[Federal Register Volume 61, Number 179 (Friday, September 13, 1996)]
[Notices]
[Pages 48465-48471]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-23526]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-421-803]
Certain Cold-Rolled Carbon Steel Flat Products From the
Netherlands; Final Results of Antidumping Duty Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of Final Results of Antidumping Duty Administrative
Review.
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SUMMARY: On July 12, 1995, the Department of Commerce (the Department)
published the preliminary results of the administrative review of the
antidumping duty order on certain cold-rolled carbon steel flat
products from the Netherlands. The review covers one exporter of the
subject merchandise to the United States, Hoogovens Groep BV
(Hoogovens) and the period August 18, 1993, through July 31, 1994. The
Department has now completed this administrative review in accordance
with section 751 of the Tariff Act of 1930, as amended (the Act).
EFFECTIVE DATE: September 13, 1996.
FOR FURTHER INFORMATION CONTACT: Helen Kramer or Linda Ludwig, Import
Administration, International Trade Administration, U.S. Department of
Commerce, 14th Street and Constitution Avenue, N.W., Room 7866,
Washington, D.C. 20230; telephone: (202) 482-0405 or (202) 482-3833,
respectively.
SUPPLEMENTARY INFORMATION:
Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute and to the
Department's regulations are references to the provisions as they
existed on December 31, 1994.
Background
On July 12, 1995, the Department published in the Federal Register
(60 FR 35893) the preliminary results of the administrative review of
the antidumping duty order on certain cold-rolled carbon steel flat
products from the Netherlands (58 FR 44172, August 19, 1993). On
February 6, 1996, and on August 7, 1996, the Department sent Hoogovens
supplemental questionnaires on the subject of reimbursement of
antidumping duties. We gave interested parties an opportunity to
comment on our preliminary results and the supplemental questionnaires.
Based on our analysis of the comments received, we have changed the
results from those presented in the preliminary results of review.
Scope of This Review
The products covered by this review include cold-rolled (cold-
reduced) carbon steel flat-rolled products, of rectangular shape,
neither clad, plated nor coated with metal, whether or not painted,
varnished or coated with plastics or other nonmetallic substances, in
coils (whether or not in successively superimposed layers) and of a
width of 0.5 inch or greater, or in straight lengths which, if of a
thickness less than 4.75 millimeters, are of a width of 0.5 inch or
greater and which measures at least 10 times the thickness or if of a
thickness of 4.75 millimeters or more are of a width which exceeds 150
millimeters and measures at least twice
[[Page 48466]]
the thickness, as currently classifiable in the Harmonized Tariff
Schedule (HTS) under item numbers 7209.11.0000, 7209.12.0030,
7209.12.0090, 7209.13.0030, 7209.13.0090, 7209.14.0030, 7209.14.0090,
7209.21.0000, 7209.22.0000, 7209.23.0000, 7209.24.1000, 7209.24.5000,
7209.31.0000, 7209.32.0000, 7209.33.0000, 7209.34.0000, 7209.41.0000,
7209.42.0000, 7209.43.0000, 7209.44.0000, 7209.90.0000, 7210.70.3000,
7210.90.9000, 7211.30.1030, 7211.30.1090, 7211.30.3000, 7211.30.5000,
7211.41.1000, 7211.41.3030, 7211.41.3090, 7211.41.5000, 7211.41.7030,
7211.41.7060, 7211.41.7090, 7211.49.1030, 7211.49.1090, 7211.49.3000,
7211.49.5030, 7211.49.5060, 7211.49.5090, 7211.90.0000, 7212.40.1000,
7212.40.5000, 7212.50.0000, 7217.11.1000, 7217.11.2000, 7217.11.3000,
7217.19.1000, 7217.19.5000, 7217.21.1000, 7217.29.1000, 7217.29.5000,
7217.31.1000, 7217.39.1000, and 7217.39.5000. Included in this review
are flat-rolled products of nonrectangular cross-section where such
cross-section is achieved subsequent to the rolling process (i.e.,
products which have been ``worked after rolling'')--for example,
products which have been bevelled or rounded at the edges. Excluded
from this review is certain shadow mask steel, i.e., aluminum-killed,
cold-rolled steel coil that is open-coil annealed, has a carbon content
of less than 0.002 percent, is of 0.003 to 0.012 inch in thickness, 15
to 30 inches in width, and has an ultra flat, isotropic surface. These
HTS item numbers are provided for convenience and Customs purposes. The
written description remains dispositive.
This review covers sales of cold-rolled carbon steel flat products
from the Netherlands by Hoogovens Groep BV. The review period is August
18, 1993, through July 31, 1994.
Analysis of Comments Received
We gave interested parties an opportunity to comment on the
preliminary results. We also gave them an opportunity to comment on the
issue of potential reimbursement of antidumping duties to be assessed.
