[Federal Register Volume 61, Number 179 (Friday, September 13, 1996)]
[Notices]
[Pages 48465-48471]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-23526]


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DEPARTMENT OF COMMERCE
International Trade Administration
[A-421-803]


Certain Cold-Rolled Carbon Steel Flat Products From the 
Netherlands; Final Results of Antidumping Duty Administrative Review

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

ACTION: Notice of Final Results of Antidumping Duty Administrative 
Review.

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SUMMARY: On July 12, 1995, the Department of Commerce (the Department) 
published the preliminary results of the administrative review of the 
antidumping duty order on certain cold-rolled carbon steel flat 
products from the Netherlands. The review covers one exporter of the 
subject merchandise to the United States, Hoogovens Groep BV 
(Hoogovens) and the period August 18, 1993, through July 31, 1994. The 
Department has now completed this administrative review in accordance 
with section 751 of the Tariff Act of 1930, as amended (the Act).

EFFECTIVE DATE: September 13, 1996.

FOR FURTHER INFORMATION CONTACT: Helen Kramer or Linda Ludwig, Import 
Administration, International Trade Administration, U.S. Department of 
Commerce, 14th Street and Constitution Avenue, N.W., Room 7866, 
Washington, D.C. 20230; telephone: (202) 482-0405 or (202) 482-3833, 
respectively.

SUPPLEMENTARY INFORMATION:

Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute and to the 
Department's regulations are references to the provisions as they 
existed on December 31, 1994.

Background

    On July 12, 1995, the Department published in the Federal Register 
(60 FR 35893) the preliminary results of the administrative review of 
the antidumping duty order on certain cold-rolled carbon steel flat 
products from the Netherlands (58 FR 44172, August 19, 1993). On 
February 6, 1996, and on August 7, 1996, the Department sent Hoogovens 
supplemental questionnaires on the subject of reimbursement of 
antidumping duties. We gave interested parties an opportunity to 
comment on our preliminary results and the supplemental questionnaires. 
Based on our analysis of the comments received, we have changed the 
results from those presented in the preliminary results of review.

Scope of This Review

    The products covered by this review include cold-rolled (cold-
reduced) carbon steel flat-rolled products, of rectangular shape, 
neither clad, plated nor coated with metal, whether or not painted, 
varnished or coated with plastics or other nonmetallic substances, in 
coils (whether or not in successively superimposed layers) and of a 
width of 0.5 inch or greater, or in straight lengths which, if of a 
thickness less than 4.75 millimeters, are of a width of 0.5 inch or 
greater and which measures at least 10 times the thickness or if of a 
thickness of 4.75 millimeters or more are of a width which exceeds 150 
millimeters and measures at least twice

[[Page 48466]]

the thickness, as currently classifiable in the Harmonized Tariff 
Schedule (HTS) under item numbers 7209.11.0000, 7209.12.0030, 
7209.12.0090, 7209.13.0030, 7209.13.0090, 7209.14.0030, 7209.14.0090, 
7209.21.0000, 7209.22.0000, 7209.23.0000, 7209.24.1000, 7209.24.5000, 
7209.31.0000, 7209.32.0000, 7209.33.0000, 7209.34.0000, 7209.41.0000, 
7209.42.0000, 7209.43.0000, 7209.44.0000, 7209.90.0000, 7210.70.3000, 
7210.90.9000, 7211.30.1030, 7211.30.1090, 7211.30.3000, 7211.30.5000, 
7211.41.1000, 7211.41.3030, 7211.41.3090, 7211.41.5000, 7211.41.7030, 
7211.41.7060, 7211.41.7090, 7211.49.1030, 7211.49.1090, 7211.49.3000, 
7211.49.5030, 7211.49.5060, 7211.49.5090, 7211.90.0000, 7212.40.1000, 
7212.40.5000, 7212.50.0000, 7217.11.1000, 7217.11.2000, 7217.11.3000, 
7217.19.1000, 7217.19.5000, 7217.21.1000, 7217.29.1000, 7217.29.5000, 
7217.31.1000, 7217.39.1000, and 7217.39.5000. Included in this review 
are flat-rolled products of nonrectangular cross-section where such 
cross-section is achieved subsequent to the rolling process (i.e., 
products which have been ``worked after rolling'')--for example, 
products which have been bevelled or rounded at the edges. Excluded 
from this review is certain shadow mask steel, i.e., aluminum-killed, 
cold-rolled steel coil that is open-coil annealed, has a carbon content 
of less than 0.002 percent, is of 0.003 to 0.012 inch in thickness, 15 
to 30 inches in width, and has an ultra flat, isotropic surface. These 
HTS item numbers are provided for convenience and Customs purposes. The 
written description remains dispositive.
    This review covers sales of cold-rolled carbon steel flat products 
from the Netherlands by Hoogovens Groep BV. The review period is August 
18, 1993, through July 31, 1994.

