[Federal Register Volume 63, Number 177 (Monday, September 14, 1998)]
[Notices]
[Pages 49078-49080]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-24599]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-122-822]
Notice of Court Decision: Certain Corrosion-Resistant Carbon
Steel Flat Products From Canada
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of court decision
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SUMMARY: On July 23, 1998, the United States Court of International
Trade (``CIT'') affirmed the determination made by the Department of
Commerce (``the Department'') pursuant to a remand of the final results
of administrative review in the case of certain corrosion-resistant
carbon steel flat products from Canada. AK Steel Corp. et al. v. United
States, Slip Op. 98-106 (CIT, July 23, 1998) (``AK Steel''). In its
remand determination, the Department corrected ministerial errors in
the calculation of Stelco Inc.'s (``Stelco'') margin, eliminated the
credit for partial reversal of prior period charges from Dofasco
Inc.'s/Sorevco's (``Dofasco'') cost calculation, and determined that
Continuous Colour Coat's (``CCC'') post-invoicing price adjustment
methodology for credit and debit notes allocated to multiple sales was
acceptable.
EFFECTIVE DATE: August 3, 1998.
FOR FURTHER INFORMATION CONTACT: Lyn Baranowski (Dofasco), Carrie Blozy
(CCC), N. Gerard Zapiain (Stelco) or Rick Johnson, Import
Administration, International Trade Administration, U.S. Department of
Commerce, 14th Street and Constitution Avenue, N.W. Washington, D.C.
20230; telephone: (202) 482-1385, 482-0165, 482-1395, or 482-3818,
respectively.
SUPPLEMENTARY INFORMATION: On March 28, 1996, the Department published
its final results of administrative review of the antidumping order on
corrosion-resistant steel from Canada. See Certain Corrosion-Resistant
Carbon Steel Flat Products and Certain Cut-to-Length Carbon Steel Plate
From Canada; Final Results of Antidumping Duty Administrative Reviews,
61 FR 13815 (March 28, 1996) (``Final Results''). The review covered
three manufacturers/exporters, CCC, Dofasco, and Stelco, of the subject
merchandise for the period February 4, 1993, through July 31, 1994.
On November 14, 1997, in its Memorandum Opinion in the case of AK
Steel Corp. et. al. v. United States, Slip Op 97-152 (CIT, November 14,
1997) (``Memorandum Opinion''), the CIT remanded three issues to the
Department. For CCC, the Department was ordered to reconsider post-
invoicing adjustments to price and indicate where on the record the
adjustments in question are shown to be properly related, either
directly or through allocation, to specific sales transactions.
Memorandum Opinion at 58. For Dofasco, the Department was ordered to
reconsider Dofasco's partial reversal of restructuring charges. The CIT
determined that the Department must ``eliminate the credit for the
reversals unless it can articulate a rational reason for abandoning its
past practice.'' Memorandum Opinion at 32. Finally, for Stelco, the
Department requested, and was granted, a remand to correct ministerial
errors in Stelco's final margin calculation.
I. CCC
A. Background
In its final results of administrative review, the Department
determined that CCC's price adjustment methodology regarding credit or
debit notes for sales in both the home market and United States was
acceptable. Specifically, the Department determined that the allocation
of a credit or debit note over multiple invoices was reasonable and
accepted these notes as direct adjustments. Final Results at 13822.
B. Post-Invoicing Price Adjustments
Through an examination of the record, the Department determined
that of the twenty home market and U.S. sales examined during
verification, only four home market and zero U.S. sales involved post-
invoicing adjustments. For the first two home market sales, the
Department found an acceptable level of price specificity in CCC's
price adjustment methodology. The third home market sale involved a
credit note which referenced one work-order. The work-order contained
multiple invoices and CCC allocated the credit note to all transactions
made pursuant to the work-order on a weighted average basis. Because of
CCC's inability to match the returned merchandise to the coil
identified on the internal complaint
[[Page 49079]]
form, the Department determined that CCC's allocation of the credit
note across sales made pursuant to the work-order identified on the
internal complaint form was sufficiently specific. Finally, the fourth
home market sale involved a debit note issued to a customer that did
not reference a specific invoice or work-order. The Department
concluded that a more specific allocation was not feasible, and that
CCC's methodology does not distort the normal value and in turn the
dumping margin.
