce
Memorandum, A-100-003, of April 19, 1995; ``For those respondents
unable to report the same product characteristics for seconds in both
markets, the Department could simply drop the missing characteristics
and compare products based on the same characteristics reported in both
markets.''). As with the market for CCC's coated products, the
Department determined that the market for non-prime merchandise was
highly specialized, and that, therefore, the standard hierarchy would
require parties to report irrelevant characteristics (of which they
were unlikely to maintain records) and would produce inappropriate
matches. No interested party raised objections to the methodology for
matching non-prime merchandise.
In its sales verification, the Department noted that CCC used
available information to report type, process, metal, coating weight,
thickness, width, and form. In addition, it reported quality, strength,
temper rolling, and tension leveling for input coils purchased from
Stelco. Stelco provided the reported information requested by CCC.
During the verification, the Department confirmed that CCC did not
possess the four characteristics previously mentioned for coil
purchased from suppliers other than Stelco.
Petitioners cite the Timken case as support for their contention
that the Department is compelled to use BIA in this case. However, the
case in question differs from Timken in regard to the facts. In Timken,
the court directed the Department to collect additional home market
sales data from a previous review period which had already been
completed. When it requested the additional data, the Department found
that the company under review had already disposed of all of its home
market data for the period and was unable to provide the necessary
information, necessitating the use of BIA. Unlike the situation in
Timken, CCC did not dispose of the relevant data, but rather had no
reason to ever maintain such data. Thus, the use of BIA in this case is
not warranted.
Comment 10: Petitioners protest the use of certain slitting
expenses incurred by CCC in U.S. sales as an addition to Foreign Market
Value. Petitioners claim that the Department should instead deduct the
expenses from U.S. price. Petitioners cite 19 U.S.C.
Sec. 1677a(d)(2)(A), stating that ``the statute requires that
additional costs, charges and expenses incident to bringing the
merchandise from the place of shipment in the country of exportation to
the United States shall be deducted from U.S. price.''
Department's Position: We disagree with Petitioners. Both CCC and
Dofasco had U.S. sales which were slit in the U.S. by unrelated
slitters. In both cases, the Department considered the sales to be
purchase price sales, and not exporter sales price sales. The slitters
in question were unrelated to the companies being reviewed. However,
there were slight differences between CCC and Dofasco in terms of the
structure of transactions performed by unrelated slitter. In the case
of Dofasco, the customer designates the slitter to be used. The slitter
invoices Dofasco, which then adds the amount of the charge, noted on a
separate line of the invoice, to the price that it charges the customer
for the un-slit steel. By contrast, CCC, chooses the slitter, which is
a single non-related U.S. company. Furthermore, CCC does not separate
the charges but instead includes them in the overall sales price. CCC
finalizes the price prior to shipment into the U.S. and maintains a
record of the expense charged to it by the slitter.
As a result, the Department simply disregarded the price for the
slitting when identifying the price charged by Dofasco. For CCC,
however, the slitting expense is a circumstance of sale expense for
which the Department must make a circumstance of sale adjustment to FMV
under section 773(a)(4).
Petitioners' reliance on section 772(d)(2)(A) is unwarranted. That
provision deals with the deduction from USP of movement and related
expenses (such as freight, brokerage, handling and port charges).
Although the slitting expense was incurred prior to delivery to the
customer, that fact alone does not make the expense a movement expense
subject to 772(d)(2)(A).
Comment 11: Petitioners object to the Department's price adjustment
methodology regarding credit and debit notes for sales in both the U.S.
and Canadian markets. Specifically, Petitioners believe that the
Department should not allocate such adjustments over multiple sales.
Instead, the Department should tie said adjustments directly to
specific sales and use BIA when these expenses cannot be tied to
specific sales.
[[Page 13822]]
Respondents contend that both the Department's policy and various
court decisions do not allow for the allocation of such expenses to
unspecified invoices. In the case of CCC, however, respondent notes
that the adjustments in question are directly related to a specific
group of invoices. Therefore, the credit and debit notes are directly
related to a set of sales, rather than one sale in particular or to all
sales. As such, they meet the criteria of the Department for direct
expenses.
Department's Position: While the Department prefers that discounts,
rebates and other price adjustments be reported on a transaction-
specific basis, the Department has long recognized that some price
adjustments are not granted on that basis, and thus cannot be reported
on that basis. However, the Department disagrees with CCC's argument
that the debits and credits at issue were not granted on a transaction-
specific basis. CCC issued the adjustments when a customer over- or
under-paid a specific transaction. By including several invoices on the
debit or credit note, CCC allocated the debit or credit over the
transactions included on the note. Consequently, the debits and credits
are transaction-specific but not invoice-specific.
Nevertheless, the Department does not agree with petitioners that
this methodology is sufficient to warrant treatment of the adjustments
as indirect expenses in the home market (or application of BIA in the
U.S. market), under the policy discussed in Antifriction Bearings (and
Parts Thereof) from France, 58 FR 39729, 39759 (1993), cited by
petitioners. In that case, the Department contrasted transaction-
specific reporting with customer- or product-specific reporting. In
this case, the amount of the ``allocation'' is limited to a few
specific transactions, all to the same customer, and typically within a
very limited period of time. Thus the danger of allocation, which is
the averaging effect on prices, is extremely limited in this case. This
case is similar to situations, permitted by the Department as direct
adjustments, in which a rebate is granted on a limited number of
purchases by a single customer. Because CCC's method of reporting this
transaction is reasonable, the Department has allowed it as a direct
adjustment.
Dofasco/Sorevco
Comment 12: Respondents claim that the Department improperly
reclassified certain home market rebates as post-sale price adjustments
in the preliminary results. Dofasco states that, contrary to the
Department's assertion, the record shows that the buyer was aware of
the conditions to be fulfilled and the approximate amount of the
rebates at the time of sale. Respondents also claim that there are no
factual differences between the investigation and this administrative
review concerning Dofasco's rebates. Finally, respondents assert that
the antidumping law was never intended to be so rigid that memoranda or
customer letters would be an insufficient basis to show previous
knowledge. Therefore, Dofasco says that the Department should classify
all of its home market rebates as rebates.
Petitioners assert that respondents have failed in each case to
substantiate these home market rebates. For the first type of rebate,
petitioners claim that respondents have stated for the record that in
the majority of cases, documentation which the Department requested to
illustrate ``that their customer knew the conditions and terms of each
rebate granted to the customer before the time of the sale'' did not
exist. Furthermore, even in the minority of cases where some
documentation exists, such evidence does not demonstrate the necessary
facts for the Department to classify such expenses as rebates.
Likewise, for the other two types of rebates, the documentation Dofasco
presents as evidence is, according to petitioners, insufficient proof
that the customers were aware of the terms of sale and the amount of
the rebates at or before the time the sale was made.
Department's Position: We agree with petitioners. First, the
evidence to which respondents have pointed in their case brief in no
way demonstrates that Dofasco's customers had knowledge of the terms
and conditions of the rebates at or before the time of sale.
For Dofasco-reported REBATE1H, respondents have referred to an
internal Dofasco memorandum stating the terms of the rebate for a
future period. Respondents argue that, while this internal memorandum
``may not constitute explicit customer notice,'' the fact that the
customer had been receiving the rebate for some time previously was a
clear indication that the customer knew of the rebate prior to sale.
In this case, respondents have implicitly acknowledged the inherent
deficiency of this evidence: namely, that the document to which
respondents refer is an internal memorandum, and thus by its nature
cannot serve as evidence of the customer's prior awareness of the terms
and conditions of the rebate. While the customer's receipt of this
rebate over time may increase the likelihood that the customer may have
expected to continue to receive this rebate, such a condition reflects
at most the probability that Dofasco's ``rebate'' policy in this case
represented its normal business practice. However, it does not
constitute the customer's awareness of the rebate at or prior to the
time of the sale.
Furthermore, respondents explicitly acknowledged during
verification that ``the majority of its rebate and pricing negotiations
are completed over the phone and little written communication is
exchanged between Dofasco and the customer.'' See Dofasco Sales
Verification Report (May 5, 1995), at pg. 24. In fact, for REBATE1H we
found no written communication proving prior customer awareness. In
this respect, Dofasco's reference to the hand written notation in the
example provided in their case brief is unpersuasive. Even presuming
the individual in question is employed by the customer (for which we
have no evidence), there is no indication when (or whether) the
document was sent to the individual.
With regard to Dofasco-reported REBATE2H, respondents have also
failed to provide adequate evidence proving prior customer awareness
for the example cited. The letters from the customer to Dofasco to
which respondents refer in their case brief show nothing about what the
customer knew at the time of the sale. Finally, concerning Dofasco-
reported REBATE3H, Dofasco's evidence suffers the same defect as
REBATE1H: that is, the 1992 document provided as an attachment to
respondents' case brief is an internal memorandum which fails entirely
in proving the customer's prior awareness.
Second, the Department takes issue with respondents' claim that
there are ``no factual differences between the investigation and this
administrative review'' concerning Dofasco's rebates. In fact, it is
precisely the factual, documentary difference between the LTFV
investigation and this administrative review which has led the
Department to its decision to disallow the treatment of these
``rebates'' as rebates for the Department's purposes. In the LTFV
investigation, Dofasco was able to produce a certain type of document
(an Allowance Approval Page) which proved that the customer was aware
of the terms and conditions of these rebates at or before the time the
sale was made. See, Dofasco's Response to Sections B, C, and E of the
Department's Questionnaire, October 20, 1992, Appendix B-4. This
[[Page 13823]]
Allowance Approval Page is absent from the record of this review.
