[Federal Register Volume 64, Number 109 (Tuesday, June 8, 1999)]
[Notices]
[Pages 30688-30710]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-13675]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-412-818]
Notice of Final Determination of Sales at Less Than Fair Value;
Stainless Steel Sheet and Strip in Coils From the United Kingdom
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of final determination of sales at less than fair value.
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EFFECTIVE DATE: June 8, 1999.
FOR FURTHER INFORMATION CONTACT: Charles Rast at (202) 482-1324 or
Nancy Decker at (202) 482-0196, Antidumping and Countervailing Duty
Enforcement Group III, Import Administration, International Trade
Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, NW, Washington, DC 20230.
Applicable Statute and Regulations
Unless otherwise indicated, all citations to the Tariff Act of
1930, as amended (the Tariff Act), are to the provisions effective
January 1, 1995, the effective date of the amendments made to the
Tariff Act by the Uruguay Round Agreements Act (URAA). In addition,
unless otherwise indicated, all citations to the Department's
regulations are to the regulations codified at 19 CFR Part 351 (1998).
Final Determination
We determine that stainless steel sheet and strip in coils (SSSS)
from the United Kingdom (U.K.) are being, or is likely to be, sold in
the United States at less than fair value (LTFV), as provided in
section 735 of the Tariff Act. The estimated margins of sales at LTFV
are shown in the ``Suspension of Liquidation'' section of this notice.
Case History
We published in the Federal Register the preliminary determination
in this investigation on January 4, 1999. See Notice of Preliminary
Determination of Sales at Less Than Fair Value and Postponement of
Final Determination; Stainless Steel Sheet and Strip in Coils From the
United Kingdom, 64 FR 85 (January 4, 1999) (Preliminary Determination).
Since the publication of the Preliminary Determination, the following
events have occurred:
On February 23, 1999, the Department published a correction to the
preliminary determination, incorporating corrected scope language. See
Notice of Correction: Preliminary Determinations of Sales at Less than
Fair Value, Stainless Steel Sheet and Strip from France, Germany,
Italy, Japan, Mexico, South Korea, and United Kingdom; and Amended
Preliminary Determination of Sales at Less Than Fair Value, Stainless
Steel Sheet and Strip from Taiwan, 64 FR 8799 (February 23, 1999).
The Department verified the responses of the respondent, Avesta
Sheffield Ltd. and Avesta Sheffield NAD, Inc. (collectively
``Avesta''), as follows: sections A (General Information), B (Home
Market Sales), and C (U.S. Sales) of Avesta's responses from January
18-31, 1999, in Sheffield, Stocksbridge, and Oldbury, U.K., and from
February 10-12, 1999, in Schaumberg, Illinois; and section D (Cost of
Production) questionnaire responses from February 15-22, 1999, in
Sheffield, U.K. See Memorandum For the Files; ``Sales Verification of
Sections A-C Questionnaire Responses Submitted By Avesta,'' April 1,
1999 (Home Market Sales Verification Report); Memorandum For the Files;
``U.S. Sales Verification of Sections A & C Questionnaire Responses
Submitted By Avesta,'' March 23, 1999 (U.S. Sales Verification Report);
Memorandum to Richard Weible, Director, Office Eight, Enforcement Group
Three; ``Verification Report on the Cost of Production and Constructed
Value Data,'' April 2, 1999 (Cost Verification Report). Public versions
of these, and all other Departmental memoranda referred to herein, are
on file in room B-099 of the main Commerce building.
On January 29, 1999, Allegheny Ludlum Corporation, Armco, Inc., J&L
Specialty Steel, Inc., Washington Steel Division of Bethlehem Steel
Corporation, United Steelworkers of America, AFL-CIO/CLC, Butler Armco
Independent Union, and Zanesville
[[Page 30689]]
Armco Independent Organization, Inc. (petitioners), requested a public
hearing in this case. On February 4, 1999, Avesta also requested a
hearing. However, on April 13, 1999, and on April 16, 1999, Avesta and
petitioners, respectively, withdrew their requests for a hearing;
therefore, none was held. On April 9, 1999, petitioners and Avesta
filed case briefs in this matter; we received rebuttal briefs from
petitioners and Avesta on April 16, 1999.
Scope of the Investigation
We have made minor corrections to the scope language excluding
certain stainless steel foil for automotive catalytic converters and
certain specialty stainless steel products in response to comments by
interested parties.
For purposes of this investigation, the products covered are
certain stainless steel sheet and strip in coils. Stainless steel is an
alloy steel containing, by weight, 1.2 percent or less of carbon and
10.5 percent or more of chromium, with or without other elements. The
subject sheet and strip is a flat-rolled product in coils that is
greater than 9.5 mm in width and less than 4.75 mm in thickness, and
that is annealed or otherwise heat treated and pickled or otherwise
descaled. The subject sheet and strip may also be further processed
(e.g., cold-rolled, polished, aluminized, coated, etc.) provided that
it maintains the specific dimensions of sheet and strip following such
processing.
The merchandise subject to this investigation is classified in the
Harmonized Tariff Schedule of the United States (HTS) at subheadings:
7219.13.00.30, 7219.13.00.50, 7219.13.00.70, 7219.13.00.80,
7219.14.00.30, 7219.14.00.65, 7219.14.00.90, 7219.32.00.05,
7219.32.00.20, 7219.32.00.25, 7219.32.00.35, 7219.32.00.36,
7219.32.00.38, 7219.32.00.42, 7219.32.00.44, 7219.33.00.05,
7219.33.00.20, 7219.33.00.25, 7219.33.00.35, 7219.33.00.36,
7219.33.00.38, 7219.33.00.42, 7219.33.00.44, 7219.34.00.05,
7219.34.00.20, 7219.34.00.25, 7219.34.00.30, 7219.34.00.35,
7219.35.00.05, 7219.35.00.15, 7219.35.00.30, 7219.35.00.35,
7219.90.00.10, 7219.90.00.20, 7219.90.00.25, 7219.90.00.60,
7219.90.00.80, 7220.12.10.00, 7220.12.50.00, 7220.20.10.10,
7220.20.10.15, 7220.20.10.60, 7220.20.10.80, 7220.20.60.05,
7220.20.60.10, 7220.20.60.15, 7220.20.60.60, 7220.20.60.80,
7220.20.70.05, 7220.20.70.10, 7220.20.70.15, 7220.20.70.60,
7220.20.70.80, 7220.20.80.00, 7220.20.90.30, 7220.20.90.60,
7220.90.00.10, 7220.90.00.15, 7220.90.00.60, and 7220.90.00.80.
Although the HTS subheadings are provided for convenience and Customs
purposes, the Department's written description of the merchandise under
investigation is dispositive.
Excluded from the scope of this investigation are the following:
(1) Sheet and strip that is not annealed or otherwise heat treated and
pickled or otherwise descaled, (2) sheet and strip that is cut to
length, (3) plate (i.e., flat-rolled stainless steel products of a
thickness of 4.75 mm or more), (4) flat wire (i.e., cold-rolled
sections, with a prepared edge, rectangular in shape, of a width of not
more than 9.5 mm), and (5) razor blade steel. Razor blade steel is a
flat-rolled product of stainless steel, not further worked than cold-
rolled (cold-reduced), in coils, of a width of not more than 23 mm and
a thickness of 0.266 mm or less, containing, by weight, 12.5 to 14.5
percent chromium, and certified at the time of entry to be used in the
manufacture of razor blades. See Chapter 72 of the HTS, ``Additional
U.S. Note'' 1(d).
In response to comments by interested parties the Department has
determined that certain specialty stainless steel products are also
excluded from the scope of this investigation. These excluded products
are described below:
Flapper valve steel is defined as stainless steel strip in coils
containing, by weight, between 0.37 and 0.43 percent carbon, between
1.15 and 1.35 percent molybdenum, and between 0.20 and 0.80 percent
manganese. This steel also contains, by weight, phosphorus of 0.025
percent or less, silicon of between 0.20 and 0.50 percent, and sulfur
of 0.020 percent or less. The product is manufactured by means of
vacuum arc remelting, with inclusion controls for sulphide of no more
than 0.04 percent and for oxide of no more than 0.05 percent. Flapper
valve steel has a tensile strength of between 210 and 300 ksi, yield
strength of between 170 and 270 ksi, plus or minus 8 ksi, and a
hardness (Hv) of between 460 and 590. Flapper valve steel is most
commonly used to produce specialty flapper valves in compressors.
Also excluded is a product referred to as suspension foil, a
specialty steel product used in the manufacture of suspension
assemblies for computer disk drives. Suspension foil is described as
302/304 grade or 202 grade stainless steel of a thickness between 14
and 127 microns, with a thickness tolerance of plus-or-minus 2.01
microns, and surface glossiness of 200 to 700 percent Gs. Suspension
foil must be supplied in coil widths of not more than 407 mm, and with
a mass of 225 kg or less. Roll marks may only be visible on one side,
with no scratches of measurable depth. The material must exhibit
residual stresses of 2 mm maximum deflection, and flatness of 1.6 mm
over 685 mm length.
Certain stainless steel foil for automotive catalytic converters is
also excluded from the scope of this investigation. This stainless
steel strip in coils is a specialty foil with a thickness of between 20
and 110 microns used to produce a metallic substrate with a honeycomb
structure for use in automotive catalytic converters. The steel
contains, by weight, carbon of no more than 0.030 percent, silicon of
no more than 1.0 percent, manganese of no more than 1.0 percent,
chromium of between 19 and 22 percent, aluminum of no less than 5.0
percent, phosphorus of no more than 0.045 percent, sulfur of no more
than 0.03 percent, lanthanum of less than 0.002 or greater than 0.05
percent, and total rare earth elements of more than 0.06 percent, with
the balance iron.
Permanent magnet iron-chromium-cobalt alloy stainless strip is also
excluded from the scope of this investigation. This ductile stainless
steel strip contains, by weight, 26 to 30 percent chromium, and 7 to 10
percent cobalt, with the remainder of iron, in widths 228.6 mm or less,
and a thickness between 0.127 and 1.270 mm. It exhibits magnetic
remanence between 9,000 and 12,000 gauss, and a coercivity of between
50 and 300 oersteds. This product is most commonly used in electronic
sensors and is currently available under proprietary trade names such
as ``Arnokrome III.'' \1\
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\1\ ``Arnokrome III'' is a trademark of the Arnold Engineering
Company.
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Certain electrical resistance alloy steel is also excluded from the
scope of this investigation. This product is defined as a non-magnetic
stainless steel manufactured to American Society of Testing and
Materials (ASTM) specification B344 and containing, by weight, 36
percent nickel, 18 percent chromium, and 46 percent iron, and is most
notable for its resistance to high temperature corrosion. It has a
melting point of 1390 degrees Celsius and displays a creep rupture
limit of 4 kilograms per square millimeter at 1000 degrees Celsius.
This steel is most commonly used in the production of heating ribbons
for circuit breakers and industrial furnaces, and in rheostats for
railway locomotives. The product is
[[Page 30690]]
currently available under proprietary trade names such as ``Gilphy
36.'' \2\
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\2\ ``Gilphy 36'' is a trademark of Imphy, S.A.
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Certain martensitic precipitation-hardenable stainless steel is
also excluded from the scope of this investigation. This high-strength,
ductile stainless steel product is designated under the Unified
Numbering System (UNS) as S45500-grade steel, and contains, by weight,
11 to 13 percent chromium, and 7 to 10 percent nickel. Carbon,
manganese, silicon and molybdenum each comprise, by weight, 0.05
percent or less, with phosphorus and sulfur each comprising, by weight,
0.03 percent or less. This steel has copper, niobium, and titanium
added to achieve aging, and will exhibit yield strengths as high as
1700 Mpa and ultimate tensile strengths as high as 1750 Mpa after
aging, with elongation percentages of 3 percent or less in 50 mm. It is
generally provided in thicknesses between 0.635 and 0.787 mm, and in
widths of 25.4 mm. This product is most commonly used in the
manufacture of television tubes and is currently available under
proprietary trade names such as ``Durphynox 17.'' \3\
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\3\ ``Durphynox 17'' is a trademark of Imphy, S.A.
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Finally, three specialty stainless steels typically used in certain
industrial blades and surgical and medical instruments are also
excluded from the scope of this investigation. These include stainless
steel strip in coils used in the production of textile cutting tools
(e.g., carpet knives).\4\ This steel is similar to AISI grade 420 but
containing, by weight, 0.5 to 0.7 percent of molybdenum. The steel also
contains, by weight, carbon of between 1.0 and 1.1 percent, sulfur of
0.020 percent or less, and includes between 0.20 and 0.30 percent
copper and between 0.20 and 0.50 percent cobalt. This steel is sold
under proprietary names such as ``GIN4 Mo.'' The second excluded
stainless steel strip in coils is similar to AISI 420-J2 and contains,
by weight, carbon of between 0.62 and 0.70 percent, silicon of between
0.20 and 0.50 percent, manganese of between 0.45 and 0.80 percent,
phosphorus of no more than 0.025 percent and sulfur of no more than
0.020 percent. This steel has a carbide density on average of 100
carbide particles per 100 square microns. An example of this product is
``GIN5'' steel. The third specialty steel has a chemical composition
similar to AISI 420 F, with carbon of between 0.37 and 0.43 percent,
molybdenum of between 1.15 and 1.35 percent, but lower manganese of
between 0.20 and 0.80 percent, phosphorus of no more than 0.025
percent, silicon of between 0.20 and 0.50 percent, and sulfur of no
more than 0.020 percent. This product is supplied with a hardness of
more than Hv 500 guaranteed after customer processing, and is supplied
as, for example, ``GIN6''.\5\
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\4\ This list of uses is illustrative and provided for
descriptive purposes only.
\5\ ``GIN4 Mo,'' ``GIN5'' and ``GIN6'' are the proprietary
grades of Hitachi Metals America, Ltd.
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Period of Investigation
The period of investigation (POI) is April 1, 1997 through March
31, 1998.
Fair Value Comparisons
To determine whether sales of SSSS from the United Kingdom to the
United States were made at less than fair value, we compared export
price (EP) or constructed export price (CEP) to the normal value (NV),
as described in the ``Export Price and Constructed Export Price'' and
``Normal Value'' sections of this notice, below. In accordance with
section 777A(d)(1)(A)(i) of the Tariff Act, we calculated weighted-
average EPs and CEPs for comparison to weighted-average NVs.
Transactions Investigated
For its home market and U.S. sales, Avesta reported the date of
invoice as the date of sale, given the Department's stated preference
for using the invoice date as the date of sale. As explained in
response to Comment 2, below, for this final determination we have
continued to rely upon Avesta's invoice dates in the home and U.S.
markets as the date of sale. However, should this investigation result
in an antidumping duty order, we intend to scrutinize further this
issue in any subsequent segment of this proceeding involving Avesta.
We have excluded from our analysis all of Avesta Sheffield Inc.'s
(ASI) U.S. resales of rejected merchandise. See Comment 6 below.
Avesta has asserted that hot-rolled merchandise, which is sold only
in the home market, should be considered a product of Sweden, and, as
such, it should be excluded from the Department's analysis. Avesta has
also asserted that a small amount of merchandise reported in the United
States and/or home market databases is: (1) hot-rolled and cold-rolled
in Sweden, and then further cold-rolled, annealed, and finally
processed in the United Kingdom (affecting U.S. and home markets); and
(2) hot-rolled and cold-rolled in Sweden and then further processed in
the United Kingdom (affecting the home market). We have excluded from
our analysis (1) Avesta's hot-rolled sales, and (2) those sales of
merchandise that are first cold-rolled in Sweden. See Comment 13 below.
Product Comparisons
In accordance with section 771(16) of the Tariff Act, we considered
all products produced by the respondent covered by the description in
the ``Scope of the Investigation'' section, above, and sold in the home
market during the POI, to be foreign like products for purposes of
determining appropriate product comparisons to U.S. sales. Where there
were no sales of identical merchandise in the home market to compare to
U.S. sales, we compared U.S. sales to the next most similar foreign
like product on the basis of the characteristics and reporting
instructions listed in the Department's questionnaire.
Level of Trade
In our preliminary determination, we found that one level of trade
(LOT) existed for Avesta in the home market. Furthermore, we found that
Avesta had two LOTs in the United States, one for EP sales and one for
CEP sales, and we found that a CEP offset was appropriate in accordance
with section 773(a)(7)(B) of the Tariff Act. As explained in Comment 4,
below, and the preliminary determination, we find that (1) one LOT
existed for Avesta in the home market; (2) two separate LOTs existed
for Avesta in the United States; and (3) a CEP offset is appropriate.
Export Price and Constructed Export Price
We calculated EP, in accordance with section 772(a) of the Tariff
Act, for those sales where the merchandise was sold to the first
unaffiliated purchaser in the United States prior to importation by the
exporter outside the United States, and where CEP methodology was not
otherwise warranted, based on the facts of the record. For further
discussion on the classification of EP sales, see Comment 1 below.
