[Federal Register Volume 61, Number 61 (Thursday, March 28, 1996)]
[Notices]
[Pages 13834-13846]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7464]
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DEPARTMENT OF COMMERCE
[A-428-816]
Certain Cut-To-Length Carbon Steel Plate From Germany: Final
Results of Antidumping Duty Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of final results of antidumping duty administrative
review.
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SUMMARY: On July 13, 1995, the Department of Commerce (the Department)
published the preliminary results of the administrative review of the
antidumping duty order on certain cut-to-length carbon steel plate from
Germany. This review covers one manufacturer/exporter of the subject
merchandise to the United States during the period of review (POR),
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 review.
EFFECTIVE DATE: March 28, 1996.
FOR FURTHER INFORMATION CONTACT: Nancy Decker or Linda Ludwig, 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 July 13, 1995, the Department published in the Federal Register
(60 FR 36105) the preliminary results of the administrative review of
the antidumping duty order on certain cut-to-length carbon steel plate
from Germany (58 FR 44170, August 19, 1993). The Department has now
completed this administrative review in accordance with section 751 of
the Tariff Act of 1930, as amended (the Act).
Applicable Statute and Regulations
Unless otherwise stated, all citations to the statute and to the
Department's regulations are references to the provisions as they
existed on December 31, 1994.
Scope of These Reviews
The products covered by this administrative review constitute one
``class or kind'' of merchandise: Certain cut-to-length carbon steel
plate. These products include hot-rolled carbon steel universal mill
plates (i.e., flat-rolled products rolled on four faces or in a closed
box pass, of a width exceeding 150 millimeters but not exceeding 1,250
millimeters and of a thickness of not less than 4 millimeters, not in
coils and without patterns in relief), of rectangular shape, neither
clad, plated nor coated with metal, whether or not painted, varnished,
or coated with plastics or other nonmetallic substances; and certain
hot-rolled carbon steel flat-rolled products in straight lengths, of
rectangular shape, hot rolled, neither clad, plated, nor coated with
metal, whether or not painted, varnished, or coated with plastics or
other nonmetallic substances, 4.75 millimeters or more in thickness and
of a width which exceeds 150 millimeters and measures at least twice
the thickness, as currently classifiable in the Harmonized Tariff
Schedule (HTS) under item numbers 7208.31.0000, 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 bevelled or rounded
at the edges. Excluded is grade X-70 plate. These HTS item numbers are
provided for convenience and Customs purposes. The written description
remains dispositive.
The POR is February 4, 1993, through July 31, 1994. This review
covers entries of certain cut-to-length carbon steel plate by AG der
Dillinger Huttenwerke (Dillinger).
Analysis of Comments Received
We gave interested parties an opportunity to comment on the
preliminary results. We received case and rebuttal briefs from the
respondent (Dillinger) and petitioners (Bethlehem Steel Corporation,
U.S. Steel Company a Unit of USX Corporation, Inland Steel Industries,
Inc., Geneva Steel, Gulf States Steel Inc. of Alabama, Sharon Steel
Corporation, and Lukens Steel Company). Dillinger requested a hearing
then subsequently withdrew its request; therefore, no hearing was held.
Comment 1: Petitioners assert that based on the overwhelming number
of problems with Dillinger's information, the Department has no choice
but to apply total best information available (BIA). Petitioners base
their assertion on a claim that, despite an inordinate number of
opportunities to correct its deficient submissions, Dillinger has still
failed to provide reliable data on even the most fundamental elements
of the Department's analysis. According to petitioners, the
Department's verification reports and exhibits demonstrate Dillinger
failed verification. Petitioners assert that problems with Dillinger's
data include: a majority of Dillinger's home market sales transactions
examined at verification contained erroneous data; Dillinger's product
coding contains systemic problems; Dillinger failed to demonstrate
complete reporting of U.S. sales for 1994 and home market sales for
1992 and 1994; Dillinger failed to resolve a discrepancy between
verification documentation and reported U.S. sales quantities;
Dillinger did not provide the necessary actual to theoretical weight
conversion factors for cost of production (COP), constructed value
(CV), and differences in merchandise (DIFMER) adjustment; Dillinger
miscoded customer levels of trade; Dillinger failed to demonstrate that
certain freight services provided by related parties were at arm's-
length; Dillinger failed to demonstrate that commissions paid to
related parties were at arm's-length; Dillinger failed to provide
information regarding 500 related companies thus preventing the
Department from verifying whether they provide Dillinger with services
related to subject merchandise; Dillinger extensively misreported dates
of sale and failed to demonstrate to the Department that its reported
sales took into account changes in price and payment date; Dillinger
reported as date of payment the date on which payment was due to it
rather than the actual date on which payment for home market sales was
received; and Dillinger's data contains numerous additional
inaccuracies and omissions.
Petitioners cite the Department's recent decision to assign total
(uncooperative) BIA to Mannesmannrohren-Werke AG (MRW)
[[Page 13835]]
in Small Diameter Circular Seamless Carbon and Alloy Steel, Standard,
Line and Pressure Pipe from Germany (60 FR 31978-79--June 19, 1995).
Petitioners argue that this makes the case for applying total BIA to
Dillinger all the more compelling because Dillinger's errors and
omissions are far more egregious than those committed by MRW. In the
Seamless Pipe case, petitioners note that the Department found that:
MRW company officials were unable to explain or provide adequate
documentation for numerous discrepancies and omissions; DIFMER data
could not be tied to the financial statements; and MRW did not
adequately demonstrate that sales data reported to the Department took
into account changes in price, quantity, and date of sale. Similarly,
the petitioners assert that the Department's verification reports and
exhibits indicate that the Department encountered essentially the same
problems with respect to Dillinger's responses, and demonstrate that
the Department was unable to verify the completeness of either
Dillinger's reported home market or U.S. sales databases. Therefore,
according to petitioners, Dillinger's home market and U.S. sales
databases have not been demonstrated to be reliable and thus cannot be
used to calculate accurate dumping margins.
According to petitioners, significant errors in reporting product
characteristics, sale dates, and levels of trade effectively eliminate
any possibility of matching home market and U.S. sales. Petitioners
assert that the failure to identify related parties renders reported
charges and expenses meaningless.
Petitioners argue that Dillinger has significantly impeded the
Department's administration of this review by providing seriously
deficient information. Furthermore, petitioners claim that Dillinger
failed to alert the Department to any difficulties with respect to,
among other deficient areas, the reporting of: levels of trade; prime/
non-prime merchandise; actual/theoretical weights and conversion
factors; and dates of sale. Moreover petitioners argue that Dillinger
has repeatedly ignored or provided incomplete and/or inaccurate
responses to the Department's requests for information. Therefore,
petitioners continue, the Department should disregard Dillinger's
responses and use as BIA, the highest rate ever applicable to the firm
for the same class or kind of merchandise from the investigation.
Finally, petitioners assert that if the Department determines to
contradict its standard practice (see Defrost Timers from Japan (59 FR
1928--January 13, 1994), Tapered Roller Bearings from Japan (60 FR
22349--May 5, 1995), and Certain Carbon Steel Flat Products from
Belgium (58 FR 37083, 37084, 37090--July 9, 1993)) and erroneously
concludes not to apply total BIA, it should make certain adjustments
which are discussed in petitioners' other comments.
Respondent argues that petitioners concentrate on arguments which
are either not supported by the record evidence, supplant the
Department's judgment of what data should have been verified or taken
into evidence as verification exhibits, or take out of context judicial
opinions and ignore the relevant case law and standard practices of the
Department. Certain of petitioners' comments (i.e., regarding the
majority of Dillinger's home market sales containing erroneous data)
are nothing more than unsupported statements.
Specifically, respondent contends that contrary to petitioners'
assertions, the Department verified the completeness of Dillinger's
reported home market and U.S. sales databases. Concerning petitioners'
allegation that there is a significant discrepancy in Dillinger's
reported value of U.S. sales, respondent argues that it satisfactorily
demonstrated that its own accounting records list only the price of the
merchandise as it leaves Germany. This value does not include expenses,
which are incurred by Francosteel (Dillinger's related U.S. selling
agent), included in the sales price to the first unrelated purchaser
(e.g., U.S. duty, U.S. inland freight, etc.). The respondent contends
that the Department verified the total sales value and quantity for
both 1993 and 1994 at Francosteel and tied these amounts to
Francosteel's financial statements. Therefore, respondent argues that
petitioners' allegation has no foundation in fact.
Respondent further argues that petitioners' assertions of
significant errors in reporting product characteristics, sales dates,
levels of trade, and failure by Dillinger to identify related parties,
are without merit. Respondent contends that the evidence on the record
unequivocally shows that the data submitted by Dillinger was verified
and accurate in all material respects.