We received comments and rebuttal comments from Hoogovens Groep BV, an
exporter of the subject merchandise, (respondent), and from Bethlehem
Steel Corporation, U.S. Steel Group a Unit of USX Corporation, Inland
Steel Industries, Inc., LTV Steel Company, Inc., National Steel
Corporation, AK Steel Corporation, Gulf States Steel Inc. of Alabama,
Sharon Steel Corporation, and WCI Steel Inc., petitioners.
Comment 1: The respondent argues that the Department should have
exercised its discretion not to require Hoogovens to report a very
small quantity of U.S. sales of secondary merchandise by a U.S.
affiliate, Precision Slitting, Inc. (PSI), which were its only sales of
``seconds'' in the United States. While acknowledging that the
Department considers the antidumping law to require the inclusion of
all U.S. sales during the period of review (POR) in the calculation of
margins, it cites American Permac, Inc. v. United States, 783 F. Supp.
1421, 1423-24 (CIT 1992), in support of its contention that sales of
seconds should be excluded from the calculation of dumping margins when
they are de minimus and distortive of the margins.
Petitioners respond that the Department's practice of including all
U.S. sales was held to be reasonable in NSK Ltd. v. United States, 896
F. Supp. 1263, 1267-68 (CIT 1995).
Department's Position: It is normal Department practice to consider
all of a company's U.S. sales in an administrative review, including
those that were excluded due to time and resource constraints in the
original investigation. American Permac, upon which Hoogovens relies,
states that, while U.S. sales outside the ordinary course of trade
normally should be included in the sales database, ``a methodology is
to be applied which accounts for sales which are unrepresentative and
which do not lead to a fair price comparison.'' 16 CIT 41, 42 (1992).
The American Permac court then upheld the Department's inclusion of a
small number of sales alleged by the plaintiff in that case to be
distortive, noting that it was not clear from the record that any
distortion actually occurred in that case. Id. at 43-44. Thus, American
Permac stands for the proposition that U.S. sales in small quantities
will be included unless they are shown to be distortive.
Commerce has met the standards set forth in American Permac by
providing for a methodology which accounts for the allegedly
unrepresentative sales involving secondary merchandise and leads to a
fair comparison. As explained in the memorandum of April 19, 1995, from
Roland L. MacDonald to Joseph A. Spetrini entitled Treatment of Non-
Prime Merchandise for the First Administrative Review of Certain Carbon
Steel Flat Products (``Non-Prime Memorandum''), which is part of the
General Issues record for all of the Carbon Steel first reviews, the
Department made every effort to avoid distortion by developing
methodologies to distinguish secondary merchandise in these reviews
from prime merchandise. Where the respondent combined prime and
secondary merchandise within a single product grouping, Commerce
separated them for the purpose of developing the model match
concordance. Similarly, secondary merchandise was segregated from prime
merchandise for purposes of conducting the arm's length test, the cost
test, and the margin calculation. In those cases in which a U.S. sale
of secondary merchandise could not be matched to a contemporaneous home
market sale of secondary merchandise, Commerce compared the U.S. sale
with constructed value (CV), using the approach upheld in IPSCO, Inc.
v. United States, 965 F.2d 1056, 1060 (Fed. Cir. 1992). Specifically,
because Hoogovens expended the same materials, capital, labor and
overhead for prime merchandise and secondary merchandise, the CV of
prime and secondary merchandise is identical. IPSCO, 965 F.2d at 1058,
1060-61.
Finally, Hoogovens own characterization of these sales as
``insignificant'' suggests that they could not significantly distort
the overall, weight-averaged, margin. Because Hoogovens has not shown
that, despite these measures, the relevant PSI sales are distortive,
Commerce has not excluded them from the U.S. sales database. See also
Comment 2.
Comment 2: Respondent contends that the Department's use of CV to
calculate foreign market value (FMV) for matches to U.S. sales of
seconds is internally inconsistent with its policy enunciated in its
Non-Prime Memorandum that ``the Department should consider, and
compensate for, the potentially distortive effects of including seconds
in our antidumping duty calculations.'' Respondent urges the Department
either to use Hoogovens' reported CV for seconds (which was based on
standard costs multiplied by the ratio of the sales value of seconds to
the sales value of prime merchandise), or to exclude from the margin
calculation those secondary sales for which there are no
contemporaneous home market matching sales, or to calculate FMV based
on the weight-averaged price of home market seconds for the entire POR.
Repondent argues that the Department's methodology is not
``compelled'' by the Court of Appeals decision in IPSCO, which affirmed
the Department's decision to allocate production costs equally between
the prime product and a co-product in calculating CV for the co-
product.