Analysis of Comments Received

    We gave interested parties an opportunity to comment on the 
preliminary results. We also gave them an opportunity to comment on the 
issue of potential reimbursement of antidumping duties to be assessed. 
We received comments and rebuttal comments from Hoogovens Groep BV, an 
exporter of the subject merchandise, (respondent), and from Bethlehem 
Steel Corporation, U.S. Steel Group a Unit of USX Corporation, Inland 
Steel Industries, Inc., LTV Steel Company, Inc., National Steel 
Corporation, AK Steel Corporation, Gulf States Steel Inc. of Alabama, 
Sharon Steel Corporation, and WCI Steel Inc., petitioners.
    Comment 1: The respondent argues that the Department should have 
exercised its discretion not to require Hoogovens to report a very 
small quantity of U.S. sales of secondary merchandise by a U.S. 
affiliate, Precision Slitting, Inc. (PSI), which were its only sales of 
``seconds'' in the United States. While acknowledging that the 
Department considers the antidumping law to require the inclusion of 
all U.S. sales during the period of review (POR) in the calculation of 
margins, it cites American Permac, Inc. v. United States, 783 F. Supp. 
1421, 1423-24 (CIT 1992), in support of its contention that sales of 
seconds should be excluded from the calculation of dumping margins when 
they are de minimus and distortive of the margins.
    Petitioners respond that the Department's practice of including all 
U.S. sales was held to be reasonable in NSK Ltd. v. United States, 896 
F. Supp. 1263, 1267-68 (CIT 1995).
    Department's Position: It is normal Department practice to consider 
all of a company's U.S. sales in an administrative review, including 
those that were excluded due to time and resource constraints in the 
original investigation. American Permac, upon which Hoogovens relies, 
states that, while U.S. sales outside the ordinary course of trade 
normally should be included in the sales database, ``a methodology is 
to be applied which accounts for sales which are unrepresentative and 
which do not lead to a fair price comparison.'' 16 CIT 41, 42 (1992). 
The American Permac court then upheld the Department's inclusion of a 
small number of sales alleged by the plaintiff in that case to be 
distortive, noting that it was not clear from the record that any 
distortion actually occurred in that case. Id. at 43-44. Thus, American 
Permac stands for the proposition that U.S. sales in small quantities 
will be included unless they are shown to be distortive.
    Commerce has met the standards set forth in American Permac by 
providing for a methodology which accounts for the allegedly 
unrepresentative sales involving secondary merchandise and leads to a 
fair comparison. As explained in the memorandum of April 19, 1995, from 
Roland L. MacDonald to Joseph A. Spetrini entitled Treatment of Non-
Prime Merchandise for the First Administrative Review of Certain Carbon 
Steel Flat Products (``Non-Prime Memorandum''), which is part of the 
General Issues record for all of the Carbon Steel first reviews, the 
Department made every effort to avoid distortion by developing 
methodologies to distinguish secondary merchandise in these reviews 
from prime merchandise. Where the respondent combined prime and 
secondary merchandise within a single product grouping, Commerce 
separated them for the purpose of developing the model match 
concordance. Similarly, secondary merchandise was segregated from prime 
merchandise for purposes of conducting the arm's length test, the cost 
test, and the margin calculation. In those cases in which a U.S. sale 
of secondary merchandise could not be matched to a contemporaneous home 
market sale of secondary merchandise, Commerce compared the U.S. sale 
with constructed value (CV), using the approach upheld in IPSCO, Inc. 
v. United States, 965 F.2d 1056, 1060 (Fed. Cir. 1992). Specifically, 
because Hoogovens expended the same materials, capital, labor and 
overhead for prime merchandise and secondary merchandise, the CV of 
prime and secondary merchandise is identical. IPSCO, 965 F.2d at 1058, 
1060-61.
    Finally, Hoogovens own characterization of these sales as 
``insignificant'' suggests that they could not significantly distort 
the overall, weight-averaged, margin. Because Hoogovens has not shown 
that, despite these measures, the relevant PSI sales are distortive, 
Commerce has not excluded them from the U.S. sales database. See also 
Comment 2.
    Comment 2: Respondent contends that the Department's use of CV to 
calculate foreign market value (FMV) for matches to U.S. sales of 
seconds is internally inconsistent with its policy enunciated in its 
Non-Prime Memorandum that ``the Department should consider, and 
compensate for, the potentially distortive effects of including seconds 
in our antidumping duty calculations.'' Respondent urges the Department 
either to use Hoogovens' reported CV for seconds (which was based on 
standard costs multiplied by the ratio of the sales value of seconds to 
the sales value of prime merchandise), or to exclude from the margin 
calculation those secondary sales for which there are no 
contemporaneous home market matching sales, or to calculate FMV based 
on the weight-averaged price of home market seconds for the entire POR.
    Repondent argues that the Department's methodology is not 
``compelled'' by the Court of Appeals decision in IPSCO, which affirmed 
the Department's decision to allocate production costs equally between 
the prime product and a co-product in calculating CV for the co-
product.