Finally, concerning respondents' assertion that the antidumping law
was never intended to be so rigid that memoranda or customer letters
would be an insufficient basis to show previous knowledge, we stress
that the Department's requirements in this regard are not arbitrary.
The purpose of requiring respondents to prove that the buyer was aware
of the conditions to be fulfilled and the approximate amount of the
rebates at the time of the sale is to protect against manipulation of
the dumping margins by a respondent once it learns that certain sales
will be subject to review. See Antifriction Bearings (other than
Tapered Roller Bearings) and Parts Thereof from France (AFBs), 60 FR
10900, 10930 (February 28, 1995), which notes that the purpose of the
rebate rule is to ``prevent respondents, after they realize that their
sales will be subject to administrative review, from granting rebates
in order to lower dumping margins on particular sales.'' Hence, in
order to circumvent any such ex post facto downward adjustments of
foreign market value, the Department has established the evidentiary
requirement of ``prior knowledge''. Therefore, the Department disallows
these ``rebates'' as Departmentally-defined rebates for the period of
review.
Comment 13: Petitioners argue that the Department should not treat
Dofasco's home market rebates as post-sale price adjustments, because
the Department has indicated that post-sale price adjustments are
generally corrections to the price resulting from clerical or other
data input errors. Moreover, petitioners assert that such a
reclassification undermines the Department's policy of requiring a
respondent to demonstrate that the rebate is justified. Therefore,
petitioners conclude that Dofasco's claimed adjustments must be denied.
Additionally, petitioners assert that even if the Department adjusts
for Dofasco's rebates, it should not directly adjust for two types of
``rebates'' because Dofasco reported these on a customer-specific
basis, and not on a transaction or product-specific basis.
Respondents argue that, even if the Department does not accept
Dofasco's ``rebates'' as rebates (as defined by the Department), it
must at a minimum accept them as post-sale price adjustments, since
they reflect a respondent's normal business practice. Regarding the two
types of ``rebates'' allegedly reported on a customer-specific basis,
Dofasco claims that the Department verified that these rebates have
been reported for each customer on a product-specific basis.
Department's Position: We agree in part with respondents. While
petitioners have asserted that post-sale price adjustments are
``generally corrections to the price resulting from clerical or other
data input errors,'' they have failed to note that in the case from
which they cite, the Department also allowed post-sale price
adjustments which were not data input errors, because they reflected
the respondent's ``normal business practice.'' See AFBs at 10930. As
Dofasco has argued, the post-sale price adjustments in this instance do
reflect its normal business practice. The Department reviewed numerous
documents at verification which confirmed this, and petitioners have
not suggested otherwise. Additionally, although documentation regarding
the administration of these ``rebates'' for this administrative review
differs from the LTFV investigation, their existence since the
beginning of the investigation indicates that the use of these
``rebates'' reflects Dofasco's normal business practice. Nevertheless,
in AFBs (at 10929), the Department stated that ``as a general matter,
the Department only accepts claims for discounts, rebates and price
adjustments as direct adjustments to price if actual amounts are
reported for each transaction.'' The Department discovered at
verification that for certain customers, for two types of Dofasco's
claimed rebates (REBATE1H and REBATE2H), ``Dofasco totaled the value of
specific credit notes issued to a customer and allocated them over
sales to that customer.'' Furthermore, Dofasco demonstrated at
verification that it had ``allocated rebates for a number of customers
because the credit notes did not specify the invoices on which Dofasco
granted the credit, and company officials noted that the invoicing
department did not always identify correctly the specific product on
which the credit was being granted.'' See Verification Report at 22.
Thus, it is clear that these adjustments have often not been made on a
transaction-specific basis, and the Department will, accordingly, treat
them as indirect selling expenses for certain customers.
Finally, the Department disagrees with petitioners' assertion that
reclassification undermines the Department's policy with respect to
rebates. Rebates typically may be granted as a fixed and constant
percentage of sales. The Department's policy is to treat them as direct
adjustments if they are reported on that basis. AFBs at 10929. By
contrast, post-sale price adjustments are usually granted on a
transaction-by-transaction basis and, to qualify as direct adjustments,
may only be reported on that basis.
Comment 14: Respondents state that the Department's preliminary
results give the wrong impression concerning Dofasco's sales of
secondary merchandise. Dofasco claims that it has informed the
Department ``since the beginning of the LTFV investigation'' that it
cannot properly identify all the product characteristics of secondary
merchandise. Thus, Dofasco objects to the Department's alleged
inference that Dofasco represented as accurate information certain
product characteristics of its secondary merchandise.
Petitioners did not comment on this issue.
Department's Position: The Department has not stated at any time in
this review that Dofasco has attempted to represent as complete
information certain reported product characteristics for its sales of
secondary merchandise. The evidence on the record of this review
repeatedly confirms that Dofasco has consistently maintained it is
unable to properly identify the product characteristics in question.
See, e.g., Response of Dofasco Inc. to Sections IV & V of the
Department of Commerce's Antidumping Administrative Review
Questionnaire, pp. 15-17 of Section IV, (November 14, 1994);
Supplemental Response of Dofasco Inc. to Section III, IV, and V of the
Department of Commerce's Antidumping Administrative Review
Questionnaire, pp. 21-25 (December 23, 1994); and Response of Dofasco
Inc. to Section III, IV, and V of the Department of Commerce's
Antidumping Administrative Review Supplemental Questionnaire, pg. 6
(February 22, 1995). Furthermore, the Department explicitly verified
respondents' contention through a thorough review of Dofasco's records
regarding secondary merchandise. See Sales Verification Report (May 5,
1995), pp. 8-10. The preliminary results of review merely confirm that
the Department performed its model match on these six product
characteristics (see also the Department's April 19, 1995 memorandum on
secondary merchandise).
Comment 15: Respondents claim that the Department employed a
methodology for adjusting for taxes which artificially inflates
margins. Dofasco notes that 19 U.S.C. 1677a(d) (1988) of the statute
requires the Department to adjust U.S.P. to take into account taxes
that are levied upon
[[Page 13824]]
foreign market sales, but that are rebated or not collected upon export
sales. Respondents argue that because the Department's tax methodology
violates the United States' international obligation by increasing or
creating dumping margins, the Department should adopt the tax-
adjustment methodology upheld by the Court of Appeals in Federal Mogul
Corp. v. United States (Federal Mogul), 94-1097, -1104, at 20-21 (Fed.
Cir. Aug. 28, 1995). Dofasco claims that the Court of Appeals
specifically held that this U.S.P. tax-adjustment methodology is in
accordance with the United States' international agreements and is
reasonable.
Petitioners assert that respondents have improperly characterized
the Federal Mogul opinion, and furthermore, that Dofasco's proposed
alternative methodology would ``artificially deflate the amount of cash
deposits'' (emphasis added). First, petitioners claim that the Court
supported the Department's methodology in Federal Mogul as consistent
with the express statutory language and ``not an unreasonable
position.'' Petitioners add that, even if the results are contrary to
certain GATT provision, the Court noted in Federal Mogul that ``in the
event of a conflict between a GATT obligation and a statute, the
statute must prevail.'' Therefore, the Court did not order the
Department to utilize the methodology in Federal Mogul which
respondents in this case now advocate. Instead, according to
petitioners, the Court allowed the Department discretion to select a
tax methodology such as the one used for the preliminary results here.
Second, petitioners argue that the utilization of Dofasco's
proposed tax methodology would reduce the estimated duty deposit rate
to a level below what it would be if no tax were imposed in the home
market. Specifically, petitioners argue that Dofasco's approach, while
creating an absolute dumping margin which is tax neutral, would deflate
the ad valorem margin. Petitioners allege that this significant aspect
of the methodology was not addressed by the Court of Appeals in Federal
Mogul, and that ``no court has ever suggested that it was Congress'
intent to diminish the amount of cash deposit rate to the detriment of
the domestic industries (emphasis original).''
Department's Position: In accordance with Federal Mogul, we have
changed our VAT methodology (see VAT tax methodology section, above).
Comment 16: Petitioners claim that Dofasco used an improper
methodology for calculating its product-specific cost of production
(COP), constructed value (CV), and difference in merchandise (difmer)
data. Petitioners argue that Dofasco did not calculate its costs using
its entire production volume to calculate weighted-average costs per
product, but rather used only production for home market sales orders
to determine the cost of manufacturing (COM) for COP, and only its
production for U.S. sales orders to determine its COM for CV.
Furthermore, petitioners claim that Dofasco did not alert the
Department in its response concerning its methodology.
Respondents claim that petitioners have misunderstood the cost
methodology employed by Dofasco to calculate COP and CV. Respondents
state that their calculation methodology is a two-step process. First,
Dofasco calculates a per unit production cost based on total production
of a Dofasco product. Dofasco then weight-averages all Dofasco products
by the Department's control number and by production for sale in a
particular market. Dofasco argues that this methodology is in
accordance with the statute (19 U.S.C. 1677b(e) (1995) for CV and 19
U.S.C. 1677b(b) (1995) for COP) and in accordance with the Department's
questionnaire instructions.
