[Federal Register Volume 63, Number 145 (Wednesday, July 29, 1998)]
[Notices]
[Pages 40461-40472]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-20022]
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DEPARTMENT OF COMMERCE
INTERNATIONAL TRADE ADMINISTRATION
[A-583-828]
Notice of Final Determination of Sales at Less Than Fair Value:
Stainless Steel Wire Rod from Taiwan
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: July 29, 1998.
FOR FURTHER INFORMATION CONTACT: Laurel LaCivita or Alexander Amdur,
Import Administration, International Trade Administration, U.S.
Department of Commerce, 14th Street and Constitution Avenue, NW,
Washington, DC 20230; telephone: (202) 482-4740 or (202) 482-5346,
respectively.
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's regulations are
to the regulations at 19 CFR part 351, 62 FR 27296 (May 19, 1997).
Final Determination
We determine that stainless steel wire rod (SSWR) from Taiwan is
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 ``Suspension of Liquidation'' section of this notice.
Case History
The preliminary determination in this investigation was issued on
February 25, 1998. See Notice of Preliminary Determination of Sales at
Less Than Fair Value and Postponement of Final Determination: Stainless
Steel Wire Rod from Taiwan, 63 FR 10836 (March 5, 1998) (Notice of
Preliminary Determination). Since the preliminary determination, the
following events have occurred:
On March 12, 1998, we received a submission from Yieh Hsing
Enterprise Corporation, Ltd. (Yieh Hsing) alleging that the Department
made ministerial errors in the preliminary determination. In response
to Yieh Hsing's ministerial error allegations, we issued an amended
preliminary determination on March 30, 1998. See Notice of Amended
Preliminary Determination of Sales at Less Than Fair Value: Stainless
Steel Wire Rod From Taiwan, 63 FR 16972 (April 7, 1998).
In March 1998, we issued supplemental questionnaires to and
received responses from the respondents in this case, Walsin Cartech
Specialty Steel Corporation (Walsin) and Yieh Hsing (hereinafter
``respondents'').
In March, April, and May 1998, we verified the sales and cost
questionnaire responses of these two respondents. In June 1998, Yieh
Hsing submitted revised sales databases at the Department's request.
The petitioners (i.e., AL Tech Specialty Steel Corp., Carpenter
Technology Corp., Republic Engineered Steels, Talley Metals Technology,
Inc., and the United Steel Workers of America, AFL-CIO/CLC) and the
respondents submitted case briefs on June 8 and 10, 1998, and rebuttal
briefs on June 16 and 17, 1998. We held a public hearing on June 18,
1998.
Scope of Investigation
For purposes of this investigation, SSWR comprises products that
are hot-rolled or hot-rolled annealed and/or pickled and/or descaled
rounds, squares, octagons, hexagons or other shapes, in coils, that may
also be coated with a lubricant containing copper, lime or oxalate.
SSWR is made of alloy steels containing, by weight, 1.2 percent or less
of carbon and 10.5 percent or more of chromium, with or without other
elements. These products are manufactured only by hot-rolling or hot-
rolling, annealing, and/or pickling and/or descaling, are normally sold
in coiled form, and are of solid cross-section. The majority of SSWR
sold in the United States is round in cross-sectional shape, annealed
and pickled, and later cold-finished into stainless steel wire or
small-diameter bar.
The most common size for such products is 5.5 millimeters or 0.217
inches in diameter, which represents the smallest size that normally is
produced on a rolling mill and is the size that most wire-drawing
machines are set up to draw. The range of SSWR sizes normally sold in
the United States is between 0.20 inches and 1.312 inches diameter. Two
stainless steel grades, SF20T and K-M35FL, are excluded from the scope
of the investigation. The chemical makeup for the excluded grades is as
follows:
SF20T
------------------------------------------------------------------------
------------------------------------------------------------------------
Carbon.................................... 0.05 max.
Manganese................................. 2.00 max.
Phosphorous............................... 0.05 max.
Sulfur.................................... 0.15 max.
Silicon................................... 1.00 max.
Chromium.................................. 19.00/21.00.
Molybdenum................................ 1.50/2.50.
Lead...................................... Added (0.10/0.30).
Tellurium................................. Added (0.03 min.)
------------------------------------------------------------------------
K-M35FL
------------------------------------------------------------------------
------------------------------------------------------------------------
Carbon.................................... 0.015 max.
Nickel.................................... 0.30 max.
Silicon................................... 0.70/1.00.
Manganese................................. 0.40 max.
Phosphorous............................... 0.04 max.
Sulfur.................................... 0.03 max.
Chromium.................................. 12.50/14.00.
Lead...................................... 0.10/0.30.
Aluminum.................................. 0.20/0.35.
------------------------------------------------------------------------
The products under investigation are currently classifiable under
subheadings 7221.00.0005, 7221.00.0015, 7221.00.0030, 7221.00.0045, and
7221.00.0075 of the Harmonized Tariff Schedule of the United States
(HTSUS). Although the HTSUS subheadings are provided for convenience
and customs purposes, the written description of the scope of this
investigation is dispositive.
Period of Investigation
The period of investigation (POI) is July 1, 1996, through June 30,
1997.
Fair Value Comparisons
To determine whether sales of SSWR from Taiwan to the United States
were made at less than fair value, we compared the Export Price (EP)
and/or Constructed Export Price (CEP) to the Normal Value (NV). Our
calculations followed the methodologies described in the preliminary
determination, except as noted below and in company-specific analysis
memoranda dated July 20, 1998.
On January 8, 1998, the Court of Appeals for the Federal Circuit
issued a decision in CEMEX v. United States, 1998 WL 3626 (Fed Cir.).
In that case, based on the pre-URAA version of the Act, the Court
discussed the appropriateness of using constructed value (CV) as the
basis for foreign market value when the Department finds home market
sales to be outside
[[Page 40462]]
the ``ordinary course of trade.'' This issue was not raised by any
party in this proceeding. However, the URAA amended the definition of
sales outside the ``ordinary course of trade'' to include sales below
cost. See Section 771(15) of the Act. Consequently, the Department has
reconsidered its practice in accordance with this court decision and
has determined that it would be inappropriate to resort directly to CV,
in lieu of foreign market sales, as the basis for NV if the Department
finds foreign market sales of merchandise identical or most similar to
that sold in the United States to be outside the ``ordinary course of
trade.'' Instead, the Department will use sales of similar merchandise,
if such sales exist. The Department will use CV as the basis for NV
only when there are no above-cost sales that are otherwise suitable for
comparison. Therefore, in this proceeding, when making comparisons in
accordance with section 771(16) of the Act, we considered all products
sold in the home market as described in the ``Scope of Investigation''
section of this notice, above, that were in the ordinary course of
trade for purposes of determining appropriate product comparisons to
U.S. sales. Where there were no sales of identical merchandise in the
home market made in the ordinary course of trade to compare to U.S.
sales, we compared U.S. sales to sales of the most similar foreign like
product made in the ordinary course of trade, based on the
characteristics listed in Sections B and C of our antidumping
questionnaire. We have implemented the Court's decision in this case,
to the extent that the data on the record permitted.
We made product comparisons based on the same characteristics and
in the same general manner as that outlined in the preliminary
determination. As in the preliminary determination, in instances where
a respondent has reported a non-AISI grade (or an internal grade code)
for a product that falls within an AISI category, we have used the
actual AISI grade rather than the non-AISI grade reported by the
respondents for purposes of our analysis. In instances where the
chemical content ranges of a reported non-AISI grade (or an internal
grade code) are outside the parameters of an AISI grade, we have used
the non-AISI (or internal) grade code reported by the respondents for
analysis purposes. However, in instances in which an internal grade
matches all the specified chemical content tolerance ranges of an AISI
grade, but the internal grade also contains amounts of chemicals that
are not otherwise specified as being included in the standard AISI
designation, we have used the corresponding AISI grade rather than the
internal grade. For further discussion, see Comment 2 and Comment 16 in
the ``Interested Party Comments'' section of this notice.
Export Price/Constructed Export Price
For Walsin, we used EP and CEP methodology as defined in sections
772(a) and 772(b) of the Act. For certain unreported CEP sales made
during the POI by Carpenter Technology Corp. (Carpenter), Walsin's U.S.
affiliate, we applied facts available in accordance with Section 776(a)
of the Act. For the reasons stated in the DOC Position to Comment 1 in
the ``Interested Party Comments'' section of this notice, we determined
that adverse inferences in selecting among the facts otherwise
available are not warranted in this instance. Therefore, as facts
available, we applied the weighted-average margin calculated for all
reported sales to the unreported CEP sales at issue.
