[Federal Register Volume 62, Number 223 (Wednesday, November 19, 1997)]
[Notices]
[Pages 61731-61751]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-30389]
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DEPARTMENT OF COMMERCE
International Trade Administration A-791-804
Notice of Final Determination of Sales at Less Than Fair Value:
Certain Cut-to-Length Carbon Steel Plate From South Africa
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of Final Determination of Sales at Less Than Fair Value.
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EFFECTIVE DATE: November 19, 1997.
FOR FURTHER INFORMATION CONTACT: Charles Rast, Nancy Decker, or Linda
Ludwig, Import Administration, International Trade Administration, U.S.
Department of Commerce, 14th Street and Constitution Avenue, N.W.,
Washington, D.C. 20230; telephone: (202) 482-5811, (202) 482-0196, and
(202) 482-3833, respectively.
The Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute are
references to the provisions effective January 1, 1995, the effective
date of the amendments made to the Tariff Act of 1930 (the Act) by the
Uruguay Rounds Agreements Act (URAA). In addition, unless otherwise
indicated, all citations to the Department's regulations are in
reference to the regulations, codified at 19 CFR Part 353, as they
existed on April 1, 1996.
Final Determination
We determine that certain cut-to-length carbon steel plate (CTL
plate) from South Africa is being, or is likely to be, sold in the
United States at less than fair value (LTFV), as provided in section
735 of the Act.
Case History
Since the preliminary determination in this investigation
(Preliminary Determination of Sales at Less Than Fair Value and
Postponement of Final Determination: Certain Cut-to-Length Carbon Steel
Plate From South Africa, 62 FR 31963 (June 11, 1997)), the following
events have occurred:
In July and August 1997, we verified the respondents' questionnaire
responses. On August 22, 1997 and September 3, 1997, the Department
issued its reports on verification findings for Iscor Ltd. (Iscor). On
August 25, 1997 and September 15, 1997, the Department issued its
reports on verification findings for Highveld Steel and Vanadium
Corporation Ltd. (Highveld). On September 22, 1997, respondents
submitted new computer sales listings which included data corrections
identified through verification. Petitioners and respondents submitted
case briefs on September 15, 1997, and rebuttal briefs on September 22,
1997. A public hearing was not held.
Scope of Investigation
The products covered by this investigation are hot-rolled iron and
non-alloy steel universal mill plates (i.e., flat-rolled products
rolled on four faces or in a closed box pass, of a width exceeding 150
mm but not exceeding 1250 mm and of a thickness of not less than 4 mm,
not in coils and without patterns in relief), of rectangular shape,
neither clad, plated nor coated with metal, whether or not painted,
varnished, or coated with plastics or other nonmetallic substances; and
certain iron and non-alloy steel flat-rolled products not in coils, of
rectangular shape, hot-rolled, neither clad, plated, nor coated with
metal, whether or not painted, varnished, or coated with plastics or
other nonmetallic substances, 4.75 mm or more in thickness and of a
width which exceeds 150 mm and measures at least twice the thickness.
Included as subject merchandise in this petition 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. This merchandise is currently
classified in the Harmonized Tariff Schedule of the United States (HTS)
under item numbers 7208.40.3030, 7208.40.3060, 7208.51.0030,
7208.51.0045, 7208.51.0060, 7208.52.0000, 7208.53.0000, 7208.90.0000,
7210.70.3000, 7210.90.9000, 7211.13.0000, 7211.14.0030, 7211.14.0045,
7211.90.0000, 7212.40.1000, 7212.40.5000, 7212.50.0000. Excluded from
the subject
[[Page 61732]]
merchandise within the scope of the petition is grade X-70 plate.
Although the HTS subheadings are provided for convenience and Customs
purposes, our written description of the scope of this investigation is
dispositive.
Period of Investigation
The period of investigation (POI) is October 1, 1995, through
September 30, 1996.
Fair Value Comparisons
To determine whether sales of the subject merchandise by
respondents to the United States were made at less than fair value, we
compared the Export Price (EP) or Constructed Export Price (CEP), where
appropriate, to the Normal Value (NV), as described in the ``Export
Price'' and ``Normal Value'' sections of this notice. In accordance
with section 777A(d)(1)(A)(i) of the Act, we compared the weighted
average EPs or CEPs to weighted-average NVs during the POI. In
determining averaging groups for comparison purposes, we considered the
appropriateness of such factors as physical characteristics and level
of trade.
(i) Physical Characteristics
In accordance with section 771(16) of the Act, we considered all
products covered by the description in the ``Scope of Investigation''
section of this notice, produced in South Africa by the respondents and
sold in the home market during the POI, to be foreign like products for
purposes of determining appropriate product comparisons to U.S. sales.
Where there were no sales of identical merchandise in the home market
to compare to U.S. sales, we compared U.S. sales to the most similar
foreign like product on the basis of the characteristics listed in the
Department's antidumping questionnaire. In making the product
comparisons, we relied on the following criteria (listed in order of
preference): paint, quality, specification and/or grade, heat
treatments, standard thickness, standard width, whether or not
checkered, and descaling. It is our practice where sales were made in
the home market on a different weight basis from the U.S. market
(theoretical versus actual weight) to convert all quantities to the
same weight basis, using the conversion factors supplied by the
respondents, before making our fair-value comparisons. (See Final
Determination of Sales at Less Than Fair Value: Cut-to-Length Carbon
Steel Plate from Finland, 58 FR 37122 (July 9, 1993) and Final
Determination of Sales at Less Than Fair Value: Certain Welded
Stainless Steel Pipes from Taiwan, 57 FR 53705 (November 12, 1992).)
For Iscor, we found that it did not properly report a weight conversion
factor. In order that all price comparisons be made on the same weight
basis, we converted Iscor's reported home market and U.S. prices,
quantities and costs, as appropriate, based on information on the
record (see Comment 10 of the ``Interested Party Comments'' section of
this notice).
(ii) Level of Trade
To the extent practicable, we determine normal value for sales at
the same level of trade as the U.S. sales (either EP or CEP). When
there are no sales at the same level of trade we compare U.S. sales to
home market (or, if appropriate third country) sales at a different
level of trade. For both EP and CEP, the relevant transaction for level
of trade is the sale from the exporter to the importer. While the
starting price for CEP is that of a subsequent resale to an
unaffiliated buyer, the construction of the EP results in a price that
would have been charged if the importer had not been affiliated. We
calculate the CEP by removing from the first resale to an independent
U.S. customer expenses and the profit associated with those expenses
under section 772(d) of the Act. These expenses represent activities
undertaken by, or on behalf of, the affiliated importer. Because the
expenses deducted under section 772(d) represent selling activities in
the United States, the deduction of these expenses normally yields a
different level of trade for the CEP than for the later resale which is
used for the starting price. Movement charges, and duties and taxes
deducted under section 772(c) of the Act do not represent activities of
the affiliated importer and we do not remove them to obtain the CEP
level of trade. The NV level of trade is that of the starting price of
sales in the home market. When NV is based on constructed value, the
level of trade is that of the sales from which we derive SG&A and
profit.
To determine whether home market sales are at a different level of
trade than U.S. sales, we examine whether the home market sales are at
different stages in the marketing process than the U.S. sales. The
marketing process in both markets begins with goods being sold by the
producer and extends to the sale to the final user. The final user
could be an individual consumer or an industrial user, but the
marketing process for all goods starts with a producer and ends with a
user. The chain of distribution between the two may have many or few
links, and the respondent's sales occur somewhere along this chain. In
the United States, the respondent's sales are generally to an importer,
whether independent or affiliated. We review and compare the
distribution systems in the home market and U.S. export markets,
including selling functions, class of customer, and the extent and
level of selling expenses for each claimed level of trade. Customer
categories such as distributor, original equipment manufacturer (OEM),
or wholesaler are useful as they are commonly used by respondents to
describe levels of trade, but, without substantiation, they are
insufficient to establish that a claimed level of trade is valid. An
analysis of the chain of distribution and of selling functions
substantiates or invalidates claimed customer classifications based on
levels of trade. If the claimed levels are different, the selling
functions performed in selling to those levels should also be
different. Conversely, if levels of trade are nominally the same, the
selling functions performed should also be the same. Different levels
of trade necessarily involve differences in selling functions, but
differences in selling functions, even substantial ones, are not alone
sufficient to establish a difference in the level of trade. Different
levels of trade are characterized by purchasers at different places in
the chain of distribution and sellers performing qualitatively or
quantitatively different functions in selling to them.
When we compare U.S. sales to home market sales at a different
level of trade, we make a level-of-trade adjustment if the difference
in level of trade affects price comparability. We determine any effect
on price comparability by examining sales at different levels of trade
in a single market, the home market. Any price effect must be
manifested in a pattern of consistent price differences between home
market sales used for comparison and sales at the equivalent level of
trade of the export transaction. To quantify the price differences, we
calculate the difference in the average of the net prices of the same
models sold at different levels of trade. We use net prices because any
difference will be due to differences in level of trade rather than
other factors. We use the average difference in net prices to adjust
the NV when it is based on a level of trade different from that of the
export sale. If there is a pattern of no price differences, then the
difference in level of trade does not have a price effect, and no
adjustment is necessary.
In terms of granting a CEP offset, the statute also provides for an
adjustment to NV if NV is established at a level of trade that is
different from that of the
[[Page 61733]]
CEP, provided the NV level is more remote from the factory and we are
unable to determine whether the difference in levels of trade affects
the price comparability between the CEP and NV. This latter situation
can occur where there is no home market level of trade equivalent to
the U.S. sales level or where there is an equivalent home market level,
but the data are insufficient to support a conclusion on price effect.
The CEP offset is the lower of: (1) the indirect selling expenses on
the home market sale; or (2) the indirect selling expenses deducted
from the starting price in calculating CEP. The CEP offset is not
automatic each time export price is constructed. It is only applicable
when the level of trade of the home market sales used for NV are more
advanced than the level of trade of the CEP and there is not an
appropriate basis for determining whether there is an affect on price
comparability.
Iscor did not claim a difference in level of trade. Consistent with
our findings in the preliminary determination, for this final
determination we have treated all of Iscor's home market and U.S. sales
as being at a single level of trade and we have made no level of trade
adjustment when matching its U.S. sales to home market sales.
Highveld claimed for the preliminary determination of this
investigation, that its sales in the home market were made at two
different levels of trade, and that all of its U.S. sales (both EP and
CEP) were made at one level of trade. Based on our analysis of selling
functions performed by Highveld, we found that a single level of trade
existed in each market.
For this final determination Highveld argued that its sales in the
home market were at a different, more remote, level of trade that its
sales to the United States. Highveld has asserted that its sales in the
home market were at a different stage in the marketing process than its
CEP sales in the United States because they were to a different class
of customer, and that the selling functions performed by Highveld were
both qualitatively and quantitatively different between its home market
and U.S. sales. Accordingly, because its home market sales are at a
different, more remote, LOT than its sales to the United States, and
because the Department cannot quantify whether the different LOTs
affect price comparability, Highveld claims it should be granted a CEP
offset.
Petitioners dispute Highveld's arguments that sales in the home
market are more remote than its U.S. sales and that steel service
centers and distributors are at different stages in the marketing
process. Petitioners also argue that many of the selling functions
described by Highveld are intangible, and because there is neither a
quantitative or qualitative difference in selling functions performed
in the two markets, Highveld should not be granted a CEP offset.
In determining whether separate levels of trade actually existed
between the U.S. and home markets, we examined Highveld's marketing
stages. In reviewing the chains of distribution and customer categories
reported in the home market and in the United States, we are unable to
make clear distinctions between different stages of the marketing
process claimed by Highveld. Based on our review of the selling
functions in the U.S. and home markets, the distinctions are not
sufficient to constitute a difference in level of trade between sales
in the two markets. As a result, we have not granted Highveld a CEP
offset. See Comment 23 for a more complete discussion of this issue.