Department's Position: The Department agrees with respondent and
considers Dofasco's COP/CV response to be in compliance with the
statute and with the Department's questionnaire.
Petitioners' argument that Dofasco used an improper methodology in
determining COP and CV for subject merchandise because it does not take
into account all of Dofasco's production is incorrect. As documented at
verification, Dofasco used costs based on total production (on a
control number basis) to determine COP and CV figures.
In addition, as stated in the Department's questionnaire issued to
Dofasco, COP represents ``the total cost of production of each product
sold in the home market/third country'' and constructed value ``is
based upon the costs incurred to produce each product sold in the U.S.
market, as if it had been sold in the home market.'' Thus, Dofasco's
practice of basing COP and CV on home market sales and U.S. sales
respectively is entirely consistent with the Department's practice and
intent.
Comment 17: Petitioners claim that Dofasco failed to include third-
country production in its weighted-average cost calculations. As a
result, according to petitioners, there is no way for the Department to
determine accurate product-by-product cost data.
Respondents claim that, as explained in Comment 16 above, the cost
of manufacture for each product within a control number is based upon
Dofasco's entire production volume of that product, regardless of where
each individual production run of that product was sold.
Department's Position: As stated above, the Department verified
that Dofasco used costs incurred in its total production (within each
CONNUMH and CONNUMU) to determine the COP and CV of subject
merchandise. Third country information was only disregarded when
Dofasco weight-averaged its costs to determine U.S.-specific CV data
and home market-specific COP data.
Comment 18: Petitioners claim that the reliability of Dofasco's COP
data is compromised because Dofasco included in its calculations
numerous sales orders where there was no cost for slab production,
resulting in ``understated'' costs.
Respondents note that, for a small number of products, Dofasco
inadvertently has not reported slab costs. Respondents maintain that
this was a simple error arising from their presumption that there were
no sales in 1994 of steel poured into ingots at Dofasco's ingot mill,
which the Department verified had closed in the third quarter of 1993.
Respondents argue that petitioners should have informed the Department
of this error prior to petitioners' submission of their case brief, and
that petitioners' failure to do so was a deliberate attempt to prevent
respondents from presenting proof that the actual incidence of missing
slab costs is insignificant.
Respondents add that, in the event Dofasco is not allowed the
opportunity to correct this obvious error, the Department should adopt
Dofasco's proposed methodology to correct this error, which Dofasco
claims is adverse because it results in a certain increase in the cost
data of all control numbers.
Department's Position: We agree with petitioners in part.
Regardless of whether Dofasco's failure to report certain slab costs
was an oversight, the Department is obligated to correct such errors.
Because of the nature of this error, which prevented the Department
from identifying which sales should have included slab costs, the
Department has adopted the following methodology: the Department
upwardly adjusted Dofasco's reported value for the control number which
we verified, utilizing the weighted-average costs of slab production of
all sales orders
[[Page 13825]]
except those for which slab costs were clearly not included in reported
production costs. Then, we applied to all control numbers, for both COP
and CV purposes, the percentage difference between the upwardly
adjusted value figure and the originally reported value figure as a
partial BIA,. Because of the limited nature of this error, and the fact
that Dofasco has been cooperative, the Department does not believe that
total BIA is appropriate.
Comment 19: Petitioners claim that the problems with Dofasco's cost
data, as put forward in comments 16-18 above, also affected the difmer
data to the point where such data is inaccurate and unreliable.
Petitioners state that the data used to calculate COP, which it claims
did not include certain slab cost data, were also used to calculate
difmers. Additionally, petitioners argue that the difmers were
calculated incorrectly for a significant number of CONNUMs where
Dofasco sold the merchandise in both the home and U.S. markets.
Finally, petitioners stress that the calculation of accurate difmer
data is not possible because Dofasco ignored production for export to
third countries in calculating COP, and there is no way to know whether
all or only some CONNUMs are affected.
Respondents agree with petitioners that the cost data used to
calculate the difmer should be based on both U.S. and home market cost
data, but that, due to a programming error, this did not occur in ``a
few instances.'' Respondents argue that all the necessary information
is currently on the record for the Department to recalculate difmers,
and have provided the Department with proposed calculation strings and
programming language to correct the data. Therefore, Dofasco asserts
that there is no reason for the Department to resort to BIA.
Department's Position: The Department agrees with petitioners that
Dofasco's reported difmer data is incorrect. However, the errors are
obvious and were brought to the Department's attention in sufficient
time for correction. Moreover, as noted by respondent, the Department
does possess all the information necessary to correct this data. As a
result, the Department corrected this data by using the computer code
submitted by respondent. The Department has thoroughly reviewed this
language and is satisfied that it fully corrects the difmer data.
Comment 20: Petitioners claim that respondents have under reported
general and administrative costs by improperly deducting from its
expense two items designated as ``Reversal of Restructuring Costs.''
Petitioners assert that the Department is clear that such prior period
reversals are not part of the current year's cost of production.
Petitioners argue that the Department should add a certain percentage
to Dofasco's COP and CV figures to compensate for this improper
calculation.
Respondents argue that petitioners have been ``inconsistent'' on
this issue between the LTFV investigation and this review. Respondents
claim that, since the Department included the restructuring expenses
(as ordinary expenses borne by the entire corporation) in their
entirety as part of COP and CV in the LTFV investigation, the
Department should now accept a prior period reversal of a portion of
those original restructuring estimates. According to Dofasco, this
approach would achieve consistency in the Department's treatment of
these restructuring expenses, and would also coincide with the
Department's ``long-standing practice'' of following the home country's
generally accepted accounting principles.
Respondents further argue that petitioners' reliance on Small
Diameter Circular Seamless Carbon and Alloy Steel, Standard, Line and
Pressure Pipe from Italy, 60 FR 31981, 31987 (1995) is misplaced,
because in that instance, the respondent attempted to benefit from a
reversal during a POI of an expense prior to the POI.
Department's Position: The Department agrees with respondent. In
the Final Determination 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 Canada (58 FR 37108),
the Department agreed with petitioners that estimated expenditures
related to restructuring should have been included in their entirety as
part of COP and CV. In the investigation, these expenditures were on
Dofasco's financial statements.
In the present review, Dofasco's financial statements include
certain partial reversals of those earlier restructuring estimates. In
order for the Department to be consistent and abide by its long-
standing policy, it must also include these partial reversals in its
calculation of COP and CV for Dofasco.
Comment 21: Petitioners note that Dofasco claimed a total of five
levels of trade which consisted of distributors, known as service
centers, and the following four categories of end-users: automotive,
construction, converters, and manufacturers. Petitioners claim that the
Department should reject Dofasco's claim that its end-user customers
comprised four distinct levels of trade and that Dofasco has not proved
distinct selling functions for the reported total of five levels of
trade. Petitioners argue that the Department should disallow
respondents' claim of different levels of trade within one general
category because it is contrary to Departmental practice. Petitioners
claim further that any differences pointed to by Dofasco among its
purported levels of trade predominantly concern quantities purchased,
not function. Petitioners argue that the Department has emphasized in
the past that such differences do not warrant distinct level of trade
treatment. Finally, petitioners claim that the analysis provided by
respondents attempting to show a correlation between price and selling
expenses on the one hand and levels of trade on the other is flawed and
meaningless. Thus, petitioners state that the Department should allow
only two levels of trade: Distributors and end-users.
Respondents note that the Department calculated its dumping margin
in the final determination of the LTFV investigation based on its five
reported levels of trade, which the Department verified. According to
respondents, because the Department has verified these same five levels
of trade in this review, and ``nothing has changed'' since the
investigation regarding Dofasco's levels of trade, a Departmental
decision to collapse Dofasco's levels of trade would ``constitute a
change of policy * * * from the investigation,'' and that an agency
must present an adequate basis for a policy change in such a situation.
Moreover, respondents assert that the Department has differentiated
among end-users in past cases. Finally, respondents claim that there
were no meaningful methodological errors in its analysis of price and
selling expenses by trade level, and that the record shows that
Dofasco's prices indeed vary by level of trade for each particular
product group.
Department's Position: In asking for level of trade information,
the Department attempts to determine where in the distribution chain
the respondent's customer falls (end-user, distributor, retailer).
Thus, ``comparisons are made at distinct, discernible levels of trade
based on the function each level of trade performs, such as end-user,
distributor, and retailer.'' See Certain Carbon and Alloy Steel Wire
Rod from Canada (``Wire Rod from Canada''), 59 FR 18791, 18794 (April
20, 1994) (Import Administration Policy Bulletin 92/1 (July 29, 1992)).
[[Page 13826]]
In this case, Dofasco has reported separate levels of trade among
four types of end-users: that is, Dofasco claims that, while all four
types of end-users occupy the same spot on the distribution chain, the
differences among these end-users are significant enough that the
Department would be mistaken to conduct its model match if they were
aggregated into one end-user level.
However, the Department normally disallows a respondent's claim of
different levels of trade within one general category. See Disposable
Pocket Lighters from Thailand, 59 FR at 53415, and Disposable Pocket
Lighters from Thailand, 60 FR 14263, 14264 (final determination) (March
16, 1995). We note that, in its divisions among end-users, the only
characteristics of each of these end-users about which Dofasco
uniformly informed the Department were quantities and the customer's
end-products. This represents the type of information which the
Department highlighted as being inadequate in Wire Rod from Canada (59
FR at 18794).