With respect to partial BIA, the respondent does not believe any
adverse changes should be made to any item addressed by the
petitioners, but if the Department decides to change its calculations,
only the actual figure attributable to the sale in question should be
changed. Alternatively, a reasonable figure, such as an average of the
data provided, should be used rather than the most adverse number
advocated by petitioners.
Department's Position: We agree with respondent that the use of
total BIA is not warranted in this administrative review. Dillinger has
been cooperative throughout the proceeding. While we did discover some
errors and discrepancies at verification, the extent and magnitude of
the errors and discrepancies did not exceed those that are commonly
found at verification and were not so large as to render the
Dillinger's reported information unusable. Therefore, we find the use
of total BIA unjustified. Regarding date of sale, while changes in
price or quantity may have occurred after the date of sale Dillinger
reported, the reported price and quantity were correct. In other words,
only the date of sale may have been wrong. As the verification report
notes, home market date of sale is the date a sale is originally booked
in the computer; the date is not changed in this database if the order
is subsequently modified. As noted in the preliminary results, we have
used shipment date as date of sale for home market sales in our
calculations. The rest of petitioners' individual allegations are
addressed in other comments.
Comment 2: Respondent argues that the Department incorrectly added
a reserve for demolition of an old coking plant. It states that the
plant was torn down in 1984--ten years prior to the POR, and that it
ended production in July 1984. Accordingly, it states that the cost to
demolish this plant can correctly be allocated only to the steel which
was the beneficiary of this plant's production. Respondent summarizes
that since that steel is not subject to this review, no adjustment is
permissible.
Petitioners respond that the Department correctly added this
accrual to COP and CV. They state that Dillinger apparently capitalized
the costs of demolishing the coke plant because these costs were
expected to benefit future periods. Petitioners argue that the
subsequent accruals, therefore, represent the periodic benefit which
Dillinger associated with the demolition. Petitioners argue that the
fact that these expenses were included in Dillinger's fiscal 1993
financial records indicates that the accruals continued through the
period of review. The petitioners further state that this accrual
differs from the reversal of prior year operating expense accruals
(which represent a correction of an estimate made in a prior year)
which the Department does not include in COP and CV (see, e.g., Small
Diameter
[[Page 13836]]
Circular Seamless Carbon and Alloy, Standard Line, and Pressure Pipe
from Italy, 60 FR 31981, 31991, June 19, 1995).
Department's Position: We disagree with the respondent. This
accrual was recorded in Dillinger's accounting records during the POR.
It is the Department's general practice to include accruals which are
recognized in the respondent's audited financial statements in the COP/
CV calculations. While the old coking plant does not benefit current
operations, its removal does by rationalizing operations which was
recognized in the financial statements during the POR. In Steel Pipe
from Italy, 60 FR 31981, 31992 (June 19, 1995), we found that upon
disposal of assets, the gain or loss associated with them would be
included in COP/CV at that time. The demolition of the coke plant is
equivalent to the disposal of an asset; therefore we are continuing to
include this accrual in the calculation of COP/CV.
Comment 3: Respondent argues that the Department should not have
added an amount for Rogesa's (Dillinger's supplier of pig iron and a
partially owned subsidiary) write-off of receivables from Saarstahl AG
(SAG) (Dillinger's sister company), to COP and CV. Respondent argues
that this amount resulted from sales of pig iron by Rogesa to SAG,
which were written-off by Rogesa as an extraordinary loss solely
because of SAG's bankruptcy. Dillinger further states that because
Rogesa is a producer of pig iron and because SAG uses the pig iron to
manufacture non-scope products (neither Rogesa nor SAG are producers of
carbon steel plate), there is no link between this sale of pig iron and
the antidumping order on sales of carbon steel plate by Dillinger.
Respondent cites the fact that in prior cases, the Department has
determined an extraordinary loss should be included in COP only if it
relates to the production of subject merchandise (Antifriction Bearings
from Japan: Final Results, July 11, 1991, 56 FR 31692, 31734). Finally,
respondent states that if the Department continues to include this
amount in COP and CV, it should at least reduce the amount by 50
percent. It states that the cost verification report acknowledges that
Rogesa would be responsible for only half the amount written off
because of Rogesa's profit/loss sharing agreement with its parents.
Petitioners respond that the Department has considered expenses
related to bankruptcy proceedings to be ordinary operating expenses, as
opposed to extraordinary expenses (see Fresh and Chilled Atlantic
Salmon From Norway, 58 FR 37912, 37915, July 14, 1993); even if these
expenses were extraordinary, they still may be included in the COP and
CV if they are related to the subject merchandise. The petitioners
further state that the relevance of the SAG bankruptcy expenses to
Rogesa is indicated by the fact that the expenses were incurred by
Rogesa and were entered on Rogesa's accounting records in the normal
course of business. Petitioners continue that since Rogesa booked these
expenses as extraordinary rather than operating expenses relating to
particular merchandise, these expenses relate to Rogesa as a whole
rather than to particular merchandise manufactured or sold by Rogesa.
Petitioners claim that accordingly, these expenses are properly
included in COP and CV. Petitioners note that COP and CV comprise all
costs of producing the subject merchandise including general and
administrative (G&A) expenses which relate to the company as a whole
rather than to the production process. According to the petitioners,
including these expenses in the COP of the pig iron was correct since
the pig iron sold to Dillinger is used in the production of subject
merchandise. Finally, petitioners disagree with respondent that if the
Department includes this expense in COP and CV, it should at least be
reduced by 50 percent. Petitioners assert that the fact that Rogesa's
parent companies absorb its profit or loss has no relevance to the
determination of Rogesa's cost of producing the pig iron used in
manufacturing the subject merchandise.
Department's Position: We agree with petitioners that these
expenses are properly included in the COP for pig iron. We found these
expenses to be write-offs of receivables from SAG. Write-offs of
receivables are bad debt expenses. The Department considers these to be
ordinary operating expenses because they are by their very nature
indirect selling expenses since, under generally accepted accounting
principles, bad debt is recovered over time by future price increases
(see Fresh Cut Roses from Columbia, 60 FR 6980, 7014). Since cost
information was used for the purchase of pig iron from Rogesa (rather
than acquisition price) and since these expenses are ordinary operating
expenses, which relate to Rogesa as a whole, they are properly included
in Rogesa's COP along with Rogesa's other general expenses. The fact
that Rogesa's parents absorb its profit or loss has no relevance.
Rogesa's sales must cover all of its expenses (production and general).
Rogesa's G&A costs were divided by total production to give a cost per
ton of pig iron. We have treated the bankruptcy costs like Rogesa's
other general or overhead expenses.
Comment 4: Respondent argues that Department should not have
included two expenses related to SAG's bankruptcy in COP and CV.
According to respondent, one of the costs related to Dillinger's
assumption of SAG's debt to another company. Respondent states that
since SAG does not produce carbon steel plate, this cost is not
relevant to the antidumping duty order because it is not related to the
production or sale of carbon steel plate by Dillinger. According to
respondent, the other cost was an extraordinary loss that resulted from
the write-off of claims against SAG for pension obligations, which were
to be reimbursed to Dillinger. Again, Dillinger claims that since these
expenses do not concern the production of carbon steel plate, they have
no relevance to the antidumping duty order.
Petitioners argue that Dillinger: booked these expenses as
extraordinary expenses rather than operating expenses relating to
particular merchandise; entered into an arrangement to assume various
debts of SAG and to write-off receivables owed by SAG; and was jointly
liable for SAG's tax liability. Petitioners assert that the bankruptcy
expenses assumed by Dillinger, therefore, relate to Dillinger ``as a
whole'' and should be included in the G&A component of COP and CV.
Department's Position: We disagree with respondent. Contrary to
respondent's characterization, we found these expenses to be write-offs
of receivables from SAG and its subsidiaries. Write-offs of receivables
are bad debt expenses. The Department considers these to be ordinary
operating expenses because they are by their very nature indirect
selling expenses since, under generally accepted accounting principles,
bad debt is recovered over time by future price increases (see Fresh
Cut Roses from Columbia, 60 FR 6980, 7014). Therefore, we have included
these in the indirect selling expense portion of COP/CV.
Comment 5: Petitioners argue that the Department should include all
the bankruptcy expenses related to Dillinger Htte Saarstahl (DHS)
(Dillinger's and SAG's parent company) and SAG. Petitioners assert the
Department considers bankruptcy costs to be ordinary operating expenses
(see Fresh and Chilled Atlantic Salmon from Norway (58 FR 37912,
37915--July 14, 1993)). According to petitioners, even extraordinary
expenses may be included in calculating the COP and CV under
[[Page 13837]]
the principle of full absorption costing provided they are related to
the subject merchandise (see Tapered Roller Bearings from Japan (56 FR
41508, 41516--August 21, 1991) and Welded Stainless Steel Pipe from
Korea (57 FR 53693 and 53694--November 12, 1992)). Petitioners argue
that although Dillinger contended SAG was not involved in the
manufacture of subject merchandise, the information Dillinger submitted
at verification indicated otherwise. Petitioners assert that the
majority of expenses booked by Dillinger and Rogesa involve write-offs
of receivables owed by SAG to Dillinger and Rogesa. According to
petitioners, these receivables were generated as a result of the
operations of Dillinger and Rogesa. Petitioners claim that while the
Department adjusted for Rogesa's write-off of receivables from SAG in
the preliminary results, it did not adjust for receivables forgiven by
Dillinger or for debts assumed by Dillinger and Rogesa, or other
expenses of bankruptcy. Petitioners assert that these remaining
bankruptcy expenses should be included in Dillinger's COP/CV.
