[Federal Register Volume 64, Number 109 (Tuesday, June 8, 1999)]
[Notices]
[Pages 30820-30843]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-13679]
[[Page 30820]]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-427-814]
Notice of Final Determination of Sales at Less Than Fair Value:
Stainless Steel Sheet and Strip in Coils From France
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: June 8, 1999.
FOR FURTHER INFORMATION CONTACT: Robert Bolling or Douglas Campau,
Import Administration, International Trade Administration, U.S.
Department of Commerce, 14th Street and Constitution Avenue, NW,
Washington, DC 20230; telephone: (202) 482-3793.
The Applicable Statute
Unless otherwise indicated, all citations to the Tariff Act of
1930, as amended (``the Act''), are references to the provisions
effective January 1, 1995, the effective date of the amendments made to
the Act by the Uruguay Round Agreements Act (``URAA''). In addition,
unless otherwise indicated, all citations to the Department of Commerce
(``Department'') regulations are to the regulations at 19 CFR part 351,
adopted at 62 FR 27296 (May 19, 1997).
Final Determination
We determine that stainless steel sheet and strip in coils
(``SSSS'') from France are being sold in the United States at less than
fair value (``LTFV''), as provided in section 735 of the Act. The
estimated margins are shown in the ``Continuation of Suspension of
Liquidation'' section of this notice.
Case History
Since the preliminary determination, issued on December 17, 1998
(Notice of Preliminary Determination of Sales at Less Than Fair Value:
Stainless Steel Sheet and Strip in Coils from France, 64 FR 130
(January 4, 1999) (``Preliminary Determination''), the following events
have occurred:
On January 12, 1999, we issued a supplemental questionnaire to
Usinor for sections A, B, and C of our initial questionnaire. On
January 26, 1999, Usinor's submitted its response to the Department's
supplemental questionnaire. On January 15, and January 21, 1999, we
issued our cost and sales verification outlines, respectively.
On January 8, 1999, petitioners submitted comments on the planned
Usinor sales and cost verifications. During February and March 1999, we
conducted sales and cost verifications of Usinor and its affiliates'
responses to the antidumping questionnaires in France and the United
States. Between March 30, and April 7, 1999, we issued our sales and
cost verification reports for Usinor and its affiliates (i.e., Ugine,
Ugine Service, Bernier, Uginox, Hague, and Edgcomb). On April 15, 1999,
respondent submitted revised sales and cost databases. Petitioners and
respondent submitted case briefs on April 14, 1999, and rebuttal briefs
on April 21, 1999. On April 28, 1999, the Department held a public
hearing.
Scope of 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
[[Page 30821]]
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 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.
Transactions Investigated
For its home market and U.S. sales, Usinor reported the date of
invoice as the date of sale. See 19 CFR Sec. 351.401(i). As explained
in response to Comment 10, below, for the final determination, we have
continued to rely upon Usinor's invoice dates in the home and U.S.
markets as the date of sale.
Product Comparisons
In accordance with section 771(16) of the Act, we considered all
products produced by Usinor covered by the description in the Scope of
Investigation section, above, and sold in France during the POI, to be
foreign like products for purposes of determining appropriate product
comparisons to U.S. sales. We relied on nine characteristics to match
U.S. sales of subject merchandise to comparison sales of the foreign
like product (listed in order of preference): grade, hot/cold rolled,
gauge, finish, metallic coating, non-metallic coating, width, tempered/
tensile strength, and edge trim. These characteristics have been
weighted by the Department where appropriate. The Department's
questionnaire authorized respondent to make distinctions (sub-codes)
within some of these characteristics, but not within others. For
certain product characteristics (i.e., finish and coating) Usinor
reported additional sub-codes which were specifically permitted by the
Department's questionnaire. However, Usinor also reported additional
sub-codes in its hot/cold rolled, and tempered product characteristic
categories. These are characteristics for which the Department's
questionnaire did not explicitly permit sub-codes. However, for
purposes of the preliminary determination, the Department included
these additional codes. See Analysis Memo from Doug Campau to The File,
dated December 17, 1998. At verification, we reviewed respondent's
claims for the additional sub-codes. See Home Market
[[Page 30822]]
Verification Report of Usinor/Ugine at pages 6-9, dated April 6, 1999.
In light of our findings at verification, we conclude that use of these
additional codes is appropriate, and have included them in the
Department's product matching methodology.
Also, respondent commented on the Department's finish matching
methodology. As explained in response to Comment 4, below, for this
final determination we have not changed our finish matching
methodology.
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
discussed above, which were listed in the August 3, 1998 antidumping
questionnaire and the reporting instructions.
Changes Since the Preliminary Determination
On February 23, 1999, the Department published the amended
preliminary determination, incorporating corrected scope language. See
Notice of 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).
Based on our analysis of comments received, we have made certain
corrections to our preliminary determination. We have corrected certain
programming and clerical errors in our preliminary determination, where
applicable, and they are discussed in the relevant comment sections
below.
Also, the Department corrected the model match and margin programs
in calculating packing costs for use in the cost test and constructed
value analysis. In the Preliminary Determination, the Department
inadvertently used a sale-specific packing cost for use in the
calculation of interest expenses in both the cost test and constructed
value analysis. For the final determination, the Department has revised
this section of the program to calculated a weighted-average packing
cost per CONNUM for use in these calculations. For a more complete
analysis, please see the Final Determination Analysis Memo, dated May
19, 1999.
Fair Value Comparisons
To determine whether sales of SSSS from France to the United States
were made at LTFV, we compared constructed export price (``CEP'') to
the Normal Value (``NV''), as described in the ``Constructed Export
Price'' and ``Normal Value'' sections of this notice, below. In
accordance with section 777A(d)(1)(A)(i) of the Act, we calculated
weighted-average CEP sales for comparison to weighted-average NV sales
or constructed value (CV) sales.
Constructed Export Price
We calculated CEP in accordance with section 772(b) of the Act
because the first sale to an unaffiliated purchaser took place through
an affiliated purchaser after the subject merchandise was imported into
the United States.
We based CEP on the packed ex-warehouse or delivered prices to
unaffiliated purchasers in the United States. We identified the
starting price by accounting for billing adjustments to the invoice
price. See 19 CFR Sec. 351.401(c). Where appropriate, we made
deductions from the starting price for billing adjustments, credit,
warranty expenses, and commissions. We also made deductions for the
following movement expenses, where appropriate, in accordance with
section 772(c)(2)(A) of the Act: inland freight from plant to
distribution warehouse, inland freight from plant/warehouse to port of
exportation, international freight, marine insurance, U.S. inland
freight from port to warehouse, U.S. inland freight from warehouse to
the unaffiliated customer, U.S. inland insurance, U.S. warehouse
expenses, and U.S. Customs duties. In accordance with section 772(d)(1)
of the Act, we deducted selling expenses associated with economic
activities occurring in the United States, including direct selling
expenses, inventory carrying costs, and other indirect selling
expenses. We recalculated credit expenses for those sales with missing
payment dates. For U.S. sales with missing payment dates, the
Department set the date of payment to the final date of the U.S. sales
verification. Additionally, for international freight by affiliated
freight forwarders, we used the average of the reported rates for
unaffiliated freight forwarders. See Comment 6.
For products that were further manufactured after importation, we
adjusted for all costs of further manufacturing in the United States in
accordance with section 772(d)(2) of the Act. We relied on Usinor's
submitted further manufacturing costs, except where the Department
determined that the submitted further manufacturing costs could not be
relied upon.
Specifically, we made the following adjustments:
1. We adjusted Hague's further manufacturing costs by applying the
percentage difference between the reported values and the subject
merchandise specific value. We address this issue further in our
response to comment 30 in the ``Interested Party Comments'' section of
the notice. See Final Cost Analysis Memorandum at 4.
2. Because Edgcomb was unable to report further manufacturing costs
in the manner required by the Department, we had to resort to facts
otherwise available. Where we did find that Edgcomb's reported costs
were reported correctly (i.e., SG&A and financial expense
calculations), we used those costs. We also used certain yield loss and
processing costs data verified at Edgcomb. However, for all other
costs, as facts otherwise available, we have utilized the manufacturing
costs reported by Usinor's other affiliated further manufacturer,
Hague. Specifically, we developed process string specific costs to
adjust Edgcomb's reported single weighted-average material and
conversion costs. We address this issue further in our response to
comment 25 in the ``Interested Party Comments'' section of the notice.
Also, See Final Cost Analysis Memorandum at 5.
3. We also applied Usinor's adjusted financial expense factor to
the further manufacturing costs reported by Hague.
We deducted the profit allocated to expenses deducted under section
772(d)(1) and (2) in accordance with sections 772(d)(3) and 772(f) of
the Act. In accordance with section 772(f) of the Act, we computed
profit based on total revenues realized on sales in both the U.S. and
home markets, less all expenses associated with those sales. We then
allocated profit to expenses incurred with respect to U.S. economic
activity (including further manufacturing costs), based on the ratio of
total U.S. expenses to total expenses for both the U.S. and home
market.
Normal Value
After testing home market viability, as discussed below, we
calculated NV as noted in the ``Price-to-Price Comparisons'' and
``Price-to-CV Comparisons'' sections of this notice.
1. Home Market Viability
As discussed in the preliminary determination, we determined that
the home market was viable. See Preliminary Determination at 134. The
parties did not contest the viability of the home market. Consequently,
for the final determination, we have based NV on home market sales
wherever possible.
[[Page 30823]]
2. Cost of Production Analysis
In accordance with section 773(b)(3) of the Act, we calculated a
weighted-average COP based on the sum of Usinor's cost of materials and
fabrication for the foreign like product, plus amounts for general and
administrative expenses, interest expenses, and packing costs. We
relied on the COP data submitted by Usinor in its original and
supplemental cost questionnaire responses, except in the following
specific instances:
1. Usinor valued hot-rolling services proved by affiliated parties
at the transfer price. In accordance with section 773(f)(2) of the Act,
we compared the reported transfer price for this hot-rolling service to
a reported market price provided by the affiliate to unaffiliated
parties. We found that the transfer price was below the market price.
Thus, for the final determination, we have increased Usinor's
affiliated hot rolling cost to reflect the market value paid by non-
affiliates in accordance with section 773(f)(2). We address this issue
further in our response to comment 19 in the ``Interested Party
Comments'' section of the notice. Also, See Final Cost Analysis
Memorandum at 1.
2. Usinor did not include profit sharing expense and certain other
expenses reported on the company's income statement in the calculation
of COP and CV. We included these expenses in the calculation of the
revised G&A expense rate. We address these items further in our
response to comments 21 and 22 in the ``Interested Party Comments''
section of the notice. Also, See Final Cost Analysis Memorandum at 2.
3. We increased Usinor's reported net interest expense by the ratio
of Usinor Holding's (a member of the Usinor Group generating most of
the Group's financial expenses and revenues) gross and net financial
expenses. We address these issues further in our response to comments
23 and 32 in the ``Interested Party Comments'' section of the notice.
Also, See Final Cost Analysis Memorandum at 3.
We conducted our sales below cost test in the same manner as that
described in our Preliminary Determination at 134-135. As with our
preliminary determination, we found that for certain models of SSSS,
more than 20 percent of Usinor's home market sales were at prices less
than the COP within an extended period of time, and were not at prices
that would provide for recovery of cost. We therefore disregarded the
below-cost sales and used the remaining above cost sales as the basis
for determining NV, in accordance with section 773(b)(1) of the Act.
3. Calculation of Constructed Value
In accordance with section 773(e)(1) of the Act, we calculated CV
based on the sum of Usinor's cost of materials, fabrication, general
and administrative (G&A), U.S. packing costs, direct and indirect
selling expenses, interest expenses and profit. In accordance with
section 773(e)(2)(A) of the Act, we based SG&A expenses and profit on
the amounts incurred and realized by Usinor in connection with the
production and sale of the foreign like product in the ordinary course
of trade, for consumption in the foreign country. For selling expenses,
we used the actual weighted-average home market direct and indirect
selling expenses. We relied on the submitted CVs, except as noted above
in the Cost of Production Analysis section.
Price-to-Price Comparisons
For those product comparisons for which there were sales at prices
above the COP, we based NV on prices to home market customers. We made
adjustments, where appropriate, for physical differences in the
merchandise in accordance with section 773(a)(6)(C)(ii) of the Act. In
accordance with section 773(a)(6), we deducted home market packing
costs and added U.S. packing costs.
We calculated NV based on prices to unaffiliated home market
customers. Where appropriate, we deducted credit expenses, warranty
expenses, inland freight, inland insurance, and warehousing expense. We
also adjusted the starting price for price adjustments such as
discounts, rebates and freight revenue.
We recalculated credit expenses for those sales with missing
payment dates. For home market sales with missing payment dates, the
Department set the date of payment as the last day of the home market
sales verification.
For reasons discussed below in the Level of Trade section, we
allowed a CEP offset for comparisons made at different levels of trade.
To calculate the CEP offset, we deducted the home market indirect
selling expenses from normal value for home market sales that were
compared to U.S. CEP sales. We limited the home market indirect selling
expense deduction by the amount of the indirect selling expenses
deducted in calculating the CEP as required under section 772(d)(1)(D)
of the Act.
Price-to-CV Comparisons
In accordance with section 773(a)(4) of the Act, we based NV on CV
if we were unable to find a home market match of identical or similar
merchandise. Where appropriate, we made adjustments to CV in accordance
with section 773(a)(8) of the Act. We deducted from CV the weighted-
average home market direct selling expenses and allowed a CEP offset
adjustment (see Level of Trade section, below).
Arm's-Length Sales
Usinor reported that it made sales in the home market to affiliated
end users. Sales to affiliated customers in the home market not made at
arm's-length prices are excluded from our analysis under 19 CFR
Sec. 351.403(c). To test whether these sales were made at arm's length,
we compared the starting prices of sales to affiliated and unaffiliated
customers net of all movement charges, direct selling expenses,
discounts and packing. Where 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 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).
Level of Trade
In accordance with section 773(a)(1)(B) of the Act, to the extent
practicable, we determine NV based on sales in the comparison market at
the same level of trade (LOT) as the EP or CEP transaction. The NV LOT
is that of the starting-price sales in the comparison market, or when
NV is based on CV, that of the sales from which we derive selling,
general and administrative (SG&A) expenses and profit. For EP, the U.S.
LOT is also the level of the starting-price sale, which is usually from
exporter to importer. For CEP, it is the level of the constructed sale
from the exporter to the importer.
To determine whether NV sales are at a different LOT than EP or
CEP, we examine stages in the marketing process and selling functions
along the chain of distribution between the producer and the
unaffiliated customer. If the comparison market sales are at a
different LOT, and the difference affects price comparability as
manifested in a pattern of consistent price differences between the
sales on which NV is based and comparison market sales at the LOT of
the export transaction, we make an LOT adjustment under section
773(a)(7)(A) of the Act. Finally, for CEP
[[Page 30824]]
sales, if the NV level is more remote from the factory than the CEP
level, but the data available do not provide an appropriate basis for
determining whether the difference in levels between NV and CEP affects
price comparability, we adjust NV under section 773(a)(7)(B) of the Act
(the CEP offset provision). See Notice of Final Determination of Sales
at Less Than Fair Value: Certain Cut-to-Length Carbon Steel Plate from
South Africa, 62 FR 61731, 61732 (November 19, 1997).
In reviewing the selling functions reported by the respondent, we
examined all types of selling functions and activities reported in
respondent's questionnaire response on LOT. In analyzing whether
separate LOTs existed in this investigation, we found that no single
selling function was sufficient to warrant a separate LOT in the home
market.