[[Page 48467]]
Respondent contends that seconds are by-products, and absent any
instructions from the court on how to calculate costs for by-products,
the Department must accept the costing of these products according to
GAAP. Hoogovens contends that it treats secondary merchandise as a by-
product in its accounting system.
Petitioners respond that Hoogovens' argument that seconds are a by-
product is unsupported by evidence in the record. Moreover, this claim
is contradicted by other evidence in the record. In the calculation of
CV, Hoogovens used the income from the sale of by-products as an offset
against the total costs of production, but used a different methodology
for costing seconds. Hoogovens' calculation of standard costs for
seconds is known as the ``sales value at split-off method,'' and is
generally used to cost co-products, not by-products. Petitioners claim
that PSI's sales of seconds are treated as sales of co-products, and
that therefore they should be costed in the same way as prime products,
like the secondary products at issue in IPSCO. Further, the petitioners
argue, the suggestion that including these sales distorts the
calculated margins has no basis. To the extent that there is any
potential for distortion, they argue, the Department has adopted a
methodology which compensates for such distortion by comparing U.S.
sales of seconds to sales of seconds in the home market, or when there
are no contemporaneous home market sales, to the constructed value
(CV).
Department's Position: We disagree with the respondent. The
Department continues to follow IPSCO in its practice. Respondent's
argument that seconds are a by-product is unsupported by the record. In
the response to Section VI of the Department's questionnaire (November
14, 1994), Hoogovens described its by-products accounting as follows
(Exhibit VI-2, p. 6): ``The cost of the by-products like cookery [sic]
by-products, slag, gas, etc. are part of the departmental budget for
raw materials cost of the iron and steel production. These by-products
are sold to third parties or transferred internally at market value.''
This reference to by-products of the coke ovens is the sole reference
to by-products in the response. Nowhere does Hoogoven indicate that any
by-products are generated in the steel rolling mills. To the contrary,
Hoogovens describes the ``seconds'' as ``prime quality steel that had
been declassified at RBC as a result of damage during transatlantic
shipment or during processing at RBC. Hoogovens does not actively
market secondary quality subject merchandise in the United States, and
exported no such material during the POR.'' (Letter to the Department
dated October 5, 1994, p. 2.) Thus, the merchandise Hoogovens exported
to the United States and sold as seconds was originally of prime
quality and incurred the same costs as merchandise ultimately sold as
prime quality.
Comment 3: Respondent argues that the Department should return to
the methodology used in the investigation to make the adjustment for
value added taxes (VAT), which was the methodology enunciated in Grey
Portland Cement and Clinker from Mexico, 58 FR 25803 (April 28, 1993),
to achieve tax neutrality. Although the Court of International Trade
(CIT) rejected this methodology in Federal Mogul Corp. v, United
States, 834 F. Supp. 1391 (CIT 1993), the Court of Appeals reversed
this decision on August 28, 1995 (Federal Mogul Corp. v, United States,
94-1097, -1104). Hoogovens claims that the Department's current
methodology inflates dumping margins over those that would be
calculated in the absence of a tax adjustment.
Alternatively, respondent argues that if the Department continues
to use its current methodology, it should apply the VAT only to gross
prices, because under Dutch law the proper tax basis is gross sales
price (the first level). Respondent contends the Department has no
authority to calculate the tax adjustment to USP on the basis of a unit
price net of all adjustments (the second level).
Petitioners comment that Hoogovens has misread the Court of
Appeal's decision in Daewoo Electronics v. United States, 6 F.3d 1511,
1519-20 (Fed. Cir. 1993), in which the court ruled that in making the
tax adjustment under 19 USC Sec. 1677a(d)(1)(C), the Department must
apply the tax rate to USP using a tax basis that is at an ``analogous
point'' in the stream of commerce as the tax basis for the home market
tax. Daewoo says nothing about the second level adjustment. Petitioners
argue that the Department's methodology fully complies with the
analogous point requirement: in both the home market and the U.S.
market, the basis for the Department's tax adjustment calculations was
the gross invoice price to the first unrelated customer. The Department
makes the second level adjustment in order to eliminate distortion
arising from different circumstances of sale in the home and U.S.
markets, such as differences in freight, physical characteristics of
the merchandise, or selling expenses. The CIT expressly recognized that
such an adjustment is appropriate in Daewoo Electronics Co. Ltd. v.
United States, 760 F.Supp. 200, 208 (Ct. Int'l Tr. 1991). Petitioners
characterize as baseless Hoogovens' argument that this holding was
rendered moot by the subsequent decision of the Court of Appeals in
that case that the delivered price, not the ex-factory price, was the
point at which taxes are incurred under Korean tax law. The CIT's
holding regarding the second level adjustment becomes even more
important when items such as freight charges (which are included in the
delivered prices) are part of the tax basis.
Department's Position: In light of the Federal Circuit's decision
in Federal Mogul v. United States, CAFC No. 94-1097, the Department
changed its treatment of home market consumption taxes for this review.