For Yieh Hsing, we used EP methodology as defined in section 772(a)
of the Act. In the preliminary determination, we reclassified some of
Yieh Hsing's U.S. sales of SSWR as CEP sales. Based on the record
developed since the preliminary determination, the Department has
reconsidered its decision and has accepted Yieh Hsing's classification
of all of its U.S. sales of SSWR as EP sales for purposes of the final
determination. For further discussion, see Comment 18 in the
``Interested Party Comments'' section of this notice.
A. Export Price
We calculated EP based on the same methodology used in the
preliminary determination, with the following exceptions:
Walsin
We corrected for certain clerical errors found during verification
with respect to Walsin, including the corrections to the response that
Walsin identified in the course of preparing for verification and
reported in its May 11, 1998 submission.
Yieh Hsing
We made additional deductions from the starting price, where
appropriate, for U.S. handling and other charges, U.S. customs duties,
harbor maintenance and merchandise processing fees (which are included
in U.S. duties), and U.S. entry fees, pursuant to section 772(c)(2)(A)
of the Act.
We corrected for certain clerical errors found during verification
with respect to Yieh Hsing's calculations, including gross unit price,
foreign inland freight, foreign brokerage and handling, U.S.
commission, entry fees, U.S. handling and other charges, and U.S.
credit expenses.
B. Constructed Export Price
We calculated CEP for Walsin based on the same methodology used in
the preliminary determination, with the following exceptions:
We corrected for certain clerical errors found during verification
with respect to Walsin, including the corrections to the response that
Walsin identified in the course of preparing for verification and
reported in its May 11, 1998 submission. We made additional deductions
from starting price for U.S. brokerage expense pursuant to section
772(c)(2)(A) of the Act (see Comment 9 in the ``Interested Party
Comments'' section of this notice).
We recalculated indirect selling expenses incurred in the United
States as a result of our findings at verification (see Comment 1 in
the ``Interested Party Comments'' section of this notice and the July
20, 1998 Memorandum from Laurel LaCivita to the File, Walsin-Cartech
Specialty Steel Corporation: Concurrence Memorandum for the Final
Determination (Walsin Concurrence Memorandum).
Normal Value
We used the same methodology to calculate NV as that described in
the preliminary determination, with the following exceptions:
A. Walsin
We corrected for certain clerical errors found during verification
with respect to Walsin, including the corrections to the response that
Walsin identified in the course of preparing for verification and
reported in its May 11, 1998 submission.
B. Yieh Hsing
We included all of Yieh Hsing's home market sales to affiliated
customers in our analysis because we determined that these sales were
made at arm's-length prices and thus in the ordinary course of trade.
We corrected for certain clerical errors found during verification
with respect to Yieh Hsing's calculations, including interest revenue
and inland freight.
Cost of Production
We calculated the weighted-average cost of production (COP), by
model, based on the sum of each respondent's cost of materials and
fabrication for the foreign like product, plus amounts for
[[Page 40463]]
home market selling, general and administrative (SG&A) expenses and
packing costs in accordance with section 773(b)(3) of the Act. We
relied on the submitted COP except in the following specific instances
where the submitted costs were not appropriately quantified or valued:
A. Walsin
We made changes based on our findings at verification with respect
to Walsin's reported yield loss. (See Comment 11 in the ``Interested
Party Comments'' section of this notice and Memorandum to Christian
Marsh from Stan Bowen and Laurens Van Houten dated July 20, 1998
(``Walsin Cost Memo'')). We revised Walsin's submitted general and
administrative (G&A) expense factor to include idle capacity,
miscellaneous income and expenses, salvage income, and loss on the sale
of equipment. (See Comment 13 in the ``Interested Party Comments''
section of this notice and Walsin Cost Memo). We adjusted the reported
transfer price for copper purchased from an affiliate to reflect the
market price. (See Comment 14 in the ``Interested Party Comments''
section of this notice and Walsin Cost Memo).
B. Yieh Hsing
Yieh Hsing failed to report a unique COP for each of the product
categories it reported on its computer sales listing. Therefore, we
used the COP of the most similar model for each missing product
category. (See Memorandum to Christian Marsh from Stan Bowen and
Laurens Van Houten dated July 20, 1998 (``Yieh Hsing Cost Memo'')). We
adjusted the cost of billets that Yieh Hsing obtained from an
affiliated supplier to reflect the higher of the market price, transfer
price, or COP of the billets. In addition, we adjusted the cost of the
billets that Yieh Hsing obtained from its affiliate to include revised
G&A and interest expenses of the affiliate, bonus payments that the
affiliate paid to its employees, and the cost of billet freight from
the affiliate to Yieh Hsing. We adjusted the cost of sales figure used
to compute Yieh Hsing's G&A and interest expense rates by the amount of
its scrap revenue. This resulted in a revision to reported G&A and
interest expense. We further adjusted the calculation of Yieh Hsing's
G&A expense rate by including bonus payments that Yieh Hsing paid to
its employees, and by excluding certain foreign exchange gains, gains
on the disposal of long-term investments and properties, investment
loss, and rental income. For further discussion, see Comments 24, 25
and 26 in the ``Interested Party Comments'' section of this notice; and
Yieh Hsing Cost Memo.
We also conducted our sales below cost test in the same manner as
that described in our preliminary determination. We found that, for
certain models of SSWR, more than 20 percent of Walsin's and Yieh
Hsing's home market sales within an extended period of time were at
prices less than the COP. Further, the prices did not provide for the
recovery of costs within a reasonable period of time. 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. For those U.S. sales of SSWR for which there were
no comparable home market sales in the ordinary course of trade, we
compared EPs or CEPs to CV in accordance with section 773(a)(4) of the
Act.
Constructed Value
In accordance with section 773(e) of the Act, we calculated CV
based on the sum of the respondent's cost of materials, fabrication,
G&A, U.S. packing costs, direct and indirect selling expenses, interest
expenses, and profit. We relied on the submitted CVs except for the
specific changes described above in the ``Cost of Production'' section
of the notice.
Price-to-Price Comparisons
We made price-to-price comparisons using the same methodology as
that described in the preliminary determination, with the following
exceptions:
A. Walsin
In making circumstance-of-sale adjustments to NV for comparison to
EP sales under section 773(a)(6)(C)(iii) of the Act and section
351.410(c)(4) of the regulations, we recalculated home market and U.S.
credit expenses as a result of our findings at verification (see
Comment 7 in the ``Interested Party Comments'' section of this notice).
For comparisons to both EP and CEP sales, as a result of our findings
at verification, we also recalculated inventory carrying costs and
indirect selling expenses incurred in the home market that were used in
our calculation of the commission offset (see Comments 7 and 8 in the
``Interested Party Comments'' section of this notice and the Walsin
Concurrence Memorandum).
B. Yieh Hsing
In making circumstance-of-sale adjustments to NV for comparison to
EP sales under section 773(a)(6)(C)(iii) of the Act and section
351.410(c)(4) of the regulations, we made additional adjustments for
interest premium expenses and letter of credit fees. Furthermore,
because we verified that Yieh Hsing properly calculated inventory
carrying costs in its responses submitted subsequent to the preliminary
determination, we included inventory carrying costs in the weighted-
average amount of home market indirect selling expenses used to offset
U.S. commissions in calculating NV. For further discussion, see Comment
21 in the ``Interested Party Comments'' section of this notice.
Price-to-CV Comparisons
For Walsin, we made price-to-CV comparisons using the same
methodology as that described in the preliminary determination.
Currency Conversion
As in the preliminary determination, we made currency conversions
into U.S. dollars based on the exchange rates in effect on the dates of
the U.S. sales as certified by the Federal Reserve Bank in accordance
with Section 773(A) of the Act.
Interested Party Comments
A. Walsin
Comment 1: Treatment of Verification of CEP Sales.
The petitioners claim that the Department's verification report
covering Carpenter's CEP sales outlines serious issues, omissions, and
errors that were discovered at verification. They argue that these
errors and omissions were so material and so pervasive as to make the
response unreliable for purposes of calculating a final antidumping
duty margin. The petitioners note that these errors and omissions
impeded the proceeding and prevented the Department from verifying
Carpenter's questionnaire response. Consequently, the petitioners urge
the Department to use adverse facts available in calculating the margin
for Walsin's CEP sales and to apply the highest rate calculated for
either EP or CEP sales to all of Carpenter's CEP sales for the final
determination.