Export Price
We calculated the price of U.S. sales based on EP, in accordance
with section 772(a) of the Act, when the subject merchandise was sold
to unaffiliated purchasers in the United States prior to the date of
importation. In certain instances, however, we determined that CEP as
defined in section 772(b) of the Act was a more appropriate basis for
the price of the U.S. sales. These instances involved sales made by
Highveld to its U.S. affiliate, Newco Steel Trading (NST or Newco),
which negotiates prices and quantities with its U.S. customers, and
sells the subject merchandise to the U.S. customers. Newco operates as
Highveld's exclusive distributor for sales of the subject merchandise
in the United States, and as such, undertakes selling activities
exceeding those of processing sales-related documentation.
Specifically, Newco negotiates prices for particular products with its
customers on a case-by-case basis, pays Highveld for the product order
based on a price agreement, and takes title to the merchandise which is
physically transferred to U.S. customers by common carriers.
For both respondents, we calculated EP sales based on packed prices
to unaffiliated customers in the United States. Where appropriate, and
pursuant to sections 772 (a) and (c) of the Act, we made deductions
from the starting price for foreign inland freight, international
freight, foreign brokerage and handling, marine insurance, early
payment discounts, pre-sale warehousing expenses, and U.S. Customs
duties.
We calculated CEP based on packed prices to unaffiliated customers
in the United States. Where appropriate, and pursuant to sections
772(b) and (c) of the Act, we made deductions for the starting price
for the foreign inland freight, foreign brokerage and handling,
international freight, marine insurance, U.S. Customs duties, survey
expenses, stevedoring and wharfage, commissions, inventory carrying
expenses, credit expenses, and indirect selling expenses. We also made
an adjustment for the amount of profit allocated to these expenses, in
accordance with section 772(d)(3) of the Act.
We corrected the respondents' data for certain errors and omissions
found at verification and submitted to the Department. Specifically,
for Iscor we corrected for certain errors and omissions found at
verification as submitted by the company on September 22, 1997, and we
made adjustments to U.S. and home market credit expenses, certain
rebates, ocean freight, and Iscor's weight conversion factors based on
findings from verification. See ``Interested Party Comments'' section
of this notice. For Highveld, we corrected for certain errors and
omissions found at verification as submitted by the company on
September 22, 1997, and we made adjustments to U.S. and home market
credit expenses, marine insurance, brokerage and handling charges,
certain rebates, survey expenses, stevedoring and wharfage, inland
freight, packing, U.S. warranty expenses, and certain direct selling
expenses and unreported U.S. sales. See ``Interested Party Comments''
section of this notice.
Normal Value
Based on a comparison of the aggregate quantity of home-market and
U.S. sales, we determined that the quantity of the foreign like product
sold in the exporting country was sufficient to permit a proper
comparison with the sales of the subject merchandise to the United
States, pursuant to section 773(a) of the Act. Therefore, in accordance
with section 773(a)(1)(B)(i) of the Act, we based NV on the price which
the foreign like product was first sold for consumption in the home
market, in the usual commercial quantities and in the ordinary course
of trade. Where appropriate, we deducted rebates, discounts, credit,
inland freight, pre-sale warehousing, and packing. We also made
adjustments, where appropriate, for home-market indirect selling
expenses to offset U.S. commissions in CEP comparisons. In comparisons
to EP and CEP sales, we increased NV by U.S. packing costs in
accordance with
[[Page 61734]]
section 773(a)(6)(A) of the Act. We also made adjustments to NV for
physical differences in merchandise (``difmer'').
Cost of Production Analysis
As discussed in the preliminary determination, the Department
conducted an investigation to determine whether Iscor and Highveld made
home market sales during the POI at prices below their cost of
production (COP) within the meaning of section 773(b) of the Act.
A. Calculation of COP
We compared sales of the foreign like product in the home market
with the model-specific cost of production figures for the POI. In
accordance with section 773(b)(3) of the Act, we calculated the COP
based on the sum of the costs of materials and fabrication employed in
producing the foreign like product plus selling, general and
administrative (SG&A) expenses and all costs and expenses incidental to
placing the foreign like product in condition ready for shipment. Based
on our verification of the cost responses for Highveld, we adjusted the
company's COP to reflect dimensional cost differences, correct for
overstated fabrication costs, include the effect of yield loss on fixed
overhead, calculate interest expense using the company's consolidated
financial results and correct for errors in the SG&A rate calculation.
For Iscor we adjusted the COP to reflect the reclassification variance
on a more product-specific basis, include certain year-end adjustments
and minor corrections, account for the difference between reported
costs and those recorded in its normal accounting records, include
headquarters cost in SG&A, and allocate G&A over cost of sales.
B. Test of Home Market Prices
In order to test Iscor's and Highveld's home market prices, we
compared their weighted-average COP figures to home market sales of the
foreign like product as required under section 773(b) of the Act, in
order to determine whether these sales had been made at prices below
the COP. On a product-specific basis, we compared the COP to the home
market prices, less any applicable movement charges, rebates, and
direct selling expenses.
C. Results of the COP Test
Pursuant to section 773(b)(2)(C)(i) of the Act, where less than 20
percent of a respondent's sales of a given product were at prices less
than the COP, we did not disregard any below-cost sales of that product
because we determined that the below-cost sales were not made in
``substantial quantities.'' Where 20 percent or more of a respondent's
sales of a given product were at prices less than the COP, we
disregarded the below-cost sales where such sales were found to be made
at prices which would not permit the recovery of all costs within a
reasonable period of time (in accordance with section 773(b)(2)(D) of
the Act). Where all sales of a specific product were at prices below
the COP, in accordance with section 773(b)(1) of the Act, we
disregarded all sales of that product, and calculated NV based on
constructed value (CV) in accordance with section 773(e) of the Act.
D. Calculation of Constructed Value (CV)
In accordance with section 773(e) of the Act, we calculated CV
based on the sum of the respondent's cost of materials, fabrication,
SG&A, interest expenses, and profit. In accordance with sections
773(e)(2)(A), we based SG&A and profit on the amounts incurred and
realized by the respondent in connection with the production and sale
of the foreign like product in the ordinary course of trade, for
consumption in the home market. For selling expenses, we used the
weighted-average home market selling expenses. Based on our
verification of the cost responses submitted by Iscor, we adjusted the
reported CV for the same items noted in the COP section above. Based on
our verification of the cost responses submitted by Highveld, we
adjusted the reported CV for the same items noted in the COP section
above.
Facts Available
Section 776(a)(2) of the Act provides that ``if an interested party
or any other person--(A) withholds information that has been requested
by the administering authority; (B) fails to provide such information
by the deadlines for the submission of the information or in the form
and manner requested, subject to subsections (c)(1) and (e) of section
782; (C) significantly impedes a proceeding under this title; or (D)
provides such information but the information cannot be verified as
provided in section 782(i), the administering authority * * * shall,
subject to section 782(d), use the facts otherwise available in
reaching the applicable determination under this title.''
In addition, section 776(b) of the Act provides that, if the
Department finds that an interested party ``has failed to cooperate by
not acting to the best of its ability to comply with a request for
information,'' the Department may use information that is adverse to
the interests of the party as the facts otherwise available. The
statute also provides that such an adverse inference may be based on
secondary information, including information drawn from the petition.
In this case, the Department has applied partial facts available
for various expenses and adjustments. (See ``Interested Party
Comments'' section of this notice, comments 9, 10, 22, 31, 33, and 37.)
We have also applied facts available to account for unreported sales.
(See ``Interested Party Comments'' section of this notice, comment 28.)
Currency Conversion
For purposes of the preliminary determination, we made currency
conversions using the official daily exchange rate in effect on the
date of the U.S. sale. These exchange rates were derived from actual
daily exchange rates certified by the Federal Reserve Bank of New York.
(See Change in Policy Regarding Currency Conversions, 61 FR 9434 (March
8, 1996).) Section 773A(a) of the Act directs the Department to use a
daily exchange rate in order to convert foreign currencies into U.S.
dollars, unless the daily rate involves a ``fluctuation.'' In
accordance with the Department's practice, we have determined that a
fluctuation exists when the daily exchange rate differs from a
benchmark by 2.25 percent. (See Change in Policy Regarding Currency
Conversions, 61 FR 9434, 9435 (March 8, 1996).) The benchmark is
defined as the rolling average of rates for the past 40 business days.
When we determine that a fluctuation exists, we substitute the
benchmark for the daily rate, in accordance with established practice.
Further, section 773A(b) of the Act directs the Department to allow a
60-day adjustment period when a currency has undergone a sustained
movement. A sustained movement has occurred when the weekly average of
actual daily rates exceeds the weekly average of benchmark rates by
more than five percent for eight consecutive weeks. Such an adjustment
period is required only when a foreign currency is appreciating against
the U.S. dollar and was not applicable in this case.
In this investigation, there were certain days of the POI for which
we substituted the benchmark for the daily rate because the daily rate
involved a fluctuation. Consistent with our findings in the preliminary
determination, for the final determination we saw no reason in this
case to deviate from established practice, since South Africa is not a
high-inflation economy, and the decline in the rand was not so
precipitous and
[[Page 61735]]
large as to reasonably preclude the occurrence of a fluctuation. (See
Comment 14 of the ``Interested Party Comments'' section of this
notice.)
Verification
As provided in section 782(i) of the Act, we verified the
information submitted by Iscor and Highveld for use in our final
determination. We used standard verification procedures, including
examination of relevant accounting and sales/production records and
original source documents provided by respondents.
Interest Party Comments
Comment 1
Petitioners state that the Department should correct for the errors
Iscor reported on the first day of verification. Iscor reported that
the submission contained an error in the calculation of the tonnage
allocation factor that it used to calculate the variable and fixed cost
adjustments and the company's total variance. According to the
petitioners, these corrections are necessary because Iscor's errors
effect the differences in merchandise adjustments and the 20% test for
product matching. In addition, petitioners state that Iscor omitted
year-end cost adjustments from its reported costs. According to the
petitioners, these year-end adjustments are costs that relate to the
whole period. Thus, the Department should also correct for this
omission for the final determination.
Iscor concurs with the petitioners in that the Department should
adjust the company's submitted COP and CV figures for this error and
omission. Moreover, Iscor states that it gave the Department the
appropriate information to adjust its submitted costs for the final
determination.
DOC Position
We agree with both Iscor and petitioners. The Department's normal
practice is to capture production costs for the specific product sold
during the period of investigation. Therefore, we have adjusted Iscor's
reported costs to account for the omission of the company's year-end
adjustments from costs and to correct the reported values for the minor
errors pointed out by Iscor on the first day of verification.
Comment 2
Petitioners assert that Iscor's reported costs are based on a
distortive methodology and that we should reject its reported COP and
CV data. Petitioners claim that the submitted costs are based on
estimates and not actual costs. Specifically, petitioners claim that
Iscor assigns labor costs and hours on a budgeted basis and that
production costs are based on approximate production quantities.
According to petitioners, Iscor's product groupings are being
aggregated in contravention of the statue. In addition, petitioners
argue that Iscor grouped costs for various products with different
physical characteristics into a single control number.
Iscor states that it acted to the best of its ability in responding
to the Department's questionnaires and has reasonably determined the
production cost for each control number based on the company's existing
data. Contrary to the petitioners' assertion, Iscor claims that it
based its submitted costs on actual production quantities. As for the
petitioners' specific concerns on product groupings, Iscor contends
that this issue only arose in one control number sampled by the
Department during verification. Therefore, Iscor argues that this does
not make its home market sales data unusable nor does it warrant a
determination of facts available as suggested by the petitioners. Iscor
then elaborates that the reason it grouped internal product codes with
variations in costs was that this control number consists of physically
similar reclassified product codes (i.e., reserve stock, flange
material, and scrap) and prime product codes. Iscor further points out
that a variation in costs exists between these internal product codes
because it values reclassified product codes in a different manner than
prime product codes.
DOC Position
We disagree with the petitioners' claim that we cannot rely on
Iscor's submitted costs. Although the reported COP and CV amounts were
calculated based on estimated labor costs and hours, Iscor adjusted all
estimated or standard amounts to actual costs by calculating and
applying production variances. (See cost verification exhibit 14). In
addition, we disagree with petitioners' claim that we cannot rely on
Iscor's submitted costs because they are based on approximate
production mix tonnages. Although the reported production mix tonnages
for each CONNUM were based on estimates, we believe that Iscor's method
of estimating these tonnages resulted in a reasonable measure of the
actual production tonnages by CONNUM. In the ordinary course of
business Iscor does not retain production information on a model
specific basis as defined by a CONNUM. Iscor does, however, maintain
information on its sales mix which, because the company produces
largely to order, resembles its production mix. Thus, Iscor used its
sales dispatches to identify the quantity sold of each model. Iscor
then used this information to determine the POI sales mix which was
used as a surrogate for its production mix. Iscor adjusted this
surrogate production mix tonnage to equal its actual total production
tonnage. To show that this methodology was reasonable, Iscor provided a
POI inventory movement report for the merchandise under investigation.