We determined that Usinor sold merchandise at two LOTs in the home
market during the POI. One level of trade involved sales made through
two channels: (1) Sales by Usinor's Ugine division, directly to
unaffiliated service centers or end users, as well as arm's-length
sales by Usinor's Ugine division, directly to affiliated service
center/reseller Ugine Service (Channel 1); and (2) sales made by
Usinor's Ugine division, with the assistance of Ugine-Service in its
capacity as sales agent, to unaffiliated service centers or end users
(Channel 2). The second level of trade involved sales from Ugine to
Usinor's affiliate Bernier, together with subsequent resales by Bernier
to unaffiliated end users (Channel 3). From our analysis of the
marketing process for these sales, we determined that sales through
Channel 3 were made at a more remote marketing stage than that for
sales through Channels 1 or 2. See Memorandum from Doug Campau to
Roland MacDonald, dated December 12, 1998, on file in Import
Administration's Central Records Unit, Room B-099, U.S. Department of
Commerce, 14th & Constitution Avenue, N.W., Washington, D.C. We also
found significant distinctions in selling activities and associated
expenses between the sales through channel 3 and those through channel
1 or 2. Based on these differences, we concluded that two LOTs existed
in the home market.
In order to determine whether separate LOTs actually existed
between the U.S. and home market, we reviewed the selling activities
associated with each channel of distribution. Usinor only reported CEP
sales in the U.S. market. Because all of Usinor's CEP sales in the U.S.
market were made through Uginox, there was only one level of trade. For
these CEP sales, we determined that fewer and different selling
functions were performed for CEP sales to Uginox than for sales at
either of the home market LOTs. In addition, we found that the home
market sales were at a more advanced stage of distribution (to service
centers or end-users) compared to the CEP sales (to the affiliated
distributor).
We examined whether a LOT adjustment was appropriate. The
Department makes this adjustment when it is demonstrated that a
difference in LOTs affects price comparability. However, where the
available data do not provide an appropriate basis upon which to
determine a LOT adjustment, and where the NV is established at a LOT
that is at a more advanced stage of distribution than the LOT of the
CEP transactions, we adjust NV under section 773(a)(7)(B) of the Act
(the CEP offset provision). We were unable to quantify the LOT
adjustment in accordance with section 773(a)(7)(A) of the Act, as we
found that neither of the LOTs in the home market matched the LOT of
the CEP transactions. Because of this, we did not calculate a LOT
adjustment. Instead, a CEP offset was applied to the NV-CEP
comparisons. See Memorandum from Doug Campau to Roland MacDonald, dated
December 12, 1998, on file in Import Administration's Central Records
Unit, Room B-099, U.S. Department of Commerce, 14th & Constitution
Avenue, N.W., Washington, D.C.
We applied the aforementioned criteria in our preliminary
determination. See Preliminary Determination at 135. For the final
determination, we continue to find that respondent has two levels of
trade in the home market and one level of trade in the U.S.
Use of Facts Available
In accordance with section 776 of the Act, we have determined that
the use of facts available is appropriate for certain portions of our
analysis of Usinor's data. For a discussion of our application of facts
available, see Comment 25.
Currency Conversion
We made currency conversions into U.S. dollars, in accordance with
section 773A of the Act, based on the exchange rates in effect on the
dates of the U.S. sales as certified by the Federal Reserve Bank.
Verification
As provided in section 782(i) of the Act, we verified the
information submitted by Usinor for use in our final determination. We
used standard verification procedures, including examination of
relevant accounting and production records and original source
documents provided by Usinor.
Interested Party Comments
Home Market and U.S. Sales
Comment 1: Use of Home Market Downstream Resales in Determining Normal
Value
Respondent argues the Department should not utilize the home market
downstream resales of Bernier and Ugine Service for comparison purposes
in the final determination. According to respondent, in deciding
whether downstream resales need to be reported, the Department should
consider the nature of the merchandise sold to and by the affiliate,
the volume of sales to the affiliate, the levels of trade involved, and
whether sales to affiliates were made at arm's length. See Preamble, 62
FR at 27356. Respondent argues that these factors militate against
using Bernier's and Ugine Service's downstream resales. According to
respondent, Bernier's and Ugine Service's downstream resales of subject
merchandise together account for approximately five percent of total
home market sales. Respondent argues that Ugine's home market sales are
far more representative for margin determination purposes, being at a
closer level of trade to Ugine's CEP sales to Uginox. Furthermore,
according to respondent, the Department could have readily included
Ugine's sales to Ugine Service, rather than downstream resales.
According to respondent, Ugine's sales to Ugine Service pass the
Department's arm's-length test, and including these sales rather than
downstream sales would have captured ninety-nine percent of the total
home market sales. Respondent argues that given the significant
coverage provided by the Ugine sales, there is no way the Department's
margin calculation would be compromised by the absence of Bernier's and
Ugine Service's resales. Preamble, 62 FR at 27356.
Respondent points out that the Department has determined and
verified that all sales of subject merchandise in France were made at
different levels of trade than sales in the United States. All sales in
the United States were CEP sales made through Ugine's super-distributor
Uginox, whereas Ugine's home market sales were made to end users and
resellers. Thus, according to respondent, all home market sales were
made at levels of distribution more advanced than that of Ugine's sales
to Uginox. This difference is all the more
[[Page 30825]]
significant for downstream resales by Bernier and Ugine Service, which,
according to respondent, involve a significant extra layer of selling
activities and expenses, and which are far more remote from the factory
than Ugine's CEP sales to Uginox.
Respondent argues that because the average U.S. CEP sale was--
according to respondent--more than eleven times the size of the average
home market downstream resale, no fair comparison can be made between
Ugine's CEP sales to Uginox and downstream home market sales of Bernier
and Ugine Service. According to respondent, the law requires that a
fair comparison be made between CEP and normal value, and that the
Department--to the extent practicable--establish normal value using
sales at the same level of trade as the constructed export price. See
section 773(a) of the Act. Respondent argues that current law gives the
Department ample authority to favor the level of trade proximity of
sales by Ugine over the more remote downstream sales by Bernier and
Ugine Service in making sales comparisons. In order to make a fair
comparison under current law, respondent believes the Department's
matching should attempt to find satisfactory product comparisons at the
nearest level of trade (i.e., involving sales by Ugine), rather than
seeking identical matches at more remote levels of trade. Respondent
argues that a comparison of downstream resales of merchandise of
Bernier and Ugine Service can not be satisfactorily made because they
are at remote, different levels of trade. Thus, respondent believes the
Department's comparisons should use Ugine's sales of comparable
merchandise. Respondent argues that Ugine's sales are the only sales of
merchandise that may be reasonably compared with Ugine's CEP sales to
Uginox.
Respondent argues that significant differences between the level of
trade of Bernier and Ugine Service sales and the level of trade of
sales from Ugine to Uginox are not addressed by the statute's level of
trade or CEP offset provisions. Specifically, respondent believes the
CEP offset applied in the preliminary determination did not address the
higher costs for slitting and processing performed by the downstream
resellers, nor the costs of holding coils in inventory prior to such
processing. Respondent also believes the CEP offset failed to take into
account the pricing/profit structure of the downstream resellers--which
reflects the far lower quantities sold, the customers involved, and the
risk associated with carrying inventory of finished product.
To conclude, respondent argues that the Department's consideration
of downstream home market sales was distortive and did not result in
fair comparisons. Consequently, respondent believes the Department
should base normal value on Ugine sales, rather than home market
downstream sales, for comparison purposes.
According to petitioners, respondent's request that the Department
disregard downstream sales of Bernier and Ugine Service has no basis in
law, is contrary to the facts of the case, and would result in a less
accurate calculation of normal value. Petitioners argue that Ugine
provides no argument or evidence to dispute the memoranda prepared
during the preliminary phase of this proceeding that detailed the
Department's analysis and rejection of Ugine's request when it was
initially made.
Petitioners also argue the Department should dismiss respondent's
argument that inclusion of the aforementioned downstream sales would
distort the margin calculation by matching sales at widely varying
levels of trade. According to petitioners, the statute provides for a
level of trade adjustment, in appropriate circumstances, and for a CEP
offset where a level of trade adjustment can not be calculated.
According to petitioners, the very fact that the adjustment and offset
exist is testament to the fact that the statute permits matching across
levels of trade, contrary to respondent's argument.
Petitioners also argue that the Department captured all of the
selling expenses the statute directs it to capture in calculating CEP
offset. Petitioners point out that in calculating CEP offset, the
Department is required to deduct only the amount of indirect selling
expenses incurred in the country in which normal value is determined on
sales of foreign like product, but not more than the amount of such
expenses for which a deduction is made. Thus, petitioners argue that
the costs respondent claims the Department should deduct--namely costs
for slitting and processing subject merchandise in very small
quantities, costs for holding coils in inventory for such processing,
and costs relating to the pricing/profit structure of the downstream
resellers--actually have no bearing on the Department's CEP offset
calculation because they are not indirect selling expenses.
Department's Position: We agree with respondent that the downstream
sales of Ugine Service should be disregarded in the final
determination. According to 19 CFR Sec. 351.403(c), if an exporter or
producer sells the foreign like product to affiliated parties, the
Department may calculate normal value based on such sales if it
determines that the net prices for such sales are comparable to the
prices at which the exporter or producer sold the foreign like product
to persons not affiliated with the seller. It is the Department's
normal practice to run an arm's-length analysis on home market sales
made by a producer to an affiliated company to determine whether the
prices for such sales are comparable to prices charged to unaffiliated
parties. If the Department determines that prices for sales to the
affiliated company were sufficiently comparable to prices for sales to
unaffiliated parties, then the Department need not use downstream sales
from the affiliated company in its subsequent calculations.
Prior to making its Preliminary Determination, the Department ran
an arm's-length analysis on Ugine's home market sales to affiliated
resellers Ugine Service and Bernier. This analysis led the Department
to conclude that such sales were not made on an arm's-length basis.
Consequently, downstream sales from Ugine Service and Bernier to
unaffiliated customers were used in all calculations for the
Preliminary Determination. In preparing to run its analysis for the
final determination, the Department discovered that the data tape used
to run the arm's-length analysis for the Preliminary Determination
contained incomplete data on the sales from Ugine to Ugine Service and
Bernier. This tape had been submitted to the Department on December 1,
1998. The Department subsequently reran its arm's length analysis using
a data tape containing complete data on the sales from Ugine to Ugine
Service and Bernier. This tape had been submitted to the Department on
November 16, 1999. In rerunning the arm's length analysis with the
November tape, the Department found that Ugine's sales to Ugine Service
were in fact made on an arm's length basis. Thus, for all affected
calculations made for the final determination, the Department used the
sales from Ugine to Ugine Service. The Department did not use the
downstream sales from Ugine Service to unaffiliated customers.
Conversely, the Department has continued to use the downstream sales of
Bernier because the sales from Ugine to Bernier failed the arm's length
analysis for the final determination.
Section 773(a)(1)(B)(i) states that ``to the extent practicable'',
the comparison will be made at the same level of trade. Thus, where it
is not practicable--e.g., where there is no sale at the same LOT--
comparing across LOTs is
[[Page 30826]]
reasonable and permissible. Also, as Petitioners note, the very
existence of the level of trade adjustment and CEP offset is testament
to the fact that the statute permits matching across levels of trade,
and that comparisons involving downstream resales by Bernier can be
fairly and satisfactorily made. As stated in the Preliminary
Determination, to determine whether NV sales are at a different LOT
than EP or CEP, we examine stages in the marketing process and selling
functions along the chain of distribution between the producer and the
unaffiliated customer. If the comparison market sales are at a
different LOT, and the difference affects price comparability as
manifested in a pattern of consistent price differences between the
sales on which NV is based and comparison market sales at the LOT of
the export transaction, we make an LOT adjustment under section
773(a)(7)(A) of the Act. For CEP sales, if the NV level is more remote
from the factory than the CEP level and there is no basis for
determining whether the difference in levels between NV and CEP affects
price comparability, we adjust NV under section 773(a)(7)(B) of the Act
(the CEP offset provision). See Certain Welded Carbon Steel Standard
Pipes and Tubes from India: Preliminary Results of New Shipper
Antidumping Duty Administrative Review, 62 FR 23760, 23761 (May 1,
1997). For the final margin determination, we again made the
appropriate CEP offset. Consequently, we disagree with Usinor that it
is inappropriate for comparison purposes because they may be at a
different level of trade.
We also agree with petitioners that all appropriate selling
expenses were captured in the Department's CEP offset calculation. To
the extent Usinor discusses expenses in the Bernier sales not accounted
for in the CEP offset, these are accounted for elsewhere in the margin
program. For example, any additional slitting and processing performed
by Bernier is accounted for in the difference in merchandise
adjustment, where appropriate, under section 773(a)(6)(C)(2). The cost
of holding coils in inventory prior to further processing is included
in inventory carrying cost calculations. Therefore, for the final
determination, the Department has continued to use Bernier's downstream
sales.
Comment 2: Inclusion of Resales by Edgcomb in Determining CEP
According to respondent's submissions, all of Ugine's U.S. sales of
subject merchandise were made via Uginox, a wholly-owned and U.S.-based
subsidiary of Usinor. Uginox, in turn, sells subject merchandise to
Edgcomb, a downstream processor and reseller. Respondent argues that,
although Edgcomb is affiliated with Usinor pursuant to section 771(33)
of the Act, Edgcomb should not be regarded as affiliated with Uginox.
Respondent states that Uginox and Edgcomb are not under common control
within the meaning of section 771(33)(F) of the Act, and that neither
Uginox nor Edgcomb controls the other within the meaning of section
771(33)(G) of the Act. Furthermore, respondent argues that neither
Usinor nor Uginox exercises sufficient control over Edgcomb to compel
Edgcomb to provide timely and accurate responses to the Department's
requests for information. In light of this, respondent believes the
Department should reverse its finding that Edgcomb is an affiliated
person. Respondent also believes the Department should utilize Uginox's
sales to Edgcomb for comparison purposes instead of Edgcomb's sales to
its downstream customers.
Respondent argues that even though Uginox and Edgcomb are each
affiliated with Usinor, such affiliations do not in turn mean that
Uginox and Edgcomb are necessarily affiliated with each other under
section 771(33)(F) of the Act. According to respondent, to be so
affiliated, Uginox and Edgcomb would have to be under common control.
Respondent argues that Uginox and Edgcomb are not under common control.
Respondent points out that Usinor is limited to three of ten seats on
the Board of Directors of Macsteel, Edgcomb's parent company.
Respondent further argues that Uginox and Edgcomb are not
affiliated pursuant to section 771(33)(G) of the Act, which provides
that any person who controls any other person shall be considered
affiliated with that person. According to respondent, the statute
describes control as existing where one person is legally or
operationally in a position to exercise restraint or direction over
another person. Respondent argues that no such control exists between
Uginox and Edgcomb. According to Respondent, Uginox and Edgcomb are not
part of the same corporate family group, do not have intertwined
computer systems, have an insignificant supply-purchase relationship,
and negotiate prices on an arm's-length basis. Moreover, according to
respondent, Uginox has absolutely no say in Edgcomb's business
decisions, including sources of supply, customers to whom Edgcomb
sells, and prices which Edgcomb charges. Consequently, respondent
believes Edgcomb and Uginox should not be found affiliated under
section 771(33)(G) of the Act.
Respondent further argues that exclusion of Edgcomb's resales would
not distort the margin calculation because Uginox's sales to Edgcomb
were made at arm's-length prices, and because there is nothing else to
suggest that Edgcomb's downstream sales were distortive such that they
must be included in the Department's analysis. Moreover, according to
respondent, Hague's downstream sales accounted for a much larger
percentage of Uginox's sales than those of Edgcomb. Respondent also
asserts that the sales profiles of Hague and Edgcomb closely resemble
one another, such that the absence of Edgcomb statistics would not
meaningfully affect the Department's margin calculation--such
calculation being based on the weighted average price of each product
sold in the U.S. for the entire POI. To conclude, respondent argues the
Department should include Uginox's sales to Edgcomb and should exclude
Edgcomb's resales to its downstream customers in its margin
calculation.
Petitioners cite section 772(b) of the Act, which defines CEP as
the price at which subject merchandise is first sold to a purchaser not
affiliated with the producer or exporter. Petitioners also point out
that Usinor has admitted that Edgcomb and Usinor are affiliated. Thus,
petitioners argue, the first purchasers not affiliated with Usinor
within this particular sales channel would be Edgcomb's customers.