In this respect, the Department notes that Dofasco has referred to
a case (Limousines from Canada, 55 FR 11036, 11039 (1990)), in which
two end-users were differentiated due to differences in volume
purchased, lower prices, and different sales resources. With regard to
quantities purchased, it is noteworthy that the decision in Limousines
from Canada predates Wire Rod from Canada by four years, and as such
does not reflect current Department policy with regard to quantities
purchased. Moreover, there is no discussion on the record of this
review confirming price differentials among construction, converter,
and manufacturing end-users. Finally, regarding sales resources, the
Department found at verification that Dofasco's construction and
manufacturing customers are served by the same sales division, and
Dofasco has not set up a sales division to service only its converter
customers as it has done, for example, for its automotive customers.
Dofasco also points to Stainless Steel Bar from Spain, in which
Dofasco maintains that ``the Department separated end-user customers
into two levels of trade because the characteristics of those customers
were significantly different.'' See Stainless Steel Bar from Spain, 59
FR 66931, 66937 (December 28, 1994). In fact, in its discussion Dofasco
omitted a crucial distinction between the end-users in the case of
Stainless Steel Bar from Spain: namely, one set of end-users purchased
through one distribution channel (direct from factory), while the other
group of end-users made its purchases through a different distribution
channel (from related service centers).
Nevertheless, Dofasco did report significantly more information
regarding its sales to the automotive industry than it has for its
sales to converters and manufacturers. This information includes a
differentiated sales process (through a wholly-owned subsidiary), early
vendor involvement, the presence of long-term requirements contracts,
and generally lower prices. Together, such distinct and discernible
functions represent exactly the sort of evidence which serves to
distinguish sales to automotive manufacturers from sales to other
customers, notwithstanding petitioners' contention regarding the
methodological integrity of Dofasco's analysis of price and selling
expenses. Moreover, the Department acknowledged in its questionnaire
the uniqueness of automotive manufacturers as steel industry customers.
Specifically, the computer field CUSTOMER CATEGORY/LEVEL OF TRADE
(CUSTLOT) stated that respondents should ``(s)how a different code for
each of the basic types of customers to whom you sell the merchandise,
e.g., auto manufacturers, steel service centers, etc...'' (emphasis
added).
Finally, with regard to Dofasco's assertion that a Departmental
decision to collapse Dofasco's levels of trade would constitute a
change of policy from the investigation, and that ``an agency must
present an adequate basis for a policy change'' (see British Steel, Plc
v. United States, 879 F. Supp. 1254, 1307 (Ct. Int'l Trade 1995),
citing Secretary of Agric. v. United States, 347 U.S. 645, 653-54, 74
S.Ct. 826, 832, 98 L.Ed. 1015 (1954)), the LOT issue addressed in this
review was not brought to the Department's attention in the
investigation and the Department is not precluded from making a
determination on that issue in this administrative review. Neither
petitioners nor respondents briefed the issue in the investigation.
Each segment of a proceeding (e.g. investigations and review) forms a
separate administrative record about which parties may raise issues
before the Department and seek judicial review.
The Court's decision in British Steel, Plc v. United States cited
by respondents is inapposite to the present case. The British Steel
decision addressed a situation where the Department changed an
explicitly stated policy between two segments of a proceeding. The
issues raised by Petitioners in this proceeding concern the proper
treatment of LOT in light of the facts presented and the Department's
current policy.
Consequently, in accordance with standard practice, the Department
has determined that Dofasco's three reported levels of trade
``construction'', ``converter'', and ``manufacturer'' are combined into
one end-user level of trade. We have treated the automotive sector as a
separate level of trade for the following reasons: a differentiated
sales process (through a wholly-owned subsidiary), early vendor
involvement, the presence of long-term requirements contracts, and
generally lower prices.
Comment 22: Petitioners assert that, for one term of sale, the
Department should include freight revenue to Dofasco in gross unit
price and should deduct reported freight rates. Petitioners note that
Dofasco did not supply actual freight rates, and that Dofasco
acknowledged that in certain cases it did not pay the same amount for
freight as the amount charged by Dofasco to its customers. Therefore,
petitioners claim that the Department should add freight paid in
certain sales, and deduct reported minimum freight for that destination
in the home market, and add freight paid in certain United States sales
while deducting maximum freight for that destination. Additionally,
petitioners claim that an adjustment should also be made to net price
for the purposes of the cost test, but that the application of the
maximum freight rate (instead of the minimum) should be used as BIA.
Respondents argue that the Department properly accepted the freight
amounts charged to Dofasco's customers for one term of sale. First,
respondents state that there existed no requirement that Dofasco report
actual freight charges. According to respondents, such a requirement
would have imposed an unreasonable burden. Second, respondents stress
that the Department has no reason to believe that the amounts charged
to Dofasco's customers for these sales do not ``reasonably
approximate'' Dofasco's actual freight expenses. Finally, respondents
assert that petitioners have not indicated how differences between
reported freight expenses and minimum/maximum freight rates charged are
in any way significant.
Department's Position: In reporting its freight expenses, Dofasco
Inc. has used an allocative methodology because, as the Department
verified, the carrier invoices Dofasco for this term of sale for a
group of shipments, as opposed to individual sales orders. Because (1)
it would impose a heavy burden on respondents to report actual freight
charges; (2) the terms of the
[[Page 13827]]
questionnaire did not prohibit the use of an appropriate allocative
methodology in determining freight expenses; and (3) the Department has
consistently allowed the use of reasonable allocative methodologies in
reporting freight expenses (See, e.g., Small Diameter Circular Seamless
Carbon and Alloy Steel, Standard, Line and Pressure Pie from Italy, 60
FR 31981, 31987 (June 19, 1995), and Oil Country Tubular Goods from
Korea (``OCTG from Korea''), 60 FR 33561, 33563 (June 28, 1995)), the
Department agrees with respondent that respondent's use of allocations
for the values reported for freight expense, (i.e., the amounts charged
by Dofasco to its customers) is acceptable and we determine that the
use of this allocation methodology does not cause inaccuracies or
distortions.
Nevertheless, the Department notes that Dofasco reported and the
Department verified: (1) The amount Dofasco charged its customer on the
invoice and the amount the customer paid Dofasco; and (2) the minimum
freight rate charged by the carrier to Dofasco per destination for the
home market, the maximum freight rate charged by the carrier to Dofasco
per destination for the United States market, and the actual amount
Dofasco paid the carrier. The reported minimum freight rates charged by
the carrier to Dofasco in the home market reflect the minimum amount to
be deducted from foreign market value. Therefore, the Department
verified that Dofasco would have lowered its FMV (thereby lowering its
margin) had it been able to report actual freight charged by the
carrier to Dofasco, because the Department verified that in fact,
Dofasco was always charged a higher rate by the carrier in the home
market. Similarly, the reported maximum freight rates charged by the
carrier to Dofasco in the U.S. market reflect the maximum amount to be
deducted from U.S. price. Hence, the Department verified that Dofasco
would have raised its USP (thereby lowering its margin) had it been
able to report actual freight charged by the carrier to Dofasco,
because the Department verified that in fact, Dofasco was always
charged a lower rate by the carrier in the U.S. market.
The Department verified that differences between reported freight
expenses and minimum/maximum freight rates charged are indeed
significant (see, e.g., Dofasco Sales Verification Report, May 5, 1995,
pg. 21), and thus, contrary to respondents' assertion, the Department
has adequate reason to believe that the amounts charged to Dofasco's
customers for these sales do not reasonably approximate what Dofasco
actually paid the carrier.
Regarding petitioners' claim that an adjustment should also be made
to net price for the purposes of determining whether certain sales have
been made below the cost of production, but that the application of the
maximum freight rate (instead of the minimum) should be used as BIA
(thereby increasing the likelihood that a sale would fail the cost test
by deducting a greater amount from the sale's gross unit price), the
Department agrees with petitioner that some form of BIA should be used.
However, petitioners' proposal in this situation, in which Dofasco has
cooperated fully with the Department and has provided extensive
information for the record of this review, is not appropriate.
Petitioners have proposed that the Department adjust upward Dofasco's
minimum freight rate per home market destination by the highest
percentage difference between minimum and maximum freight rates for any
home market destination. Instead, the Department determines that the
percentage difference between minimum and maximum freight rates for the
most popular home market destination for this term of sale should be
used to upwardly adjust minimum freight rates for all home market
destinations. The resulting BIA rate shall be applied to upwardly
adjust the minimum freight charged to Dofasco by the carrier for home
market sales for the purposes of calculating net price for the cost
test.
Therefore, for one term of sale, the Department will add freight
paid to Dofasco by the customer and deduct reported minimum freight
paid by Dofasco to its carrier for that destination in the home market,
and add freight paid to Dofasco by the customer while deducting maximum
freight paid by Dofasco to its carrier for that destination in the
United States.
Comment 23: Petitioners argue that the Department must deduct
estimated antidumping duties paid by the respondent or related parties
from U.S. price. Section 772(d)(2)(A) states that the purchase price
and exporter's sales price shall be reduced by United States import
duties. According to petitioners, antidumping duties are ``incident to
bringing the subject merchandise from the place of shipment in the
country of exportation to the place of delivery in the United States''
and are therefore properly classified as import duties. Furthermore,
petitioners claim that antidumping or countervailing duties are
considered ``import duties'' in trade laws unless the provision
specifically indicates otherwise.