(See verification exhibit 21.) According to this movement report,
Iscor's production tonnages and sales tonnages were essentially the
same amounts during the POI.
As Iscor has pointed out, the product codes it grouped together for
the one commercial plate specification control number sampled by the
Department during verification consisted of prime products and
reclassified prime products (i.e., reserve stock, flange material, and
scrap) that had similar physical characteristics. To calculate a
weighted-average cost for this control number, Iscor assigned
manufacturing costs to the reclassified products based on the product
code under which it sold the product rather than the actual costs based
on what it intended to produce. (See cost verification exhibit 13.)
While we do not disapprove of Iscor grouping prime products of similar
physical characteristics within the same control number, we do consider
the methodology used by Iscor to account for the cost of reclassified
products inappropriate. Rather, in this instance, we consider it
appropriate to use the actual cost incurred to manufacture the product
rather than the cost assigned to the product by Iscor based on the
product's classification for sale. We note that despite the fact that
Iscor captured the difference between the cost of producing the
intended merchandise and that which it ultimately sold through its
reclassification variance, Iscor's reclassification variance approach
spreads product-specific costs from models with commercial plate
specifications to other product groupings.
For the final determination, we have adjusted the submitted cost of
manufacturing for control numbers with commercial plate specifications
by disallowing the assigning of lower costs to reclassified products.
This adjustment is limited to models with commercial plate
specifications because testing of Iscor's other product groupings at
verification did not indicate the same problem. To avoid double
counting costs, we have reduced the reclassification and reserve stock
variances by the aggregate amount in
[[Page 61736]]
which we increased reported costs for models with commercial plate
specifications.
As for our position concerning Iscor's methodology of grouping
product codes with different physical characteristics, see comment 7
for further details.
Comment 3
Iscor maintains that the Department should not adjust its reported
costs for the slight deviation reported on the reconciliation worksheet
that it submitted as part of its cost verification exhibit 8. Iscor
claims that this deviation only shows that its reported costs based on
simulated production mixes are reasonable. Iscor suggests that the
Department should expect some difference because its reported
production mixes are based on what it sold during the POI and not what
it produced. According to Iscor, using sales quantities was necessary
because the company does not maintain model-specific production
information. As for the cause of the deviation, Iscor provides the
following explanations. Iscor first points out that the specific
product mixes it manufactured during the POI was not necessarily the
same as that sold during the POI. According to Iscor, this difference
will statistically equal out over time because it only produces against
orders. Iscor's second explanation is that its internal product codes
consist of various similar products that have a similar cost make-up.
However, these product codes have different physical characteristics
and dimensions which made it necessary for the company to use them more
than once when compiling the reported CONNUMs. The final reason stated
by Iscor is that it can attribute the difference to the fact that it
has historically used a standard cost system and not an actual costing
system. Thus, Iscor had to adjust its standard costs to calculate the
reported costs.
Petitioners contend that the Department must adjust Iscor's
reported costs to account for the discrepancy between reported costs
and costs recorded in the financial accounting system. According to
petitioners, Iscor's explanation for the discrepancy does not mitigate
the difference. If there is indeed a different product mix between the
financial and cost accounting data that results in a difference in
costs that have been calculated, then it is evidence that Iscor's
reported costs are unreliable. Petitioners point out that one would not
expect a difference between Iscor's reported and recorded costs because
it actually derived the reported section D costs from the cost of sales
recorded in the financial accounting system. Moreover, the petitioners
state that Iscor provided its costs on this basis specifically because
it assumed that it produces products in the same ratio as sold over a
representative period. If the difference in the reported costs and
financial system costs disproves this assumption, then the Department
should reject Iscor's costs. Otherwise, the Department should increase
Iscor's reported costs by the verification finding.
DOC Position
We agree with petitioners that we should increase Iscor's reported
production costs to account for the difference between the reported
costs and those recorded in its accounting system. As part of
verification, Iscor prepared a reconciliation worksheet that shows its
reported costs are less than the costs recorded in its accounting
records. Although Iscor speculated as to the cause of the reconciling
difference, the company could neither document nor quantify the
specific reasons why its reported costs differed from those recorded
normally in its records. With respect to Iscor's explanations for the
difference, the fact that the company had to use relative sales
quantities to determine product specific production quantities, or that
it had to include sales of different models within a product code in
different CONNUMs does not justify it not capturing all costs as
recorded in its financial accounting system in accordance with its home
country GAAP. In addition, Iscor having to adjust its standard costs to
actual for the submission should cause the reported costs to agree with
the actual costs recorded in its accounting system, not cause a
reconciling item. Absent support for each of the reconciling
assumptions noted by Iscor, we consider it appropriate to adjust the
company's reported costs to include all costs as captured by its normal
accounting system.
Comment 4
Petitioners argue that the Department must adjust Iscor's reported
G&A expense for methodological errors. The petitioners cite the
Department's cost verification report which states that Iscor omitted
headquarters' costs from G&A and allocated G&A against fixed costs
rather than cost of sales. Thus, the petitioners contend that the
Department should correct these figures for the final determination.
Iscor claims that it is appropriate for it to allocate general
expenses as a percentage of the fixed costs incurred to manufacture
each specific product code. Iscor argues that it uses this methodology
in the normal course of business and that the methodology appropriately
applies the G&A percentage to each product code's reported fixed cost
amount. Moreover, Iscor claims that the effect of expressing the
percentage in terms of fixed cost instead of total cost has little
effect on the reported costs because it is basically the same amount.
DOC Position
We agree with the petitioners that Iscor should allocate its G&A
expense based on cost of sales rather than fixed costs. As set forth in
Large Newspaper Printing Presses and Components Thereof, Whether
Assembled or Unassembled, From Japan, Final Determination of Sales at
Less Than Fair Value, 61 FR 38139, 38150 (July 23, 1996), our normal
methodology for allocating G&A expenses to merchandise is based on cost
of sales. Our methodology recognizes the fact that the G&A expense
category consists of a wide range of different types of costs which are
so unrelated or indirectly related to the immediate production process
that any allocation based on a single factor (e.g., head counts, fixed
costs) is purely speculative. The Department's normal method for
allocating G&A costs based on cost of sales takes into account all
production factors (i.e., materials, labor, and overhead) rather than a
single arbitrarily chosen factor. Absent evidence that our normal G&A
allocation method unreasonably states G&A costs, we allocated such
costs for the final determination based on cost of sales.
In addition to allocating Iscor's G&A expenses based on the
company's cost of sales, we increased Iscor's reported G&A expenses to
account for headquarters costs incurred during the first half of the
POI. Iscor indicated that this expense is a cost of production and that
it should have included it in COP and CV. (See Iscor's cost
verification report, at page 2.) Furthermore, Iscor included similar
costs incurred during the second half of the POI in the submitted COP
and CV.
Comment 5
Petitioners argue that ABS Grade A shipbuilding plate should not be
matched to ASTM A36 plate because the majority of the shipbuilding
plate was dual-certified to the A36 specification and is sold as
structural plate. According to petitioners, the Department's plate
specification hierarchy dictates that the more appropriate match is to
the most stringent standard to which the product
[[Page 61737]]
is produced: the ABS grade. This grade, they allege, exhibits the
closest physical characteristics.
Iscor argues that ABS Grade A shipbuilding plate is sold as
structural steel and is intended to be used primarily as ASTM A36
material. Iscor claims that the Department verified Iscor's plate
specification model match hierarchy.
Petitioners counter that the fact that shipbuilding plate may be
used as structural plate or sold to structural plate customers is
irrelevant to the Department's plate specification model match
hierarchy, which focuses on physical characteristics. In petitioners'
view, the fact that this steel is dual-certified to both the ABS and
ASTM A36 specification does not mean that A36 is the best match.
Petitioners state that because this material meets the more stringent
ABS shipbuilding standard, it should be matched to a product with
similar characteristics.
Iscor responds that the dual certified ABS and A36 plate was sold
in the United States as a structural steel and not as shipbuilding
plate. Iscor acknowledges that its customers requested the dual
certification to enable them to sell this material as shipbuilding
plate, but argues that the vast majority of this material was sold as
A36 material. Iscor claims that matching this steel to Lloyds
shipbuilding plate Grade A would ignore the first intent for the
material sold in the United States, which is structural steel. Iscor
likens matching the two shipbuilding steels under these circumstances
to matching a pressure vessel steel to a structural steel. Iscor notes
that it gives dual certified ABS and A36 material the same internal
quality code as it gives to single certified A36 material, while single
certified ABS plate has a different quality code. Iscor cites this as
evidence that the company treats the dual certified material as
equivalent to A36 and that this is the best home market match for dual
certified material sold in the United States.
DOC Position
We agree with petitioners. As petitioners correctly note, the fact
that shipbuilding plate may be used as structural plate or sold to
structural plate customers is irrelevant to the Department's plate
specification model match hierarchy, which focuses on physical
characteristics of the most stringent specification to which a product
is made. In this case the ABS Grade A specification is the more
stringent specification and this is the specification that is
controlling in selecting a home market product. As Iscor acknowledges,
the reason the product sold in the United States is dual certified is
that its customers requested the dual certification to enable them to
sell this material as shipbuilding plate. Regardless of how this
product is ultimately used by the customer, this remains the most
stringent specification to which this product is made. For this final
determination we are continuing to consider the best match
specification for dual certified ABS/A36 plate sold in the United
States to be Lloyds Grade A plate sold in the home market.
Comment 6
Petitioners allege that Iscor seemed to have difficulty reporting
the correct chemical requirements of the certain plate specifications
examined at verification, which may distort the appropriate product
matching of grades. They state that the Department should ensure that
the correct chemical requirements are reviewed when matching grades and
creating product control numbers. Petitioners note that a large and
divergent number of products were included in one product control
number. Petitioners state that Iscor was unable to determine the actual
characteristics of much of the plate in this product control number,
and that therefore the Department should reject Iscor's product control
numbers and base the final determination on facts available.
Iscor maintains that it correctly constructed each product control
number using information that pertained to the order on which the
invoice was issued. Iscor notes that petitioners' claims relate to
information submitted in response to Part D of the Department's
antidumping duty questionnaire, the cost portion of this review. Iscor
references its response to Comment 2 above and alleges that because the
effect and cost deviations were declared and explained in the costing
system, the deductions made from the variances in cost are accounted
for.
DOC Position
We agree with both respondent and petitioners, in part. During our
review of the product characteristics for numerous sample sales, we did
not identify any discrepancies in reported product characteristics
between mill certificates and product specifications. That is, each
product we examined met its stated product specification. This was also
true of the commercial quality plate that we examined. We note that
with respect to the one product control number referenced by
petitioners, the relevant specification covers a broad range of steels.
Again, all of the products we examined for this specification were
within the stated specifications of this product. While the
specifications of the product that Iscor intended to make, as opposed
to the specifications that the product actually met and were sold to,
are relevant in terms of analyzing costs of production, they are not
relevant for this portion of our analysis.
While we agree with petitioners that at verification we found some
minor inconsistencies between the product characteristics noted on
Iscor's plate specification model match hierarchy tables and the actual
specifications themselves, we did not find any inconsistencies which
were significant enough to change the model match hierarchy. Therefore,
we have not modified Iscor's plate specification model match hierarchy
from the one used in the preliminary determination.
Comment 7
Petitioners allege that Iscor improperly constructed its product
control numbers. They claim that material such as flange material,
which is described by Iscor as the ``lowest of the low'' in the market,
has generally been downgraded from other specification products, and
Iscor admits that it cannot determine what the original specification
might be. Petitioners assert that flange products cannot be said to be
like other prime commercial products. See 19 U.S.C. 1677(16)(B)(ii).
