[Federal Register Volume 60, Number 243 (Tuesday, December 19, 1995)]
[Notices]
[Pages 65264-65284]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-30784]
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DEPARTMENT OF COMMERCE
[A-428-814]
Certain Cold-Rolled Carbon Steel Flat Products From Germany;
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
Reviews.
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SUMMARY: On August 2, 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 Germany (A-428-814) (Preliminary Results). The review
covers sales from one manufacturer of the subject merchandise to the
United States and the period August 18, 1993, through July 31, 1994. We
gave interested parties an opportunity to comment on our preliminary
results. Based on our analysis of the comments
[[Page 65265]]
received, we have changed the results from those presented in the
preliminary results of review.
EFFECTIVE DATE: December 19, 1995.
FOR FURTHER INFORMATION CONTACT: Steve Bezirganian or Robin Gray,
Office of Agreements Compliance, Import Administration, International
Trade Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202)
482-1395 or (202) 482-0196, respectively.
SUPPLEMENTARY INFORMATION:
Background
On August 2, 1995, the Department published in the Federal Register
(60 FR 39355) the preliminary results of the administrative review of
the antidumping duty order on certain cold-rolled carbon steel flat
products from Germany (58 FR 44170, August 19, 1993). The Department
has now completed this administrative review in accordance with section
751 of the Tariff Act of 1930, as amended (the Act).
Applicable Statute and Regulations
Unless otherwise stated, all citations to the statute and to the
Department's regulations are references to the provisions as they
existed on December 31, 1994.
Scope of these Reviews
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 the thickness, as currently
classifiable in the 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, 7209.24.1010, 7209.24.1050,
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, 7211.41.7075, 7211.41.7085, 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 one exporter of certain cold-rolled carbon steel
flat products, Thyssen AG (TAG). 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. Petitioners and Thyssen requested a public hearing
but later withdrew their requests. Petitioners and Thyssen filed case
briefs and rebuttal briefs on September 1, 1995, and September 12,
1995, respectively.
Comment 1: Petitioners argue that fundamental and pervasive flaws
in Thyssen's responses require the use of total best information
available (``BIA''). Petitioners argue that the failure of the
Department to apply total BIA provides a significant disincentive for
respondents to comply with the Department's instructions and
information requests in the future, and encourages them to respond
selectively in accordance with what would be to their benefit in the
margin calculation.
Thyssen counters that the Department correctly determined in its
July 20, 1995, memorandum on the use of BIA (``July 20, 1995,
memorandum'') that the use of total BIA is not warranted in this case,
and that petitioners' ``total BIA'' argument grossly mischaracterizes
the record and does not provide any new information which would warrant
a departure from the Department's preliminary results. Thyssen argues
that total BIA is reserved for those respondents who have been truly
uncooperative or whose submissions have been so replete with errors as
to make application of partial or neutral BIA impossible. See
Antifriction Bearings (Other than Tapered Roller Bearings) and Parts
from France; et al; Final Results of Antidumping Administrative
Reviews, 60 FR 10900, 10908 (February 28, 1995). Thyssen argues that
the Department's use of BIA should not unfairly penalize a respondent
who substantially cooperates. See, e.g., Allied-Signal Aerospace Co. v.
United States, 996 F. 2d 1185 (Fed. Cir. 1993); NTN Bearing Corp. of
America v. United States, Slip Op. 93-129 (CIT July 13, 1993).
Department's Position: As discussed in the Department's July 20,
1995, memorandum, the Department applies total BIA when a respondent
fails to submit information in a timely manner, or when the submitted
data is sufficiently flawed, so that the response as a whole is
rendered unusable. The Department considers the errors and
inconsistencies in Thyssen's submission of such a nature that they have
had a limited effect upon the analysis and, as appropriate, can be
dealt with on an individual basis. Individual issues which petitioners
argue warrant the use of total BIA, and Thyssen's rebuttals, are
addressed below in Comments 2 through 4.
Comment 2: Petitioners argue that Thyssen's reporting of product
characteristics was replete with mistakes and omissions and could not
be conclusively verified by the Department given Thyssen's failure or
refusal to provide mill certificate information. Petitioners argue that
Thyssen's unreliable product comparisons and erroneous reporting
preclude an accurate determination of the true dumping margin in this
review, as demonstrated by the home market verification report.
Furthermore, petitioners argue that product characteristics could not
be conclusively verified because of Thyssen's failure to provide mill
certificates or similar information that would conclusively demonstrate
the physical properties of the merchandise in question. Petitioners
argue that order documentation, product brochures, and Thyssen's ``List
of Analysis'' directory do not indicate the particular specifications
to which each transaction in fact conforms. Petitioners note that
[[Page 65266]]
while Thyssen has attempted to justify its failure to produce such
documentation at verification by claiming that these documents
generally are not requested by Thyssen's home market customers because
of the extra charge, Thyssen's price list in its Section III response
indicates that Thyssen does not always charge extra for preparation of
information typically provided on mill certificates or similar
documentation.
Thyssen responds that, as the Department noted in its July 20,
1995, memorandum, almost all of Thyssen's home market product
characteristic errors involved products with the quality classification
of ``other high strength'' that would not be used for matching
purposes. Thyssen also argues that, as noted in the Department's July
20, 1995, memorandum, the only errors in Thyssen's U.S. sales product
characteristics involved sales to specific customers which Thyssen
brought to the Department's attention at the beginning of the product
characteristic review in Germany, and which Thyssen had corrected by
the beginning of the U.S. verification.
Thyssen argues that mill certificates were never required, as the
Department's July 20, 1995, memorandum also noted, and that the
Department properly did not demand access to Thyssen's magnetic tape
records for whatever mill certificate information might have been
available. Thyssen argues that it does not maintain mill certificates
in its current ``database'' for more than three months after shipment
for two reasons: these documents generally are not requested by
Thyssen's customers, and so database access is not required; and the
volume of business makes retention in the database impractical. Thyssen
notes that the mill certificate information was and remains available
on magnetic tape, but that retrieval of isolated pieces of data from
this medium is time consuming. Thyssen notes that it was able to
provide from its ``database,'' immediately upon request, a mill
certificate for a sale in February 1995 for the only shipment where
this document was requested by the customer. Thyssen argues that it
provided the Department with mill certificates for all of its U.S.
sales, where mill certificates are an order requirement, and argues
that the Department confirmed that the ordered material corresponded to
that which was produced and sold. Finally, Thyssen argues that
petitioners' citation of a price list showing that some minimal
information will be provided free of charge ``if selected and precisely
ordered by the purchaser'' does not contradict the Department's finding
that Thyssen charges extra for ``the vast majority of test
certificates.''
Department's Position: Petitioners have questioned several aspects
of Thyssen's reporting of product characteristics. First, we disagree
with petitioners regarding the errors in reported product
characteristics for home market sales involving the quality ``other
high strength.'' These errors were discovered in a review of
observations that Thyssen had designated with this specific quality.
The specific sales in which errors were discovered were not used for
matching purposes. After the discovery of this error, the Department
examined additional ``high strength'' sales; no discrepancies were
identified.
Regarding the majority of product characteristic errors for U.S.
sales, the Department verified that Thyssen had identified the correct
product characteristic information. We instructed Thyssen to
incorporate those corrections in its final tape submission, and Thyssen
did so in a satisfactory manner. Regarding mill certificates, the
Department indicated in its verification outline of March 8, 1995, and
throughout its review of product characteristics of home market and
U.S. sales during verification in Germany, that it would be preferable
if we were able to review the appropriate mill certificates for the
observations in question. Thyssen indicated at verification that an
attempt to locate available information for the period of review
(``POR'') from magnetic tape would be very burdensome. In any case, the
Department remains satisfied with Thyssen's presentation of
documentation regarding the product characteristics of its reported
sales. Although the documentation reviewed at verification in Germany
indicated several errors committed by Thyssen in its reporting of
product classifications, nothing was noted at verification that
indicated that Thyssen shipped merchandise, as specified in its
commercial invoices, that differed from the specifications noted in the
corresponding purchase orders and in Thyssen's general production
standards by grade. (Contrary to Thyssen's assertion, most of the mill
certificates provided during the verification in Detroit were not used
for purposes of product characteristic verification, as the
verification of the product characteristics of pre-selected and
surprise sales for both markets had already been completed during the
verification in Germany.) As noted in the Department's July 20, 1995,
memorandum, the Department did not insist that Thyssen's magnetic tape
records be reviewed because the retrieval of isolated pieces of data
from Thyssen's magnetic tape records would have been inordinately
burdensome for Thyssen to have accomplished during verification.
Comment 3: Petitioners claim that the numerous corrections and
clarifications provided by Thyssen demonstrate that Thyssen's response
cannot be deemed reliable or usable. Petitioners argue that the nature
of the errors precludes proper product matching, distorts claimed
expenses and adjustments, and prevents an accurate analysis and
substantiation of costs overall.
Thyssen argues that the clerical errors identified and corrected by
Thyssen during the course of the review were inconsequential when
compared to the millions of bits of information reported; that the
Department noted numerous instances, in its verification reports, where
no discrepancies were found; and that the Department correctly
concluded in its July 20, 1995, memorandum that the problems found were
not sufficient to render Thyssen's submission unreliable or unusable.
Department's Position: We disagree with petitioners. As reflected
in the Department's July 20, 1995, memorandum and elsewhere in this
final determination in regard to particular areas of concern, the
Department properly allowed Thyssen to make corrections to its
submissions. We determined that the remaining errors and
inconsistencies did not warrant disregarding Thyssen's submission as a
whole, and could be dealt with on an individual basis.
Comment 4: Petitioners assert that Thyssen failed to report cost
information as requested by the Department, thereby rendering the
company's responses unusable for the purposes of our final results.
Specifically, petitioners first argue that Thyssen failed to provide a
schedule of production quantities, thereby preventing the Department
from tying control number specific cost of production (``COP'') and
constructed value (``CV'') figures to Thyssen's accounting records.
Petitioners argue that the verification of production quantities was
crucial in determining the accuracy of Thyssen's reported COP and CV
amounts because the company used production quantities to compute (1)
the average per-unit costs contained in its cost center expense
reports, (2) the per-ton basis costs that were common to all products
within each cost center, and (3) all product-specific basis costs
within each cost center as part of the ``tons per hour'' factor.
Petitioners note that the Department has stated that the
[[Page 65267]]
failure of a respondent to show that the product-specific costs
included in COP and CV are tied to the company's accounting records
results in a failed verification. See Antifriction Bearings (Other Than
Tapered Roller Bearings and Parts Thereof From the Federal Republic of
Germany); Final Results of Antidumping Duty Administrative Review, 56
FR 31692, 31707 (July 11, 1991) (AFBs From Germany). Petitioners argue
that, despite the Department's specific request for such a schedule,
Thyssen refused to provide this information, claiming that it would be
extremely burdensome, but failing to show why that was the case.
Petitioners claim that the Department appears to have contradicted the
record, including its own cost verification report, when it stated that
``Thyssen did report product-specific costs in that it computed actual
product-specific costs using production quantities at each stage of the
production process'' and that ``[t]hese production quantities were
reviewed and tested at verification.'' Petitioners believe the cost
verification report indicates that product-specific production quantity
information was not provided to the Department at verification.
Petitioners argue that the Department's ``alternative verification
procedures,'' i.e., the examination of fiscal-year ending inventory
balances and movements in and out of a single warehouse, cannot be
deemed to have demonstrated a link between production quantity
information and Thyssen's financial records.
Petitioners also argue that Thyssen failed to identify product-
specific costs as standard or actual costs, thereby preventing the
Department from tying ``basis costs'' to actual production quantities.
Petitioners argue that the Department has determined that it cannot use
the cost response of a respondent which failed to provide actual costs
and was unable to support its standard costs. See Final Determination
of Sales at Less Than Fair Value: New Steel Rail, Except Light Rail,
from Canada, 54 FR 31984, 31985-86 (August 3, 1989).
Petitioners argue that throughout the review Thyssen has failed to
conclusively identify whether its reported cost figures are based on
standard or actual cost amounts. Petitioner contends that all of the
information on the record indicates that Thyssen's product-specific
manufacturing costs for the COP and CV figures are based on standards
for which variances must be calculated. Petitioners assert that the
information on the record is inconsistent with statements from the
Department's cost verification report that it ``tested that the
standard costs were fully adjusted by the variances incurred and thus
the submitted costs reflect the actual costs incurred during the
respective fiscal periods.''
Petitioners conclude that Thyssen's failure to report cost
information as requested requires the Department to reject the
company's questionnaire responses and apply total BIA. Petitioners
argue that the flaws in Thyssen's reporting of COP and CV preclude the
Department from conducting its sales-below-cost test and prevent the
Department from having confidence in the difference-in-merchandise
(``difmer'') data, which are needed in the Department's margin
calculations. Petitioners argue that, if the Department determines not
to reject Thyssen's responses on the whole, the Department must, at the
very least, apply as BIA to Thyssen's cost information the highest cost
of manufacturing for all COP and CV values from sales in this review.
Thyssen counters that there is no doubt that the Department
verified the company's actual production costs and actual production
quantities. The Department utilized an exacting standard to verify
Thyssen's submitted costs and the results of the Department's
verification are supported by substantial evidence. Respondent argues
that petitioners' claims must be rejected.
Thyssen argues that the Department's statements in its July 20,
1995, memorandum regarding this issue are accurate, contrary to the
assertions of petitioners. Thyssen argues that its own submissions and
the Department's cost verification report confirm that the actual
production quantities were provided and verified. The actual costs were
incurred by each processing cost center, based upon actual production,
actual yield, actual work time and standard performance.
Furthermore, Thyssen argues that petitioners have mischaracterized
the purpose of the Department's request for product-specific quantity
information which was provided by alternative means. According to
Thyssen, the request for quantity information pertained not to the
compilation of production costs, but rather was designed to allow the
Department to reconcile to Thyssen's inventory.