We calculated CEP, in accordance with section 772(b) of the Tariff
Act, for those sales made by ASI, an affiliated U.S. sales company, to
unaffiliated purchasers in the United States.
We calculated EP and CEP based on the same methodology employed in
the preliminary determination, except as noted below in ``Comments''
and in the Final Sales Analysis Memorandum from Charles Rast and Nancy
Decker to The File, dated May 19, 1999 (Final Analysis Memorandum).
[[Page 30691]]
Normal Value
Home Market Viability
As discussed in the Preliminary Determination, in order to
determine whether the home market was viable for purposes of
calculating NV (i.e., the aggregate volume of home market sales of the
foreign like product was equal to or greater than five percent of the
aggregate volume of U.S. sales), we compared the respondent's volume of
home market sales of the foreign like product to the volume of U.S.
sales of the subject merchandise, in accordance with section
773(a)(1)(C) of the Tariff Act. As Avesta's aggregate volume of home
market sales of the foreign like product was greater than five percent
of its aggregate volume of U.S. sales of the subject merchandise, we
determined that the home market was viable. Therefore, we based NV on
home market sales in the usual commercial quantities and in the
ordinary course of trade.
Affiliated-Party Transactions and Arm's-Length Test
Sales to affiliated customers in the home market not made at arm's-
length prices (if any) were excluded from our analysis because we
considered them to be outside the ordinary course of trade. See 19 CFR
351.102. To test whether these sales were made at arm's-length prices,
we compared, on a model-specific basis, the prices of sales to
affiliated and unaffiliated customers net of all movement charges,
direct selling expenses, and packing. Where, for the tested models of
subject merchandise, prices to the affiliated party were on average
99.5 percent or more of the price to unaffiliated parties, we
determined that sales made to the affiliated party were at arm's
length. See 19 CFR 351.403(c). In instances where no price ratio could
be constructed for an affiliated customer because identical merchandise
was not sold to unaffiliated customers, we were unable to determine
that these sales were made at arm's-length prices and, therefore, we
excluded them from our LTFV analysis. See, e.g., Final Determination of
Sales at Less Than Fair Value: Certain Cold-Rolled Carbon Steel Flat
Products from Argentina, 58 FR 37062, 37077 (July 9, 1993); Notice of
Preliminary Determination of Sales at Less Than Fair Value and
Postponement of Final Determination: Emulsion Styrene-Butadiene Rubber
from Brazil, 63 FR 59509 (Nov. 8, 1998), citing to Final Determination
of Sales at Less Than Fair Value: Certain Cold-Rolled Carbon Steel Flat
Products from Argentina, 58 FR 37062 (July 9, 1993). Where the
exclusion of such sales eliminated all sales of the most appropriate
comparison product, we made a comparison to the next most similar
model.
Cost of Production Analysis
In accordance with section 773(b)(3) of the Tariff Act, we
calculated the weighted-average cost of production (COP) based on the
sum of Avesta's cost of materials, fabrication, general expenses, and
packing costs. In addition, on a transaction specific basis, we added
to COP tolling costs for slitting work done by an unaffiliated party.
We relied on Avesta's submitted COP, except in the following specific
instances where the submitted costs were not appropriately quantified
or valued:
We revised Avesta's financial expense ratio using British Steel
PLC's consolidated financial statements. See Comment 18 below.
We adjusted the calculation of Avesta's general and administrative
expense (G&A) ratio to use unconsolidated cost of goods sold of the
producing entities. See Final Analysis Memorandum.
We compared the weighted-average COP for Avesta to home market
sales prices of the foreign like product, as required under section
773(b) of the Tariff Act. In determining whether to disregard home
market sales made at prices less than the COP, we examined whether such
sales were made (i) in substantial quantities within an extended period
of time, and (ii) at prices which permitted the recovery of all costs
within a reasonable period of time. On a product-specific basis, we
compared COP to home market prices, less any applicable movement
charges, billing adjustments, and discounts and rebates.
Pursuant to section 773(b)(2)(C)(i) of the Tariff Act, where less
than twenty percent of a respondent's sales of a given product were at
prices less than the COP, we do not disregard any below-cost sales of
that product because we determine that the below-cost sales were not
made in ``substantial quantities.'' Where twenty percent or more of a
respondent's sales of a given product during the POI are at prices less
than the COP, we determine such sales to have been made in substantial
quantities within an extended period of time, in accordance with
sections 773(b)(2)(C)(i) and 773(b)(2)(B) of the Tariff Act. In
addition, pursuant to section 773(b)(2)(D) of the Tariff Act, because
we compared prices to POI-average COPs, we also determine that such
sales were not made at prices which would permit recovery of all costs
within a reasonable period of time. Therefore, we disregard the below-
cost sales.
Our cost test for Avesta revealed that, for certain products, less
than twenty percent of Avesta's home market sales of those products
were at prices below Avesta's COP. We retained all sales of those
products in our analysis. For other products, more than twenty percent
of Avesta's sales of those products were at prices below COP. In such
cases, we disregarded the below-cost sales, while retaining the above-
cost sales for our analysis. See Final Analysis Memorandum.
Price-to-Price Comparisons
For those product comparisons for which there were sales at home
market prices at or above the COP, we based NV on Avesta's sales to
unaffiliated home market customers or prices to affiliated customers
that we determined to be at arm's-length prices. We made adjustments
for billing adjustments and discounts and rebates. We made deductions,
where appropriate, for foreign inland freight, warehousing, and inland
insurance, pursuant to section 773(a)(6)(B) of the Tariff Act. In
addition, we made adjustments, where appropriate, for physical
differences in the merchandise in accordance with section
773(a)(6)(C)(ii) of the Tariff Act. We continued to make circumstance-
of-sale (COS) adjustments in accordance with section 773(a)(6)(C)(iii)
of the Tariff Act.
Price-to-Constructed Value Comparisons
In accordance with section 773(a)(4) of the Tariff Act, we based NV
on constructed value (CV) if we were unable to find a home market match
of identical or similar merchandise. We calculated CV based on the sum
of Avesta's costs of materials, fabrication, SG&A expenses, profit, and
U.S. packing expenses. See section 773(e) of the Tariff Act. In
accordance with section 773(e)(2)(A) of the Tariff Act, we based SG&A
expense and profit on the amounts incurred and realized by the
respondent in connection with the production and sale of the foreign
like product in the ordinary course of trade for consumption in the
United Kingdom. We calculated the cost of materials, fabrication, and
general expenses based upon the methodology described in the ``Cost of
Production Analysis'' section, above. For selling expenses, we used the
weighted-average home market selling expenses. Where appropriate, we
made adjustments to CV in accordance with section 773(a)(8) of
[[Page 30692]]
the Tariff Act. For comparisons to EP, we made COS adjustments by
deducting home market direct selling expenses and adding U.S. direct
selling expenses. When we compared CV to CEP, we deducted from CV the
weighted-average home market direct selling expenses.
Currency Conversion
We made currency conversions into U.S. dollars in accordance with
section 773A(a) of the Tariff Act based on the exchange rates in effect
on the dates of the U.S. sales, as certified by the Federal Reserve
Bank.
Analysis of Interested Party Comments
Issues Relating to Sales
Comment 1: EP versus CEP sales
Petitioners argue that the Department should reclassify Avesta's
reported EP sales as CEP sales based on the evaluation of the
activities of ASI, Avesta's U.S. affiliate. Petitioners, also assert
that, in fact, the mere existence of the respondent's affiliate in the
United States demonstrates that the respondent's sale should be
classified as CEP sales.
Petitioners claim that, when sales are made prior to importation,
it is the Department's practice to evaluate the following: whether the
merchandise is shipped directly to the unaffiliated buyer without being
introduced into the physical inventory of the selling agent; whether
direct shipment to the unaffiliated buyer is the customer channel for
sales of the subject merchandise between the parties involved; and
whether the selling agent in the United States acts only as a processor
of the sales-related documentation and a communication link with the
unaffiliated U.S. buyer. Referencing the last criterion, petitioners
argue that the Department has amplified its policy on evaluating the
level of involvement of U.S. subsidiaries by determining that such
sales are appropriately classified as CEP sales in the following
instances: the U.S. subsidiary was the importer of record and took
title to the merchandise; the U.S. subsidiary financed the relevant
sales transactions; the U.S. subsidiary arranged and paid for further
processing; and the U.S. subsidiary assumed the seller's risk.
Petitioners assert that there is ample precedent for re-classifying
sales as CEP, where the Department determines that a U.S. affiliate's
involvement in a sale is significant, but where the merchandise is not
entered into a U.S. affiliate's inventory. Citing Extruded Rubber
Thread from Malaysia: Final Results of Antidumping Duty Administrative
Review, 63 FR 12752 (March 16, 1998) (Extruded Rubber Thread),
petitioners argue that the Department determined sales to be CEP sales
in circumstances where the U.S. sales force contacted the U.S.
customer, negotiated sales terms, arranged for production and shipment,
and issued final invoices and collected payment. In other instances,
according to petitioners, the Department has re-classified the
respondents' U.S. sales as CEP because the U.S. companies performed
significant selling functions in the United States.
According to petitioners, ASI satisfies the criteria established in
Extruded Rubber Thread for reclassifying ASI's EP sales as CEP sales.
Petitioners argue that, as in that case, ASI is responsible for all
paperwork, invoicing, and transportation. Furthermore, petitioners
contend, ASI is responsible for providing quotations to the customer in
the U.S. and confirming prices with the U.K. mill. They cite the
Department's U.S. Sales Verification Report, noting that ASI arranges
shipment logistics for clearance through Customs and shipment to the
customer, performs customer credit checks, extends credit, collects
payment, maintains accounts receivables, holds inventory, issues order
confirmations, inputs orders, sends mill certificates and packing
lists, and issues the final invoice. Furthermore, according to
petitioners, the Department's pre-selected sales described in the U.S.
Sales Verification Report support reclassifying ASI's EP sales as CEP
sales.
Petitioners state it is evident from information collected by the
Department at verification that ASI is not merely a ``paper
processor'', and that although merchandise is customarily shipped
directly to customers from the United Kingdom, ASI handles almost every
significant aspect of making U.S. sales. Because ASI must, in general,
retain employees to sell the subject merchandise, handle all the
paperwork, arrange entry and transportation, administer customer
accounts, and deal with late payments, its activities were not limited
to that of a ``processor of sales-related documentation'' and
``communication link'' with the unaffiliated buyers.
Petitioners assert that the mere existence of ASI demonstrates its
involvement in the U.S. sales process, and that its large staff
comprising of an active sales force, billing and accounting staff,
indicate that its activity must be ``significant''. According to
petitioners, in the absence of ASI, the respondent would simply conduct
operations from its home market. A true ``paper processing''
subsidiary, they state, would have an inexpensive office and small
clerical staff with little more than telephone and facsimile equipment
to communicate with the home office, and that an adjustment (for
indirect selling expenses) to the starting price, while necessary,
would be small. On the other hand, according to petitioners, a more
extensive export market operation, such as ASI's, would result in a
commensurately larger adjustment. Petitioners argue that, given ASI's
extensive involvement in the selling process, the Department should
deduct the indirect selling and operating costs of ASI from the
starting price for all U.S. sales involving ASI.
Avesta argues that the Department correctly classified the U.S.
sales referenced by petitioners as EP sales. Avesta contends that
petitioners' claim that ASI is responsible for providing quotations to
the customer in the United States and confirming prices with the U.K.
mill is deceptive. Avesta points to verified evidence demonstrating
that the U.K. mill sets the price for EP sales because ASI has much
less familiarity with the market price for such specialized products.
Also, Avesta asserts that the Department reviewed sales documentation
at verification, showing that ASI requested price guidance from the
mill, and that the mill quoted prices to ASI for each of the EP
customers during the POI. Avesta claims that the fact that ASI does not
negotiate the terms of sales distinguishes ASI's role in the sales
process from that of the affiliated U.S. sales agents in the cases
cited by petitioners. In all of those instances, according to Avesta,
the Department's decision to reclassify U.S. sales as CEP transactions
was based, at least in part, on a finding that the U.S. sales agent was
involved in the negotiation of the sales.
Avesta indicates that record evidence shows that ASI's role in the
sales process for certain sales of merchandise meets the Department's
requirements for EP sales. According to Avesta, ASI's role for these
sales is most similar to that of the U.S. affiliate in Stainless Wire
Rod from Korea, in which the Department determined that the extent of
the U.S. affiliate's involvement in the sales process was indicative of
the involvement normally provided by a processor of sales-related
documentation and a communications link. (See Stainless Wire Rod from
Korea: Final Determination of Sales at Less Than Fair Value, 63 FR
40404, 40419 (July 29, 1998) (Stainless Wire Rod from Korea). Avesta
states that, similarly, the Department has
[[Page 30693]]
previously found that a U.S. affiliate whose functions include
receiving orders, preparing and executing order confirmation, invoices,
packing lists, and other sales-related documentation, as well as
receiving and processing payments from customers, was not so
substantial to conclude that it was more than a processor of documents
or communications link.
Avesta argues that petitioners' assertion that the mere existence
of a U.S. affiliate constitutes evidence that the respondent's U.S.
sales should be characterized as CEP sales is without basis in law or
Departmental practice. Avesta contends that, in Stainless Wire Rod from
Korea, where sales are made prior to importation through a U.S.-based
affiliate to an unaffiliated customer in the United States, the
Department has recently explained that it examines several factors to
determine whether the sales warrant classification as EP sales. Avesta
notes that it is not the mere existence of an affiliated U.S. sales
agent that determines EP versus CEP treatment of U.S. sales, but the
Department's analysis of the factors enunciated in its EP/CEP test.
Avesta states that petitioners' arguments seem to ignore the fact
that Avesta has reported only a small number of U.S. sales as EP sales,
and that Avesta is not holding the position that all, or even a large
number of U.S. sales, should be classified as EP sales. Avesta claims
that, because this small quantity of sales clearly involved sales and
negotiation by the U.K. mill for certain products, they were correctly
classified by the Department as EP sales. Avesta asserts that this
small quantity of EP sales, relative to total U.S. sales, demonstrates
the inaccuracy of petitioners' characterization of the size and level
of ASI, and that the activity of ASI's U.S. sales force must be
significant. Avesta argues that petitioners' characterization of ASI's
staff as ``large'' is not supported by record evidence and that
petitioners give no indication of why the Department must assume that
the activities of ASI's staff are focused on EP sales, which make up
only a small percentage of total U.S. sales by ASI.
Department's Position: We disagree with petitioners that Avesta's
U.S. sales should be treated as CEP sales, and have continued to treat
Avesta's EP-classified U.S. sales as EP sales in the final
determination. Specifically, we disagree with petitioners' contention
that ASI acts as more than a communications link and processor of
sales-related documentation for sales classified by Avesta as EP during
the POI.
The statute defines EP price as the price at which the subject
merchandise is first sold (or offered for sale) to an unaffiliated
purchaser before the date of import by the exporter outside the United
States. In contrast, CEP is the price at which the subject merchandise
is first sold (or offered for sale), before or after the date of
import, in the United States by or for the account of the exporter or
by a seller affiliated with the exporter to an unaffiliated purchaser.
Thus, sales made prior to import can be either EP or CEP, with the
former being sold by the exporter or producer outside the United States
and the latter being sold by someone in the United States who is
selling for the account of the exporter or is affiliated with the
exporter. In cases in which both the exporter and a U.S. affiliate, or
a party in the United States acting on the exporter's behalf, are
involved in the sales transaction, a case-by-case determination must be
made, based on the facts associated with the transactions at issue, to
determine whether such sales are properly characterized as EP or CEP
sales. Normally, when a party in the United States is involved in the
sale to the first unaffiliated customer, the sales are properly treated
as CEP sales. However, the Department has a long history of recognizing
so-called ``indirect EP sales,'' which are sales made by an exporter,
with the party in the United States performing only certain ancillary
functions that support the sales process. To determine whether sales
are properly classified as EP in such cases the Department examines
three criteria: whether (1) the merchandise is not inventoried by the
importer, (2) the sale is made through a customary commercial channel
for sales of this merchandise, and (3) the affiliated importer acts
only as a processor of sales-related documents and as a communications
link with the exporter. See, e.g., Du Pont v. United States, 841 F.
Supp.1248-50 (CIT 1993); AK Steel v. United States, Court No. 97-05-
00865, 1998 WL 846764 at *6 (CIT 1998) (AK Steel). Only when all three
criteria are met does the Department treat the sales as EP sales. As
the Court explained in AK Steel, this test is simply a means to
determine whether a sale at issue is in essence between the exporter
and the unaffiliated buyer, in which case the EP rules apply, or
whether the role of the affiliate has sufficient substance that the CEP
rules apply. Id.