Petitioners also argue that like other non-prime products, flange
material is not equal in commercial value to prime commercial products.
See 19 U.S.C. 1677(16)(B)(iii). In petitioners view, flange material
should not be compared to prime commercial grade or structural material
sold in the United States.
Petitioners argue that certain downgraded products may also be sold
outside the ordinary course of trade. Petitioners cite the factors in
Laclede v. United States: the price of the merchandise compared to
other home market sales, the profitability of the merchandise compared
to other home market sales, the number of customers purchasing the
product, quality assurances provided for the product, differences in
how the product is sold, the end use of the product, the average size
of the sale compared to other sales, and whether the product is
distinguished by the seller from other merchandise of the same type.
See Laclede Steel Co. v. United States, Slip Op. 95-144 (CIT August 11,
1995). Petitioners claim that many of these factors apply to this case.
Petitioners
[[Page 61738]]
argue that the Department verified that certain products (such as
flange material) are sold at a discount and are less profitable than
prime products. Petitioners also state that these products are
downgraded to more limited uses than originally intended when produced,
and that they are sold as is without mill certificates. Unlike most
products, according to petitioners, these products are inventoried and
given a different designation, and these products are sold to a more
limited group of customers.
Petitioners state that Iscor has configured its database in such a
way that it has distorted product matching, calculation of difference-
in-merchandise adjustments, and calculation of normal value. For these
reasons, they claim that the final determination should be based on the
facts available.
Respondent maintains that its home market database is usable and
has been verified. Iscor notes that it has distinguished between prime
and non-prime products. Iscor notes that it was instructed by the
Department in its March 19, 1997, Supplemental Questionnaire to
reclassify non-prime products to prime products if these products meet
any specification (even if not the one originally intended). Iscor
claims that it followed the Department's instructions and that it would
be unjust to penalize Iscor for following these directions.
Iscor argues that its reclassified products are not sold outside
the ordinary course of trade. Iscor states that in determining whether
products are outside the ordinary course of trade the Department does
not evaluate just one factor in isolation but all the circumstances
particular to the sales in question. See Murata Mfg. Co. v. United
States, 820 F. Supp. 603, 607 (CIT 1993) and Portland Cement and
Clinker from Mexico, 62 FR 47626 (September 10, 1997). Iscor claims
that its reclassified products are not sold for unusual reasons or
under unusual circumstances, and urges the Department not to find these
sales outside the ordinary course of trade.
DOC Position
We agree with respondent. At verification we found that Iscor
produces and sells certain products as commercial quality products for
general engineering applications where moderate bending, forming and
drawing are involved. These products are not produced to specific
mechanical property requirements and, as a result, they do not meet the
same stringent specifications that may be characteristic of other Iscor
products. Although Iscor's family of commercial products is sold to
certain customers in the local market absent test certificates, this
material is accompanied by analysis certificates which attest to its
meeting certain chemical specifications.
During our review of Iscor's commercial quality products, we found
that some of these products are comprised of steel which has been
downgraded and reclassified during production from its originally
intended specification. This material, like the commercial quality
material intended as prime commercial quality material, meets the
limited characteristics and specifications of Iscor's family of
commercial quality products. We note that for purposes of a price-to-
price comparison, the fact that some commercial quality material may
originally not have been intended as commercial quality material is
irrelevant. What is important is that the material sold and valued as
commercial quality material meets the specifications for which it is
valued and sold; and our analysis of sample sales at verification
involving these products demonstrated that they conformed to the
limited specifications and guidelines of commercial quality plate
products. We acknowledge that the Department instructed Iscor to
reclassify certain non-prime products classified as ``seconds'' as
prime products if they met any specification (even if not the one
originally intended).
Regarding petitioners' claim that Iscor's reclassified and
downgraded products may be sold outside the ordinary course of trade,
petitioners appear to be primarily concerned with flange material, the
``lowest of the low.'' We agree that several of the factors cited as
criteria used in making such a determination with respect to sales
outside the ordinary course of trade appear to apply in this case. For
example, certain flange material is sold on a tender basis, and not per
specific orders. As a result, these products may be sold at prices
lower than other prime commercial grade steel products. The
profitability of downgraded commercial material is also less than the
profitability of as intended commercial grade material. There is
limited information on the record with respect to the other criteria.
However, we note that a very significant portion of the commercial
grade home market sales that match to U.S. sales fail the cost test.
Because the steel in question is the ``lowest of the low,'' these
prices are presumably lower than those of as intended commercial
quality steel. To the extent that certain sales in the relevant product
control number are more properly designated as seconds than prime (and
therefore should be in a separate control number and not matched to
prime U.S. sales (see Certain Cold-Rolled Carbon Steel Flat Products
From the Netherlands, 62 FR 18476, 18482 (April 15, 1997)), we believe
that these sales are most likely to be the ones that failed the cost
test and are, therefore, already not being used in our matching
analysis. Therefore, no further adjustment is required. See Analysis
Memo, dated October 24, 1997.
Comment 8
According to petitioners, Iscor has improperly calculated its home
market rebate adjustments. Petitioners note that two of the rebates,
REBATE2H and REBATE6H, were allocated by calculating the total rebates
paid on all direct and indirect sales and dividing that amount by the
direct sales tonnage. This amount was allocated only to direct sales,
which petitioners allege unfairly skews the price-to-price comparisons.
Petitioners argue that the Department should not grant Iscor's reported
REBATE2H or REBATE6H as adjustments to normal value; but for purposes
of the cost/price test, the full rebates should be granted. Petitioners
state that the amounts of two other rebates, REBATE3H and REBATE5H were
skewed. Petitioners urge the Department to use facts available for this
final determination, as the gross unit price net of rebates cannot be
accurately determined for any sale receiving any of these rebates.
Iscor claims that it used a reasonable methodology in reporting
rebates and that the Department verified these rebates. Iscor notes
that customers were entitled to a rebate on both direct and indirect
tonnage, that is irrespective of whether the material was bought
directly from Iscor or through a merchant. Iscor argues that it
correctly allocated the full rebate to direct sales because it was
requested to state the rebates on a sales-specific basis and it only
stated direct sales tonnage in Part B of its questionnaire response.
DOC Position
We agree, in part, with both petitioners and respondents. With
respect to REBATE2H and REBATE6H, we agree with petitioners that the
methodology employed by Iscor which calculates these rebates on the
basis of both direct and indirect tons purchased (rather than on direct
tons purchased) skews the treatment of these rebates. This methodology
was not explained to the Department prior to verification. Indeed,
Iscor's most detailed submission on this issue indicated that the
rebates
[[Page 61739]]
were calculated using total customer tonnage (see response of June 27,
1997). Iscor's allocation methodology greatly overstates the rebate
amounts for REBATE6H and REBATE2H for certain sales, and understates
these amounts for other sales. Because these rebates are allocated
across all direct sales to a particular customer, and customers may buy
more than one type of steel, these distortions can significantly affect
our analysis. We note, however, that Iscor's reported amounts for
REBATE6H do not apply to home market sales that are matched to U.S.
sales. Consequently, this portion of the comment is moot. Regarding
REBATE2H, we are disallowing this rebate for the final determination
with the exception noted below. For certain sales, we found at
verification that essentially all sales were direct rather than a
combination of direct and indirect. For these sales, we are continuing
to use the reported rebate amount as an adjustment to normal value. (We
note that certain sales for which this rebate was reported do not match
to U.S. sales and although we are disallowing this rebate, for these
sales this issue is moot.) With respect to REBATE3H and REBATE5H, the
Department found at verification that Iscor's allocation methodology
under-stated the actual amounts for the rebates had they been
calculated on a transaction-specific basis. For the final
determination, therefore, we are using the reported rebate amounts as
adjustments to NV. See Analysis Memo, dated October 24, 1997.
Comment 9
Petitioners state that various errors in Iscor's U.S. sales
database render it unreliable as a basis for the final determination.
For example, petitioners identify certain discrepancies relating to
ocean freight rates and early payment discounts. Petitioners argue that
U.S. credit expenses were not verified as no documentation of payment
dates was provided.
Iscor claims that the U.S. sales database has been verified. With
respect to ocean freight, Iscor notes that the discrepancy arose
because the reported amount was an estimate calculated prior to the
actual shipment. Iscor states that the Department has the actual
expense and that an estimated freight rate will always differ from the
actual freight rate as estimated rates are negotiated prior to fixing
sales price. With respect to early payment discounts, Iscor alleges
that it employed a reasonable methodology.
DOC Position
We agree with petitioners in part. While the Department identified
certain discrepancies relating to ocean freight rates, early payment
discounts, and U.S. credit at verification, we disagree that these
errors render Iscor's overall U.S. sales database unreliable. The
Department considers these mistakes to have been relatively minor and
not to call into question the integrity of the entire database. As a
result, we are using Iscor's submitted data, with the revisions noted
in these comments, and not using total facts available in this final
determination.
With respect to ocean freight expenses reported by Iscor for
certain sales, we found at verification that the reported amounts
misstated the actual amounts for certain shipments. For the final
determination, we have corrected ocean freight charges for these
specific sales. For all other ocean freight expenses, where such
charges are applicable, we are applying as facts available the highest
reported amount for any U.S. sale. By not providing verifiable
information for ocean freight expenses when such information was
available to Iscor, we have determined that Iscor failed to cooperate
by not acting to the best of its ability to comply with a request for
information. See Certain Pasta From Turkey, 61 FR 30309, 30312 (June
14, 1996) (Pasta). Consequently, the use of adverse facts available
under section 776(b) of the Act is warranted. Additionally, we did not
convert ocean freight from rand to dollars as we did in the preliminary
determination, as this amount was in fact reported in dollars.
With respect to U.S. credit expenses, we were unable to verify date
of payment, since Iscor did not provide documentation of proof of
payment for its U.S. sales during verification. As facts available for
U.S. credit expenses, we are applying the highest reported U.S. credit
expense to all U.S. sales. By not providing verifiable information for
U.S. date of payment when such information was available to Iscor, we
have determined that Iscor failed to cooperate by not acting to the
best of its ability to comply with a request for information. See
Pasta. Consequently, the use of adverse facts available under section
776(b) of the Act is warranted.
We are allowing Iscor's reported early payment discounts. Our
review of Iscor's allocation methodology, which calculated a discount
amount based on all early payment discounts and tons shipped to the
customer was determined to be reasonable. The allocated amount reported
is an average for all sales--including sales which received the
discount and sales which did not receive the discount. Consequently,
this amount will always differ from the discount amount specified by
contract on individual sales, as the discount was not in fact paid on
all sales. For the final determination we are continuing to use Iscor's
reported U.S. early payment discount amounts.
Comment 10
Petitioners note that many U.S. sales were made on a theoretical
weight basis and that because Iscor rolls larger than the nominal
dimensions, customers who purchase on a theoretical weight basis
actually receive more tons than ordered. Therefore, if the gross price
is divided by the actual weight, it will result in a lower unit price
than the theoretical weight based unit price. Petitioners argue that
all price comparisons should be made on the same weight basis, and that
all prices and expenses should be converted to actual weights.
Respondent did not comment on this issue.
DOC Position
We agree with petitioners that all price comparisons should be made
on the same weight basis. In its original and supplemental
questionnaire responses, and as we found at verification, Iscor failed
to report properly an actual to theoretical weight conversion factor
for both its U.S. and home market sales, thereby prohibiting price
comparisons to be made on the same weight basis. As facts available, we
are applying the average of the verified U.S. ratio of theoretical to
actual weights to all U.S. quantities and prices reported on an actual
weight basis. We are applying the same conversion factor to CV. With
respect to the home market, as facts available we are applying the
verified ratio of theoretical to actual weights to all home market
quantities and prices reported on an actual weight basis. We are
applying this same conversion factor to the reported COP. See Analysis
Memo, dated October 24, 1997. We are applying facts available to these
adjustments under section 776(a)(2) because Iscor did not provide
information requested by the Department in its submitted database.
Comment 11
According to petitioners, Iscor did not document its home market
payment dates at verification. Therefore, they claim that the
Department should not grant Iscor a downward adjustment to normal value
for home market credit expenses due to the fact that the payment time
could not be verified.