Respondents rebut petitioners' assertion by noting that the
Department, the courts, and the U.S. Congress have rejected
petitioners' argument. Dofasco stresses that petitioners have cited
``no legal or other authority whatsoever'' to support their argument.
Respondents assert that Congress did not intend for the antidumping law
to operate in the manner proposed by petitioners; that furthermore,
Congress explicitly rejected such a treatment in drafting the Uruguay
Round trade negotiations implementing legislation; and that to follow
petitioners' proposal would result in a geometric and infinite margin
inflation. Additionally, respondents have only paid ``estimated duty
deposits,'' and not actual antidumping duties. Therefore, respondents
claim that the U.S. Court of International Trade has agreed with the
Department's practice of refusing to deduct estimated antidumping duty
deposits in calculating margins for a given period of review.
Department's Position: While section 772(d(2)(A) requires the
deduction of normal ``import duties,'' cash deposits of estimated
antidumping duties are not normal import duties, and do not qualify for
deduction under section 772. Contrary to petitioners' argument, the CIT
in Federal-Mogul v. United States 813 F. Supp. 856, 872 (CIT 1993),
recognized that the actual amounts of normal duties to be assessed upon
liquidation are known because they are based upon rates published in
the Harmonized Tariff Schedule and the actual entered value of the
merchandise. In contrast, deposits of estimated antidumping duties are
based upon past dumping margins and may bear little relation to the
actual current dumping margin. Thus, the CIT recognized the distinction
between estimated antidumping duties and ``normal'' import duties for
purposes of section 772(d)(2)(A).
Petitioners' methodology also conflicts with the holding of the CIT
in PQ Corp. v. United States, 652 F. Supp. 724 (CIT 1987), in which the
court addressed the issue of deduction of estimated antidumping duties
under section 772(d)(2)(A). The court cited with approval the
Department's policy of not allowing estimated antidumping duties, based
upon past margins, to alter the calculation of present margins. The
court explained ``[i]f deposits of estimated antidumping duties entered
into the calculation of present dumping margins, then those deposits
would work to open up a margin where none otherwise exists.'' Id. At
737.
Petitioners argue at length that the Department should not
distinguish
[[Page 13828]]
between purchase price and ESP transactions in deducting antidumping
duties. However, because the Department does not deduct estimated
antidumping duties from any transaction, this argument is inapposite.
The Department agrees with petitioners that statements made in the
URAA are not relevant in this review, which is being conducted under
pre-URAA law. However, the policies of other countries, cited by
petitioners with respect to this issue, are equally irrelevant.
Comment 24: Respondents claim that the Department made a clerical
error in its computer program on an inland freight charge for a U.S.
sale.
Petitioners claim that the Department made clerical errors in the
computer program by: failing to include the further processing field in
the U.S. price calculation; failing to deduct a U.S. rebate from U.S.
price; improperly classifying U.S. duty and brokerage as U.S. direct
expenses instead of movement expenses; and double-counting one home
market rebate.
Respondents agree with petitioners' identified clerical errors.
Petitioners did not comment on respondents' identified clerical errors.
Department's Position: We acknowledge the clerical errors which
both parties have identified, and have corrected them for our final
results of review.
MRM
Comment 25: MRM contends that the Department's preliminary results
contained a ministerial error affecting its treatment of VAT as it
relates to U.S. sales. MRM asserts that the Department should multiply
U.S. Price by 1.07 to account for the seven percent VAT tax which
should be added to U.S. price.
Petitioner agrees with MRM but argue that a similar error was made
affecting FMV.
Department's Position: The Department disagrees with both
petitioners and respondents. In response to Federal Mogul v. United
States, we have changed our VAT methodology in a manner not addressed
by either party. See the VAT tax methodology section, above.
Comment 26: Petitioners contend that MRM has not substantiated its
reported rebate expense by failing to demonstrate that the rebates were
contemplated at the time of sale, and that (with one exception) MRM did
not have any written rebate agreements with any of its customers. In
support for their position, petitioners cite Antifriction Bearings
(Other Than Tapered Roller Bearings) and Parts Thereof From France, et
al.; Final Results of Antidumping Duty Administrative Reviews, 60 FR
10900, 10930 (February 28, 1995). In addition, Petitioners allege that
there is no documentary evidence of MRM's reported ``rebate program.''
Given the average value of these ``rebates'', Petitioners argue that
the Department should not grant any adjustment to MRM's FMV (with the
exception of the one customer who had a written agreement with MRM).
MRM contends that it has satisfied the legal criteria for
establishing that the Department should adjust FMV for rebates. MRM
holds that it has established that the rebates are directly related to
the sales under consideration by tying them directly to sales invoices
and making reference to them on the invoice. In addition, MRM states
that the Department conducted sales traces at verification that
established that MRM paid the rebates and the documentation noted that
the rebates were either customer or product specific in nature. MRM
also argues that these rebates are fixed and determinable at the time
of sale, and that it is a demonstrable business practice of MRM to
offer these rebates.
Department's Position: We agree with petitioners that MRM failed to
demonstrate that the rebates were contemplated at the time of sale. At
verification, we confirmed that in the normal course of business, MRM
normally made verbal agreements over the telephone with its customers
concerning rebates. Only one of MRM's customers had a written rebate
agreement. At verification, we examined documentation for MRM's one
customer that had a written rebate agreement. We found that the
agreement stated MRM's rebate program for the upcoming year, the rebate
amount and the minimum purchase necessary to qualify for the rebate.
For the rebates where there were verbal agreements, we examined
correspondence between MRM and its customers. These letters indicated
the amount of sales on a monthly basis, the amount of the rebate earned
and method of MRM's payment of the rebate to the customer. However, the
correspondence from MRM to its customers fail to indicate what the
customer knew at the time of the sale. In addition, MRM stated during
verification that ``[i]n most cases there is no written agreement but
there are verbal agreements between MRM and its customers. Negotiations
and inquiries over MRM's rebate program are usually conducted over the
telephone. MRM stated that it does not usually send a confirmation
letter to its customers.'' See MRM Sales Verification Report (May 5,
1995), at pg. 14. With regard to MRM's rebates, respondent has failed
to provide adequate evidence proving prior customer awareness for the
claimed rebate.
As we stated in our position in Comment 13 concerning Dofasco's
rebates, the Department allows post-sale price adjustments that reflect
the respondent's ``normal business practice.'' The Department found
that MRM's ``rebate'' program is part of the company's ``normal
business practice.'' As the Department reviewed numerous documentation
at verification that confirmed that MRM did pay the ``rebate'' amount
claimed in the response, and as we tied the payments to the sale of
subject merchandise, we will reclassify MRM's rebates to post-sale
price adjustments and deduct them from FMV.
Comment 27: Petitioners note that MRM was unable to report actual
credit expense because it could not report actual date of payment, and
instead estimated credit expense by multiplying its short-term interest
rate by the terms of payment offered to the individual customer.
Petitioners contend that MRM's credit expense cannot be based upon
terms of payment alone, but must reflect actual credit experience in
each market, since all customers do not always pay according to agreed
terms of payment. In support of their position, petitioners cite
Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts
Thereof From France, et al.; Final Results of Antidumping Duty
Administrative Reviews, 60 FR 10900, 10915 (February 28, 1995); and
Final Determination of Sales at Less Than Fair Value; Certain Tapered
Roller Bearings from Italy, 49 FR 2278 (January 19, 1984). Petitioners
contend that the Department should make no adjustment to FMV for credit
expense and, for U.S. sales, apply as BIA the highest per unit credit
expense reported by MRM for any sale.
MRM argues that it reported estimated dates of payment based upon
each customer's terms of payment because it does not maintain records
of actual date of payment received for each invoice. MRM notes that
Canadian GAAP does not require this information be maintained or
collected by MRM. However, MRM did keep track of overdue accounts, and
included those figures in its estimates.
Department's Position: We disagree with petitioners that MRM's
credit expenses should be denied. At verification, we found that MRM
was unable to report the actual expense because in the normal course of
business, MRM does not maintain
[[Page 13829]]
information on the date of payment in its computer system. We find that
MRM's use of the average age of invoices for each month of the POR to
be an acceptable methodology given the lack of company data concerning
date of payment and the fact that the actual number of days outstanding
on late payments were included in the estimate. At verification, we
found that the credit information contained in the company's sales
response tied to the company's internal records. We specifically
examined customer-specific information about the number of days
outstanding for credit while conducting our examination of MRM's sales
traces at verification and found no discrepancies.
We disagree with petitioners' interpretation of Roller Bearings
from Italy because in that case, the Department rejected the credit
expense because ``the seller received payment on various dates later
than those required under the terms of sale but did not account for
this (emphasis added).'' In contrast, MRM's methodology specifically
took into account actual credit experience on overdue accounts. We also
disagree with petitioners' reliance on Antifriction Bearings from
France in which the Department stated that it would be inappropriate to
make an adjustment based solely on agreed terms rather than actual
terms. In this review, MRM was unable to report the actual expense due
to its record keeping system but did account for the late payments.
Therefore, for the purposes of the final results, we have allowed the
claimed credit expense.