The petitioners claim that Carpenter did not intentionally fail
verification as suggested by Walsin. Rather, they argue that Carpenter
provided information to Walsin, which was submitted to the Department
in consolidated form in Walsin's questionnaire responses. Carpenter
also provided certifications for that information, and participated in
a verification of CEP sales at Carpenter's headquarters. The
petitioners note that throughout the investigation, Walsin's
[[Page 40464]]
counsel was in the role of assisting Carpenter, including being present
at Carpenter's verification.
The petitioners argue that the Department's inability to verify
Carpenter's CEP information has no connection to Carpenter's intent and
status as one of the petitioners in this investigation. They further
maintain that the statute requires the use of facts otherwise available
in reaching a determination if any of the following circumstances are
present: (1) Necessary information is not available on the record; (2)
someone withholds information requested by the Department; (3) someone
fails to provide such information by the deadlines or in the form and
manner requested; (4) someone significantly impedes a proceeding; or
(5) someone provides information but the information cannot be
verified. The petitioners note that the statute directs the Department
to apply facts otherwise available without making a specific finding of
intent not to cooperate.
Walsin argues that any verification failure by Carpenter, the
principal petitioner in this investigation, should be adverse to
Carpenter's interest and not adverse to Walsin. Walsin notes that some
of the information that was required to be reported on the CEP sales
was in the exclusive possession and control of Carpenter, whose primary
interest during the POI was domestic production of SSWR rather than
importation of SSWR from Taiwan. Consequently, Walsin contends that
Carpenter may not have had an interest in the success of the CEP
verification. In the event that the Department is unable to use the
submitted CEP information and must apply facts available in the final
determination, Walsin argues that the Department should use the lowest
non-aberrant, transaction-specific margin from Walsin's verified EP
sales for all of the CEP transactions.
DOC Position
We discovered at verification that there were certain significant
errors and deficiencies in the information submitted on the record by
Carpenter. The Department's verification report of June 2, 1998, cited
the following important deficiencies in the verification of Carpenter's
information: Carpenter failed to report a significant percentage of
sales and price adjustments to covered merchandise in its computer
sales listing; Carpenter was not able to substantiate the amount of
indirect selling expenses reported in its questionnaire response; and,
for certain sales, Carpenter failed to report all of the freight
expenses that it incurred to transport merchandise from the port and
warehouse to the customer in the United States.
Section 776(a) of the Act provides that the Department may use
facts otherwise available if an interested party withholds information
that has been requested by the Department, fails to provide such
information or in the form requested, significantly impedes a
proceeding under the antidumping statute, or provides information that
cannot be verified. Section 776(b) states that the Department may use
an inference which is adverse to the interest of the party in selecting
from among the facts otherwise available if the party has failed to
cooperate by not acting to the best of its ability to comply with the
Department's request for information.
Our analysis of the information presented on the record indicates
that adverse inferences with respect to Walsin's CEP sales are not
warranted, as suggested by the petitioners. With respect to U.S.
indirect selling expenses and U.S. freight charges, the Department has
verified information to use to correct the deficiencies for these
expense items. As facts available, for indirect selling expenses, we
used the verified selling expenses recorded on Carpenter's audited
trial balance for the specialty steel division and adjusted for freight
and commissions. We derived an indirect selling expense factor by
dividing the amount of indirect selling expenses by the total value of
sales recorded on the audited financial statements for the specialty
steel division. We applied the factor to gross price, and used the
resulting per unit indirect selling expense in our calculations. With
respect to the unreported freight expenses discovered at verification,
we applied the additional verified freight expense to the reported
freight expense for the affected sales, and used the resulting revised
per unit freight charge in our calculations. For further discussion of
these issues, see Walsin Concurrence Memorandum.
With respect to Carpenter's failure to report a significant number
of CEP sales and price adjustments on its computer sales listing, we
have determined not to use adverse inferences in applying facts
available to account for such information. Given the nature of the
relationship between Walsin and Carpenter; Carpenter's participation in
this proceeding as a petitioner; and Carpenter's exclusive control of
the sales and price information at issue, we find that Walsin was not
in a position to report this information. Given these unusual
circumstances, we have not determined that Walsin failed to act to the
best of its ability to comply with the Department's request for
information. Therefore, in applying facts available, we used the
weighted-average margin for all of Walsin's reported sales to the CEP
sales that were not reported to the Department in the course of the
investigation. For further discussion, see the Walsin Concurrence
Memorandum.
Comment 2: Model Match.
The petitioners disagree with the findings at verification, as
outlined in the Department's June 2, 1998 verification report at page
5, that Walsin accurately identified which products fit into AISI codes
in the ``Content and Property Tolerance'' charts submitted in Walsin's
March 22, 1998, second supplemental questionnaire response. The
petitioners contend that Walsin incorrectly coded several grades, and
assigned more than one grade code to the same grade of material. The
petitioners provided a table in their case brief identifying what they
believe to be the most appropriate grade codes identifying the products
sold in the home and U.S. markets.
Walsin contends that the petitioners failed to explain the
methodology used to revise Walsin's grade code system. In addition,
Walsin notes that there are obvious errors in the petitioners' code
designations. Therefore, Walsin argues that the Department should
disregard the petitioners' concordance in its entirety.
DOC Position
We agree with both the petitioners and the respondent in part.
Verification revealed that the six-digit internal chemistry code
contained in Walsin's product model number provides the most accurate
information concerning the chemical content of each grade of steel
identified in exhibit 13 of the October 24, 1997 Section A response. We
found no discrepancies between the information provided in the
questionnaire responses of October 24, 1997; November 12, 1997; January
20, 1998; and March 31, 1998; and the primary source documents used by
the factory to produce and test the chemical specifications of the
subject merchandise.
However, upon further examination, we found that Walsin often
assigned more than one commercial grade name to each six-digit internal
chemistry code in the normal course of business, and that it assigned
grade codes for the Department's product matching purposes to each of
its internal commercial grade names. As a result, in certain instances,
more than one grade code applied to the same grade of
[[Page 40465]]
merchandise. Therefore, we conducted an analysis of Walsin's grade code
designations for all of Walsin's models sold in the U.S. and home
market. We compared the AISI codes identified in the GRADE1 field of
the March 31, 1998 response with the grade code designations in
Walsin's original section B and C response of November 12, 1997. If the
grade code reported for a particular model in the March 31, 1998
response differed from that in the November 12, 1997 response, we
assigned to that model a grade code corresponding to the AISI grade in
the GRADE1 field. These adjustments allowed us to assign a unique grade
code to each AISI grade identified in the GRADE1 field of the March 31,
1998 response. Therefore, all models identified as AISI 304 in the
GRADE1 field, for example, would have the same grade code designation.
We then compared the recommendations presented in the petitioners'
case brief with Walsin's code designations, and our revised grade code
designations. In the event that either the petitioners or the
Department disagreed with Walsin's grade code designations, we compared
the internal chemistry of each model in question with the AISI
standards presented in the Worldwide Guide to Equivalent Irons and
Steels, and followed the methodology outlined in the ``Fair Value
Comparisons'' section of the notice. The results of our analysis are
recorded in the Walsin Concurrence Memorandum.
Comment 3: Level-of-Trade Adjustment.
The petitioners claim that the Department should not change the
level-of-trade analysis performed in the preliminary determination, and
should continue to deny a level-of-trade adjustment in the final
determination. The petitioners note that even with slight differences
in levels of selling expenses, Walsin provided similar selling
functions in both the home and U.S. markets. Thus, there is no reason
for the Department to make any changes regarding level of trade in its
analysis for the final determination.
Walsin notes that it did not request a level-of-trade adjustment
for the preliminary determination.
DOC Position
We conducted a level-of-trade analysis for the preliminary
determination and found that all of Walsin's sales were made at the
same level of trade. We subsequently verified the information on which
our preliminary level-of-trade analysis was based. For a discussion,
see Notice of Preliminary Determination at page 10837, and the
Concurrence Memorandum for Preliminary Determination of Investigation
dated February 25, 1998. No record evidence has been presented since
our preliminary determination that would lead us to change our
analysis. Therefore, we have not made a level-of-trade adjustment for
purposes of the final determination.
Comment 4: Second Quality Merchandise.
The petitioners argue that the Department should exclude sales of
second quality merchandise from the pool of home market sales used to
calculate the margin in the final determination. It notes that Walsin
did not report such sales in its computer sales listing.
Walsin notes that it reported sales of second-quality merchandise
on its computer sales listing as indicated by the letter ``U'' at the
end of the product model number.
DOC Position
We agree with both the petitioners and Walsin. An examination of
the March 31, 1998 computer sales listing reveals that Walsin reported
sales of second-quality merchandise on its computer sales listing as
indicated by the letter ``U'' at the end of the product model number.