[[Page 48467]]

Respondent contends that seconds are by-products, and absent any 
instructions from the court on how to calculate costs for by-products, 
the Department must accept the costing of these products according to 
GAAP. Hoogovens contends that it treats secondary merchandise as a by-
product in its accounting system.
    Petitioners respond that Hoogovens' argument that seconds are a by-
product is unsupported by evidence in the record. Moreover, this claim 
is contradicted by other evidence in the record. In the calculation of 
CV, Hoogovens used the income from the sale of by-products as an offset 
against the total costs of production, but used a different methodology 
for costing seconds. Hoogovens' calculation of standard costs for 
seconds is known as the ``sales value at split-off method,'' and is 
generally used to cost co-products, not by-products. Petitioners claim 
that PSI's sales of seconds are treated as sales of co-products, and 
that therefore they should be costed in the same way as prime products, 
like the secondary products at issue in IPSCO. Further, the petitioners 
argue, the suggestion that including these sales distorts the 
calculated margins has no basis. To the extent that there is any 
potential for distortion, they argue, the Department has adopted a 
methodology which compensates for such distortion by comparing U.S. 
sales of seconds to sales of seconds in the home market, or when there 
are no contemporaneous home market sales, to the constructed value 
(CV).
    Department's Position: We disagree with the respondent. The 
Department continues to follow IPSCO in its practice. Respondent's 
argument that seconds are a by-product is unsupported by the record. In 
the response to Section VI of the Department's questionnaire (November 
14, 1994), Hoogovens described its by-products accounting as follows 
(Exhibit VI-2, p. 6): ``The cost of the by-products like cookery [sic] 
by-products, slag, gas, etc. are part of the departmental budget for 
raw materials cost of the iron and steel production. These by-products 
are sold to third parties or transferred internally at market value.'' 
This reference to by-products of the coke ovens is the sole reference 
to by-products in the response. Nowhere does Hoogoven indicate that any 
by-products are generated in the steel rolling mills. To the contrary, 
Hoogovens describes the ``seconds'' as ``prime quality steel that had 
been declassified at RBC as a result of damage during transatlantic 
shipment or during processing at RBC. Hoogovens does not actively 
market secondary quality subject merchandise in the United States, and 
exported no such material during the POR.'' (Letter to the Department 
dated October 5, 1994, p. 2.) Thus, the merchandise Hoogovens exported 
to the United States and sold as seconds was originally of prime 
quality and incurred the same costs as merchandise ultimately sold as 
prime quality.
    Comment 3: Respondent argues that the Department should return to 
the methodology used in the investigation to make the adjustment for 
value added taxes (VAT), which was the methodology enunciated in Grey 
Portland Cement and Clinker from Mexico, 58 FR 25803 (April 28, 1993), 
to achieve tax neutrality. Although the Court of International Trade 
(CIT) rejected this methodology in Federal Mogul Corp. v, United 
States, 834 F. Supp. 1391 (CIT 1993), the Court of Appeals reversed 
this decision on August 28, 1995 (Federal Mogul Corp. v, United States, 
94-1097, -1104). Hoogovens claims that the Department's current 
methodology inflates dumping margins over those that would be 
calculated in the absence of a tax adjustment.
    Alternatively, respondent argues that if the Department continues 
to use its current methodology, it should apply the VAT only to gross 
prices, because under Dutch law the proper tax basis is gross sales 
price (the first level). Respondent contends the Department has no 
authority to calculate the tax adjustment to USP on the basis of a unit 
price net of all adjustments (the second level).
    Petitioners comment that Hoogovens has misread the Court of 
Appeal's decision in Daewoo Electronics v. United States, 6 F.3d 1511, 
1519-20 (Fed. Cir. 1993), in which the court ruled that in making the 
tax adjustment under 19 USC Sec. 1677a(d)(1)(C), the Department must 
apply the tax rate to USP using a tax basis that is at an ``analogous 
point'' in the stream of commerce as the tax basis for the home market 
tax. Daewoo says nothing about the second level adjustment. Petitioners 
argue that the Department's methodology fully complies with the 
analogous point requirement: in both the home market and the U.S. 
market, the basis for the Department's tax adjustment calculations was 
the gross invoice price to the first unrelated customer. The Department 
makes the second level adjustment in order to eliminate distortion 
arising from different circumstances of sale in the home and U.S. 
markets, such as differences in freight, physical characteristics of 
the merchandise, or selling expenses. The CIT expressly recognized that 
such an adjustment is appropriate in Daewoo Electronics Co. Ltd. v. 
United States, 760 F.Supp. 200, 208 (Ct. Int'l Tr. 1991). Petitioners 
characterize as baseless Hoogovens' argument that this holding was 
rendered moot by the subsequent decision of the Court of Appeals in 
that case that the delivered price, not the ex-factory price, was the 
point at which taxes are incurred under Korean tax law. The CIT's 
holding regarding the second level adjustment becomes even more 
important when items such as freight charges (which are included in the 
delivered prices) are part of the tax basis.
    Department's Position: In light of the Federal Circuit's decision 
in Federal Mogul v. United States, CAFC No. 94-1097, the Department 
changed its treatment of home market consumption taxes for this review. 
Where merchandise exported to the United States was exempt from the 
consumption tax, the Department added to the U.S. price the absolute 
amount of such taxes charged on the comparison sales in the home 
market. This is the same methodology that the Department adopted 
following the decision of the Federal Circuit in Zenith v. United 
States, 988 F. 2d 1573, 1582 (1993), and which was suggested by that 
court in footnote 4 of its decision. The Court of International Trade 
(CIT) overturned this methodology in Federal Mogul v. United States, 
834 F. Supp. 1391 (1993), and the Department acquiesced in the CIT's 
decision. The Department then followed the CIT's preferred methodology, 
which was to calculate the tax to be added to U.S. price by multiplying 
the adjusted U.S. price by the foreign market tax rate; the Department 
made adjustments to this amount so that the tax adjustment would not 
alter a ``zero'' pre-tax dumping assessment.
    The foreign exporters in the Federal Mogul case, however, appealed 
that decision to the Federal Circuit, which reversed the CIT and held 
that the statute did not preclude Commerce from using the ``Zenith 
footnote 4'' methodology to calculate tax-neutral dumping assessments 
(i.e., assessments that are unaffected by the existence or amount of 
home market consumption taxes). Moreover, the Federal Circuit 
recognized that certain international agreements of the United States, 
in particular the General Agreement on Tariffs and Trade (GATT) and the 
Tokyo Round Antidumping Code, required the calculation of tax-neutral 
dumping assessments. The Federal Circuit remanded the case to the CIT 
with