Department's Position: We disagree with petitioners' allegation
that Thyssen failed the cost verification. The Department's
verification provided reasonable assurance of the accuracy of Thyssen's
reported costs, and our cost verification report outlined all of the
testing which we performed and noted any exceptions or deficiencies in
the results of that testing. As stated recently by the Court of Appeals
for the Federal Circuit, the Act ``gives Commerce wide latitude in its
verification procedures.'' American Alloys Inc. v. United States, 30
F.3d 1469, 1475 (Fed. Cir. 1994). The standard for verification is not
to verify all information or to require perfect accuracy.
``Verification is like an audit, the purpose of which is to test
information provided by a party for accuracy and completeness, so that
Commerce can justifiably rely on that information.'' Tatung Co. v.
United States, Slip Op. 94-195 (CIT December 14, 1994). Accordingly, as
detailed below, we are satisfied that the shortcomings identified in
the cost verification report regarding Thyssen's data do not undermine
the reliability of Thyssen's submission as a whole and do not warrant
resort to BIA.
Contrary to petitioners' assertions, we do not believe that
Thyssen's omission of product-specific (i.e., control number-specific)
production quantities renders the company's questionnaire response
unreliable for purposes of calculating COP and CV. As Thyssen explained
in its response and as we observed at verification, the company does
not maintain production quantities on such a product-specific basis as
part of its normal accounting system. Instead, Thyssen relies on total
production quantity figures at each of its steel production stages to
compute an average per-unit coil cost for all products. Thyssen then
converts this average coil cost to a product specific cost based on a
standard table of ``extras,'' which are discussed further below. Thus,
the total production quantities at each production stage are
determinative, as relied upon by Thyssen to calculate the per-stage
costs which are then accumulated to determine the coil production cost.
As part of our verification testing, we required Thyssen to provide
accounting records showing actual production quantities at each stage
of production. In order to verify the accuracy of Thyssen's reported
per-unit costs we examined production quantities and total production
costs for selected cost centers within specific production stages. We
found no discrepancies between the production quantities used by
Thyssen to compute the actual weighted-average cost reported to the
Department and the company's normal production records.
In contrast to Thyssen, the respondent in question in AFBs From
Germany, the case cited by petitioners, was able to report the relevant
information (regarding labor, overhead and other
[[Page 65268]]
expenses) on a model- or product-specific basis. The Department
determined, however, that it could not tie the reported model-specific
amounts to the respondent's internal accounting records and financial
statements, information which was successfully verified. AFBs From
Germany, 56 FR at 31707. Being unable to devise a methodology to better
allocate labor and overhead costs, the Department relied upon total
BIA. Id. Following a challenge by respondent, the CIT remanded the AFBs
From Germany determination, stressing that the actual information
provided by respondent was accurate and verified. The CIT required the
Department to further explain why, instead of relying upon total BIA,
it had not supplied its own methodology or that of another respondent.
Nippon Pillow Block Sales Co. v. United States, 820 F. Supp. 1444, 1455
(CIT 1993). Following remand, the CIT upheld the Department's
determination that it could not develop an allocation methodology or
use that of another respondent which would allow it to use the
previously verified data. Nippon Pillow Block Sales Co. v. United
States, 837 F. Supp. 434, 436 (CIT 1993).
Hence, as demonstrated by both the Department's initial
determination and the CIT's two decisions, AFBs From Germany stands for
the principle that the Department should rely upon a party's
information to the extent possible. Here, because we found Thyssen's
cost information as well as its accounting methodology reasonable and
verifiable, we see no reason for resorting to BIA.
With respect to petitioners' claim that it is unclear whether
Thyssen reported standard or actual costs, it is clear from the
computer tape submitted by Thyssen and from the verification report
that Thyssen reported the actual weighted-average cost of producing
cold-rolled coil. The adjustments Thyssen made to adjust the base cost
to actual cost are described in the cost verification report at pages
5-7. Thyssen adjusted the average cost of coil by three factors on the
computer tape: the computer variables CREXT1 and CREXT2 (``extras'')
accounted for composition, size, width, and form differences between
the average product and the unique product; the computer variable
THMOADJ adjusted the average coil cost for year-end accruals, price and
overhead variances. These three computer variables adjusted the average
coil cost to actual product-specific cost.
Petitioners' reliance upon New Steel Rail From Canada is misplaced.
In that case, the Department rejected the respondent's COP information
after determining that it could not be verified. The Department found,
among other deficiencies, that the respondent had developed information
for the investigation based on the standard product costs used by the
company, ``which were not part of the normal financial accounting
system and which were for a period subsequent to the period of
investigation.'' New Steel Rail From Canada, 54 FR at 31985. Despite
having a cost system which reported actual costs, the company in
question ``chose not to use this information for its response.'' Id. By
contrast, there is no evidence in the record of this review indicating
that Thyssen deviated from its normal accounting methodology except to
the extent necessary to meet the Department's reporting requirements.
We also disagree with petitioners' contention that it is
inappropriate to use standard machine times as a basis on which to
compute labor cost for specific products. The use of standard machine
times as a reasonable and appropriate allocation basis is well
substantiated in both accounting and Departmental practice. Notice of
Preliminary Determination of Sales at Less than Fair Value and
Postponement of Final Determination: Certain Welded Stainless Steel
Pipes from the Republic of Korea, 57 FR 27731, 27733 (June 22, 1992).
Machine hours effectively relate the labor cost incurred to the
specific product. We find it reasonable and not distortive to use
standard machine hours to allocate actual processing costs to specific
products.
In sum, Thyssen supported its COP and CV figures with substantial
evidence on the record as is indicated by the company's questionnaire
responses, supplemental responses and verification exhibits. We
reviewed and tested the accuracy and completeness of Thyssen's
submitted COP and CV data and did not identify any problems which would
cast doubt on the company's response as a whole. Accordingly, we have
relied on Thyssen's cost response as the basis for our final results of
this administrative review.
Comment 5: Petitioners argue that, should the Department determine
not to disregard Thyssen's cost response, it must still account for
Thyssen's failure to provide actual costs of material inputs from
related parties. Petitioners argue that this failure prevents the
verification of the valuation of materials acquired from related
suppliers and requires the application of BIA.
Petitioners first contend that Thyssen's provision of financial
statements or reports for a related iron ore supplier and a related
ferrous scrap supplier in lieu of actual costs was insufficient for
determining whether transfer prices are above or below the cost of
production. Petitioners cite the final determination in the underlying
investigation, which stated that ``[f]or the Department to be assured
that the transfer prices are above costs, the Department must be able
to test the transfer prices against the actual costs of production of
the inputs. * * *'' Notice of 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 Germany, 59 FR 37136, 37151 (July 9, 1993) (Steel from Germany).
Petitioners argue that the Department's verification of Thyssen's
related iron ore supplier was inadequate to show whether transfer
prices were above costs, and did not account for the fact that the
overall profit on that supplier's income statement may obscure the fact
that it incurs costs, on sales to Thyssen that are most likely not
incurred on other sales, such as transportation and additional
processing costs. Petitioners argue that the COP information provided
by the related scrap supplier are also insufficient to demonstrate that
the merchandise was sold above the cost of production. Furthermore,
petitioners argue that Thyssen failed to distinguish between the cost
of merchandise sold to Thyssen and the cost of merchandise sold to
other customers. Consequently, petitioners argue that Thyssen failed to
demonstrate that the transfer prices paid were above the supplier's
cost of production, and therefore the application of BIA is warranted.
Thyssen responds that petitioners' claims ignore the cost
verification report, the accompanying exhibits and analysis, as well as
the substantial documentation provided by Thyssen. Thyssen points to
its March 8, 1995, submission at 8-17 and accompanying exhibits 11-15,
and pages 12-16 and exhibit G of the Department's May 17, 1995, cost
verification report. Thyssen argues that the Department did not base
its decision to accept related party input suppliers' prices solely on
profit information in the financial statements. Further, Thyssen
provided extensive information relating to sales quantities and
production costs for its related iron ore supplier which established
that transfer prices were above actual production costs. Thyssen
counters that given its related iron ore suppliers'
[[Page 65269]]
product mix, petitioners' suggestion that potentially differing terms
of sale could have resulted in production costs exceeding transfer
prices is absurd on its face.
In regard to scrap sales, Thyssen quotes the cost verification
report at 16 which concluded that the ``Rhine region scrap division,
the only division providing scrap to Thyssen Stahl AG (``TSAG''), was
profitable on a DM per ton basis.'' Thyssen states the Department acted
reasonably in using the transfer prices submitted in determining COP
and CV in the absence of any evidence that the cost data supplied was
unreliable or any evidence of record more probative than that which
Thyssen and its related suppliers submitted.
Further, Thyssen contends that the cost information submitted by
petitioners cannot be considered because it consists of factual
information available to petitioners prior to publication of the
preliminary determination and therefore was not timely filed. See NSK
Ltd. v. United States, 798 F. Supp. 721, 725 (CIT 1992).
Department's Position: The Department disagrees with petitioners.
Thyssen submitted evidence that the prices paid to related suppliers
for the most significant inputs identified by the Department were at
arm's length and were not at prices below the related suppliers' cost
of production. The Department tested the submitted prices from a major
related iron ore supplier and a major related scrap supplier. The
Department found that the iron ore prices from unrelated and related
suppliers were the same. The Department found that scrap prices from
unrelated and related suppliers were comparable. The Department also
tested that the prices were above the cost of production. The
Department computed a cost per ton of iron ore from the constant
currency income statements of the major related iron ore supplier for
the years ending December 31, 1993 and December 31, 1994. We compared
this amount to the average sales price, noting that the transfer price
was higher than the average cost. It was appropriate in this case to
use the average cost calculation because the major iron ore supplier's
sole business is the sale of iron ore; therefore, financial results are
not affected by other lines of business. Petitioners' argument that the
profit on domestic sales may far exceed the profit on export sales is
speculative and not supported by evidence on the record. Export sales
constituted the majority of the related suppliers' sales. Export sales
commanded significantly higher prices than domestic sales; this higher
price should reflect any additional processing or transportation costs
envisioned by petitioners.
In addition, at verification we reviewed the profit analysis of the
major scrap supplier's Rhine region division, which supplies Thyssen
with its ferrous scrap, and concluded that the division was profitable
and therefore its sales of scrap were at prices above the cost of
production.
Comment 6: Petitioners assert that the Department should use BIA
for the CV of material inputs. Petitioners argue that for purposes of
calculating CV, it is not sufficient that the transfer prices of major
inputs reflect market value. Rather, section 773(e)(2) of the Act
requires the Department to disregard the transfer price of a major
input and use the actual cost of producing the input if the transfer
price is below the related supplier's COP for that input. See
Antifriction Bearings From France, supra, 60 FR at 10924. Petitioners
argue that Thyssen's failure to provide credible evidence that the
transfer price for iron ore was above the cost of production despite
numerous requests from the Department for this information constitutes
reasonable grounds to believe or suspect that the transfer prices paid
by Thyssen were less than the cost of production. With respect to
``non-major'' inputs, petitioners argue that Thyssen failed to
demonstrate that its transfer prices were at arm's length as, except
for scrap, which the Department examined at verification, Thyssen
provided only self-selected invoices which cannot be considered
representative of prices.
Department's Position: The Department disagrees with petitioners.
As discussed above in response to comment 5, the Department's testing
at verification revealed that Thyssen's related party did not offer
preferential pricing to related suppliers for major inputs. Moreover,
we verified that major inputs were purchased at prices that were not
below their cost of production. We are satisfied with Thyssen's
submissions regarding this issue, as verified. With respect to
materials purchased from related suppliers which consisted of a small
part of the cost of manufacturing--so-called ``non-major'' inputs--the
Department elected not to verify these amounts. We determined that
these inputs had a minimal effect on the total cost of manufacturing.
Given this fact, the constraints of time, and the nature of
verification (see response to comment 4), we did not consider it
necessary to verify these amounts individually.
Comment 7: Thyssen argues that, for purposes of its COP and CV
calculations, the Department incorrectly reduced Thyssen's reported
interest income by interest/dividends earned on security investments of
working capital. Thyssen disputes the Department's rationale that ``the
Department does not generally allow dividends as an offset to financing
expense because dividends are not considered to be short-term in
nature.'' According to Thyssen, only short-term income from current
assets was included in the interest income offset. Thyssen argues that,
since this income was attributable to Thyssen's ``short term
investments of its working capital,'' it should not have been excluded
from the interest income offset. See, e.g., Antifriction Bearings From
France, 60 FR at 10926; and Television Receivers, Monochrome and Color
from Japan; Final Results of Administrative Review, 56 FR 23281, 23282-
83 (May 21, 1991). Thyssen argues that a cost verification exhibit
confirms that its claim was limited to income from current assets and
did not include interest from long term securities and interest other
than from current assets.
Petitioners agree with the Department's preliminary determination
that Thyssen has not demonstrated that the source of the claimed income
is short-term in nature.
Department's Position: Thyssen has not demonstrated that it is
entitled to an offset to interest expenses for income derived from
dividends. The Department's long-established practice is to deny an
offset for income of this nature. See Final Determination of Sales at
Less Than Fair Value: Circular Welded Non-Alloy Steel Pipe From the
Republic of Korea, 57 FR 42942, 42953 (September 17, 1992); Final
Determination of Sales at Not Less Than Fair Value: Saccharin From
Korea, 59 FR 58826, 58828 (November 15, 1994). The CIT recently
affirmed the Department's general standard in NTN Bearing Corp. v.