We agree with the petitioners that these sales should not be used in
our margin analysis since Walsin made no sales of second-quality
merchandise to the United States. This is consistent with the rationale
outlined in the preliminary determination. (See Notice of Preliminary
Determination at page 10838.)
Comment 5: Affiliation in the Home Market.
The petitioners contend that the Department should regard two of
Walsin's home market customers as affiliated parties for the purposes
of this investigation, and disregard any home market sales that are not
found to be made at arm's length.
The petitioners claim that Walsin had a ``close relationship'' with
one of the customers in question in which Walsin acquired an ownership
stake shortly after the POI, and to which it sold a significant amount
of SSWR during the POI. They claim that the volume of sales and the
knowledge that the acquisition was about to occur would have affected
the price negotiations between Walsin and its customer during the POI.
The petitioners claim that Walsin directly or indirectly owned,
controlled or voted five percent or more of the outstanding shares of
the other customer in question during the POI. Therefore, the
petitioners argue that the Department should consider this customer to
be affiliated with Walsin, conduct an arm's-length test on the sales
between Walsin and the customer at issue, and disregard from its margin
analysis any sales which were not made at arm's length during the POI.
Walsin claims that the petitioners presented no support for the
contention that Walsin had a ``close supplier relationship'' with its
two customers during the POI. Walsin notes that the Department
confirmed at verification that Walsin did not have any long-term
investments in these two companies during the POI. In addition, Walsin
points out that in the Department's long-standing practice, the ``close
supplier'' relationship alone is insufficient to support conducting an
arm's-length test, even when the sales at issue are subject to a 100%
exclusive buy-sell arrangement between the parties.
DOC Position
We conducted extensive tests at verification to determine whether
Walsin had any ownership of these two companies during the POI and
found that Walsin had no ownership of either of these two companies
during the POI.
In light of the issues raised by the parties, we considered whether
Walsin was affiliated with these companies within the meaning of
section 771(33) of the Act and section 351.102(b) of the Department's
regulations. An analysis of the verified information on the computer
sales listing demonstrates that the sales that Walsin made to these
customers account for only a small portion of its total sales during
the POI, and that a significant portion of the customers' purchases of
SSWR come from producers other than Walsin (see Walsin Concurrence
Memorandum). Based on these facts, we cannot conclude that Walsin has
close supply relationships with the parties at issue in the home market
within the meaning of section 351.102(b) of the Department's
regulations. Based on the foregoing analysis, we have not considered
these parties to be affiliated for the purposes of the final
determination.
Comment 6: Home Market Sales of Merchandise Produced in France.
The petitioners argue that the Department should include in its
final determination home market sales of a certain grade of merchandise
which Walsin claimed was produced in France and which Walsin failed to
report in its computer sales listing. The petitioners argue that Walsin
was not able to document at verification that this merchandise was
actually manufactured in France, as claimed in the
[[Page 40466]]
questionnaire response. Consequently, the petitioners argue that the
Department should make adverse inferences concerning these sales by not
making any adjustments for selling expenses incurred on these sales in
the calculation of NV.
Walsin claims that it provided the Department a clear documentary
trail establishing that this merchandise was produced in France and not
produced during the POI. Walsin further notes that its sales of this
merchandise were not made in the ordinary course of trade, as they
consisted of sales of either second-quality or trial-grade merchandise.
Therefore, Walsin argues that the use of such sales would have a
distortive effect on the determination of NV and should be excluded
from the Department's final analysis.
DOC Position
We agree with the petitioners in part. Verification revealed that
Walsin made a significant number of home market sales of the grade of
merchandise at issue which Walsin claimed was produced in France and
which it had not previously reported to the Department. At
verification, Walsin was not able to provide documentary evidence that
this merchandise was produced in France, as it claimed in its
questionnaire responses. Therefore, we have included these sales in our
final analysis. However, because Walsin made no sales of this
merchandise in the United States during the POI, and this merchandise
has not been identified as one of the most similar grades of steel for
comparison to any products sold in the United States, the application
of adverse facts available is unnecessary in reaching our final
determination.
Comment 7: The Interest Rate Used for Credit Expense and Inventory
Carrying Cost.
The petitioners argue that the Department should recalculate the
interest rate used for credit expenses and inventory carrying costs in
the United States and home market using adverse facts available, since
verification revealed that Walsin's interest rate was based on the
theoretical interest rate on all short-term loans that were outstanding
on the last day of the fiscal year, rather than on the actual interest
rate obtained by the company on its short-term loans.
Walsin disagrees, claiming that it reported a figure for the total
value of loans which ties directly to the company's financial
statements. It maintains that this figure is a reliable indicator of
the interest rate because it ties to the financial statements. Walsin
argues that the figure is reasonable and should be used in the final
determination.
DOC Position
We agree with the petitioners. We found at verification that Walsin
improperly reported both the value of its loans and interest payments
during the POI. Walsin's reporting methodology did not allow the
Department to determine prior to verification that any problems existed
in the company's method for determining its interest rate, and to
request that Walsin revise its methodology accordingly.
Section 776(a)(1) of the Act provides that the Department may use
facts available in situations in which the necessary information is not
available on the record. Section 776(b) states that the Department may
use an inference which is adverse to the interest of the party in
selecting from among the facts otherwise available if the party has
failed to cooperate by not acting to the best of its ability to comply
with a request for information from the administering authority.
Since Walsin did not provide the information that was required by
the Department in order to determine the appropriate interest rates to
be used in the calculation of U.S. and home market credit expenses and
inventory carrying costs incurred in the home market, and since the
provision of this information was within its control, we determined
that Walsin has failed to cooperate by not acting to the best of its
ability to comply with the Department's request for information.
Therefore, we determined that it is appropriate to make adverse
inferences in this case. Therefore, as adverse facts available for
credit expense, we used the lowest short-term interest rate obtained in
the home market and reported in verification exhibit 18 to recalculate
short-term credit expenses for home market sales. For EP sales, we used
the prime interest rate as defined by the Federal Reserve Bank to
recalculate short-term credit expenses. For inventory carrying cost
incurred in the home market, we have used in our final calculations the
highest per-unit expense reported in the May 11, 1998 submission for
U.S. sales and the lowest per-unit expense reported in the May 11, 1998
submission for home market sales.
Comment 8: Indirect Selling Expenses in the Home Market.
The petitioners contend that the Department must recalculate home
market indirect selling expenses to exclude direct selling expenses,
foreign inland freight and travel expenses to foreign countries in
accordance with our verification findings.
Walsin agrees that the reported home market indirect selling
expenses included export expenses, inland freight, marine freight and
royalty expenses that had already been included in direct selling
expenses, and thus the amount of home market indirect selling expenses
reported on the computer sales listing was overstated.
DOC Position
We agree with both the petitioners and Walsin that the reported
home market indirect selling expenses incorrectly included certain
direct selling expenses and export-related expenses that were reported
elsewhere in Walsin's response. In order not to double-count these
expenses in our calculations, we have adjusted the figures accordingly
for use in the final determination.
Comment 9: The Inclusion of U.S. Brokerage and Handling in Movement
Expenses.
The petitioners argue that the Department erroneously neglected to
deduct U.S. brokerage and handling from Walsin's gross U.S. price.
Walsin did not comment on this issue.
DOC Position
We agree and have corrected the error.
Comment 10: Minor Corrections to the Response.
Walsin submitted a number of corrections at the start of the sales
and cost verification. It claims that the Department reviewed those
corrections as a part of its regular verification process, and
therefore requests that the corrections be accepted for the purposes of
the final determination.
DOC Position
We examined the corrections presented at the beginning of
verification and have accepted them with the exception of those
relating to inventory carrying costs (see Comment 7 for the treatment
of inventory carrying costs).
Comment 11: Yield Loss.
Walsin argues that it accurately reported the yield loss incurred
throughout the entire SSWR manufacturing process. To support its
position, Walsin states that the Department should reexamine several
accounting worksheets that the verifiers took as cost verification
exhibits 14, 15, and 16. According to Walsin, these exhibits, which
calculate the company's cumulative yield loss, demonstrate that
[[Page 40467]]
it accurately reported its yield loss. Thus, Walsin argues that there
is no basis to make any further adjustment in this regard. Walsin
states further that if the Department does adjust its reported yield
loss, it cannot rely on certain production reports taken as cost
verification exhibit 30. According to Walsin, these reports only show
the realized yield of its first grade products and not the accumulated
yield of both first and second grade products. Therefore, Walsin claims
that the yield rate reported on this exhibit is inaccurate for
calculating the cost associated with its yield loss.