Petitioners note that Dillinger and Rogesa incurred G&A costs (which
the questionnaire describes as those which relate to the company as a
whole rather than to the production process) to save DHS (their parent)
from bankruptcy. Petitioners argue that the exclusion of such costs is
contrary to Department practice, and therefore, the costs should be
included in G&A.
Respondent argues that the Department correctly excluded certain
expenses related to SAG's bankruptcy. It argues that these expenses are
not G&A, regardless of the petitioners' characterization, and
therefore, don't relate to the company as a whole. According to
respondent, many are selling expenses unrelated to scope merchandise
(incurred by SAG on purchases unrelated to plate). According to
respondent, petitioners do not explain how sales of pig iron by Rogesa
to SAG, another non-producer of plate, can be tied to the product under
review because there is no connection.
Department's Position: Of the bankruptcy expenses, the Department
included: Rogesa's write-off of receivables from SAG in the cost of
manufacturing (COM), as explained in Comment 3; and Dillinger's write-
off of receivables from SAG and its subsidiaries in the indirect
selling expense portion of COP/CV, as explained in Comment 4. The
Department did not include the following in COP/CV: Dillinger's and
Rogesa's assumption of DHS and SAG liabilities (including VAT
responsibilities) and bank debts (that is Dillinger and Rogesa assumed
some of SAG's bank debts) because these expenses are not directly
related to production. The fact that Rogesa and Dillinger assumed some
of SAG's debts does not relate to the manufacture of subject
merchandise.
Comment 6: Petitioners argue that the Department should include
severance payments made during the POR in Dillinger's COP/CV. They
state that during the POR, part of a prior period accrual for severance
payments was reversed, and a certain amount was actually paid. Neither
was included in the COP/CV calculations, but the petitioners argue, the
actual payments should have been included. Petitioners assert that
although Dillinger had claimed earlier in the proceeding that the
reversal should have been included, this amount was properly excluded.
Petitioners claim that this conforms with the Department's recent
statement in Steel Pipe from Italy (60 FR 31981, 31991--June 19, 1995).
However, the petitioners argue that the severance payments made in 1993
should be included in COM because they relate to the manufacturing
expenses during the POR. According to petitioners, in Steel Flat
Products from Japan (58 FR 37174), the Department stated that
termination allowances represent an expense recognized within the
period of investigation and should be reflected in the product cost in
accordance with full absorption costing principles.
The respondent argues that the Department should not just exclude
the reversal of the accrual for severance payments but deduct the
reversal from COP/CV. It claims that the Department included accruals
of severance expenses in its COP calculations in the original
investigation of Dillinger. It would be inequitable and without
justification for the Department to now ignore the reversal of the
accrual for the identical expense. Unlike the case cited by
petitioners, Dillinger claims it will achieve revenue or reduced
operating costs because it will no longer have to pay the sums
involved. According to the respondent, the Department's general view in
Steel Pipe from Italy does not make sense. According to the respondent,
the Department will only accept a reversal of an accrual in the same
year as the original accrual. Respondent argues that in that case,
there would be no accrual in the financial statement in the first
place. Respondent argues that this type of adjustment is conceptually
identical to a warranty expense. According to respondent, most warranty
expenses do not occur for sales within the period of review; they are
often granted later, yet the Department recognizes this as a legitimate
expense to be allocated over sales to which they do not apply.
Respondent argues that the same holds true for reversals of accruals.
Department's Position: We disagree with petitioners that the actual
severance payments should be included in COM. These expenses are
applicable to the COM of the period in which they were accrued, which
is not the period of review. This is in accordance with full absorption
costing principles, which, contrary to petitioners' assertion, is
consistent with the Japanese Flat Products case. In that case, the
termination allowances were recognized within the period of
investigation and therefore reflected in the product cost in accordance
with full absorption costing principles. In the instant review, the
severance expenses were recognized and accrued in a prior period. In
the period of review, Dillinger is simply paying severance amounts out
of the prior period expense/accrual.
We also disagree with respondent that the reversal of the accrual
should be included in COM. The original accrual occurred in 1990. The
accrual being reversed relates to costs expensed in 1990, which was
before the period of investigation. Therefore, these costs do not
relate to the merchandise under review. While reversals of accruals are
in accordance with generally accepted accounting principles (GAAP), the
Department relies on GAAP if it does not distort costs. In this case,
reversing costs that were accrued in 1990 distorts costs in the POR.
Furthermore, as we found in Steel Pipe from Italy, we do not consider
it appropriate to reduce current year production costs by the reversal
of prior year operating expense accruals and write-downs of equipment
and inventory. The subsequent year's reversal of these estimated costs
does not represent revenue or reduced operating costs in the year of
the reversal. Rather, they represent a correction of an estimate which
was made in a prior year. The position of the Department in Steel Pipe
from Italy considered the facts in that case, which included write-offs
and write-downs. These types of costs are not the costs at issue here.
There is not justification for distorting actual production costs
incurred in a subsequent year by reducing subsequent year costs by the
overestimated amount.
Comment 7: Petitioners argue that the Department should correct the
reduction Dillinger made to its COP and CV by reversing a prior period
accrual for its Stahlzulage (steel subsidy program). As petitioners
discussed in
[[Page 13838]]
Comment 6, the Department does not consider it appropriate to reduce
current year production costs by the reversal of prior year operating
expense accruals (see Small Diameter Circular Seamless Pipe from Italy
(60 FR 31991) and Al Tech Specialty Steel Corp. v. U.S., 651 F. Supp.
1421, 1430 (CIT 1986)). Petitioners assert that because Dillinger has
reduced its production costs by the reversal of prior period operating
expense accruals, the inclusion of Stahlzulage in COM is improper.
The respondent argues that Dillinger's financial statements, in
accordance with GAAP, reversed an accrual for a Stahlzulage subsidy.
They state that this was verified, and the Department treated this item
correctly in the Preliminary Results and should continue to do so in
the Final Results.
Department's Position: We disagree with petitioners. The reversal
of the Stahlzulage is permitted by German GAAP, and it is related to
assets in use during the POR. Therefore, it is appropriate to include
this amount in COM. In Italian Steel Pipe, the Department did not
consider it appropriate to reduce current year production costs by the
reversal of prior year operating expense accruals based on the fact
that these were estimated expenses. In the instant review, the
Stahlzulage is not an estimate but an amount which is intrinsically
linked to assets (currently used in production) based on a program
which was allowed by German law. Also, petitioners' citation to Al Tech
is inapposite. The issue in that case was whether a subsidy
determination could be made in the context of an antidumping
proceeding. The court ruled that such an investigation could not be
undertaken. With respect to the present proceeding, there has been no
countervailing duty investigation that has resulted in a determination
that the ``Stahlzulage'' is in fact a subsidy. Pursuant to Al Tech, the
Department is precluded from making such a determination in this
antidumping administrative review.
Comment 8: The petitioners argue that the Department should correct
the understated amount of Usinor Sacilor's G&A attributed to Dillinger.
Dillinger's method of identifying the share of its parent's (Usinor
Sacilor's) G&A attributable to Dillinger's operations is flawed.
Petitioners contend that the unconsolidated amount (i.e., parent
operating expenses less operating revenue) used to calculate this part
of G&A equals net operating income or loss, not G&A as should have been
calculated. Given the oversight nature of Usinor Sacilor and that no
information regarding Usinor Sacilor's unconsolidated expenses is on
the record, the Department should consider all of Usinor Sacilor's
unconsolidated operating expenses as G&A and should recalculate the
parent company portion of Dillinger's G&A accordingly.
Respondent contends that it correctly reported Usinor Sacilor's G&A
expenses. According to respondent, only the net expenses of Usinor
Sacilor, a holding company without any production of its own, are
allocated to affiliated companies; therefore, the net expenses
represent G&A expenses which are allocated to operating subsidiaries.
Respondent claims that as a non-operating company, Usinor Sacilor only
incurs G&A expenses. Although Dillinger disagrees that Usinor Sacilor's
G&A expense should be included at all, if it is, the Department's
methodology was correct.