United States, Slip Op. 95-165 (CIT Oct. 2, 1995). Relying on its
earlier decision in Timken Co. v. United States, 852 F. Supp. 1040,
1048 (CIT 1994), the court clarified that to qualify for an offset,
interest income must be related to the ``ordinary operations of a
company.'' NTN Bearing at 32. While this standard does not require that
interest income be tied directly to the production of the subject
merchandise, a respondent must show ``a nexus between the reported
interest income'' and its ``manufacturing operation.'' Id. at 33; see
Timken at 1048. Unlike interest income earned from the short-term
investment of working capital,
[[Page 65270]]
only rarely will dividend income earned from a company's investment
activities meet this standard. See Final Determination of Sales at Less
Than Fair Value: Certain Carbon and Alloy Steel Wire Rod from Canada,
59 FR 18791, 18795 (April 20, 1994).
Thyssen argues in its brief that its dividend income qualifies as
an offset because it is ``short-term'' income from current assets, such
as ``interest on current bank accounts, interest on time and fixed-term
deposits and interest on short-term securities.'' However, the
verification exhibit referred to by Thyssen as support actually
characterizes the income in question as ``dividends from securities of
working capital.'' Cost Verification Report, Exhibit K. This is very
similar to the facts in NTN Bearings, where the CIT upheld the
Department's denial of the offset. NTN Bearing at 33. See also
Television Receivers, Monochrome and Color, from Japan; Final Results
of Antidumping Duty Administrative Review, 56 FR 34180, 34184 (July 26,
1991). Indeed, Thyssen made little if any effort to demonstrate why its
dividend income qualified as an offset. Therefore, because Thyssen
failed to show the necessary nexus between its dividend income and
manufacturing operations, we have denied the claimed offset.
Comment 8: Thyssen reported separate cost and allocated expense
data for sales observations according to the fiscal year in which the
sales took place. The Department conformed its computer programs so
that they could utilize these fiscal year data. Thyssen argues that the
Department incorrectly calculated one weighted-average home market
direct selling expense and one weighted-average home market indirect
selling expense for the entire POR. Thyssen argues that this is
inconsistent with the Department's utilization of separate fiscal year
costs and expenses for all of the other elements utilized in
calculating constructed value.
Petitioners argue that calculating two such general expenses per
control number (``CONNUM''), as requested by Thyssen, would improperly
separate the class or kind into two categories, each of which has a
separate cost. Petitioners argue more generally that the reporting of
two costs and/or expenses per CONNUM conflicts with the statute and
Department practice, distorts the effects of the costs and expenses,
and is administratively burdensome. Consequently, petitioners argue
that the Department should re-calculate a single weighted average for
all costs and expenses covering the two fiscal periods.
Department's Position: We disagree with petitioners' assertion that
the reporting of costs for the two fiscal periods covered by the POR
violates the antidumping statute which directs the Department to
calculate for constructed value, the ``general expenses and profit
equal to that usually reflected in sales of merchandise in the same
general class or kind as the merchandise under consideration.'' Thyssen
did calculate general expenses for the same class or kind of
merchandise in accordance with the statute for the two fiscal periods
encompassed within the POR. We have determined that computing general
expenses by fiscal period does not, in effect, divide the class or kind
of merchandise because the calculation for each period covers the
entire class or kind. Using expenses associated with each fiscal period
has not distorted our analysis because we have used contemporaneous
prices and expenses. Contrary to petitioners' assertions, attempting to
recalculate a single weighted average for all costs and expenses
covering the two fiscal periods would be extraordinarily burdensome. We
inadvertently did not account for two fiscal years in the instance
noted by Thyssen, and have adjusted the programming language for
weighted-average home market direct and indirect selling expenses so
those calculations are in accordance with the Department's general use
of separate fiscal year data. In this instance we have used the
reported data.
Comment 9: Thyssen argues that the Department, through clerical
error, improperly calculated Thyssen's fiscal 1992/93 cost of
manufacture for cost of production. Thyssen argues that the Department
failed in one instance, due to a missing zero, to follow its June 16,
1995, COP, CV, and Further Manufacturing Concurrence Memorandum in
correcting Thyssen's thirteenth month adjustment.
Department's Position: We agree with Thyssen, and have incorporated
the correct information in the programming for the final results.
Comment 10: Thyssen asserts that the Department improperly failed
to adjust for physical differences in merchandise when comparing U.S.
sales to home market sales falling within the same control number (or
CONNUM, identified in the sales data bases as CONNUMU and CONNUMH,
respectively).
According to Thyssen, it reported its variable manufacturing costs
on a weighted-average basis for each CONNUMU and CONNUMH, with the
weighted average derived from actual costs attributable to each
individual invoice. Consequently, Thyssen argues that the material
costs, labor costs and overhead expenses were not necessarily identical
for all sales within a particular CONNUM. Similarly, because the
physical characteristics of the merchandise grouped together in the
U.S. sales listing often differed from the physical characteristics of
merchandise grouped together in the home market sales listing, the
variable cost of manufacturing for U.S. sales (VCOMU) often differed
from variable cost of manufacturing for home market sales (VCOMH) for
product groupings with the same identifying CONNUM.
As noted in the May 17, 1995, cost verification report at 22, ``the
variable cost of manufacturing in the home market sales listing and the
U.S. sales listing was computed by calculating a variable cost of
manufacturing for each sale and weight averaging all sale specific
model costs within the control number.'' Thyssen asserts that the
Department verified that Thyssen had quantified its product-specific
cost differences resulting from differences in physical characteristics
not reflected in the model matching characteristics upon which the
determination of specific CONNUMs is based. Therefore, according to
Thyssen, the Department established that the differences in the VCOMH
and VCOMU for product groupings with the same identifying CONNUM were
based on the physical differences in the merchandise actually falling
within each group.
As support, Thyssen refers to section 771(16)(A) of the Act, which
uses the phrase ``identical in physical characteristics.'' Because this
phrase is not defined, Thyssen argues that it must be construed in
accordance with its common meaning, i.e., ``exactly the same.'' Thyssen
cites various cases where the Department noted that its product
groupings are not necessarily limited to a single ``identical''
product. See, e.g., Antifriction Bearings (Other than Tapered Roller
Bearings) and Parts Thereof from France; et al.; Final Results of
Antidumping Duty Administrative Reviews, 57 FR 28360, 28364-66 (June
24, 1992); Antifriction Bearings (Other than Tapered Roller Bearings)
and Parts Thereof from the Federal Republic of Germany, Final
Determination of Sales at Less than Fair Value, 54 FR 18992, 19072 (May
3, 1989). Thyssen concludes that the Department has refused to make
adjustments for differences in costs of producing merchandise only when
the products in question had identical physical characteristics. See
Import Administration Policy Bulletin, No. 93.2 (July 29, 1992).
[[Page 65271]]
In response, petitioners argue that it is well established in the
cold-rolled carbon steel flat products cases that all products which
have the same CONNUM are considered by the Department to be
``identical'' for the purpose of applying Section 773(a)(4)(C). For
example, Appendix V of the questionnaire from the underlying
investigation states that ``[f]or purposes of these investigations,
products will be considered `identical' in thickness if they fall
within the same thickness range * * * regardless of the actual
thickness of the products''; ``products will be considered `identical'
in width if they fall within the same width range identified * * *
regardless of the actual width of the merchandise''; ``and ``[n]o
difference in merchandise adjustment (difmer) may be claimed for
products that are within the same thickness or width range, but differ
in actual measurement.'' Similarly, the Department stated that, in
following such an approach for determining which sales are of
``identical'' merchandise, ``if there are `identical' matches according
to our designated criteria, we will not make an adjustment for any
additional differences in merchandise (difmer).''
Petitioners argue that, in the present review, CONNUMs have been
defined such that each CONNUM has a unique set of identifiers for the
matching criteria established by the Department. As a result, products
sold in the United States and home markets which have the same CONNUM
would share the same ``identifier'' for all of the Department's
product-matching criteria and, accordingly, the Department was correct
in not making difmer adjustments for U.S. and home market products with
the same CONNUM.
Department's Position: We disagree with respondent. As explained
below, the Department correctly declined to make difmer adjustments
when U.S. sales were matched to what we determined to be home market
sales of identical merchandise (i.e., when the U.S. and home market
sales in question possessed the same product characteristics as set
forth by the Department in its model matching criteria).
Section 771(16) of the Act directs the Department to compare sales
of home market merchandise which are ``such or similar'' to merchandise
sold in the United States. In accordance with section 771(16)(A), the
Department first identifies and compares that merchandise which is
``identical'' in physical characteristics, followed by sales of
merchandise which is most ``similar'' in physical characteristics. To
make these determinations, the Department devises a hierarchy of
commercially meaningful characteristics suitable to each class or kind
of merchandise. The Department considers merchandise to be identical
within the meaning of section 771(16)(A) when all the relevant
characteristics match.
The courts have recognized that the Department has broad discretion
``to choose the manner in which `such or similar' merchandise shall be
selected.'' Koyo Seiko Co. v. United States, 66 F.3d 1204, 1209 (Fed.
Cir. 1995). This discretion extends to determining which products
properly should be considered identical.
However, the Department is not authorized to grant difmer
adjustments within identical product categories. Under section
773(a)(4)(C) of the Act, the Department may only adjust for cost
differences between two products which are ``similar'' in physical
characteristics, and in this way compensate for any difference in the
price derived solely from the physical difference between the two
products compared.
Basing its product matching criteria on commercially meaningful
characteristics permits the Department to draw reasonable distinctions
between products for matching purposes, without attempting to account
for every possible difference inherent in certain classes or kinds of
merchandise. Given the tremendous number of variations between products
in the various flat-rolled carbon steel product categories, including
cold-rolled steel, the Department has followed this approach in the
present case, beginning with the original less-than-fair-value
investigation. As such, the Department may define certain products as
being ``identical'' within the meaning of section 771(16)(A), even
though they contain minor differences. See Final Determination of Sales
at Less Than Fair Value; Gray Portland Cement and Clinker From Mexico,
55 FR 29244, 29247-48 (July 18, 1990). Similarly, the Department need
not account for every conceivable physical characteristic of a product
in its hierarchy. Thus, a range of products may be considered
``identical'' within the meaning of the statute.
For instance, as Thyssen correctly notes in its case brief, many
steel products would have been treated by the Department as identical
(i.e., in the same CONNUM) even when their widths differed from one
another, because this product characteristic is identified in terms of
ranges (e.g., 40 to 60 inches as identifier ``F'' for the width product
characteristic). In other words, two sales could be classified in the
same CONNUM even if one was of merchandise with a width of 41 inches
and the other was of merchandise with a width of 59 inches because both
would fall within the width category identified as ``F''.
At the outset of the present review, when it had an opportunity to
comment on the hierarchy of product matching criteria, Thyssen failed
to argue that it considered the Department's width and thickness
product categories overly broad, nor did Thyssen argue that additional
product characteristics should be included within the hierarchy.
Because the products within each CONNUM are identical within the
meaning of the statute, the VCOMH and VCOMU reported by Thyssen within
individual CONNUMs do not provide a basis for making difmer
adjustments.
Comment 11: Thyssen contends that the Department improperly
compared U.S. sales of seconds to constructed value, rather than to
home market sales of seconds. Thyssen acknowledges that home market
seconds were sold at prices below cost. However, Thyssen cites the
Senate Report accompanying the Trade Reform Act of 1974 to argue that
neither the statute nor the Department's regulations mandate that all
below cost home market sales be disregarded in calculating foreign
market value. See S.Rep. No. 1298, 93d Cong., 2nd Sess. 173 (1974).
Thyssen argues that in the steel industry it is normal business
practice for all companies, including Thyssen, to sell secondary steel
at less than the cost of producing prime steel of the same grade. At
the same time, however, sales of seconds are relatively infrequent in
comparison to sales of prime material and do not prevent a steel
manufacturer from recovering production costs on all steel sales,
primes and seconds, within a reasonable period in the normal course of
trade. Thyssen contends that this result is directly contrary to the
intent of Congress.
Thyssen argues that IPSCO, Inc. v. United States, 965 F.2d 1056,
1060 (Fed. Cir. 1992), which the Department cites at page 3 in its
April 19, 1995, memorandum on treatment of non-prime merchandise (from
Roland MacDonald to Joseph Spetrini, General Issue Case No. A-100-003),
merely permits the Department to compare the prices of seconds to
constructed value in appropriate circumstances; IPSCO does not mandate
that result. Thyssen contends that the particular issue which it has
raised, the question of whether Thyssen's sales of seconds were in
sufficiently large quantities over a significantly lengthy period, is
fact-
[[Page 65272]]
specific to the instant review and was not presented to the IPSCO
court.
Petitioners respond that it is inappropriate to combine prime and
non-prime merchandise in determining whether the quantity of below cost
sales is sufficiently large to warrant disregarding those sales in
determining FMV. Petitioners contend that Thyssen has taken the
inconsistent positions that the Department should separate prime and
non-prime merchandise for the arm's length test, but combine both types
of merchandise for the cost test. Petitioners argue that the comparison
of U.S. sales with CV is mandated by statute whenever such or similar
home market merchandise fails the COP test, that Thyssen admits that
its sales of seconds fail this test, and that, accordingly, U.S. sales
of non-prime merchandise should be compared to CV. Petitioners add that
Thyssen did not provide any evidence that the costs of the merchandise
consisting of a combination of both prime and non-prime merchandise
would be recovered over a reasonable period of time, even if such an
analysis were relevant.
Department's Position: Thyssen is essentially requesting that the
Department modify the below-cost test it applied in the preliminary
results to include sales of seconds for matching purposes whenever the
corresponding sales of prime were at above cost prices. In this regard,
Thyssen mistakenly relies on the Senate report accompanying the 1974
Trade Reform Act to contend that the Department should not disregard
sales of seconds, regardless of whether they were at prices below cost.
We disagree.
The Act requires the Department to determine whether a respondent's
sales were made over an extended period of time and in substantial
quantities so as to warrant disregarding those sales in determining
FMV. This test applies across sales of a model as a whole, whether they
be prime, seconds or otherwise. See 19 U.S.C. Sec. 773(b). The 1974
Senate report did list several exceptions to this test, including
obsolete and end-of-model year merchandise, which the Department should
not disregard regardless of the whether they were below cost.