In the instant investigation, the sales in question were made prior
to importation through Avesta's affiliated U.S. sales company, ASI, to
an unaffiliated customer in the United States. With respect to the
first prong of the indirect EP test, the record in this case indicates
that the subject merchandise was shipped directly from the U.K. mill to
the unaffiliated U.S. customers. Although, as we found at verification,
a small amount of ASI's mill direct sales may be delayed at the
customer's request and held by ASI, record evidence during the POI does
not support petitioners' contention that ASI therefore ``holds
inventory.'' In fact, our sales verification report specifically states
that, with respect to ASI's maintaining of inventory, ``none is
maintained for EP sales.'' See U.K. Sales Verification Report. With
respect to the second prong, we verified that this pattern of direct
shipment is a customary commercial channel between the parties
involved, and there is no indication that the sales between the parties
involved any departure from this pattern.
As for the third prong, whether ASI's role in the sales process was
limited to that of a ``processor of sales-related documentation'' and a
``communications link,'' we found at verification that EP and CEP-
classified sales differ at the inquiry stage. Specifically, for EP-
classified sales, ASI is not involved in the negotiation of sales but
merely contacts the U.K. mill, which sets a price for the sales. The
mill quotes the price from the mill to ASI. ASI then adds amounts for
duty, brokerage, freight and handling, and a set markup to derive the
price charged to the customer. We examined documentation between the
U.K. mill and ASI, including price quotes and other customer-related
issues. See U.S. Sales Verification Report. As with Avesta's CEP sales,
ASI arranges for shipment from the port to the customer, arranges for
Customs clearance, invoices the customer, and collects payment.
The facts discussed above show that the extent of ASI's involvement
in the sales process, regarding certain customers whose sales were
classified as EP, indicates that ASI plays an ancillary role normally
played by a ``processor of sales-related documentation'' and a
``communications link.'' While ASI is involved in document-processing
and other secondary activities related to the sales of subject
merchandise to the U.S. customer (e.g., clearing Customs, arranging for
U.S. transportation, issuing invoices, and collecting payment), ASI had
no substantial involvement in the sales process regarding certain
customers whose sales were classified as EP, such as sales negotiation.
For these EP-classified
[[Page 30694]]
sales, the record evidence demonstrates that ASI receives pricing
information from the U.K. mill to which ASI adds a set mark-up and
standard amounts to cover movement expenses. Therefore, ASI does not
negotiate sales terms with U.S. customers for EP-classified sales, but
rather relays pricing information between the U.K. mill and the U.S.
customer.
We disagree with petitioners that the mere existence of ASI
demonstrates its significant involvement in the U.S. sales process. As
affirmed by the Court in AK Steel, in determining whether sales should
be classified as CEP sales, the Department's analysis focuses on the
three requirements under the test, discussed above, all of which must
be met in order to classify sales as CEP. If the petitioners' argument
held true, the basis or need for such a test would not exist. Moreover,
we note that the majority of Avesta's U.S. sales were reported and
properly classified as CEP sales. ASI's main role is not for EP sales
but rather for CEP sales. The U.S. Sales Verification Report indicates
that ASI maintained a sales office for CEP sales, but that the work
concerning EP sales, which would include only document processing, was
done by the in-place staff.
We disagree with petitioners' argument that ASI satisfies the
criteria established in Extruded Rubber Thread for reclassifying ASI's
EP sales as CEP. In that case, the Department's decision to reclassify
certain U.S. sales as CEP was based, in part, on determining that the
U.S. sales agent was involved in the negotiation of sales. The fact
that ASI is not involved in the negotiation of the terms of these sales
distinguishes ASI's role in the sales process from Extruded Rubber
Thread. As noted above, while ASI is involved in document-processing
and other secondary activities related to the sales of subject
merchandise to the U.S. customer, ASI had no substantial involvement in
the sales process, such as sales negotiation, regarding certain
customers whose sales were classified as EP.
The nature of the U.K. mill's involvement in the sales process for
EP-classified sales, and ASI's ancillary role in the sales process for
these sales, lead us to conclude that the EP-classified sales took
place before the date of importation by the producer of the subject
merchandise outside of the United States to an unaffiliated purchaser
in the United States. Therefore, for the final determination, we have
continued to treat Avesta's EP-classified sales as EP.
Comment 2: Date of Sale
Petitioners argue that order date is the proper date for
establishing the date of sale for all sales. They note that, while the
Department used the invoice date as the date of sale for both home
market and U.S. sales in the preliminary determination, it indicated
that it would fully examine the issue at verification and incorporate
its findings, as appropriate, in its analysis for the final
determination. Petitioners note that the Department stated that, if
order confirmation was found to be the appropriate date of sale, it may
resort to facts available for the final determination, to the extent
the information has not been reported.
Petitioners contend that, although Avesta claims invoice date
should be used to establish the date of sale because the regulations
state that the Department will ``normally'' use the date of invoice as
the date of sale, Avesta's reliance on certain sections of the
regulations and certain cases is selective and misrepresentative.
According to petitioners, even in cases where the invoice has been used
to establish the date of sale, invoice date is conditionally or
provisionally accepted as the date of sale, ``* * * unless the record
evidence demonstrates that the material terms of sale, i.e., price and
quantity are established on a different date.'' (See Certain Welded
Carbon Steel Pipes and Tubes from Thailand: Final Results of
Administrative Review, 63 FR 55578, 55587-55588 (October 16, 1998)
(Pipe and Tubes from Thailand).)
Petitioners indicate that record evidence in this case demonstrates
that order date is the proper date for all U.S. and home market sales.
They contend that the Department considers date of sale to be a factual
issue, decided on a case-by-case basis. According to petitioners, in
the Circular Welded Non-Alloy Steel Pipe from the Republic of Korea:
Final Results of Antidumping Administrative Review, 63 FR 32833, 32835
(June 16, 1998) (Circular Pipe from Korea), the Department ruled that
the facts of the case indicated a specific sales pattern that justified
invoice date as the date of sale, even though the circumstances were
not specifically noted as an exception in the regulations. Despite
Avesta's attempts to downplay the importance of manufacturing to order,
petitioners argue that it is clear from the U.S. and home market sales
verification reports and exhibits that the company does manufacture to
order, and that the evidence indicates that price and quantity are set
on the order date. Petitioners also argue that there is significant
evidence of a long lag time across all U.S. sales (except resales and
consignment sales), and that in the rare instances where changes in the
material terms of sales are made, Avesta issues a revised order
acknowledgment.
Petitioners argue that the standard tolerance for the steel
industry (including Avesta) is plus or minus ten percent from the
quantity specified. (See Certain Cold-Rolled Carbon Steel Flat Products
from the Netherlands: Final Results of Antidumping Duty Administrative
Review, 64 FR 11829 (March 10, 1999) (Cold-Rolled Steel from the
Netherlands). They contend that Avesta did not provide the Department
at verification any documentation in support of its alternative
percentage for quantity tolerance. As a result, for the final
determination, the petitioners urge the Department to accept the
industry standard definition and determine that changes to order
quantities of ten percent do not constitute a change in the order.
Petitioners argue that the Department's review of Avesta's sales-
related documentation presented at verification indicates that, in
every instance where Avesta supplied sufficient information, the
material terms of sale were set on the order date (or change order
date) and did not change prior to shipment and invoice. They contend
that this evidence refutes Avesta's claim that price and quantity are
not known until invoice date, which, for U.S. sales, is often many
months after the order date.
Petitioners also argue that Avesta demonstrated at verification
that the prices set to customers in the United States are normally
determined many months prior to invoicing, on the order or change order
date, while prices set for home market customers are normally
determined on the order date several weeks prior to invoicing. As a
result, petitioners contend that Avesta's argument that price-setting
in the two markets is defined by invoice date is commercially
incompatible. Instead, petitioners assert, the degree to which a party
sells at less than fair value should be determined by comparing the
pricing activity when U.S. sales terms are confirmed and home market
sales terms are confirmed. According to petitioners, the Department's
regulations state that a date other than invoice date may be used where
a different date better reflects the date upon which the material terms
of sale were established by the exporter or producer. They note that
the nature of Avesta's sales process and its documentation satisfy the
Department's policy outlined in the preamble of the new regulations
that
[[Page 30695]]
``* * * the Department is presented with satisfactory evidence that the
material terms of sale are finally established on a date other than the
date of invoice, the Department will use that alternative date as the
date of sale.'' (See Antidumping Duties: Countervailing Duties, 62 FR
27296, 27349 (May 19, 1997). Thus, petitioners request that the
Department consider the order date (or change order date, if
appropriate) as the date of sale.
Avesta argues that the Department correctly used invoice date as
the date of sale in its preliminary determination. It contends that the
Department has a regulatory preference for using invoice date as the
date of sale in the absence of evidence that a better date reflects the
date on which the material terms of sale are established by the
exporter or producer. (See Stainless Steel Plate in Coils from South
Africa: Final Determination of Sales at Less Than Fair Value, 64 FR
15458, 15463 (March 31, 1999) (citing 19 C.F.R. Sec. 351.401(i)).
Avesta asserts that the Department's regulations establish a rebuttable
presumption that the invoice date will serve as the date of sale, and
that the Department's commentary on the regulations states that this
decision reflects the Department's experience with normal business
practice. Avesta states that, because petitioners have failed to
establish record evidence justifying the use of order date, the
Department should confirm in the final determination that invoice date
properly establishes Avesta's date of sale.
Avesta contends that its questionnaire responses and verification
exhibits demonstrate that the material terms can and often do change
between order and invoice date for all the U.K. entities other than
Billing, noting that due to the nature of Billing's business, changes
between order and invoice date are unlikely. Avesta also argues that
the Department should reject petitioners' claim that the standard
quantity tolerance in the steel industry is plus/minus 10 percent, and
that it has provided several examples on the record in this case of
quantity changes made after order date beyond a ten percent tolerance
level.
Avesta rejects petitioners' argument that order date is the
appropriate date of sale because Avesta's situation is similar to that
of the respondent in Circular Pipe from the Korea. Avesta states that
in Stainless Steel Plate in Coils from Belgium: Final Determination of
Sales at Less Than Fair Value, 64 FR 15476 (March 31, 1999) (Stainless
Steel Plate in Coils from Belgium), petitioners similarly argued that
the appropriate date of sale for the U.S. market was order date given
that there exists a long lag time between order and invoice date across
all U.S. sales, and that this lag time is considerably greater, on
average, for U.S. sales than for home market sales. In that case,
however, the Department distinguished its determination in Circular
Pipe from Korea and concluded that the appropriate date of sale was
invoice date. Avesta notes that, in Stainless Steel Plate in Coils from
Belgium, the Department disagreed with petitioners' reliance on
Circular Pipe from Korea to support the argument that the longer lag
time between the date of purchase order and the date of invoice for the
U.S. market, as compared to the time lag on the home market, justifies
the use of order date as the date of sale. First, Avesta notes, in
Circular Pipe from Korea, the Department verified that the changes to
terms of sale were infrequent and not material in nature. Second,
Avesta argues, Circular Pipe from Korea involved an administrative
review, where the Department makes monthly (rather than annual)
weighted-average comparisons; therefore, the differences in time lags
between the markets were significant for comparison purposes. Avesta
asserts that, unlike the respondent in Circular Pipe from Korea, Avesta
has submitted numerous examples of changes in terms of sale between
order date and invoice date.
Department's Position: We agree with Avesta that invoice date is
the correct date of sale for all home market and U.S. sales in this
investigation. Under our current practice, as codified in the
Department's Final Regulations at section 351.401(i), in identifying
the date of sale of the subject merchandise, the Department will
normally use the date of invoice, as recorded in the producer's records
kept in the ordinary course of business. See Hot-Rolled Flat-Rolled
Carbon-Quality Steel Products from Japan: Notice of Final Determination
of Sales at Less Than Fair Value, 64 FR 24239 (May 6, 1999) (Steel
Products from Japan). In some instances, however, it may not be
appropriate to rely on the date of invoice as the date of sale because
the evidence may indicate that the material terms of sale were
established on some date other than invoice date. See Preamble to the
Department's Final Regulations at 62 FR 27296 (1997). Therefore,
despite the general presumption that the invoice date constitutes the
date of sale, the Department may determine that this is not an
appropriate date of sale where evidence of the respondent's selling
practice points to a different date on which the material terms of sale
were set.
In the present case, in response to the Department's original
questionnaire, Avesta reported invoice date as the date of sale in both
the U.S. and home markets. To determine whether Avesta and ASI
accurately reported the date of sale, the Department included in its
October 28, 1998, questionnaire a request for additional information
regarding changes in the material terms of sale subsequent to order
date and asked Avesta to report order date for all U.S. and home market
sales. In its November 23, 1998, response, Avesta indicated that
invoice date best reflects the date on which the terms of home market
sales are established. Avesta also indicated that changes can and do
occur in price and quantity between order date and invoice date for a
large number of sales, and that the Department's request would be
extremely burdensome. Avesta noted that it does not have computerized
records across all five reporting U.K. entities that would allow it to
obtain order date information. Also, Avesta indicated that invoice date
is consistent with its internal accounting practices. Avesta reported
order date for the vast majority of its U.S. sales. For purposes of our
Preliminary Determination, we accepted the invoice date as the date of
sale subject to verification.
At verification, we closely examined Avesta's and ASI's selling
practices. We found that each U.K. entity and ASI records sales in its
financial records by date of invoice. For the home market, we reviewed
several sample sales for which the material terms of sale (price and
quantity) changed subsequent to the original order across all the U.K.
entities other than Billing (see Home Market Sales Verification Report
and Final Analysis Memorandum). Additionally, during our review of
sample sales, we noted instances where order information changed for
reasons other than changes to price or quantity. For example, we
reviewed several sample sales for which the original order was amended
because of changes to delivery week and/or delivery address. In these
instances, the Avesta entity updated its computer system to reflect the
amended order and issued an order re-acknowledgment to the customer
noting the change. We found that, because the computer systems differ
across all the entities, the effect of these changes on the original
order date information maintained in the systems also differs. We
observed, for example, that the modified information in the computer
systems for several of the entities reflected the date of the latest
change,
[[Page 30696]]
regardless of the type of change, or number of changes. Because the
computer systems and data maintained in these systems regarding order
date information (including changes made to orders) differ across all
the entities, we found that Avesta could not consistently distinguish
between changes made to the material terms of sale from other types of
changes. See U.S. Sales Verification Report, Home Market Sales
Verification Report, and Final Analysis Memorandum.
Consequently, we disagree with petitioners' claim that the order
date (or change order date) is the most appropriate date of sale for
Avesta's U.S. and home market sales because the material terms of sale
would not change after that date. The fact that terms often changed
subsequent to the original order, and even after an initial order
confirmation, suggests that these terms remained subject to change
(whether or not they did change with respect to individual
transactions) until as late as the invoice date. For sales that we
reviewed, we found this to be true for material terms of sale such as
price and quantity, including quantity changes outside of established
tolerances. (See Steel Products from Japan.)
With respect to changes in quantity, we disagree with petitioners'
argument that, because Avesta did not provide evidence at verification
supporting its alternative percentage quantity tolerance, the
Department should accept what petitioners claim to be the industry
standard definition and determine that changes to order quantities of
up to ten percent do not constitute a change in the order. There is no
evidence on the record in this case to suggest that the standard
tolerance for the steel industry (including Avesta) is plus or minus
ten percent from the quantity specified. We note that the discussion in
Cold-Rolled Steel from the Netherlands concerning the industry standard
definition, as cited by petitioners, is referenced only in respondent's
comments of that determination, not in the Department's positions.
Also, Cold-Rolled Steel from the Netherlands involved different
merchandise (cold-rolled carbon steel flat products), and not
merchandise subject to this investigation. There is no evidence on the
record in the present case indicating that the percentage quantity
tolerances for both products are the same. In Pipes and Tubes from
Thailand, 63 FR at 55578, 55588, the Department indicated that ``while
we agree with petitioners that changes consistent with the tolerance
level established in the contract may establish a binding agreement on
quantity at the contract date, our analysis of the sample contract and
corresponding invoices reveals that changes frequently were made beyond
the agreed upon tolerance levels. Where such changes occurred
frequently after the contract date, we have relied upon a later date.''
We disagree with petitioners' argument that the Department's
determination in Circular Pipe from Korea is applicable to this
investigation because Avesta manufactures to order, and because there
is a long time lag between the order date and invoice date for Avesta's
U.S. sales, as compared to the time lag in the home market. The facts
in the present case are distinguishable from those in Circular Pipe
from Korea for two reasons. First, in Circular Pipe from Korea, the
Department verified that changes to terms of sales were infrequent and
not material in nature. As noted above, at verification we reviewed a
significant number of instances in both the home market and U.S. where
the material terms of sale (price and quantity) changed subsequent to
the original order. Second, unlike this case, Circular Pipe from Korea
involved an administrative review, where the Department makes monthly,
rather than annual, weighted-average comparisons, and consequently, the
differences in time lags between the markets were significant for
comparison purposes. (See Stainless Steel Plate in Coils from Belgium.)