Iscor argues that the Department incorrectly rejected Iscor's proof
of payment. Iscor notes that verification is a long process and it is
often necessary
[[Page 61740]]
to work long hours to complete verification. Iscor explains that
because the verification continued past normal business hours on the
last day of verification it lost access to the office that had proof of
payment records. Iscor states that it forwarded this information to the
Department representatives after verification, but the Department
rejected these records. Iscor urges the Department to consider proof of
payment to be verified because it made a good faith effort to provide
the information to the verification team.
In responding to petitioners, Iscor noted that its data system does
not provide transaction specific payment dates because local sales are
paid by statement, not by individual invoice. Iscor claims that it
devised a reasonable methodology as the most accurate way to determine
payment dates based on the information that it did have.
DOC Position
We agree with petitioners that we were unable to verify Iscor's
home market payment dates. While Iscor may have devised a reasonable
date of payment methodology, we were not able to verify this
methodology on site. The Department appropriately rejected Iscor's
post-verification date of payment submission as untimely. Date of
payment information and source documentation was clearly requested in
the Department's verification outline, which was provided to Iscor in
advance of verification. This information should have been prepared in
advance of the start of verification and should have been part of the
sales trace packages at the time they were presented to the Department.
After verification had ended, the verification team was not in a
position to tie date of sale information to original company records or
otherwise verify any information regarding payment date. Therefore, we
are denying home market credit expenses as an adjustment to normal
value.
Comment 12
According to petitioners, no offset to normal value for pre-sale
warehousing should be granted as the Department was unable to verify
pre-sale warehousing expenses. Respondent did not comment on this
issue.
DOC Position
We disagree with petitioners. The Department is not required to
verify every item in a respondent's questionnaire response. Rather, in
conducting verification, the Department must prioritize its examination
of a respondent's reported data according to factors such as time
availability, a respondent's general level of compliance, and the
relative dollar value of the reported amounts. ``[V]erfication is like
an audit, the purpose of which is to test information provided by a
party for accuracy and completeness. Normally, an audit entails
selective examination rather than testing of an entire universe.''
Bomont Indus. v. United States, 733 F. Supp. 1507, 1508 (CIT 1990). In
this case, time did not permit us to verify Iscor's reported pre-sale
warehousing expenses. Because we have no evidence that would lead us to
disregard respondent's reported pre-sale warehousing expenses, we are
granting this adjustment for the final determination.
Comment 13
Petitioners argue that the scope of the investigation should be
clarified to include: (a) purported ``alloy'' plate, sold as ASTM A36
or another carbon plate specification, to which trace amounts of
inexpensive alloying agents have been added (``low-alloy plate'') and
(b) subject merchandise sold as having a \3/16\'' nominal thickness but
``rolled light'' to an actual thickness of just under 4.75mm (the
boundary of the tariff classifications set forth in the scope
description of the preliminary determination) (``light-rolled \3/16\''
plate''). Petitioners state that the Department routinely makes minor
changes to its scope descriptions, both during investigations and after
an order is issued, particularly where this is thought necessary to
prevent circumvention. See Small Diameter Circular Seamless Carbon and
Alloy Steel Standard, line and Pressure pipe from Italy, 60 FR 31981,
31983-85 (June 19, 1995) and Freshwater Crawfish Tail Meat from the
People's Republic of China, 62 FR 41347, 41357-58 (August 1, 1997).
Petitioners claim that any argument that the International Trade
Commission (ITC) preliminary determination precludes this scope
clarification is based on a fundamental misunderstanding of the
interrelationship between the scope of investigation, the industry
examined by the ITC (defined as producers of the like product), and the
requirement for industry support. Petitioners note that although the
Department frequently modifies the scope of an investigation during its
course, the Department is expressly prohibited by statute from
reconsidering the issue of industry support. Petitioners claim that the
Department has explicitly rejected the theory that the Department
cannot include merchandise within the scope of an investigation unless
precisely the same merchandise was include in the ITC's injury
determination. See Hot-Rolled Lead and Bismiuth Carbon Steel Products
from the United Kingdom and Germany, 62 FR 34213, 34215 (June 25, 1997)
(initiation of anticircumvention inquiry). Petitioners add that none of
the anticircumvention provisions require a new injury determination.
According to petitioners, they have demonstrated in their July 3,
1997, submission that, using the five factors traditionally employed by
the Department to decide whether particular products are within the
same class or kind covered by the order, low-alloy plate and light-
rolled \3/16\'' plate share the same general physical characteristics
as other subject plate; that ultimate purchasers have the same
expectations of low-alloy plate and light-rolled \3/16\'' plate as of
other subject plate; and that low-alloy plate and light-rolled \3/16\''
plate are sold in the same channels of trade, for the same ultimate
uses, and at the same cost, as other subject plate.
Petitioners assert that all \3/16\'' nominal thickness plate is
within the scope of the investigation regardless of whether its actual
thickness is less than 4.75mm. They state that because \3/16\'' plate
is an important part of the market for thin gauge plates, the scope
should be clarified to state that it covers plate 4.75mm in thickness
or more in nominal or actual thickness. According to petitioners, any
customer ordering a \3/16\'' A36 plate, for example, would be willing
to accept any thickness within the tolerance for that size plate. Thus,
any plate within the tolerance for 4.75mm nominal thickness plate will
compete directly with any other plate within the tolerance.
Petitioners argue that all cut-to-length plate that meets common
non-alloy plate specifications is within the scope of the
investigation, regardless of the presence of alloys in excess of those
specified in the Harmonized Tariff Schedule of the United States
(``HTSUS'') categories for non-alloy steel. They state that the
addition of such alloys does not change the specification, grade,
physical characteristics or applications of the plate. Petitioners
believe the published description of the scope of the investigation
should be amended to make clear that it covers all cut-to-length plate
made to common non-alloy plate specifications. This includes, but is
not limited to, ASTM A36, A572, A709, A588, A283, PVQ A516, A573, A455,
and ABS grades, as well as chemical or proprietary equivalents to
[[Page 61741]]
those specifications, regardless of the alloy content or tariff
classification.
Petitioners allege that certain producers in the countries subject
to these investigations on cut-to-length carbon steel plate have begun
to vary the alloy content slightly so that these products no longer
meet the tariff definition of non-alloy steel. In particular,
petitioners believe that certain producers may be adding boron to their
chemistries, because boron is relatively inexpensive. Petitioners
believe such products are being used in identical applications as other
subject merchandise. In petitioners' view, in any instance where the
added alloy does not change the performance characteristics of the
plate or affect the product's classification within the industry
specification the product should remain within the scope of the
investigation.
Iscor urges the Department to reject petitioners' scope
clarification because this is not a routine minor change nor have
petitioners submitted any information on the record that Iscor or any
other South African producer is circumventing or trying to circumvent
the preliminary determination in this investigation.
DOC Position
We disagree with petitioners. See memorandum on Scope of
Investigations on Carbon Steel Plate, Joseph Spetrini to Robert S.
LaRussa (October 24, 1997).
Comment 14
Iscor and Highveld urge the Department to correct its exchange rate
methodology.
Highveld argues that the Department should use without exception
the actual daily exchange rate certified by the Federal Reserve Bank of
New York to convert the South African currency into U.S. dollars
instead of a benchmark rate. According to Highveld, both the law and
Department practice direct the Department to use actual unadjusted
daily exchange rates. See Section 773A(a) of the Act and the Statement
of Administrative Action, H.R. Doc. No. 103-316, at 841-842 (1994). See
also Notice of Final Results of Antidumping Duty Administrative Review:
Certain Welded Carbon Steel Pipe and Tube from Turkey, 61 FR 69067,
69071 (December 31, 1996). Highveld notes that Certain Welded Carbon
Steel Pipe and Tube from Turkey states that the actual daily exchange
rates were used rather than the benchmark rate because the foreign
currency depreciated substantially against the U.S. dollar of the
period of review. Highveld also claims that the Department is reviewing
the application of the benchmark in situations where the foreign
currency depreciates substantially against the U.S. dollar over the
period of investigation or review, situations in which it may be
appropriate to use daily rates. See Department of Commerce Policy
Bulletin 96-1: Import Administration Exchange Rate Methodology, 61 FR
9434, 9435 n.2 (March 8, 1996). Highveld claims that the South African
currency steadily and substantially depreciated against the U.S. dollar
during the period of investigation. It cites the sales verification
report where verifiers noted a ``sharp devaluation during the POI.''
Highveld also states that there need not be a determination of
significant inflation or hyperinflation. Highveld cites Certain Welded
Carbon Steel Pipe and Tube from Turkey and states that Department
practice does not require a claim of significant inflation in order to
use daily exchange rates and that daily exchange rates may be used on
two separate occasions: (a) if the foreign currency has undergone a
substantial depreciation against the dollar or (b) if domestic price
inflation is significant. Highveld claims that the first scenario
occurred for this case and urges the Department to use daily exchange
rates.
Iscor argues that the Department incorrectly used a benchmark rate
to convert South African rand into U.S. dollars instead of the daily
rate on certain days of the POI because of currency fluctuations. Iscor
maintains that the use of the benchmark rate is contrary to section
773A(a) of the law and Commerce practice (Certain Welded Carbon Steel
Pipe and Tube from Turkey). Iscor takes issue with the Department's
statement in the preliminary determination regarding the decline in the
South African rand. Iscor argues that it is not a requirement in the
law, regulations or Policy Bulletin (see above) that South Africa be a
high-inflation economy in order not to use a benchmark. Like Highveld,
Iscor urges the Department to correct its exchange rate methodology in
the final determination and use the actual unadjusted daily exchange
rates instead of the benchmark rates for all dates.
Petitioners argue that the currency conversion methodology used in
the preliminary determination was correct. In petitioners' view, the
Department's methodology was both lawful and consistent with past
practice. Petitioners cite section 773A of the Act and the SAA as
stating that in converting foreign currencies into U.S. dollars
fluctuations in exchange rates shall be ignored. Petitioners argue that
the Department's preliminary determination in this case is entirely
consistent with the Policy Bulletin on Currency Conversions. (See
Department of Commerce Policy Bulletin 96-1: Import Administration
Exchange Rate Methodology, 61 FR 9434, 9435 n.2 (March 8, 1996).)
Petitioners explain that the reason the methodology used in the
preliminary determination differs from that in Certain Welded Carbon
Steel Pipe and Tube from Turkey is that the Turkish case involved a
hyperinflationary economy in which the currency was undergoing a
dramatic depreciation. Petitioners state that this case does not
involve dramatic currency depreciation driven by hyperinflation, and
cite the Department's finding in the preliminary determination that the
decline in the rand was not so precipitous and large as to reasonably
preclude the occurrence of fluctuations. Petitioners argue that
Highveld's statements that the rand underwent a sharp devaluation
quoted in the verification report is not evidence of a precipitous and
large depreciation in the rand and the fact that the benchmark was used
only for certain days also argues against the existence of a
precipitous and large depreciation in the rand.
DOC Position
We agree with petitioners. This case is distinguished from Certain
Welded Carbon Steel Pipe and Tube from Turkey as that case involved a
hyperinflationary economy in which the currency was undergoing a
dramatic depreciation. There is no evidence in the present case of
either a precipitous and large depreciation in the rand relative to the
dollar or of hyperinflation in the South African market. As petitioners
correctly note, section 773A of the Act and the SAA both state that in
converting foreign currencies into U.S. dollars fluctuations in
exchange rates shall be ignored. The Department's use of benchmark
exchange rates in place of daily exchange rates in instances when a
foreign currency is considered fluctuating is consistent with these
statutory requirements. We are continuing to use benchmark rates in
place of daily exchange rates in instances when a foreign currency is
considered fluctuating for the final determination. For further
discussion of this issue, see the ``Currency Conversion'' section of
this notice.
Comment 15
Petitioners argue that Highveld's per-unit COP data do not properly
account for differences in physical characteristics. Petitioners
further contend that Highveld's methodology
[[Page 61742]]
ignores cost differences due to differences in each product's
processing time per ton. Petitioners support these arguments by citing
that (1) Highveld allocated the same per-ton conversion costs to slabs,
billets, and blooms although they have different production processes,
and (2) Highveld allocated conversion costs for the flat-products plant
based on the tonnage of slab inputs compared to the tonnage of slab
inputs used for other non-subject products produced in the plant. The
petitioners reason that all products produced by the flat products
plant require different machine times per ton and, therefore, should
have different per-unit conversion costs according to their thickness,
width, length, and other extras. Petitioners argue that Highveld should
have at least allocated the conversion costs for as-rolled products
over the output of finished products instead of over the input.