Where merchandise exported to the United States was exempt from the
consumption tax, the Department added to the U.S. price the absolute
amount of such taxes charged on the comparison sales in the home
market. This is the same methodology that the Department adopted
following the decision of the Federal Circuit in Zenith v. United
States, 988 F. 2d 1573, 1582 (1993), and which was suggested by that
court in footnote 4 of its decision. The Court of International Trade
(CIT) overturned this methodology in Federal Mogul v. United States,
834 F. Supp. 1391 (1993), and the Department acquiesced in the CIT's
decision. The Department then followed the CIT's preferred methodology,
which was to calculate the tax to be added to U.S. price by multiplying
the adjusted U.S. price by the foreign market tax rate; the Department
made adjustments to this amount so that the tax adjustment would not
alter a ``zero'' pre-tax dumping assessment.
The foreign exporters in the Federal Mogul case, however, appealed
that decision to the Federal Circuit, which reversed the CIT and held
that the statute did not preclude Commerce from using the ``Zenith
footnote 4'' methodology to calculate tax-neutral dumping assessments
(i.e., assessments that are unaffected by the existence or amount of
home market consumption taxes). Moreover, the Federal Circuit
recognized that certain international agreements of the United States,
in particular the General Agreement on Tariffs and Trade (GATT) and the
Tokyo Round Antidumping Code, required the calculation of tax-neutral
dumping assessments. The Federal Circuit remanded the case to the CIT
with
[[Page 48468]]
instructions to direct Commerce to determine which tax methodology it
will employ.
The Department has determined that the ``Zenith footnote 4''
methodology should be used. First, as the Department has explained in
numerous administrative determinations and court filings over the past
decade, and as the Federal Circuit has now recognized, Article VI of
the GATT and Article 2 of the Tokyo Round Antidumping Code required
that dumping assessments be tax-neutral. This requirement continues
under the new Agreement on Implementation of Article VI of the General
Agreement on Tariffs and Trade. Second, the URAA explicitly amended the
antidumping law to remove consumption taxes from the home market price
and to eliminate the addition of taxes to U.S. price, so that no
consumption tax is included in the price in either market. The
Statement of Administrative Action (p. 159) explicitly states that this
change was intended to result in tax neutrality.
While the ``Zenith footnote 4'' methodology is slightly different
from the URAA methodology, in that section 772(d)(1)(C) of the pre-URAA
law required that the tax be added to United States price rather than
subtracted from home market price, it does result in tax-neutral duty
assessments. In sum, the Department has elected to treat consumption
taxes in a manner consistent with its longstanding policy of tax-
neutrality and with the GATT.
Comment 4: Respondents comment that the Department's computer
program incorrectly weight-averaged equally similar matches, because of
the absence of an output statement, and failed to weight-average the
differences in merchandise (``difmers'') of the equally similar home
market sales.
Department's Position: We agree, and have made the appropriate
corrections to the program for the final results.
Comment 5: Respondent and petitioners comment that the Department
used Hoogovens' reported interest rate on short-term borrowings,
instead of the interest expense factor for purposes of determining cost
of production and allocating profit on further manufactured sales.
Department's Position: We agree, and have used the interest expense
factor for ESP sales in our final margin calculations. This was not an
issue for purchase price sales, as all of these sales had home market
matches and CV was not used.
Comment 6: Respondent comments that the Department erred in not
converting packing costs incurred in the Netherlands for U.S. sales
from guilders to dollars in calculating foreign market value. Because
of a typographical error, the format sheets supplied with Hoogovens'
January 13, 1995, response incorrectly stated that these expenses were
reported in U.S. dollars.
Department's Position: We agree and have corrected this error in
our final margin calculation.
Comment 7: Respondent comments that in adding missing further
manufacturing cost data for two control numbers, the Department erred
in adding these costs to sales with process code ``40,'' which are ``as
is'' sales of seconds.
Department's Position: After the preliminary results, the
Department found that some sales of seconds were erroneously coded as
prime merchandise, which caused the computer program to identify the
further manufacturing cost data for those sales as missing. For the
final results, we have corrected the coding and used the respondent's
reported cost data for the sales in question.
Comment 8: Respondent comments that in the first model comparison,
the Department set the variable costs of home market sales of seconds
equal to the variable costs of home market sales of prime merchandise
for the same control number, but failed to make this change in the
second model comparison.
Department's Position: We agree with respondent and have corrected
the program.
Comment 9: Respondent notes that for some of PSI's sales of seconds
corresponding to six control numbers, the Department used Hoogovens'
reported variable costs for seconds to compare with the (corrected)
prime variable costs of home market sales of seconds. Hoogovens
proposed adding new programming language to the model match and section
2 of the margin calculation programs.