Based on Avesta's representation, and as a result of our
examination at verification of sample sales and each entity's selling
records kept in the ordinary course of business, we are satisfied that
the invoice date should be used as the date of sale because it best
reflects the date on which the material terms of sale were established
for Avesta's home market and U.S. sales.
Comment 3: Sales for Consumption
Petitioners argue that the Department should apply facts available
to the volume of merchandise sold to Avesta Sheffield Distribution,
Ltd. (AVSD), one of the U.K. sales entities, for consumption that could
not be linked to AVSD's resales. They note that in its November 2,
1998, supplemental questionnaire response, Avesta did not include in
its home market sales database home market sales made to its affiliate
AVSD given that there was no practical means available to determine
which of those sales were made to AVSD for consumption and which were
made to AVSD for resale.
Petitioners indicate that, while AVSD reported all of its sales of
subject merchandise from Avesta's U.K. mills (with the exception of
those sales identified in the home market sales verification report as
``processed sales--supplier id untraceable''), it did not report the
coils purchased from the U.K. mills consumed in the production of non-
subject merchandise. They note that Avesta reported, on November 23,
1998, in a separate database its home market sales made from Avesta
Sheffield, Ltd. (ASL) and Avesta Sheffield Precision Strip, Ltd. (SPS)
(U.K. producing mills) to AVSD, and that these sales were not included
in the preliminary margin analysis. Petitioners also state that the
Department did not address the issue of AVSD's sales for consumption in
the home market in the preliminary analysis memorandum or the Federal
Register notice. They indicate that the preliminary margin analysis did
not include the total quantity and value of sales by the mills to AVSD
of the subject merchandise because the volume of sales consumed by AVSD
to produce non-subject merchandise cannot be linked. Petitioners assert
that, for the final determination, the Department should apply adverse
facts available to the volume of sales sold by the mills to AVSD for
consumption that were not included in AVSD's database. Therefore, the
Department should apply the highest reported home market price and
lowest reported U.S. price to the volume of sales sold by the mills to
AVSD for consumption.
Avesta argues that the Department should reject petitioners'
argument and affirm its preliminary decision to exclude from its
analysis the sales made by Avesta's mills to AVSD for consumption.
Avesta contends that use of facts available is inappropriate because
the company, to the best of its ability, fully complied with the
Department's reporting requirements. Moreover, despite significant
burden, Avesta emphasizes that it reported two home market databases.
Avesta asserts that, none of the situations referenced in section
351.308(a) of Commerce's regulations (19 CFR 351.308(a)) authorizing
the Department to use facts available are present in this case. Avesta
notes that it explained in its response that it did not have the
practical means available to determine which mill sales were made to
AVSD for consumption and which mill sales were made to AVSD for resale.
Avesta states that the Department's review of the sales process at
verification confirmed the accuracy of this claim and the home market
sales verification report demonstrates that Avesta correctly reported
that AVSD could not link mill sales to its resales.
[[Page 30697]]
Department's Position: We agree with Avesta. Based on the verified
evidence contained in the record of this proceeding, we disagree with
the petitioners that the use of facts available in this instance is
warranted. Section 776(a) of the Tariff Act provides that, if an
interested party withholds information that has been requested by the
Department, fails to provide such information in a timely manner or in
the form or manner requested, significantly impedes a proceeding under
the antidumping statute, or provides information which cannot be
verified, the Department shall use, subject to section 782(d) and (e),
facts otherwise available in reaching the applicable determination.
In this case, Avesta reported in its November 23, 1998,
supplemental questionnaire response, two home market sales databases:
the first database contained sales made by the U.K. entities, while the
second one contained all home market sales from ASL and SPS to AVSD
(including sales which AVSD consumed for production of non-subject
merchandise). We believe that Avesta complied with the Department's
reporting requirements for this information to the best of its ability.
First, these databases were reported in a timely manner. Second, at
verification, Avesta demonstrated, through sample sales traces, as well
as during its overview of the sales process, that it cannot reasonably
determine which mill sales were made to AVSD for consumption and which
mill sales were made to AVSD for resale. As the Department's Home
Market Sales Verification Report indicates, no information is provided
to mills on material consumed by AVSD. Although the mills know which
sales go to AVSD, they do not know which of those sales are further
processed by AVSD. We found that, while certain information (i.e., the
cast number) can identify the source of the merchandise, it cannot be
used to tie back a particular purchase to the mills except by a manual
review. Our review of AVSD's computer system and mill sales determined
that the company had no practical means of linking incoming merchandise
and the processed merchandise sold by AVSD.
In this case, we verified that Avesta is unable to segregate those
sales made by the Avesta mills to AVSD for consumption from AVSD's
resales of subject merchandise. Therefore, we conclude that the company
reported everything that it could reasonably have been expected to
report. Rather than ``double-counting'' the downstream sales by using
the sales to AVSD and the sales by AVSD of the same merchandise, we
have thus decided to continue to exclude from our analysis the sales
made by the Avesta mills to AVSD (including sales for consumption) and
use Avesta's reported downstream sales.
Comment 4: CEP Offset: Petitioners argue that the Department should
disallow Avesta a CEP offset for the final determination. They contend
that record evidence does not support the Department's decision in the
preliminary determination that Avesta's home market sales are at a more
advanced stage of distribution than its CEP sales. According to
petitioners, the Department improperly made deductions from the CEP
starting price prior to analyzing the LOT for CEP sales. They assert
that the Department's decision to analyze the LOT based on adjusted CEP
prices, rather than the CEP starting prices, is inconsistent with the
Court of International Trade's (CIT) opinion in Borden Inc. et al. v.
United States, Court No. 96-08-01970, Slip Op. 98-36 (March 26, 1998)
(Borden), and with the Department's remand in that case. (See Final
Remand Results for Borden, Inc., et al. v. United States, Consol. Court
No. 96-08-01970 (August 28, 1998) (Remand Results). Petitioners claim
that, should the Department rely on the CEP starting price and the
associated selling functions, it would find: (1) that the CEP starting
price and home market sales were made at a single LOT, (2) that the
home market LOT was not more remote than the U.S. LOT, and (3) that a
CEP offset is not warranted.
Petitioners maintain that the Department's home market and U.S.
sales verification reports demonstrate that Avesta engages in the same
type of selling activities in its dealings with ASI as it does with
home market and EP sales. They state that record evidence indicates
that technical services and warranties (which petitioners submit are
the most significant activities in terms of defining LOT), are handled
by Avesta and are included in the constructed export price between
Avesta and ASI, demonstrating that Avesta does not provide warranty and
after sale services related to its CEP sales. Also, according to
petitioners, record evidence indicates that freight services are
provided to ASI's CEP sales, demonstrating that the mill performs the
same functions at the home market LOT as it does for the CEP LOT.
Avesta counters that the Borden decision is not final or conclusive
because the Department is appealing that decision; therefore, the
decision is not binding. (See Certain Pasta from Italy: Final Results
and Partial Recission of Antidumping Duty Administrative Review, 64 FR
6615, 6618 (February 10, 1999) (Pasta from Italy).) Second, the
Department's preliminary findings that the CEP LOT is the level of the
constructed sale from the exporter to the importer is consistent with
the statute and longstanding administrative practice. Third, record
evidence now verified by the Department shows that Avesta had only one
CEP LOT in the U.S. market. According to Avesta, this evidence
demonstrates that the CEP LOT differed considerably from the LOT in the
home market and was at a less advanced stage of distribution than the
home market LOT. Avesta argues that petitioners' focus only on the
provision of technical and warranty services ignores the other reported
and verified selling functions. Avesta asserts that because the data
available do not provide an adequate basis for making a LOT adjustment,
but the home market LOT is at a more advanced stage of distribution
than the CEP sales, a CEP offset remains appropriate for the final
determination.
Department's Position: We agree with Avesta. The CIT has recently
held that the Department's practice to base the LOT comparisons of CEP
sales after CEP deductions is an impermissible interpretation of
section 772(d) of the Tariff Act. See Borden, Slip Op. 98-36 at 58; see
also Micron Technology Inc. v. United States, Court No. 96-06-01529,
Slip Op. 99-02 (January 28, 1999). The Department believes, however,
that its practice is in full compliance with the statue, and that the
CIT decision does not contain a persuasive statutory analysis. Because
Borden is not a final decision, the Department has continued to follow
its normal practice of adjusting CEP under section 772(d) prior to
starting a LOT analysis, as articulated in the regulations at section
351.412. Accordingly, consistent with the Preliminary Determination in
this case, we will continue to analyze the LOT based on adjusted CEP
prices rather than the CEP starting prices. See Pasta from Italy.
In the Preliminary Determination, the Department made a CEP offset
adjustment to NV. Because Avesta's home market sales were found to be
at a more advanced stage of distribution than its CEP sales, we
determined that these sales were at a different LOT. As the data
available did not provide an appropriate basis for making a LOT
adjustment, but the home market LOT was found to be at a more advanced
stage than the LOT of the CEP sales, we determined that a CEP offset
was appropriate in accordance with section 773 (a)(7)(B), as claimed by
Avesta (see Preliminary Determination).
[[Page 30698]]
We disagree with petitioners' argument that, based on record
evidence of Avesta's handling of technical services, warranties, and
freight, Avesta engages in the same type of selling activities in its
dealings with ASI as it does with home market and EP sales. While we
agree with petitioners that Avesta performed these services for CEP
sales and that these activities are important, based on our review at
verification of all Avesta's selling functions in the United States and
home market, we found that Avesta also performed other selling
functions (i.e., other than technical services and warranties) related
to its home market and EP sales that we believe include important
selling activities. For example, services such as sales and marketing
support functions, negotiating prices, and maintaining inventory were
also provided. (See U.S. Sales Verification Report and Home Market
Sales Verification Report.)
Therefore, we believe that record evidence supports our findings in
the Preliminary Determination that Avesta had only one CEP LOT in the
U.S. market, and this CEP LOT differed from the LOT in the home market.
Because the data available do not provide an appropriate basis for
making a LOT adjustment, but the home market LOT is at a more advanced
stage of distribution than the CEP sales, a CEP offset remains
appropriate.
Comment 5: Sales of Proprietary Grade Used To Produce Specialty Steels
Both petitioners and Avesta comment in their case briefs and
rebuttal briefs on the Department's inclusion of a proprietary grade of
steel used in certain industrial blades and surgical and medical
instruments. Petitioners argue that the Department should include sales
of this grade in the final margin analysis. They note that Avesta
stated in its November 2, 1998, questionnaire response that British
Steel provided one of the U.K. mills reporting under this investigation
mainly with this grade to produce two specialty steels. While
petitioners agree with Avesta that one of these steel products has been
excluded from the investigation, they disagree with Avesta's assertion
that the second product is also not subject to this investigation.
Petitioners state that they agreed to exclude from the scope of these
investigations two proprietary grades of stainless steel sheet and
strip in coils produced by Hitachi Metals, Ltd. and Hitachi Metals
America, Ltd., GIN5 and GIN6. (See Letter from Paul C. Rosenthal to the
Secretary of Commerce, September 29, 1998.) Petitioners contend that
Avesta never requested an exclusion for its proprietary grade. They
maintain that, in agreeing to the exclusion for Hitachi, they in no way
agreed to exclude Avesta's proprietary grade.
Petitioners disagree with Avesta's assertion that record evidence
demonstrates that this merchandise meets the specifications for the
excluded product, as defined by petitioners and the Department. They
state that this material is not identical to the specifications
outlined by petitioners or the Department. For example, according to
petitioners, there are differences in the minimum carbon contents for
Avesta's product and the product excluded by the Department.
Petitioners state that, although they have no information regarding the
correct carbide density (an issue raised by Avesta, see below) of GIN5,
Hitachi Metals, Ltd. and Hitachi Metals America, Ltd. identified its
carbide density in several letters to the Department. (See
Sonnenschein, Nath and Rosenthal Letters to the Department, dated July
29, 1998, September 8, 1998, September 11, 1998, and September 21,
1998.) Petitioners urge the Department to confirm the average density
with Hitachi Metals, Ltd. and Hitachi Metals, Ltd. They state, however,
that regardless of whether the correct carbide density is an average of
100 carbide particles per square micron or an average of 100 carbide
particles per 100 square microns, the Department should continue to
include the carbide density in its definition and not expand the range
as suggested by Avesta.
Avesta argues that, to the extent the proprietary grade referred to
by petitioners meets the definition of the specialty steels used in
blades and surgical instruments that are excluded from the scope of the
investigation, the Department should eliminate sales of this
proprietary grade from its final antidumping analysis. Avesta contends
that, in the preliminary determination, the Department identified three
speciality steels typically used in certain industrial blades and
surgical instruments which are excluded from the scope of the
investigation. According to Avesta, the second of these products, an
example of which is GIN5 steel, is defined both in terms of chemical
content and in terms of average carbide density. However, due to the
difficulties in measuring carbide density of a given shipment of
scalpel steel, Avesta contends that the Department should amend its
definition of this excluded product to eliminate the reference to
carbide density. Alternatively, should the Department retain a carbide
density measure, Avesta recommends that the Department amend the scope
language to refer to a carbide density that is metallurgically
feasible.
Avesta contends that, unlike chemical content, the carbide density
of scalpel steel may be tested infrequently because it is time-
consuming, posing a burden on foreign producers/exporters, and
customers do not need to know the carbide density of particular
shipment. Also, carbide density cannot be measured on an absolute scale
because different magnifications of the steel will result in different
measures of carbide density. Therefore, according to Avesta, the
Department should amend the scope language to omit the reference to
carbide density. Alternatively, should the Department retain the
reference, it should at least change the specified density to one which
producers may plausibly achieve. Avesta asserts that the Department's
current description of the excluded GIN5-like product as having an
average of 100 carbide particles per square micron is incorrect, and
not feasible from a metallurgical standpoint. Avesta argues that,
should the Department retain a carbide density measure, it should amend
the scope to refer to particles per 100 square microns.
Also, Avesta contends that, because the carbide density of a
particular product varies depending on the magnification level at which
it is measured, the Department should refer to a magnification level of
9,000, which is commonly used in the industry. Avesta also urges the
Department to replace the current language describing the excluded
product which specifies an average carbon density, without indicating
how wide or narrow is the acceptable range of carbide density. Avesta
argues that the Department should replace the current language of the
scope defining the excluded GIN5-like product as having a carbide
density on average of 100 carbide particles per square micron with the
following: ``This steel has a carbide density in the range of 50-100
carbide particles per 100 square microns when measured at a
magnification level of x 9,000.''
Avesta claims that the reference in the Department's preliminary
determination to GIN5 as ``an example'' of the excluded product
confirms that the exclusion is not limited to Hitachi's proprietary
grade, and that such a limitation would result in discriminatory
treatment by the Department of similarly situated respondents producing
products with the same characteristics but with different brand names.
Avesta also argues that petitioners' contention that
[[Page 30699]]
the proprietary grade referenced does not meet the specified minimum
carbon content is incorrect. It asserts that Avesta routinely produces
the grade at higher carbon levels than the specified minimum level, and
despite petitioners' assertions, Avesta submitted evidence of this
minimum carbon content, as well as all specifications for the grade as
a home market sales verification exhibit. Avesta states that the
specification sheet contained in Home Market Sales Verification Exhibit
15B and sales trace documentation verified by the Department show that
the grade meets all the chemical content requirements for the excluded
product as defined by the Department.
Department's Position: We agree with petitioners that sales of the
referenced Avesta proprietary grade should be included in our final
analysis, and that carbide density should remain in the definition of
the noted excluded product. First, we note that Avesta's request to
include magnification levels in the excluded product description is
irrelevant because petitioners have not recognized this requirement as
a necessary aspect of its exclusion request. Therefore, magnification
is not included as a requirement/characteristic of this excluded
merchandise.
Second, while we agree with Avesta that GIN 5 is merely an example
of the excluded product and that the exclusion is not limited to
Hitachi's proprietary grade, the evidence on the record demonstrates
that Avesta's proprietary grade material only meets the chemical
requirements of the excluded product. At verification, Avesta noted
that, in its opinion, Avesta's proprietary grade fits within the GIN 5
definition that had been excluded from the scope. The company provided
a description of its proprietary grade in several supplemental
responses and in a verification exhibit (see Home Market Sales
Verification Report at 29). In addition, we reviewed documentation for
a sale of this merchandise. None of this information on the record
provides any information regarding carbide density. Therefore, we are
including Avesta's proprietary grade product in our final analysis.
Should Avesta adequately demonstrate in the future that its proprietary
grade complies with all the requirements of the excluded product, then
Avesta's proprietary grade products would not be covered in the scope
of this case.
We agree with Avesta that the measure of carbide density referenced
in the Preliminary Determination is incorrect. We have revised the
scope for the carbide density of the second excluded product to read:
``This steel has a carbide density on average of 100 carbide particles
per 100 square microns.''