[[Page 48468]]

instructions to direct Commerce to determine which tax methodology it 
will employ.
    The Department has determined that the ``Zenith footnote 4'' 
methodology should be used. First, as the Department has explained in 
numerous administrative determinations and court filings over the past 
decade, and as the Federal Circuit has now recognized, Article VI of 
the GATT and Article 2 of the Tokyo Round Antidumping Code required 
that dumping assessments be tax-neutral. This requirement continues 
under the new Agreement on Implementation of Article VI of the General 
Agreement on Tariffs and Trade. Second, the URAA explicitly amended the 
antidumping law to remove consumption taxes from the home market price 
and to eliminate the addition of taxes to U.S. price, so that no 
consumption tax is included in the price in either market. The 
Statement of Administrative Action (p. 159) explicitly states that this 
change was intended to result in tax neutrality.
    While the ``Zenith footnote 4'' methodology is slightly different 
from the URAA methodology, in that section 772(d)(1)(C) of the pre-URAA 
law required that the tax be added to United States price rather than 
subtracted from home market price, it does result in tax-neutral duty 
assessments. In sum, the Department has elected to treat consumption 
taxes in a manner consistent with its longstanding policy of tax-
neutrality and with the GATT.
    Comment 4: Respondents comment that the Department's computer 
program incorrectly weight-averaged equally similar matches, because of 
the absence of an output statement, and failed to weight-average the 
differences in merchandise (``difmers'') of the equally similar home 
market sales.
    Department's Position: We agree, and have made the appropriate 
corrections to the program for the final results.
    Comment 5: Respondent and petitioners comment that the Department 
used Hoogovens' reported interest rate on short-term borrowings, 
instead of the interest expense factor for purposes of determining cost 
of production and allocating profit on further manufactured sales.
    Department's Position: We agree, and have used the interest expense 
factor for ESP sales in our final margin calculations. This was not an 
issue for purchase price sales, as all of these sales had home market 
matches and CV was not used.
    Comment 6: Respondent comments that the Department erred in not 
converting packing costs incurred in the Netherlands for U.S. sales 
from guilders to dollars in calculating foreign market value. Because 
of a typographical error, the format sheets supplied with Hoogovens' 
January 13, 1995, response incorrectly stated that these expenses were 
reported in U.S. dollars.
    Department's Position: We agree and have corrected this error in 
our final margin calculation.
    Comment 7: Respondent comments that in adding missing further 
manufacturing cost data for two control numbers, the Department erred 
in adding these costs to sales with process code ``40,'' which are ``as 
is'' sales of seconds.
    Department's Position: After the preliminary results, the 
Department found that some sales of seconds were erroneously coded as 
prime merchandise, which caused the computer program to identify the 
further manufacturing cost data for those sales as missing. For the 
final results, we have corrected the coding and used the respondent's 
reported cost data for the sales in question.
    Comment 8: Respondent comments that in the first model comparison, 
the Department set the variable costs of home market sales of seconds 
equal to the variable costs of home market sales of prime merchandise 
for the same control number, but failed to make this change in the 
second model comparison.
    Department's Position: We agree with respondent and have corrected 
the program.
    Comment 9: Respondent notes that for some of PSI's sales of seconds 
corresponding to six control numbers, the Department used Hoogovens' 
reported variable costs for seconds to compare with the (corrected) 
prime variable costs of home market sales of seconds. Hoogovens 
proposed adding new programming language to the model match and section 
2 of the margin calculation programs.
    Department's Position: We agree with respondent. This error 
occurred because Hoogovens incorrectly coded certain U.S. sales of 
seconds as prime sales. We have made the suggested corrections in the 
programs for our final results.
    Comment 10: Petitioners argue that Hoogovens' claimed adjustments 
for home market rebates should be denied, because they include amounts 
paid on out-of-scope merchandise and are allocated on a per ton, rather 
than an ad valorem basis. In addition, for some of the sales, Hoogovens 
included post-sale price adjustments in the same field as rebates.
    Respondent replies that since rebates were paid at the same rate 
for both scope and non-scope merchandise, there is no possibility that 
the reported amounts were skewed by the rebates paid on non-scope 
merchandise. The CIT has consistently recognized, even in the 
Torrington case cited by the petitioners (Torrington v. United States, 
881 F. Supp. 622 [CIT 1995]), that respondents may apportion rebates 
that are paid at the same percentage rate on both scope and non-scope 
merchandise. (Torrington, 881 F. Supp. at 640, citing Smith-Corona 
Group v. United States, 713 F.2d 1568, 1580 [Fed. Cir. 1983].) 
Hoogovens' reported rebates were ``calculated directly from actual 
sales figures and from the total amount of rebate paid,'' as required 
by the Court of Appeals in Smith-Corona. Hoogovens also notes that it 
granted rebates on both scope and non-scope merchandise to only one 
customer. Further, Hoogovens reported its rebates on a per ton basis, 
because this is the basis on which they are recorded in Hoogovens' 
financial records. The Department should therefore continue to use the 
reported rebates in the final results. Finally, respondent argues that 
inclusion of post-sale price adjustments in the rebate field for five 
home market invoices does not affect the calculation of margins where 
the Department has fully verified that all the components of the 
amounts reported in the field are accurate. Where the respondent has 
reported these expenses in the manner in which they are recorded in his 
accounting system, and the Department has verified the accuracy of 
these adjustments, there is no reason why they should not be accepted 
by the Department.
    Department's Position: We agree with respondent. We verified that 
Hoogovens apportioned rebates on scope and non-scope merchandise at the 
same percentage rate. During verification, we also examined the 
allocation of rebates for scope and non-scope merchandise. We verified 
that the customers met their required sales target and traced the 
rebate payment through supporting documents. We saw no indication that 
Hoogovens ties the rebate to the invoice in their ledger system, or 
that the allocation method distorted the amounts reported. Hoogovens 
usually reported home market post-sale price adjustments in the 
``OTHDIS1H'' field. However, for five home market sales, there was both 
a post-sale price adjustment and a rebate combined and reported in the 
``REBATE1H'' field. In the January 13, 1995, response (Exhibit 23), 
Hoogovens broke out the post-sale price adjustments and rebates for 
each of the sales. We verified the rebate given in the course of the 
sales traces, and traced the post-sale price adjustments to