According to petitioners, the record establishes and the Department
has determined that Edgcomb and Uginox are affiliated through the
common control of Usinor under section 771(33)(F) of the Act.
Petitioners believe respondent's argument that the Department should
reverse its determination that Edgcomb and Uginox are affiliated is
contrary to the Department's regulations and has no support on the
record.
According to petitioners, for purposes of affiliation, control is
defined as the quality of being legally or operationally in a position
to exercise restraint or control over a person. See section 771(33) of
the Act. Petitioners do not believe this definition requires a finding
of actual control, but only the capacity to exercise control. Ferro
Union Inc. v. United States, Slip Op. 99-27 at 32 (Ct. Int'l Trade Mar.
23, 1999). According to petitioners, the Department has emphasized that
the essence of being legally or operationally in a position to exercise
restraint and direction is having the potential to impact decisions
concerning production, pricing or cost.
[[Page 30827]]
See Antidumping Duties; Countervailing Duties: Final Rule, 62 FR 27297
(May 19, 1997). Petitioners argue that the application of this standard
to the facts of this case demonstrates control within the meaning of
the statute. Petitioners point out that for the first half of the POI,
Usinor owned 49 percent of Edgcomb through its wholly-owned subsidiary
Sollac; that during the second half of the POI, Usinor indirectly owned
28.5 percent of Edgcomb; that Usinor holds three of ten seats on the
board of directors during the POI; and that Edgcomb and Usinor (through
Uginox) have a customer/supplier relationship. By virtue of these
facts, petitioners believe Usinor is in a position to exercise
restraint or direction over Edgcomb. Further, Usinor has the potential
to impact Edgcomb's decisions concerning production, pricing or cost,
and thus Usinor has control over Edgcomb during the POI within the
meaning of section 771(33) of the Act.
Petitioner argues that the fact that Usinor's ownership interest
was a minority interest and that Usinor did not have majority
representation on the board of directors does not prevent the finding
of control. According to petitioners, minority and majority owners can
control an entity at the same time, singly or as a group. Ferro Union,
Slip Op. 99-27 at 32. Petitioners also argue that majority stock
ownership is not a prerequisite for a finding of control according to
the Uruguay Round Agreement Acts, Statement of Administrative Action,
reprinted in H.R. Doc. No. 316, 103d Cong., 2d Sess. At 838 (1994).
Department's Position: We agree with petitioners that it is
appropriate to use resales by Edgcomb in the final margin calculations.
According to section 771(33)(E) of the Act, as amended by the URAA,
``any person directly or indirectly owning, controlling, or holding
with power to vote, five percent or more of the outstanding voting
stock or shares of any organization and such organization'' shall be
considered affiliated. According to section 771(33)(F) of the Act, as
amended by the URAA, ``two or more persons directly or indirectly
controlling, controlled by, or under common control with, any person''
shall be considered affiliated. For purposes of section 771(33), ``a
person shall be considered to control another person if the person is
legally or operationally in a position to exercise restraint or
direction over the other person.''
Respondent acknowledges that Edgcomb and Usinor are affiliated
pursuant to section 771(33)(E). See Usinor Case Brief at p. 8, dated
April 14, 1999. We have also determined that Edgcomb and Uginox are
affiliated within the meaning of section 771(33)(F) of the Act because
they are both controlled by Usinor. The evidence also establishes that
Edgcomb was controlled by Usinor during the POI within the meaning of
section 771(33)(F) of the Act. As noted in its letter of August 31,
1998, Usinor indirectly owned 49% of Edgcomb, through its wholly-owned
affiliate Sollac, for the first half of the POI, and 28% during the
second half of the POI. The legislative history makes clear that the
statute does not require majority ownership for a finding of control.
Rather, the statutory definition of control encompasses both legal and
operational control. Indeed, the very purpose of adding the ``control''
provision to the Act was to establish that parties may be affiliated in
the absence of any ownership interest at all. See Statement of
Administrative Action (``SAA'') in H. Doc. 103-316 (vol. 1) 103d Cong.,
2d Sess., at. p. 838. A minority ownership interest, examined within
the context of the totality of the evidence, is a factor that the
Department considers in determining whether one party is operationally
in a position to control another. See Certain Cut-To-Length Carbon
Steel Plate From Brazil, 62 FR 18486, 18490 (April 15, 1997); and 19
CFR 351.102(b). In this case, during the POI, Edgcomb was also a
service center, processor, and reseller of subject merchandise produced
by Usinor. Furthermore, as confirmed during verification and
acknowledged in respondent's case brief, Usinor held at least three of
ten seats on Edgcomb's board of directors for the duration of the POI.
Finally, at verification we learned that Usinor dictated that Edgcomb
use a certain accounting procedure which Edgcomb acknowledged it would
not otherwise have used. These facts, juxtaposed with the substantial
ownership interest, lead us to conclude that Usinor is ``in a position
to exercise restraint or direction over'' Edgcomb.
Additionally, as noted in its letter of August 31, 1998, Usinor
wholly owns its U.S. affiliate Uginox. Because Usinor is the sole owner
of Uginox, it is ``in a position to exercise restraint or direction
over'' Uginox within the meaning of section 771(33) of the Act. Usinor
thus controls both Edgcomb and Uginox, fulfilling the common control
element required for finding affiliation between Edgcomb and Uginox
under section 771(33)(F) of the Act.
Because we find that Edgcomb and Uginox are affiliated under
section 771(33)(F), and have used the downstream resales of Edgcomb in
our calculations for the final determination instead of the sales from
Uginox to Edgcomb, it is not necessary to address the petitioners'
comment that under section 772(b) we must use the downstream resales of
Edgcomb because of Edgcomb's affiliation with Usinor, regardless of
Edgcomb's affiliation with Uginox.
Comment 3: Home Market Indirect Selling Expenses and CEP Offset
Respondent argues that the Department incorrectly excluded indirect
selling expenses associated with Ugine's Building Products Group (``The
Group'') in determining the CEP offset in the preliminary
determination. Respondent states that the Department made this
determination based on its conclusion such costs were ``not clearly
attributable to scope merchandise.'' 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
France, 64 FR 130 (January 4, 1999) (``Stainless Steel Sheet and Strip
from France''). Respondent notes that this exclusion resulted in an
understatement of its indirect selling expenses in the home market.
Further, respondent contends that contrary to the Department's
preliminary determination, the subject merchandise was in fact sold by
the Building Products Group and the Group's mission is to promote the
use of stainless steel products (including the subject merchandise) in
France. Thus, the Group's costs are properly included in Ugine's
indirect selling expenses and in the CEP offset. Furthermore,
respondent notes that in its questionnaire response, Ugine allocated
the expenses of the building products cost center in a reasonable
manner which was pursuant to the Department's questionnaire and prior
practice by allocating its home market indirect selling expenses
related to sales of all products over company-wide sales. See Notice of
Final Determination of Sales at Less Than Fair Value: Collated Roofing
Nails from Korea, 62 FR 51420, 51426 (October 1, 1997). Specifically,
respondent noted that these expenses support all sales of stainless
steel products in France, not just certain products. Therefore,
respondent stated that the Department should include the expenses of
Ugine's Building Products Group in its calculation of home market
indirect selling expenses and the CEP offset in the final
determination.
Petitioners acknowledge respondent's argument that Ugine Sales
Verification Exhibit UG-20 (Feb. 26, 1999) contains
[[Page 30828]]
proof that Ugine Building Products sold subject merchandise, and that,
consequently, total indirect selling expenses should not have been
reduced by indirect selling expenses related to Ugine's Building
Products Division. However, according to petitioners, the Ugine Sales
Verification Report provides no clear evidence or finding to support
Usinor's claim. Petitioners also point out that Usinor itself has
stated that the Building Products Group's mission is to promote the use
of stainless steel ``products''. According to petitioners, this
statement demonstrates that the activities to which the Building
Products Group's activities relate are not the promotion of subject
merchandise, but rather the promotion of products made from subject
merchandise. According to petitioners, such activities are not clearly
attributable to the subject merchandise. Thus, petitioners argue, the
Department properly excluded these indirect selling expenses from the
numerator of its preliminary calculation.
Department's Position: We agree with respondent. The Department has
examined the respondents' home market indirect selling expenses,
specifically Ugine Building Products (UBI) indirect selling expenses,
and found that these expenses have been properly reported. The
Department included the indirect selling expenses associated with UBI
in its calculation of Ugine's indirect selling expense ratio. We have
verified that Ugine has properly included UBI's expenses in its
numerator of indirect selling expenses. The Department has verified
that UBI was formed to develop new stainless steel products for the
French and European building construction industry and UBI's main
mission is improve Ugine's stainless steel sales to the building
construction industry, including sales of subject merchandise.
Additionally, we verified that UBI is in charge of promoting and
selling stainless steel products such as the subject merchandise to the
different markets as ``an attempt at trying to convince end-users
(contractors and architects) to try it, switching from their
traditional zinc-coated products or other non-steel products'' to
Ugine's stainless steel products. See Home Market Verification Report
of Usinor/Ugine, at page 38, April 6, 1999. Furthermore, the Department
has determined that the respondent has properly included an allocated
portion of UBI's selling expenses in Ugine's indirect selling expense
calculation. Therefore, we have determined that the respondent has
properly reported its home market indirect selling expenses.
Comment 4: Model Match Methodology/Group Products According to Finish
Overruns
Respondent argues that the Department's product matching
methodology with respect to weighting of the finish characteristics is
not supported by factual evidence. Respondent noted that the Department
never disclosed its rationale for weighting the individual
characteristics. Respondent contended that the Department disregards
the level of processing required to achieve the designated finish. For
example, the Department's methodology for matching finishes matches a
bright-annealed finish (i.e., requires no finishing beyond the rolling
mill), first to a product with a polish finish, then to a product that
requires more finishing. Thus, rather than matching to other products
without a finish step beyond rolling, the Department matches a product
with no finish steps to products with one or two finish steps. Hence,
respondent argued that the Department's weighting of finishes fails to
account for the differences in finishes with respect to cost, value and
difficulty in finishing. Therefore, respondent argues that the
Department should first match products with identical finishes, and if
no identical finish match is available, then the Department should
match to all other finishes requiring the same number of finish steps,
which would be reasonable and proper as well as supported by the
record.
Petitioners argued that the Department should reject Usinor's
proposed finish groupings because it fails to adequately distinguish
between the physical characteristics created by the finishing processes
as required by the statute, and consequently fails to retain important
cost distinctions among different products. According to petitioners,
section 771(16) of the Act requires that products be matched according
to identical and similar physical characteristics. For the subject
merchandise, petitioners argued that finish is an identifiable and
quantifiable difference in merchandise. Petitioners asserted that the
subcategories suggested by respondent, which, according to petitioners,
are based on a simple count of the number of finishes, do not recognize
the differences in the physical characteristics and costs of the
subject merchandise that are created by the finishing process.
According to petitioners, to treat products with different finishes as
identical would be to ignore the strict hierarchy of section 771(16) of
the Act, as well as the different costs of production of each product.
Department's Position: We disagree with respondent. In July 1998,
the Department solicited comments addressing potential model match
criteria. The comments respondent submitted on July 27 and 28, 1999
made no suggestion that the Department consider number of finish
processes involved in production of subject merchandise in establishing
its matching criteria. In fact, the suggested matching criteria for
finish that respondent submitted on July 27, 1998 contained only six
possible types of finish (including ``[n]one'').
In this case, level of processing is not determinative of what
constitutes a best match for model match purposes. Thus, whether a
product goes through three, two, one or no finishing processes is not
reflected in the model match program. This is because section 771(16)
requires that products be matched according to physical characteristics
rather than according to production processes, as suggested by
respondent. We agree with petitioners that the subcategories suggested
by respondent (based on number of finish steps) do not adequately
distinguish products based on the differences in physical
characteristics of subject merchandise produced via the different types
of finishing processes.
Finally, it is not possible--utilizing the information gathered at
verification or otherwise submitted to the record by Ugine--to
consistently determine how many finish processes a particular product
has gone through. Exhibit 8 of respondent's case brief indicates that a
majority of the finish types assigned model match codes by the
Department involve more than one finish process. However, as
illustrated in exhibits UG-3(f) and UG-5, the information verified and
on record is not detailed enough to allow the Department to conclude
that a particular quantity of subject merchandise was produced via a
particular number of finish processes. Therefore, even if we wished to
follow Ugine's suggestion, Ugine has not provided sufficient
information to enable us to utilize the number of finish process steps
in our model matching procedures.
Comment 5: Foreign Inland Freight
Petitioners stated that respondent failed to report inland freight
expenses between the Gueugnon plant and the Macon containerization
facility and did not provide an explanation why these expenses were not
reported. Thus, petitioners argued that the Department is required to
base this expense on facts
[[Page 30829]]
available in accordance with section 776(a) of the Act because
respondent made no effort to provide the actual freight information in
its pre-verification submission although its records permitted it to
report other foreign inland freight for other sales. Also, because
respondent did not provide any evidence that it acted to the best of
its ability to provide the missing information. Further, petitioners
contended that because respondent did not demonstrate that it acted to
the best of its ability, the Department should apply adverse facts
available. See section 776(b) of the Act. Petitioners argued that
adverse facts available are warranted because neither the information
itself or sufficient justification for its omission was provided, and
not applying adverse facts available would allow respondent to
selectively provide information and improperly influence the outcome of
the margin calculation, which would be contrary to the purpose of the
facts available provisions. See Olympic Adhesives, 899 F.2d at 1571.
Furthermore, petitioners stated that to apply the average
transportation cost for all reported sales, as suggested by respondent,
would not be appropriate, because it would potentially permit the
respondent to manipulate the database. Therefore, the correct facts
available rate to apply for these sales, is the highest reported
transportation rate paid by Ugine on any such sale. See Circular Welded
Non-Ally Steel Pipe and Tube from Mexico: Final Results of Antidumping
Duty Administrative Review, 63 FR 33041, 33046-47 (June 17, 1998).
Respondent argues that petitioners' contention that it failed to
report inland freight expenses between the Gueugnon plant and the Macon
containerization facility is erroneous. According to respondent, it
disclosed in its September 28, 1998 section C response that the company
was unable to collect the foreign inland freight expense data for
certain shipments destined for Hague, and that for such shipments, an
average per-unit expense was reported. Respondent further explains that
prior to verification, Ugine discovered the average expense had been
inadvertently omitted for these sales, and subsequently presented the
average freight expense as a minor correction. Respondent also notes
that during the Hague verification, it provided the Department with
actual freight expenses from the Gueugnon plant to the Macon
containerization facility for the sales transactions selected for
review, and that such actual freight expenses were approximately equal
to the reported average freight expense. Respondent claims it resorted
to utilization of average transportation cost only for those sales
where transaction-specific data were unavailable.
Respondent further asserts that petitioners' citation to Circular
Welded Non-Alloy Steel Pipe and Tube from Mexico: Final Results of
Antidumping Duty Administrative Review does not support petitioners'
claim that the Department should apply the highest reported
transportation rate paid by Ugine to all sales for which no expense was
reported. Id. According to respondent, the Department applied facts
available in the aforementioned case only after having placed the
respondent on notice--in prior reviews--that verifiable freight expense
information was required and should not be destroyed, and where the
respondent continued to destroy its freight records. Respondent asserts
that in the present case, Ugine presented verifiable expense
information, and average freight expense information only where
transaction-specific data were unavailable. According to respondent,
Ugine has cooperated fully and to the best of its ability with all of
the Department's requests. Thus, respondent believes the Department
should deny petitioners' request for use of facts available for foreign
inland freight expenses on Hague transactions.