Comment 6: Resales of Rejected Merchandise
Both petitioners and Avesta comment in their case briefs and
rebuttal briefs upon the Department's exclusion of U.S. resales of
rejected merchandise in the preliminary determination. Petitioners
argue that the Department should include in its final determination all
U.S. sales, including resales of stainless sheet and strip which had
been cut to length prior to resale. They disagree with Avesta's claim
that U.S. resales of rejected products were not representative of
Avesta's sales during the POI and constituted a negligible quantity of
its overall U.S. sales. Petitioners note that, while the Department
included resales of stainless sheet and strip in coils in the United
States in the preliminary determination, it excluded resales of
stainless sheet and strip which had been cut to length prior to resale.
Petitioners argue that, for the final margin analysis, the Department
should include all resales, regardless of whether the merchandise was
resold in coil form or cut-to-length form, because all merchandise
resold in the United States originated from subject merchandise.
Petitioners disagree with Avesta's claim that its resales in the
United States are not representative. They contend that the concept of
sales outside the ordinary course of trade does not pertain to U.S.
sales. They state that the resales originated from sheet and strip in
coils from the United Kingdom--the merchandise under investigation.
Petitioners argue that ASI's resales are subject to this investigation
regardless of the volume of sales they represent, and furthermore, they
are on the record and have been verified by the Department.
Petitioners argue that the Department's normal practice is to
include all U.S. sales in its margin calculations. They state that,
prior to the URAA changes to the Tariff Act of 1930, the Department
considered exclusion requests of insignificant ``outlier'' sales that
make up less than five percent of the U.S. sales database based on
whether the respondent established need (i.e., whether the burden of
collecting this data outweighed the need for the data) for the
exclusion. Petitioners note that the exclusion of such ``outlier''
sales acknowledged the following: that the Department considered a six-
month POI, and it calculated transaction-specific margins for each U.S.
sale. Petitioners state that the Department's post-URAA current
practice is to investigates a 12-month POI to capture a full snapshot
of a respondent's year-long selling practices in each relevant market,
and that the Department calculates a weighted-average U.S. selling
price for each product, rather than for each sale. Petitioners state
that this ``significantly reduces'' the likelihood that a few sales
will drive margin calculations. Petitioners argue that, given this
background, the Department should reconsider its policy of excluding
bona fide sales of subject merchandise in the United States, and reject
Avesta's assertion that these sales are not representative of its U.S.
sales.
Petitioners also pose a corollary argument that, if Avesta had
resold merchandise in the home market during the POI, and as a result
received substantially lower prices, the Department should likewise
exclude such sales because they are not representative of the 12-month
POI. Petitioners contend that the Department will not exclude those
resales because they will be weight-averaged with other sales, and
presumably Avesta will continue to resell merchandise after the POI, so
the sales are not unrepresentative. According to petitioners, Avesta
has no incentive to argue for the exclusion of low-priced home market
resales, or low-priced home market sales made for any reason, because
such sales tend to lower dumping margins. Petitioners contend that
Avesta presumably continues to resell merchandise in the United States,
and that nothing about this is unrepresentative about such sales, other
than the fact that these are lower-priced U.S. sales.
Avesta argues that the Department properly excluded U.S. resales of
rejected merchandise from the preliminary determination. It notes that,
in the preliminary determination, the Department concluded that ``if
the Department determines based on verification that Avesta's claims
about the nature of the resales are correct, they will not be used in
the final antidumping margin calculations.'' (See Memorandum from Linda
Ludwig to Joseph A. Spetrini, Limited Reporting of U.S. Sales (October
26, 1998) (Limited Reporting Memorandum).) Avesta contends that,
because the Department successfully verified the information provided
by ASI concerning the U.S. resales, these resales should not be
included in the final margin calculations. According to Avesta, the
Department examined the unusual nature of the U.S. resales, including
the process for handling resales of rejected
[[Page 30700]]
merchandise and documentation for three U.S. resales. In each of the
resales reviewed, notes Avesta, the Department verified that the
customer rejected the merchandise for a variety of reasons, including
mechanical properties, scratches, material problems, acid marks, dirt,
pits, etc. Also, Avesta states that for two of these resales, the
Department verified that the rejected merchandise had been cut to
length prior to resale. Accordingly, the Department properly excluded
from the preliminary analysis those U.S. resales of rejected
merchandise that were cut-to-length by ASI's customers before being
returned, as these were not sales of merchandise under investigation.
However, Avesta contends, because of the unusual circumstances
surrounding ASI's resales, the Department should disregard all U.S.
resales in the final determination.
Avesta also argues that the Department should exercise its
discretion to exclude resales of rejected merchandise because these
resales represent a very small percentage of ASI's U.S. sales during
the POI. Avesta notes that, in the Limited Reporting Memorandum
regarding limiting reporting of U.S. sales, the Department acknowledged
that it may exclude certain U.S. sales in its less than fair value
calculations where those sales have an insignificant effect on the
margin, or where they are not representative of the respondent's
selling practices in the United States. Avesta states that the
Department also recognized that it normally considers exclusion
requests pertaining to less than five percent of total U.S. sales, and
that ASI's resales of rejected merchandise during the POI meet this
criteria.
Avesta asserts that the resales are not representative of ASI's
sales during the POI. Because ASI orders only prime quality stainless
sheet and strip in coils from the United Kingdom, Avesta argues that
all merchandise exported from the U.K. mills to ASI is believed to be
prime when it comes off the production line. It is only when the U.S.
customer receives and uncoils the merchandise, that occasionally,
defects in the material may be discovered for the first time. Avesta
states that, as recognized by the Department, the nature of these
resales is different from typical sales of secondary merchandise, where
the producer considers the merchandise to be defective and initially
sells it as ``seconds.'' According to Avesta, these resales are not
part of ASI's business plan, and that they differ from normal U.S.
sales in that resales possess different physical characteristics from
prime merchandise (i.e., defects) and the rejected merchandise is
resold to a different class of customers than ASI's normal, prime
merchandise (i.e., secondary dealers). Thus, because the small volume
of ASI's imports of secondary merchandise is unintentional and the
resales of this merchandise are unlike the U.S. sales of prime
merchandise, these resales cannot be considered representative of ASI's
normal U.S. sales activity. Additionally, Avesta argues that
petitioners' position that the Department should include in its
analysis resales of cut-to-length merchandise is unsupportable, given
that petitioners excluded cut-to-length stainless steel sheet and strip
from the scope of imported merchandise covered in their petition.
Department's Position: We agree with Avesta. On October 26, 1998,
the Department issued a decision memorandum indicating that if it
determines, based on verification, that Avesta's claims about the
nature of its U.S. resales of rejected merchandise are correct, these
sales will not be used in the final antidumping margin calculations. In
this memorandum, the Department stated that it may, on occasion,
exclude certain U.S. sales in LTFV comparisons, if the sales have an
insignificant effect on the margin. See Bowe Passat Reinigungs v.
United States, 926 F. Supp. 1138 (CIT 1996), citing Ipsco Inc. v.
United States, 687 F. Supp. 633 (CIT 1988). (For a detailed analysis of
this issue, see Limited Reporting Memorandum.) Based on our findings at
verification, we believe that Avesta's claims regarding the volume and
nature of these sales is supported by record evidence. At the U.S.
verification, we found that these resales indeed represent a small
share of total U.S. sales. As we noted in the U.S. Sales Verification
Report at 10, these sales constitute a small part of ASI's business.
Moreover, although the merchandise purchased from the U.K. mills is
assumed to be prime, occasionally, defects can occur, which may not be
discovered until the customer uses the merchandise.
During our review of three sample resales of this rejected
merchandise, Avesta provided documentation demonstrating, in each case,
that the resold merchandise had been returned by the original customer
due to a number of reasons, including mechanical properties, scratches,
material problems, acid marks, dirt, pits, etc. See U.S. Sales
Verification Report. The resold merchandise was subsequently purchased
by secondary dealers in the United States. For two of these resales,
the rejected merchandise was cut to length prior to resale. Based on
our findings at verification, Avesta's previous claims concerning the
nature of its U.S. resales of rejected merchandise appear to be
accurate.
Excluding these sales will have an insignificant effect on the
margin. The sales process for these sales is highly complex, involving
an initial sale, the customer's rejection of the merchandise, the
subsequent resale, as well as the linking of the resale to the initial
sale. These sales also involve difficult model match and programming
issues. Rather than fully undertake this time-consuming and burdensome
analysis, for a small number of sales which will have an insignificant
effect on the margin, we are excluding all of these resales from our
analysis in the final determination.
Comment 7: Sales Submitted by SPS and Billing
Petitioners argue that the Department should apply partial facts
available to sales made by SPS and Billing. They indicate that Avesta
presented at verification, as minor corrections, certain quantities of
stainless sheet and strip in coils sold by Billing and by SPS, which
should have been included in the home market database, but were omitted
until verification.
Petitioners contend that it has been the Department's consistent
practice, in cases where sales data are offered for the first time at
verification, to accept for the record only enough documentation to
establish the actual magnitude of the omission. (See, e.g., Certain
Helical Spring Lock Washers from the People's Republic of China: Final
Determination of Sales at Less Than Fair Value, 58 FR 48833, 48835
(September 20, 1993) (Lockwashers).) Petitioners note that, in the case
of Lockwashers, the Department returned the sales trace documentation
pertaining to the unreported sales that the respondent submitted during
verification. Petitioners reference the Department's verification
outline in arguing that verification is not the appropriate time to
submit new information; rather, the sole purpose of verification is to
check the accuracy of questionnaire responses. They also question what
facts made Avesta ``recognize'' the under-reported data during
verification preparation, and argue that the company deliberately
withheld it until verification. Petitioners state that, as facts
available, the Department should apply the highest home market price
and lowest U.S. price to the percentage of sales unreported prior to
verification.
[[Page 30701]]
Avesta argues that the Department should include the reported data
for sales by SPS and Billing in the final margin analysis, and that
petitioners' suggestion that the Department apply facts available to
these sales is unreasonable. Avesta notes that the sales in question
are home market sales only and not U.S. sales, which are fully
reported. Avesta contends that all six of the Department's conditions
used to define clerical errors are met in this case. Avesta notes that
these criteria are: (1) The error in question must be demonstrated to
be a clerical error, not a methodological error, an error in judgment,
or a substantive error; (2) the Department must be satisfied that the
corrective documentation provided in support of the clerical error
allegation is reliable; (3) the respondent must have availed itself of
the earliest reasonable opportunity to correct the error; (4) the
clerical error allegation, and any corrective documentation, must be
submitted to the Department no later than the due date for the
respondent's administrative case brief; (5) the clerical error must not
entail a substantial revision of the response; and (6) the respondent's
corrective documentation must not contradict any information previously
determined to be accurate at verification. (See Cold-Rolled Steel from
the Netherlands, 64 FR at 11829.) Avesta argues that the omissions
resulted from clerical errors, as explained in U.K. Sales Verification
Exhibit 1. According to Avesta, the omission of SPS sales resulted from
dimensional differences between the suggested definition of excluded
flat wire product (the industry standard) and the flat wire definition
adopted by the Department in the Preliminary Determination. Avesta
notes that, at the time it submitted its home market sales file, it
reasonably assumed that merchandise meeting the standards for flat
wire, as defined by the industry and as endorsed by the petitioners,
was excluded from the scope of the investigation. As a result, the
computer program used to compile SPS'' sales file was programmed to
identify sales of merchandise with a width greater than 12.7 mm (rather
than 9.5 mm).
With respect to the omission of Billing sales, Avesta argues that
the source of the merchandise sold was not recorded in the company's
computer system, and therefore, these sales were not identified as
sales of U.K. merchandise. Moreover, Avesta contends that, in the
Department's review at verification of documentation concerning the
omitted sales, and as part of its completeness tests, the Department
was satisfied that the corrective documentation is reliable. Avesta
states that petitioners' contention that the omitted sales were
deliberately withheld until verification is false. According to Avesta,
as soon as it discovered the omissions, it compiled as much data on the
sales as possible, given the time constraints, and reported the missing
transactions to the Department at the beginning of the U.K.
verification. Avesta also contends that its identification of the
clerical errors and submission of corrective documentation was timely
as all of this information was submitted to the Department at the
beginning of verification, two months prior to the due date for case
briefs. Avesta argues that inclusion of the previously omitted sales
does not entail a substantial revision of the response, and they
represent small percentages of total home market sales during the POI.
Furthermore, assuming the Department accepts the minor correction for
field EDGEH for Billing's sales as presented at verification, all sales
made by Billing during the POI will likely drop out of the Department's
analysis for matching purposes. Lastly, Avesta asserts that the
corrective documentation concerning the SPS and Billing sales does not
contradict information previously determined to be accurate since it
was reviewed and verified by the Department.
Department's Position: We agree with Avesta. To ensure accurate
determinations, the Department's practice allows respondents to submit
information at the beginning of verification to correct errors found
during the course of preparing for verification. See Preamble to the
Proposed Rules, 61 FR 7308, 7323 (February 27, 1996). In this case, at
the outset of the verification, Avesta promptly informed the Department
verifiers that it mistakenly omitted a small quantity of sales made by
SPS and Billing. The company explained that it did not report these
sales because of its initial confusion about the scope language with
respect to SPS' sales, and because of Billing's delay to provide its
sales information for a small number of sales to be included in the
home market database. Given that these corrections were insignificant
when compared to Avesta's total home market sales (see Final Analysis
Memorandum) and that we found Avesta's explanation for these omissions
reasonable, we have accepted and verified these sales in accordance
with our practice of allowing respondents to correct minor errors while
preparing for verification. Accordingly, we have included SPS' and
Billing's sales in our final determination.
Comment 8: U.S. Warehousing
Petitioners argue that the Department should apply facts available
to ASI's reported warehousing expense in the final determination. They
state that the Department found at verification a discrepancy in the
way that ASI recorded storage charges, as well as related charges for
movement in and out of storage in its normal course of business.
Petitioners contend that, in some instances, all three charges were
recorded in the warehouse account, and in other instances, only storage
costs were recorded in warehousing expenses. They note that, for one
sale, the Department found that ASI reported only trucking charges as
freight expenses, and handling in/out charges were not reported.
Petitioners argue that, as facts available, the Department should apply
the highest reported warehousing expense in the U.S. database to all
U.S. sales.
Avesta argues that petitioners' proposed application of facts
available to Avesta's warehousing expenses should be rejected and that
the inadvertent omission of handling in/out charges from some U.S.
sales is simply a clerical error. Avesta contends that, because these
omitted charges are so small on a per pound basis, the effect of any
adjustment is immaterial. Avesta indicates that the Department found
discrepancies in the reported warehousing expense for only five of the
20 sales traces reviewed at verification. It contends that the
Department should reject petitioners' suggestion to apply the highest
reported warehousing expense to all U.S. sales. Instead, should the
Department decide not to accept ASI's warehousing expenses as reported,
it should only apply the highest reported value to those sales
transactions for which warehousing expenses were actually incurred.
Department's Position: We disagree with petitioners that we should
apply facts available to warehousing expenses and determine to accept
warehousing expenses as reported. Avesta chose to employ a methodology
corresponding to what it believed was its normal recording of these
expenses. Six of the 20 sales examined at the U.S. verification
involved marine freight invoices featuring handling in and out of
storage, freight, and warehousing, while other sales either did not
involve marine freight invoices or involved marine freight invoices for
freight alone. For sales with marine freight invoices for handling,
freight, and storage, Avesta
[[Page 30702]]
decided to report freight as inland freight, and it presumed that
handling and storage expenses would be encompassed in the warehousing
account. Based on the stated methodology, of these six sales examined,
two involved incorrect recording of handling, and one involved
incorrect recording of warehousing, in the company's normal course of
business. While freight was correctly reported to the Department for
each sale, the company ``incorrectly'' recorded, in its normal course
of business, freight for four of the sales. In fact, for two of the
sales, freight was recorded in the warehousing account: one in the POI
and one before the POI. This results in freight being considered in
effect twice for one of the sales--once as freight and another time as
part of average warehousing reported. Therefore, while some sales may
have been under-reported, other sales were, in essence, over-reported.
Avesta reported an average per unit warehousing amount for sales
warehoused during the POI. We found at verification that this
calculation involved all storage expenses during the POI, including
non-merchandise related records storage. While three of the six sales
examined had handling and storage recorded in the warehousing account
before the POI, it is reasonable to presume that in their place the
warehousing account included handling and storage expenses for sales
that occurred after the POI. Because, on average, the effect of any
mis-recordings should be minimal, we determine to accept Avesta's
warehousing expenses as reported.
Comment 9: Inland Freight Expenses
According to petitioners, the Department should apply facts
available to Billing's reported inland freight expenses, plant/
warehouse to customer. They note that company officials explained to
the Department at verification that it would take a large manual effort
to tie all invoices to the actual freight invoices, which was the
reason why Avesta chose one month at random and calculated an average
freight amount by customer using all invoices in that month.
Petitioners contend that this methodology is not reasonable because one
month is not a representative period of time. In addition, petitioners
assert that this methodology fails to reflect freight charges incurred
by Billing during the POI. According to petitioners, mere burden is not
an excuse for failing to respond fully and accurately to the
Department's questionnaire. As partial facts available, petitioners
urge the Department to apply the lowest reported freight charge to
Billing's home market sales.