Department's Position: We disagree with petitioners. The amount
Dillinger used to calculate Usinor Sacilor's G&A attributable to
Dillinger was taken from Usinor Sacilor's financial statements. Because
the unconsolidated company is a non-producing holding company, the only
expenses it incurs are general in nature. It would incur expenses on
its own behalf and on behalf of its subsidiaries. Revenue it receives
(including reimbursements from subsidiaries) offsets the G&A it incurs
on behalf of its subsidiaries. The difference between these two amounts
is the G&A expense of the parent company itself. A more detailed
allocation is not possible, and is not required, given the absence of
more detailed information on the record.
Comment 9: Petitioners contend that the Department should include
home market commissions paid to related parties in the calculation of
home market selling expenses for COP/CV (SELLCOP). The preliminary
margin program determines whether sales were made below cost by
comparing net price with COP. Yet, the petitioners claim, the
Department did not include in this program the expenses related to
Dillinger's related party commissions despite the fact that these are
clearly costs of production. Petitioners assert that home market
commissions should have been included in SELLCOP (which only included
indirect selling expenses in the preliminary results).
Respondent argues that the Department should exclude home market
commissions paid to related parties in the calculation of home market
selling expenses for purposes of COP. Since Dillinger included both its
own indirect selling expenses as well as those of its related sales
agent, Saarlux, in the indirect selling expense field, the petitioners'
methodology of including Saarlux's sales commissions as well would be
double counting.
Department's Position: We agree with respondent. Since Saarlux's
expenses are included in indirect selling expenses, commissions to
Saarlux should not also be included in total selling expenses for COP/
CV. Since Dillinger pays Saarlux commissions to cover Saarlux's costs
related to Dillinger's sales, to include both the commissions and
Saarlux's actual costs would be double-counting. Since Dillinger did
not demonstrate that commissions were at arm's-length, we would not use
these commissions as a cost in any event.
Comment 10: Petitioners contend that the Department should apply
BIA to determine the COP, CV, and DIFMER of sales for which no weight
conversion factor was provided. The weight of steel is an essential
element in determining unit price. Dillinger reported all U.S. sales on
a theoretical weight basis and home market sales on either a
theoretical or actual basis. Petitioners assert that Dillinger did not
provide conversion factors to compare home market prices reported on a
theoretical weight basis to COP reported on an actual weight basis.
Petitioners argue that the Department, therefore, cannot apply the
sales-below-cost test to such home market sales. In addition,
petitioners assert that conversion factors were not provided to compare
the CV amounts, reported on an actual weight basis, to U.S. sales on a
theoretical weight basis. In the flat-rolled steel investigation, the
Department recognized that U.S. and home market prices, as well as COP
and CV, must be on the same weight basis to accurately calculate
margins (see Cut-to-Length Carbon Steel Plate from Finland (58 FR 37122
and 37123--July 9, 1993) and Certain Welded Stainless Steel Pipes from
Taiwan (57 FR 53705, 53711--November 12, 1992)). Petitioners assert
that although Dillinger eventually provided conversion factors to
permit price-to-price comparisons on the same weight basis, it did not
provide factors for converting the costs of producing merchandise from
an actual to theoretical weight basis. Therefore, petitioners continue,
sales prices, on a theoretical weight basis, cannot be compared to COP
and CV, which are based on actual weight.
Petitioners argue that Dillinger ignored the questionnaire's
explicit instruction to report COP and CV on the same basis as sales
were reported. Dillinger's responses state that its cost accounting
system uses actual material prices and actual material quantities,
[[Page 13839]]
and that the average actual cost of materials and processing per ton
for all production, at each step, is calculated monthly. The factors
Dillinger provided to convert the weight of home market merchandise
sold on an actual weight basis to a theoretical weight basis cannot be
used to convert COP or CV to a theoretical weight basis because the
conversion factors provided are transaction specific and not control
number (CONNUM) specific. Accordingly, the Department should apply BIA
to all sales for which Dillinger failed to provide a conversion factor
to enable the COP/CV to be compared on the same measure of weight as
prices (i.e., all U.S. sales compared to CV and all home market sales
made on a theoretical weight basis).
Respondent contends that it reported COP, CV, and DIFMER on a
theoretical weight basis. Dillinger reported actual costs and actual
weights of inputs at the beginning of the production process. According
to respondent, the actual cost per ton of the finished product was
calculated using theoretical weight. According to Dillinger, it used
theoretical weight as the denominator for the per ton calculation of
COP, CV, and DIFMER amounts. Respondent further asserts that there is
no weighing station at the end of the production line in the factory.
Dillinger does not know the actual weight of each production run, much
less record it for cost accounting purposes. The Department can
therefore correctly calculate dumping margins using COP, CV, and DIFMER
data.
Department's Position: We disagree with petitioners that Dillinger
reported its costs on an actual weight basis. When Dillinger reported
that it uses actual material prices and actual material quantities, the
``actual'' in that sense refers to the actual in actual cost accounting
versus standard cost accounting (used for cost inputs), as opposed to
the actual in actual weight versus theoretical weight. Verification
Exhibit 2 includes a map of the plate rolling mill. This reveals, as
respondent contends, that there is a scale at the entrance to the mill,
but there is not one at the end of the process. Therefore, they cannot
weigh the finished product at the end of the product line, which
indicates that finished product costs are based on theoretical weight.
Also, on pages 5-6 of Dillinger's November 14, 1994, Section VI
response, Dillinger indicates that its inventory value, which is
calculated from the actual average cost system, is based on theoretical
production. The inventory amount is only adjusted to actual at year-
end. Therefore, Dillinger's day-to-day costs in their accounting system
are based on theoretical weight. We agree with petitioners that costs
and prices must be on the same weight basis to accurately calculate
margins. In this case, the costs and prices are on the same weight
basis (theoretical), so the petitioners' argument for BIA moot.
Comment 11: Petitioners argue that the Department should assign BIA
to Dillinger's misreported product characteristics. As petitioners have
previously pointed out and the Department recognized in its preliminary
results, Dillinger has misreported non-prime products (Y-grades) as
prime products. Petitioners argue that by including non-prime products
within the same product specification as prime products, Dillinger has
precluded the agency from comparing prime merchandise to prime
merchandise in both markets. The Department's computer program excludes
all home market sales of products with specifications that cover Y-
grade merchandise. However, petitioners assert, by simply excluding all
products with those particular specifications, the Department likely
has excluded sales of prime merchandise as well. The petitioners argue
that the exclusion of the home market control numbers (CONNUMHs) with
these particular product specifications from the margin calculation
program in the preliminary results, actually favors Dillinger by
lowering its margin. According to petitioners, it was inappropriate to
reward Dillinger for this error. The petitioners argue that when a
respondent fails to provide the information requested, the Department
must use BIA. When employing BIA, there should be an adverse assumption
on the part of the Department unless special circumstances dictate
otherwise. Petitioners assert that as BIA, all U.S. sales matched to
the sale of a home market product in which the specification code is
one which includes Y-grade products, should be assigned the higher of
the highest, non-aberrant margin calculated on any individual
transaction for this review or the 36.00 percent margin assigned to
Dillinger in the investigation.
Respondent argues that the Department incorrectly assumed that Y-
grade material contained both prime and non-prime merchandise.
Dillinger informed the Department that non-prime merchandise sold in
the home market should not be compared to prime material. In order to
facilitate the Department's calculations, Dillinger reported all non-
prime home market sales in a separate file. Thus, respondent contends,
only prime Y-grade material is contained in Dillinger's primary home
market sales file. Dillinger claims that it informed the verification
team that Y-grade material was guaranteed for chemistry, dimensions and
for tensile strength. According to respondent, no mill test certificate
was issued for mechanical properties because none was requested by the
customer. Dillinger did provide an analysis report to the customer.
There is a published specification sheet for Y-grade material,
indicating it is a prime product, made to order. Thus, respondent
argues, while the chemical composition of the products in question did
not meet their originally intended specifications, they were
nevertheless prime material, meeting the requirements of the published
Y-grade specifications. Generally speaking, according to Dillinger, it
treats Y-grades no differently from any other prime grade (i.e., A36).
Dillinger claims that the verification team simply misinterpreted the
facts. According to respondent, all sales reported as Y-grade
specifications were treated by Dillinger as prime merchandise.
Dillinger argues that its non-prime sales are sold in rail car lots
containing mixed products (e.g., carbon and alloy), without reference
to type, specification, measurement, or grade. According to the
respondent, there is nothing on the record (e.g., verification report)
to suggest that Y-grade material is considered to be non-prime
material. Respondent asserts that the only record evidence (in the
verification report) confirms that all non-prime material is sold in
unmarked lots.