Comment 28: Petitioners note that MRM has reported estimated
freight expenses despite an ability to report actual freight expenses
on an invoice-by-invoice basis. Therefore, Petitioners contend that the
Department should reject MRM's freight information and as BIA use the
lowest home market freight adjustment for all home market sales and the
highest reported expense for constructed value and U.S. sales.
MRM argues that in the ordinary course of business, it does not
track actual freight costs to individual invoices. Instead, MRM
includes an estimated freight cost in each invoice and when later
available, records the actual freight payment in its account payable
records. MRM argues that the Department verified the accuracy of these
estimates by comparing the monthly variance between actual and
estimated freight payments for shipments in both the U.S. and home
markets. MRM states that it established the reasonableness of this
approach at verification. MRM contends that the Department's
preliminary decision to accept MRM's estimated freight expense is both
reasonable and supported by substantial evidence on the record.
Department's Position: We agree with respondent. We found that MRM
does not track the actual freight payment on a invoice-by-invoice basis
in the normal course of business. At verification, we examined
documentation concerning MRM's estimated freight amounts and we
successfully tied the estimated amounts to the response and proof of
payment. In addition, we examined the variances between actual and
estimated freight payments for both home market and U.S. sales and
found that the variances were either nonexistent or de minimis and thus
verified the accuracy of the method of estimation. Consequently, we
determine that MRM's freight methodology is reasonable and will allow
the adjustments for the final results.
Comment 29: Petitioners argue that MRM improperly calculated its
interest expense based upon information for 1993 and the first half of
1994, instead of using only annual data. Petitioners contend that using
partial year 1994 data is inappropriate and MRM should have used only
1993 information.
MRM argues that the Department verified the reported interest
expense by tying it and the cost of goods sold to the audited financial
statements of the Canam Manac group. Petitioner notes also that there
is no compelling reason to base interest expense solely on annual
figures.
Department's Position: We agree with respondents. The Department
tied MRM's interest expense at verification from the questionnaire
response to the audited financial statements. We specifically examined
the annual data from MRM's audited financial statements for 1993 and
1994. Consequently, the Department examined and verified the full year
data on interest expense for both 1993 and 1994 and the actual interest
expenses during the POR. Accordingly, the Department will use MRM's
interest expense as reported in its questionnaire response.
Comment 30: Petitioners note that MRM reported its G&A expenses on
a per/ton basis instead of expressing it as a ratio of cost of goods
sold. Petitioners contend that the Department should recalculate the
G&A expense as a percentage of cost of goods sold. In addition,
petitioners assert that the Department should recalculate MRM's G&A
expense as a ratio using 1993 annual data only (excluding the use of
partial-year 1994 data).
MRM states that it recalculated its G&A expense as a percentage of
the cost of goods sold, in accordance with Departmental instructions,
and submitted it the Department on May 5, 1995. Regarding Petitioner's
argument that G&A expense should be based upon fiscal year figures only
(citing Oil Country Tubular Goods from Argentina (60 FR 33539, 33549),
MRM notes that the case actually states that ``the Department long-
standing [sic] practice is to calculate G&A expenses from the audited
financial statement which most closely correspond to the POI.''
Therefore, MRM claims it is entirely appropriate to use the audited
financial records corresponding directly to the POR.
Department's Position: We agree with petitioners in part. We agree
that the G&A expense should be calculated as a percentage of the cost
of goods sold. However, petitioners are incorrect in their assertion
that MRM's G&A expense is calculated on a per/ton basis. The Department
required MRM to recalculate its G&A on a cost of goods sold basis (see
Memorandum to the File, May 5, 1995, p.2).
However, we disagree with petitioners that the Department should
recalculate MRM's G&A expense as a ratio using 1993 annual data only
(excluding the use of partial-year 1994 data). As we stated in Oil
Country Tubular Goods, the Department's methodology for G&A expenses
intends to smooth out fluctuations and capture a representative picture
of respondent's G&A costs. MRM's G&A expenses are based on the cost of
goods sold over the POR which include 1993 and the first seven months
of 1994. At verification, we examined MRM's costs over the entire POR
to ensure that respondent properly included all relevant costs in the
calculation of its G&A expense. We tied the cost of goods sold to MRM's
financial records and statements and determined that both the numerator
and denominator in the G&A equation were correct and that the costs
were not distortive.
We agree with MRM's interpretation of Oil Country Tubular Goods
from Argentina where the Department stated that its long-standing
practice is to calculate G&A expenses from the audited financial
statements which most closely correspond to the POI. The Department's
position is also explained in Furfuryl Alcohol (see, Final
Determination of Sales at Less Than Fair Value: Furfuryl Alcohol From
Thailand, 60 FR 22557, 22560, May 8, 1995) where the Department
determined that the G&A rate should be calculated from the annual
audited financial statements. Since the Department confirmed the
accuracy of MRM's G&A
[[Page 13830]]
expenses and tied the expenses to both its 1993 and 1994 audited
financial statements, we will use MRM's G&A costs for the final
results.
Stelco
Comment 31: Stelco states that on August 11, 1995, it advised the
Department of a significant error contained in the computer program
used to calculate the antidumping margin calculation. Stelco maintains
that the Department's computer error resulted in the exclusion of more
than 60 percent of Stelco's U.S. sales from the antidumping margin
calculation.
Department's Position: We agree with respondent and have corrected
our calculations for the final results of review.
Comment 32: Petitioners state that the Department must apply BIA
for Stelco's sales of prime corrosion-resistant merchandise with
missing product characteristics. Petitioners state that the
Department's methodology for matching prime sales with missing product
characteristics violates three provisions of the antidumping statute.
Petitioners contend that the statute requires the Department to
determine FMV based on the price at which ``such or similar
merchandise'' is sold in the home market. ``Such or similar
merchandise,'' say petitioners, is defined by the statute as
merchandise that is ``identical in physical characteristics'' or ``like
that merchandise in component material or materials.'' Petitioners
contend that these provisions compel the Department to match sales
based on actual physical characteristics of the products and do not
permit the Department to exclude sales with missing physical
characteristics or to assume that missing characteristics are the same
as reported for missing characteristics on matching sales.
Petitioners continue that the antidumping statute requires the
Department to make adjustments to FMV to take into account the
differing costs that are present when matched products are similar but
not identical.
Petitioners conclude that the Department must use BIA if the
respondent is unable to provide the adequate information, citing
Antifriction Bearings (Other than Tapered Roller Bearings) and Parts
Thereof from France et al., (57 FR 28360, 28379 June 24, 1992). By
failing to report full product characteristics for a number of prime
home market and U.S. sales, petitioners state that Stelco made it
impossible to accurately perform the model match with respect to these
sales or to determine accurate costs of these products. Petitioners
assert that the Department is required to use BIA whenever a party or
any other person refuses or is unable to produce information requested
in a timely manner and in the form required, or otherwise significantly
impedes an investigation. Petitioners recommend that to ensure that
respondents are encouraged to provide complete information, the
Department should apply to the relevant transactions the higher of
second-tier BIA or the highest non-aberrant margin found on any Stelco
sale. Petitioners indicate that this degree of BIA should be applied to
all U.S. prime sales with missing product characteristics as well as to
all U.S. sales whose best match could have been a home market sale with
missing characteristics.
Stelco contends that it did not fail to report any information
available to it, nor did it misrepresent any information. Respondent
indicates that Stelco informed the Department that there were a few
sales for which it was not able to identify all of the product
characteristics requested by the Department, and that a majority of
these were sales of secondary merchandise and that the remainder were
excess prime sales. Stelco explains these sales of seconds and excess
prime had lost their ``mill order number'' and the company then lost
track of the characteristics of the merchandise and does not know all
of the manufacturing processes.
Respondent maintains that petitioners overstate the significance of
limited-characteristic sales. Respondent states that these sales equal
.04 percent of total U.S. sales volume. Additionally, Stelco reasserts
that given its inability to calculate exact costs for excess prime
products, it applied its most reasonable surrogate: The average cost of
production for all products having those same characteristics.
Furthermore, respondent objects to petitioners' allegation that
Stelco purposefully failed to report product characteristics to conceal
high-priced home market sales to circumvent the antidumping law. Stelco
states that its inability to provide complete characteristics
represents an unintended consequence of the characteristics of the
company's normal product invoicing system.
Respondent states that petitioners' assertion that the Department's
comparison of these sales violates three provisions of the antidumping
statute is based on a fundamentally flawed concept of the law.
Respondent maintains that there is nothing in the statute that defines
``identical'' as meaning ``identical in every respect,'' that the
interpretation of what is identical is up to the Department, and that
the Department's comparison of limited-characteristic merchandise is
the only reasonable policy in this case.
Department's Position: We disagree with petitioners. The Department
has the authority to determine what merchandise qualifies as such or
similar for the purposes of the statute. United Engineering & Forging
v. the United States, 779 F. Supp. 1375, 1380-82 (CIT1991); NTN Bearing
Corp. v. United States, 747 F. Supp. 726, 735-36 (CIT 1990); Kerr-McGee
Chem. Corp. v. United States, 741 F. Supp. 947, 951-52 (CIT 1990);
Monsanto Co. v. the United States, 698 F. Supp. 275, 277-278 (CIT
1988); Timken Co. v. United States (Timken I), 630 F. Supp. 1327, 1338
(CIT 1986).