Avesta argues that the methodology used by Billing to report inland
freight from plant/warehouse to the customer is reasonable and
representative of freight charges incurred by the company during the
POI, and that it should be accepted by the Department. Avesta notes
that the Department recently confirmed that although it prefers actual
freight costs, a reasonable allocation methodology that most closely
reflects actual costs is acceptable. See Final Results of Antidumping
Duty Administrative Review: Oil Country Tubular Goods From Mexico, 64
FR 13962, 13969 (March 23, 1999) (OCTG from Mexico). Avesta contends
that Billing was unable to report its actual freight charges because it
does not have a freight system that is able to allocate these expenses
directly to customer orders. (Avesta cites its September 29, 1998, and
November 23, 1998, Section B Questionnaire Responses and the Home
Market Verification Report.) Because of the limitations of this system,
Billing's methodology used to calculate an average freight amount by
customer, based on shipments during a representative month, was
reasonable. Avesta also argues that the Department verified evidence
presented by Billing that demonstrated that the overall freight charge
for all customers during the POI was in line with the average of
freight charges for the year.
Department's Position: We agree with Avesta. While the Department
prefers to have actual freight costs, a reasonable allocation that most
closely reflects actual costs is acceptable. See OCTG from Mexico, 64
FR at 13969. The Department verified that Billing was unable to report
its actual freight charges absent a manual search because its
accounting system does not directly link transport charges to customer
orders. See Home Market Sales Verification Report. While Billing did
choose a month ``at random,'' we found that its methodology nonetheless
avoided unrepresentative months. Billing also analyzed the amounts
calculated for that month for unusually high values to ensure
reasonableness. The Department verified information regarding freight
rates, payments for freight, and that the overall freight charge for
all customers during the POI was in line with the average freight
charges for the total year. Based on our findings at verification, we
therefore conclude that Avesta's methodology is reasonable, and have
accepted it for the final determination.
Comment 10: Ocean Freight, Inland Freight, and Brokerage Charges
Petitioners argue that the Department should apply facts available
to Avesta's reported ocean freight, inland freight, and brokerage
charges. They contend that Avesta improperly calculated these expenses
using gross tons, rather than net tons, which was the unit of measure
of the reported sales quantity. Petitioners state that, at
verification, Avesta provided sample calculations of the expenses in a
verification exhibit. Petitioners recommend that the Department apply
the highest reported expenses for ocean freight, inland freight, and
brokerage and handling charges.
Avesta argues that the Department should reject petitioners'
proposed application of facts available to ocean freight, inland
freight, and brokerage charges. Avesta disagrees with petitioners that
it reported these charges on gross tons, rather than net tons, for all
Avesta entities. Avesta claims that, contrary to petitioners' claims,
only the Sheffield Business Unit calculated its charges using this
methodology. Avesta contends that petitioners fail to provide support
for their assertion that Sheffield's charges for inland freight, ocean
freight, and brokerage and handling should have been divided by net
tons. Avesta asserts that the Department's questionnaire does not
specify a preference for calculations based on either gross or net
tons, and that Sheffield's calculations based on gross tons was
reasonable, given that the shipping company applies its per-unit charge
to gross weight when determining ocean freight charges to Sheffield.
Avesta argues that, should the Department determine Sheffield's
methodology is improper, a reasonable alternative to petitioners'
suggestion is to apply a multiplier to the values reported for these
variables for all Sheffield sales to the United States, in order to
approximate a per-unit expense calculated on a net weight basis. Avesta
notes that the difference in calculating these expenses using gross
weight versus net-weight has a minimal impact.
Department's Position: We agree, in part, with both petitioners and
Avesta. Petitioners are correct in noting that, for certain sales
reviewed at verification, we found that Avesta calculated the values
reported for ocean freight, inland freight, and brokerage and handling
expenses in gross tons, rather than net tons. Also, we acknowledge that
Avesta provided an exhibit demonstrating this methodology at
verification. Our review of this exhibit, however, resulted in a
finding that this methodology applies
[[Page 30703]]
only to sales by the Sheffield Business Unit. We did not find evidence
of this methodology used by the other U.K. entities in calculating
ocean freight, inland freight, and brokerage and handling charges.
While we agree with Avesta that the Department's questionnaire does not
specifically state a preference for the calculations to be based on
gross or net weight, sales and expenses should be reported on a similar
basis to ensure fair comparisons in the Department's LTFV analysis. For
the final determination, we have applied a multiplier to the expenses
in question for all Sheffield Business Unit sales to the United States,
in order to arrive at an approximation of the expenses on a net weight
basis. See Final Analysis Memorandum.
Comment 11: Verification Changes
Petitioners state that many changes (affecting movement expenses,
payment date, physical characteristics) were presented to the
Department's verifiers at the U.S. verification, home market
verification, and the cost verification, and that all of these changes
(with the exception of those resulting from new factual information)
should be implemented for the final margin analysis. Avesta did not
comment on this issue.
Department's Position: We agree with petitioners that numerous
changes were presented to the Department at the sales and cost
verifications. For the final determination, we have made changes, where
appropriate, to Avesta's submitted cost and sales data as discussed in
our Final Analysis Memorandum.
Comment 12: Freight Revenue
Petitioners argue that the Department should deduct freight revenue
from the calculation of movement expenses in the home market. They
contend that the Department's preliminary margin program incorrectly
failed to deduct freight charged to the customer in the home market
(FREICUSH) from total movement expenses. According to petitioners,
Avesta stated in its supplemental questionnaire response that FREICUSH
is not included in the gross price for those AVSD (one of the U.K.
sales entities) sales for which FREICUSH is shown as a separate charge;
otherwise, FREICUSH is either embedded in the gross unit price or not
charged.
Petitioners also contend that the Department incorrectly deducted
freight charged to customers in the U.S. market (FREICUSU) from gross
price in calculating revenue in the United States (REVENU), which in
turn is used to calculate CEP profit. Petitioners note that, as in
accordance with Avesta's questionnaire response, FREICUSU is included
in the gross price. Petitioners argue that FREICUSU is revenue and
should not be deducted from gross unit price in the calculation of
revenue in the Department's final margin analysis.
Avesta agrees that the Department should subtract freight charged
to the customer from the calculation of movement expenses in the home
market but only for sales by AVSD. Avesta notes that AVSD is the only
one of the five U.K. entities that reported values in the field
FREICUSH without also including the FREICUSH value in gross unit price.
Specifically, for Avesta observes that, those sales for which AVSD
reported a positive value in field FREICUSH, the freight charged to
customer is not included in gross unit price. For those sales for which
AVSD reported a zero, Avesta notes that, the freight charged to
customer is included in gross unit price.
Department's Position: We agree with respondent that we should
subtract FREICUSH from the calculation of movement expenses only for
sales by AVSD. Comparison of sales documentation obtained at the home
market verification and the home market database reveals that, in
reporting AVSD's sales to the Department, freight charged to the
customer was not added to price of the merchandise, and the gross unit
price in the home market database contains only the price of the
merchandise. For other U.K. selling entities examined, we found that
the gross unit price in the home market database was reported as the
sum of the price charged to the customer for the merchandise, plus the
price charged to the customer for freight. In order to remove all
movement-related charges from the foreign prices, we subtracted
movement expenses reported from gross unit price. Reported movement
expenses reflect the total cost charged to Avesta for movement of the
merchandise. The net movement cost incurred by Avesta would be reported
movement expenses less freight revenue received from the customer. When
freight charged to the customer is included in reported gross unit
price, subtracting only reported movement expenses from gross unit
price results in the deduction of net movement costs incurred by the
respondent, leaving the price of the merchandise alone. When freight
charged to the customer is not included in reported gross unit price,
however, and reported movement expenses are subtracted from gross unit
price, failure to also subtract freight charged to the customer from
movement expenses (the same effect as adding it to gross unit price)
results in the deduction from gross unit price of more than the net
movement costs incurred by the respondent. Therefore, as a result of
our verification findings and our clearer understanding of FREICUSH and
reported gross unit price for each of the U.K. reporting entities, we
have changed the methodology from our Preliminary Determination to
subtract FREICUSH from movement expenses for sales made by AVSD.
We agree with petitioners that FREICUSU should not be deducted from
gross unit price in calculating REVENU. We found at verification that
reported gross unit price in the United States includes freight charged
to customer. Therefore, as discussed above, deducting FREICUSU from
REVENU results in more than the net movement costs incurred by the
respondent being deducted from gross unit price in the calculation of
CEP profit. Therefore, we have changed the methodology from our
Preliminary Determination to remove FREICUSU from the calculation of
REVENU.
As noted above, reported gross unit price in the United States
includes freight charged to the customer. Therefore, when freight
charged to the customer is included in reported gross unit price,
subtracting only reported movement expenses from gross unit price
results in the deduction of net movement costs incurred by the
respondent, leaving the price of the merchandise alone. In the
Preliminary Determination, we deducted both reported movement expenses
and reported FREICUSU from gross unit price in calculating net U.S.
price. In this final determination, we are removing FREICUSU from the
calculation of net U.S. price. This methodology ensures that the
treatment of freight charged to customers on U.S. sales and home market
sales is consistent.
Comment 13: Hot-Rolled, Annealed and Pickled Merchandise
Avesta argues that, in the Preliminary Determination, the
Department correctly determined that Avesta's sales of hot-rolled
annealed and pickled SSSS should be excluded from its analysis, as this
merchandise is produced in Sweden and not in the United Kingdom. Avesta
explains that it hot-rolls this merchandise in Sweden and not in the
United Kingdom.
Avesta maintains that annealing and pickling do not substantially
transform the product, in that neither process changes the chemical
composition of
[[Page 30704]]
the merchandise. Avesta states that it cited in its questionnaire
response several rulings by the U.S. Customs Service, which hold that
the annealing and pickling in the United Kingdom is not a substantial
transformation which confers country of origin. Avesta declares that
the Customs decisions address issues of concern to the Department in
rendering scope decisions, and as such, they must be given substantial
weight in the Department's analysis. Avesta also holds that Stainless
Steel Plate from Sweden is a comparable case also involving Avesta
Sheffield. Avesta argues that, in that case, the Department rejected
arguments that annealing and pickling in addition to hot-rolling is
necessary to bring hot band within the definition of stainless steel
plate. Avesta cites to Memorandum from Richard Weible to Joseph
Spetrini re: Affirmative Scope Ruling--Stainless Steel Plate from
Sweden (A-401-040), December 22, 1997 (Stainless Steel Plate from
Sweden Scope Memorandum).
Petitioners did not comment on this issue.
Department's Position: We agree with Avesta that its hot-rolled
sales during the POI should be excluded from our analysis as this
merchandise is produced in Sweden and not in the United Kingdom. In the
Stainless Steel Plate from Sweden Scope Memorandum (the public version
of which is attached to the Preliminary Determination Analysis
Memorandum for this case, dated December 17, 1998), we determined that
hot bands rolled in Sweden from British slab are within the scope of
that antidumping finding. In that case we explained that, in
determining whether substantial transformation has occurred, the
Department looks to whether a ``new and different article'' results
from the production process. In addition to whether the production
process results in a ``new and different article,'' the Department has
considered value-added and process-cost in other cases involving
substantial transformation. See Stainless Steel Plate from Sweden Scope
Memorandum.
The instant case also involves British slabs that are hot-rolled in
Sweden on the same equipment as that analyzed in the Stainless Steel
Plate from Sweden Scope Memorandum. As we found in the Stainless Steel
Plate from Sweden Scope Memorandum, based upon physical changes that
the conversion of slab into hot band produces on the product, we
conclude that the rolling of slabs into hot bands results in the
production of a ``new and different article'' and constitutes a
substantial transformation within the meaning of the antidumping law.
See Certain Carbon Steel Butt-Weld Pipe Fittings from India: Notice of
Final Determination of Sales at Less Than Fair Value, 60 FR 10545,
10546 (February 27, 1995). The processing of slabs into hot bands
dramatically changes the physical characteristics of the product,
drastically reducing the thickness, extending its length, changing the
microstructure and significantly increasing its strength
characteristics. Therefore, we find that U.K. slabs hot rolled in
Sweden do not fall within the scope of this investigation. Accordingly,
we are continuing to exclude hot-rolled sales in our final analysis.
Comment 14: Class or Kind
Avesta argues that, in the Preliminary Determination, the
Department erred in determining that hot-rolled, annealed and pickled
sheet and strip (HRAP SSSS) and cold-rolled sheet and strip (CR SSSS)
are the same subject merchandise or class or kind. Avesta contends that
the Department has both the authority and the obligation to modify the
petition's description of class or kind when it finds that the petition
has described more than one class or kind. Avesta asserts that the
Department is not bound by the like product determination of the
International Trade Commission (ITC), and that the Department and the
ITC have separate statutory authority to make class or kind and like
product determinations and may make distinct determinations.
Avesta comments that the Department considers class or kind of
merchandise to establish the scope of a proceeding. Questions of class
or kind most commonly arise, according to Avesta, when the Department
is to determine whether particular foreign merchandise falls within the
scope of an antidumping investigation.
Avesta asserts that, in determining whether products constitute one
or more classes or kinds of merchandise, the Department normally
considers several factors, with no single factor being dispositive.
According to Avesta, these factors are: (1) Physical characteristics of
the merchandise; (2) end uses; (3) interchangeability of products; (4)
channels of distribution in which the merchandise moves; (5) the
production process; and (6) price. (Avesta refers to High Information
Content Flat Panel Displays and Display Glass Therefor From Japan, 56
FR 32376, 32381 (July 16, 1991), in which the Department applied
basically the same criteria for class or kind product analysis, and to
Diversified Products Corporation v. United States, 572 F. Supp. 883,
889 (CIT 1983) (Diversified Products), in which the following criteria
were used: physical characteristics, end use, expectations of
customers, channels of trade, and cost.) Avesta contends that analysis
of these factors demonstrates that there is more than one category of
merchandise under investigation. Avesta analyzed each of the factors as
described below.
Regarding physical characteristics, Avesta argues that irrespective
of thickness, CR SSSS are distinguished from HRAP SSSS by increased
uniformity of surface and smoothness and by closer dimensional
tolerances. Avesta asserts that the relative smoothness of the surface
layer of the material cross-section differs between HRAP and CR by a
factor of 10. Avesta further claims that the enhanced surface
characteristics typically available in a cold-rolled product allow for
dramatic differences in material performance pertaining to issues such
as bacteria retention and ability to perform downstream metal finishing
operations to achieve sanitary or aesthetic properties associated with
cold-rolled stainless steels. In addition, Avesta states that CR SSSS
have a tighter thickness tolerance than HRAP SSSS. Avesta holds that
the differences in physical characteristics between HRAP and CR SSSS
are reflected in their classification under different headings in the
HTSUS and in the codes assigned by the AISI.
Regarding end uses, Avesta contends that the end uses of HRAP and
CR SSSS differ substantially. Avesta notes that HRAP SSSS are used in
applications that do not require the surface finish of CR SSSS or are
used as feed stock for CR SSSS. Avesta maintains that HRAP SSSS are
consumed by manufacturers of welded pipe, and by manufacturers of
specialized equipment requiring corrosion-resistant steel (such as
pulp/paper, chemical/petrochemical, etc. equipment). Avesta notes that
purchases of hot-rolled material require the corrosion/heat resistance
or strength characteristics of stainless steel, and do not require the
surface characteristics, finish and dimensional tolerance of CR SSSS,
while for purchasers of CR SSSS, surface characteristics, finish, and/
or dimensional tolerance are important.
Regarding interchangeability, Avesta argues that HRAP and CR SSSS
are not interchangeable. Avesta claims that CR SSSS are generally sold
for applications requiring specific surface conditions or dimensional
tolerances, and therefore, HRAP SSSS are generally not substitutable
for CR SSSS.
[[Page 30705]]
Regarding channels of distribution, Avesta notes that these
channels overlap for HRAP and CR SSSS overlap. Avesta further notes
that, while end users have distinct requirements for these products,
distributors often handle sales of both products and the same purchaser
may purchase both HRAP and CR products. Nevertheless, Avesta asserts,
producers and purchasers perceive the two products as distinct. Avesta
maintains that it is common for steel products regarded as separate
products to be handled by the same distributors, and to be purchased by
the same end users for different applications. Avesta contends that the
Department should not focus disproportionately on the channel of
distribution portion of the analysis because sharing of a significant
portion of the channels of distribution is not dispositive if the
balance of the evidence supports a Department finding of two separate
classes or kinds of merchandise (Avesta cites to Certain Brake Drums
and Certain Brake Rotors From the People's Republic of China, 61 FR
14740 (April 3, 1996)).