Department's Position: We disagree with respondent that Y-grades
should be treated as prime merchandise. This is a question of
methodology. Dillinger believes this to be prime material, since this
is how it was reported and sold. We found at verification that there
were ``Misfit Cast'' products, which were characterized as such because
of an error in pouring. These were classified as Y-grades. The term
``Misfit Cast'' denotes non-prime merchandise. Since Dillinger did not
provide enough information to refute this classification, we are
continuing to treat Y-grades as non-prime merchandise. However, since
Dillinger provided all requested information, and given the relatively
small number of sales involved, we have determined simply to exclude
from the home market sales database all specification codes containing
Y-grade material. We do not agree with petitioners that our methodology
(disregarding sales with specifications
[[Page 13840]]
that contain Y-grades) actually favors Dillinger. Even though these
specification codes contain some prime material, given the structure
and hierarchy of the model match, these specification codes would not
match to any U.S. sales. Therefore, the impact on the dumping margin is
essentially non-existent.
Comment 12: The petitioners argue that the Department should use
adverse BIA to account for Dillinger's unreported and unverified home
market sales. Petitioners assert that there is no indication that
Dillinger's 1994 financial statements were ever examined by the
Department during the sales verification. Petitioners continue that the
absence of such financial statements during the verification prevented
the Department from tying home market sales for 11 of the 23 months for
which home market sales were reported, to Dillinger's audited financial
statements. The petitioners argue that it is not possible to conclude
that all 1992 and 1994 sales in the home market were reported or that
accurate information was provided for home market sales in 1992 and
1994 since neither years' sales were traced to their respective audited
financial statements. Since Dillinger presented 1994 semi-annual
financial statements to the cost verification team but not to the sales
verification team, the petitioners assert that this indicates selective
presentation of information, which casts further doubt on the
completeness of Dillinger's home market sales database. If the
Department erroneously concludes that Dillinger's reported home market
sales are usable, petitioners argue that BIA should be used to account
for unreported or unverified home market sales. Petitioners continue
that any U.S. sale made in February or March 1993, or between November
1993 and July 1994, should be assigned as BIA the higher of the highest
non-aberrant margin or the 36.00 percent margin from the investigation
Respondent contends that the Department verified the total quantity
and value in both the U.S. and home markets for the entire period of
review, 1993 and 1994. Dillinger provided all data requested by the
Department during verification. Respondent argues that as the
petitioners are well aware, the Department does not trace sales to the
financial reports for each month in the period of review.
Department's Position: We disagree with petitioners. We consider
total home market sales to be verified. Contrary to petitioners'
assertion, we were not prevented from verifying certain months during
the POR. Verification is a testing procedure and not every single item
is examined (see Monsanto Co. v. U.S., 698 F. Supp 275, 281 (CIT
1988)). In the present case, we traced 1993 totals to the audited
financial statements and performed completeness checks on various
months in 1993 and 1994. For example, we reviewed the general ledger,
sales ledger, sales journal, and profit and loss statement from the
general ledger for the months of October 1993, February 1994, and June
1994. Dillinger provided all requested information, and contrary to
petitioners' assertion, we were not prevented from verifying any month
of the period. Because no discrepancies were found, we consider total
home market sales to be reported and verified.
Comment 13: Respondent notes that in comparing foreign market value
(FMV) to end-user sales in the United States, the Department made an
adjustment to FMV to compensate for the problem discovered at
verification where Dillinger incorrectly coded the customer code and
level of trade for six home market sales. Respondent argues that as a
result, the Department used one level of trade in the home market and
increased the price of all end-user sales--both those incorrectly coded
as well as those correctly coded--by the level of the discount granted
to service centers/distributors when compared to end-user sales in the
U.S. Respondent argues that this methodology added the full amount of
the discount to sales that were correctly coded. Instead, respondent
proposes that a smaller adjustment be made to all end-user sales which
would be calculated by applying to the discount the ratio of
incorrectly coded sales to total sales examined.
Petitioners note that the Department's adjustment incorrectly
assumes Dillinger misreported the home market customer level of trade
in only one manner--by identifying service center sales as end-user
sales. Petitioners note Dillinger also misreported end-user sales as
service center sales. Because of Dillinger's improper reporting of
level of trade and failure to adequately explain the Handlerrabatt and
its commissions have precluded the Department from identifying the
correct level of trade, the Department should assume all sales
constituted sales to end-users and increase all home market prices by
the amount of the discount.
Department's Position: We agree with petitioners that respondent's
improper reporting of level of trade and its failure to report
separately certain other adjustments have precluded the Department from
identifying the correct level of trade. Since the only known difference
in terms of sale to service centers/distributors and end-users was that
service centers/distributors received a trader discount
(Handlerrabatt), in matching home market sales to sales to U.S. end-
users, we have adjusted FMV for this discount. We disagree with
petitioners that this amount should be added to FMV for all home market
sales matching to U.S. service center sales. The Department's
methodology in effect treats all home market sales as service center
sales. Therefore, there is no reason to increase the FMV for home
market sales matched to U.S. service center sales. We also disagree
with respondent that we should adjust FMV by a ratio applied to the
discount, rather than the full discount. Given the pervasive errors in
the respondent's database in the coding of the customer and the level
of trade, it is appropriate to treat all home market sales as service
center sales and increase FMV for all such home market sales matched to
U.S. end-users by the full trader discount.
Comment 14: Respondent states that the sales verification report
contained misstatements concerning discounts for home market sales and
other expenses. The verification report states that the reported gross
unit price is net of a market discount and trader's commission. The
report also states that the reported gross unit price includes an end-
user discount which is paid directly to the customer and is reported in
the other expense field. Respondent states that all discounts granted
to service centers/distributors, whether market, trader's or end-user,
are subtracted by Dillinger during negotiation with the purchaser, and
the invoice price is net of these discounts. Thus, according to
respondent, the end-user discount is not found in the other expense
field. Respondent states that if the verification report were correct,
the other expense field would have an amount corresponding to discounts
given to service centers for end-user sales.
Department's Position: We disagree with respondent. Respondent is
confusing the end-user rebate with discounts given to service centers
for end-user sales. In the verification report the term ``trader's
commission'' refers to discounts given to service centers for end-user
sales. This discount is netted out of reported gross unit price.
However, end-user rebates--paid directly to the service center's
customer--are included in reported gross unit price and are reported in
the other expense field.
Comment 15: Petitioners state that the Department should correct
Dillinger's reported home market gross unit prices
[[Page 13841]]
to account for the conversion from actual to theoretical weight.
Respondent agrees that the Department should compare sales in each
market on a same weight basis.
Department's Position: We agree that Dillinger's reported home
market gross unit prices should be adjusted from actual to theoretical
weight and have done so in these final results. Additionally, we have
converted to a theoretical weight basis, other Dillinger adjustments
which were reported on an actual weight basis (see Analysis Memorandum,
November 6, 1995).
Comment 16: Petitioners argue that the Department should deny
Dillinger's home market credit expenses because Dillinger reported
payment due dates rather than the actual dates of payment. Should the
Department erroneously grant Dillinger a downward adjustment for home
market credit expenses, this adjustment should be limited to the
smallest credit expense reported by Dillinger for any home market sale.
Respondent notes that the Department verified the actual dates of
payment for Dillinger's home market sales. These dates, according to
respondent, were substantially the same as those reported in the
responses. Respondent argues that no change in methodology should be
made to that used in the preliminary results.
Department's Position: We agree with respondent that we should not
deny Dillinger's adjustment to home market price for credit expenses.
However, contrary to Dillinger's assertion, at verification we found
that Dillinger's actual payment dates were different than reported in
that they generally were later than those reported. As such,
Dillinger's actual expenses, on those sales that were verified,
generally exceeded those that were claimed. Accordingly, we are
allowing the claimed expense.
Comment 17: Petitioners argue that the Department should deny
Dillinger's claimed adjustment for global credit and debit notes and
other expenses. Petitioners state that Dillinger has not given a
consistent explanation of these adjustments. Both global credits and
debits are reported for certain transactions. According to petitioners,
it appears that the other expenses field also includes global credit
notes, which would result in double counting of global credit notes.
Petitioners question whether gross unit price has already been adjusted
for end-user discounts.
Respondent disputes petitioners' claims, noting that Dillinger gave
the Department a detailed explanation of the global credit and debit
notes at verification and provided the identity of all customers
receiving these credits and debits. Respondent asserts that the
Department verified how Dillinger allocated these notes on a customer-
by-customer basis, and the Department correctly accounted for these
notes in the preliminary results. Respondent explains that global
credits and debits could have been granted for the same sales because a
particular customer could have been granted credits on some sales and
debits on other sales. With respect to the other expense variable,
respondent notes that this variable is correctly described on page 31
of the sales verification report, which states that this field contains
rebates, invoicing errors, or warranty expenses.
Department's Position: We disagree with petitioners. At
verification we verified Dillinger's methodology for allocating global
credits and debits on a customer-by-customer basis. We found that
global credits and debits were accurately reported. We agree with
respondent that global credits and debits could have been granted for
the same sales because a particular customer could have been granted
credits on some sales and debits on other sales. As noted in our
verification report, we found at verification that gross unit price had
not been adjusted for end-user discounts and this discount was reported
in the other expense field. The other expense field does not include
global credits or debits. Hence there is no double counting.