Therefore, the Department determined that CCC's post-invoicing
price adjustment methodology for credit and debit notes allocated to
multiple sales was acceptable.
II. Dofasco
A. Background
In calculating Dofasco's Cost of Production (``COP'') and
Constructed Value (``CV'') during the less-than-fair value (``LTFV'')
investigation, the Department included in their entirety certain
estimated expenditures related to restructuring of the corporation.
Final Results, 61 FR at 13825 (citing Final Determination of Sales at
Less Than Fair Value: Certain Hot-Rolled Carbon Steel Flat Products,
Certain Cold-Rolled Carbon Steel Flat Products, Certain Corrosion-
Resistant Carbon Steel Flat Products and Certain Cut-to-Length Carbon
Steel Plate from Canada, 58 FR 37099, 37108 (July 9, 1993)). The
Department determined that estimated expenditures related to
restructuring should be included in their entirety as part of Dofasco's
COP and CV, because these expenditures were on Dofasco's financial
statements and were considered ordinary expenses that Dofasco charged
against its 1992 income.
In the final results of this administrative review, the Department
determined that Dofasco's prior period reversal of a portion of
restructuring estimates should be allowed because Dofasco's financial
statements include certain partial reversals of those earlier
restructuring estimates (the reductions were included in Dofasco's
financial statements in 1993 and 1994 as a credit to costs).
B. Prior Period Reversal Credit
In defendant's memorandum dated April 15, 1997, the Department
requested a remand to clarify its policy with respect to the reversal
charges and to determine if the adjustments made for Dofasco were
consistent with that practice and policy. The court did not grant
immediate remand, but ordered the Department to explain and describe
its policy and past practice. As articulated before the court, the
Department's past practice regarding reversal of charges for a prior
period has two components. As a first step, the Department will rely
upon a respondent's books and records prepared in accordance with the
home country's Generally Accepted Accounting Principles (``GAAP'')
unless those accounting principles do not reasonably reflect the costs
of producing the merchandise. See Certain Cut-to-Length Carbon Steel
Plate from Germany: Final Results of Antidumping Administrative Review,
61 FR 13834, 13837 (March 28, 1996), in which the Department did not
allow a reversal of prior period costs because to do so would be to
distort the costs in the subsequent period; see also Final
Determination of Sales at Less Than Fair Value: Small Diameter Circular
Seamless Carbon and Alloy Steel, Standard, Line and Pressure Pipe from
Italy, 60 FR 31981, 31991 (June 19, 1995), in which the Department
noted that reducing a subsequent year's costs because of the reversal
in that year of a prior year's estimate would mean distorting the
actual production costs incurred in a subsequent year.
As a second step in the analysis, the Department may recognize an
exception to its general rule in cases such as this one. The Department
stated that the matching principle of accounting may be superseded by
the concept of conservatism (the concept that certain expenses relating
to liabilities for current and future periods be accrued in the first
accounting period in which they can be estimated) in certain situations
such as this one. Because in the LTFV investigation the Department
included, in its entirety, the amount of estimated expenditures in the
COP/CV calculation and because implementation of the multi-year
restructuring plan was still in progress during the review, the
Department determined that it was reasonable to allow Dofasco to
include in its COP/CV calculation certain adjustments or reversals to
the estimated expenditures accrued in 1992.