This category of exceptions is narrow, however, and is designed
only to permit the inclusion of below-cost sales which can be expected
to occur on an ``infrequent'' basis. S. Rep. No. 1298, 93d Cong., 2d
Sess. 173 (1974); see also Final Determination of Sales at Less Than
Fair Value: Dynamic Random Access Memory Semiconductor of One Megabit
and Above From the Republic of Korea, 58 FR 15467, 15476 (March 23,
1993). It is possible to verify whether merchandise claimed to be
obsolete or end-of-model year actually falls within the exception. The
exception does not include seconds, however, which tend to occur more
frequently and which a party would be more inclined to
``systematically'' sell at prices which will not permit recovery of all
costs. See S. Rep. 1298 at 173. It would also be more difficult to
verify whether a product was properly classified as a ``second.''
In past cases, the Department has considered prime and secondary
merchandise to be separate models for matching purposes. ``To do
otherwise would distort the margins, since sales prices are dependent
on the quality of the merchandise.'' Porcelain-on-Steel Cooking Ware
From Mexico; Final Results of Antidumping Duty Administrative Review,
58 FR 43327, 43328 (August 16, 1993). In IPSCO, the Court of Appeals
upheld the Department's approach of applying the same cost to prime and
secondary merchandise. See IPSCO, 965 F.2d at 1061. In this case, we
computed the cost of Thyssen's secondary merchandise using a
methodology consistent with that applied in the IPSCO case. Based on
these cost figures, we found insufficient quantities of above cost
sales and, accordingly used CV as FMV.
Comment 12: Thyssen argues that the Department improperly combined
sales of prime and secondary merchandise in its arm's length test.
According to Thyssen, the Department should conduct separate arm's
length tests and calculate separate customer-specific weighted-average
price ratios for prime and secondary merchandise. In support of its
argument, Thyssen asserts that such treatment would be consistent with
the Department's April 19, 1995, memorandum on the treatment of non-
prime merchandise.
Petitioners respond that Thyssen misrepresents the Department's
statements on this matter, indicating a serious misunderstanding on
Thyssen's part as to how the arm's length test was applied in the
present case. Petitioners describe the Department's arm's length test
as first comparing the net price of sales of a CONNUM sold to a related
customer with the net price of sales of a CONNUM sold to unrelated
customers. Only then, petitioners argue, is the related customer-
specific weighted-average price ratio calculated, by combining all
CONNUMs, consisting of all prime and non-prime merchandise sold to both
related and unrelated customers. The Department's test separates prime
and non-prime merchandise in making the initial comparison of related
and unrelated prices on a CONNUM-specific basis. It is this initial
comparison to which the Department refers in its memorandum when it
states that ``prime and seconds should be separated.'' Prime and non-
prime merchandise are necessarily separated for this initial CONNUM-
specific comparison because prime and non-prime merchandise do not
share the same CONNUM. The separation of products on a CONNUM-specific
basis for the initial price comparison is necessary because there are
understandable differences in prices among CONNUMs, irrespective of
whether the different CONNUMs consist of prime or non-prime
merchandise. Petitioners argue that the objective of the Department's
arm's length test is to determine whether sales to individual related
customers are made at the same or greater prices than those at which
sales of the same products are made to unrelated customers. To make
this customer-specific determination, all sales of all CONNUMs, both
prime and non-prime, must be combined, and, so, the Department combined
all CONNUMs sold to related customers which are also sold to unrelated
customers to determine the customer-specific weighted average price
ratios.
Department's Position: We disagree with Thyssen. The Department's
April 19, 1995, seconds memorandum, states that ``if sales of seconds
to related parties are compared to sales of prime (or prime and seconds
combined) to unrelated parties, the results of the arm's length test
could be distorted.'' The memorandum concludes that, consequently,
``prime and seconds should be separated for purposes of conducting the
arm's length test. . . .'' The recommendation section of the memorandum
goes on to clarify, however, that the separation of prime and secondary
merchandise is done on what amounts to a CONNUM-specific basis. In
cases where sales of prime and secondary merchandise were reported
together in the same CONNUM, the Department treated them as separate
CONNUMs for purposes of the arm's length test. As petitioners point
out, the Department would ordinarily follow this approach in the
initial steps of conducting the arm's length test because there are
understandable differences in prices among CONNUMs, irrespective of
whether the different CONNUMs consist of prime or secondary
merchandise. See April 19, 1995, memorandum at 2-3. In this specific
case, Thyssen's seconds were already classified in separate CONNUMs
distinct from sales of prime merchandise, meaning that the
[[Page 65273]]
Department was not required to make such an initial separation.
The purpose of the Department's arm's length test is to determine
if total sales to a related party are at arm's length. To make this
determination, we calculate, by CONNUM, prices to each related party as
a percentage of prices of sales to unrelated parties. We then take a
weighted average of this ratio for all CONNUMs sold to a given related
party, including seconds and prime, to determine if sales to that
related party are at arm's length. Thyssen has not demonstrated that
the approach resulted in a distortion of the arm's length test. See
Usinor Sacilor v. United States, 872 F.Supp. 1000, 1004 (CIT 1994).
Comment 13: Thyssen contends that the Department improperly
calculated the VAT adjustment. Thyssen argues that in Zenith
Electronics Corporation v. United States, 988 F.2d 1573 (Fed. Cir.
1993), the Federal Circuit held that the Department's practice of
making a circumstance of sale adjustment to FMV to achieve tax
neutrality was contrary to law, reasoning that ``Section
1677a(d)(1)(C), the section dealing with tax adjustments, does not
provide for any adjustment to FMV to correct for tax-related distortion
of the dumping margin,'' and that ``the specific provision of Title 19
for tax adjustments does not permit changes to FMV.'' Id. at 1580.
Thyssen adds that in Daewoo Electronics v. International Union, 6 F.3d
1511, 1519-20 (Fed. Cir. 1993), the Federal Circuit held that the tax
should be applied at the sale price at which the tax was actually
assessed.
Thyssen argues that, in Federal Mogul Corp. v. United States, CAFC
No. 94-1097 (Fed. Cir. August 28, 1995), the Federal Circuit expressly
held that the Department had the authority to calculate the adjustment
by taking the paid tax amount in the home market for the same
merchandise, and adding ``that amount to the price actually paid in the
United States.'' Slip Op. at 9. According to Thyssen, the Court
reasoned that the tax neutral methodology which results from adding the
identical tax amount to both the home market and the United States
sides of the dumping equation ``clearly accords with international
understandings, negotiated by this country regarding unfair trade
policy,'' whereas any alternative methodology which artificially
increases dumping margins may ``read a GATT violation into the
statute.'' Id. at 22-23.
Thyssen argues that the Department's preliminary results are
contrary to Zenith in that it adjusted FMV by the tax relating to
expenses that were deducted from FMV. Thyssen argues that the
Department's preliminary results are contrary to Daewoo in that its
calculation methodology resulted in the tax being applied to an ex-
factory price, rather than the sales price at which the tax was
actually assessed. Thyssen argues that both Zenith and Daewoo prevent
the Department from making any secondary adjustments in calculating the
tax pursuant to section 772(d)(1)(C), and even if the Department had
this authority, it must be limited to those isolated instances in which
the primary tax adjustment created margins where none had previously
existed. Thyssen argues that in the case of Thyssen a secondary
adjustment could never be authorized, since Thyssen's deductible U.S.
expenses exceed its deductible home market expenses, and since the
Department's secondary adjustment artificially and significantly
inflates dumping margins, in direct contravention to Federal Mogul.
Thyssen concludes that the Department's preliminary results
methodology, which applies the VAT to a different point in the chain of
commerce than the point at which the tax is assessed, and which creates
a secondary tax adjustment to FMV, is directly contrary to Federal
Mogul, Zenith, and Daewoo. Thyssen argues that the Department should
add to USP the exact amount of the tax added to FMV, as authorized by
Federal Mogul, or, alternatively, calculate the tax added to FMV in the
manner reported by Thyssen (gross price less discounts, times 0.15) and
calculate the tax added to USP by multiplying TINC's net sales price
(gross price less cash discount, where applicable) times the tax rate.
Petitioners assert that the Department properly calculated the VAT
adjustment in accordance with its statutory mandate and existing legal
authority, which requires that an adjustment be made to USP to account
for any VAT that may have been charged on the corresponding home market
sale. To do this, the Department applied the rate from the home market
to the U.S. sale and added this amount to USP.
Petitioners argue that, because Federal Mogul does not require that
any particular methodology be used, the Department's methodology in
this case is not precluded by the Court's decision. While Thyssen is
correct in pointing out that the Court of Appeals did rule on the issue
of the VAT adjustment methodology, and clearly upheld the Department's
previous methodology of calculating the amount of tax paid on the home
market sale and adding the amount of the tax to USP, the opinion does
not indicate that this is the only methodology that the Department may
use. To the contrary, petitioners argue, the Court does not state that
use of this methodology is required by the statute, but rather that it
is not precluded by the statute. Furthermore, petitioners argue, as
demonstrated by its use in several earlier determinations by the
Department, the methodology used in this review is entirely reasonable.
See, e.g., Color Television Receivers from the Republic of Korea; Final
Results of Antidumping Duty Administrative Review, 59 FR 13700, 13701
(March 23, 1994); Certain Internal-Combustion Industrial Forklift
Trucks from Japan; Final Results of Antidumping Duty Administrative
Review, 59 FR 1374, 1376 (January 10, 1994).
Department's Position: In light of the Federal Circuit's decision
in Federal Mogul, the Department has changed its treatment of home
market consumption taxes. Where merchandise exported to the United
States is exempt from the consumption tax, the Department will add 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, 988 F. 2d at 1582, and which was suggested by that Court in
footnote 4 of its decision. The 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 the Department 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 instructions to direct Commerce to determine which tax methodology
it will employ.
[[Page 65274]]
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 Uruguay Round Agreements
Act, (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 long standing policy of tax-
neutrality and with the GATT.
Comment 14: Thyssen argues that the Department, through clerical
error, improperly failed to correct certain reported home market
product characteristics. Thyssen argues that the Department did not in
its arm's length test program make all of the product characteristics
corrections made in its model match program.
Department's Position: We agree with Thyssen that the arm's length
test program did not contain all of the product characteristic
corrections made in the model match program. However, we note that this
oversight had no effect upon the Department's analysis because CONNUMs,
rather than product characteristics, are used within the arm's length
computer program, and the merchandise in question would still be
classified in the same distinct CONNUMs even if the product
characteristics were corrected. Consequently, we have removed any
reference to product characteristic corrections from the arm's length
program.
Comment 15: Thyssen argues that the Department improperly excluded
home market sales prior to February 1993 from its calculations. Thyssen
argues that it is inconsistent for the Department to include in its
analysis shipments to Thyssen's U.S. customers with dates of shipment
from Germany during the POR regardless of the date of the requirements
contract, while at the same time excluding all home market shipments
with sale dates prior to February 3, 1993, even though the date of
shipment from the mill, the functional equivalent of the shipment date
from Germany for U.S. sale observations, is within the POR.
Thyssen argues that this is particularly egregious, given that the
Department has resorted to BIA for certain of Budd's U.S. resales
because Thyssen did not report home market sales back far enough; it
argues that the Department cannot penalize Thyssen for underreporting
and at the same time exclude transactions for being prior to the
requested reporting period.
Department's Position: We disagree with Thyssen. The Department is
applying BIA to the Budd sales with dates of sale in 1992 because
Thyssen failed to report home market sales back far enough to provide
home market sales contemporary with those Budd sales (see Comment 31).
Normally we request home market sales for the entire period from the
earliest U.S. sale date forward and would apply the arm's length test
to all sales reported. However, Thyssen selectively reported sales
prior to February 1993. Thyssen might have reported home market sales
for an intervening period between the 1992 Budd sales and February 1993
based solely upon the effects of such reporting on the arm's length
test. Therefore, to avoid the risk of distorting the arm's length test
results, we disregarded those sales, which were not contemporaneous
with any U.S. sales.
Thyssen's argument that some of the excluded home market sales were
shipped during the POR, like the U.S. sales, is unpersuasive. The
Department reviews shipments to the U.S. during the period of review.
However, in order to make the price-to-price comparison, we look at the
date of sale for the U.S. transaction, which may or may not be
different than the date of shipment to the United States, and match it
to a home market sale with a contemporaneous date of sale, which may or
may not be the date of shipment in the home market. The fact that
Thyssen considers the shipment to its home market customers the
equivalent of shipment from Germany to the United States is not
relevant for purposes of identifying home market sales for matching
purposes.
Comment 16: Petitioners argue that the Department should deduct all
direct and indirect selling expenses incurred on further manufactured
sales made in the U.S. market from the gross prices associated with
those sales. Petitioners argue that the Department's calculation of a
share of U.S. direct and indirect selling expense variables is
appropriate for purposes of calculating the ESP cap, but that for
purposes of calculating U.S. price, all direct and indirect selling
expenses should be deducted.
Thyssen counters that the computer programming language in question
was present in the version of the program disseminated to all
interested parties on October 13, 1994. Petitioners filed extensive
comments on that program with the Department, but did not object to the
Department's proposed reduction of U.S. price by only a share of U.S.
direct and indirect selling expenses.
Department's Position: We agree with petitioners that the
methodology followed by the Department in the preliminary results, to
reduce U.S. price by only a share of U.S. direct and indirect selling
expenses, was inappropriate. The Department inadvertently included this
language in its computer program. Such a share should only be used in
the calculation of the ESP cap or offset for further manufactured sales
in order to capture the portion of the indirect selling expenses
attributable to foreign manufacturing. We have corrected the
programming to reflect the correct methodology. The fact that
petitioners failed to comment on this issue prior to the preliminary
results does not alter the fact that they have identified a program
error that should be corrected.