Department's Position: We agree with respondent. This error
occurred because Hoogovens incorrectly coded certain U.S. sales of
seconds as prime sales. We have made the suggested corrections in the
programs for our final results.
Comment 10: Petitioners argue that Hoogovens' claimed adjustments
for home market rebates should be denied, because they include amounts
paid on out-of-scope merchandise and are allocated on a per ton, rather
than an ad valorem basis. In addition, for some of the sales, Hoogovens
included post-sale price adjustments in the same field as rebates.
Respondent replies that since rebates were paid at the same rate
for both scope and non-scope merchandise, there is no possibility that
the reported amounts were skewed by the rebates paid on non-scope
merchandise. The CIT has consistently recognized, even in the
Torrington case cited by the petitioners (Torrington v. United States,
881 F. Supp. 622 [CIT 1995]), that respondents may apportion rebates
that are paid at the same percentage rate on both scope and non-scope
merchandise. (Torrington, 881 F. Supp. at 640, citing Smith-Corona
Group v. United States, 713 F.2d 1568, 1580 [Fed. Cir. 1983].)
Hoogovens' reported rebates were ``calculated directly from actual
sales figures and from the total amount of rebate paid,'' as required
by the Court of Appeals in Smith-Corona. Hoogovens also notes that it
granted rebates on both scope and non-scope merchandise to only one
customer. Further, Hoogovens reported its rebates on a per ton basis,
because this is the basis on which they are recorded in Hoogovens'
financial records. The Department should therefore continue to use the
reported rebates in the final results. Finally, respondent argues that
inclusion of post-sale price adjustments in the rebate field for five
home market invoices does not affect the calculation of margins where
the Department has fully verified that all the components of the
amounts reported in the field are accurate. Where the respondent has
reported these expenses in the manner in which they are recorded in his
accounting system, and the Department has verified the accuracy of
these adjustments, there is no reason why they should not be accepted
by the Department.
Department's Position: We agree with respondent. We verified that
Hoogovens apportioned rebates on scope and non-scope merchandise at the
same percentage rate. During verification, we also examined the
allocation of rebates for scope and non-scope merchandise. We verified
that the customers met their required sales target and traced the
rebate payment through supporting documents. We saw no indication that
Hoogovens ties the rebate to the invoice in their ledger system, or
that the allocation method distorted the amounts reported. Hoogovens
usually reported home market post-sale price adjustments in the
``OTHDIS1H'' field. However, for five home market sales, there was both
a post-sale price adjustment and a rebate combined and reported in the
``REBATE1H'' field. In the January 13, 1995, response (Exhibit 23),
Hoogovens broke out the post-sale price adjustments and rebates for
each of the sales. We verified the rebate given in the course of the
sales traces, and traced the post-sale price adjustments to
[[Page 48469]]
the sales journal and supporting documentation.
Comment 11: Petitioners argue that Hoogovens inappropriately used
different averaging periods when calculating the interest for home
market and U.S. purchase price sales. These rates were used to
calculate inventory carrying charges and credit expenses. Petitioners
urge the Department to use the same averaging period for both home
market and U.S. sales, or to calculate separate home market interest
rates for the non-overlapping periods.
Respondent replies that the Department specifically instructed
Hoogovens to calculate its interest rates based on the time period for
which sales were reported in each market, and that the Department fully
verified the reported interest rates.
Department's Position: We agree with respondent. As instructed by
the Department, Hoogovens used the average interest rate for each sales
reporting period in each market. It is appropriate to utilize the
average interest rate applicable to sales in each of the reporting
periods. This more accurately reflects the borrowing experience of the
respondent for the respective sales reporting periods.
Comment 12: Petitioners argue that in calculating the dumping
margin, the Department should deduct from United States Price (USP) the
actual dumping duties to be paid by NVW (U.S.A.) Inc. (``NVW''), i.e.,
the Department should treat antidumping duties as a cost. Petitioners
interpret 19 U.S.C. Sec. 1677a(d) as including antidumping and
countervailing duties in the phrase ``import duties,'' which are
deducted from purchase price and exporter's sales price. The
Department's margin program calculates the difference between foreign
market value and USP on each sale. ``This difference is essentially
equal to the antidumping duties to be paid by NVW and referred to in
Sec. 1677a(d)(2)(A).'' Petitioners urge the Department to modify its
program so that once this difference is calculated, it is deducted from
USP before the final margin is determined.