[[Page 48469]]

the sales journal and supporting documentation.
    Comment 11: Petitioners argue that Hoogovens inappropriately used 
different averaging periods when calculating the interest for home 
market and U.S. purchase price sales. These rates were used to 
calculate inventory carrying charges and credit expenses. Petitioners 
urge the Department to use the same averaging period for both home 
market and U.S. sales, or to calculate separate home market interest 
rates for the non-overlapping periods.
    Respondent replies that the Department specifically instructed 
Hoogovens to calculate its interest rates based on the time period for 
which sales were reported in each market, and that the Department fully 
verified the reported interest rates.
    Department's Position: We agree with respondent. As instructed by 
the Department, Hoogovens used the average interest rate for each sales 
reporting period in each market. It is appropriate to utilize the 
average interest rate applicable to sales in each of the reporting 
periods. This more accurately reflects the borrowing experience of the 
respondent for the respective sales reporting periods.
    Comment 12: Petitioners argue that in calculating the dumping 
margin, the Department should deduct from United States Price (USP) the 
actual dumping duties to be paid by NVW (U.S.A.) Inc. (``NVW''), i.e., 
the Department should treat antidumping duties as a cost. Petitioners 
interpret 19 U.S.C. Sec. 1677a(d) as including antidumping and 
countervailing duties in the phrase ``import duties,'' which are 
deducted from purchase price and exporter's sales price. The 
Department's margin program calculates the difference between foreign 
market value and USP on each sale. ``This difference is essentially 
equal to the antidumping duties to be paid by NVW and referred to in 
Sec. 1677a(d)(2)(A).'' Petitioners urge the Department to modify its 
program so that once this difference is calculated, it is deducted from 
USP before the final margin is determined.
    Respondent replies that petitioners' proposal has been repeatedly 
rejected by the Department, the courts and the U.S. Congress, and that 
the petitioners cite no authorities in support of their interpretation 
of the statute. The effect of their proposal would be to inflate 
Hoogovens' margins geometrically. In effect, the margin would be 
doubled on each transaction. This inflated rate, they argue, would then 
become the basis for the deduction from USP in the succeeding 
administrative review, and would again be doubled. Moreover, Hoogovens 
actually paid only estimated duty deposits upon entry of the 
merchandise, rather than the final duties to be calculated in this 
review. These entries have not been liquidated; hence there are no 
antidumping duties actually paid that the Department could deduct from 
USP, even if such action were legally appropriate. In Federal-Mogul 
Corp. v. United States, 813 F. Supp. 856 (CIT 1993), the CIT agreed 
with the Department's consistent practice of refusing to consider the 
amount of estimated antidumping duties based upon past margins in its 
calculation of current margins.
    Department's Position: It is the Department's longstanding position 
that antidumping and countervailing duties are not a cost within the 
meaning of 19 U.S.C. Sec. 1677a(d). Antidumping and countervailing 
duties are unique. Unlike normal duties, which are an assessment 
against value, antidumping and countervailing duties derive from the 
margin of dumping or the rate of subsidization found. Logically, 
antidumping and countervailing duties cannot be part of the very 
calculation from which they are derived. This logical rationale for the 
Department's interpretation of the statute is consistent with prior 
decisions of the Court of International Trade. See Federal-Mogul v. 
United States, 813 F. Supp. 856, 872 (1993) (deposits of antidumping 