Comment 17: Petitioners argue that, for U.S. sales observations
which the Department determined required the use of BIA, the Department
should not have applied what petitioners describe as neutral BIA, the
deposit rate from the underlying investigation. Petitioners claim that
Thyssen's submissions reflect widespread omissions and insufficiencies
by Thyssen that require application of, at the least, adverse BIA. In
support, petitioners emphasize the CIT's statement that, ``[a]lthough
the ultimate purpose of BIA is not to punish, BIA is intended to be
adverse and requires the use of adverse assumptions.'' National Steel
Corp. v. United States, 870 F. Supp. 1130, 1136 (CIT 1994) (National
Steel). Petitioners argue that, given Thyssen's numerous omissions and
insufficiencies, it is highly probable that there remain other,
undiscovered problems with Thyssen's submission.
Petitioners also assert that should the Department continue to
apply neutral partial BIA in its final results, respondents would have
no reason to
[[Page 65275]]
comply with the Department's requests for information knowing that the
worst they could receive as BIA for any missing or incomplete
information is the rate from the underlying investigation. Petitioners
cite the CIT's reasoning that using ``BIA for only those segments of a
submission that are rejected could permit a party * * * to select the
data it believed would be to its benefit, leaving Commerce only to fill
in the blanks.'' Tatung Co. v. United States, Slip. Op. 94-195 at 13
(December 14, 1994) (citing Chinsung Indus. v. United States, 705 F.
Supp. 598, 601 (CIT 1989)). Petitioners argue that an appropriately
adverse partial BIA would be either the higher of the margin from the
investigation or the highest non-aberrant margin calculated for
Thyssen's sales in this review; because the latter figure is not known
to respondents until the final calculation of the margin at the end of
the review, respondents would be unable to perform the cost/benefit
analysis to allow them to selectively disclose only certain
information.
Thyssen responds that the Department has broad discretion in
choosing BIA, and need only give a reasonable explanation of its
choice. See Neuweg Fertigung GmbH v. United States, Slip Op. 92-137
(CIT August 20, 1992). Thyssen argues that, contrary to petitioners'
claims, the Department is not required to utilize the highest non-
aberrant margin from a respondent's sales for respondents who comply
with the Department's information requests, but provide information
which is incomplete or inaccurate in some regard. Thyssen argues that
in National Steel the Court affirmed the Department's decision to apply
respondents' weighted-average margin as BIA where respondent fully
cooperated in the investigation and the misreporting was limited in
nature. Thyssen argues that the Department's choice of BIA in its
preliminary results was identical to that utilized in Antifriction
Bearings From Germany, 56 FR at 31705.
Thyssen also argues that petitioners mistakenly presume that
additional, undiscovered errors exist in Thyssen's database. Thyssen
notes that it provided clerical error corrections to the Department,
and the Department did additional spot checks at verification
confirming errors had been corrected and were limited to isolated sales
as reported by Thyssen. Thyssen concludes that the Department's use of
a benign BIA would not encourage a future respondent to selectively
report information.
Department's Position: As we determined in the preliminary results,
Thyssen's revised database did contain unauthorized changes and other
unexplained problems, but the sales affected were minimal in quantity
relative to the size of the entire data base. As a result, the
Department did not apply ``the most adverse partial BIA'' to such
observations, but chose instead to apply Thyssen's weighted-average
margin from the original investigation. Contrary to the position taken
by the petitioners, this approach was approved by the CIT in National
Steel. See also Usinor Sacilor v. United States, 872 F.Supp. 1000, 1007
(CIT 1994). At the same time, we do not consider this rate to be
neutral, as argued by petitioners. It is considerably higher than the
rate assigned to most of Thyssen's sales during this review which are
based on the company's own data.
Comment 18: Petitioners argue that the Department should multiply
the total volume of the BIA sales by the BIA rate to calculate the
total BIA margin, then combine the resulting BIA margin with the total
dumping margin calculated for the other sales to arrive at the
weighted-average dumping margin. Petitioners argue that contrary to its
normal practice, the Department incorrectly used the value of most of
the BIA sales in the calculation of the weighted-average dumping
margin. That sales information, petitioners note, is inherently
unreliable, given that they are BIA sales, and reduces the dumping
margin.
Thyssen acknowledges that the Department could use either
methodology, assuming the use of BIA was appropriate. Thyssen argues,
however, that use of the price information in the calculation of the
weighted-average margin constitutes the most reasonable method because
there were not price-related errors in the BIA sales in question.
Department's Position: We agree with petitioner. We have decided to
calculate the overall margin for the final determination by weight-
averaging the non-BIA and BIA margins by quantity alone because that is
the Department's normal practice. Moreover, we note that, contrary to
Thyssen's assertions, a few of the BIA observations in question did
involve unauthorized changes in price.
Comment 19: Thyssen argues that the Department's resort to BIA
because of clerical errors or arguably incomplete analyses contained in
summary worksheets presented at the commencement of the U.S. sales
verification constitutes ``a clear abuse of administrative
discretion.'' Thyssen contends that the CIT has held that the DOC has
abused its discretion in the past by rejecting a respondent's post
preliminary determination submission as untimely. See Usinor Sacilor v.
United States, 872 F.Supp. 1000, 1008 (CIT 1994) (Usinor Sacilor).
Thyssen cites the CIT decision in RHP Bearings v. United States, 875
F.Supp. 854, 857 (CIT 1995) (RHP Bearings) that ``[a]n error, although
untimely filed, is eligible for correction if the error is obvious from
an examination of the administrative record which is before Commerce at
the time of the preliminary results and the newly submitted information
is obviously correct.'' Thyssen also cites Brother Industries, Ltd. v.
United States, 771 F. Supp. 374, 384 (CIT 1991) (Brother), wherein the
CIT ordered the Department to correct a respondent's clerical error,
which respondent had brought to the Department's attention prior to
publication of the preliminary results in an administrative review.
Thyssen claims that these cases demonstrate that the Department's
resort to BIA was inappropriate. Thyssen argues that all of the errors
in question consisted of clerical errors in summary worksheets, the
correct data were reported in its computer database, and the clerical
errors were brought to the Department's attention immediately upon
discovery and prior to publication of the preliminary results.
Petitioners counter that, as the Department and Thyssen have both
recognized, the information provided by Thyssen at and after
verification was clearly erroneous and incomplete. Petitioners also
argue that the erroneous information provided by Thyssen after
verification did affect the veracity of the database as a whole.
Petitioners argue that since the majority of errors were not identified
until after verification, corrections made to the data base after
verification obviously were not verified by the Department. Petitioners
state that Thyssen did not identify the errors made in its submissions,
supplying corrections only after petitioners had identified them, and
that Thyssen's first attempt at clarification, the June 13, 1995,
submission, included additional erroneous information. Petitioners
assert that isolated verification of so-called corrected information
does not negate the pervasive errors throughout groups of sales within
Thyssen's database, and that a worksheet indicating an invoice
``change'' does not constitute sufficient notice to the Department
because it does not identify the type or number of ``changes'' made to
these invoices.
Petitioners add that it is not the Department's duty or obligation
to
[[Page 65276]]
correct a respondent's errors. See NSK Ltd. v. United States, 825 F.
Supp. 315, 319 (CIT 1993); Color Television Receivers from the Republic
of Korea; Final Results of Antidumping Duty Administrative Reviews, 59
FR 42805, 42812 (August 19, 1994). Petitioners contend that Thyssen has
failed to satisfy its burden of providing reliable information.
Petitioners explain that the various cases cited by Thyssen do not
proscribe the application of BIA in the circumstances of this
proceeding.
Department's Position: We disagree with Thyssen's assertion that
the Department's use of BIA was inappropriate. Thyssen failed to make
changes it proposed at verification which the Department had
authorized. Thyssen also made changes which the Department did not
authorize. This called into question the accuracy of the information
reported for those observations. Thyssen was given the opportunity to
explain how the changes in its final tape submission reflected the
changes authorized by the Department's May 15, 1995, and May 17, 1995,
memoranda to the file. Where Thyssen's explanation was not
satisfactory, BIA was applied, as described elsewhere in this notice,
in the preliminary notice, and the Department's analysis memoranda.
Furthermore, we agree with petitioners that the cases cited by
Thyssen do not require a different outcome. For example, in Usinor
Sacilor, the Court found the Department had abused its discretion by
rejecting a post-preliminary results submission from the respondent. A
controlling consideration for the Court, however, was that the
Department's questionnaire had been misleading, which is not the case
here. In RHP Bearings, also cited by Thyssen, the Court emphasized that
it may be appropriate to correct respondent's errors if the errors are
obvious from the record prior to the preliminary results and the new
information is obviously correct. Thyssen's errors were neither obvious
nor was the ``newly submitted information'' correct.
Finally, Brother is distinguishable from the current situation as
well. There, the Court only required the Department to consider
respondent's revised data because it was ``clerical'' in nature and
because the Court was ordering remand on other issues. The Court
stressed that its decision should not be construed as undermining the
Department's authority to disregard untimely information. Brother, 771
F.Supp. at 384. In Thyssen's case, most of the information was provided
after verification and none of Thyssen's unauthorized changes could be
verified by the Department. Indeed, as petitioners argue, in Brother
the Court emphasized the need for proper analysis and verification for
such information, stating that the statute may require that inadequate
submissions be corrected if received in time to permit proper analysis
and verification of the information concerned. Such was not the case
here.
Comment 20: Thyssen provided information at the beginning of the
U.S. verification to correct sales that it stated had been reported
twice in its U.S. database. The Department determined that Thyssen's
efforts to correct the problem involving the ``duplicates'' at
verification and in its final tape submission were unsatisfactory.
Accordingly, the preliminary results reflected a BIA margin for the
total quantity of steel in any of the invoices listed by Thyssen as
``duplicates'' and not appearing in its final tape submission.
Petitioners contend that the Department should assign a BIA margin
to the total volume of the duplicate U.S. sales deleted by Thyssen from
its U.S. market database. Petitioners argue that this amount is
handwritten on Thyssen's June 13, 1995, submission, one of Thyssen's
submissions intended to explain changes reflected in Thyssen's final
tape submission.
Thyssen asserts that petitioners have ignored the methodology used
by the Department. Thyssen argues that, once the decision was made to
use BIA in this situation, the Department cannot accept post-
verification corrections which were adverse to Thyssen, while at the
same time, rejecting all other corrections as sufficiently unreliable
to justify the use of BIA.
Thyssen argues that the Department improperly applied BIA to U.S.
invoices identified by Thyssen at verification as duplicates. Thyssen
argues that it provided the list to the Department prior to
verification, it advised the Department of clerical errors contained in
the list, and it explained the reason for the discrepancies.
Department's Position: We disagree with Thyssen, and have continued
to apply BIA in this situation. The numerous errors in Thyssen's
proposed deletions call into question whether or not any of the
invoices in question should actually have been deleted. In the
preliminary results, we inadvertently failed to increase the U.S. sales
database by the quantities reported for any of the invoices listed in
the ``deletion of alleged duplicates'' section of the relevant
verification exhibit that were deleted in Thyssen's final tape
submission; these quantities could very well have reflected distinct,
unduplicated sales. The actual invoice and quantity information is
included in the Department's December 12, 1995, Final Analysis
Memorandum from Steve Bezirganian to the File (December 12, 1995,
analysis memorandum). We have corrected this error in these final
results.
We agree with Thyssen that it would be inappropriate to base the
quantity to which BIA is applied upon the amount cited by petitioners.
We were unable to determine how the handwritten number to which
petitioners allude was calculated. Therefore, because we have no basis
from which to conclude that the handwritten number represents the total
quantity for the deleted invoices, we have not used that amount.
Comment 21: Petitioners argue that the Department should ensure
that the BIA dataset it creates contains all of the invoices for which
a BIA margin is to be used. For example, the Department stated in its
June 16, 1995, memorandum that its preliminary results reflected the
use of a BIA margin for sales to which Thyssen made unauthorized
changes in quantity and/or price in its last tape submission. The
Department applied BIA in the preliminary results to four such
``quantity/price'' observations because they reflected unauthorized
price and/or quantity changes for these observations. Petitioners argue
that the Department failed to include three invoices containing similar
unauthorized changes to quantity and/or price. Petitioners also argue
that the Department inadvertently left out of its BIA programming one
of the four quantity/price invoices by adding an extra zero to the
invoice number in its programming.
Petitioners also argue that the Department inadvertently did not
include three Richburg Division invoices in its BIA list because the
spaces indicated in these invoice numbers were not reported by Thyssen
in the Sales Verification exhibit in question.
Thyssen responds that for the first quantity/price invoice cited by
petitioners, the change in quantity was minimal and it was explained by
Thyssen. Thyssen notes that the invoice contained three separate lines,
and therefore is divided into three distinct U.S. sales observations.
Thyssen argues that the change in question only affected one line, so
any BIA should only be applied to the observation reflecting that line
of the invoice.
For the second quantity/price invoice cited by petitioners, left
out of the Department's BIA list because of clerical
[[Page 65277]]
error, Thyssen argues that BIA is improper because the errors, for this
and other Richburg sales, related solely to the summary worksheet
provided to the Department at verification and did not affect the
veracity of the data submitted in the database. Thyssen notes that the
Department did not find an error in quantity during the sales trace of
one observation that appeared as an addition on the summary list, and
that the quantity observed for another sales trace observation
corresponded to the corrected quantity in Thyssen's June 13, 1995,
submission. Petitioners counter by noting that examples of sales with
correct quantity information do not negate the pervasive errors
throughout the whole group of sales in question.
For the third quantity/price invoice cited by petitioners, Thyssen
argues that it did report the changes in U.S. Sales Verification
Exhibit 24A1 and 24A3.
Thyssen claims that it also identified at verification as requiring
correction the four quantity/price observations to which the Department
chose to apply BIA in its preliminary results, two of which were listed
in its column of changes entitled ``Deletion of Duplicate Invoices.''
The other two were listed in the column of changes entitled ``Misc.