Department's Position: We disagree with petitioners. In this
instance, although we verified that respondent was unable to report the
freight expense at issue for all transactions, respondent has been
fully cooperative and has acted to the best of its ability to provide
the Department with all available information as the Department has
requested. Moreover, respondent has provided a reasonable estimate of
the freight amount for those transactions where respondent could not
identify the exact amount. Thus, we do not believe the facts warrant
the application of an adverse assumption as facts available in this
instance. We note that the Department allows respondents to correct for
minor changes in preparation of verification. The verification outline
of January 21, 1999 provided for ``presentation by Usinor of minor
changes, if any, to the response resulting from verification
preparation. Identification of the specific observation(s) involved,
and corresponding database(s), must also be provided.'' See
Verification Outline at page 3, dated January 21, 1999. Respondent
provided minor corrections for its freight on U.S. sales/foreign inland
freight on Hague sales at the start of Ugine's home market sales
verification. See Home Market Verification Report of Usinor/Ugine at
page 3, April 6, 1999. Furthermore, during Ugine's home market sales
verification, we compared several of the reported average freight
figures with an the actual freight expense from the Gueugnon plant to
the Macon containerization facility, and found that the average figures
were reasonable. See Home Market Verification Report of Usinor/Ugine,
at pages 42-45, April 6, 1999; and Exhibits UG-28, UG-35, UG-36, UG-37
and UG-39.
Moreover, we disagree with petitioners in their citation of
Circular Welded Non-Alloy Steel Pipe and Tube from Mexico: Final
Results of Antidumping Duty Administrative Review in support of their
facts available claim for this issue. 63 FR 33041, 33046-47 (June 17,
1998). In that case, the Department stated that it was justified in
applying the use of partial adverse facts available because the
respondent did not cooperate to the best of its ability. In this
instance, Usinor has cooperated to the best of its ability in supplying
the Department with all of the relevant information, including, when
necessary, careful estimates of missing information, for the inland
freight expenses between the Gueugnon plant and the Macon
containerization facility. In sum, for the final determination, we used
respondent's information for the inland freight expenses between the
Gueugnon plant and the Macon containerization facility.
Comment 6: Affiliated Freight Forwarders
Petitioners state that respondent was unable to demonstrate that
rates from its affiliated freight forwarder were arm's-length rates.
Petitioners argue that the fact that the affiliated freight forwarder
made profit does not necessarily prove the rates it charged to
respondent and its affiliates were arm's-length rates. Petitioner
believes that respondent should have been able to present information
to establish that the affiliate charged arm's-length prices. Because,
in petitioners' opinion, respondent did not establish the arm's-length
nature of the affiliated freight forwarder's rates, petitioners believe
these transactions should be disregarded pursuant to section 773(f)(2)
of the Act, and that the Department should base rates for affiliated
freight forwarders on the highest reported rate for an unaffiliated
freight forwarder.
Respondent argues that petitioners' claim that Usinor is unable to
demonstrate that it deals with its affiliated freight forwarder on an
arm's-
[[Page 30830]]
length basis--and that the Department should therefore base affiliated
freight forwarder rates on the highest reported rate for an
unaffiliated freight forwarder--is incorrect. According to respondent,
the Department verified the fact that the affiliated freight forwarder
made a reasonable profit on the services it provided to Ugine.
According to respondent, no further evidence of the arm's-length
character of these services is needed.
Respondent also claims that the vast majority of charges by the
affiliated freight forwarder are what respondent refers to as ``pass-
throughs of charges'' from unaffiliated service providers. Respondent
further indicates that any charges to be found on invoices of the
affiliated freight forwarder that are not what respondent refers to as
``pass-throughs of charges'' from unaffiliated entities will represent
minuscule percentages of the total amounts for each invoice.
Department's Position: We agree with petitioners in part. It is
clear from the record evidence that Usinor was unable to demonstrate
that its affiliated freight forwarder rates were at arm's length
prices. At verification, respondent stated that ``it can not show how
the affiliated freight forwarder's rates are generated and charged
versus the rates of other, non-affiliated freight forwarders.'' See
Home Market Verification Report of Usinor/Ugine, at page 31, April 6,
1999. Consequently, we are unable to conclude that these affiliated
party transactions were carried out at arm's length prices.
Further, we disagree with respondent's argument that a profit made
on the services of the affiliated freight forwarder provided to Ugine
proves that these services were at arm's length. The arm's length test
compares prices charged by or paid to affiliated parties with prices
which would otherwise be obtained in transactions with unaffiliated
parties. See Circular Welded Non-Alloy Steel Pipe from Korea, 63 FR
32833, 32838 (June 16, 1998). The level of profit on these sales is not
a relevant consideration.
Nevertheless, because Usinor was unable to provide the requested
information, it would inappropriate to use the rate proposed by
petitioners, because use of such a rate would require an adverse
assumption under section 776(b) of the Act. Because we find that Usinor
has acted to the best of its ability with respect to this adjustment,
as non-adverse facts available, we have used the average of Usinor's
reported freight-forwarder rates.
Comment 7: Product Matching
Petitioners noted that Edgcomb sometimes shipped higher quality,
higher cost products than that which was ordered by a particular
customer. Petitioners argued that where GRADEU (grade) and INGRADU
(invoiced grade) differ, the Department should match sales according to
INGRADU. According to petitioners, the statute requires the Department
to match products according to the similarity of the actual physical
characteristics of the products. Therefore, according to petitioners,
the actual grade sold and shipped--the IN GRADU--must be the basis for
product matching with home market sales in order to determine the
actual level of dumping on such sales.
Additionally, petitioners argued the Department should ensure that
Usinor has reported constructed value information based on INGRADU and
not on GRADEU. According to petitioners, because the products shipped
actually have a higher cost of production than the product invoiced,
the constructed value reported must reflect the higher actual cost of
production. If constructed value is not available on an INGRADU basis
for any U.S. sale being compared to constructed value, petitioners
believe the margin for that sale should be based on facts available.
Respondent asserted that Ugine accurately reported the physical
characteristics of the material actually produced and shipped in fields
GRADEH or GRADEU as required by the Department's questionnaire.
Respondent stated that where the information contained in fields
INGRADH or INGRADU differs from the information in fields GRADEH or
GRADEU, it is because the grade invoiced differed from the grade
actually produced and shipped to the customer. Respondent further
stated that, per the Department's instructions, the grade reported in
INGRADH or INGRADU is the grade appearing on the invoice to the
customer, even though it does not always reflect the actual physical
characteristics of the product in those circumstances. Hence, according
to respondent, the information in fields GRADEH and GRADEU should be
used for product comparisons, as such information reflects the actual
physical characteristics of the material produced and sold.
Department's Position: We disagree with petitioners' contention
that product matching must be based on the data reported in field
INGRADU. Petitioners appear to misunderstand the reported
characteristics: although they correctly argue that matching should be
based on the characteristics of the merchandise actually shipped, they
mistakenly state that the fields INGRADU and INGRADH are the fields
which contain those characteristics. In fact, in response to the
Department's initial and supplemental questionnaires, respondent
reported the grades of subject merchandise invoiced to customers in
fields INGRADU and INGRADH. Respondent reported the grades of subject
merchandise actually produced and shipped to customers in fields GRADEU
and GRADEH. As Edgcomb explained at verification, for a number of
sales, the grades reported in fields GRADEU and INGRADU differ. See
United States Verification Report of Edgcomb, at page 5, April 7, 1999.
According to Edgcomb, when necessary, they would ship higher quality
and higher cost product than what was ordered, while invoicing a
customer for the lower quality and lower cost grade ordered. See United
States Verification Report of Edgcomb, at page 5, April 7, 1999.
Edgcomb representatives explained that this was sometimes necessary
because of shortages in inventory. See United States Verification
Report of Edgcomb, at page 5, April 7, 1999. Edgcomb would also do this
at times to reduce inventory of certain products. Thus, in some cases,
the fields INGRADU and INGRADH do not reflect the actual merchandise
delivered to the customer. The Department is required to base its
calculations on products actually sold for consumption in the U.S. and
home markets. In cases where the grades reported in fields GRADEU and
INGRADU differ, the Department will base its product comparison on the
product actually produced and shipped. Thus, the Department used the
data reported in fields GRADEU (or GRADEH, as appropriate) for
comparison purposes.
Comment 8: Credit Expenses/Bernier Sales
Petitioners claimed that Bernier was not able to report its actual
dates of payment for its home market sales, but instead provided an
average delay between invoice and payment. Additionally, petitioners
noted that Bernier recalculated the average payment period using only
roughly 70 percent of its reported sales value. Thus, petitioners
argued the average payment period proposed by respondent should be
rejected because the recalculation is not based on the total sales
value. Further, petitioners contended that the omitted 30 percent of
sales could substantially reduce the average payment period, and the
sales chosen
[[Page 30831]]
for recalculating the average payment period do not appear to be
sampled randomly. Therefore, petitioners argued that Bernier's credit
expense for home market sales should be rejected because Bernier has
not provided either actual payment dates or accurate average date of
payment for all sales.
According to respondent, at the outset of verification, Bernier
made a minor correction to revise the reported delay between invoice
date and date of payment in order to correct an error in its computer
program used to compute the data. Respondent explains that in providing
the corrected data, Bernier examined its largest sales--representing
over 80 percent of the total quantity and 70 percent of total value of
sales of subject merchandise--provided the Department with figures for
actual payment delay on such sales, and then calculated average payment
delay on its remaining sales based on the actual data. Thus, respondent
believes petitioners' demand that Bernier should be denied an
adjustment for credit expense should be rejected.
Department's Position: We disagree with petitioners. Respondent's
methodology for reporting its credit expenses is acceptable. At the
beginning of verification, Bernier presented the Department with a
minor correction on its date of receipt of payment which revised the
reported delay between invoice date and the receipt of payment dates
which had previously been misreported due to a computer programming
error. To correct this error, respondent manually researched its
largest sales, which represented over 80 percent of the total quantity
of their sales of subject merchandise (roughly 70 percent of the total
sales value). See Home Market Verification Report of Bernier, at page
2, April 6, 1999 and Exhibit BE-1. Once Bernier had completed its
research, it provided the Department with revised figures with the
actual payment delay on the aforementioned pool of sales. See Sales
Transactions, Verification Exhibits BE-14 through BE-16. Further,
Bernier only used an average payment date for the remaining pool of
sales that did not have an actual payment date, and based that average
date on the actual payment date data for the largest sales. Moreover,
the Department's questionnaire clearly states, ``if actual payment
dates are not readily accessible in your accounting system, you may
base the calculation on the average age of accounts receivable.'' See
Department's Questionnaire at page B-28, August 3, 1998. Thus, it is
reasonable for respondent to calculate an average payment date for
those sales that did not have an actual payment date. Therefore,
respondent has been fully cooperative and has acted to the best of its
ability to provide the Department with all available information and
facts available is warranted in this regard. In sum, for the final
determination, the will use respondent's information for credit
expense.
Comment 9: Credit Expenses/Ugine Service Sales
Petitioners stated that Ugine Service was not able to report its
actual dates of payment for its home market sales, but instead provided
an average delay between invoice and payment. Additionally, petitioners
noted that Ugine Service recalculated the average payment period using
a small portion of its sales database. Thus, petitioners argued the
average payment period proposed by respondent should be rejected
because the recalculation is not based on the total sales value.
Further, petitioners contended that the larger omitted portion of sales
could substantially change the average payment period, and Ugine
Service did not provide information on how it chose the sales for its
sample. Since the Department cannot determine whether the sales chosen
are representative of all other sales and cover a representative period
in the POI, petitioners state the validity of the sample cannot be
determined and thus is not reliable. Therefore, petitioners argued that
Ugine Service's credit expense for home market sales should be rejected
because Ugine Service has not provided either actual payment dates or
demonstrated that it has provided an accurate average date of payment
for all sales.
According to respondent, Ugine Service was able to manually
identify and report actual date of payment for a significant percentage
of its reported home market sales. Where possible, Ugine Service
computed the average days payment was outstanding based on customer-
specific information. For the rest, respondent claims Ugine Service
applied an overall average based on the customer-specific information.
According to respondent, such data was reported to the best of Ugine
Service's ability. Thus, respondent believes the Department should deny
petitioners' request to reject Ugine Service's credit expense
adjustment.
Department's Position: We disagree with petitioners. Respondent's
methodology for reporting its credit expenses is acceptable. At the
beginning of verification, Ugine Service presented the Department with
a minor correction on its receipt of payment date. Respondent stated
that they had to revised the date of receipt of payment due to double-
counting the period from the actual invoice date to the due date. Due
to this error, respondent stated that it manually researched its files
and reported the actual date of receipt of payment on a transaction-
specific basis for a portion of its sales file. See Home Market
Verification Report of Ugine Service at page 2, April 5, 1999 and
Exhibit UGS-1, Attachment 2. For the remaining sales, Ugine Service
used an average based on customer specific data, to calculate a number
of days outstanding for the credit calculation. That calculated average
is very close to the average number of days based on transaction-
specific information. See Home Market Verification Report of Ugine
Service, April 5, 1999 and Exhibit UGS-1, Attachment 3. Thus, Ugine
Service's calculated average days was a reasonable surrogate because
Ugine Service could not provide the actual payment dates for these
sales. Further, the Department's questionnaire clearly states, ``if
actual payment dates are not readily accessible in your accounting
system, you may base the calculation on the average age of accounts
receivable.'' See Department's Questionnaire at page B-28, August 3,
1998. Thus, it is reasonable for respondent to calculate an average
payment date for those sales that did not have an actual payment date.
Therefore, respondent has been fully cooperative and has acted to the
best of its ability in providing the Department with all available
information and facts available is not warranted in this instance. In
sum, for the final determination, we used respondent's information for
credit expense.
Comment 10: Date of Sale in the Home Market
According to petitioners, the verification report for Ugine
demonstrates that order confirmation date is the appropriate date of
sale for home market sales. Specifically, petitioners stress that an
order acknowledgment document is generated by Ugine's order entry
system for each order and each change of order. Petitioners argued that
the Department should conclude that order date--as defined by the order
confirmation--is the appropriate date of sale because it is the date of
sale on which the terms of sale are set and recorded.
According to respondent, the date of invoice properly reflects date
of sale in this case. Respondent claims that Ugine and Uginox maintain
their sales records based on invoice date in the normal course of
business. Thus, respondent asserted that the companies reported
[[Page 30832]]
their sales by invoice date on the basis of the Department's
regulations, the Questionnaire instructions, and the applicable facts.
According to respondent, the Department verified that order date would
not be the appropriate date of sale in this case, as price and quantity
are subject to continued negotiation until a sale is invoiced. Thus,
respondent argued that the Department should reject petitioners'
contention that the home market date of sale should be based on order
date.
Department's Position: We agree with respondent that invoice date
is the correct date of sale for Usinor's home market sales. 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 Certain Welded Carbon Steel Pipes and Tubes from
Thailand: Final Results of Administrative Review, 63 FR 55578, 55587
(October 16, 1998) (``Pipes and Tubes from Thailand''). However, in
some instances, it may not be appropriate to rely on the date of
invoice as the date of sale, where the evidence indicates that the
material terms of sale were established on some date other than invoice
date. See Preamble to the Department's Final Regulations, 62 FR 27296,
27348-27350 (May 19, 1997). Thus, 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 the
evidence of the respondent's selling practice points to a different
date on which the material terms of sale were set.
In this investigation, in response to the original questionnaire,
Usinor reported invoice date as the date of sale in both the U.S. and
home markets. On November 2, 1998, Usinor submitted a letter requesting
that the Department not require the submission of order confirmation
date data because the companies' record keeping systems were not
equipped to report order acknowledgments, in some cases because order
acknowledgments were not generated, and in some cases because they were
routinely purged from the involved databases. Furthermore, Usinor
reported that the essential terms of the companies' orders change
between the date of order acknowledgment and the invoice date for most,
but not all, of its U.S. and home market sales. For purposes of our
preliminary determination, we accepted the date of invoice as the date
of sale subject to verification. See Preliminary Determination at 133-
134.