In response, the court stated that first, the concept of
conservatism does not supersede the concept of matching, but should be
incorporated into it. Secondly, the court stated that corrections to
the financial records in one period should be made only in that same
period; it is respondent's responsibility to correct estimates promptly
and in the same proceeding to which they are applicable. Third, the
court said that although it may not have been appropriate for the
Department to include all costs for a multi-year restructuring in the
LTFV investigation cost calculation, that proceeding is not before the
court. Finally, the court stated that allowing a credit against costs
accounted for years earlier when they were estimated but not incurred
may result in a double distortion and may impact the company in the
current period. The court also said that the Department's
rationalization, that it ``must abide by its long standing policy''
(see Final Results, 61 FR 13825), does not stand scrutiny because its
practice is the opposite of what it did in the instant case. As such,
the Court remanded this issue to the Department with the instruction
that the Department was to eliminate the credit for the reversals
unless it could articulate a rational reason for abandoning its past
practice.
In its redetermination on remand, the Department eliminated the
credit for the partial reversal of a prior period charge from the
calculation of Dofasco's costs, as instructed by the Court. In
addition, in reviewing the margin calculation, the Department
identified and corrected ministerial errors in the calculation of
interest expenses, general and administrative expenses, and variable
and total cost of manufacturing for model match purposes. See Analysis
Memorandum dated January 28, 1998, for more information concerning this
issue.
III. Stelco
A. Background
In its final results, the Department calculated a margin for
Stelco's imports of corrosion resistant product using our standard
calculation programs. On April 19, 1996, petitioners alleged that there
were three ministerial errors in the Department's margin calculation
program for this product. The Department agreed with petitioners but
was unable to correct these errors prior to jurisdiction vesting with
the CIT.
B. Ministerial Errors
The ministerial errors at issue consist of the following:
1. In the Final Results, 61 FR 13816, the Department stated that it
intended to follow the ``Zenith footnote 4'' methodology for adjusting
United States Price (``USP'') for home market consumption taxes.
Pursuant to this methodology, when merchandise exported to the United
States is exempt from home market consumption taxes, the Department
adds to USP the absolute amount of such taxes charged on comparison
sales in the home market. Inadvertently, the Department
[[Page 49080]]
failed to calculate USP in accordance with this methodology.
2. The Department intended to correct an adjustment to certain
sales that resulted in double counting. Final Results at 13832.
However, the Department failed to recalculate USP in accordance with
this methodology.
3. In the Final Results at 13832, the Department stated that it
intended to treat Stelco's slitting expenses as further manufacturing
costs for purposes of calculating exporter's sales price. Nevertheless,
the Department neglected to make these adjustments in the calculations
for the final results.
In its redetermination on remand, the Department corrected these
ministerial errors in Stelco's margin calculation.
Results of Redetermination on Remand: The Department filed its
redetermination with the CIT on January 28, 1998. See Final Results of
Redetermination on Remand, AK Steel Corp. et al. v. United States,
Court No. 96-05-01312. On July 23, 1998, the CIT affirmed the
Department's remand determination.
As a result of the remand determination, the Department re-
calculated the weighted average margins for Dofasco and Stelco. The
final dumping margins for the period February 4, 1993, through July 31,
1994 are as follows:
------------------------------------------------------------------------
Margin
Manufacturer/exporter (percent)
------------------------------------------------------------------------
CCC........................................................ 1.96
Dofasco.................................................... 1.72
Stelco..................................................... 5.62
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In its decision in Timken Co. v. United States, 893 F.2d 337 (Fed.
Cir. 1990) (``Timken''), the United States Court of Appeals for the
Federal Circuit held that, pursuant to 19 U.S.C. section 1516a(e), the
Department must publish a notice of a court decision which is not ``in
harmony'' with a Department determination, and must suspend liquidation
of entries pending a ``conclusive'' court decision. The CIT's July 23,
1998 decision in AK Steel constitutes a decision not in harmony with
the Department's final results of review. Publication of this notice
fulfills the Timken requirement. Accordingly, the Department will
continue to suspend liquidation pending the expiration of the period of
appeal, or, if appealed, until a ``conclusive'' court decision.
Dated: September 4, 1998.
Joseph A. Spetrini,
Acting Assistant Secretary for Import Administration.
[FR Doc. 98-24599 Filed 9-11-98; 8:45 am]
BILLING CODE 3510-DS-P