Comment 18: Petitioners state that the Department should
recalculate Dillinger's overly inclusive and misallocated home market
indirect selling expenses. According to petitioners, Dillinger included
both their sales cost as well as those of Saarlux. Petitioners assert
that this is different than the methodology used to calculate the U.S.
indirect selling expenses. Petitioners continue that Dillinger reduced
its costs to account for functions performed by Francosteel and Daval
(Francosteel's parent and a commission agent on U.S. sales).
Petitioners further assert that Dillinger did not provide an
explanation for how it determined cost of manufacturing used to
allocate U.S. indirect selling expenses. Because of the complete
miscalculation of its home market indirect selling expenses, the
Department should deny Dillinger any adjustment for home market selling
expenses. If the Department determines to grant this adjustment, then
at a minimum, the Department should assign the smallest reported home
market selling expense for any sale to all home market sales.
Respondent states that it did not double count any home market
indirect selling expenses. Dillinger argues that it did not
artificially reduce any sales expenses attributable to U.S. sales.
According to Dillinger, it simply did not incur many traditional
selling expenses applicable to U.S. sales because those functions are
performed by Daval and Francosteel. Dillinger asserts that it also does
not incur all home market selling expenses because many of them are
performed by Saarlux. Dillinger argues that it correctly calculated
indirect selling expenses in both markets predicated on cost of
manufacturing, and that this is confirmed in verification exhibits.
Department's Position: We agree with respondent. We found both home
market and U.S. indirect selling expenses to be allocated on the basis
of cost of manufacturing. The methodology used by Dillinger for
calculating home market indirect selling expenses was reasonable and
not overly inclusive. U.S. indirect selling expenses have not been used
in the calculation of antidumping duty margins as we consider
Dillinger's U.S. sales to be purchase price and there are no home
market commissions to offset with U.S. indirect selling expenses.
Therefore, issues relating to the use or calculation of U.S. indirect
selling expenses are moot.
Comment 19: Petitioners state that the Department should deny the
erroneous adjustment for inventory carrying costs it granted to
Dillinger. Petitioners assert that Dillinger failed to provide any
support for its method of calculating the number of days between the
date of production and the date of shipment. Petitioners summarize that
Dillinger has thus failed to demonstrate entitlement to this
adjustment, and the Department should deny it.
Respondent argues that it provided a detailed explanation of how it
derived inventory carrying costs at verification. According to the
respondent, the Department accepted and verified that explanation.
Department's Position: We disagree with petitioners. At
verification, Dillinger provided the Department with a copy of a
submission estimating the number of days between the date of production
and the date of shipment. These figures appeared reasonable at
verification, and result in an extremely small adjustment for inventory
carrying costs. We note that inventory carrying costs are included in
indirect selling expenses. As stated above in the Department's position
on question 18, we have not used U.S. indirect selling expenses in our
calculations. We further
[[Page 13842]]
note that home market indirect selling expenses are only included to
the extent that they do not exceed U.S. commissions. As home market
indirect selling expenses exceed U.S. commissions even if inventory
carrying costs are not included, this issue is moot.
Comment 20: Petitioners argue that the Department should treat
Dillinger's U.S. sales as exporter's sales price (ESP) transactions.
According to petitioners, there is no documentary evidence that
supports Dillinger's assertion that its related selling arm in the
United States, Francosteel, is only a processor of sales-related
documentation. Petitioners assert that Dillinger's sales through
Francosteel do not meet the statutory definition of purchase price. The
Department uses a three-part test to determine whether ESP or purchase
price should be used to determine United States price (USP) when the
sale is made prior to the date of importation. Petitioners argue that
only the third factor in this test (whether the related selling agent
in the U.S. acted only as a mere processor of sales-related
documentation and a communications link with the unrelated U.S. buyers)
directly addresses the question for whether the sales took place in a
foreign country for exportation to the United States. Before the
Department can make a finding that the related party is just a
processor of documentation, there has to exist evidence in the record
to support that conclusion. Petitioners assert that in this case, the
Department only has Dillinger's assertion. Petitioners argue that there
is nothing in the record that indicates that Francosteel communicated
with Daval before it issued its confirmation of sale. Petitioners argue
that the price at which the merchandise is sold to the unrelated
purchaser is different from the price at which it was purchased from
Daval. Petitioners assert that in PQ Corp v. U.S., 652 F. Supp. 732
(CIT 1987), the court noted that this is a factor that supports a
determination that the sale is an ESP transaction. Petitioners argue
that Dillinger has the burden of producing the information that proves
Francosteel is only a processor of sales related documentation, and it
has not done so.
Petitioners further argue that Francosteel sells for its own
account in the United States. According to petitioners, Francosteel's
agreement with Daval demonstrates that Francosteel has undertaken to
sell, in the United States, the products of a related party, and that
it, Francosteel, not the unrelated purchaser, obtains those products
through a purchase from Daval. Because the sale takes place in the
United States between a party related to the foreign seller and an
unrelated purchaser, the sale is clearly ESP. Petitioners assert that
since Francosteel purchases the products from the foreign seller and
the unrelated purchaser does not, the transaction falls outside of the
purchase price definition.
Petitioners further argue that declarations made on Customs Form
7501 clearly indicate that Francosteel is the purchaser of the imported
merchandise. Petitioners assert that given these declarations, this
merchandise was apparently entered for appraisement by Dillinger under
transaction value, the most common basis of determining Customs value.
According to petitioners, transaction value is defined as the price
actually paid or payable for the merchandise when sold for exportation
to the United States. Petitioners assert that this definition is
largely the same as purchase price. Petitioners argue that given the
similarity of the statutes, Dillinger's claim that its U.S. sales to
the first unrelated purchaser should be treated as purchase price
transactions is inconsistent with a claim that the merchandise should
be appraised under transaction value at the price established by the
Daval/Francosteel transaction.
Respondent asserts that the first unrelated customer purchases the
merchandise from Dillinger, not Francosteel. Respondent argues that at
the time of the order and order confirmation, Francosteel does not have
title to the merchandise. According to respondent, Francosteel merely
receives the order from the unrelated customer and forwards it to
Dillinger for approval. Respondent further states that once Dillinger
approves the order, it notifies Francosteel, and then Francosteel
notifies the customer. Dillinger treats the date of sale as the date it
enters the order confirmation into its system. According to respondent,
only after the plate is produced does the contract between Daval and
Francosteel become applicable. Respondent states that at this time the
steel has already been sold to the first unrelated customer. Respondent
asserts that Francosteel's agreement with Daval operates only from the
time that Francosteel obtains the merchandise at the European port
until it invoices the U.S. customer upon arrival at the U.S. port. Even
if Francosteel took title, in Outokumpu Copper Rolled Products AB v.
U.S., 829 F. Sup. 1371 (CIT 1993), the Court held that where the
subsidiary took title to the exported merchandise and paid customs
duties, the sales were nevertheless properly classified as purchase
price transactions.
The respondent further asserts that a related U.S. company can
receive purchase orders directly from U.S. customers, send invoices
directly to those customers, act as an importer of record and receive
payment, and still be deemed to be a mere processor of documentation
and a communication link (see E.I. DuPont de Nemours & Co. v. U.S., 841
F. Supp. 1237 (CIT 1993)). Therefore, the Department should continue to
treat U.S. sales as purchase price transactions.
Department's Position: We disagree with petitioners. The Department
determined that purchase price, as defined in section 772 of the Tariff
Act, was the appropriate basis for calculating USP. All sales were made
through Francosteel, a related sales agent in the United States, to
unrelated purchasers. Whenever sales are made prior to the date of
importation through a related sales agent in the United States, we
typically determine that purchase price is the most appropriate
determinant of the USP based upon the following factors: 1) the
merchandise in question was shipped directly from the manufacturer to
the unrelated buyer, without being introduced into the inventory of the
related shipping agent; 2) direct shipment from the manufacturer to the
unrelated buyers was the customary commercial channel for sales of this
merchandise between the parties involved; and 3) the related selling
agent in the United States acted only as a processor of sales-related
documentation and a communication link with the unrelated U.S. buyers.
See Certain Stainless Steel Wire Rods from France: Final Determination
of Sales at Less than Fair Value, 58 FR 68865, 68868 (December 29,
1993); Granular Polytetrafluoroethylene Resin from Japan: Final Results
of Antidumping Duty Administrative Review, 58 FR 50343, 50344
(September 27, 1993). In the present review, we found that: the
essential terms of sale were set prior to importation by or on approval
by Dillinger; the merchandise was shipped immediately to the customer
upon importation into the United States, without being introduced into
the inventory of the related shipping agent; direct shipment from the
manufacturer to the unrelated buyers was the customary commercial
channel for sales of this merchandise; the merchandise was not
warehoused by Francosteel during the normal course of business; and the
related selling agent in the United States acted only as a processor of
sales-related documentation and a
[[Page 13843]]
communication link with the unrelated U.S. buyers.