The petitioners contend that the Department should adjust Walsin's
reported costs to reflect the fact that they do not adequately account
for the company's yield loss. The petitioners argue that the Department
cannot accept Walsin's reported costs because the company has
understated its reported cost of manufacturing. Thus, the petitioners
suggest that the Department should either adjust Walsin's reported
costs according to verification findings, substitute costs based on
facts available, or completely reject Walsin's costs.
DOC Position
We disagree with Walsin that it has adequately accounted for its
yield loss incurred in manufacturing SSWR. For the calculation of COP
and CV, we found that Walsin applied the yield loss of each production
stage only to the costs incurred in that stage. This methodology,
however, fails to properly account for yield costs incurred in previous
stages which are input into the subsequent stages. Thus, the reported
yield loss amounts do not accurately capture the actual overall yield
loss incurred by the company in producing SSWR. Walsin should have
calculated its reported yield loss amount by applying each production
stage's yield loss rate to the sum of each stages's preceding and
current production costs. In fact, Walsin calculates its overall yield
loss in the ordinary course of business in the same manner by combining
its previous production stage's costs with the current production
stage's costs. Walsin then divides the total costs by finished output
to calculate a yielded cost (see the last three pages of cost
verification exhibit 14). As referenced by Walsin in its case brief,
cost verification exhibit 14 contains worksheets that depict the
company's normal recognition of its overall yield loss for a single
model on a per-unit basis. We note, however, that the fully yielded
material costs at the final stage of manufacturing are different from
the material costs reported in Walsin's cost database. For its reported
costs, Walsin only reported a material cost that it yielded at the
billet manufacturing stage. This results in a yield loss that is less
than the actual overall yield loss of the fully processed product. For
the final determination, we adjusted Walsin's reported billet costs for
the yield loss rate experienced in the rolling, annealing, and pickling
production processes. We computed the yield loss rate for these
production processes based on the information used by Walsin in the
ordinary course of business to compute a fully yielded material cost.
Walsin provided this information in cost verification exhibit 8.
Comment 12: Flood Damage Loss.
Walsin asserts that the Department should not consider the
company's flood damage loss component of COP. Walsin explains that in
its normal course of business it treated the loss as an extraordinary
item and not a manufacturing or general expense item because it was the
result of an unusual and infrequent occurrence. According to Walsin,
this treatment is in accordance with Taiwanese Generally Accepted
Accounting Principles (GAAP) and, thus, the Department should accept
it. Moreover, the respondent argues that the exclusion of this cost
reasonably reflects the costs associated with producing SSWR and it
avoids aberrant cost fluctuations. Walsin also notes that in Certain
Fresh Cut Flowers From Columbia 62 FR 19772, 19778 (April 8, 1997), the
Department allowed the respondent a similar exclusion for severe water
damage and consequent loss of production.
The petitioners argue that the Department should include the loss
from the flood in Walsin's calculation of COP and CV. According to the
petitioners, Walsin incurred the expenses associated with the flood
during normal operations. Thus, it is appropriate that the Department
include this expense in the calculation of COP and CV.
DOC Position
We agree with Walsin that it is appropriate in this case to exclude
its flood damage loss from the calculations of COP and CV. Walsin
reported that during the POI, the area in which Walsin's manufacturing
plant is located received a historically high amount of rainfall over a
short period of time. The excessive amount of rainfall caused the local
levy to break and flood the surrounding area. Because of the flood,
Walsin incurred out-of-the-ordinary cleanup expenses and losses
associated with the write-off of damaged equipment and supplies.
Consistent with our position in the 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,
38153 (July 23, 1996) (``LNPP from Japan''), it is the Department's
practice to allow respondents to exclude out-of-the-ordinary losses if
such losses stem from an accident that constitutes an unforeseen
disruption in production which is beyond the management's control. See
Uruguay Round Agreements Act Statement of Administrative Action (SAA)
at 162. In such instances, we rely on the actual costs incurred for
production exclusive of the costs associated with the unforeseen event.
At verification, we confirmed that the flood and the damages
resulting from the flood were unforseen and beyond management's
control. Therefore, for the final determination, we did not include any
of the additional expenses incurred as a result of the flood in the
calculation of COP and CV.
Comment 13: Idle Capacity Loss.
Walsin argues that the Department should not include its idle
capacity loss in the calculation of COP and CV because it is an
extraordinary loss. According to Walsin, this loss consists of the idle
depreciation expense on plant and equipment that was not in use or was
underutilized during the POI. Walsin maintains that because the company
is a relatively new producer it determined that it was reasonable to
classify this type of cost as extraordinary until the company reaches a
normal production level. Moreover, Walsin emphasizes that classifying
this cost as extraordinary is appropriate and acceptable under
Taiwanese GAAP. Therefore, Walsin requests that the Department follow
Taiwanese GAAP which considers the idle capacity loss charge as
extraordinary, and exclude the loss from the calculation of COP and CV.
The petitioners disagree, stating that the Department should
include Walsin's idle capacity loss, which the company reported on its
audited income statement, in the calculation of COP and CV. According
to the petitioners, the Department is directed to adjust a respondent's
cost if it determines that the respondent has shifted costs away from
production of the subject merchandise as stated in the SAA.
DOC Position
We disagree with Walsin that we should exclude its idle capacity
loss from the calculation of COP and CV. As
[[Page 40468]]
Walsin has noted, the idle capacity loss consisted of depreciation
expense that the company incurred on holding idle production assets.
For this type of expense, it is our normal practice to include it as
part of G&A. For instance, in the Final Results of Antidumping Duty
Administrative Review: Silicomanganese From Brazil, 62 FR 37869, 37871
(July 15, 1997) and Final Determination of Sales at Less Than Fair
Value: Extruded Rubber Thread From Malaysia, 61 FR 54773, 54772
(October 22, 1996), we considered ``idle depreciation to be period
costs (i.e., costs that are more closely related to the accounting
period rather than the current manufacturing costs) and included the
expense in our calculation of G&A expenses.'' As for Walsin's
contention that its idle capacity loss is an extraordinary expense
under Taiwanese GAAP and should therefore be excluded from the
company's reported costs, we disagree. Simply because a company
characterizes certain expenses as extraordinary in the ordinary course
of business in accordance with its home market GAAP does not mean the
cost automatically is the result of an unforeseen disruption in
production that is beyond management's control and should therefore be
excluded from COP and CV (see LNPP from Japan at 38153). In this
instance, we see nothing unusual or unforeseen about depreciation
expense incurred on idle assets for a manufacturing company. Thus, for
the final determination we have included Walsin's idle capacity loss in
the calculation of its COP and CV.
Comment 14: Transfer Price for Copper.
The petitioners state that the Department should revise the
reported transfer price for copper obtained from affiliates to reflect
the market value paid to non-affiliates. According to the petitioners,
the reported transfer price is less than the purchase price of
comparable copper obtained from non-affiliates. Based on these facts,
the petitioners maintain that the Department should revise the reported
transfer price for copper to reflect the market value.
Walsin contends that the transfer price for copper included in its
reported costs should not be revised. According to Walsin, there is no
evidence to support that the affiliated-party copper sales were not
made on an arm's-length basis. Therefore, Walsin states that the
Department should not revise the transfer price of copper in Walsin's
reported section D database.
DOC Position
We agree with the petitioners. We compared the reported transfer
price paid for copper purchased from an affiliated supplier to reported
market prices and the affiliated suppliers' cost, and found that the
average market price was the highest. We performed this comparison in
accordance with section 351.407(b) of the Department's regulations,
which sets forth the method by which the Department will determine
value under the major input rule for the purposes of section 773(f)(3)
of the Act. This provision, which applies to the calculation of both CV
and COP, states that the Department will determine the value of a major
input purchased from an affiliated person based on the higher of: (1)
the price paid by the exporter or producer to the affiliated person for
the major input; (2) the amount usually reflected in sales of the major
input in the market under consideration; or (3) the cost to the
affiliated person of producing the major input. We have relied on this
methodology in the Final Results of Antidumping Duty Administrative
Review; Certain Corrosion-Resistant Carbon Steel Flat Products and
Certain Cut-to-Length Carbon Steel Plate From Canada, 62 FR 18449,
18457 (April 15, 1997), 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),
and the 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 (November 7, 1996).
In this case, we found the market price to be higher than the reported
transfer price and the affiliated suppliers' cost. Thus, for the final
determination, we have increased Walsin's affiliated supplier's copper
cost to reflect the market value paid by non-affiliates.
B. Yieh Hsing
Comment 15: Modification of Control Numbers.