duties should not be deducted from USP because such deposits are not 
analogous to deposits of ``normal import duties'').
    In contrast, Petitioners' reasoning is circular rather than 
logical: in calculating the dumping margin the Department must take 
into account the dumping margin. Such double counting, i.e., including 
the same unfair trade practice twice in a single calculation, is 
unjustifiable, except in the limited circumstances provided for in 
section 353.26.
    Moreover, the treatment of antidumping and countervailing duties 
(already paid or to be assessed) as a cost to be deducted from the 
export price is an issue that was arduously debated during passage of 
the Uruguay Round Agreements Act (URAA) and ultimately rejected by 
Congress. See, H.R. 2528, 103rd Cong., 1st Sess. (1993). Alternatively, 
Congress directed the Department to investigate, in certain 
circumstances, whether antidumping duties were being absorbed by 
affiliated U.S. importers. 19 U.S.C. Sec. 1675(a)(4). Thus, Congress 
put to rest the issue of antidumping and countervailing duties as a 
cost. URAA Statement of Administrative Action at 885 (``The duty 
absorption inquiry would not affect the calculation of margins in 
administrative reviews. This new provision of the law is not intended 
to provide for the treatment of antidumping duties as a cost.''); see 
also H. Rep. No. 103-826(I), 103rd Cong., 2nd Sess. (1994) at 60.
    Comment 13: Petitioners argue that Hoogovens should have reported 
direct selling expenses for NVW, and urge the Department to apply the 
best information available (``BIA'') by making the adverse assumption 
that all of NVW's expenses were direct expenses.
    Respondent replies that NVW ``serves only as a facilitator, 
communication link and processor of documents for its U.S. imports and 
sales.'' In this capacity, NVW processes sales of both subject and non-
subject merchandise. NVW's expenses consist primarily of rent for 
office space and the salaries of its officers. The Department always 
treats these types of expenses as indirect selling expenses. Hoogovens 
reported all of NVW's expenses in its calculation of U.S. indirect 
selling expenses, and these expenses were verified by the Department.
    Department's Position: We agree with respondent. Petitioners 
misquoted Hoogovens' response of October 6, 1994, when they claimed 
that Hoogovens characterized NVW as its ``selling agent'' in the United 
States. Hoogovens' response made clear that its U.S. sales are 
negotiated by its sales office in IJmuiden, the Netherlands and not by 
NVW in the United States.
    Comment 14: Petitioners argue that Hoogovens miscalculated its 
inventory carrying costs (``ICC'') for its ESP sales, contending that 
the amounts reported in the INVCARU field are substantially lower than 
should result from Hoogovens' methodology, and that this methodology is 
flawed. Petitioners object to Hoogovens' use of the transfer price, 
rather than the cost of production (``COP'') in the calculation, citing 
Hoogovens' statement that ``the inventory cost must be based on the 
cost of producing the steel, not the price for which it is sold.'' 
(Secs. III-V Supplemental Response at 35). Although the Department's 
practice has been to use the cost of manufacture (COM) in the 
calculation, petitioners further argue that COP better measures the 
true opportunity cost to Hoogovens, because it includes COM and 
additional general, administrative and interest expenses. Second, 
petitioners argue, the transfer price is not on the same basis as the 
total cost of goods sold and should not be reduced by the ratio of the 
total cost to total sales. Third, petitioners argue that the home 
market interest rate should be used in the ESP

[[Page 48470]]

ICC calculation. Petitioners urge the Department to recalculate INVCARU 
for the ESP sales using the following formula:

ESP ICC = COP x HM Int. Rate x Inv. Days/365

    Respondent replies that the methodology it used is reasonable and 
has been verified by the Department. Moreover, the alternative 
methodology the petitioners propose is almost identical to Hoogovens' 
methodology, and would change the calculated margins by an infinitesmal 
amount. Furthermore, Hoogovens' reported ICC is, in fact, cost-based. 
Although Hoogovens multiplies the ICC factor by the transfer price, it 
then multiplies the factor by the ratio of Hoogovens' average cost of 
production to average sales price. This results in an ICC amount that 
is, in effect, based on the COP. It would be inappropriate to use gross 
unit price, instead of the transfer price, in the equation, because the 
gross unit price reported for ESP sales is the price charged by 
Hoogovens' affiliates to the first unrelated customer. However, the ICC 
in question is the cost of carrying inventory from the time of 
production in the Netherlands to the time of delivery to Hoogovens' 
U.S. affiliates. In calculating the inventory cost for time in the 
Netherlands and time on the water, Hoogovens used the transfer price 
and a cost/sales ratio based on Hoogovens' own sales revenues. Thus, 
the price and the cost/sales ratio used in the calculation of ICC were 
calculated on the same basis. In regard to the interest rate, Hoogovens 
submits that U.S. ICC expenses should be calculated based on the costs 
of carrying inventory for the period for which Hoogovens reported its 
U.S. sales. Accordingly, the Department should not adjust Hoogovens' 
reported data.
    Department's Position: Petitioners' argument is based on the 
erroneous conclusion that Hoogoven's ICC reporting was not cost-based. 
Respondent's methodology of multiplying the ICC factor by the ratio of 
average cost of production to average sales price results in an ICC 
based on cost of production. Therefore, we have accepted Hoogoven's ICC 
calculation methodology. However, the ICC reported in the INVCARU field 
is incorrect for a different reason. Prior to verification, respondent 
reported to the Department certain corrections to its previous 
submissions, including corrections of the short-term interest rates on 
its borrowings in both the home and U.S. markets. (Letter to the 
Department dated March 15, 1995, Exhibit 5.) On March 31, 1995, at the 
Department's request, Hoogovens submitted revised computer files 
containing corrections to certain errors identified prior to 
verification. These files purportedly included revised ICC to reflect 
the corrected short-term borrowing rates. However, this correction to 
ICC was not made for U.S. sales owing to a programming error. For the 
final results, the Department has modified its margin calculation 
program to correct this error.
    Comment 15: Petitioners argue that the Department improperly 
excluded three zero-priced U.S. ``sample sales'' by Hoogovens' U.S. 
affiliate, although it is its practice in administrative reviews not to 
exclude sample sales, unless the respondent can demonstrate either that 
(a) no transfer of ownership occurred between the exporter and 
unrelated U.S. purchaser, or (b) that the product was not used for 
commercial consumption. Hoogovens has not so claimed for any of these 
sales, and therefore the Department should include them in its margin 
calculation.
    Hoogovens contends that these sales of ``small, throw-away pieces 
of damaged steel'' cannot reasonably be described as ``samples,'' and 
that it would be unfair to require Hoogovens to pay antidumping duties 
on a tiny quantity of damaged steel of no commercial value. Further, 
Hoogovens argues that no case has been made that exclusion of these 
sales would prejudice the petitioners' interests.
    Department's Position: We agree with petitioners. In general, the 
Department does not exclude any U.S. sales from its calculation of USP. 
The Department has considered all transactions to be sales whenever 
ownership transfers to an unrelated party. However, the Department has 
in the past determined that, in appropriate circumstances, free-of-
charge samples are not ``sales'' within the meaning of section 772 of 
the antidumping law. The CIT has recognized that the Department must 
make its determinations regarding sample sales by examining the 
relevant facts of each individual case and that the burden of proof in 
demonstrating that such sales are outside the ordinary course of trade 
lies with the respondent. Hoogovens did not claim or offer evidence 
that these sales were outside the ordinary course of trade. 
Consequently, the Department has no basis for excluding them from the 
margin calculation. See Granular Polytetrafluoroethylene Resin from 
Japan: Final Results of Antidumping Duty Administrative Review, 58 FR 
50343 (September 27, 1993); The Timken Company v. United States, 862 F. 
Supp. 413, 417 (CIT 1994).
    Comment 16: Petitioners comment that the Department mistakenly 
added two incorrect program lines to its margin calculation program for 
further manufacturing sales which had the effect of allocating U.S. 
direct and indirect selling expenses on the basis of the ratio of 
foreign manufacturing to total manufacturing.
    Department's Position: We agree with petitioners and have removed 
these lines from the program.
    Comment 17: Petitioners argue that Hoogovens' response to the 
February 6, 1996, supplemental questionnaire demonstrates that 
Hoogovens is reimbursing NVW for payment of antidumping duties. 
Hoogovens responds that the issue cannot arise until final antidumping 
duties are assessed following completion of the administrative review. 
Hoogovens also argues that because NVW is not an unaffiliated U.S. 
customer, and makes no sales to such customers, transactions associated 
with NVW's ``routine selling functions'' on behalf of its foreign 
parent cannot ``implicate the remedial purposes of the reimbursement 
regulation.''
    Department's Position: Section 353.26 of the antidumping 
regulations requires the Department to deduct from the United States 
price the amount of any antidumping duty that a producer or reseller 
either pays directly on behalf of the importer or reimburses to the 
importer. The Department has interpreted this regulation as applying 
where the importer is an affiliated party (CEP situations) as well as 
when the importer is unaffiliated. See Color Television Receivers from 
the Republic of Korea; Final Results of Antidumping Duty Administrative 
Review, 61 Fed. Reg. 4408, 4410-11 (Feb. 6, 1996). That interpretation 
is consistent with both the plain language of the regulations and the 
regulatory history. See, e.g., 19 CFR 353.41 (defining United States 
price as the purchase price or the exporter's sales price).
    Furthermore, contrary to Hoogovens' argument, the reimbursement 
regulation can apply in the first review even though duties have not 
yet been assessed. An agreement to reimburse is sufficient to trigger 
the regulation. This is evident from the required reimbursement 
certification, which must state that ``I have not entered into any 
agreement or understanding for the payment or refunding to me. . .of 
all or any part of the antidumping duties assessed. . . .'' 19 CFR 
Sec. 353.26(b). The reimbursement adjustment is made not on the basis 
of cash deposits, but rather on the basis of the actual amounts to be 
assessed. This procedure was noted