Even if Francosteel temporarily takes title to the merchandise, it
is not inventoried by them. The term ``inventory'', as it is commonly
used in business, implies that the merchandise is in storage and is
available for sale. We have determined that the subject merchandise
that Francosteel imports (the merchandise is not physically warehoused
by Francosteel during the normal course of business) is not generally
available for sale. It is awaiting delivery to a specific customer (see
Stainless Steel Wire Rods from France).
Although Francosteel takes title to the merchandise and
participates in sales negotiations, we found at verification that it
does not have the flexibility to set the price of the steel and only
acts as a processor of sales-related documentation (see Stainless Steel
Wire Rods from France). Furthermore the Court of International Trade
found in Independent Radionic Workers of America v. U.S., (Slip Op. 95-
45, March 15, 1995 CIT), that while the respondent processed purchase
orders, performed invoicing, collected payments, arranged U.S.
transportation, and was the importer of record, these duties, while
substantial, are not necessarily disqualifying of purchase price
treatment.
For all of the above reasons, we are continuing to treat U.S. sales
as purchase price sales.
Comment 21: Petitioners argue that the Department should apply BIA
to the value of a discrepancy in Dillinger's reported U.S. sales for
1993 and its sales ledger information. Petitioners state that Dillinger
underreported both the quantity and value of its U.S. sales.
Respondent counters that it explained at verification the double
counting of one invoice. Respondent also states that the discrepancy in
the value of U.S. sales is accounted for by expenses incurred by
Francosteel which are not contained in Dillinger's books.
Department's Position: We agree with respondent. As Francosteel
explained at verification, Dillinger only retained one entry for the
same tonnage in its calculations of total volume and value, thinking
that the second identical tonnage was a duplication. However, the same
tonnage was reported on two separate invoices, and was properly
reported in Dillinger's U.S. sales listing. This second ``duplicate''
invoice accounts for virtually all of the tonnage discrepancy. The
difference in value is accounted for by expenses incurred by
Francosteel.
Comment 22: Petitioners argue that the Department should apply BIA
to the value of all 1994 Francosteel imports, as Dillinger failed to
demonstrate the completeness of its 1994 U.S. sales at verification.
Respondent states that petitioners' assertion is without any
foundation on the record. Nowhere in the verification report does the
Department state that any material data was not verified. Accordingly,
the Department should continue to use Dillinger's 1994 sales data.
Department's Position: We agree with respondent. As discussed
above, verification is a testing procedure and not every single item
need be examined. See Monsanto Co. v. U.S., 698 F. Supp 275, 281 (CIT
1988). We consider total U.S. sales to be verified. We traced 1993
totals to the audited financial statements and performed completeness
tests on various months in 1993 and 1994. For example, we randomly
selected sales from Francosteel's invoice registers for the months of
August 1993 and August 1994 to determine if products were properly
included and/or excluded from Dillinger's U.S. sales listing. Because
no discrepancies were found, we consider total U.S. sales to be
reported and verified.
Comment 23: Petitioners claim that the Department should apply BIA
to unreported sales made by Berg Steel Pipe (Berg). Petitioners state
that they gave the Department information indicating that Dillinger
failed to report sales of subject merchandise (pipe) by Berg Steel
Pipe, a related party to Dillinger. According to petitioners, the
Department did not confirm whether there were any sales of subject
merchandise made by Berg to unrelated customers in the United States
during the POR. Petitioners argue that simply because Dillinger stated
that Berg did not purchase subject merchandise from it during the POR
does not foreclose the possibility that Berg already had subject
merchandise in stock which it could have sold during the POR.
Petitioners argue that furthermore, Dillinger permitted the Department
to select invoices only from a computer-generated listing at
verification, rather than an actual sales journal, and did not
demonstrate that the computer program which generated the listing was
outputting appropriate and complete information. Publicly available
data shows that Francosteel imported and shipped steel plate to Panama
City, Florida, where Berg is located, during the POR.
Respondent states that the Department verified that all sales and
entries in the POR by Dillinger to Berg were of non-scope merchandise.
Respondent asserts that assuming, arguendo, that Berg had sales of
scope merchandise in the POR which were entered prior to the POR, the
petitioners' point is moot. Respondent argues that entries prior to the
POR are not subject to this review and have already been liquidated in
any case.
Department's Position: We agree with respondent. While it is true
that Dillinger sold plate to Berg during the POR, there is no evidence
that any of this steel was subject merchandise. To establish whether
any sales of subject merchandise were made to Berg, we examined random
invoices selected from a company computer report listing all sales to
Berg at verification. This report was generated from Dillinger's normal
sales accounting system. The sales invoices we examined described the
plate sold to Berg as X-70 grade steel, which is outside the scope of
this review. We reviewed mill certificates for certain invoices,
confirming that this steel was X-70 grade and the strength levels were
above 70,000 pounds per square inch. We found this to be sufficient
proof that Dillinger did not sell subject merchandise to Berg during
the POR.
Comment 24: Petitioners state that the Department should use BIA
for foreign brokerage and handling. Because there has been no
demonstration of arm's-length transactions between Dillinger and the
related company that provided its foreign brokerage and handling
services, the Department should apply adverse BIA.
Respondent notes that the Department verified that the brokerage
and handling fees charged by this related company were at arm's-length.
Department's Position: We disagree with petitioners. As noted
above, verification is a testing procedure and not every single item
need be examined. See Monsanto Co. v. U.S., 698 F. Supp 275, 281 (CIT
1988). We performed an arm's-length test on one related party (a barge
company) and found that prices for comparable services charged by the
unrelated party were less than those charged by the related party. We
also found that another related party providing services to Dillinger
was profitable. We have no reason to believe that foreign brokerage and
handling were provided on other than an arm's length basis and we are
allowing this adjustment.
Comment 25: Petitioners argue that the Department should use BIA
for ocean freight. They claim that there has been no demonstration of
arm's-length transactions between Dillinger and the
[[Page 13844]]
related company that provided ocean transportation services.
Respondent notes that the related party does not own the ships
which carry the plates to the United States; this related party simply
arranges transportation. Respondent argues that none of the ocean
carriers are related to Dillinger, and the payments made for ocean
freight were made to unrelated parties.
Department's Position: We agree with respondent. While ocean
freight is arranged by a related party, the actual ocean carriers are
unrelated parties. As such, there is no need to perform an arm's length
test because the actual ocean freight is not provided by a related
party.
Comment 26: Petitioners state that the Department should use BIA
for foreign inland freight. First, the petitioners argue, Dillinger
reported related-party foreign inland freight charges, but failed to
demonstrate that they were incurred at arm's-length prices. According
to petitioners, Dillinger attempted to demonstrate its foreign inland
freight expenses were at arm's-length by providing information at
verification concerning a transaction between Dillinger and an
unrelated freight company. However, the petitioners assert, the
verification report does not indicate the product shipped, the route,
or the basis for calculating the rate. Moreover, the petitioners argue,
the invoices examined were for a different period than those to its
related party. The petitioners argue that Dillinger also claimed its
transactions were at arm's-length based on transportation charges
between this related party and an unrelated customer. However, the
petitioners assert, the supporting documentation provided is merely a
translation of an agreement, with no actual original documentation. The
petitioners argue that the verification report does not indicate that
this information was ever verified. According to petitioners,
verification documentation also reveals that Dillinger often incurred
foreign inland freight expenses through another related company;
Dillinger did not attempt to demonstrate those transactions were at
arm's-length. Second, the petitioners assert, the Department's program
fails to correct the weight basis used for foreign inland freight. The
petitioners argue that Dillinger incorrectly converted a theoretical
weight figure to an actual weight figure, even though U.S. sales were
reported on a theoretical weight basis. Third, the petitioners assert,
Dillinger has failed to include costs associated with loading,
unloading, and transportation of the merchandise from Dillinger's
factory to the port of Dillingen.
Respondent counters that the verification report accurately
portrays the arm's-length nature of the foreign inland freight
expenses. According to respondent, the documents inspected by the
verification team completely satisfied the Department. The respondent
argues that concerning the weight basis of the shipped plate, the
Department is confused on the facts. Respondent states that the barge
company bills Dillinger on an actual weight basis. Respondent argues
that it converted this figure to a theoretical weight basis for
purposes of its responses.