Regarding production process, Avesta argues that the process
involved in converting HRAP to CR SSSS is significant. Avesta notes
that the U.S. Customs Service has found that such a conversion
constitutes a substantial transformation of the merchandise. Also
Avesta cites Rules for Determining the Country of Origin of a Good for
Purposes of Annex 311 of the North American Free Trade Agreement; Rules
of Origin Applicable to Imported Merchandise, 60 FR 35878, 35880 (July
12, 1995). Avesta declares that CR SSSS must undergo substantial
additional processing using production equipment that is not used to
produce HRAP SSSS. Avesta asserts that the process of producing CR SSSS
involves significant reductions to the hot-rolled material at an
ambient temperature on a reversing or tandem rolling mill and often
subsequent annealing and descaling of the material, and temper rolling
for coil shape and surface enhancement if deemed necessary. Avesta
maintains that cold-rolling is performed in a separate mill than hot-
rolling and requires separate equipment, which is reflected in Avesta's
production process in which slab is hot-rolled at the Steckel mill in
Sweden, followed by cold-rolling in separate facilities using separate
equipment.
Regarding price, Avesta notes that the price difference between
HRAP and CR SSSS is significant. Avesta argues that CR SSSS command a
significant premium over HRAP SSSS, and it has attached to its brief a
price comparison, by grade, of its home market sales during the POI.
Avesta contends that the additional cost of transforming hot-rolled
into cold-rolled material is substantial and results in the difference
in their respective selling prices.
Petitioners argue that the Department correctly recognized that
HRAP and CR SSSS comprise a single class or kind of merchandise.
Petitioners assert that, by focusing on minor physical differences,
Avesta's analysis of this issue ignores the major physical attributes
and similarities of HRAP and CR SSSS. Petitioners hold that Avesta's
analysis ignores all of the relevant determinations on this issue,
which have uniformly found that stainless steel sheet and strip, as
well as stainless steel plate, each comprise a single class or kind of
merchandise, regardless of whether they are hot or cold-rolled.
Petitioners specifically refer to the Department and ITC decisions,
which confirm that HRAP stainless steel plate and CR stainless steel
plate as comprising a single class or kind of merchandise (i.e., Notice
of Final Determination of Sales at Less than Fair Value: Stainless
Steel Plate in Coils from the Republic of Korea, 64 FR 15444 (March 31,
1999) and Certain Stainless Steel Plate from Belgium, Canada, Italy,
Korea, South Africa, and Taiwan, Inv. Nos. 701-TA-376-379 and 731-TA-
788-793 (Prelim.) USITC Pub. No. 3107 (May 1998)). Petitioners go on to
assert that, contrary to Avesta's argument, the Department and the ITC
have preliminarily determined that HRAP and CR SSSS constitute a single
class or kind, and single like product. Petitioners also argue that
these cases affirm the Department's findings in the 1980's that HRAP
SSSS and CR SSSS comprise a single class or kind of merchandise.
Petitioners cite to Final Determinations of Sales at Less Than Fair
Value: Certain Stainless Steel Sheet and Strip Products from Federal
Republic of Germany; 48 FR 20459, 20460-61 (May 6, 1983)).
Petitioners maintain that a review of Avesta's argument
demonstrates Avesta relies on two minor physical differences, surface
smoothness and dimensional tolerances, for three of six criteria
examined. Petitioners further assert that Avesta's analysis focuses on
niche products and minor exceptions. Petitioners analyzed each of the
factors also analyzed by Avesta, as summarized below.
Regarding physical characteristics, petitioners note that, while
Avesta asserts that surface smoothness and closer dimensional
tolerances distinguish CR SSSS from HRAP SSSS, the ITC, in its
preliminary determination, found that such physical differences were
minimal. Petitioners further argue that Avesta ignores the most salient
physical features of SSSS--chemical composition, thickness, and
annealed and pickled condition. Petitioners note that the most
important physical characteristic identified by the Department in this
case is grade. Petitioners assert that every grade of SSSS can be
either HRAP or CR, and that there is a substantial overlap in their
gauges. Petitioners further note that gauge is a critical physical
characteristic and that it separates stainless steel plate in coils
from SSSS. Petitioners comment that physical characteristics selected
by the Department in its matching hierarchy also overlap between HRAP
and CR, such as coating, width, edge, and annealed and pickled
condition. The petitioners also note that the ITC confirmed the
importance of the overlap in physical characteristics, gauge, and
width. While Avesta argues that HTS headings and AISI product codes
segregate HRAP and CR products, petitioners maintain that the
Department's scope specifically notes HTS headings are not dispositive
and that using Avesta's logic would lead to 60 classes or kinds as
there are 60 HTS subheadings included in the scope.
Regarding end uses, petitioners argue that, while it is true that
the vast majority of HRAP steel is used to produce CR SSSS, this
supports a finding of a single class or kind. Petitioners assert that
Avesta's only argument for differing end-uses is that manufacturers of
welded pipe and specialized equipment relied on HRAP SSSS; however,
petitioners note, the ITC found that such end-uses accounted for less
than four percent of all SSSS sales. Petitioners assert that the ITC
concluded that there is a limited market for HRAP SSSS and the vast
majority of HRAP SSSS is produced and captively consumed for CR SSSS
production, which supports a single like product (or class or kind)
determination. Petitioners contend that Avesta failed to note that the
limited number of end uses for HRAP also use CR in the same
applications. According to petitioners Avesta's argument is misleading
because it does not focus on end uses. Petitioners note that Avesta
focuses on intermediate uses for HRAP but on end uses for HR. Finally,
petitioners note that the end uses for the vast majority of SSSS are
identical because the vast majority of SSSS is CR.
Regarding interchangeability, petitioners assert that while Avesta
relies on surface conditions and dimensional tolerance, which are
physical characteristics, that argument
[[Page 30706]]
ignores the 94 percent of the market where HRAP is dedicated to
producing CR SSSS. Petitioners argue that Avesta highlights the limited
applications where HRAP is less substitutable for CR, while ignoring
that CR is always substitutable for HRAP.
Regarding channels of distributions, petitioners note that Avesta
acknowledges that distributors often handle sales of both products and
that the same purchaser will purchase both HRAP and CR products. While
petitioners agree with Avesta that weakness in one criteria is not
dispositive, petitioners note that Avesta's weakness in several
criteria here is dispositive.
Regarding production process, petitioners argue that while Avesta
cited U.S. Customs Service rulings and NAFTA Rules of Origin, these
rulings are not applicable nor controlling in the Department's class or
kind inquiries. Petitioners contend that the Department considers the
six factors noted with an eye to enforcement of the antidumping and
countervailing duty law. Petitioners further assert that Avesta fails
to acknowledge the Department's previous class or kind rulings for
stainless steel flat products have uniformly concluded HRAP and CR SSSS
are a single class or kind. Petitioners argue that it is important to
realize that a significant portion of the production process for HRAP
and CR are identical, such as melting, refining, casting, hot-rolling,
annealing, and pickling. Petitioners maintain that CR SSSS is simply a
further processed HRAP product and even then both are followed by
similar processes, such as annealing, pickling, recoiling, etc.
Petitioners also note that while Avesta states CR is performed in
separate mills, this is a consequence of Avesta's operation and not a
requirement as some producers make HRAP and CR in the same facility and
as companies that produce HRAP also produce CR SSSS.
Regarding price, petitioners argue that while Avesta submitted a
comparison of HR and CR prices, this comparison can be misleading and
should not be relied on. Petitioners contend that Avesta's pricing
analysis is by grade only, ignoring other critical physical
characteristics, especially gauge. Also, petitioners note that, Avesta
compared prices net of discounts, rebates, billing, and freight.
Petitioners contend that, since Avesta claimed and the Department
agreed in the Preliminary Determination that some of the HR merchandise
is of Swedish origin, inclusion of non-subject merchandise in pricing
comparisons is improper, and much of the pricing differences in
Avesta's analysis may be caused by freight costs related to shipping
merchandise between the United Kingdom and Sweden. Petitioners note
that the ITC examined the issue of cost in its like product
determinations, and concluded that, on average, cold-rolling represents
38 percent of the cost of finished, cold-rolled SSSS. Petitioners go on
to state that the ITC acknowledged that the cost of cold-rolling can
vary, depending on the finished product, and noted that a wide range of
products with differing specifications are produced. Petitioners
further assert that the ITC acknowledged that prices within CR types
can vary significantly, yet Avesta has not argued for different classes
for different CR products. Finally, petitioners note that while CR
clearly adds value which is sometimes significant, the majority of
value is added to products through the HRAP stage.
Department's Position: We agree with petitioners. In making class
or kind determinations, we analyze the following criteria enunciated in
the Diversified Products and Kyowa Gas cases: (1) The general physical
characteristics; (2) the end use; (3) the expectations of ultimate
customers; (4) the channels of trade; and (5) the manner in which the
product is advertised or displayed. Of the criteria mentioned by
Avesta, production process, interchangeability of products, and price
are not part of this analysis. Indeed, while price is a criterion
considered by the ITC in making a like product determination, it is not
a factor evaluated by the Department in making its class or kind
decisions.
When examining the general physical characteristics of products,
the Department does not rely on mere physical differences. There must
be a clear dividing line between different product types in order for
the Department to find different classes or kinds. See Sulfur Dyes,
Including Sulfur Vat Dyes from the United Kingdom: Final Determination
of Sales at Less Than Fair Value, 58 FR 7537 (February 8, 1993). Avesta
is correct that the cold-rolling will provide SSSS with a product that
has closer dimensional tolerances and increased uniformity of surface.
In addition, these products have different HTSUS and AISI codes.
However, the respondent's focus on the relevance of dimensional
tolerances and surface uniformity is misplaced. The most important
characteristics of SSSS revolve around the grade of the product, the
dimensional characteristics that it possesses, and its resistance to
corrosion. These characteristics will dictate the relevant applications
of the material. Regarding HRAP and CR SSSS, both products: (1) Are
produced in the same stainless steel grades (i.e., specific chemistries
such AISI 304 or 316); (2) meet the dimensional characteristics
outlined in the scope of this investigation, in many instances
overlapping in thicknesses and widths; and (3) provide the same
resistance to corrosion if produced to the same grade. The recognition
of surface uniformity, close dimensional tolerance, and different
classification headings in the HTSUS and AISI alone do not substantiate
differences in physical characteristics that merit a separate class or
kind. If the Department were to adopt Avesta's logic, there would be
multiple classes or kinds of CR SSSS as different products have
different levels of surface uniformity, dimensional tolerance, and
result in different classification headings in the HTSUS. In addition,
numerous other stainless steel orders include cold-finished and hot-
finished products within the same class or kind (e.g., stainless steel
bar) despite the cold-finished product possessing many of the
characteristics Avesta noted for CR SSSS. We did not recognize these
products as a separate class or kind precisely for the reasons noted.
Regarding end use, Avesta focuses on the differences between HRAP
and CR SSSS on specific applications such as HRAP SSSS being used for
welded pipe applications. It also states that CR SSSS uses will be
dictated by a demand for improved surface characteristics, finish, and/
or dimensional tolerances. Again, Avesta fails to recognize that the
relevant uses of SSSS are driven by the need for steel possessing
specific dimensional characteristics and providing specific levels of
resistance to corrosion. Since both HRAP and CR SSSS are produced in
the same grades and overlap in dimensional characteristics, there is
overlap in specific uses. Again, if the Department were to determine
class or kind distinctions based on products possessing different
surface characteristics, finish, or dimensional tolerances, it would be
in the untenable position of recognizing hundreds of different grades
of CR SSSS as different classes or kinds of merchandise because of the
myriad of products produced, each intended for a unique, specific use.
Regarding expectations of customers, both HRAP and CR SSSS will
satisfy the same basic requirements/needs of customers. Both products
are primarily being sought because they possess the same specific
chemical analysis that promote their resistance to the effects of
environmental corrosion, and because
[[Page 30707]]
they can possess overlapping dimensional characteristics.
Regarding channels of trade, both parties acknowledge that HRAP and
CR SSSS are marketed through the same channels of distribution.
Regarding manner in which advertised, neither party addressed this
issue in the context of the Diversified Products criteria, and there is
insufficient information presented on the record that differentiates
the manner in which HRAP and CR SSSS are advertised.
For the reasons stated above, we are continuing to treat HRAP SSSS
and CR SSSS as one class or kind.
Comment 15: Flat Wire
Avesta argues that the Department should amend the definition of
excluded flat wire to reflect the industry standard. Avesta notes that,
in the Notice of Initiation (see Stainless Steel Sheet and Strip in
Coils from France, Germany, Italy, Japan, Mexico, South Korea, Taiwan,
and the United Kingdom, 63 FR 37521, 37522 (July 13, 1998)), the
Department invited comments on product coverage in these
investigations. Avesta notes that in responding to this invitation on
July 20, 1998, it commented that while ``flat wire'' was excluded from
the scope, no definition was provided. Avesta states that it proposed
that the Department adopt the industry standard for flat wire, as
defined in the AISI Steel Products Manual, which notes a cold-rolled
product, with a prepared edge, rectangular in shape, \1/2\ inch or less
in width, under \1/4\ inch in thickness. Avesta asserts that on July
29, 1998, petitioners stated that, with respect to an appropriate
definition of the excluded flat wire, they agree with the comments on
page 6 of Avesta's July 20 letter.
Avesta complains that despite petitioners' apparent endorsement of
the AISI definition of flat wire, the Department rejected that
definition in its Preliminary Determination. Avesta argues that,
without any apparent discussion or explanation of its decision to adopt
a different definition of flat wire than the one used by the industry,
the Department amended the language excluding flat wire. Avesta
maintains that no evidence appears to exist on the record of these
investigations that supports or justifies this departure from the
standard industry definition of flat wire. Avesta alleges that, because
the Department's alternative flat wire definition is at odds with the
product the stainless steel industry normally considers flat wire, it
creates the potential for confusion on the part of foreign producers/
exporters as to what is properly excluded. To minimize this problem,
Avesta urges the Department to modify its flat wire exclusionary
language to conform with the industry standard, as set forth in the
AISI Steel Products Manual.
Petitioners argue that the Department should not amend the
definition of flat wire from the Preliminary Determination. Petitioners
emphasize that their July 29, 1998, letter, referenced by Avesta, noted
that they agreed with the comments on page 6 of Avesta's July 20
letter, noting in particular, the importance of including in the
definition a requirement that the material have a ``prepared edge''.
Petitioners, upon further discussion with the U.S. industry, have
determined that the Department's scope language for flat wire outlined
in the preliminary determination is accurate and should be retained for
the final determination. Petitioners cite The Making, Shaping, and
Treating of Steel, 10th Edition (page 1012) as containing a definition
of flat wire. Petitioners note that this publication states that ``flat
wire normally is best produced in sizes up to 9.53 mm (3/8 inch)''.
Petitioners urge the Department not to amend the scope language used in
the Preliminary Determination, namely, flat wire is cold-rolled
sections with a prepared edge, rectangular in shape, of a width of not
more than 9.5 mm.
Department's Position: We agree with petitioners. The development
of the flat wire exclusion language is reflective of the petitioners'
intent with respect to the scope language and a recognized industry
publication listing the dimensional characteristics of this product and
other stainless steel products. In the original petition, petitioners
make no mention of the dimensional or physical characteristics of their
flat wire exclusion. The Department carefully reviewed various
publications, including The Making, Shaping and Treating of Steel and
Design Guidelines for the Selection and Use of Stainless Steel. The
latter publication notes in a table on page 19 that the width
classification of stainless steel wire, including flat wire, is ``under
3/8'' (9.53 mm).'' We established a maximum width for flat wire that is
reflective of these publications' dimensional width limitation.
Petitioners have not requested that the Department amend the width
limitations of the flat wire exclusion. In fact, they have acknowledged
the suitability of this dimensional definition of flat wire, and that
this maximum width level of the flat wire exclusion is an accurate
reflection of the product for which they are not seeking relief.
Therefore, based on these publications, and since petitioners are
seeking relief for products in the scope as written in the Preliminary
Determination, we are not revising the scope language for flat wire.
Issues Relating to Cost of Production
Comment 16: Major Inputs
Petitioners argue that the Department should apply adverse facts
available to Avesta's COP given Avesta's failure to properly respond to
the Department's cost questionnaires concerning major inputs.
Petitioners assert that respondents did not provide market price data
for inputs obtained from affiliated parties.
According to petitioners, the Department must apply the major input
rule in calculating the cost of Avesta's major inputs, in accordance
with section 773(f)(3) of the Tariff Act, which provides that, where
transactions between affiliated parties involve a major input, the
Department may value the major input based on the COP if the cost is
greater than the amount that would be determined under section
773(f)(2) (i.e., the higher of transfer price or market price).
Petitioners contend that the Department is required to review purchases
from affiliated parties of major inputs in order to determine that they
reasonably reflect a fair market value.