Highveld asserts that it properly adjusted its normal accounting
records, which calculates a single cost for all products, in order to
capture the cost differences due to the physical characteristics on
which the Department based its analysis. Highveld notes that it
adjusted costs for differences in chemical components, additional labor
and overhead costs associated with normalizing, and labor and variable
overhead costs based on yield factors to account for different rolling
costs for different dimensions of merchandise.
DOC Position
We agree with the petitioners in part that Highveld's reporting
methodology failed to fully account for cost differences associated
with differences in certain physical characteristics of the subject
merchandise. Highveld's reported COP and CV data does account for (1)
chemical input differences for differing quality and types of steel
produced, (2) the additional costs related to producing normalized
products, and (3) yield loss differences between differing dimensions
of merchandise. Highveld's reported cost data, however, failed to
account for cost differences associated with processing time
differences between varying dimensions of finished product. Our
verification of Highveld's reported cost data showed that the variable
cost of manufacturing the subject merchandise differs depending on the
dimensions of the product produced. We therefore adjusted Highveld's
reported costs to reflect these dimensional cost differences.
Comment 16
Highveld claims that, in its cost verification report, the
Department miscalculates the difference between the COM in Highveld's
accounting system and the COM submitted by the company. Highveld agrees
with two of the adjustments to the reconciliation identified by the
Department in its cost verification report. Highveld objects, however,
to the Department's proposed adjustment to value the cost of the
October 1995 to December 1995 sales from 1995 standard per-unit costs
to 1996 standard per-unit costs. Highveld contends that the Department
should use the average of the per-unit costs reported to the Department
in its Section D response, which results in an insignificant difference
between the COM submitted to the Department and the COM in Highveld's
accounting system. Highveld maintains that its reconciliation of
submitted COM to that contained in its cost accounting system shows
only a small difference. Any adjustment to the submitted costs for such
a small difference, according to Highveld, is completely unjustifiable.
The petitioners urge the Department to base Highveld's COM on total
facts available because Highveld was unable to reconcile its reported
COM with its cost accounting system. If the Department does not base
the final determination on total facts available, petitioners contend
that the Department should at least adjust COM by the overall
difference between Highveld's reported COM and its cost accounting
system. The petitioners contend that the flaws in Highveld's submitted
COM reconciliation identified by the Department should be accounted for
when comparing the total submitted COM with that contained in
Highveld's cost accounting system for the same time period. In
particular, the petitioners claim that Highveld incorrectly valued the
cost of its 1995 sales using 1995 standard costs rather than 1996
standard costs which were the basis of its cost response.
DOC Position
We agree with Highveld that the cost verification report
miscalculated the difference between its submitted COM and that
recorded in its accounting system. We reviewed the revised
reconciliation calculation as contained in the cost verification report
and noted that G&A was erroneously computed. In the normal course of
business, Highveld allocates G&A expenses to its steel making cost
centers, including these expenses as a cost of manufacturing, and
ultimately in the cost of sales for financial statement purposes.
Because Highveld's total COM per its accounting records included G&A
expenses while the submitted COM did not, we need to adjust the
submitted COM for the total amount of G&A expenses reported to the
Department for subject merchandise. In addition, since Highveld's
response is based on its actual cost of manufacturing during 1996 and
not its 1996 standard cost of manufacturing, we agree with Highveld
that the October through December 1995 sales should be valued based on
the average cost of manufacturing as contained in its response for
purposes of the cost reconciliation. We are satisfied that the
reconciliation provided by Highveld in its September 15, 1997, case
brief establishes that the reported costs reasonably agree with
Highveld's accounting records. Therefore, we did not adjust Highveld's
submitted costs for this difference.
Comment 17
Petitioners contend that the Department should increase Highveld's
COP because Highveld did not include in the submitted costs the full
G&A and interest expense on materials purchased from other divisions
within Highveld.
Highveld argues that G&A and interest for materials transferred
from other divisions are already included in the calculation of G&A and
interest for the subject merchandise. Highveld reasons that if the
Department were to include these costs as a part of material costs, it
would be double counting G&A and interest.
DOC Position
We agree with Highveld. The Department normally treats the cost of
inputs obtained from other divisions within the same company as a cost
incurred by that company (i.e., it is not an input obtained from an
affiliate, it is an input produced by the respondent). In this instance
we use the cost incurred by the company to produce the input. See e.g.,
Final Results of Antidumping Duty Administration Review: Certain Forged
Steel Crankshafts from the United Kingdom, 61 FR 54613, 54614 (October
21, 1996) (``Crankshafts''). We state in Crankshafts that although
respondent describes companies as ``related'' in various sections of
their questionnaire response, the weight of record evidence (e.g.,
corporate structure charts and audited financial statements) indicate
that they are divisions of the same corporation. Thus, in Crankshafts
the Department used the division's actual verified cost of producing
the input.
[[Page 61743]]
Highveld's record evidence indicates that the inputs it identified
as obtained from ``related'' parties were obtained from other divisions
within the company. While the Department's normal practice is to value
inputs from divisions at actual cost, Highveld elected to value these
inputs at its transfer prices for submission purposes. Our verification
of Highveld's reported cost data showed that the transfer prices for
these inputs were higher than the COM. Since the transfer price was
higher than the cost of manufacturing each input, Highveld did not
understate input costs in its reported COP and CV data. We, therefore,
agree with Highveld that to include G&A and interest as part of
material costs would lead to double counting of G&A and interest.
Comment 18
Petitioners claim that Highveld improperly allocated labor costs
between fixed and variable production costs by treating virtually all
labor costs as fixed. Petitioners allege that Highveld's allocation of
variable and fixed costs distorts the Department's difference-in-
merchandise comparison and product-matching.
Highveld maintains that it properly reported total direct labor for
the subject merchandise and that variable labor costs are not under-
reported for the Department's differences-in-merchandise adjustment.
DOC Position
We agree with Highveld that it properly allocated labor costs
between variable and fixed costs using percentages based on the
historical experience of its plant management. Because Highveld
reported in its Section D response both variable and fixed per-unit
labor costs as direct labor, we reclassified Highveld's reported fixed
labor costs as fixed overhead costs to compute the difference-in-
merchandise adjustment.
Comment 19
Petitioners recommend that, if accepted, Highveld's Section D costs
be used as the basis for difference-in-merchandise adjustments and
product matching.
Highveld agrees that its Section D costs should be used to
calculate the differences-in-merchandise adjustment.
DOC Position
We agree with both petitioners and Highveld. The Department used
Highveld's Section D costs to calculate the differences-in-merchandise
adjustments for the final determination.
Comment 20
Petitioners note that Highveld incorrectly calculated G&A expenses
by using different divisional levels in the numerator and denominator
for the calculation. Petitioners suggest that the Department apply the
recalculated G&A expenses to Highveld's COP and CV.
Highveld agrees that the G&A expense rate recalculated at
verification should be used for the final determination.
DOC Position
We agree with both petitioners and Highveld. The Department used
Highveld's recalculated G&A expense to calculate COP and CV for the
final determination.
Comment 21
Highveld maintains that it received net interest income and that it
incurred no interest expense associated with the production of the
subject merchandise. Therefore, Highveld contends that COP and CV
interest expense should be zero. Highveld argues that the Department's
consolidated interest expense calculation should exclude the entire
amount of interest expense associated with Columbus Joint Venture, an
entity in which Highveld has only a 33 percent equity interest.
Highveld contends that having a 33 percent equity interest fails to
meet the requirements for consolidation. Highveld cites Final Results
of Antidumping Duty Administrative Reviews: Certain Cold-Rolled and
Corrosion-Resistant Carbon Steel Flat Products from Korea, 62 FR 18404,
18445 (April 15, 1997) and Final Determination of Sales at Less Than
Fair Value: Certain Carbon Steel Butt-Weld Pipe Fittings from Thailand,
57 FR 21065, 21069 (May 18, 1992), to support its position that the
Department should exclude the Columbus Joint Venture from Highveld's
consolidated interest expense computation since there is no parent-
subsidiary corporate relationship or parental control between these two
companies. To support its claim, Highveld notes that the Department did
not consolidate a joint venture in which the respondent had 50 percent
equity ownership in Final Determination of Sales at Less Than Fair
Value: Aramid Fiber Formed of Poly-Phenylene Terephthalamide from the
Netherlands, 59 FR 23684, 23688 (May 6, 1994), because the Department
determined that parental control did not exist. Highveld notes that it
is not a parent to Columbus Joint Venture and it does not exercise
parental control.
Petitioners assert that Highveld's corporate consolidated financial
expenses must be used to calculate interest expense for COP and CV.
Petitioners state that the cases cited by Highveld show that the
Department calculates a consolidated interest factor where the parent
exercises control over the subsidiary. Since Highveld Steel Works is
controlled by the corporate parent, Highveld Steel and Vanadium
Corporation Limited, the use of the consolidated interest expense rate
is appropriate. Petitioners further argue that since Highveld includes
interest expenses for the Columbus Joint Venture in its consolidated
corporate financial statement and that the statute at 19 U.S.C.
1677b(f)(1)(A) provides that costs shall normally be calculated based
on the exporter's or producer's records if they are kept in accordance
with the generally accepted accounting principles (``GAAP'') of the
exporting country, the Department should include all interest expenses
consolidated by Highveld in its financial statement in calculating a
corporate interest expense rate.
DOC Position
We agree with petitioners. The Department normally calculates
interest expense based on the respondent's audited consolidated
financial statements for the year that most closely corresponds to the
POI. Highveld consolidated the financial results of the Columbus Joint
Venture in its 1996 annual audited financial statements. Since
Highveld's audited financial statements were found to be fairly
presented and in conformity with the GAAP of South Africa, we have no
reason to believe that the financial results for the Columbus Joint
Venture should not have been included in the consolidated financial
statements for Highveld.
We disagree with Highveld that the cases it cited support its
argument. In Final Results of Antidumping Duty Administrative Reviews:
Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products
from Korea, 62 FR 18404, 18445 (April 15, 1997), there were several
companies which met the requirements for consolidation but because
Korean GAAP did not require companies to prepare consolidated financial
statements, no audited consolidation was prepared. We therefore
combined the separate audited financial statements of the companies to
calculate a group-level interest expense factor. In Final Determination
of Sales at Less Than Fair Value: Aramid Fiber Formed of Poly-Phenylene
Terephthalamide from the Netherlands, 59 FR 23684, 23688 (May 6, 1994)
and in Final Determination of Sales at Less Than Fair Value: Certain
Carbon Steel
[[Page 61744]]
Butt-Weld Pipe Fittings from Thailand, 57 FR 21065, 21069 (May 18,
1992), the respondents were not included in the audited consolidated
financial statements of the parent because they did not meet the
consolidation requirements of their home country GAAP. In this case,
however, the Columbus Joint Venture is included in the audited
consolidated financial statements of Highveld, in accordance with its
home country GAAP. Therefore, none of these circumstances apply to
Highveld, as Highveld included Columbus Joint Venture in its
consolidated financial statements.
Comment 22
Petitioners argue that the final determination for Highveld should
be based on total facts available. Petitioners state that it has
documented in previous comments that Highveld's cost and price
responses are completely unreliable and unusable in their present form.
Petitioners note that the number of changes that the Department would
need to make to use Highveld's sales data are substantial, to the
extent the data is usable at all. Petitioners argue that Highveld's COP
and CV data are completely unusable (see comments above). In
petitioners' view, as the cost data are unusable, it is impossible to
perform the below-cost sales analysis, use the CV data, or calculate
difference in merchandise adjustments. Indeed, petitioners claim that
Highveld's entire submission is unreliable and unverified and that the
Department should base the final determination on facts available. As
facts available, petitioners propose that the Department use the higher
of the highest rate alleged in the petition or the highest rate found
for another producer.