Yieh Hsing argues that the Department should not modify Yieh
Hsing's reported control numbers (CONNUMs) as Yieh Hsing reported in
its March 31, 1998 submission. Yieh Hsing claims that the Department
verified that Yieh Hsing correctly assigned the CONNUMs in accordance
with AISI grades, and in accordance with the Department's instructions.
The petitioners agree with the respondent, except in two cases: 1)
if the Department decides to reclassify grades for all respondents
based on any general model-match decisions, and 2) if the Department
decides to reclassify one of Yieh Hsing's steel grades based on its
verification findings (see Comment 16 below).
DOC Position
For purposes of the final determination, we have continued to
employ the same general model-match methodology as that outlined in the
preliminary determination (see ``Fair Value Comparison'' section of
this notice for further discussion.) Therefore, there is no need to
generally reclassify the grades reported by Yieh Hsing and verified by
the Department. (See also DOC Position to Comment 16 below).
Comment 16: Classification of An Internal Grade.
The petitioners disagree with Yieh Hsing's classification of one of
its internal grades as AISI grade 304. The petitioners argue that this
internal grade is more appropriately classified as another AISI grade,
and request that the Department reclassify this internal grade
accordingly. The petitioners base their argument on the chemical
specifications listed on the mill certificate for this grade that were
discussed in the Department's verification report.
Yieh Hsing argues that the Department should not reclassify this
steel grade. Yieh Hsing contends that the Department verified that Yieh
Hsing correctly classified this grade as AISI 304. Yieh Hsing also
states, based on the chemical specifications of this grade that it
reported to the Department, that this grade may not be classified as
the AISI grade suggested by the petitioners. Yieh Hsing also notes that
the Department verified for one selected home market transaction that
the grade at issue met the specifications for AISI grade 304. Yieh
Hsing also argues that if, notwithstanding these facts, the Department
still decides to reclassify this grade as the AISI grade requested by
the petitioners, the Department should recalculate COP and CV for the
latter grade to reflect the reclassification.
DOC Position
We agree with Yieh Hsing. Based on our review at verification of a
mill certificate for the grade at issue, we found that this grade meets
the specifications of AISI grade 304, and does not meet the
specifications of the grade proposed by the petitioners, or of
[[Page 40469]]
any other AISI grade of which we are aware. Furthermore, we note that
in instances in which an internal grade matches all the specified
chemical content tolerance ranges of an AISI grade, but that the
internal grade also contains chemicals that are not otherwise specified
as being included in the standard AISI designation, it is appropriate
to classify the internal grade as the AISI grade. We therefore have
accepted Yieh Hsing's classification of this grade as AISI grade 304 in
the final determination. For further discussion, see Memorandum from
Alexander Amdur to Holly Kuga on Yieh Hsing Enterprise Corporation,
Ltd.: Analysis of Issues Raised in the Case and Rebuttal Briefs for the
Final Determination (Yieh Hsing Concurrence Memorandum).
Comment 17: Model Matching Program.
Yieh Hsing argues that the Department should modify its SAS program
to correctly match Yieh Hsing's U.S. sales with home market sales. Yieh
Hsing claims that the SAS program that the Department used for the
preliminary determination, by comparing the absolute values of the
control numbers, would result in improper matches of the most similar
grades identified in Yieh Hsing's March 31, 1998 submission.
The petitioners argue that the Department should continue to use
the model-match program from the preliminary margin calculation. The
petitioners state that this program accurately identified the most
similar grades based on the comparison of the absolute values of the
control numbers, and this program is more accurate than Yieh Hsing's
reported most similar models.
DOC Position
We agree in part with both the respondent and the petitioners. In
the preliminary determination, the model-match program correctly
identified matches of identical grades by comparing the absolute values
of the control numbers. In cases where no matches of identical grades
existed, we inserted language into the model-match program to correctly
identify the most similar grades based on Yieh Hsing's reported most
similar grades. For the final determination, we have continued to use
this program, and have made any necessary modifications to ensure that
this program correctly identifies the most similar grades as reported
by Yieh Hsing in its March 31, 1998 submission, and clarified in its
June 8, 1998 case brief.
Comment 18: Classification of Sales as EP or CEP.
Yieh Hsing argues that the Department incorrectly determined in the
preliminary determination that Yieh Hsing's sales to one of its U.S.
customers were CEP sales. Yieh Hsing claims that the Department, in
reclassifying these sales as CEP sales, incorrectly determined that
Yieh Hsing's sales agent acted as more than a ``processor of sales-
related documentation'' and a ``communication link'' with this
customer. Yieh Hsing notes that it explained in its March 31, 1998
submission (submitted after the preliminary determination) that its
sales agent refaxed messages received from Yieh Hsing to this customer,
and that the sales agent was not required to, and did not, make any
sales promotion efforts during the POI. Yieh Hsing argues that a letter
examined by the Department at verification shows that its U.S. sales
agent acted as a communication link between Yieh Hsing and this
customer, and shows that the sales agent did not negotiate sale terms.
Citing to the Department's verification report, Yieh Hsing also argues
that the Department verified that Yieh Hsing correctly explained its
sales agent's role in its March 31, 1998 submission.
Yieh Hsing further claims that the Department improperly cited Yieh
Hsing's January 13, 1998 submission for the conclusion that Yieh
Hsing's U.S. sales agent performed various selling functions on behalf
of Yieh Hsing. Yieh Hsing states that it reported that its sales agent
acted on behalf of Yieh Hsing to distinguish the sales agent from
working on behalf of Yieh Hsing's customer. Yieh Hsing also states that
it reported that it gave a quotation to the sales agent because Yieh
Hsing communicated with its customer through the sales agent. Yieh
Hsing states that it never stated that the sales agent negotiated sales
terms with the customer, or that it instructed its sales agent to
solicit customers on its behalf.
The petitioners argue that the Department properly concluded that
Yieh Hsing's sales to this U.S. customer meet the statutory definition
of CEP sales. The petitioners further argue that the Department's
preliminary conclusion is further supported by documents found at
verification. The petitioners state that a letter examined by the
Department at verification (also referred to by Yieh Hsing)
demonstrates that Yieh Hsing's sales agent negotiates price and seeks
out customers on its own, and thus is more than a ``paper-pusher'' and
a ``communications link'' between Yieh Hsing and Yieh Hsing's customer.
DOC Position
We agree with the respondent that its U.S. sales to this customer
should be treated as EP sales. In the preliminary determination, in
order to determine whether sales made prior to importation through Yieh
Hsing's sales agent in the United States were EP or CEP transactions,
we analyzed whether Yieh Hsing's U.S. sales to this customer met the
Department's three criteria for EP sales: (1) whether the merchandise
in question is shipped directly from the manufacturer to the
unaffiliated buyer without being introduced into the physical inventory
of the selling agent; (2) whether direct shipment from the manufacturer
to the unaffiliated buyer is the customary channel for sales of the
subject merchandise between the parties involved; and (3) whether the
selling agent in the United States acts only as a processor of sales-
related documentation and a communication link with the unaffiliated
U.S. buyer.
Based on the information on the record at the time of the
preliminary determination, we determined that Yieh Hsing's U.S. sales
to this customer during the POI met the first two of the Department's
three criteria for EP sales. We further determined that Yieh Hsing's
U.S. sales to this customer did not meet the Department's third
criterion for EP sales since the reported sales-related
responsibilities (including seeking out customers on its own and
negotiating sales terms) of Yieh Hsing's sales agent in the United
States demonstrated that the sales agent functioned as more than a
``paper-pusher'' in the U.S. sales process.
The record, as it has been developed since the preliminary
determination, continues to show, and both parties do not contest, that
Yieh Hsing's U.S. sales to this customer meet the first two criteria.
In reexamining whether the third criterion (i.e., whether the selling
agent acts as more than a document processor), is satisfied, we
considered whether the U.S. sales agent's involvement in making the
sale is incidental or ancillary. See Certain Cold-Rolled and Corrosion-
Resistant Carbon Steel Flat Products from Korea: Final Results of
Antidumping Duty Administrative Review, 63 FR 13170 (March 18, 1998).
See also Viscose Rayon Staple Fiber From Finland: Final Results of
Antidumping Duty Administrative Review, 63 FR 32820 (June 16, 1998).