Stelco's sales of excess prime represent a very small portion of
its home market and United States sales and consist of one or more of
the following types of merchandise: (1) Material downgraded from use in
exposed portions of automobiles to use in unexposed portions; (2)
merchandise resulting from production overruns; (3) leftover materials
after customers cancel orders; and (4) merchandise with coil weights
less than that required by the customer. The Department verified that
Stelco customarily effects these sales by offering the customer a list
of products it has ready for sale at specific prices, and the customer
returns the offer either accepted, rejected or with a counteroffer. The
sales process for this merchandise differs significantly from sales of
other prime merchandise because under usual circumstances, the buyer
and Stelco discuss quantity, quality and price before the merchandise
is produced.
The few prime sales Stelco made that did not have complete physical
characteristics were orders for which the mill order number had been
lost. The Department verified that Stelco designates prime sales
lacking complete characteristics as excess prime sales before the
product is sold. Stelco then finds customers for this merchandise.
Although the material in question is prime, Stelco reported and the
Department verified that it is sold at a reduced price, and in the vast
majority of cases to distributors. While this merchandise is not
defective, full and complete physical characteristics were not needed
to make the sale to the customer. The end uses of such material are
applications for which knowledge of certain of the product's
characteristics was unimportant.
The use of BIA is not appropriate in this case, because Department
[[Page 13831]]
methodology properly matches sales based on the information Stelco
reported. The Department verified that because of the way that Stelco
keeps its records Stelco could not report the full physical
characteristics of the small number of sales in question. Petitioners'
reference to AFB's from France is not precisely relevant, because in
that case, the Department used the BIA cited by petitioners as total
BIA for companies that either failed to respond to the Department's
questionnaire or were unable to complete verification. In this case,
Stelco cooperated with the Department and provided all the product
matching physical characteristics that it could report. In addition,
the Department could use the information that Stelco provided for
matching purposes. Consequently, the use of total BIA in this
circumstance is unwarranted.
The Department's model match methodology uses a series of matching
product characteristics to find such or similar matches. Using these
product characteristics, the Department can reasonably find an
``identical'' match although the merchandise may not be identical in
every physical characteristic. We note that the Department used the
same matching methodology in the LTFV investigation. (See Memorandum
from Roland MacDonald to Joseph Spetrini, A-100-003, April 19, 1995).
Therefore, because Stelco sold this merchandise in both markets,
because the missing physical characteristics were not important to
Stelco's customers and because we verified that respondent reported all
physical characteristics it could, the Department matched this
merchandise based on the limited physical characteristics reported.
Since these were the only physical characteristics relevant to the way
the product was sold, we conclude that we may make appropriate matches
on the basis of only these physical characteristics in this limited
circumstance.
Comment 33: Petitioners contend that Stelco incorrectly reported
gross unit prices for corrosion resistant and cut-to-length plate sales
in both markets and that they should be rejected. Petitioners state
that Stelco directly adjusted its reported gross unit prices for
various clerical billing errors or other price adjustments. These
adjustments were not made on a transaction-specific basis but were
allocated over all invoices referenced on a particular credit or debit
memo. Furthermore, say petitioners, Stelco's reporting made it
unfeasible to decide what adjustments were made to particular sales,
because allocated debits and credits were applied directly to gross
unit price and not in a separate computer field, as required by the
Department. Petitioners maintain that because it is not possible to
determine the actual prices for sales to which price adjustments were
assigned, the Department must reject Stelco's information with respect
to these sales.
Petitioners argue that it is the Department's practice to require
respondents to attribute price adjustments to the precise transactions
that lead to the adjustments on a transaction-specific basis, citing
Antifriction Bearings (Other than Tapered Roller Bearings) and Parts
Thereof from France et al., Final Results of Antidumping Administrative
Review, (58 FR 39729, 39759 July 26, 1993) (AFBs from France (1993)).
Despite the fact that the Department rejected Stelco's reporting of
allocated price adjustments in the original investigation, and although
both the CIT and a U.S.--Canada Binational Panel have specifically
upheld the Department's policy with respect to price adjustments,
Stelco reported allocated price adjustments in this review, declare
petitioners.
Petitioners maintain that in the case in which a respondent
improperly allocates adjustments, the Department's normal practice is
to treat the adjustments as indirect selling expenses in the home
market, and to use the highest reported price adjustment as BIA in the
U.S. market. Petitioners conclude that Stelco's improper reporting of
its price adjustments merits this application of partial BIA, because
it did not list these in the manner required by the Department. When a
respondent fails to provide usable information for certain sales, the
Department's practice is to use second-tier BIA for the misreported
U.S. sales, as well as the U.S. sales whose matching FMV is affected by
misreported home market sales, maintain petitioners.
Respondent states that as verified by the Department through each
selected sale, Stelco's credit and debit notes reference the specific
invoice or invoices to which the credit or debit applies. Respondent
continues that in the original investigation, adjustments for clerical
errors were made on a customer and product-specific basis only.
Respondent indicates that this means that in the investigation they
allocated the total of all credit and debit notes issued to a customer
on subject merchandise over all sales of subject merchandise to that
customer: there was no tying of the adjustments to the individual
invoices that they referenced in the adjustments. However, respondent
states that for this review Stelco matched each credit and debit note
to the specific invoice or invoices to which the note applies.
Therefore, concludes respondent, the adjustments are no longer customer
and product-specific, but are transaction-specific.
Respondent additionally argues that Stelco correctly reported
adjustments for clerical errors in billing. Respondent states that
Stelco did not report these errors in a separate computer field for
``rebates'' or ``discounts,'' because they do not meet that definition.
Respondent concludes that at verification, the Department reviewed
numerous transactions involving adjustments for clerical errors and
noted in the verification report that ``all values had been entered
correctly and that all adjustments had been calculated properly.''
Department's Position: We agree with respondent. The verification
report states that the Department examined documentation concerning
Stelco's adjustments to price and we determined that Stelco properly
allocated debit and credit notes on a transaction-specific basis. In
AFB's from France, the Department made direct adjustments for reported
home market discounts, rebates, and price adjustments if they were
calculated on a transaction-specific basis and were not based on
allocations. Petitioners' reliance on AFB's from France, as the basis
for the Department to determine that Stelco incorrectly reported its
gross unit sales prices is therefore unfounded because Stelco reported
the majority of these expenses on a transaction-specific basis.
However, on occasion, Stelco allocated debit and credit notes for a
particular customer over more than one invoice. While the Department
prefers that discounts, rebates and other price adjustments be reported
on a transaction-specific basis, the Department has long recognized
that some price adjustments are not granted on that basis, and thus
cannot be reported on that basis.
The Department does not agree that Stelco's methodology is
sufficient to warrant application of BIA under the policy as discussed
in AFBs from France (1993) 58 FR at 39759. In that case, the Department
contrasted preferred, transaction-specific reporting with customer- or
product-specific reporting. In this case, the amount of ``allocation''
is limited to a few specific transactions, all to the same customer,
and typically within a very limited period of time. Thus the danger of
allocation, which is the averaging effect on prices, is extremely
limited in this case. This case is similar to situations,
[[Page 13832]]
permitted by the Department as direct adjustments, in which a rebate is
granted on a limited number of purchases by a single customer. Because
Stelco's method of reporting these adjustments is reasonable, the
Department has allowed it as a direct adjustment.
Comment 34: Petitioners assert that the Department should use BIA
with respect to Stelco's reported cash discounts for corrosion-
resistant sales citing AFBs from France and Antifriction Bearings
(Other than Tapered Roller Bearings) and Parts Thereof from France, et
al., Final Results of Antidumping Administrative Review, (60 FR 10,929
February 28, 1995). Petitioners state that the Department should treat
these discounts as indirect selling expenses in the home market, and
should use the highest reported discount as BIA in the U.S. market for
all sales which incurred discounts because Stelco failed to report its
early payment discounts on a transaction-specific basis.
Respondent maintains that the Department`s decision to accept
Stelco`s calculation of cash discounts is reasonable and is supported
by evidence on the record. To calculate the adjustment for discounts,
Stelco calculated total monthly sales and the total cash discount taken
per month for each eligible customer. Stelco then calculated the actual
percentage of cash discounts taken by each customer for each month.
They then applied these percentages to the gross unit price. Stelco
thus calculated the most precise early payment discount adjustment that
it could from the information it had available from its computerized
accounting system.
Department`s Position: We agree with petitioners. Although Stelco`s
submission of January 9, 1995 indicated that it granted the discounts
on a transaction-specific basis, due to accounting restraints, Stelco
could not report the actual discount amount, if any, granted on each
transaction. Consequently, the Department has no basis to treat this
discount as a direct selling expense. Consistent with our practice as
outlined in AFBs from France, we are treating these discounts as
indirect selling expenses in the home market and as direct selling
expenses in the U.S. market as best information available.
Comment 35: Petitioners maintain that the Department should not
make a particular adjustment for certain U.S. sales of corrosion-
resistant carbon steel products.
Respondent agrees that if petitioners` allegation is valid, that
the Department should carefully examine its program to confirm that the
claimed double-counting in fact occurs under the Department`s program.
Department`s Position: We agree with petitioner and respondent that
the adjustment results in double-counting and therefore the Department
will not make this adjustment for the final results. Further
explanation of this adjustment would reveal business proprietary
information. (See Analysis Memorandum).