Highveld argues that the final determination should be based on its
submitted data, not facts available. Highveld acknowledges that the
Department found several errors in its reported information, but claims
that this data was substantially verified and that any errors were
invariably minor and not sufficient for the Department to resort to
facts available. See Notice of Final Determination of Sales at Less
Than Fair Value: Beryllium Metal and High Beryllium Alloys From the
Republic of Kazakstan, 62 FR 2648, 2650 (January 17, 1997) and Certain
Cut-To-Length Carbon Steel Plate from Germany: Final Results of
Antidumping Duty Administrative Review, 61 FR 13834 (March 28, 1996).
To the extent the Department finds errors or gaps in Highveld's
information, respondent argues, it should revise the data using non-
adverse facts available.
Highveld also objects to petitioners' claim that the Department
should draw adverse inferences. In Highveld's view, the minor errors
that were found are not sufficient to cause the Department to resort to
adverse inferences. Highveld states that it did not fail to submit a
questionnaire response, provide a response which was wholly
unverifiable, or refuse to provide information to the Department. See
Final Determination of Sales at Less Than Fair Value: Large Newspaper
Printing Presses and Components Thereof, Whether Assembled or
Unassembled, From Germany, 61 FR 38166, 38167 (July 23, 1996);
Antifriction Bearings, 61 FR 35713, 35715-6 (June 8, 1996); Final
Determination of Sales at Less Than Fair Value: Certain Pasta From
Turkey, 61 FR 30309, 30312 (June 14, 1996). Highveld also cites other
cases in which the Department did not apply adverse inferences, and
states that in comparison with these cases, the application of adverse
inferences is not appropriate in this case. See Final Determination of
Sales at Less Than Fair Value: Circular Welded Non-Alloy Steel Pipe
From South Africa, 61 FR 24271 (May 14, 1996) (Circular Welded Non-
Alloy Steel Pipe From South Africa).
Highveld claims that the information it presented is not completely
unreliable as suggested by petitioners, and the Department should not
use total facts available or use adverse inferences in its final
determination.
Petitioners counter that due to time and resource constraints,
verification cannot be more than a spot-check of information provided
by respondent. In petitioners' view, the sheer volume and pervasiveness
of the errors discovered during verification call into question the
accuracy and complement of the whole response. See Circular Welded Non-
Alloy Steel Pipe From South Africa, 61 FR 24271, 24274. Petitioners
note that the statute allows the Department to use adverse facts
available whenever an interested party has failed to cooperate by not
acting to the best of its ability. Petitioners claim that the extensive
pattern of inaccuracies and omissions is evidence of Highveld's failure
to cooperate. Petitioners argue that given the extensive deficiencies
found with respect to nearly every major cost and price adjustment, the
Department should assign Highveld an adverse facts available margin
based on the highest margin found for another producer or the highest
rate in the petition.
DOC Position
We agree with respondent that the final determination in this
investigation should not be based on total facts available. While the
Department agrees with petitioners that there are errors and omissions
in Highveld's responses, we do not believe that the scope and impact of
the errors in question are sufficient to warrant the application of
facts available in the case as a whole. See Circular Welded Non-Alloy
Steel Pipe and Tube from Mexico: Final Results of Antidumping Duty
Administrative Review, 62 FR 37014, 37015 (July 10, 1997). We note that
the magnitude of the errors in this investigation are substantially
less than those noted in Circular Welded Non-Alloy Steel Pipe From
South Africa, 61 FR 24271, 24272-3 (May 14, 1996). With appropriate
corrections, the Department has determined that Highveld's responses
are usable for purposes for the purpose of margin calculations.
Pursuant to sections 776 and 782(e) of the Act, the Department has used
the facts otherwise available when necessary.
Comment 23
Highveld argues that the Department incorrectly determined there to
be one level of trade in the preliminary determination. Highveld claims
that sales in the home market and sales in the U.S. are at different
levels of trade and that the Department should grant it a CEP offset.
Highveld does not contest the Department's determination that there was
only a single level of trade in the home market, but does disagree with
the Department's finding that home market and U.S. sales are at the
same level of trade.
Highveld notes that the Department determines normal value for
sales at the same level of trade as the U.S. sales and that the
starting price for CEP is the first sale to an unaffiliated buyer from
which profit and expenses are deducted under section 772(d) of the Act.
Highveld cites the preliminary determination which states that this
deduction ``will normally yield a different level of trade for the CEP
than for the later resale which is used for the starting price.''
Highveld states that to determine whether sales are at different levels
of trade, the Department considers the stage in the marketing process,
taking into account the class of customer, selling functions and
expenses associated with these functions. (See Antifriction Bearings
(Other Than Tapered Roller Bearings) and Parts Thereof From France,
Germany, Italy, Japan, Singapore, and the United Kingdom: Final Results
of Antidumping Duty Administrative Reviews, 62 FR 2081, 2107 (January
15, 1997) (Antifriction Bearings).) Highveld then cites the statute at
19 U.S.C.
[[Page 61745]]
1677b(a)(7)(A), which provides for a CEP offset if there is a
difference in level of trade between CEP versus EP, but the data
available do not provide an appropriate basis to determine a level of
trade adjustment.
Highveld argues that record information demonstrates Highveld's
home market sales are at a different, more remote, level of trade than
its U.S. sales. Highveld claims its home market and U.S. sales are to a
different class of customer and that the selling functions performed
are qualitatively and quantitatively different (see Highveld's sales
verification report, at pages 13, 23-25).
Highveld posits the existence of four marketing stages for the
subject merchandise: (1) Production; (2) Sale to Distributor; (3) Sale
to Steel Service Center (SSC); and, (4) Sale to End-User. Highveld
claims that its home market sales are at stage 3--to SCCs. Highveld
states that its U.S. CEP sales to Newco are at stage 2--to
distributors. Highveld argues that since the selling functions of the
U.S. importer (Newco) are accounted for by a deduction under provision
of the law, they cannot be included in the level of trade analysis.
(See 62 FR 27295, 27370 (May 19, 1997) and Antifriction Bearings.)
Highveld alleges that it has an additional layer of selling
activity in the home market which is qualitatively and quantitatively
different and amounts to a different selling function. Highveld claims
that in the home market, it performs the following sales activities--
rolling planning, order status feedback, pricing support, extensive
post-sale service, market research, technical advice, advertising,
freight and delivery arrangements, quality control, quality assurance,
organizations and memberships and customer relations. Highveld states
that in the U.S. sales functions are limited to moderate post-sales
service, market discussions and meetings, freight and delivery
arrangement, quality control and quality assurance. Highveld cites the
Preliminary Results, 62 FR at 31965-31966 where the Department notes
several differences in selling functions for U.S. and home market
sales. Highveld cites the Department's Final Rules, 62 FR 27295, 27371,
where it states, ``[S]ubstantial differences in the amount of selling
expenses associated with two groups of sales also demonstrates that the
two groups are at different levels of trade.''
Highveld states that since the Department cannot quantify whether
Highveld's different levels of trade affect price comparability, the
Department should grant Highveld a CEP offset.
Petitioners support the Department's determination in the
preliminary determination that a single level trade exists in both the
home market and the U.S. market, and urges the Department to reach the
same conclusion for the final determination. Petitioners state that
neither difference in selling functions or customer descriptions are
alone sufficient to establish different levels of trade. See Certain
Welded Steel Pipe and Tube from Turkey, 61 FR 69067, 69068. Petitioners
claim that the record in this review does not contain sufficient
evidence of differentiated selling functions to justify more than one
level of trade. Petitioners point to Highveld's sales verification
report, at page 23, where the verifiers stated that selling functions
were handled the same by Highveld, regardless of their classification
and that Highveld differentiated selling functions based on the
quantity of the sale rather than the level of trade. Petitioners claim
that market research, technical advice, product development research,
freight and delivery, quality assurance programs, and production
planning were all performed in both markets. Petitioners noted that the
only selling function that appeared to be different was personnel
training, but that verifiers found this function to be very limited in
scope (see Highveld's sales verification report). Petitioners
acknowledge other small differences (i.e., just-in-time delivery and
advertising) (Preliminary Results at 62 FR 31966). Petitioners state
that none of these differences are sufficient enough to justify
differing levels of trade, and that the Department should not grant a
CEP offset.
In response to petitioners' comments Highveld continues to maintain
that its home market sales are at a different, more remote level of
trade from its U.S. sales, and that the Department should grant a CEP
offset. Highveld claims that petitioners do not dispute the fact that
its home market and U.S. sales are at a different stage of the
marketing process. Highveld disputes petitioners' claim that selling
functions are the same in both markets.
Highveld notes that market research is focused primarily on the
home market, and that any comparable functions performed by Newco would
be excluded from the level of trade analysis. With respect to technical
advice and product development research, Highveld claims that there are
qualitative and quantitative differences in the advice provided.
Highveld states that U.S. production planning involves shipments
planned well in advance, whereas home market planning entails more
short-term demands and requests. Highveld notes petitioners'
acknowledgment of differences between personnel training, and states
that this difference should not be ignored because it is limited in
scope. Highveld reiterates the additional differences in selling
functions cited in the preliminary determination, and again asks the
Department to grant it a CEP offset.
Petitioners counter that Highveld's U.S. and home market sales are
at the same level of trade and no CEP offset is warranted. Petitioners
dispute Highveld's claim that its home market sales are more remote
than its U.S. sales. Petitioners note that steel service centers and
distributors are not necessarily at different stages in the marketing
process. Petitioners state that service centers are often themselves
distributors and that no recorded evidence indicates a clear
distinction between service centers and other distributors. According
to petitioners, both distributors and service centers may sell to other
distributors and service centers or directly to end-users.
Petitioners claim that many of Highveld's home market selling
activities do not appear to be tangible. Petitioners note that Highveld
must do rolling planning on all sales, in order to maximize the
efficient use of its mill. Petitioners state that there is no record
evidence that just-in-time delivery plays any significant role in
Highveld's sales as it generally produces all sales to order.
Petitioners note that pricing supports are simply discounts and rebates
which are already taken into account in the Department's analysis,
along with warranty expenses. Petitioners argue that the record does
not demonstrate that customer care visits, market share research or
liaison meetings result in any significant costs or effort on
Highveld's part. Petitioners note that Highveld acknowledges that it
has after-sales service, freight and delivery arrangements, market
discussion and liaison meetings, and quality control and assurance for
sales in both markets. In petitioners view, there is not a quantitative
or qualitative difference in the selling functions performed in the two
markets and no CEP offset should be granted.
DOC Position
We agree in part with petitioners and with Highveld. In determining
whether separate levels of trade actually existed between the U.S. and
home markets, we examined Highveld's marketing stages, reviewing the
chains of distribution and customer categories reported in the home
market and in the United States. Highveld argues that its sales in the
[[Page 61746]]
home market are more remote and at a different stage of the marketing
process from its sales in the United States. While we agree with
petitioners that Highveld's distinction between SSCs and distributors
is questionable, we do agree with Highveld that after Newco's selling
functions are accounted for by a deduction under section 772 (d) of the
Act, they cannot be included in the level of trade analysis.
With respect to the selling activities described by Highveld as
representative of the greater quantitative and qualitative selling
functions associated with home market sales compared to U.S. sales,
many home market selling functions, although greater in number, appear
to be activities similar in nature to the selling functions associated
with U.S. sales. In addition, some of the home market selling functions
detailed by Highveld do not characterize services provided to
customers.
In some instances the activities characterized by Highveld as
selling functions are more appropriately characterized as activities
and functions associated with production and manufacturing processes.
Rolling planning, for example, is something Highveld conducts in order
to maintain efficiency during production, and it is required for
products sold in all markets. Nor do we consider order status feedback
and the conveyance to customers of the progress of particular orders to
be a selling function. In any case, these services are provided to
customers in both markets.
With respect to pricing supports, such as discounts and rebates,
these are already accounted for in the calculation of NV, and we do not
consider them to be distinct selling functions which are relevant to
our level of trade analysis. Neither do various home market
organizations and memberships to which Highveld belongs and makes
contributions and payments to relate to services provided to customers
per se.