Corrections.'' Petitioners counter that a worksheet indicating an
invoice ``change'' does not constitute sufficient notice to the
Department because it does not identify the type or number of
``changes'' made to these invoices.
Regarding the quantity/price invoice for which the Department added
an extra zero, Thyssen argues that it had identified this invoice as a
``change,'' and provided the Department with corrected information
immediately upon discovery of the summary worksheet error.
Regarding the other three Richburg invoices which petitioner argues
should be included in the BIA dataset, Thyssen again argues that BIA is
not appropriate for the sales in question because the errors related
solely to the summary worksheet provided to the Department at
verification.
Thyssen concludes that the Department should treat Thyssen's
clerical mistakes in the same manner as petitioners have suggested the
Department should correct the Department's own clerical errors. Thyssen
argues that the limited burden of correcting the mistakes is far
outweighed by the preference for accuracy in final dumping
determinations, and that it would be both paradoxical and a clear abuse
of discretion for the Department to punish Thyssen for its attempt to
create as error-free and as accurate a margin calculation as possible.
Department's Position: The Department is not applying BIA to the
first quantity/price invoice in question. That invoice is referred to
on page 9 of the U.S. Sales Verification report as having an error in
reported actual weight. The Department did not instruct Thyssen to make
the correction to that invoice in its post-verification database;
however, applying BIA to the invoice in question because Thyssen
unilaterally corrected an error amounting to roughly two-tenths of one
percent that the Department identified at verification, would be
inappropriate.
The Department is applying BIA to the second quantity/price invoice
in question, as it did for other Richburg Division invoices which
Thyssen attempted to correct at U.S. verification. As noted in the
Department's June 16, 1995, analysis memorandum, Thyssen provided a
number of changes to the U.S. sales database with respect to sales from
Richburg, but some of these changes differed from those provided at
verification; differences included incorrect quantities, deletion of
non-existing invoices or portions thereof, and incorrect shipping
dates. The numerous errors and inconsistencies in Thyssen's
presentation of changes involving Richburg sales created doubts about
the observations in question. The errors in Thyssen's proposed changes
only became apparent after verification, when Thyssen submitted its
post-verification database on May 22, 1995. Furthermore, the fact that
the verification report seems to indicate that a sale was reported
accurately is not dispositive, and we agree with petitioners that the
numerous errors called into question the reliability of the Richburg
observations as a whole.
Regarding the third quantity/price invoice in question, the
Department agrees with Thyssen that it provided the appropriate changes
to the Department at verification in U.S. Sales Verification Exhibit
24A1 and 24A3.
We are applying BIA to the four quantity/price observations,
consistent with our preliminary results, because there was no
indication in the correction exhibits provided by Thyssen at the U.S.
verification that quantity and/or price of these observations would be
changed in Thyssen's final tape submission. These observations differ
from the first quantity/price change observation cited by petitioners
as inappropriately left out of the Department's BIA dataset. The latter
observation involved an extremely small error precisely identified
during a sales trace at verification, while the former four
observations involve previously unidentified and unexplained changes to
quantity and/or price. We note that for one of these four invoices, as
noted by petitioners, we inadvertently included an extra zero in the
invoice number, and have corrected this error.
Regarding the other three Richburg invoices cited by petitioners,
we are including these in the BIA dataset, in accordance with the
explanation above regarding the Richburg observation changes presented
at verification.
Thyssen's general argument that the burden to correct its mistakes
is limited is unfounded. The mistakes in question are of such nature
that the accuracy of the observations involved is called into question.
It is unclear whether the ``corrected'' data actually are correct, and
the Department cannot be expected to take the steps necessary (i.e., an
additional verification) to make that determination. Thyssen had
numerous opportunities to correct its mistakes. One such opportunity
was at the beginning of verification, when Thyssen did in fact provide
lengthy lists of changes. Review of these corrections proved very time
consuming, particularly when errors in the ``corrections'' were
discovered. Any changes that were not authorized by the Department
prior to Thyssen's final tape submission, or that were not clearly
explained as resulting from such an authorized change, were rightfully
subject to adverse BIA.
Comment 22: Thyssen argues that the Department incorrectly applied
a 16.56 percent BIA margin to all U.S. observations relating to several
shipments of steel covered by a single order. Thyssen contends that the
Department believes the data provided in Thyssen's post-verification
database submission did not reflect the changes provided to the
Department at verification. Those changes involved Thyssen's attempt to
update its database to account for what previously had been unshipped
balances. Thyssen contends that, in its June 13, 1995, submission, it
advised the Department of a typographical error in the relevant
correction sheet provided at verification, and that the actual quantity
shipped and the actual unshipped balances were correctly reported in
the United States database.
Petitioners argue that the Department properly applied BIA to this
order, for which information was inaccurately reported.
Department's Position: We disagree with Thyssen. After reviewing
these data issues at verification, and after allowing Thyssen to
provide a post-verification submission to clarify
[[Page 65278]]
changes to its database. We have determined that these errors are not
fully explained by the typographical error identified by Thyssen. It is
still not clear how each of the invoice numbers and shipment quantities
listed under the order in question relate to each other and to specific
observations in Thyssen's post-verification database submitted on May
22, 1995. Consequently, we have continued to apply a margin based on
BIA to the U.S. observations relating to the order in question.
Comment 23: Petitioners argue that the Department, in its
preliminary results, improperly treated Thyssen's reported ``trader
discounts'' granted to trading companies for sales made to customers
that were end-users. Petitioners argue that, since the trading company
never receives title to or takes possession of the merchandise, these
deductions should be treated as a commission expense to Thyssen, rather
than as a price discount. Moreover, given that the trading companies
serve only as facilitators, there is no evidence that the prices
charged the end-user customers in these transactions are altered or
affected by the commission.
Citing Industrial Phosphoric Acid from Israel, 52 FR 25440, 25442
(July 7, 1987), Thyssen responds that the reduction in price on these
end-user sales should properly be considered discounts granted to the
trading companies. Respondent acknowledges initially having
characterized these as commissions, but argues that it later clarified
that they are discounts because the trading company is invoiced, it is
responsible for paying Thyssen, and it bears the risk of loss if the
customer does not pay. Thyssen argues that the trader discount is a
reduction on the invoice of the invoice amount, for which no separate
payment by TSAG is made, and that it reduces the net price received by
TSAG, since it is a deduction from the amount paid by the trading
company. Thyssen argues further that the Department noted, in its July
20, 1995 memorandum, that it verified that if the traders were invoiced
and responsible for payment, they did in fact receive the ``discount.''
Department's Position: Generally speaking, a commission is a
payment to a sales representative for engaging in sales activity,
normally on behalf of the seller but occasionally on behalf of the
customer. See, e.g., Antifriction Bearings (Other Than Tapered Roller
Bearings) and Parts Thereof From France, et al; Final Results of
Antidumping Duty Administrative Reviews, Partial Termination of
Administrative Reviews, and Revocation in Part of Antidumping Duty
Orders, 60 FR 10,900, 10,914 (Feb. 28, 1995); Final Determination of
Sales at Less Than Fair Value: Sulfur Dyes, Including Sulfur Vat Dyes,
From the Peoples Republic of China, 58 FR 7537, 7543 (Feb. 8,
1993)(Sulfur Dyes). A discount is a reduction in price to a customer.
See Sulfur Dyes From the PRC. Therefore, the key question here is
whether there was one transaction between Thyssen and the ultimate
purchaser in which the trading companies acted as Thyssen's sales
representatives for a commission; or whether there were two
transactions, one in which the trading companies bought from Thyssen
and received a discount on the price for that initial sale and the
ultimate purchaser then bought from the trading companies.
In addressing this question, we looked first to the manner in which
Thyssen reported its sales. Significantly, Thyssen identified the
transactions involving the trading companies as sales made by Thyssen
itself to the ultimate customer. This indicates that in Thyssen's view,
there were no separate sales to the trading companies; instead, the
first and only sale was to the ultimate purchaser. Thus, the role of
the trading companies must have been that of a commissionnaire.
Thyssen's claim that the trading companies are intermediate purchasers
who receive a price discount is inconsistent with its reporting of
sales to the ultimate customers.
Thyssen's acknowledgement that it conducted the price negotiations
with the ultimate customers also supports the conclusion that there was
a single sale between Thyssen and the ultimate customer. In addition,
as petitioners stressed, Thyssen originally referred to the amounts in
question as ``commissions,'' then used the term ``discount'' after the
Department requested supplemental information on the commissions.
On the other hand, information in the record appears to indicate
that Thyssen invoices the trading companies, and the trading companies
invoice the ultimate customer. This suggests the presence of two
transactions. Moreover, the Department did verify that the actual
invoices to the trading companies referred to the amounts in question
as discounts. Although there is conflicting evidence on the record, it
is most reasonable to treat this issue consistently with Thyssen's
reporting of its home market sales. Accordingly, we have revised the
preliminary results in this respect and have treated these deductions
as commissions.
Comment 24: Petitioners contend that the Department should deny
Thyssen's claimed indirect selling expense adjustment for home market
technical services expenses. The home market verification report
describes the technical services expenses claimed by Thyssen as
consisting primarily of research and development (R&D), which
petitioners argue are generally considered production expenses rather
than selling expenses. Petitioners conclude that these R&D expenses
cannot be tied directly to sales of the subject merchandise, and so do
not qualify as technical services expenses.
Thyssen argues that the Department noted in its Home Market Sales
Verification at 21 that the technical services expenses claimed by
Thyssen are related to customer-specific testing (not to be confused
with the R&D expenses claimed as indirect expenses), and that, as such,
these expenses are product-specific.
Department's Position: We disagree in part with petitioners.
Thyssen's January 17, 1995, submission, at page 56, and Exhibit 31 of
that submission describe the technical services identified on page 16
of Thyssen's November 21, 1994, Section IV submission. Exhibit 31
depicts the costs of assorted functions, including the provision of
advice regarding potential new products and adjustments in production
processes. However, home market verification report Exhibit XXI
indicates that the cost center from which the costs were derived was
identified as ``material complaints.'' As the verification report
confirms, the category material complaints pertains to testing costs
related to warranty claims. Because the information in Exhibit XXI
referring specifically to R&D is not reflected in the technical
services expense data reported by Thyssen, we reject petitioners'
assertion that these data include R&D costs.
However, we do agree with petitioners that the expenses in question
cannot be tied to subject merchandise, and we note that Thyssen's
allocation methodology, as presented at verification, was deficient.
Verification Report Exhibit XXI indicates that Thyssen derived its
reported DM/ton expense by dividing total technical services expenses
by shipments in Germany. Thyssen's total expenses, as is clear from the
exhibit, include those for all cold-rolled material, including that
which was further processed out of the scope of this review. Thyssen's
total expenses also include those for merchandise produced for all
customers, not just those in Germany. Consequently, we have reduced
this expense amount by that amount which we estimate pertains to non-
covered merchandise. See the Department's
[[Page 65279]]
December 12, 1995, analysis memorandum.
Comment 25: Petitioners assert that the interest rate used by the
Department to calculate Thyssen's home market credit and inventory
carrying cost adjustments should be based solely upon the company's
short-term borrowings from unrelated parties. Petitioners note that the
Department has recognized that expenses paid to related parties in the
home market may sometimes be priced above the market rate for those
expenditures, and, in such instances, the market rate of interest
should be employed in the calculation of the adjustments to home market
price. See Color Picture Tubes from Japan; Final Results of Antidumping
Duty Administrative Review, 55 FR 37915, 37922-23 (Sept. 14, 1990)
(Color Picture Tubes from Japan); High Information Content Flat Panel
Displays and Display Glass Therefor from Japan: Final determination;
Recission of Investigation and Partial Dismissal of Petition, 56 FR
32376, 32393 (July 16, 1991)(Flat Panel Displays). Petitioners suggest
that the market ``expense'' of Thyssen's borrowings should be
determined by using interest rates of Thyssen's borrowings from
unrelated parties.
According to Thyssen, the information on the record confirms that
the interest rates charged for intra-company loans were consistent with
other loans. Thyssen notes that it was the nature of the loan, rather
than the relationship of the lender to Thyssen, which was the critical
factor in determining Thyssen's interest rates during the POR.
Thyssen also argues that, in the fair value investigation, the
Department rejected a similar claim by petitioners that the Department
should ignore Thyssen's related company borrowings, where differences
in rates were not significant. Steel from Germany, 58 FR at 37149.
Thyssen adds that in Final Determination of Sales at Less Than Fair
Value: Fresh Kiwifruit from New Zealand, 57 FR 13695, 13705 (April 17,
1992), the Department rejected a respondent's attempt to disregard a
related-party loan, stating that ``there was no evidence that the
interest rate on the related-party loan did not reflect market interest
rates.''
Department's Position: We disagree with petitioners. As in the
original investigation, Steel from Germany at 37149, we have determined
that information on the record indicates that the intracompany loans in
question were made at what could be considered market rates.
The situation here differs from that in both determinations relied
upon by petitioners. In Color Picture Tubes from Japan, the Department
determined at verification that the related party charged the
respondent more for freight than the related party was charged by the
trading company that actually delivered the merchandise. In Flat Panel
Displays from Japan, the Department found that, rather than being a
market price, the price charged by the related party was established
for respondent's internal bookkeeping purposes only. By contrast, in
the present case, neither the information in Exhibit XIV of the Home
Market Sales Verification, which provides interest rates on loans of
varying duration from related and unrelated parties, nor the
Department's May 2, 1995, Home Market Sales Verification Report,
support the contention that interest rates on concurrent loans of
similar duration provided to Thyssen by related parties differed in any
meaningful way from those offered by unrelated parties.
However, we note that in the preliminary results we did not account
for the fact that Thyssen incorrectly reported home market credit
expenses that were calculated based on a price that does not net out
discounts that are not on the invoice. While Thyssen has stated that it
pays these discounts every quarter, there is no information on the
record indicating that Thyssen pays the customers such ``discounts''
for a particular sale before the customer pays for the merchandise.