At verification, we carefully examined Usinor and its affiliates
selling practices, namely, the manner in which each company records the
sales in its financial records by date of invoice. For the home market,
we reviewed several sales observations for which the price and quantity
changed subsequent to the original order confirmation. See Home Market
Verification Report of Usinor/Ugine at pages 12, and 39-47, dated April
6, 1999. Additionally, at verification we examined respondent's study
of order modifications in 1995 and found that the terms of sale for a
large portion of sales in that year were modified multiple times
between the initial order date and the invoice date, and that the vast
majority of orders were modified at least once. See Home Market
Verification Report of Usinor/Ugine at pages 12, and 39-47, dated April
6, 1999. Further, we discovered at verification that when an order is
changed only the most recent set of information can be retrieved from
the database system. Thus, if an order is changed, Usinor would only be
able to recover information from the most recent version of the changed
order, and is thus not able to recover historical information about
that order. In addition, at verification we discovered that Usinor
purges its record keeping database system (i.e., CDSTAT) every six
months in order to keep computer memory space at a maximum, and only
the original order date and other original order data are retained in
another (i.e., FACSTAT) database. See Home Market Verification Report
of Usinor/Ugine at page 11, April 6, 1999. Thus, based on respondent's
representations, and as a result of our examination of Usinor and its
affiliates records kept in the ordinary course of business, we are
satisfied that the date of invoice should be used as the date of sale
because it best reflects the date on which material terms of sale were
established for Usinor and its affiliates' home market and U.S. sales.
Comment 11: Reimbursement of Antidumping Duties Paid
According to petitioners, the Uginox verification report indicates
that Ugine charges Uginox prices net of all export and import-related
expenses. Petitioners concluded that this amounts to a discount or
rebate to Uginox from Ugine of all the export and import related
expenses, plus an amount for profit, on each U.S. sale. In light of
this practice, petitioners argued that Ugine will now discount the
price to Uginox on U.S. sales by the amount of any antidumping duties
collected, contrary to the requirements of 19 C.F.R.
Sec. 351.402(f)(1)(i). Petitioners contended that the Department should
apply section 353.402(f) of its regulations, find that there is an
agreement between Ugine and Uginox that will result in the
reimbursement of antidumping duties by Ugine to Uginox, and then add
the amount of the duties to be reimbursed into the duty deposit rate
for Usinor.
Petitioners asserted that the Department previously applied the
reimbursement regulation in a case where duties had yet to be assessed,
and that the Department specifically concluded that an agreement to
reimburse was sufficient to trigger the regulation. Petitioners further
stated that there is no legal or logical reason to wait until the end
of the first administrative review to apply the reimbursement
regulation, thereby frustrating the remedial effect of the antidumping
laws for that additional time. In support of this, petitioners quote
cases indicating that the regulation is designed to preserve the
statute's remedial purpose by discouraging foreign exporters from
assuming the cost of duties, and that the remedial effect must be
preserved as soon as an agreement to reimburse duties is apparent.
According to respondent, the Department's reimbursement regulations
do not apply at this stage of the proceeding. Respondent asserted that
petitioners fail to cite any cases where reimbursement was found or
considered in an investigation. Respondent further stated that
petitioners only cite administrative reviews--covering periods for
which duties had already been imposed--in support of their argument.
Respondent argued that there must be a finding of sales at less than
fair value before a dumping margin can be imposed, and there must in
turn be an established dumping margin prior to any finding that
reimbursement is taking place. Respondent contended that in this case
the Department has not determined that the subject merchandise is being
sold at less than fair value, so there is no basis for an actual
assessment of duties. Thus, according to respondent, the Department can
not find that reimbursement is taking place.
Respondent claimed that there is no agreement by Ugine to reimburse
Uginox for antidumping duties. Respondent further claimed that
petitioners have failed to satisfactorily allege the required elements
of duty reimbursement. According to respondent, the Department's
regulations require that a petitioner
[[Page 30833]]
show evidence that an exporter either directly pays antidumping duties
for its affiliated importer or has reimbursed the importer for duties
already paid. Respondent claimed that no such payments or
reimbursements have been or can be made. Respondent also argued that
petitioners' claim is legally infirm because the Department's policy
and practice related to the treatment of possible discounts or
reimbursements of the type discussed above require more and different
evidence than has been presented in this case.
Finally, respondent argued the Department should reject
petitioners' argument for a rebuttable presumption of reimbursement
against Uginox. According to respondent, the Department's regulations
state that a rebuttable presumption of reimbursement may be imposed if,
at the time duties are being paid, the importer has not filed a pre-
liquidation certificate with Customs. Respondent argued that such a
presumption is impossible in this case because duties have not been
assessed and are not being paid. Thus, respondent stated that the
Department should reject petitioners' reimbursement claim.
Department's Position: We disagree with petitioners. First, our
reimbursement regulations are not applicable at this stage of the
proceeding. For the Department to apply the duty reimbursement
provision, there must be a duty to reimburse. During the POI, there was
no liability for antidumping duties to be assessed.
Second, petitioners have improperly cited certain cases in support
of their argument, e.g., Certain Cold-Rolled Carbon Steel Flat Products
from the Netherlands: Final Results of Antidumping Administrative
Review, 61 FR 48465, 48470 (September 13, 1996); Porcelain-on-Steel
Cookware from Mexico: Preliminary Results of Antidumping Administrative
Review, 64 FR 1592, 1593 (January 11, 1999) (``Porcelain Cookware'').
Both of these cases involve administrative reviews. In all
administrative reviews--unlike in investigations--actual duties are to
be assessed on the transactions under review. Therefore, these cases
are not applicable.
In light of the stage of the proceeding, we conclude that there is
no basis to apply the reimbursement regulation in this case.
Comment 12: CEP Sales and Home Market Level of Trade
Petitioners point out that the Department compared CEP sales to
home market sales based on a constructed level of trade for those CEP
sales after the adjustments under section 772(d) of the Act were made.
According to petitioners, the Court of International Trade has ruled
that the Department's interpretation that the adjustments under section
772(d) of the Act must be made prior to level of trade matching
contravenes the purpose of the statute. Borden, Inc. v. United States,
4 F. Supp. 2d 1221 (Ct. Int'l Trade 1998). Thus, for the final
determination of this investigation, petitioners argued that the
Department is required to determine level of trade prior to the
application of adjustments under section 772(d) of the Act.
Respondent argued the Department should adhere to its current
practice of beginning its level of trade analysis after adjusting for
U.S. selling expenses and profit. According to respondent, petitioners'
reliance on Borden Inc. v. United States is misguided, as the
Department has indicated its disagreement with Borden, and because the
case is under appeal. 4 F. Supp. 2d 1221 (Ct. Int'l Trade 1998).
Respondent also asserted that petitioners' claim is fundamentally
identical to an argument expressly considered and rejected in Certain
Stainless Steel Wire Rod From France: Final Results of Antidumping Duty
Administrative Review, 63 FR 30185 (June 3, 1998).
Department's Position: We disagree with petitioners. The Department
is continuing its practice, articulated in section 351.412(c) of the
new regulations (see 62 FR 27296, 27414), of making the level of trade
comparisons for CEP sales on the basis of the CEP after adjustments
provided for in section 772(d) of the statute.
As we stated in Certain Stainless Steel Wire Rods from France:
Final Results of Antidumping Duty Administrative Review, starting price
is not the basis for comparison for CEP sales. 62 FR 7206 (February 18,
1997) (``SSWR II''). The statutory comparison is based on the CEP,
which is defined as starting price net of the CEP deductions (i.e.,
those deductions provided for in section 772(d) of the Act which are
only applicable to CEP sales). See section 772(b) of the Act. The Act
requires the Department to make comparisons between NV and EP or CEP to
the extent practicable, at the same level of trade. See section
773(a)(1)(B) of the Act. If the starting price is used to determine the
level of trade for CEP sales, the Department's ability to make
meaningful comparisons at the same level of trade (or appropriate
adjustments for differences in levels of trade) would be severely
undermined in cases involving CEP sales. Similarly, using the
unadjusted price to determine the level of trade of both EP and CEP
sales would result in a finding of different levels of trade for an EP
and a CEP sale when, after adjustment, the selling prices reflect the
same selling functions. Moreover, using the adjusted CEP for
establishing the level of trade is consistent with the purposes of the
CEP adjustment: to determine what the sales price would have been had
the transaction between the producer and its U.S. affiliate qualified
as an export price sale. Accordingly, we have followed our practice,
which specifies that the level of trade analyzed for CEP sales is the
level of trade of the price after the deduction of U.S. selling
expenses and profit associated with economic activity in the United
States pursuant to section 772(d) of the Act. Therefore, for the final
determination, the Department has continued to apply the level-of-trade
analysis from its preliminary determination.
The U.S. Court of International Trade (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 Act. See Borden Inc., et al. v. United States, Court No.
96-08-01970, Slip Op. 98-36 (March 26, 1998), at 58 (Borden); see also
Micron Technology Inc. v. United States, Court No. 96-06-01529, Slip
Op. 99-02 (Jan. 28, 1999). The Department believes, however, that its
practice is in full compliance with the statute, 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.
Comment 13: Hague's Credit Expense
Respondent argued that the Department incorrectly recalculated
Hague's credit expenses when it recalculated the credit expenses
associated with unpaid invoices. Respondent contended that because
Hague's sales do not have specific payment dates, Hague's credit
expenses are based on average days outstanding and are not transaction
specific. Thus, blank payment dates for Hague sales do not indicate
unpaid invoices. Respondent noted that the Department's computer
program mistakenly mistook Hague sales with blank payment dates as
unpaid invoices and recalculated the credit expenses for these sales.
Therefore, respondent argued that for the final determination, this
recalculation of credit expense for
[[Page 30834]]
Hague sales with blank payment dates should be removed.
Petitioners did not comment on this issue.
Department's Position: We agree with respondent and have corrected
our computer programming (i.e., margin calculation program) with
respect to Hague's U.S. credit expenses for sales with blank or missing
payment dates for the final determination. In the final margin program,
the Department added specific computer language to correct this
problem. For a complete listing of the changes the Department has made
to its final margin program, please see the Department's analysis
memorandum and final margin computer program.
Comment 14: CEP Profit Calculation
Respondent argued that the Department incorrectly double-counted
U.S. and home market freight revenue when it calculated CEP profit in
the preliminary determination. Respondent states that on the home
market side, the Department added freight revenue (FRTREVH) to the home
market revenue (REVENVH), but the Department had already included
FRTREVH in the CEP profit calculation as an offset to movement
expenses. Thus, the Department should correct the double counting of
FRTREVH.
Additionally, respondent argued that on the U.S. side, the
Department added freight revenue (FRTREVU) to the U.S. revenue
(REVENU), but the Department had already included FRTREVU in the CEP
profit calculation as an offset to movement expenses. Thus, the
Department should correct the double counting of FRTREVU.
Petitioners did not comment on this issue.
Department's Position: We agree with respondent and have corrected
our computer programming (i.e., model match and margin calculation
programs) to prevent double-counting home market and United States
freight revenue for the final determination. For a complete listing of
the changes the Department has made to its final margin program, please
see the Department's analysis memorandum and final margin computer
program.
Comment 15: CEP Profit Calculation/Currency Conversion of U.S. Packing
Expense
Respondent argued that the Department did not correctly convert the
currency for U.S. packing cost in its CEP profit calculation.
Respondent noted that the Department converted the packing expense
variable PACKU to U.S. dollars and saved this result in the variable
PACKINGU. However, respondent contended that the Department included
the dollar-denominated variable PACKINGU in the calculation of the
French franc-denominated variable string (COGS), therefore mixing the
currencies. Thus, respondent stated that the Department should correct
this currency conversion for the final determination.
Petitioners did not comment on this issue.
Department's Position: We agree with respondent and have corrected
our computer programming (i.e., margin calculation program) with
respect to the packing costs in the CEP profit calculation. In the
final margin program, the Department has corrected the currency
conversion problem in the CEP profit calculation. For a complete
listing of the changes the Department has made to its final margin
program, please see the Department's analysis memorandum and final
margin computer program.
Comment 16: U.S. Intercompany Sales between Uginox and Edgcomb
Petitioners stated that the Department incorrectly included sales
from Uginox to Edgcomb in its preliminary determination. Petitioners
noted that in the preliminary determination the Department fully
intended to include all downstream sales from Bernier, Ugine Service,
Hague and Edgcomb in its dumping calculation but not intercompany
sales. Thus, petitioners stated that by including the sales between
Uginox and Edgcomb and the downstream sales of Edgcomb, the Department
has double-counted these sales and calculated an improper CEP for
Edgcomb sales. Petitioners stated that the Department should correct
this error for the final determination and only use Edgcomb's
downstream sales.
Respondent stated that it agrees with petitioners that the
Department should not double-count Edgcomb's resales as well as sales
from Uginox to Edgcomb. However, respondent argues that the Department
should eliminate Edgcomb's resales for the reasons stated above comment
2.
Department's Position: We agree with petitioners. As stated in
comment 2 above, the Department has concluded that Edgcomb should be
considered affiliated with both Usinor and Uginox for the purposes of
this final determination. See Comment 2. Therefore, for purposes of
calculating a final antidumping duty margin for Usinor, the Department
included Edgcomb's downstream sales in its margin calculation, and
eliminated sales from Uginox to Edgcomb.
Comment 17: Failure to Deduct U.S. Freight Expenses From Port to
Warehouse
Petitioners argued that the Department inadvertently failed to
include U.S. port to warehouse expenses (i.e., the variable INLFPWU) in
its calculation of total U.S. movement expenses. Petitioners stated
that the Department should correct this inadvertent error for the final
determination.
Respondent did not comment on this issue.
Department's Position: We agree with petitioners. In the
preliminary determination, the Department inadvertently failed to
include U.S. port to warehouse expenses ( INLFPWU) in its calculation
of total U.S. movement expenses. In the final determination, we have
included INLFPWU in our calculation of U.S. movement expenses. Please
see the Department's analysis memorandum and final margin computer
program for this change.
Comment 18: Missing Payment Dates
Petitioners stated that in the preliminary determination, the
Department recalculated credit expenses for sales with missing payment
dates. However, in the Department's revised credit expense calculation,
petitioners contend that the revised net price calculation failed to
deduct early payment discounts and other discounts in the home market
credit expense calculation, and early payment discounts in the U.S.
credit expense calculation. Further, petitioners noted that the
respondent included other discounts and early payment discounts in its
calculations of both the U.S. and home market credit expenses.
Therefore, petitioners argue that without considering these additional
deductions, the credit expense calculation is not consistent with the
respondent's reported data for credit expenses.
Respondent stated that petitioners objection to the Department's
calculation of credit expense for sales with missing payment dates has
been overtaken by events. Specifically, credit expense on the revised
files has been recalculated to account for actual payment dates, where
available, or average days outstanding. Therefore, respondent argued
that there is no basis for alteration of the Department's program with
regards to credit expenses.
Department's Position: We agree with respondent in part. On April
8, 1999, the Department provided respondent an opportunity to revise
its sales and cost files with minor corrections found at the
[[Page 30835]]
recent sales and cost verifications in France and the United States.
See Memorandum to the File, dated April 8, 1999. On April 15, 1999,
respondent provided the Department with revised sales and cost tapes.
The Department has confirmed that Respondent's U.S. credit expenses do
not need to be recalculated because the respondent has already
recalculated all of its U.S. credit expenses to account for actual
payment dates, where available, or average days outstanding. However,
in the preliminary determination, we did not deduct early payment
discounts and other discounts in the home market credit expense
calculation. Additionally, respondent's revised home market sales tape
continues to have missing payment dates for certain sales which have
not been paid. Therefore, for the final determination, we have
recalculated respondent's home market credit expense for sales with
missing payment dates by designating the last day of the home market
verification as payment date, and have deducted early payment discounts
and other discounts in our recalculation of home market credit expense,
where appropriate. For a complete listing of the changes the Department
has made to its final margin program, please see the Department's
analysis memorandum and final margin computer program.