Department's Position: We disagree with petitioners. Verification
is a testing procedure and not every single item need be examined. See
Monsanto Co. v. U.S., 698 F. Supp 275, 281 (CIT 1988). We performed an
arm's-length test on one related party (a barge company) and found that
foreign inland freight charges charged by an unrelated party were less
than those charged by the related party. In addition to the checks
performed at verification, we have compared the prices charged by this
unrelated party to reported foreign inland freight expenses for 1994
U.S. sales. We again found the related expenses to be greater than the
unrelated charges. Thus, we believe Dillinger's foreign brokerage and
handling expenses to be at arm's length. We agree with respondent that
verification exhibits demonstrate that these expenses were reported on
a theoretical weight basis. Regarding the costs associated with
loading, unloading, and transportation of the merchandise from
Dillinger's factory to the port, we found (on the basis of the
information submitted and verification findings) these expenses to be
included in COP/CV. In Dillinger's accounting system, these expenses
are embedded in the cost of production and are not easily separated.
These expenses are incurred on both home market and U.S. sales. Also,
because of the very short distance from the plant to port, these
expenses are extremely minor. Therefore, we are allowing Dillinger's
treatment of these loading, unloading, and transportation expenses.
Comment 27: Petitioners state that the Department should reject
Dillinger's reported U.S. short-term interest rate. In determining
whether to use loans obtained from related parties to calculate credit
and inventory carrying costs, the Department examines the terms of
these loans to determine whether they were made at arm's-length
interest rates. When a respondent fails or is unable to demonstrate
that such loans are at arm's-length, the Department excludes these
loans from its calculation of interest rate. According to the
petitioners, Dillinger did not demonstrate this and failed to exclude
these related party interest rates from the weighted-average interest
rate used to calculate credit and inventory carrying costs. Petitioners
argue that verification exhibits demonstrate that the related party
interest rates were not arm's-length. Petitioners assert that there is
no indication that Dillinger attempted to demonstrate the reported
interest rates reflected all of Francosteel's borrowing during the POR.
Petitioners argue that there is no indication of any review of
Francosteel's accounts to verify whether Francosteel used other sources
of financing. Since Dillinger did not establish the arm's length nature
of its related party borrowings or demonstrate that all borrowings were
reported, its reported U.S. short-term interest rate should be denied
altogether. The Department should use the U.S. prime lending rate or,
at a minimum, use the weighted-average short-term interest rate
reported by Dillinger calculated without the related party interest
rates.
Respondent argues that the Department verified that loans from
related parties were at arm's length by comparing them to those
obtained from unrelated parties. Therefore, no change should be made to
the Department's methodology.
Department's Position: During verification, we examined
Francosteel's accounts to determine that all short-term borrowings had
been reported for use in the short-term interest rate. To accomplish
this, we inquired about all interest expenses on Francosteel's books
and their sources. We were satisfied that all borrowings had been
reported. We disagree with petitioners in part in that some of the
related party loans are considered to be arm's-length when compared for
contemporaneous periods. That is, we compared the loan from a related
party to those from unrelated parties, looking at when they were made.
Some of the related party loans were found to have rates at or above
those of unrelated parties, using time and term as the criteria.
Accordingly, loans from related parties whose loans were below arm's-
length were excluded from the interest rate calculation for purposes of
these final results (in the preliminary results, all loans from related
parties had been included in the calculations).
Comment 28: Petitioners state that the Department should apply BIA
to an unreported U.S. sale. Petitioners state that the Department's
examination of
[[Page 13845]]
one observation at verification revealed the amount invoiced to the
U.S. customer was less than the total amount appearing on the bill of
lading. Petitioners argue that although this sale should be included in
Dillinger's sales listing, the verification report provides no
indication the sales listing was examined to verify that the sale had
been reported, nor does it indicate any follow-through during
verification to determine similar discrepancies. Therefore, the
Department should presume the difference is caused by a missing sale
and should apply total BIA to the value of that sale.
Respondent notes that sales to one end user were made each time
that customer released tonnage from its inventory. Respondent asserts
that all tonnage contained in the bill of lading is accounted for in
the observations reported to the Department, and there are no
unreported U.S. sales.
Department's Position: We agree with respondent. In verifying the
calculation of U.S. duty on the observation in question, we examined
the total volume on the entry and verified it was totally reported in
Dillinger's submissions across a number of other observations.
Therefore, there is no missing U.S. sale.
Comment 29: Petitioners argue that the Department should adjust its
program to account for understated U.S. commissions. Petitioners assert
that the Department correctly treated Dillinger's U.S. commissions as a
direct selling expense. Petitioners argue that although the Department
found at verification that some of the reported commissions were
understated, the Department's program fails to adjust for this
understatement. As BIA, the Department should increase all commissions
by the average difference between Dillinger's reported commission and
its actual commission on these sales.
Respondent agrees that the Department found a discrepancy in U.S.
sales commissions for some sales, but points out that these
discrepancies are de minimis. If the Department makes a correction, it
should only be for the three sales in question.
Department's Position: After further examination of U.S.
commissions, we have determined that this expense has been correctly
reported. The sales referred to in the verification report include
multiple observations for each sale. We have found that taking the
total weighted-average of all the U.S. commissions corresponding to all
observations on a given invoice results in the amount described in the
verification report as the correct value for U.S. commissions (see
Analysis Memorandum, November 6, 1995).
Comment 30: Petitioners argue that the Department should adjust
U.S. price for warehousing expenses. Petitioners assert that although
the record indicates that Dillinger incurred warehousing costs for its
U.S. sales, Dillinger failed to report these expenses. The Department
should make an adjustment to USP to account for the cost of
warehousing. The Department should use, as BIA for warehousing
expenses, data provided in Francosteel's financial statements.
Respondent argues that the Department verified that Francosteel
incurred no warehousing expenses applicable to subject merchandise in
the period of review; therefore no adjustment is necessary. According
to respondent, warehousing in Francosteel's accounting documents is
merely an accounting term, and not a reference to a physical warehouse.
Department's Position: We agree with the respondent. We extensively
examined this topic at verification and found that Francosteel did not
physically inventory, i.e., warehouse, subject merchandise during the
POR (as discussed in the Francosteel verification report). Consequently
it did not incur any warehousing costs related to subject merchandise
during the POR.
Comment 31: Petitioners argue that the Department must ensure that
the value-added tax (VAT) amount added to USP is no more than the VAT
amount added to/included in FMV. Petitioners assert that the Department
neglected to adhere to the instructions of the CIT in Federal-Mogul v.
U.S., 862 F. Supp. 384, 394-95 (CIT 1994), requiring the Department to
impose a cap on the VAT adjustment made to USP. Accordingly, the
Department should ensure that the VAT amount added to USP is, in every
instance, no greater than the VAT amount which is added to the FMV to
which USP is being compared. The petitioners assert that the deposit
rate will be affected by an unwarranted increase in USP caused by the
Department's failure to apply a VAT cap.
Department's Position: 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 of the United States,
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 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-
[[Page 13846]]
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.
Final Results of Review
As a result of our review, we have determined that the following
margin exists:
------------------------------------------------------------------------
Margin
Manufacturer/exporter Time period (percent)
------------------------------------------------------------------------
AG der Dillinger Huttenwerke.... 2/4/93-7/31/94 1.42
------------------------------------------------------------------------
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.
Furthermore, the following deposit requirements will be effective
upon publication of this notice of final results of review for all
shipments of plate from Germany entered, or withdrawn from warehouse,
for consumption on or after the publication date, as provided for by
section 751(a)(1) of the Act: (1) the cash deposit rates for the
reviewed company will be the rate for that firm as stated above; (2)
for previously reviewed or investigated companies not listed above, the
cash deposit rate will continue to be the company-specific rate
published for the most recent period; (3) if the exporter is not a firm
covered in this review, or the original less than fair value (LTFV)
investigation, but the manufacturer is, the cash deposit rate will be
the rate established for the most recent period for the manufacturer of
the merchandise; and (4) if neither the exporter nor the manufacturer
is a firm covered in this review, the cash rate will be 36.00 percent.
This is the ``all others'' rate from the LTFV investigation. See
Antidumping Duty Order and Amendment of Final Determination of Sales at
Less Than Fair Value: Certain Cut-To-Length Carbon Steel Plate from
Germany, 58 FR 44170 (August 19, 1993). These deposit requirements,
when imposed, shall remain in effect until publication of the final
results of the next administrative review.
This notice serves as a final reminder to importers of their
responsibility under section 353.26 of the Department's regulations to
file a certificate regarding the reimbursement of antidumping duties
prior to liquidation of the relevant entries during this review period.
Failure to comply with this requirement could result in the Secretary's
presumption that reimbursement of antidumping duties occurred and the
subsequent assessment of double antidumping duties.
This notice also serves as a reminder to parties subject to
administrative protective order (APO) of their responsibility
concerning the disposition of proprietary information disclosed under
APO in accordance with section 353.34(d) of the Department's
regulations. Timely notification of return/destruction of APO materials
or conversion to judicial protective order is hereby requested. Failure
to comply with the regulations and the terms of an APO is a
sanctionable violation.
This administrative review and this notice are in accordance with
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and section 353.22
of the Department's regulations.
Dated: March 20, 1996.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 96-7464 Filed 3-27-96; 8:45 am]
BILLING CODE 3510-DS-P