Thyssen confirmed on page 13 of its June 23, 1995, submission that it
``does not incur any financing expenses from date of shipment to date
of payment for these out of invoice discounts.'' Consequently, we have
adjusted home market credit expenses for the final results and are
calculating this expense net of discounts not on the invoice. See the
Department's December 12, 1995, analysis memorandum.
Comment 26: Petitioners argue that the Department should exclude
the R&D and general and administrative (G&A) costs from the
miscellaneous indirect selling expense variable amounts claimed by
Thyssen. Petitioners reiterate that expenses pertaining to R&D are
generally not selling expenses, but, rather, production costs, and that
such expenses should be classified as non-sales-related general and
administrative expenses. Petitioners also argue that none of the
various G&A expenses claimed by Thyssen qualify as indirect selling
expenses, since they are not associated with selling activities.
Finally, petitioners argue that should the Department decide to include
Thyssen's claimed R&D in the indirect selling expenses deducted from
USP and FMV, it must correct the allocation of those R&D expenses to
the home and U.S. markets.
Thyssen responds that the record clearly establishes that it
correctly included these expenses in its home market indirect selling
expenses. Thyssen argues that the R&D expenses categorized as indirect
selling expenses include items related to selling, not production
activities. See Antifriction Bearings from France, 60 FR at 10920.
Thyssen argues that the same is true for the various G&A expenses
included as indirect selling expenses. Finally, Thyssen argues that the
Department confirmed at verification that the R&D expenses in question
had been allocated to each market on the identical basis as were
selling expenses, verified by the DOC.
Department's Position: We disagree with petitioners regarding G&A
expenses. Our verification indicated that the expenses in question were
indirect selling expenses. The type of costs which Thyssen listed
include meals and transportation for Thyssen's customers. These are
costs which we reasonably consider to be selling expenses.
However, petitioners are correct that the Department does not
normally consider R&D expenses to be costs associated with selling the
merchandise. See Antifriction Bearings (Other Than Tapered Roller
Bearings) and Parts Thereof From France, et al.; Final Results of
Antidumping Duty Administrative Reviews, 57 FR 28360, 28415 (June 24,
1992). There are exceptions to this policy. See Antifriction Bearings
From France, 60 FR at 10920. However, we have determined that Thyssen
has not shown that the R&D costs in question constitute selling
expenses. We have therefore adjusted Thyssen's miscellaneous home
market indirect selling expense variable to reflect this finding. See
the Department's December 12, 1995, analysis memorandum.
Comment 27: Petitioners argue that Thyssen's reported home market
warranty expenses for the POR are aberrational and that the Department
should instead use a weighted-average for these indirect selling
expenses based on Thyssen's reported data for calendar years 1990 and
1991, and fiscal years 1991/92, 1992/93, and 1993/94. Petitioners cite
Television Receivers, Monochrome and Color, From Japan; Final Results
of Antidumping Duty Administrative Review, 56 FR 38417, 38421 (Aug. 13,
1991)(Television Receivers from Japan); and Final
[[Page 65280]]
Determination of Sales of Less Than Fair Value: Certain Carbon And
Alloy Steel Wire Rod from Canada, 59 FR 18791, 18795-6 (April 20, 1994)
(Steel Wire Rod from Canada).
Petitioners argue that for U.S. warranty expenses, the Department
should employ BIA in place of Thyssen's claimed adjustment. Petitioners
argue that for both its automotive and non-automotive divisions Thyssen
provided U.S. warranty expense information which pertains to products
well beyond the scope of this review, and that Thyssen's use of total
warranty expenses over total sales does not conform to the CIT's ruling
that the Department must ``develop a methodology which removes
technical services and warranty expenses incurred on sales of out of
scope merchandise.'' Federal-Mogul Corp. v. United States, 862 F. Supp.
384, 406-07 (CIT 1994). Petitioners also argue that the reliability of
Thyssen's reported warranty expenses are further undermined by
Thyssen's failure to provide information on its ``historical experience
of warranty/guarantee expenses for U.S. sales in each of the five years
preceding the period of review,'' as requested by the Department.
Petitioners argue that the Department should recalculate Thyssen's
per-unit U.S. warranty expense adjustment by dividing the total
warranty expense amounts reported by Thyssen for fiscal years 1992/93
and 1993/94, by the total volume of subject merchandise sold by Thyssen
in the U.S. market in each of those fiscal years, respectively.
Furthermore, petitioners argue that, because Thyssen did not provide
information on its warranty experience for the five years preceding the
POR, the Department should apply the higher of the two fiscal year
amounts as BIA to all U.S. sales.
Petitioners conclude that, should the Department use the reported
home market warranty expenses in question without weight-averaging, at
a minimum it must also use the U.S. warranty expense data from the same
exhibit.
Thyssen responds that the Department generally uses warranty
expenses incurred during the POR, and will only resort to historical
experience in those instances in which: (1) a respondent is not able to
demonstrate a relationship between POR sales and its warranty expense
claim, by tying actual warranty expenses to POR sales; and (2) a
historical average would be a more representative proxy of eventual
warranty expenses on POR sales than warranty expenses actually incurred
during the review period. See Steel Wire Rod from Canada, 59 FR at
18795-96, and Television Receivers from Japan, 56 FR at 38421-22.
Thyssen argues that the Department properly relied upon Thyssen's home
market warranty expenses incurred in fiscal year 1993/94, and that
these expenses were only slightly higher than those for fiscal year
1992/93 on either an absolute or a percentage [of sales] basis. Thyssen
also argues that, for the last three fiscal years, Thyssen's home
market warranty expenses reflected a relatively steady aggregate
amount.
Regarding its U.S. warranty expenses, Thyssen argues that it did in
fact provide adequate historical information. It also argues that
Federal Mogul does not preclude the Department from accepting the
warranty expense allocation methodology presented by Thyssen, and that
the Department accepted a similar methodology in Antifriction Bearings
from France, 60 FR at 10910. Thyssen argues that even petitioners
acknowledge that the Department verified both the amount of U.S.
warranty expenses incurred during the POR and the total value of sales
upon which warranty expenses were allocated. Thyssen argues that,
contrary to petitioners' claim, the Department never explicitly
instructed Thyssen to report only those warranty expenses applicable to
cold-rolled steel, but rather requested that it do so or clarify why it
could not do so; and the Department confirmed in its U.S. sales
verification report at 12-14 that the necessary records were not
maintained, either by supplier or product type.
Thyssen argues that petitioners' suggestion that the Department
should apply 100 percent of Thyssen's verified warranty expenses to
cold-rolled shipments must be rejected, since the Department has
confirmed that the expenses relate to all products, and the Department
cannot penalize a respondent for failing to maintain business records
in a particular manner or for utilizing an allocation method which
subsequently may be rejected by the Department. See, e.g., Industrial
Quimica del Nalon, S.A. v. United States, 15 CIT 240, 244 (CIT 1991).
Finally, Thyssen also argues that petitioners' alternative of
applying a deutsche marks per metric ton warranty expense to Thyssen's
U.S. shipments based on a home market sales verification exhibit is
flawed, since the document upon which petitioners rely does not include
data for fiscal year 1992/93. Thyssen argues that if the Department
does decide to use BIA for U.S. warranty expenses, it should rely on
data utilized in its fair value investigation, which were purportedly
accepted by petitioners and verified by the Department from both a
historical and actual perspective.
Department's Position: We disagree with petitioners' arguments that
we should use weighted-averaged expenses calculated for earlier years
because Thyssen's reported home market warranty expenses were
aberrational. As noted in Television Receivers from Japan, the
Department generally uses warranty expenses incurred during the POR. As
the Department's May 2, 1995, Home Market Sales Verification Report
indicates, there were no problems observed with Thyssen's reported home
market warranty expenses. Various factors may lead to some variation in
warranty expenses, and the variations in Thyssen's expenses do not
appear to be abnormal.
Regarding Thyssen's reported U.S. warranty expenses, we agree with
Thyssen that it would not be appropriate to apply Thyssen's total
warranty expenses over total sales of subject merchandise, as suggested
by petitioners. Given Thyssen's substantial U.S. sales of non-subject
merchandise relative to its U.S. sales of subject merchandise, such an
approach would be inappropriately adverse.
However, Thyssen did submit, as noted by petitioners, warranty
expenses for U.S. shipments of cold-rolled flat products made during
fiscal year 1993/94. The data for 1993/94 U.S. shipments, contained in
Home Market Verification Exhibit XIX, were reviewed at the home market
verification, and found to be reasonable. Thus, we are able to use this
figure for calculating the adjustment, a methodology which is
consistent with the CIT's directive in Federal Mogul. Thyssen did not
submit similar data in a timely fashion for fiscal year 1992/93.
However, there is no indication on the record that Thyssen's 1992/93
fiscal year warranty expenses for U.S. sales of subject merchandise
were any higher or lower than those for fiscal year 1993/94. Therefore,
we have used the 1993/94 data for all of Thyssen's U.S. sales,
regardless of fiscal year.
Comment 28: Petitioners argue that the Department should reject all
of the cash discount information supplied by Thyssen and employ
instead, as BIA, an ad valorem cash discount for all U.S. sales based
on the highest discount granted to a U.S. customer. Petitioners argue
that the Department recognized in its May 11, 1995, memorandum from
Richard O. Weible to Roland L. MacDonald (May 11, 1995, discount
memorandum), that the cash discount information provided by Thyssen is
[[Page 65281]]
highly unreliable and subject to serious deficiencies, and that it is
possible that there are other inaccuracies in the U.S. discount data
that remain undetected. Petitioners argue that the fact that the errors
found at verification were limited to certain customers does not
indicate that such errors were not more widespread, but rather suggests
that the contrary may be true, since the errors noted were self-
produced by Thyssen. Furthermore, petitioners argue that Thyssen has
failed to explain why at times its customers took the discount when
eligible, at other times they did not take the discount when eligible,
and at still other times they took the discount when they were
technically not eligible.
Thyssen argues that the Department's verification confirmed that
Thyssen had properly reported its cash discounts for all of its U.S.
customers other than those specifically referred to in the Department's
May 11, 1995 discount memorandum. Thyssen also argues that the
Department verified the total discounts granted by TINC as a percentage
of sales. Consequently, Thyssen argues that the Department must reject
petitioners' call for use of BIA beyond that applied for U.S. cash
discounts in the preliminary results.
Department's Position: We disagree with petitioners. Our review of
U.S. discounts at verification included the pre-selected and surprise
sales trace observations, as well as a thorough review of Thyssen's
changes to its discounts, which were proposed in a timely manner. As
noted in the Department's July 20, 1995, memorandum at 5, the only
problems noted were limited to a few specific customers, and discounts
reported for other customers were found to be accurate. See also May
11, 1995, discount memorandum. The only relevant issue is the total
amount of the discounts, which has been determined as noted above. The
reasons why a discount was offered or accepted for specific
transactions is irrelevant to this inquiry.
Comment 29: Petitioners argue that the Department should deny
Thyssen's attempt to include interest income in the calculation of its
U.S. short-term interest rate. Petitioners argue that the calculation
of a respondent's imputed credit and inventory carrying costs should be
based on the short-term interest rate either actually or potentially
incurred by the respondent in financing its accounts receivable. For
purposes of calculating its imputed credit and inventory carrying
costs, Thyssen's borrowing costs during the POR are fully and
accurately represented by its weighted-average gross interest expense.
Petitioners argue that the Department should base Thyssen's U.S.
imputed credit and inventory carrying cost amounts upon the short-term
interest rates reported by the company prior to verification.
Thyssen argues that it properly reduced its borrowing rate to
account for short-term interest income in order to avoid a double
deduction of interest resulting from the fact that Thyssen included an
amount equal to TINC's allocated share of the interest expense of
Thyssen AG in its U.S. indirect selling expense deduction from USP.
Thyssen argues that a similar adjustment was made to avoid double-
counting in Antifriction Bearings (Other than Tapered Roller Bearings)
and Parts Thereof from West Germany, 56 FR 31692, 31721 (July 11,
1991). Because the Department's questionnaire does not provide for this
particular deduction, if interest income is not deducted from interest
paid, interest expenses deducted from USP will be greater than
Thyssen's actual borrowing costs for the POR.
Department's Position: We have denied Thyssen's claim for an
adjustment to its borrowing rate to offset short-term interest income
against the deduction of credit expenses and inventory carrying costs
from U.S. price. The Department does not normally allow an offset of
this type outside the context of a COP or CV calculation. As explained
in Comment 7, in a COP or CV calculation, the Department does generally
offset interest expenses for short-term interest income earned through
a company's ``general operations,'' which excludes unrelated and long-
term interest income such as that earned from investment activities.
NTN Bearing Corp., Slip Op. 95-165 at 33; Timken Co., 852 F.Supp. at
1048.
By contrast, in a sales calculation, respondents must demonstrate a
more direct relationship between the interest income and the sales
under review in order to qualify for an offsetting adjustment.
See Certain Internal-Combustion, Industrial Forklift Trucks from
Japan; Final Results of Antidumping Duty Administrative Review, 59 FR
1374, 1378 (January 10, 1994). In accordance with this standard, the
Department has offset interest income actually shown to reduce the
respondent's cost of extending credit to its customers. For instance,
the Department granted an offset for interest earned on a respondent's
sales of the subject merchandise pursuant to a special arrangement with
another party. Polyethylene Terephthalate Film, Sheet and Strip From
the Republic of Korea; Final Results of Antidumping Duty Administrative
Review, 60 FR 42835, 42838 (August 17, 1995); see also Certain
Internal-Combustion, Industrial Forklift Trucks from Japan; Final
Results of Antidumping Duty Administrative Review, 57 FR 3167, 3178
(January 28, 1992). The Department has also permitted an offset for
interest earned from pre-shipment advance money, Final Determination of
Sales at Less Than Fair Value: Antidumping Duty Investigation of
Stainless Steel Angle From Japan, 60 FR 16608, 16615 (March 31, 1995);
Final Determination of Sales at Less Than Fair Value: Certain Hot-
Rolled Carbon Steel Flat Products, Certain Cold-Rolled Carbon Steel
Flat Products, and Certain Corrosion Resistant Carbon Steel Flat
Products From Japan, 58 FR 37154, 37173 (July 9, 1993) (Steel From
Japan), and for interest earned on late payments. Final Determination
of Sales at Less Than Fair Value; Certain Internal-Combustion,
Industrial Forklift Trucks from Japan, 53 FR 12552, 12571 (April 15,
1988). The Department has also determined that pre-payment funds for
which a party claims to have received interest income may not be used
to finance ongoing operations. Steel From Japan at 37173.