Cost of Production/ Constructed Value
Comment 19: Affiliated Party Transactions (Usinor)
Petitioners argue that the Department should adjust Usinor's
reported hot rolling costs to reflect a market value in accordance with
the major input rule. According to the petitioners, the Department
determines the value of a major input purchased from an affiliated
party based on the highest of the price paid to the affiliated party,
the market price, or the cost of producing the major input (see Final
Results of Antidumping Duty Administrative Review: 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); Final Results of Antidumping Duty
Administrative Reviews and Revocation in Part of an Antidumping
Finding; Tapered Roller Bearings and Parts Thereof, Finished and
Unfinished, from Japan and Tapered Roller Bearings, Four Inches or less
in Outside Diameter, and Components Thereof, from Japan, 61 FR 57629,
57644 (Nov. 7, 1996)). In this instance, the petitioners claim the
record shows that the market price is higher than either the reported
transfer price or the affiliates cost of production (``COP'').
Usinor disagrees with the petitioners' assertion that an adjustment
is necessary. According to Usinor, Ugine properly valued affiliated
party inputs at the transfer price which exceeded actual cost. As for
the comparison to a market price, Usinor claims that the Department
cannot make a proper comparison between the reported market price and
the reported transfer price because of the differing market conditions.
Thus, Usinor states that no adjustment to hot rolling costs is
necessary for the final determination.
Department's Position: We agree with petitioners that the hot
rolling services Usinor obtained from an affiliate should be adjusted
to a market price. Section 773(f)(2) allows the Department to test
whether transactions between affiliated parties involving any element
of value are at prices that ``fairly reflect * * * the market under
consideration.'' Section 773(f)(3) allows the Department to test
whether transactions between affiliated parties involving a major input
is above the affiliated supplier's cost of production. In other words,
if an understatement in the value of an input would have a significant
impact on the reported cost of the subject merchandise, the law allows
the Department to insure that the transfer price or market price is
above the affiliated supplier's cost. The determination as to whether
an input is considered major is made on a case-by-case basis. See Final
Rule 62 FR at 27362.
In determining whether an input is considered major, among other
factors, the Department looks at both the percentage of the input
obtained from affiliated suppliers (verses unaffiliated suppliers) and
the percentage the individual element represents of the subject
merchandise's COM (i.e., whether the value of inputs obtained from an
affiliated supplier comprises a substantial portion of the total cost
of production for subject merchandise). In the instant case, we looked
at these percentages for hot rolling services provided by an affiliate.
The cost of these services represent a relatively small percentage of
the subject merchandise's COM, which reduces the risk of misstatement
of the subject merchandise's costs to such a degree that we have
determined that section 773(f)(3) of the Act does not apply to these
inputs. However, we found that the weighted-average transfer price of
hot rolling services reported by Usinor was below market price and
therefore, in accordance with section 773(f)(2) of the Act, we have
increased the subject merchandise's COM accordingly.
As for Usinor's concern that the reported market price is not
comparable to the reported transfer price, we disagree. For the market
price, Ugine reported the arm's length sales price the affiliate
charged to non affiliates for performing analogous hot rolling
services. Thus, we note that the reported market price does represent
the amount usually reflected in sales of the major input in the home
market under consideration as required by section 773(f)(3) of the Act.
Comment 20: Depreciation Expense (Usinor)
To calculate COP and CV, petitioners claim that the Department
should rely on the depreciation expense recorded in Ugine's cost
accounting system rather than the depreciation expense reported on the
financial statements. According to petitioners, section 773(f)(1)(A) of
the Tariff Act of 1930, as amended, provides that the Department
normally relies on data from a respondent's books and records in which
its costs are normally kept if those records are prepared in accordance
with the home country's generally accepted accounting principles
(``GAAP''), and where they reasonably reflect the cost of producing the
merchandise. In this instance, the petitioners claim that the cost
accounting system is in fact the company's normal books and records.
Thus, in order for the Department to reject Ugine's cost accounting
system for the valuation of the depreciation expense, the petitioners
argue that the Department must find that Ugine's cost accounting system
is not in accordance with French GAAP, or that costs recorded in the
cost accounting system are not reasonably reflective of the production
costs. Moreover, petitioners claim that there is no record evidence to
suggest that Ugine's cost accounting system does not reasonably reflect
the costs associated with the production of stainless steel sheet and
strip in coils. Petitioners assert that the burden is on Usinor to
demonstrate on the record that the costs recorded in their normal books
and records are not reasonable (see Final Determination of Sales at
Less Than Fair Value: Canned Pineapple Fruit from Thailand, 60 FR
29553, 29559 (June 5, 1995); Final Determination of Sales at Less Than
Fair Value: Certain Welded Stainless Steel Pipe from the Republic of
Korea, 57 FR 53693, 53705 (November 12, 1992) and Final Determination
of Sales at Less Than Fair Value: Furfuryl Alcohol from South Africa,
60 FR 22550, 22556 (May 8, 1995)). Without
[[Page 30836]]
such demonstration on the record by Usinor, the petitioners assert that
the Department should, in the final determination, base depreciation on
the figures recorded in Ugine's cost accounting records.
Usinor contends that it properly relied on the depreciation expense
reported in the company's audited financial statements prepared in the
accordance with French GAAP to calculate depreciation expense.
According to Usinor, Ugine's cost accounting system does not reflect
depreciation in accordance with GAAP and therefore such depreciation
cannot properly be used in this investigation. Usinor states that the
Department has traditionally preferred to use the figures found on the
financial statements (see Final Results of Antidumping Administrative
Review: Antifriction Bearings (Other Than Tapered Roller Bearings) and
Parts Thereof From France, Germany, Italy, Romania, Singapore, Sweden,
and the United Kingdom, 62 FR 54043, 54080 (1997)). Moreover, Usinor
claims that the Department has traditionally relied on the depreciation
expense reported on the financial statements rather than the
depreciation expense reported in the respondent's cost accounting
system (see Usinas Siderurgicas de Minas Gerias S.A. v. United States,
No. 93-09-00557-AD, 1998 WL 442297, at *9 (CIT 1998); FAG U.K. LTD v.
United States, 945 F.Supp. 260, 271 (CIT 1996); Cinsa S.A. de C.V. v.
United States, 966 F.Supp 1230, 1234 (CIT 1997); Final Results of
Administrative Review: Silicon Metal From Brazil, 64 FR 6305, 6321
(February 9, 1999); and the Final Determination of Sales at Less Than
Fair Value: Stainless Steel Round Wire From Canada, 64 FR 17324, 17335
(April 15, 1999)). Therefore, Usinor requests that the Department
reject petitioners' attempt to overturn the Department's longstanding
practice in this area and use the depreciation as recorded in Usinor's
financial accounting system.
Department's Position: We agree with Usinor that in this case the
depreciation expense reported on Usinor's audited financial statements
should be used in the calculation of COP and CV. Specifically, Ugine
S.A. became a division of Usinor at the end of 1995. As a result of the
merger, Usinor revised Ugine's depreciation expense. This revision to
Ugine's depreciation expense was made in accordance with French GAAP.
Although Usinor revised Ugine's depreciation expense for financial
statement purposes, Ugine never revised its internal financial
accounting and cost accounting depreciation ledgers to reflect the
change. Thus, Ugine's cost accounting system and financial accounting
system generate different depreciation results than the amount Usinor
officially recognizes for the division. For submission purposes, Usinor
adjusted the depreciation expense reported in Ugine's cost accounting
system to the amount Usinor reported for the Ugine division in Usinor's
financial statements. Contrary to petitioners' claim, we found that the
depreciation expense recorded in the cost accounting system conforms to
French GAAP only after the company has made adjustments to reflect the
amount reported on Usinor's audited financial statements. We note that
the independent auditors base their opinion on the final amounts
reported on the financial statements and not on the amounts that may be
recorded in the internal cost accounting system. Moreover, Ugine
demonstrated that its depreciation expense contained in its cost
accounting system eventually reconciled to Ugine's divisional financial
statement and that the depreciation expense reported on this divisional
statement reconciled to the depreciation expense reported on Usinor's
financial statements. Since the amount of depreciation expense detailed
in Ugine's cost accounting system reconciles to Usinor's audited
financial statements, we believe that Ugine's reported depreciation
expense does not distort its COP and CV figures. Finally, we note that
Usinor's ``change'' to Ugine's depreciation expense was made prior to
the POI.
Additionally, our use of amounts reported on a company's financial
statement has been upheld by the Court of International Trade (see, FAG
U.K. LTD v. United States, 945 F.Supp. 260, 271 (CIT 1996) (upholding
the Departments reliance on a firm's expense as recorded on the firm's
financial statements); Hercules, Inc. v. United States, 673 F. Supp.
454 (CIT 1987) (upholding the Department's reliance on COP information
from the respondent's normal financial statements maintained in
conformity with GAAP); See also: Final Determination of Sales at Less
Than Fair Value: Stainless Steel Round Wire From Canada, 64 FR 17324,
17335 (April 9, 1999)) (The Department relied on respondent's expense
as recorded on the firm's financial statements). More importantly, the
Court of International Trade has consistently sustained our practice of
relying on the depreciation expense reported in the company's audited
financial statements (see Cinsa S.A. de C.V. v. United States, 966
F.Supp 1230, 1234 (CIT 1997) (upholding the Department's reliance on
depreciation expense reported on the financial statements); Laclede
Steel Co. v. United States, 965 Slip OP 94-160, *24 (CIT 1994)
(upholding the Departments reliance on depreciation expense reported on
the financial statements); Final Results of Administrative Review:
Silicon Metal From Brazil, 64 FR 6305, 6321 (1999). For the final
determination, we relied on the depreciation expense reported by
Usinor.
Comment 21: Including Employee Payments in the Cost of Production
(Usinor)
For the final determination, petitioners assert that the Department
should recalculate Ugine's COP and CV to include certain employee
profit-sharing payments. According to petitioners, the Department has
addressed this issue before, and in each case has determined that
``profit-sharing'' payments are appropriately considered an employee
remuneration cost to the company and should be included in the
calculation of COP and CV. As examples of such instances, the
petitioners cite the Final Results of Antidumping Duty Administrative
Review: Porcelain-on-Steel Cooking Ware From Mexico, 60 FR 2378
(January 9, 1995); the Final Determination of Sales at Less Than Fair
Value: Oil Country Tubular Goods from Austria, 60 FR 33551, 33557 (June
28, 1995); and the Final Results of Antidumping Administrative Review:
Porcelain-on-Steel Cooking Ware from Mexico, 58 FR 43327, 43331 (August
16, 1993), in which Department included similar profit-sharing costs in
the calculation of COP.
Respondent had no comment on this issue.
Department's Position: We agree with the petitioners that Usinor's
profit sharing expense should be included in the calculation of COP and
CV. Under French law, an employer is required to distribute a portion
of its profit to employees. This distribution of profits is reflected
on the company's income statement as an expense. With respect to the
employees involved in the production and administration of the subject
merchandise, the distribution represents a form of compensation.
Moreover, our established practice is to include this type of
compensation in the calculation of COP and CV, because this profit
sharing represents an expense recognized within the POI and should be
reflected in the product cost, in accordance with full absorption
costing principle (see Final Results and Partial
[[Page 30837]]
Rescission of Antidumping Duty Administrative Review: Certain Pasta
From Turkey, 63 FR 68429 (December 11, 1998); Notice of Final Results
of Antidumping Duty Administrative Review: Certain Cut-to-Length Carbon
Steel Plate From Germany, 61 FR 13834, 13838 (March 28, 1996); and
Final Results of Antidumping Duty Administrative Review: Porcelain-on-
Steel Cooking Ware from Mexico; 60 FR 2378 (January 9, 1995). For the
final determination, therefore, we included Usinor's profit-sharing
expense in the calculation of COP and CV to reflect the fully absorbed
cost of producing the stainless steel sheet and strip.
Comment 22: Including ``Exceptional'' Expenses and Other Expenses in
the General and Administrative Expense Calculation (Usinor)
Petitioners state that the Department should include certain
omitted expenses in the calculation of Ugine's general and
administrative expense ratio. According to the petitioner, these
expenses represent normal general and administrative expenses for the
operations. Thus, they should be included in the general and
administrative expense calculation for the final determination.
Usinor asserts that it properly excluded the expenses in question
because they do not relate to the production of the subject
merchandise. According to Usinor, Ugine's exclusion of certain non-
operating and extraordinary expenses was entirely justifiable.
Moreover, Usinor claims that the Department verified these omitted
expenses and only had a concern with donations and football club
expenses. Thus, Usinor believes that the items excluded, as verified by
the Department, are not production costs. Therefore, consistent with
past Department's practice (see Final Results of Administrative Review:
Tapered Roller Bearings, Finished and Unfinished, and Parts Thereof,
From Japan, 56 FR 41508, 41516 (1991); and Final Results of
Administrative Review: Television Receivers, Monochrome and Color, From
Japan, 56 FR 5392 (1991)), Usinor claims that they properly should not
be included in Ugine's G&A expenses.
Department's Position: We agree with both petitioners and
respondent in part. We agree with petitioners that some of the omitted
expenses in question should be included in the calculation of the G&A
expense rate. For instance, we agree that contributions (i.e., donation
and the football expenses) should be included in the calculation of G&A
expense because these expenses are a part of Usinor's overall
administrative expenses attributable to all production, including
production of subject merchandise. As for the exceptional expenses, we
agree with the respondents that these items are related to investing
activities and should not be included in the calculation of COP and CV
(see, Final Determination of Sales at Less Than Fair Value: Certain
Steel Concrete Reinforcing Bars From Turkey, 62 FR 9737, 9748 (March 4,
1997); and Final Results of Administrative Review: Tapered Roller
Bearings, Finished and Unfinished, and Parts Thereof, From Japan, 56 FR
41508, 41516 (1991) (Department included extraordinary expenses).
Comment 23: Disregarding Usinor's Claim for an Offset of Short-Term
Interest Income in Its Financial Expense Calculation (Usinor)
Petitioners argue that the Department should deny Usinor's claim
for an offset of short-term interest income in its financial expense
calculation because the respondent could not distinguish short-term
interest income from total interest income. Moreover, the petitioner
asserts that Usinor could not support its claim that interest income
was generated from short-term sources. Petitioners state that the
Department will not allow an offset in such circumstances and cite the
Final Determination of Sales at Less Than Fair Value: Certain Cut-to-
Length Carbon Steel Plate from the People's Republic of China, 62 FR
61964, 61970 (November 20, 1997) in which the Department stated that it
``* * * will offset interest expense by short-term interest income only
where it is clear from the financial statements that the interest
income was indeed short-term in nature.'' In that case, the Department
did not offset the interest income in the financial expense
calculation. Therefore, the petitioners argue that since Usinor was not
able to clearly distinguish short-term interest income from total
interest income in the financial statements, the Department should
disallow and reverse the offset taken by Usinor in its financial
expense calculation.
Usinor claims that the Department should accept Ugine's offset of
short-term interest income in calculating its financial expenses--just
as the Department has done in other cases involving Usinor (see Final
Determination of Sales at Less Than Fair Value: Certain Stainless Steel
Wire Rods From France, 58 FR 68865, 68872 (December 29, 1993)).
According to the respondent, Ugine calculated the offset in the same
manner as previously approved by the Department. Thus, Usinor contends
that petitioners' request to disallow Ugine's short-term interest
income offset is without merit.
Department's Position: We agree with petitioners. Usinor's
consolidated financial statements only reported a net interest expense
figure. Therefore, in order to calculate a financial expense figure
Usinor imputed its gross interest expense, long-term interest income,
and the short-term interest expense offset based on an adjustment
methodology used by the Department in a previous antidumping
investigation involving Usinor (see Final Determination of Sales at
Less Than Fair Value: Certain Stainless Steel Wire Rods From France, 58
FR 68865, 68872 (December 29, 1993)). In that case, the Department made
an adjustment to financial expense because Usinor incorrectly deducted
both short-term and long-term interest income, rather than limiting the
deduction to short-term income as required by the Department's
practice, when calculating its reported financial expense rate. As a
result, the Department limited the interest income offset claim to an
estimated short-term amount. By contrast, in this proceeding, we have
excluded Usinor's short-term interest offset because neither of
respondent's audited financial statements reported any breakdown of
long- vs. short-term investments or investment income, nor was the
respondent able to provide support for its claimed short-term interest
income. Therefore, based on the Department's past practice, we have
disallowed Usinor's short-term interest income offset in the financial
expense calculation (see, e.g., Final Results of Antidumping Duty
Administrative Review and Determination Not to Revoke in Part: Silicon
Metal From Brazil, 64 FR 1974 (February 9, 1999) (Department disallowed
the short-term offset.).