Comment 36: Petitioners argue that the Department must deduct
antidumping duties paid by the respondent or related parties paid on
imports. Section 1677a(d) (1994) states that the purchase price and
exporter`s sales price shall be reduced by United States import duties.
Petitioners continue that antidumping duties are ``incident to bringing
the subject merchandise from the place of shipment in the country of
exportation to the place of delivery in the United States'' and are
therefore properly classified as import duties. Furthermore,
petitioners claim that ``duties'' or ``import duties'' in trade laws
are to be read as antidumping or countervailing duties unless the
provision specifically suggests otherwise.
Respondent maintains that the Department has consistently refused
to deduct antidumping duties from U.S. price and that it should
continue to do so. Respondent asserts that petitioners argue that 19
U.S.C. 1677a(d) requires the Department to deduct antidumping duties
from United States price. Respondent cites Antifriction Bearings (Other
Than Tapered Roller Bearings) and Parts Thereof from France, et al. 60
FR 10900 (1995) and Antifriction Bearings (Other than Tapered Roller
Bearings) and Parts Thereof from France, et al. 58 FR 39726 (1993)
stating that to make an additional deduction from ESP for the same
antidumping duties that correct this price discrimination results in
double counting, and that the amount of antidumping duties assessed on
imports of subject merchandise constitutes a selling expense, and
therefore, should be deducted from ESP.
Respondent continues that as recently as a month ago, the
Department rejected almost identical arguments in Certain Hot-Rolled
Lead and Bismuth Carbon Steel Plate from the United Kingdom 60 FR 44009
(1995). In that case, the Department rejected petitioners` arguments
and refused to make an adjustment for antidumping duties in its
calculation. Respondent concludes, therefore, that the Department
should reject petitioners` arguments in this case and continue to
deduct antidumping duties from USP.
Department's Position: We disagree with petitioners. For a more
detailed explanation, please see Comment 23.
Comment 37: Petitioners contend that Stelco U.S.A.'s slitting
expenses must be treated as further manufacturing costs for purposes of
calculating ESP. According to petitioners, respondent reported slitting
expenses in the fields OTHEXP1U and OTHEXP2U but did not report these
expenses in the fields for further manufacturing costs, nor were they
treated as further manufacturing costs by the Department in its
preliminary results. Instead, argue petitioners, the Department
directly deducted these costs as selling expenses in calculating ESP.
Petitioners state that Stelco U.S.A.'s slitting constitutes increased
value resulting from a process of manufacture performed after
importation. Therefore, petitioners assert that the Department must
treat these expenses as further manufacturing costs for purposes of the
final results.
Respondent maintains that the Department's questionnaire instructs
respondents to consider slitting expenses as selling expenses and that
Stelco was required to treat these expenses as such for the sales
listing, and not as a manufacturing cost. Additionally, continues
respondent, the Department decided that Stelco's slitting expenses did
not change an ESP sale into a further manufacturing (FMG) sale, but
used the slitting expenses as an additional expense to ESP sales.
Department's Position: We agree with petitioners. Stelco U.S.A.
arranges for slitting services to be performed by unrelated parties
prior to shipment or sale to its customers. Section 772 (e)(3) requires
that adjustments to U.S. price be made for ``any increased value,
including additional material and labor, resulting from a process of
manufacture or assembly performed on the imported merchandise after
importation of the merchandise and before its sale to a person who is
not the exporter of the merchandise.'' The Department does not agree
with Stelco's argument that the fact that further manufacturing
expenses are requested in the sales section of the questionnaire gives
any indication that such expenses will be treated as selling expenses.
Accordingly, the Department is treating this slitting expense as
further manufacturing for purposes of the final determination.
Comment 38: Petitioners assert that respondent reported mistaken
amounts in the field for variable manufacturing costs. Instead of
reporting the correct variable costs amounts from the cost database,
Stelco used the total cost of
[[Page 13833]]
manufacture for each control number in the sales listing, state
petitioners. Petitioners maintain that the Department must correct this
error for the final results.
Department's Position: We agree with petitioners and have corrected
this error.
Comment 39: Petitioners state that the Department made several
errors in its margin calculation programs that should be corrected for
the final results. Petitioners list the following as the mistakes in
the program for corrosion-resistant products: (A) The Department set
various U.S. adjustments to ``0''; (B) the Department placed price
adjustments in the field for U.S. direct expenses, and should have
included them with other discounts and rebates to be deducted from U.S.
price; (C) the Department's program treats credit expenses as indirect
selling expenses in calculating ESP; (D) the program fails to convert
the fields RCOM, RGNA, and RINTEX into U.S. dollars in calculating the
foreign manufacturing costs of imported goods; and (E) the program
fails to include technical services in the calculation of purchase
price for U.S. sales. Additionally, the program also leaves out the
variables for inventory carrying costs and market warehousing expenses
in calculating indirect expenses for purchase price sales, contend
petitioners. With respect to the program for plate, petitioners state
that the Department's program incorrectly treats inventory carrying
costs in the home market as a direct expense.
Respondent did not comment on A, and agrees with petitioners on
comments B, C, and D and provided additional coding to rectify price
adjustments in the field for U.S. direct expenses in the corrosion-
resistant margin calculation program. With respect to comment E,
respondent states that technical services should be treated as direct
expenses and therefore should receive the same treatment in all
calculations of net prices involving both corrosion-resistant and cut
to length carbon steel plate. Regarding petitioners' comment on the
treatment of inventory carrying costs, warehousing, and U.S. indirect
expenses, Stelco alleges that contrary to petitioners' request,
indirect selling expenses are not deducted from purchase price sales,
and that the Department should not deduct such expenses from these
sales. Respondent also agrees with petitioners' comments regarding
plate and provided coding to correct the claimed inaccuracies.
Department's Position: We agree with petitioners on comment A. We
agree with petitioners and respondents on comments B, C, D and E. We
also agree with respondents that inventory carrying costs, warehousing
and U.S. indirect expenses are not deducted from purchase price sales.
We agree with petitioners and respondents regarding the alleged
inaccuracies regarding the margin calculation for plate. (See Analysis
Memorandum).
Final Results of Reviews
As a result of our reviews, we have determined that the following
margins exist:
------------------------------------------------------------------------
Margin
Manufacturer/exporter Time period (percent)
------------------------------------------------------------------------
Corrosion-Resistant Steel
Dofasco, Inc........................... 2/4/93-7/31/94 1.65
Continuous Colour Coat................. 2/4/93-7/31/94 1.96
Stelco, Inc............................ 2/4/93-7/31/94 0.19
Cut-to-Length Plate
Algoma Steel Inc....................... 2/4/93-7/31/94 1.82
Manitoba Rolling Mills................. 2/4/93-7/31/94 0.02
Stelco, Inc............................ 2/4/93-7/31/94 0.92
------------------------------------------------------------------------
The Department shall determine, and the Customs Service shall
assess, antidumping duties on all appropriate entries. Individual
differences between United States price and foreign market value may
vary from the percentages stated above. The Department will issue
appraisement instructions directly to the Customs Service. Stelco's
rate for corrosion-resistant and Manitoba Rolling Mill's rate for plate
are de minimis.
Furthermore, the following deposit requirements will be effective,
upon publication of this notice of final results of review for all
shipments of certain corrosion-resistant carbon steel flat products and
certain cut-to-length carbon steel plate from Canada entered, or
withdrawn from warehouse, for consumption on or after the publication
date, as provided for by section 751(a)(1) of the Act: (1) The cash
deposit rates for the reviewed companies will be the rates for those
firms as stated above (except that if the rate for a particular product
is de minimis i.e., less than 0.5 percent, a cash deposit rate of zero
will be required for that company); (2) for previously investigated
companies not listed above, the cash deposit rate will continue to be
the company-specific rate published for the most recent period; (3) if
the exporter is not a firm covered in this review, or the original
investigation, but the manufacturer is, the cash deposit rate will be
the rate established for the most recent period for the manufacturer of
the merchandise; and (4) the cash deposit rate for all other
manufacturers or exporters will continue to be 18.71 percent for
corrosion-resistant steel and 61.88 percent for cut-to-length plate,
the all others rate established in the LTFV investigations. See Amended
Final Determination, 60 FR 49582 (September 26, 1995).
These deposit requirements, when imposed, shall remain in effect
until publication of the final results of the next administrative
review.
This notice serves as a final reminder to importers of their
responsibility under 19 CFR 353.26 to file a certificate regarding the
reimbursement of antidumping duties prior to liquidation of the
relevant entries during this review period. Failure to comply with this
requirement could result in the Secretary's presumption that
reimbursement of antidumping duties occurred and the subsequent
assessment of double antidumping duties.
This notice also serves as the only reminder to parties subject to
administrative protective order (APO) of their responsibility
concerning the disposition of proprietary information disclosed under
APO in accordance with section 353.34(d) of the Department's
regulations. Timely notification of return/destruction of APO materials
or conversion to judicial protective order is hereby requested. Failure
to comply with the regulations and the terms of an APO is a
sanctionable violation.
[[Page 13834]]
These administrative reviews and notice are in accordance with
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 353.22.
Dated: March 20, 1996.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 96-7462 Filed 3-27-96; 8:45 am]
BILLING CODE 3510-DS-P