The record now shows that Yieh Hsing's U.S. sales agent's role was
incidental or ancillary in making the sales to this customer during the
POI. Yieh Hsing clarified in its March 31,
[[Page 40470]]
1998 response, and we verified, that the role of Yieh Hsing's sales
agent in Yieh Hsing's sales to this customer during the POI mainly
involved refaxing messages between Yieh Hsing and this customer,
communicating Yieh Hsing's price quotations to this customer, and
assisting Yieh Hsing in handling U.S. Customs clearance of Yieh Hsing's
merchandise. We also verified that all sales were initiated by this
customer based on its production requirements. We further agree with
the respondent that the letter examined at verification that is
referenced by both the respondent and the petitioners shows that Yieh
Hsing's U.S. sales agent acted as a communication link between Yieh
Hsing and this customer, and that the sales agent did not negotiate
sale terms. We also note that other letters examined at verification
show the following: that Yieh Hsing and this customer communicated with
each other through Yieh Hsing's U.S. sales agent; that Yieh Hsing, and
not its agent, determined the terms of sale with this customer; and
that Yieh Hsing, and not its agent, accepted or rejected all sales to
this customer.
There is also no evidence that Yieh Hsing's U.S. sales agent
otherwise had substantial involvement in the sales process. Based on
these facts, we have concluded for purposes of the final determination
that EP treatment is appropriate for all of Yieh Hsing's U.S. sales to
this customer, as these sales were made by the producer, Yieh Hsing,
prior to importation to a purchaser in the United States not affiliated
with the producer (see section 772(a) of the Act). For further
discussion, see Yieh Hsing Concurrence Memorandum.
Comment 19: The Classification of Sales to Another U.S. Customer.
The petitioners argue that the Department should treat Yieh Hsing's
sales to another U.S. customer as CEP sales. The petitioners state that
information obtained at verification shows that this customer holds
inventory of Yieh Hsing's SSWR which the customer sells after it enters
the United States. The petitioners further state that this customer,
based on documents found at verification, is more than a ``paper
pusher.''
Yieh Hsing contends that the Department should continue to treat
Yieh Hsing's sales to this customer as EP sales. Yieh Hsing argues that
the petitioners' arguments are based on a false presumption that this
customer, a U.S. distributor, is a sales agent, and notes that it sold
its SSWR to this customer, and not through this customer. Yieh Hsing
further maintains that the petitioners' arguments are irrelevant to
sales made to an unaffiliated U.S. distributor, since the Act defines
EP sales as sales to an unaffiliated purchaser in the United States.
Yieh Hsing also contends that this customer's status as a distributor
is insufficient to conclude that Yieh Hsing and this customer are
affiliated, and that the verified facts show that there is no close
relationship between Yieh Hsing and this customer that would
characterize them as affiliated parties.
DOC Position
We agree with the respondent. The main factors in analyzing whether
U.S. sales are EP or CEP sales are whether they are first sold to an
unaffiliated purchaser before or after importation, and if such sales
are made before importation, whether such sales are made outside or in
the United States. See sections 772(a) and 772(b) of the Act. In this
case, the record indicates that the U.S. sales at issue were made prior
to importation by Yieh Hsing in Taiwan to the unaffiliated U.S.
purchaser. We also agree with Yieh Hsing that there is no evidence on
the record to suggest that this customer was acting on Yieh Hsing's
behalf or is affiliated with Yieh Hsing. Therefore, since Yieh Hsing
sold SSWR to this unaffiliated U.S. customer before the date of
importation, Yieh Hsing's sales to this customer meet the statutory
criteria of EP sales. For further discussion, see Yieh Hsing
Concurrence Memorandum.
Comment 20: Weight-Averaging of U.S. Prices.
Yieh Hsing argues that the Department should weight-average all
U.S. prices of identical SSWR to calculate Yieh Hsing's dumping margin,
rather than calculating dumping margins separately for EP and CEP
sales, as the Department did for the preliminary determination. Yieh
Hsing states that the Act and the Department's regulations do not
permit the separate averaging of EP and CEP sales in calculating the
weighted-average U.S. prices. Yieh Hsing further argues, citing the
``plain meaning'' rule, that the relevant sections of the Act and the
regulations, which discuss comparing the weighted average of the normal
values to the ``weighted average of the export prices and constructed
export prices'' (emphasis added), should be interpreted as stated, and
should not be interpreted as ``the weighted average of the export
prices or constructed export prices.'' Yieh Hsing also contends that
even though the Department rejected Yieh Hsing's ministerial error
allegation on the same issue, the Department has not yet addressed
whether the methodology used in the preliminary determination was
legally correct.
The petitioners argue that the Department should calculate the
final antidumping margin in the same manner as that done for the
preliminary margin analysis. The petitioners note that the Department
stated, in response to Yieh Hsing's comment on the same subject in Yieh
Hsing's ministerial error allegation, that ``the Department followed
its normal methodology to calculate Yieh Hsing's dumping margins in
this investigation.'' The petitioners also note that the SAA and the
Department's antidumping manual support the Department's position, as
both specifically mention comparing the weighted average of the normal
values with ``a weighted average of export prices or constructed export
prices.''
DOC Position
Given that the Department has now classified all of Yieh Hsing's
U.S. sales as EP sales, we need not make a determination on this issue.
See Comments 18 and 19 above for further discussion of the Department's
classification of Yieh Hsing's U.S. sales.
Comment 21: Home Market Inventory Carrying Costs.
Yieh Hsing argues that the Department should include Yieh Hsing's
reported home market inventory carrying costs in the dumping margin
analysis in the final determination. Yieh Hsing notes that the
Department did not include Yieh Hsing's reported home market inventory
carrying costs in the calculations for the preliminary determination
because the Department concluded that Yieh Hsing did not correctly
calculate these costs. Yieh Hsing also notes that the Department
verified the inventory carrying costs as reported in Yieh Hsing's March
31, 1998 submission.
DOC Position
We agree with the respondent. We verified that Yieh Hsing correctly
calculated its inventory carrying costs in its March 31, 1998
submission. Therefore, we have included Yieh Hsing's reported inventory
carrying costs in our final margin analysis, where appropriate.
Comment 22: Home Market Sales of Second-Quality Merchandise.
The petitioners argue that the Department should exclude sales of
second quality merchandise from the home market database as was done in
the preliminary margin analysis. The petitioners state that it is not
appropriate to compare sales of non-prime quality or seconds in the
home
[[Page 40471]]
market to U.S. sales of prime quality merchandise.
DOC Position
We agree with the petitioners. In the preliminary determination,
given the limited home market sales quantity of non-prime and defective
merchandise and the fact that no such sales were made to the United
States during the POI, we excluded sales of non-prime and defective
merchandise from our analysis in accordance with our past practice.
Since these facts have not changed from the preliminary determination,
we have continued to exclude sales of non-prime and defective
merchandise from our analysis in the final determination.
Comment 23: Corrections to the Response.
Yieh Hsing argues that the Department should incorporate the
corrections to minor errors that Yieh Hsing submitted at verification
in the calculations for the final determination. Yieh Hsing states that
these corrections were timely submitted and verified by the Department.
The petitioners argue that the Department must incorporate all
clerical errors discovered at verification in its final margin
calculation. In particular, the petitioners note that the Department
found at verification that Yieh Hsing incorrectly labeled its
corrections submitted at verification for U.S. brokerage and letter of
credit expenses.
DOC Position
We agree with both the respondent and the petitioners, and have
made the appropriate corrections to all clerical errors that Yieh Hsing
submitted and/or that we found at verification in our final
calculations. See ``Export Price/Constructed Export Price'' and
``Normal Value'' sections of this notice.
Comment 24: Treatment of Costs of Billets Purchased from An
Affiliate.
Yieh Hsing claims that the Department should not adjust its
reported billet costs for purchases from its affiliated supplier to
reflect an imported market price. According to Yieh Hsing, its reported
affiliated supplier billet costs are based on the higher of COP,
transfer price or market value, in accordance with section 773(f)(2)
and (3) of the Act. Moreover, Yieh Hsing states that it appropriately
used the price for physically comparable billets that its affiliate
sold to non-affiliates as the market price for comparison purposes. The
respondent emphasizes that the price it paid to non-affiliated
suppliers for imported billets is not an appropriate basis to determine
market price because the imported billets are of a higher quality, most
do not require grinding, and the processing time they require is
substantially less than those obtained from the affiliate. Yieh Hsing
argues further that because it can demonstrate that the imported
billets are qualitatively different, the Department should reject the
petitioners' assertion that it rely on the market price of such raw
material, as it did in the Final Results of Antidumping Duty
Administrative Review: Silicomanganese from Brazil, 62 Fed. Reg. 37869,
37874 (July 15, 1997).
If the Department finds it necessary to adjust its reported billet
costs for purchases from its affiliated suppliers, Yieh Hsing argues
that the Department should not use the same methodology that it used in
the preliminary determination. According to Yieh Hsing, the preliminary
adjustment incorrectly increased the billet cost for purchases from its
non-affiliated suppliers which were already reported at a market price.