Thyssen did not claim the offsetting adjustment for interest income
until verification. Thus, the Department was never able to investigate
the basis of its claim. The verification report, which contains the
only explanation regarding the funds, states only that Thyssen received
income ``attributed to interest that was part of a legal settlement.''
U.S. Verification Report at 10. An accompanying verification exhibit
provides some detail as to the origin of the interest income, in chart
form, but contains no indication that the funds were derived from sales
of the subject merchandise. Id. at Exhibit 19.
Based on the record evidence we are unable to determine whether the
interest income claimed as an offset was associated with actual sales
of the subject merchandise. It was the responsibility of Thyssen to
demonstrate entitlement to this adjustment to U.S. price and we find
that Thyssen has failed to meet the Department's standard, as set forth
above. We have, therefore, revised our preliminary results to eliminate
the offset for Thyssen's claimed interest income.
Comment 30: Petitioners argue that the Department should adhere to
its decision not to allow Thyssen's claimed currency hedging
adjustment. Petitioners agree with the Department's
[[Page 65282]]
determination that the veracity of the currency hedging gain
information is called into question by unexplained changes involving
this information in Thyssen's post-verification database. Petitioners
also argue that the adjustment should be denied on legal grounds.
Petitioners cite the CIT's decision involving this adjustment in the
underlying investigation, in which the court was ``not persuaded that
the law presently permits any adjustment in the computation of dumping
margins for either gains or losses which result from the hedging of
currencies.'' Thyssen Stahl AG v. United States, 886 F.Supp. 23, 32
(CIT 1995). Petitioners conclude that the accuracy of Thyssen's
reported data for this adjustment is largely irrelevant since the CIT
has ruled expressly on this issue.
Thyssen responds that the Department improperly denied its currency
hedging adjustment. Thyssen argues that the Department verified that
Thyssen's currency exchange contracts were tied directly to its U.S.
sales. Regarding the variations in the adjustment, Thyssen also points
to its previous explanation that ``a change in any field used in the
formula to calculate the exchange gain * * * changes the exchange
gain.''
Thyssen also argues that the CIT's decision in Thyssen Stahl AG is
not final, since Thyssen has the opportunity to appeal that decision to
the Court of Appeals for the Federal Circuit, and, moreover, that
decision is directly contrary to Torrington Company v. United States,
832 F. Supp. 379 (CIT 1993).
Department's Position: We disagree with Thyssen. As noted in the
preliminary results, Thyssen's post-verification database contained
numerous unexplained and unauthorized changes in the currency exchange
expense variable. While the Department recognized that this variable
would change if one of many other variables changed, we were unable to
reconcile all of the changes to the changes Thyssen was authorized to
make in its final tape submission. Furthermore, the largest changes
were clearly unauthorized by the Department, and were very much in
Thyssen's favor. Consequently we are continuing to disallow this
adjustment. For purposes of this review, therefore, petitioners' and
Thyssen's arguments regarding the CIT's decision are moot.
Comment 31: Petitioners agree with the Department's preliminary
determination that BIA was warranted for those Budd sales in the United
States for which Thyssen failed to report contemporaneous home market
sales. Petitioners also argue, however, that the Department should
apply BIA to all of Thyssen's remaining reported Budd sales to U.S.
customers and to an additional estimated quantity of Budd sales to U.S.
customers which Thyssen failed to report.
Petitioners note that, contrary to Thyssen's assertions, the volume
of the unreported home market sales relative to that of the Budd sales
for which they were needed is irrelevant. Petitioners argue that the
Department's longstanding practice is to compare each U.S. sale to the
weighted-average FMV associated with all home market sales made in the
ordinary course of trade within the same six-month period as the U.S.
sale. See, e.g., Final Results of Antidumping Duty Administrative
Review: Certain Forged Steel Crankshafts from the United Kingdom, 56 FR
5975, 5976 (Feb. 14, 1991). Petitioners argue that, for the Budd sales
given BIA because of Thyssen's failure to report shipment dates from
Germany, Thyssen failed to offer any explanation in its brief as to why
those shipment dates were not provided.
Petitioners also contend that the Department should apply adverse
BIA to all of the Budd sales which Thyssen did report because Thyssen
did not adequately address any of the Department's questions regarding
U.S. further processing by Budd. Specifically, petitioners argue that
Thyssen did not describe the further manufacturing processes performed
by Budd or the overhead factors or cost accounting methodology; Thyssen
also failed to indicate whether manufacturing processes were performed
in-house or by outside contractors, or what equipment or personnel were
used.
Finally, petitioners argue that the Department should apply BIA for
sales by Budd that Thyssen failed to report. Petitioners argue that the
Department is required by section 751 of the Act to determine the
amount of the antidumping duty by determining ``the foreign market
value and United States price of each entry of merchandise subject to
the antidumping duty order.'' Petitioners provide a methodology for
estimating Budd's unreported sales, and argue that the Department apply
as BIA for these sales the higher of either the margin rate from the
underlying investigation or the highest non-aberrant margin rate
calculated for sales in this review.
Thyssen asserts that the Department improperly applied a 16.56
percent BIA margin to the 1992 Budd sales for which Thyssen did not
report contemporaneous home market sales. Thyssen argues that it would
be absurd to require it to report an enormous number of additional home
market sales simply because a small amount of Budd sales involved
requirements contracts consummated in 1992. Thyssen also argues that
such a reporting burden is not appropriate given the inherent
difficulty in calculating meaningful margins when comparing the home
market sales price for cold rolled steel to the adjusted U.S. prices of
motor vehicle component parts such as those sold by Budd. Thyssen
concludes that the Department should exclude these Budd sales from the
U.S. database, citing the CIT decision in Sonco Steel Tube Div. v.
United States, 12 CIT 745, 748 (1988); or alternatively, the Department
should apply Thyssen's weighted average margin for Budd resales, as
determined in this review, citing Nat'l Steel Corp. v. United States,
870 F.Supp. 1130 (CIT 1994).
Thyssen acknowledges that the data submitted for Budd was not
presented in the identical format as that submitted by TINC. But
Thyssen argues that the Department accepted Budd's submission as
complete, as evidenced by the fact that the Department did not advise
Thyssen that additional information for Budd was required or that the
manner in which Budd reported its costs failed to conform to Department
reporting requirements. Thyssen argues that the information necessary
for the Department's analysis was provided, and that the Department has
a degree of latitude in implementing its verification procedures.
Thyssen also counters petitioners' argument that the highest non-
aberrant margin from this review should be applied to petitioners'
estimate of unreported Budd sales. According to Thyssen, the Department
never questioned Budd's interpretation of its reporting instructions,
thereby precluding resort to BIA. See, e.g., SKF USA, Inc. v. United
States, Slip Op. 95-85 (CIT May 8, 1995).
Finally, Thyssen argues that, contrary to petitioners' contention,
the Department is not required to examine every U.S. sale made by
respondents during the POR. See, e.g., Sonco Steel, 12 CIT at 748. The
potentially unreported Budd resales, Thyssen argues, consist of
merchandise which was shipped by TINC to Budd prior to the POR.
Petitioners' methodology for estimating unreported Budd sales assumes
that all of Budd's material costs consist of cold rolled steel exported
from Germany by Thyssen, which ignores the fact that the majority of
steel sold by TINC to Budd was not subject cold rolled steel, and that
only a de minimis amount of Budd's material
[[Page 65283]]
costs consisted of cold rolled steel purchased from Thyssen.
Department's Position: The Budd Company, like TSAG and TINC, is
wholly-owned by TAG. Thyssen reported sales in the U.S. by Budd after
initially refusing to do so. However, Thyssen continued to refuse to
provide the contemporaneous home market sales needed for matching to
the earliest Budd sales. Because these Budd sales were made pursuant to
requirements contracts, the necessary home market sales were dated in
1992. We disagreed with Thyssen's request that the Budd's 1992 U.S.
sales be completely excluded from the analysis or, alternatively,
assigned the weighted average margin for other Budd sales in this
review. See Preliminary Results, 60 FR at 39356. The Department
requires respondents to report contemporaneous home market sales.
Thyssen failed to do so for the sales in question, which included some
observations for which Thyssen had failed to report a shipment date
from Germany. Consequently, an adverse BIA is appropriate for the 1992
Budd sales in question, and we have continued to apply the margin from
the investigation. See Id; the Department's June 16, 1995, Analysis
Memo from Steve Bezirganian to the File.
We disagree with petitioners' contention that the Department should
assign BIA to all of those U.S. sales by Budd which Thyssen did report
because of what petitioners contend was Thyssen's failure to provide
sufficient answers to the Department's further manufacturing
questionnaire. The Budd sale submission contained the variables needed
for the Department's calculations, albeit in an unwieldy format.
Moreover, the Department did not request more detailed information on
Budd's sales, because they constituted a very small portion of
Thyssen's total U.S. sales. For those Budd sales which were reported,
the only information lacking was the contemporaneous home market sales
data discussed previously.
The Department repeatedly requested that Thyssen report U.S. sales
made by Budd. When Thyssen finally reported Budd sales, this reporting
was incorrectly on shipments during the POR from TINC to Budd, rather
than Budd sales to the first unrelated customer during the POR (or, in
the case of requirements contracts between Budd and its customers,
shipments from Germany during the POR). Petitioners are correct that
this leaves open the possibility that Thyssen failed to report all
sales by Budd.
We agree with petitioners' suggestion that the Department assume
that some percentage of Budd's sales during the POR were unreported,
and that we should apply BIA to these ``estimated unreported'' sales.
However, applying petitioners' methodology for estimating unreported
sales by Budd would grossly overestimate this possibility. Therefore,
we have determined that applying BIA in the manner suggested by
petitioners would be unreasonable. Instead, we have adjusted
petitioners' methodology to reflect our observation that very few of
TINC's sales were to Budd. Therefore, for the final results, we have
calculated a different estimate of the number of tons associated with
these potentially unreported Budd sales, which we have added to the
data base. As BIA, we have applied the rate from the original
investigation to this estimated amount. See the Department's December
12, 1995, analysis memorandum.
Comment 32: Petitioners argue that the Department should account
for unreported post-sale warehousing for certain U.S. spot sales. Spot
sales were made from existing TINC inventories, and were normally
shipped immediately after the sale took place. Thyssen conceded that,
in certain limited instances, its U.S. spot sales were shipped ten days
or more after the reported sale date. However, Thyssen argues that it
advised the Department of this possibility in its November 22, 1994,
questionnaire response. Thyssen argues that the Department verified
that Thyssen reported all of its warehousing costs in the warehousing
expense variable which the Department, as required by law, deducted
from the sales price in calculating USP.
Department's Position: The post-sale expenses to which petitioners
refer constitute a small portion of the overall amount reported by
Thyssen in its pre-sale warehousing expense variable. Because this
post-sale expense is being deducted from U.S. price, and because this
expense is very small for most sales in question, even if the
Department attempted to separate it into a separate variable and chose
to reclassify it as a direct selling expense, the effect upon Thyssen's
final calculated margin would be negligible. Consequently, we have
chosen not to make any adjustments to Thyssen's pre-sale warehousing
expense variable.
Final Results of Review
As a result of this review, we have determined that the following
margin exists for the period August 18, 1993, through July 31, 1994:
------------------------------------------------------------------------
Margin
Manufacturer/exporter (percent)
------------------------------------------------------------------------
Thyssen................................................... 5.88
------------------------------------------------------------------------
The Department shall determine, and the U.S. Customs Service shall
assess, antidumping duties on all appropriate entries. The Department
shall issue appraisement instructions directly to the Customs Service.
Furthermore, the following deposit requirements shall be effective,
upon publication of this notice of final results of administrative
review, for all shipments of the subject merchandise from Germany that
are entered, or withdrawn from warehouse, for consumption on or after
the publication date, as provided for by section 751(a)(1) of the
Tariff Act: (1) The cash deposit rate for Thyssen will be the rate
established above; (2) for previously investigated companies not listed
above, the cash deposit rate will continue to be the company-specific
rate published for the most recent period; (3) if the exporter is not a
firm covered in this review, or the original investigation, but the
manufacturer is, the cash deposit rate will be the rate established for
the most recent period for the manufacturer of the merchandise; and (4)
the cash deposit rate for all other manufacturers or exporters will
continue to be 19.03 percent, the all others rate established in the
final results of the first administrative review (58 FR 44170, August
19, 1993).
The deposit requirements, when imposed, shall remain in effect
until publication of the final results of the next administrative
review.
This notice serves as a final reminder to importers of their
responsibility under 19 CFR 353.26 to file a certificate regarding the
reimbursement of antidumping duties prior to liquidation of the
relevant entries during this review period. Failure to comply with this
requirement could result in the Secretary's presumption that
reimbursement of antidumping duties occurred and the subsequent
assessment of double antidumping duties.
This notice serves as the only 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 written notification of return/destruction of APO
materials or conversion to judicial protective order is hereby
requested. Failure to comply with the regulation and the terms of an
APO is a sanctionable violation.
[[Page 65284]]
This administrative review and notice are in accordance with
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 353.22.
Dated: December 12, 1995.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 95-30784 Filed 12-18-95; 8:45 am]
BILLING CODE 3510-DS-P