Respondent replies that petitioners' proposal has been repeatedly
rejected by the Department, the courts and the U.S. Congress, and that
the petitioners cite no authorities in support of their interpretation
of the statute. The effect of their proposal would be to inflate
Hoogovens' margins geometrically. In effect, the margin would be
doubled on each transaction. This inflated rate, they argue, would then
become the basis for the deduction from USP in the succeeding
administrative review, and would again be doubled. Moreover, Hoogovens
actually paid only estimated duty deposits upon entry of the
merchandise, rather than the final duties to be calculated in this
review. These entries have not been liquidated; hence there are no
antidumping duties actually paid that the Department could deduct from
USP, even if such action were legally appropriate. In Federal-Mogul
Corp. v. United States, 813 F. Supp. 856 (CIT 1993), the CIT agreed
with the Department's consistent practice of refusing to consider the
amount of estimated antidumping duties based upon past margins in its
calculation of current margins.
Department's Position: It is the Department's longstanding position
that antidumping and countervailing duties are not a cost within the
meaning of 19 U.S.C. Sec. 1677a(d). Antidumping and countervailing
duties are unique. Unlike normal duties, which are an assessment
against value, antidumping and countervailing duties derive from the
margin of dumping or the rate of subsidization found. Logically,
antidumping and countervailing duties cannot be part of the very
calculation from which they are derived. This logical rationale for the
Department's interpretation of the statute is consistent with prior
decisions of the Court of International Trade. See Federal-Mogul v.
United States, 813 F. Supp. 856, 872 (1993) (deposits of antidumping
duties should not be deducted from USP because such deposits are not
analogous to deposits of ``normal import duties'').
In contrast, Petitioners' reasoning is circular rather than
logical: in calculating the dumping margin the Department must take
into account the dumping margin. Such double counting, i.e., including
the same unfair trade practice twice in a single calculation, is
unjustifiable, except in the limited circumstances provided for in
section 353.26.
Moreover, the treatment of antidumping and countervailing duties
(already paid or to be assessed) as a cost to be deducted from the
export price is an issue that was arduously debated during passage of
the Uruguay Round Agreements Act (URAA) and ultimately rejected by
Congress. See, H.R. 2528, 103rd Cong., 1st Sess. (1993). Alternatively,
Congress directed the Department to investigate, in certain
circumstances, whether antidumping duties were being absorbed by
affiliated U.S. importers. 19 U.S.C. Sec. 1675(a)(4). Thus, Congress
put to rest the issue of antidumping and countervailing duties as a
cost. URAA Statement of Administrative Action at 885 (``The duty
absorption inquiry would not affect the calculation of margins in
administrative reviews. This new provision of the law is not intended
to provide for the treatment of antidumping duties as a cost.''); see
also H. Rep. No. 103-826(I), 103rd Cong., 2nd Sess. (1994) at 60.
Comment 13: Petitioners argue that Hoogovens should have reported
direct selling expenses for NVW, and urge the Department to apply the
best information available (``BIA'') by making the adverse assumption
that all of NVW's expenses were direct expenses.
Respondent replies that NVW ``serves only as a facilitator,
communication link and processor of documents for its U.S. imports and
sales.'' In this capacity, NVW processes sales of both subject and non-
subject merchandise. NVW's expenses consist primarily of rent for
office space and the salaries of its officers. The Department always
treats these types of expenses as indirect selling expenses. Hoogovens
reported all of NVW's expenses in its calculation of U.S. indirect
selling expenses, and these expenses were verified by the Department.
Department's Position: We agree with respondent. Petitioners
misquoted Hoogovens' response of October 6, 1994, when they claimed
that Hoogovens characterized NVW as its ``selling agent'' in the United
States. Hoogovens' response made clear that its U.S. sales are
negotiated by its sales office in IJmuiden, the Netherlands and not by
NVW in the United States.
Comment 14: Petitioners argue that Hoogovens miscalculated its
inventory carrying costs (``ICC'') for its ESP sales, contending that
the amounts reported in the INVCARU field are substantially lower than
should result from Hoogovens' methodology, and that this methodology is
flawed. Petitioners object to Hoogovens' use of the transfer price,
rather than the cost of production (``COP'') in the calculation, citing
Hoogovens' statement that ``the inventory cost must be based on the
cost of producing the steel, not the price for which it is sold.''
(Secs. III-V Supplemental Response at 35). Although the Department's
practice has been to use the cost of manufacture (COM) in the
calculation, petitioners further argue that COP better measures the
true opportunity cost to Hoogovens, because it includes COM and
additional general, administrative and interest expenses. Second,
petitioners argue, the transfer price is not on the same basis as the
total cost of goods sold and should not be reduced by the ratio of the
total cost to total sales. Third, petitioners argue that the home
market interest rate should be used in the ESP
[[Page 48470]]
ICC calculation. Petitioners urge the Department to recalculate INVCARU
for the ESP sales using the following formula:
ESP ICC = COP x HM Int. Rate x Inv. Days/365
Respondent replies that the methodology it used is reasonable and
has been verified by the Department. Moreover, the alternative
methodology the petitioners propose is almost identical to Hoogovens'
methodology, and would change the calculated margins by an infinitesmal
amount. Furthermore, Hoogovens' reported ICC is, in fact, cost-based.