[[Page 48471]]

with approval by the CIT in PQ Corp. v. United States, 11 CIT 53, 67 
(1987). As the opinion notes:
    Accordingly, ITA states that its practice regarding reimbursements 
for antidumping duties is as follows. .... If merchandise is being sold 
at less than fair value, then the amount of that difference--the 
dumping margin--will be the basis for an actual assessment of 
antidumping duties. Only at that point, while the merchandise is still 
in liquidation, does ITA apply 19 CFR Sec. 353.55 by determining what 
amount, if any, of the antidumping duties to be assessed are or will be 
paid. . .[or]. . . refunded to the importer by the manufacturer, 
producer, seller or exporter. The amount ``paid'' or ``refunded'' is 
based on the antidumping duties to be assessed, not on the prior 
deposit of estimated antidumping duties. Thus, if a producer agrees to 
reimburse all antidumping duties, then the entire amount of the 
antidumping duties to be assessed will be added in determining the 
dumping margin pursuant to 19 CFR Sec. 353.55, regardless of whether a 
larger or smaller deposit of estimated antidumping duties has been 
posted. (Emphasis added).

    Thus, if a producer or reseller agrees to reimburse all antidumping 
duties, then the entire amount of the antidumping duties to be 
assessed, as reflected in the initial calculation of whether dumping is 
occurring in that period of review, will be added in determining the 
dumping margin for final assessment, pursuant to 19 CFR Sec. 353.26. As 
discussed above, the evidence of record demonstrates that Hoogovens has 
agreed to reimburse NVW for antidumping duties. Therefore, the 
regulation applies.

Final Results of Review

    As a result of our review, we have determined that the following 
margin exists:

------------------------------------------------------------------------
                                                                 Margin 
           Manufacturer/exporter               Time period     (percent)
------------------------------------------------------------------------
Hoogovens Groep BV........................    8/18/93-7/31/94      5.54 
------------------------------------------------------------------------

    The Department shall determine, and the Customs Service shall 
assess, antidumping duties on all appropriate entries. Individual 
differences between United States price and foreign market value, 
taking into account reimbursed duties, may vary from the percentage 
stated above. The Department will issue appraisement instructions 
directly to the Customs Service.
    Furthermore, the following deposit requirements will be effective 
upon publication of this notice of final results of review for all 
shipments of certain cold-rolled carbon steel flat products from the 
Netherlands entered, or withdrawn from warehouse, for consumption on or 
after the publication date, as provided for by section 751(a)(1) of the 
Act: (1) The cash deposit rate for the reviewed company named above 
will be 5.54 percent; (2) for all other Netherlands exporters, the cash 
deposit rate will be the rate established in the less-than-fair-value 
(LTFV) investigation; and (3) the cash deposit rate for non-Netherlands 
exporters of the subject merchandise from the Netherlands will be the 
rate applicable to the Netherlands supplier of that exporter. The 
revised rate after remand established in the LTFV investigation is 
19.32 percent. These deposit requirements, when imposed, shall remain 
in effect until publication of the final results of the next 
administrative review.
    This notice serves as a reminder to parties subject to 
administrative protective order (APO) of their responsibility 
concerning the disposition of proprietary information disclosed under 
APO in accordance with section 353.34(d) of the Department's 
regulations. Timely notification of return/destruction of APO materials 
or conversion to judicial protective order is hereby requested. Failure 
to comply with the regulations and the terms of an APO is a 
sanctionable violation.
    This administrative review and notice are in accordance with 
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and section 353.22 
of the Department's regulations.

    Dated: August 30, 1996.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 96-23526 Filed 9-12-96; 8:45 am]
BILLING CODE 3510-DS-P