Comment 24: Accepting New Information Presented by Usinor on the Costs
of Products Sold but Not Produced (Usinor)
Petitioners claim that the Department should not accept Usinor's
minor correction provided on the first day of verification that relates
to products sold but not produced during the POI. According to
petitioners, this change is not a minor correction because the
correction is the submission of new costs for thirteen control numbers.
More important, the revision is based on new factual information that
was not submitted a week before verification took place. As a result,
neither the Department nor the petitioner had time
[[Page 30838]]
to review the submitted information before verification.
Petitioners further argue that while they recognize the need to
allow respondents an opportunity to correct minor errors at the
beginning of the verification, they do not believe that verification is
an appropriate venue for the submission of new factual information.
According to petitioners, the Department generally only collects and
uses information obtained at verification when minor discrepancies are
found or when the Department believes that a respondent's methodology
may not have been reasonable but can be simply changed (see Final
Results of Antidumping Duty Administrative Reviews: Heavy Forged Hand
Tools, Finished or Unfinished, With or Without Handles, From the
People's Republic of China, 63 FR 16758, 16761 (April 6, 1998)).
Verification, claim the petitioners, is used by the Department to
clarify and support information already on the record. Thus, the
Department will correct errors found at verification as long as those
errors are minor and do not exhibit a pattern of systemic misstatement
of fact (see Final Determination of Sales at Less Than Fair Value:
Ferrosilicon From Brazil, 59 FR 732, 736 (Jan. 6, 1994)). Therefore,
the petitioners assert that the submission of these new costs cannot be
considered minor by any measure and should not be used in the margin
calculation.
Usinor disagrees with petitioners position that the presentation of
revised cost data for these thirteen control numbers is inappropriate.
According to Usinor, the revised cost data does constitute a minor
correction because the reported costs of these control numbers were
incorrectly submitted due to a computer error. Moreover, Usinor asserts
this type of correction is typically accepted by the Department at the
commencement of verification. Usinor further states that this minor
correction was thoroughly verified by the Department. The Department,
therefore, should reject petitioners' attempt to create an issue where
none exists.
Department's Position: We agree with Usinor that the revised cost
of the thirteen control numbers in question is a minor correction
appropriately provided at the beginning of verification. Contrary to
the petitioners' argument, this revision is not based on the submission
of new information because the change relates to the correction of
existing information for these control numbers. Specifically, Usinor
presented the Department with revised cost data for 13 control numbers
(i.e., models) on the first day of verification. In its original
submission, Usinor thought that these thirteen models had been produced
outside the POI. To calculate the POI cost of these models in its
response, Usinor relied on surrogate values (i.e., the costs of the
most similar control number produced during the POI). During the
preparation for verification, however, Usinor realized that these
models had actually been produced during the POI. As a result, the
company did have the actual cost of the model available to make more
accurate calculations. During verification, we obtained and reviewed
with company officials a list of the actual cost of manufacture for
these control numbers (see cost verification exhibit 1). We noted costs
had changed but did not find the difference to be significant. As for
the collection of the corrected information, we believe the revised
calculation of the cost of these models was properly submitted prior to
the beginning of verification since the error was found as a result of
verification preparation (i.e., reconciliation of costs, as requested
in the agenda). Therefore, we have accepted the revised costs for the
final determination.
Comment 25: Application of Facts Available to Edgcomb's Further
Manufacturing Data (Edgcomb)
Petitioners contend that the dumping margin for U.S. sales further
manufactured by Edgcomb should be based on adverse facts available.
According to petitioners, it is appropriate for the Department to use
adverse facts available pursuant to section 776(b) of the Act in this
case because Usinor has failed to cooperate by not acting to the best
of its ability to comply with a request for information within the
meaning of section 776(b) of the Act. The verification report
establishes this non cooperation in several different areas. According
to petitioners, in similar cases, the Department has applied the
highest margin in the petition, the notice of initiation, or the
highest non-aberrant calculated margin in the database (see Final
Determination of Sales at Less Than Fair Value: Static Random Access
Memory Semiconductors From Taiwan, 63 FR 8909, 8910 (Feb. 23, 1998)).
Petitioners first argue that Edgcomb did not provide the most
product-specific costs available. According to petitioners, Edgcomb has
a standard cost system that calculates model-specific costs, but
Edgcomb elected not to use it for submission purposes. Petitioners
argue that Edgcomb calculated and reported a single weighted-average
per-unit further manufacturing cost based on an inappropriate
allocation methodology that was found to be inaccurate and distortive
by the Department. Specifically, petitioners first point out that
Edgcomb's reported costs did not account for the processing steps
through which the merchandise actually passed. In addition, the
reported costs were an average of all stainless steel products rather
than just subject merchandise. Thus, Edgcomb included costs for non
subject merchandise like bars and angles. Then, the petitioners note
that the respondent allocated costs using sales quantities (which do
not accurately represent production quantity, due to product-specific
changes in inventory) and sales values (which do not account for
differences in product mix). As a result of failing to provide
information based on their cost accounting system and of creating an
entirely new costing system, the petitioners argue that the information
on the record concerning Edgcomb's further manufacturing costs is so
incomplete that it cannot serve as the basis for the final
determination, and the data cannot be corrected and used without undue
difficulty.
Petitioners further allege that Edgcomb deviated from its normal
accounting system in reporting its costs without obtaining
authorization from the Department for the methodologies used. Thus, the
company failed to provide information requested by the Department in
the form and manner requested. According to petitioners, the
Department's instructions required Usinor to contact the Department
before offering an alternative methodology, which respondent failed to
do. As a result, petitioners maintain that Edgcomb's unilateral
decision to use an average rather than product-specific costs were
improper. The burden, according to the petitioners, is on the
respondent to create a complete and accurate record (see Final Results
of Administrative Review: Circular Welded Carbon Steel Pipes and Tubes
From Thailand, 62 FR 53808, 53814 (October 16, 1997)). Moreover,
respondents cannot be allowed the unilateral discretion to decide which
information to provide the Department (see Olympic Adhesives, Inc. v.
United States, 899 F.2d 1565, 1571 (CIT. 1990) and Mitsubishi Heavy
Indus., Ltd. v. United States, 833 F. Supp. 919, 924 (CIT 1993) (It is
Commerce, not the respondent, that determines what information is to be
provided for an investigation)). Lastly, petitioners contend that
[[Page 30839]]
Edgcomb failed to provide verifiable information that significantly
impeded the investigation. As a result, Edgcomb has not demonstrated
that it has acted to the best of its ability to provide requested
information to the Department.
Usinor asserts that no basis exists to apply adverse facts
available to Edgcomb's further manufacturing costs. Usinor claims that
Edgcomb clearly disclosed in its section E questionnaire response that
it was not relying on its cost accounting system to calculate its
further manufacturing costs. Moreover, Usinor asserts that the
Department never requested revised data from Edgcomb, nor did it even
request a further explanation of Edgcomb's methodology. Thus, Usinor
asserts that Edgcomb should not be penalized for the Department's
failure to give Usinor adequate notice of any perceived deficiencies in
Edgcomb's methodology. Respondent also claims that it would be
particularly unfair and inappropriate to penalize Usinor for any
perceived shortcomings in Edgcomb's cost data. According to Usinor, it
fully cooperated with the Department's investigation and provided the
Department with further cost of manufacturing data to the best of its
ability. Usinor maintains that it does not control Edgcomb, and
although Usinor believes that Edgcomb cooperated fully, it was unable
to compel Edgcomb to proceed in a particular manner or with specified
resources to provide the information pertinent to the investigation.
Moreover, Usinor argues that the further manufacturing data is
acceptable and reasonable and should be used in the Department's final
determination. Usinor argues that the methodology Edgcomb used was the
only feasible method available and that this method accurately
represents the cost of further processing. Usinor then asserts that
Edgcomb's cost accounting system did not calculate accurate costs
during the entire POI because the system was brand new. According to
Usinor, Edgcomb installed the system during the POI but was slow to
correct the cost inaccuracies the system calculated because further
processing cost represents an insignificant portion of the Company's
total cost. Since the cost system generated inaccurate results during
the POI, Usinor claims that Edgcomb's cost accounting system could not
be used. As an alternative, Usinor claims that Edgcomb appropriately
used its financial accounting system to calculate the submitted single
weighted-average per-unit cost.
If the cost accounting system had been completely implemented and
usable, Usinor then argues that Edgcomb would still not be able to use
the system to calculate its further manufacturing costs. According to
Usinor, the company would have to overcome the problem of linking the
sales orders back to the original plant that processed the subject
merchandise. Usinor claims that this would involve extensive computer
programming as well as an unreasonable amount of manual work on
Edgcomb's behalf. In such instances, Usinor claims that the Department
does not normally request such extensive undertakings and cites Usinor
Sacilor v. United States, 872 FS 1000, 1007 (CIT 1994) to support its
position that such an undertaking is not necessary.
Usinor then contends that calculating a single weighted-average
further manufacturing costs for Edgcomb is not distortive. According to
Usinor, the single weighted-average cost is appropriate because
Edgcomb's slitting and cutting fabrication costs represent
approximately the same amount. Usinor maintains that the Department
often accepts single weighted-average per-unit costs. To support its
position, Usinor cites several cases in which the Department accepted
respondent's non-product specific weighted-average production costs
when product-specific costs were not available (see Final Results of
Antidumping Review: Certain Porcelain-on-Steel Cookware from Mexico, 62
FR 42496, 42506 (August 7, 1997) (``Cookware from Mexico''); Final
Results of Antidumping Review: Certain Welded Carbon Steel Pipe From
Turkey, 61 FR 69067, 69072 (December 31, 1996) (``Steel Pipe from
Turkey''); Final Results of Antidumping Review: Certain Cold-Rolled
Carbon Steel Flat Products From Germany, 60 FR 65264, 65266 (December
19, 1995) (``Steel Sheet Flat Products from Germany''). In the same
context, Usinor disagrees with the Department's finding discussed in
the further manufacturing cost verification report that indicates that
the required processing route of a model does have an impact on the
model's specific costs. According to Usinor, the verifiers incorrectly
compared the fabricating costs associated with the cutting and slitting
processes and not the average gross unit prices of the models involved.
If the verifiers had compared the gross unit price, Usinor maintains
that the total difference in costs would be found to be de minimis. In
addition, Usinor asserts that the Department based its findings on a
limited sample that is unrepresentative of the total population.
As for using sales quantity and value as an allocation bases,
Usinor maintains that the approach is not distortive. According to
Usinor, sales quantity is appropriate as an allocation base because it
approximates Edgcomb's actual production quantity. In such instances,
Usinor claims that the Department normally accepts the sales quantities
in lieu of production quantity. To support this claim, Usinor cites
several cases in which the Department accepted sales quantities in lieu
of production quantities (see Final Results of Antidumping Duties:
Certain Welded Carbon Steel Pipe and Tube from Turkey, 61 FR 69067,
69071 (December 31, 1996); Final Determination of Sales at Less Than
Value: Stainless Steel Round Wire from Canada, 64 FR 17324, 17330
(April 9, 1999)). As to the use of sales value as an allocation base,
respondent notes that this allocation base was used principally because
the data for other allocation bases were not available.
Usinor then disagrees with the petitioners' contention that
Edgcomb's reported costs were based on incomplete data. Usinor
maintains that the only instance of Edgcomb basing its calculations on
limited data is its process material yield loss calculations. According
to Usinor, Edgcomb had to calculate this cost based on the last three
months of the POI because of the deficiencies in its cost accounting
system. Specifically, Edgcomb's cost accounting system did not retain
all the production data for the POI. Moreover, Usinor claims that the
sample used to generate the yield loss is representative because it is
based on Edgcomb's experience and there is no reason to believe the
yield losses change over time.
Department's Position: We agree with petitioners that the further
manufacturing costs cannot be used for the final determination, and
therefore the Department must resort to facts otherwise available.
While we agree with petitioners that the further manufacturing costs
contain errors that are not correctable, we disagree that the
application of adverse facts available is warranted in this case.
Section 777(b) allows the Department to use an inference that is
adverse to the respondent, if it finds that the ``interested party has
failed to cooperate by not acting to the best of its ability to comply
with a request for information.'' However, we were able to verify that,
because Edgcomb was in the process of switching accounting systems
during the POI, it experienced extraordinary difficulties in reporting
to the Department. While we agree with
[[Page 30840]]
petitioners that Usinor or Edgcomb should have notified the
Department--prior to the submission of the further manufacturing
response--that it did not intend to use its normal cost accounting
system for reporting purposes, the Department did not direct Edgcomb to
resubmit its further manufacturing costs. Therefore they have not
failed to cooperate and an adverse inference is not warranted.
However, based on our findings at verification, we conclude that
the cost methodology reported by Usinor for Edgcomb's costs is
unusable. We disagree with Usinor's argument that the reporting of one
single weighted-average per-unit further manufacturing cost does not
distort the analysis. Edgcomb's single weighted-average per-unit cost
not only obscured all cost differences associated with some of the
physical characteristics identified in this investigation as being
significant, but also included all cost differences associated with the
physical characteristics of non-subject merchandise. At verification,
we found that Edgcomb included the fabricating costs of both subject
and non-subject merchandise in its submitted weighted-average cost.
We also disagree with Usinor that the use of sales values and
quantities is appropriate. While the Department has allowed the use of
sales quantities when it is established that they are reflective of
production quantities, the use of sales values is seldom appropriate.
Sales values are not typically appropriate for purposes of allocating
cost because they do not necessarily reflect the actual factors that
drive certain costs. The court of appeals has found the use of sales
value as an allocation base leads to a circular methodology, in the
context to antidumping calculations (see IPSCO, Inc. v. United States,
965 F. 2d 1056 (Fed. Cir. 1992) (Court determined price-based
allocations of costs methodologies circular, and ``contradict the
express requirements of the statute which set forth the cost of
production as an independent standard for fair value.'').
Additionally, we disagree with Usinor's interpretation of several
cases which Usinor relies upon to support its claim that the Department
has normally accepted respondent's non-product specific weighted-
average production costs when product-specific costs were not
available. For example, in Cookware from Mexico, 62 FR at 42506, the
Department actually determined that the respondent's reported costs
``were allocated to a sufficient level of product specific detail in
accordance with the Department's questionnaire instructions.'' In Steel
Pipe From Turkey, 61 FR at 69072, the Department determined that, even
though respondent's reported cost did provide some level of product
specificity, it did not reflect the same level as the costs maintained
in its normal course of business. Therefore, the Department made
necessary adjustments through application of partial facts available to
reflect more product-specific data available on the record. In Steel
Flat Products from Germany, 60 FR at 65266, the Department determined
that the reported costs did have a certain level of product specificity
and did reflect the costs as reported in the company's normal cost
accounting system.
Finally, Usinor has also argued that the samples the Department
obtained of the cost accounting system are not representative of the
total population. We disagree. We note that the court has upheld our
use of testing the respondent's data through the use of samples. In
Tatung Co. v. United States, Slip Op. 94-195 (CIT 1994), the court
opinion stated ``verification is like an audit, the purpose of which is
to test information provided by a party for accuracy and completeness,
so that Commerce can justifiably rely on that information.'' Moreover,
we note that Usinor itself selected the two samples upon which the
Department's conclusions are based prior to verification. See Memo to
the File from Garri Gzirian, dated March 19, 1999.
Therefore, we have not relied on Edgcomb's reported cost of
manufacturing data. Where we did find that Edgcomb's costs were
reported correctly, we have used those costs. However, in other
instances, as facts otherwise available we have utilized the
manufacturing costs of Usinor's other further manufacturer, Hague. We
adjusted Hague's reported costs using certain yield loss and processing
costs data verified at Edgcomb. We have relied on Edgcomb's SG&A and
financial expense calculations.