In addition, Yieh Hsing claims that the Department distorted costs by
not making the adjustment more grade-specific. Therefore, Yieh Hsing
recommends that the Department calculate more accurate grade-specific
adjustment factors and apply these factors to only the billet costs for
purchases from its affiliated supplier. Yieh Hsing asserts that the
Department has the necessary information to make these calculations and
provided several examples of such calculations in its case brief.
The petitioners contend that the Department should adjust Yieh
Hsing's reported billet cost to reflect the market price for billets by
using the imported price. In determining the higher of COP, transfer
price, and market value, the petitioners state that the Department
should use the imported price when possible and, when no import price
is available, it should use the higher of the affiliated supplier's
revised COP, the transfer price to Yieh Hsing, or the affiliated
supplier's sales price to unaffiliated parties. As for differences in
physical characteristics, the petitioners maintain that the fact that
Yieh Hsing grinds a higher percentage of billets purchased from its
affiliate does not constitute a ``significant difference in product
characteristics.'' Therefore, they conclude that imported billets are
comparable merchandise.
DOC Position
We disagree with Yieh Hsing that its reported COP and CV amounts
properly reflect the cost of billets consumed. Although Yieh Hsing
provided the transfer prices, its affiliated supplier's cost of
production, and market values for billets used to produce SSWR, it
failed to use the higher of these three amounts in accordance with
Section 773(f)(3) of the Act. Therefore, for the final results we have
adjusted Yieh Hsing's cost of billets purchased from its affiliated
supplier to reflect a market price.
As for which market price to use in making the adjustment, we agree
with Yieh Hsing that the appropriate market price to use in our
comparison is the price at which the company's affiliated supplier sold
comparable billets to non-affiliates. In determining a market price for
an input acquired from an affiliated supplier, the Department may rely
on sales transactions for a comparable input between the affiliated
supplier and an unaffiliated customer in the home market, or purchase
transactions for a comparable input between an unaffiliated supplier
and the respondent company. In this case, however, we do not consider
it appropriate to rely on Yieh Hsing's purchases of billets from its
non-affiliated suppliers as a market price because of the non-
comparability of the billets. The imported billets Yieh Hsing purchased
from non-affiliates are physically different from those obtained from
the affiliate. For instance, Yieh Hsing receives the imported billet in
such fashion that it does not require grinding. However, the billets
purchased from its affiliated supplier require grinding. At
verification, we confirmed that there were differences between the
imported billets and those obtained from the affiliate supplier. On a
sample basis we examined daily grinding reports, such as those
contained in cost verification exhibit 28, which show that the imported
billets did not require grinding, whereas the affiliate's billets
required grinding.
As for making our billet cost adjustment for the final
determination, we first computed a market price for those grades which
have no market price (i.e., those grades which Yieh Hsing's affiliated
supplier did not sell to non-affiliates). We did this by calculating a
weighted-average adjustment factor based on those grades that had a
market price. On a grade-specific basis, we then used the higher of
transfer price, market value, and revised COP for billets purchased
from affiliated suppliers (see Comment 25) in accordance with section
773(f)(3) of the Act.
Comment 25: Adjustments to the COP of Billets from the Affiliate.
The petitioners state that the reported COP of the billets obtained
from Yieh Hsing's affiliate needs to be adjusted to include an
appropriate amount of G&A expenses, financing costs, and bonus
[[Page 40472]]
payments. According to the petitioners, the method used by the
affiliate to allocate these costs to its billets is not consistent with
the Department's normal practice. Specifically, the petitioners claim
that the affiliate allocated its G&A and interest expenses based on
production tonnages. The petitioners, however, claim that the
Department's normal practice is to allocate G&A and interest expense on
a company-wide basis as a percentage of cost of sales. As for the bonus
payments, the petitioners state that the affiliate excluded this cost
from its calculation of the billet COP. According to the petitioners,
these payments represent compensation to employees which should be
included in the calculation of the billet COP.
Yieh Hsing asserts that recalculating its affiliate's COP for the
alleged G&A and financing expense adjustments at issue would not affect
the reported billet costs contained in the section D database.
According to Yieh Hsing, these adjustments do not increase the
affiliate's COP to be above the billet's reported transfer price. Thus,
Yieh Hsing claims that adjusting the affiliate's COP is not necessary.
DOC Position
We agree with the petitioners that we should compute G&A and
interest expenses on a company-wide basis as a percentage of cost of
sales. In addition, we agree with the petitioners that the bonus
payments represent compensation to employees that should be included in
the billet COP. Accordingly, we adjusted the reported billet COP of
Yieh Hsing's affiliate to include the revised G&A expense, revised
financing costs, and bonus payments in order to properly compare the
transfer price, market price and COP of billets purchased from
affiliated suppliers in accordance with section 773(f)(3) of the Act
(see Comment 24).
Comment 26: Adjustments to the Cost of Sales Figure.
The petitioners claim that the Department should adjust Yieh
Hsing's cost of sales figure that was used to compute the G&A and
interest expense rates in order to ensure it is on the same basis as
the reported cost of manufacturing (COM) to which the rate is applied.
Specifically, the petitioners state that the Department should reduce
Yieh Hsing's cost of sales figure by the scrap revenue amount reported
on its income statement. According to the petitioners, this adjustment
is necessary to avoid the understatement of G&A and financing costs
because the COM figure to which the G&A and interest expense rates are
applied has been reduced by scrap revenue.
Yieh Hsing disagrees that such an adjustment is necessary because
the resulting effect on its COP and CV is insignificant. Because of its
insignificance, Yieh Hsing requests that the Department disregard the
adjustment in accordance with section 777A(a)(2) of the Act. In
addition, Yieh Hsing disagrees with the petitioners that its scrap
sales revenue figure should reduce its cost of sales. Instead, the
company recommends reducing its cost of sales figure by the
manufacturing cost used to make the scrap it sold.
DOC Position
We agree with the petitioners that the cost of sales figure used to
compute Yieh Hsing's G&A and interest expense rates should be reduced
by the scrap revenue amount reported on its income statement. To
calculate its reported G&A and financing expense ratios, Yieh Hsing
used its cost of sales figure as reported on its audited financial
statements. However, we note that this cost of sales figure is not on
the same basis as the reported COM because the company offset its
reported COM with the revenues it generated from the sale of scrap.
Consistent with our findings in the Final Determination of Sales at
Less Than Fair Value of Certain Pasta From Italy, 61 FR 30326, 30349
(June 14, 1996) and Final Results of Antidumping Duty Administrative
Review of Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat
Products From Korea, 62 FR18404, 18447 (April 15, 1997), we have
reduced Yieh Hsing's cost of sales figure by its scrap revenue to
obtain a cost of sales figure that is on the same basis as the reported
COM. We then used this adjusted cost of sales amount to calculate
revised G&A and financial expense ratios. Consequently, we disagree
with Yieh Hsing that the correct method to adjust the cost of sales
figure is to reduce its cost of sales by the cost of producing the
scrap. We note that reducing its cost of sales figure by the cost of
producing the scrap would be inconsistent with the method by which COM
is calculated (i.e., COM less scrap revenue). Furthermore, in
accordance with section 777A(a)(2) of the Act, our normal practice is
to make corrections when an error is significant in relation to the
value of the merchandise.
Continuation of Suspension of Liquidation
In accordance with section 733(d) of the Act, we are directing the
Customs Service to continue to suspend liquidation of all entries of
SSWR from Taiwan, except those produced/exported by Yieh Hsing
Enterprise Corporation, Ltd., that are entered, or withdrawn from
warehouse, for consumption, on or after the date of publication of this
notice in the Federal Register. The Customs Service shall continue to
require a cash deposit or posting of a bond equal to the estimated
amount by which the normal value exceeds the U.S. price as shown below.
These suspension of liquidation instructions will remain in effect
until further notice. The weighted-average dumping margins are as
follows:
------------------------------------------------------------------------
Weighted
Exporter/manufacturer average margin
percentage
------------------------------------------------------------------------
Walsin Cartech Specialty Steel Corporation.............. 8.24
Yieh Hsing Enterprise Corporation, Ltd.................. .02
All Others.............................................. 8.24
------------------------------------------------------------------------
Pursuant to section 735(c)(5)(A) of the Act, the Department has
excluded any de minimis margins from the calculation of the ``All
Others Rate.''
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 for consumption on or after the effective date of
the suspension of liquidation.
This determination is published pursuant to section 777(i) of the
Act.
Dated: July 20, 1998.
Joseph A. Spetrini,
Acting Assistant Secretary for Import Administration.
[FR Doc. 98-20022 Filed 7-28-98; 8:45 am]
BILLING CODE 3510-DS-P