Although Hoogovens multiplies the ICC factor by the transfer price, it
then multiplies the factor by the ratio of Hoogovens' average cost of
production to average sales price. This results in an ICC amount that
is, in effect, based on the COP. It would be inappropriate to use gross
unit price, instead of the transfer price, in the equation, because the
gross unit price reported for ESP sales is the price charged by
Hoogovens' affiliates to the first unrelated customer. However, the ICC
in question is the cost of carrying inventory from the time of
production in the Netherlands to the time of delivery to Hoogovens'
U.S. affiliates. In calculating the inventory cost for time in the
Netherlands and time on the water, Hoogovens used the transfer price
and a cost/sales ratio based on Hoogovens' own sales revenues. Thus,
the price and the cost/sales ratio used in the calculation of ICC were
calculated on the same basis. In regard to the interest rate, Hoogovens
submits that U.S. ICC expenses should be calculated based on the costs
of carrying inventory for the period for which Hoogovens reported its
U.S. sales. Accordingly, the Department should not adjust Hoogovens'
reported data.
Department's Position: Petitioners' argument is based on the
erroneous conclusion that Hoogoven's ICC reporting was not cost-based.
Respondent's methodology of multiplying the ICC factor by the ratio of
average cost of production to average sales price results in an ICC
based on cost of production. Therefore, we have accepted Hoogoven's ICC
calculation methodology. However, the ICC reported in the INVCARU field
is incorrect for a different reason. Prior to verification, respondent
reported to the Department certain corrections to its previous
submissions, including corrections of the short-term interest rates on
its borrowings in both the home and U.S. markets. (Letter to the
Department dated March 15, 1995, Exhibit 5.) On March 31, 1995, at the
Department's request, Hoogovens submitted revised computer files
containing corrections to certain errors identified prior to
verification. These files purportedly included revised ICC to reflect
the corrected short-term borrowing rates. However, this correction to
ICC was not made for U.S. sales owing to a programming error. For the
final results, the Department has modified its margin calculation
program to correct this error.
Comment 15: Petitioners argue that the Department improperly
excluded three zero-priced U.S. ``sample sales'' by Hoogovens' U.S.
affiliate, although it is its practice in administrative reviews not to
exclude sample sales, unless the respondent can demonstrate either that
(a) no transfer of ownership occurred between the exporter and
unrelated U.S. purchaser, or (b) that the product was not used for
commercial consumption. Hoogovens has not so claimed for any of these
sales, and therefore the Department should include them in its margin
calculation.
Hoogovens contends that these sales of ``small, throw-away pieces
of damaged steel'' cannot reasonably be described as ``samples,'' and
that it would be unfair to require Hoogovens to pay antidumping duties
on a tiny quantity of damaged steel of no commercial value. Further,
Hoogovens argues that no case has been made that exclusion of these
sales would prejudice the petitioners' interests.
Department's Position: We agree with petitioners. In general, the
Department does not exclude any U.S. sales from its calculation of USP.
The Department has considered all transactions to be sales whenever
ownership transfers to an unrelated party. However, the Department has
in the past determined that, in appropriate circumstances, free-of-
charge samples are not ``sales'' within the meaning of section 772 of
the antidumping law. The CIT has recognized that the Department must
make its determinations regarding sample sales by examining the
relevant facts of each individual case and that the burden of proof in
demonstrating that such sales are outside the ordinary course of trade
lies with the respondent. Hoogovens did not claim or offer evidence
that these sales were outside the ordinary course of trade.
Consequently, the Department has no basis for excluding them from the
margin calculation. See Granular Polytetrafluoroethylene Resin from
Japan: Final Results of Antidumping Duty Administrative Review, 58 FR
50343 (September 27, 1993); The Timken Company v. United States, 862 F.
Supp. 413, 417 (CIT 1994).
Comment 16: Petitioners comment that the Department mistakenly
added two incorrect program lines to its margin calculation program for
further manufacturing sales which had the effect of allocating U.S.
direct and indirect selling expenses on the basis of the ratio of
foreign manufacturing to total manufacturing.
Department's Position: We agree with petitioners and have removed
these lines from the program.
Comment 17: Petitioners argue that Hoogovens' response to the
February 6, 1996, supplemental questionnaire demonstrates that
Hoogovens is reimbursing NVW for payment of antidumping duties.
Hoogovens responds that the issue cannot arise until final antidumping
duties are assessed following completion of the administrative review.
Hoogovens also argues that because NVW is not an unaffiliated U.S.
customer, and makes no sales to such customers, transactions associated
with NVW's ``routine selling functions'' on behalf of its foreign
parent cannot ``implicate the remedial purposes of the reimbursement
regulation.''