Petitioners assert that Avesta failed to properly respond to the
Department's questions concerning its major inputs. According to
petitioners, Avesta indicated that, as a consolidated entity, it need
not comply with the Department's questionnaire. Instead, petitioners
note, Avesta stated that all its production facilities involved in
producing subject merchandise are either part of the same legal entity,
part of legal entities that will be collapsed and assigned one dumping
margin, or units in the same operating division within the Avesta
Sheffield Group. According to petitioners, Avesta further stated that,
because all of its production facilities are affiliated within the
Avesta Sheffield Group (``the Group'') and their accounts are
ultimately consolidated with the Group, Avesta reported the actual
costs for all facilities involved in the production of the merchandise
under investigation.
Petitioners argue that Avesta's contention that the production
facilities affiliated with the Group are ``one from an operational
standpoint'' is irrelevant because several of the affiliated entities
are not engaged in the production of the subject merchandise, but
rather,
[[Page 30708]]
produce the inputs used to make subject merchandise. Petitioners also
state that these production facilities are separate legal entities.
Petitioners assert that, in Pasta from Italy, the Department determined
that the operational reality of the close association between two
entities does not outweigh the legal form of the entities.
Petitioners contend that, given the numerous deficiencies and
Avesta's ``non-responsiveness'' to the Department's questionnaires and
requests, the use of adverse facts available for COP and CV is
warranted for the Department's final analysis. They argue that the use
of adverse facts available is appropriate because of Avesta's repeated
failure to report the necessary market value for the major inputs (a
critical element needed to gauge whether home market sales were made in
the ordinary course of trade) and its failure to report the COP and CV
data in the requested format by the Department (i.e., costs separated
for the major inputs). Petitioners recommend the application of the
highest COP and CV reported for each control number as the appropriate
basis for facts available. Alternatively, according to petitioners,
should the Department determine that Avesta's COP and CV response is
acceptable for the final margin analysis, at a minimum the Department
should apply the higher of the transfer price or cost of production for
each grade of the major inputs involved.
Avesta argues that petitioners' argument is factually and legally
unsound, and therefore, it should be rejected. Avesta contends that,
with respect to market values for the two major inputs, the Department
made no inquiries to which it failed to respond. Avesta indicates that
its supplemental questionnaire states that it did not purchase either
of the major inputs from unaffiliated suppliers, and that the accuracy
of this response was reviewed and confirmed by the Department at
verification. Avesta asserts that, because it purchased neither input
from unaffiliated suppliers, it had no information as to their market
values to provide the Department, and that market values can only be
considered when such values are available. Avesta claims that it fully
complied with the Department's reporting requirements by providing only
the COP and transfer prices for each of the major inputs. For these
reasons, asserts Avesta, no adverse inferences reasonably can or should
be drawn by the Department in its final determination.
Avesta argues that record evidence reflects that Avesta consulted
with the Department on the proper format for submitting the COP/CV
information, and the result of those discussions was the company's
submission of a chart comparing the costs and transfer prices of the
two major inputs as a substitute for the initially requested COP/CV
format. Avesta notes that the Department requested no further
information, and that the accuracy of the reported information was
reviewed and confirmed at verification. Avesta contends that no adverse
inferences reasonably can or should be drawn by the Department as to
the data provided because Avesta responded to the best of its ability
to the request for data in a particular format. Also, Avesta argues
that petitioners' recommendation that the Department perform its major
input analysis on a grade-specific basis should be rejected. Avesta
contends that it reasonably applied one methodology for all grades, and
petitioners have not provided any evidence that this methodology
materially distorts the reported COPs/CVs.
Department's Position: We disagree with petitioners that we should
apply adverse facts available to Avesta's COP information. We find that
Avesta has provided all necessary information regarding major inputs.
Moreover, given that market price information was not available for the
inputs in question, in valuing the major inputs, we have relied on the
higher of transfer price or the affiliate's cost of production, in
accordance with sections 773(f)(2) and (3) of the Tariff Act.
Sections 773(f)(2) and (3) of the Tariff Act specify the treatment
of transactions between affiliated parties for purposes of reporting
cost data (used in determining both COP and CV) to the Department.
Section 773(f)(2) states that the Department may disregard such
transactions if the amount representing that element (the transfer
price) does not fairly reflect the amount usually reflected (typically
the market price) in the market under consideration. Under these
circumstances, the Department may rely on the market price to value
inputs purchased from affiliated parties. Section 773(f)(3) states that
if transactions between affiliated parties involve a major input and
the cost of the major input is greater than the amount that would be
determined under section 773(f)(2) (i.e., the higher of the transfer or
market price), the Department may value the major input on the basis of
the information available regarding its COP. Additionally, section
773(f)(3) applies if the Department ``has reasonable grounds to believe
or suspect that an amount represented as the value of such input is
less than the COP of such input.'' The Department generally finds that
such ``reasonable grounds'' exist where it has initiated a COP
investigation of the subject merchandise (see, e.g., Stainless Steel
Plate in Coils From South Africa: Notice of Final Determination of
Sales at Less Than Fair Value, 64 FR 15459, 15474 (March 31, 1999);
Small Diameter Circular Seamless Carbon and Alloy Steel Standard, Line
and Pressure Pipe From Germany: Final Results of Antidumping Duty
Administrative Review, 63 FR 13217, 13218 (March 18, 1998), and
Silicomanganese from Brazil; Final Results of Antidumping Duty
Administrative Review, 62 FR 37869, 37871 (July 15, 1997). In
addition,19 CFR 351.407(b) further instructs the Department to
determine the value of a major input based on the higher of: (1) The
price paid to the affiliated party (i.e., transfer price), (2) the
market price, or (3) the cost of the affiliated party to produce such
input.
We find that Avesta provided to the Department all the necessary
and requested information regarding major inputs. On December 18, 1998,
we requested in a supplemental questionnaire that Avesta provide, among
other items, COP and CV databases with separate fields for each of the
major inputs. On January 4, 1999, Avesta responded that it would not be
able to provide these databases by the deadline requested. We consented
to this delay under the condition that Avesta answer related questions
in the supplemental questionnaire, and include a chart comparing
transfer price and cost, by grade, for each of the major inputs. In
addition, we asked that Avesta provide an alternative proposal on how
to apply any major input adjustments, which may be necessary to the
submitted cost database, prior to the cost verification (see Memorandum
from Charles Rast and Nancy Decker to The File, January 7, 1999).
Avesta provided the requested chart and appropriately answered the
related questions. Although the company did not provide the alternative
proposal, we found, as a result of verification, that no major input
adjustments are necessary, and therefore, the alternative proposal is
not needed. See Cost Verification Report at 15-16 and Final Analysis
Memorandum.
As noted in the Cost Verification Report at 15, Avesta did not
purchase major inputs from unaffiliated companies during the POI.
Therefore, in applying 19 CFR 351.407(b)(2), we find that there is no
market price available. Accordingly, we have relied upon the higher of
the affiliated party's cost of production of the major input or the
transfer price of that major input. The Department made a similar
decision in
[[Page 30709]]
the Final Results of Antidumping Duty Administrative Reviews:
Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts
Thereof From France, Germany, Italy, Japan, Singapore, and the United
Kingdom 62 FR 2081, 2115 (January 15, 1997).
Given that Avesta complied with our request for information by
providing necessary COP and transfer prices of major inputs, and based
on our verification findings confirming the accuracy of this
information, we have relied upon the higher of cost of production or
transfer price for the final determination, in accordance with section
773(f) of the Tariff Act and section 351.407(b) of the Department's
regulations. See Final Analysis Memorandum.
Comment 17: Estimated Versus Actual COPs
Petitioners maintain that Avesta reported estimated COP for several
control numbers in the home market. They argue that the Department
should apply the highest reported cost to those control numbers that
were reported as estimated costs. Petitioners assert that because
Avesta did not provide actual costs for all control numbers, as
requested in the Department's questionnaire, adverse facts available
should be applied. They state that Avesta should not be rewarded for
providing an inaccurate cost response. Petitioners indicate that as
facts available, the Department should add to the COM the revised
interest expense and highest reported G&A expenses.
Avesta disagrees, contending that it did report actual costs for
all control numbers in its questionnaire responses. According to
Avesta, each control number represented a product as defined by the
physical characteristics identified by the Department in its
questionnaire. Avesta maintains that, in preparing for its costs
responses, it relied upon its normal accounting system. In this system,
Avesta claims, which was verified by the Department, the company does
not track costs for products at the same level of detail associated
with each and every one of the physical characteristics identified by
the Department. (See Cost Verification Report at 22.) Avesta indicated
that, in calculating actual costs for the purposes of the responses, it
calculated actual costs for the products identified from the actual
cost information contained in its accounting system. Avesta notes that
these costs were not estimates, but were rather actual costs contained
in its accounting system calculated to comply with the Department's
reporting requirements. Thus, Avesta urges the Department to reject
petitioners' argument and rely upon its reported costs for the final
determination.
Department's Position: We agree with Avesta. At verification, we
examined Avesta's books and records kept in the ordinary course of
business. We confirmed that Avesta does not have standard costs for all
products at the same level of detail associated with each physical
characteristic identified by the Department. In cases where a control
number did not have a standard cost because there were no products with
identical physical characteristics, Avesta used the standard cost of
the product with the closest possible match containing the most similar
physical characteristics. (See Cost Verification Report, at 22-23.)
This standard was then adjusted for variances and an actual cost of the
control number for the POI was calculated. Based on our verification
findings in this case, we find that Avesta's methodology for
calculating actual costs of a control number that did not have a
standard cost in the normal accounting system is reasonable. For the
final determination we have thus relied upon Avesta's costs as
reported.
Comment 18: Interest Expense
Both petitioners and Avesta comment in their case briefs and
rebuttal briefs on whether it may be appropriate to use British Steel
PLC's consolidated profit and loss statement for the calculation of
interest expense, given that Avesta is a consolidated subsidiary of
British Steel PLC. Petitioners argue that the Department should
recalculate interest expense based on British Steel's consolidated
profit and loss statement, rather than using Avesta Sheffield AB's (AS
AB--ASL's parent company) consolidated profit and lost statement,
because Avesta is a consolidated subsidiary of British Steel PLC. They
state that it is the Department's normal methodology to calculate
interest expense at the highest consolidated level. (See Stainless
Steel Round Wire From Canada: Final Determination of Sales at Less Than
Fair Value, 64 FR 17324, 17334 (April 9, 1999) (Stainless Steel Round
Wire).)
Petitioners also argue that the Department should not adjust
British Steel's interest expense for ``other interest receivables,'' as
Avesta did not provide any supporting documentation demonstrating its
position that these receivables were short-term in nature. Petitioners
note that Avesta's treatment of these receivables is based on its
assumption as to their short-term nature. Because AS AB is 51 percent
owned by British Steel PLC, petitioners discount Avesta's position that
AS AB did not have access to the confidential accounting records of
British Steel PLC, and that the only information it had was that which
was contained in published annual accounts. They state that there is no
requirement in the law that a respondent must be able to verify public
information issued by its parent company. Petitioners note that
presumably British Steel's auditors have certified the accuracy of its
financial statements.
Avesta contends that, because British Steel's interest rate is not
relevant to Avesta, and because Avesta does not have access to the
proprietary information necessary to verify the figures reported in
British Steel's profit and loss statement, the Department should use AS
AB's consolidated income statement as the basis for calculating the
interest expense ratio in the final determination. Avesta states that
the Department traced the cost of sales, interest expense, and interest
income ratio used in this interest expense ratio to AS AB's
consolidated income statement. Avesta notes that it recalculated net
interest expense, however, based on British Steel PLC's consolidated
profit and loss statement pursuant to the Department's supplemental
questionnaire. Avesta observes that this recalculation showed a net
interest expense of zero for the POI. Avesta reiterates that it has no
access to the confidential records of British Steel PLC; therefore, it
based its recalculation on the information contained in British Steel
PLC's published annual accounts.
Avesta asserts that the use of British Steel PLC's data is
incorrect because AS AB has its own borrowings and does not receive
financing from British Steel. A second reason this approach is
incorrect, according to Avesta, is because it has no means to confirm
the accuracy or source of the data British Steel chose to make public.
Avesta concludes that the Department's decision that Avesta should base
its interest expense ratio on British Steel's data puts the company at
a significant disadvantage.
Department's Position: We agree with petitioners that interest
expense should be calculated using British Steel PLC's consolidated
profit and loss statement. Both before and after the URAA amendments,
the Department has consistently used the financing expenses incurred by
a parent company on behalf of a consolidated group of companies to
determine a particular company's net interest expense. For example, in
Final Determination of Sales at Less Than Fair Value: Certain
[[Page 30710]]
Carbon Steel Butt-Weld Pipe Fittings From Thailand, 60 FR 10552
(February 27, 1995), the Department followed its long-standing practice
and calculated the interest expense component of COP based upon the
interest expense of the parent entity of a consolidated group of
companies, rather than the individual company responsible for the
production of the product at issue. In so ruling, the Department
reasoned that capital was fungible and that the parent company's
capital was used to fund all of the operations of the consolidated
company and could not be segregated. See also Aramid Fiber Formed of
Poly Para-Phenylene Terephthalamide from the Netherlands: Final Results
of Antidumping Administrative Review, 62 FR 38059, 38060 (July 16,
1997). The CIT affirmed various aspects of this long-standing practice.
See E.I. Dupont de Nemours v. United States, Court No. 96-11-02509,
Slip Op. 98-7 at 6-8 (CIT January 28, 1998) (affirming the Department's
use of the parent's consolidated statements, where evidence cited did
not overcome the presumption of corporate control); Gulf States Tube
Div. v. United States, Court No. 95-09-01125, Slip Op. 97-124 at 34-43
(CIT August 29, 1997) (the Department's calculation of interest expense
derived from borrowing costs incurred by a consolidated group was
reasonable where the parent company's majority ownership was prima
facie evidence of control over the subsidiary); New Minivans from
Japan, 57 FR 21946 (May 26, 1992) (Comment 18); Brass Sheet and Strip
from Canada; Final Results of Antidumping Duty Administrative Review,
55 FR 3141, 31418, (August 2, 1990) (Comment 22). In calculating
interest expense, therefore, we have used British Steel PLC's
consolidated profit and loss statement.
It is the Department's practice to allow a respondent to offset
(i.e., reduce) financial expenses with short-term interest income
earned from the general operations of the company. See e.g., Timken v.
United States, 852 F. Supp. 1040, 1048 (CIT 1994); see also Static
Random Access Memory Semiconductors From Taiwan: Final Determination of
Sales at Less Than Fair Value, 63 FR 8909, 8933 (February 23, 1998). In
calculating a company's cost of financing, we recognize that, in order
to maintain its operations and business activities, a company must
maintain a working capital reserve to meet its daily cash requirements
(e.g., payroll, suppliers, etc.) The Department further recognizes that
companies normally maintain this working capital reserve in interest-
bearing accounts. The Department, therefore, allows a company to offset
its financial expense with the short-term interest income earned on
these working capital accounts. Since British Steel PLC's financial
statements do not identify the nature of interest income on its profit
and loss statement, we have compared, as facts available, British Steel
PLC's liquid assets to its total assets and have assumed that the ratio
of liquid assets to total assets represents the ratio of short-term
interest income to total interest income because liquid assets by their
very nature are short-term assets. Therefore, we have used this
percentage of total interest income to offset interest expense. See
Final Analysis Memorandum.
Continuation of Suspension of Liquidation
In accordance with section 735(c)(1)(B) of the Tariff Act, we are
directing the Customs Service to continue to suspend liquidation of all
entries of subject merchandise from the United Kingdom that are
entered, or withdrawn from warehouse, for consumption on or after
January 4, 1999 (the date of publication of the Preliminary
Determination in the Federal Register). The Customs Service shall
continue to require a cash deposit or the posting of a bond equal to
the estimated amount by which the normal value exceeds the U.S. price
as shown below. These suspension of liquidation instructions will
remain in effect until further notice. The weighted-average dumping
margins are as follows:
------------------------------------------------------------------------
Weighted-
Exporter/manufacturer average margin
(percent)
------------------------------------------------------------------------
Avesta Sheffield........................................ 14.84
All Others.............................................. 14.84
------------------------------------------------------------------------
International Trade Commission Notification
In accordance with section 735(d) of the Tariff Act, we have
notified the International Trade Commission (the Commission) of our
determination. As our final determination is affirmative, the
Commission will determine within 45 days after our final determination
whether imports of stainless steel sheet and strip in coils are
materially injuring, or threaten material injury to, the U.S. industry.
If the Commission determines that material injury, or threat thereof,
does not exist, the proceeding will be terminated and all securities
posted will be refunded or canceled. If the Commission determines that
such injury does exist, the Department will issue an antidumping duty
order directing Customs officials to assess antidumping duties on all
imports of the subject merchandise entered, or withdrawn from
warehouse, for consumption on or after the effective date of the
suspension of liquidation.
This determination is issued and published in accordance with
sections 735(d) and 777(i)(1) of the Tariff Act.
Dated: May 19, 1999.
Richard W. Moreland,
Acting Assistant Secretary for Import Administration.
[FR Doc. 99-13675 Filed 6-7-99; 8:45 am]
BILLING CODE 3510-DS-P