Comment 26: Combined Financial Statements of Edgcomb and EEHC, and
Leasing Arrangement Between the Entities (Edgcomb)
Petitioners assert that Usinor understated Edgcomb's further
manufacturing costs by not including the true cost of leasing its plant
and equipment (``P&E'') from an affiliate. According to petitioners,
Usinor relied on the amounts reported in Edgcomb and EEHC's combined
financial statements. The combined financial statements collapsed the
results of Edgcomb and EEHC (which is a partnership that leases P&E to
Edgcomb) into a single reporting entity. However, by relying on amounts
reported in the combined financial statements, petitioners assert that
Edgcomb only included the depreciation expense associated with this
leased P&E rather than the actual lease payments incurred. Petitioners
argue that this combination is improper because Edgcomb and EEHC are
distinct entities with separate revenues and costs. Thus, petitioners
contend that Usinor inappropriately understated Edgcomb's further
manufacturing costs.
Usinor disagrees with the petitioners' contention. According to
Usinor, Edgcomb manages EEHC's financial records in the normal course
of business and normally combines the financial results of the two
entities. Moreover, Usinor maintains that EEHC is simply a paper
company that was created solely for the purpose of implementing the
sale/leaseback financing arrangement. As such, Usinor maintains that
there is no actual substance to the separateness of these business
entities. In addition, Usinor claims that it is the Department's normal
practice to collapse such affiliated entities into a single reporting
entity. To support its claim, Usinor cites Koenig & Bauer Albert AG v.
United States, LEXIS 23, at *12 (CIT 1999) and Asociacion Colombiana de
Exportadores de Flores v. United States, 6 FS 2d 865, 892-896 (CIT
1998) (Demonstrates the Department's practice of collapsing affiliated
parties and treating them as a single entity.). Usinor further notes
that Edgcomb's recording of EEHC's actual depreciation expenses instead
of the actual rental expense in the combined financial statements is in
accordance with U.S. GAAP. Therefore, according to respondent, the
Department should continue its practice of adhering to a respondent's
accounting practices in accordance with GAAP so long as the practices
do not significantly distort the firm's financial position and actual
costs. To support this point, respondent cites Laclede Steel Co. v.
United States, 965 LEXIS 186, at *28 (CIT 1994) and Final Determination
of Sales at Less Than Fair Value: Stainless Steel Wire Rod From Italy,
63 FR 40422, 40429 (July 29, 1998).
Department's Position: We agree with petitioners that Edgcomb
understated its reported costs by only reporting the depreciation
expense on its leased assets rather than the transfer price. However,
we find this issue is moot because we are not relying on Edgcomb's
reported fabrication costs for the final determination.
[[Page 30841]]
Comment 27: Value of Scrap Sales Used To Offset Further Manufacturing
Material Costs (Edgcomb)
Usinor admits that Edgcomb may have slightly understated its
material costs by overstating its scrap revenue used as an offset to
these costs. However, Usinor claims that revising the value would only
increase further manufacturing costs by a de minimis amount.
Petitioners refer to the overstatement of the value of scrap sales
offset as another reason for not accepting Edgcomb's reported further
manufacturing costs. However, if the Department does not resort to
facts available, petitioners claim that the Department should make an
adjustment to correct for this understatement of costs.
Department's Position: We agree with petitioners that Edgcomb
understated its reported material costs by overstating its scrap
revenue offset. However, this issue is moot because we are not relying
on Edgcomb's fabrication costs for the final determination.
Comment 28: Including the Consolidation Depreciation Adjustment to
Further Manufacturing Costs (Edgcomb)
Usinor argues that the Department should not include the
depreciation adjustment reported in Edgcomb's 1997 financial statements
in the company's further manufacturing cost. According to Usinor, this
depreciation is the result of making a year-end adjustment for
financial statement purposes. Specifically, Usinor notes that this
adjustment was made in accordance with U.S. GAAP because the new parent
(i.e., Samsteel) of Edgcomb changed the useful lives used by Edgcomb
previous parent (i.e., Usinor). Moreover, Usinor claims that this
adjustment was later eliminated through consolidating entries when
Samsteel prepared its 1997 consolidated financial statements. In 1998,
Usinor notes that this adjustment wasn't even recorded at Edgcomb's
level. If the depreciation adjustment is added to Edgcomb's further
manufacturing costs, Usinor notes that the resulting change would have
a de minimis impact on the margin calculations.
To capture accurately the expenses incurred, petitioners contend
that the Department should include the adjustment in Edgcomb's further
manufacturing costs.
Department's Position: We agree with petitioners that this expense
should be included in Edgcomb's further manufacturing fabrication
costs. However, this issue is moot because we are not relying on
Edgcomb's fabrication costs for the final determination.
Comment 29: Applying Facts Available to Hague's Further Manufacturing
Costs (Hague)
Petitioners argue that the Department cannot accept the further
manufacturing costs reported by Hague, and should base the margin
calculations on adverse facts available. Petitioners point out that
Hague reported its unit cost of material based on overall figures that
include the total cost and quantity of subject and non-subject
merchandise. Petitioners claim that information presented on the
verification exhibits show that Hague's accounting system is capable of
providing a more detailed cost of material. Based on this conclusion,
petitioners assert that Hague failed to provide the most product-
specific costs allowed by its cost of production records, which creates
grounds for application of the adverse facts available under section
776 of the Act.
Usinor argues that petitioners' claims of inaccuracy and demands to
apply adverse facts available to Hague's further manufacturing cost
should be rejected. Usinor refutes petitioners' conclusion on the
capabilities of Hague's accounting system by claiming that it was not
feasible to provide more product-specific calculations based on the
information generated by the system. According to Usinor, in those
cases, where the system keeps track of major grade categories, it does
not allow to separate subject from non-subject material within each
grade. In other cases, where it does allow identification of the source
and process (which is essential for identifying subject merchandise),
it does not contain information by grade. Respondent contends that
Hague's further manufacturing data is based on a reasonable
methodology, consistent with the available records that Hague maintains
in its normal course of business.
Department's Position: We disagree with the petitioners' contention
that the methodologies used by Hague to calculate its reported cost of
further manufacturing warrant the application of adverse facts
available. To calculate model specific costs, Hague relied on the most
specific and reasonable allocation methods available within its normal
record keeping system. Specifically, Hague relied on the costs reported
in its financial accounting system to calculate its reported further
manufacturing costs because the company does not have a detailed cost
accounting system that generates model-specific costs. Using the
amounts reported in its financial accounting system and available
production reports, Hague was able to calculate a unique further
manufacturing cost for each major fabrication process. Where the
respondent has provided model specific costs that reasonably reflect
the cost of production, our practice is to accept the respondent's
reported costs (see Final Results of Antidumping Duty Administrative
Review: Certain Welded Carbon Steel Pipe and Tube From Turkey, 61 FR
69067 (December 31, 1996). In accordance with section 782(e) of the
Act, even where information does not meet all of the established
requirements, we will use it where it is timely, reliable, and can be
used without undue difficulty.
Moreover, our verification revealed nothing to contradict Hague's
claim that it does not maintain more product-specific data in its
normal course of business. We also verified that Hague was not able to
calculate more model specific fabrication costs than those provided.
While the accounting records identified by petitioner could in theory
be used to calculate more specific costs for each specific order, Hague
does not retain all the necessary production records in its normal
course of business to make such calculations. As a result, Hague's
methodology does provide a reasonable level of product specificity that
is consistent with the company's records maintained in the normal
course of business. Moreover, we found that the deficiencies we had
identified in our further manufacturing cost verification report (e.g.,
understatement of material costs, additional process strings, etc.) can
be adjusted without undue difficulties using data available on the
record. Therefore, we find that the application of adverse facts
available is not warranted in this instance.
Comment 30: Adjusting the Reported Further Manufacturing Material Costs
(Hague)
Usinor maintains that the Department does not need to adjust
Hague's reported material costs. Usinor argues that the methodology
used by the Department in its further manufacturing cost verification
report to show that costs may be understated is inaccurate.
Specifically, Usinor points out that the numerator in the verifiers'
calculations includes non-subject as well as subject material
purchases. In addition, the Department's calculated cost is based on
1997 calendar year figures. In contrast, the denominator includes only
subject merchandise sales and is POI based. To make the Department's
calculation more accurate and to show that the reported
[[Page 30842]]
material cost is not distortive, Usinor provided a revised calculation
of Hague's material costs in its case brief. Since the resulting figure
is only slightly higher than the reported costs, Usinor believes that
Hague's approach was fair and reasonable and should be accepted by the
Department.
Petitioners argue that the Department should adjust Hague's cost of
material to exclude non-subject materials in accordance with the
methodology suggested in the cost verification report.
Department's Position: We have reviewed the information on the
record and agree with Usinor that the material cost calculated in
Hague's cost verification report was overstated. In addition, we
reviewed the methodology suggested by Hague in its case brief and have
found it to be reasonable and more product-specific. Therefore, for the
final determination, we have adjusted Hague's further manufacturing
costs using the method outlined in Usinor's case brief.
Comment 31: Claim Reimbursement Offset Further Manufacturing Costs
(Hague)
Usinor argues that the Department should not reverse the adjustment
made to Hague's raw material costs to exclude a warranty expense.
According to Usinor, Hague appropriately reduced its reported costs for
an expense that relates to the resolution of a 1996 warranty claim on a
1995 sale.
Petitioners contend that the Department should reverse the
adjustment to include this warranty cost because it was expensed during
the POI.
Department's Position: We agree with Usinor that Hague should not
include this expense in the calculation of its further manufacturing
costs. We note that the adjustment in question (``Claim Reimbursement--
95'') actually represents a finished goods inventory adjustment.
Specifically, information on the record show that a customer rejected a
shipped product because of a defect caused by the fabrication process.
Regardless of the timing of the events and transactions underlying this
adjustment, the adjustment essentially represents a revaluation of
finished goods inventory which should not be considered a part of
Hague's further manufacturing costs. Therefore, consistent with our
normal practice, we have allowed Hague to exclude this cost from its
costs calculations (see Final Determination of Sales at Less Than Fair
Value: Stainless Steel Round Wire from Canada, 64 FR 17324, 17334
(April 9, 1999)).
Comment 32: Adjusting Further Manufacturing Financial Expense Ratio
(Hague)
Usinor argues that the Department should not adjust Hague's
reported further manufacturing financial expense. According to Usinor,
Hague appropriately deducted imputed amounts from the consolidated
financial expense figure to avoid double counting. Usinor maintains
that imputed credit and inventory carrying costs are already deducted
from the sales price in the margin calculations. Therefore, these
expenses should not be included in the calculation of the further
manufacturing costs which is also a deduction to the sales price.
Respondent asserts that it is the Department's standard practice to
avoid such double-counting. To support this assertion, respondent cites
Final Results of Antidumping Duty Administrative Reviews: Certain Cold-
Rolled and Corrosion-Resistant Carbon Steel Flat Products From Korea,
64 FR 12927, 12931 (March 16, 1999) (``Carbon Steel Flat Products From
Korea''); Final Determination of Sales at Less Than Fair Value: New
Minivans From Japan, 57 FR 21937, 21956 (May 26, 1992) (``New Minivans
From Japan''); and Final Results of Antidumping Duty Administrative
Review: Antifriction Bearings (Other Than Tapered Roller Bearings) and
Parts Thereof From the Federal Republic of Germany, 56 FR 31692, 31721
( July 11, 1991) (i.e., ``AFB from Germany'').
Petitioners, however, argue that in fact Carbon Steel Flat Products
from Korea undercuts the respondent claim, and demonstrates that, to
the contrary, the Department's standard practice is not to accept such
adjustments.
Department's Position: We disagree with Usinor. It is not
appropriate for Hague to reduce the consolidated financial expense with
imputed amounts. In fact, we have always maintained that regular
interest expenses represent a legitimate production cost of a U.S.
further manufacturing affiliate and therefore should not be reduced by
imputed interest (see Final Determination of Sales at Less Than Fair
Value: Large Newspaper Printing Presses and Components Thereof, Whether
Assembled or Unassembled, From Japan, 61 FR 38139, 38165 (July 23,
1996). In that case, the Department disagreed with the respondent that
we double counted costs in the further manufacturing interest expense
by deducting both interest and imputed credit in our CEP calculation.
As for Usinor's citations to support their position, we note that the
Department's position is taken out of context. Specifically, our
position in Carbon Steel Flat Products From Korea (which references
Minivans and AFBs From Germany) addresses the possibility of double-
counting of imputed interest in the context of U.S. indirect selling
expenses. However, we note that indirect selling expenses are not a
component of further manufacturing cost. Furthermore, even in the
context of U.S. indirect selling expenses, the Department stated its
position that ``because activities of U.S. sales affiliates differ
considerably across cases, the Department must determine the
appropriate universe of CEP deductions on a case-by-case basis.''
Therefore, we have disallowed the adjustment in question, and applied
the financial expense ratio calculated at the consolidated level.
Comment 33: Further Manufacture Financial Expense Ratio Calculation
(Edgcomb)
Usinor states that the Department should accept Edgcomb reported
further manufacturing financial expense that was calculated using
Samsteel, Inc.'s consolidated financial statements. Usinor maintains
that Edgcomb's ultimate parent, the Macsteel Group of South Africa,
does not prepare a consolidated financial statement. Thus, Edgcomb
calculated its financial expense ratio using the consolidated amounts
from the highest level financial statement obtainable (i.e., that of
Samsteel). Usinor also notes that the financial expense ratio for
Samsteel is not significantly different from Usinor's consolidated
financial expense ratio.
According to petitioners, Edgcomb is not cooperating in this
investigation by refusing to provide the consolidated financial figures
of Edgcomb's ultimate parent, Macsteel Group of South Africa.
Petitioners refer to the overstatement of the value of scrap sales
offset as another reason for not accepting Edgcomb's reported further
manufacturing costs. If the Department does not resort to adverse facts
available for Edgcomb, petitioners claim that the Department should
still adjust respondents financial expense.
Department's Position: We agree with Usinor that Edgcomb
appropriately relied on the financial statements of the highest
consolidation level available to calculate the company's further
manufacturing financial expense ratio. During verification, we
confirmed that no higher level of consolidation existed (see, Edgcomb's
cost verification exhibit 13). Moreover, relying on Samsteel's
consolidated statements as being the
[[Page 30843]]
highest level available is consistent with our prior practice (see
Final Determination of Sales at Less Than Fair Value: Stainless Steel
Round Wire From Canada, 64 FR 17324-17336 (April 9, 1999) (Department
relied on the amounts reported on the consolidated financial statements
of the highest level available to calculate the financial expense
ratio). Likewise, we found that it would be inappropriate to use the
Usinor Group's consolidated financial expense ratio as a surrogate. We
note that the Usinor Group only held a minority interest in Edgcomb. As
a result, Edgcomb's financial results were not consolidated into the
Group's financial results. Since Edgcomb's financial expense is not a
component of the reported further manufacturing costs which are being
based on facts available, as discussed above, we have relied on the
company's submitted financial expense ratio for the final
determination.
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 France 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. The suspension
of liquidation instructions will remain in effect until further notice.
The weighted-average dumping margins are as follows:
------------------------------------------------------------------------
Weighted-
average
Exporter/manufacturer margin
(percent)
------------------------------------------------------------------------
Usinor..................................................... 10.64
All Others................................................. 10.64
------------------------------------------------------------------------
ITC Notification
In accordance with section 735(d) of the Act, we have notified the
International Trade Commission (``ITC'') of our determination. As our
final determination is affirmative, the ITC will, within 45 days,
determine whether these imports are materially injuring, or threaten
material injury to, the U.S. industry. If the ITC determines that
material injury, or threat of material injury does not exist, the
proceeding will be terminated and all securities posted will be
refunded or canceled. If the ITC 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 Act.
Dated: May 19, 1999.
Richard W. Moreland,
Acting Assistant Secretary for Import Administration.
[FR Doc. 99-13679 Filed 6-7-99; 8:45 am]
BILLING CODE 3510-DS-P