Department's Position: Section 353.26 of the antidumping
regulations requires the Department to deduct from the United States
price the amount of any antidumping duty that a producer or reseller
either pays directly on behalf of the importer or reimburses to the
importer. The Department has interpreted this regulation as applying
where the importer is an affiliated party (CEP situations) as well as
when the importer is unaffiliated. See Color Television Receivers from
the Republic of Korea; Final Results of Antidumping Duty Administrative
Review, 61 Fed. Reg. 4408, 4410-11 (Feb. 6, 1996). That interpretation
is consistent with both the plain language of the regulations and the
regulatory history. See, e.g., 19 CFR 353.41 (defining United States
price as the purchase price or the exporter's sales price).
Furthermore, contrary to Hoogovens' argument, the reimbursement
regulation can apply in the first review even though duties have not
yet been assessed. An agreement to reimburse is sufficient to trigger
the regulation. This is evident from the required reimbursement
certification, which must state that ``I have not entered into any
agreement or understanding for the payment or refunding to me. . .of
all or any part of the antidumping duties assessed. . . .'' 19 CFR
Sec. 353.26(b). The reimbursement adjustment is made not on the basis
of cash deposits, but rather on the basis of the actual amounts to be
assessed. This procedure was noted
[[Page 48471]]
with approval by the CIT in PQ Corp. v. United States, 11 CIT 53, 67
(1987). As the opinion notes:
Accordingly, ITA states that its practice regarding reimbursements
for antidumping duties is as follows. .... If merchandise is being sold
at less than fair value, then the amount of that difference--the
dumping margin--will be the basis for an actual assessment of
antidumping duties. Only at that point, while the merchandise is still
in liquidation, does ITA apply 19 CFR Sec. 353.55 by determining what
amount, if any, of the antidumping duties to be assessed are or will be
paid. . .[or]. . . refunded to the importer by the manufacturer,
producer, seller or exporter. The amount ``paid'' or ``refunded'' is
based on the antidumping duties to be assessed, not on the prior
deposit of estimated antidumping duties. Thus, if a producer agrees to
reimburse all antidumping duties, then the entire amount of the
antidumping duties to be assessed will be added in determining the
dumping margin pursuant to 19 CFR Sec. 353.55, regardless of whether a
larger or smaller deposit of estimated antidumping duties has been
posted. (Emphasis added).
Thus, if a producer or reseller agrees to reimburse all antidumping
duties, then the entire amount of the antidumping duties to be
assessed, as reflected in the initial calculation of whether dumping is
occurring in that period of review, will be added in determining the
dumping margin for final assessment, pursuant to 19 CFR Sec. 353.26. As
discussed above, the evidence of record demonstrates that Hoogovens has
agreed to reimburse NVW for antidumping duties. Therefore, the
regulation applies.
Final Results of Review
As a result of our review, we have determined that the following
margin exists:
------------------------------------------------------------------------
Margin
Manufacturer/exporter Time period (percent)
------------------------------------------------------------------------
Hoogovens Groep BV........................ 8/18/93-7/31/94 5.54
------------------------------------------------------------------------
The Department shall determine, and the Customs Service shall
assess, antidumping duties on all appropriate entries. Individual
differences between United States price and foreign market value,
taking into account reimbursed duties, may vary from the percentage
stated above. The Department will issue appraisement instructions
directly to the Customs Service.
Furthermore, the following deposit requirements will be effective
upon publication of this notice of final results of review for all
shipments of certain cold-rolled carbon steel flat products from the
Netherlands entered, or withdrawn from warehouse, for consumption on or
after the publication date, as provided for by section 751(a)(1) of the
Act: (1) The cash deposit rate for the reviewed company named above
will be 5.54 percent; (2) for all other Netherlands exporters, the cash
deposit rate will be the rate established in the less-than-fair-value
(LTFV) investigation; and (3) the cash deposit rate for non-Netherlands
exporters of the subject merchandise from the Netherlands will be the
rate applicable to the Netherlands supplier of that exporter. The
revised rate after remand established in the LTFV investigation is
19.32 percent. These deposit requirements, when imposed, shall remain
in effect until publication of the final results of the next
administrative review.
This notice serves as a reminder to parties subject to
administrative protective order (APO) of their responsibility
concerning the disposition of proprietary information disclosed under
APO in accordance with section 353.34(d) of the Department's
regulations. Timely notification of return/destruction of APO materials
or conversion to judicial protective order is hereby requested. Failure
to comply with the regulations and the terms of an APO is a
sanctionable violation.
This administrative review and notice are in accordance with
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and section 353.22
of the Department's regulations.
Dated: August 30, 1996.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 96-23526 Filed 9-12-96; 8:45 am]
BILLING CODE 3510-DS-P