A number of other selling functions are provided to customers in
both markets. These include efforts to meet customer delivery
schedules, freight arrangement and delivery services, and quality
assurance and control (including line inspection and material testing
and certification). Highveld performs functions relating to market
discussions and research, and customer liaison meetings in both
markets. Although Highveld officials have less opportunity to
physically meet with U.S. customers than with those in the home market,
they nonetheless do so regularly during each year. While Newco is
responsible for conducting initial U.S. market research concerning
market conditions in preparation for visits from Highveld officials,
joint customer calls made by Highveld and Newco officials evaluate
further these conditions and findings.
We agree with petitioners that because most of Highveld's sales
involve merchandise produced to order and not sold from inventory,
just-in-time delivery is not a significant selling function
attributable to sales in one market versus another. Regarding technical
advise, although Newco is responsible for providing initial support to
U.S. customers, Highveld provides any necessary back-up, if requested.
We do acknowledge that there are some minimal differences in
selling functions between the two markets. These differences have not
changed from the ones noted in our preliminary determination, although
as petitioners note these services appear to be relatively minimal and
in our judgment are not sufficient to warrant a difference in LOT. For
this final determination, we are finding that Highveld has a single
level of trade in both markets. Accordingly, we have not granted
Highveld a CEP offset for this final determination.
Comment 24
Highveld argues that the Department inappropriately matched U.S.
specification A 515/516 Grade 70 to a less similar home market product.
Highveld notes the Department's model matching program did not match
the U.S. product with the home market product deemed by Highveld to be
the closest match (SABS 1431 300WA). Highveld states that even though
the SABS 1431 300WA is the best match with the U.S. model, in terms of
physical properties such as mechanical properties and chemical
composition, the model match program automatically discounted that
model because it is classified as structural quality. Instead,
according to Highveld, the Department's model match scenario chose a
home market specification of BS 1501 151 430A as a best match because
this specification is classified as the same pressure vessel quality as
the U.S. model. Highveld cites the Sales Verification Exhibit 9 where
evidence is submitted that states that 300WA and A515/516 tend to be
higher strength with regard to ultimate tensile strength and yield
strength. Highveld claims that the 430A is a much softer steel than the
U.S. model; that 300WA and A515/516 may be rolled from the same plate
but 430A may not; and that the mechanical and chemical similarities
between the 300WA and the A515/516 translate into cost and value
similarities. Highveld states that since the 430A requires a different
chemical composition and mechanical properties, it requires different
costs of production. In conclusion, Highveld reiterates that the better
model match is U.S. model A515/516 to the home market model 300WA.
Petitioners did not comment on this issue.
DOC Position
We disagree with respondents. In the ``Fair Value Comparisons''
section of this notice we note that when making product comparisons the
Department uses the following criteria listed in order of preference:
paint, quality, specification and/or grade, heat treatments, standard
thickness, standard width, whether or not checkered, and descaling.
Based on the Department's model matching hierarchy, products of the
same quality will be matched to one another before being matched on the
basis of similar product specifications. Consequently, this comment is
moot, as changing the plate specification weighting as advocated by
respondents will not effect the results of the Department's model match
program.
Comment 25
With regard to U.S. warranty expense, Highveld urges the Department
to utilize the more precise percentage calculated during the Sales
Verification at Newco. According to respondent, at the start of
verification, Highveld presented a percentage that it had calculated as
the cost of ``returns'' (the cost to Newco of remedying defective
merchandise, similar to warranty claims). However, Highveld observes
that verifiers decided that this calculation was not specific enough
and spent considerable time and effort to recalculate a more specific
percentage (see Highveld's sales verification report, at page 59). It
is this more specific rate that Highveld asks the Department to use to
calculate the U.S. warranty expense for the final determination.
Petitioners state that previously unreported returns of merchandise
should be deducted from CEP as a warranty expense. Petitioners
separately argue that another previously unreported warranty expense
should be subtracted from CEP.
In response to petitioners' comments, Highveld reiterates that the
more precise warranty allocation calculated at verification should be
used in the final determination.
DOC Position
We disagree with respondents. Although Highveld provided
documentation at verification which it indicated was a more precise
[[Page 61747]]
determination of U.S. warranty expenses (see Highveld's sales
verification report, at pages 58-59), the Department also found certain
unreported claims and credits relating to sales of subject merchandise.
Because we are not confident that the amount Highveld contends is the
more precise amount includes all claims which should have been reported
to the Department as U.S. warranty expenses, we are continuing to use
the percentage presented to us at the start of verification as the cost
of ``returns'' for this expense in the final determination. (See
Analysis Memo, dated October 24, 1997.)
Comment 26
Petitioners note that the Department found unreported port of entry
and exit survey charges at the U.S. verification of Newco. Petitioners
state that these charges are paid by Newco and passed on to the
customers and they should be deducted from U.S. price as a direct
selling expense. Petitioners argue that since these charges have not
been included in the computer sales listing, the Department should
apply facts available to this adjustment. See 19 U.S.C. 1677e and
1677m. Petitioners argue that the Department should use the highest
survey rates found for any sale as identified in the Highveld's sales
verification report.
Highveld notes that it has submitted a revised database including
these charges and that these charges apply to CEP sales. Highveld
states that these charges do not apply to EP sales. Highveld argues
that the Department requested this data and the use of facts available
for these charges is not appropriate.
DOC Position
We agree with respondent. It is true that the Department found
unreported port of entry and exit survey charges at the U.S.
verification of Newco. These charges are paid by Newco and passed on to
the customers and they should be deducted from U.S. price as a direct
selling expense. These charges have been included in Highveld's latest
submission and we have used Highveld's submitted port of exit and entry
survey charges for the final determination.
Comment 27
Petitioners claim that Highveld failed to report stevedoring and
wharfage charges in its sales listing, but reported them separately.
Petitioners argue that these fees must be subtracted from the CEP for
the final determination, taking into account the fees that were
verified (see Highveld's sales verification report).
Highveld states that it has included this information in its
revised database, and that these charges should be deducted from CEP.
DOC Position
We agree with both parties and have made this change for the final
determination.
Comment 28
Petitioners state that Highveld failed to report certain U.S. sales
of subject merchandise (see Highveld's sales verification report, at
page 31). Petitioners note that the Court of International Trade has
found that the ``capture of all U.S. sales at their actual prices is at
the heart of the Department's investigation,'' and that the omission of
even one U.S. sales is a ``serious error.'' See Florex v. United
States, 705 F. Supp. 582, 588 (CIT 1988) and Persico Pizzamiglio v.
United States, 16 CIT 299 (1994). Petitioners state that these missing
sales must be included in the final determination, and that if the
Department does not have detailed sales data for these missing sales on
the record, it must resort to facts available.
Highveld notes that there was no significant failure to report U.S.
sales. Highveld states that Newco manually identified sales of subject
merchandise and missed several small sales. Highveld argues that this
error is minor (less than one percent of Highveld's U.S. sales) and
will not distort the antidumping calculation. Highveld further argues
that with one minor exception these sales are the same merchandise at
the same prices as other sales analyzed by the Department and urges the
Department to exclude these sales from its antidumping analysis.
DOC Position
We agree with petitioners and have included these unreported sales
in our analysis for the final determination. As the Department does not
have detailed, verified sales data for these missing sales on the
record, it is using facts available for this portion of the final
determination. We fully agree with the finding of the Court of
International Trade that the ``capture of all U.S. sales at their
actual prices is at the heart of the Department's investigation.'' See
Florex v. United States, 705 F. Supp. 582, 588 (CIT 1988) and Persico
Pizzamiglio v. United States, 16 CIT 299 (1994). It is essential that
respondents fully report this information to the Department. By not
providing complete information for U.S. sales when such information was
available to Highveld, we have determined that Highveld failed to
cooperate by not acting to the best of its ability to comply with a
request for information. See Pasta. Consequently, the use of adverse
facts available under section 776(b) of the Act is warranted. As
adverse facts available, we are using the highest calculated non-
aberational margin for individual sales of respondent in this
investigation. See Analysis Memo, dated October 24, 1997.
Comment 29
Petitioners state that marine insurance on U.S. sales was
incorrectly reported (see Highveld's sales verification report, at page
38). Petitioners claim that since it is not possible to understand
whether this miscalculation occurred in all sales or just those
verified, the Department should increase all reported marine insurance
by the percentage verified as facts available.
Highveld counters that the deduction for marine insurance should
not be based on facts available as the Department only found that the
reported amount of marine insurance for one shipment had been under-
reported by a very small amount and marine insurance was correctly
reported for other transactions. Highveld states that the Department
should add the corrected amount (38 cents) to marine insurance for all
invoices affected by the one misreported shipment, but otherwise use
Highveld's reported data.
DOC Position
We agree with Highveld and have made this correction for our final
determination.
Comment 30
Petitioners claim that Highveld did not correctly report the
merchandise processing fee portion of U.S. import duties. They state
that the processing fees should be changed to the correct amount as
verified, and the corrected USDTYU factors of 5.7359 percent and 5.135
percent should be applied to 1995 and 1996 sales respectively.
Highveld agrees that the Department should correct this error.
However, Highveld states that the correct factor for 1995 is 5.735
percent.
DOC Position
We agree with both parties and have included the corrected U.S.
duty amounts submitted by Highveld in its revised sales listing for the
final determination.
Comment 31
Petitioners claim that the interest rate used to calculate credit
expense on CEP sales through Newco is incorrect.
[[Page 61748]]
Petitioners state that Newco used a simple average of the applicable
interest rates rather than a weighted average interest rate, and used
initial rates of interest for a particular loan, regardless of whether
or not the rates fluctuated (see Highveld's sales verification report,
at pages 38-40 ). For these reasons, petitioners believe that the
Department should use the highest rate reported for any loan as the
interest rate applied to the credit expense calculation for all CEP
sales.
Highveld claims that the Department exhaustively verified the
interest rate used to calculate CEP interest expenses. While Highveld
continues to argue that its methodology is reasonable, it notes that
based on information on the record, the Department could construct a
weighted average interest rate.
DOC Position
We agree with petitioners. The methodology used by respondent does
not accurately reflect Newco's cost of borrowing. Nor does the
Department have complete documentation on all interest rates where
these rates fluctuated. Even if the Department did have complete
information, it is not the Department's responsibility to make
extensive revisions to submitted information. By not providing
verifiable information for U.S. interest rates when such information
was available to Highveld, we have determined that Highveld failed to
cooperate by not acting to the best of its ability to comply with a
request for information. See Pasta. Consequently, the use of adverse
facts available under section 776(b) of the Act is warranted. As facts
available the Department is recalculating Highveld's credit expenses
using the highest interest rate reported for any loan for all CEP
sales.
Comment 32
Petitioners state that the Department should not subtract the
Regional Services Council (RSC) levy from normal value as this tax is
not solely rebated or not collected on exports. (See 19 U.S.C.
1677(a)(6)(B)(iii).) Highveld indicates, according to petitioners, that
this levy is placed on net sales of the company, whether or not the
merchandise was sold domestically or exported to another country.
Petitioners argue that if the Department continues to regard this levy
as a direct selling expense, then the Department should make a
circumstance of sale adjustment to add back the amount of tax collected
on the U.S. sales.
Highveld responds that the deduction from normal value for the RSC
levy is appropriate. Highveld argues that if the Department changes its
treatment of this expense in the final determination it must ensure
that this expense is treated in a neutral manner to reflect the fact
that it is an expense incurred for both home market and U.S. sales.
DOC Position
We agree with petitioners. We have reviewed the RSC levy since our
preliminary determination and found, as Highveld itself indicated in
its April 7, 1997, submission, that this levy represents a turnover tax
applied to net sales, regardless of whether the merchandise was sold
for the export or local market. Since the levy is not rebated and it is
collected on export sales, it does not qualify as a deduction from NV
under section 773(a)(6)(B) of the Act. Therefore, for the final
determination we have not adjusted NV or U.S. price for the RSC levy.
Comment 33
Petitioners state that Highveld overstated home market credit
expenses (see Highveld's sales verification report, at pages 43-44).
Petitioners note that Highveld reported payment dates as the last day
of the month, irrespective of the actual date of payment. Petitioners
state that since the Department is unable to verify the accuracy of the
home market credit expense and has found inaccuracies in the reported
amounts using Highveld's methodology, the Department should not adjust
normal value for such a credit expense. Petitioners further state that
if the Department decides to make the adjustment, it should recalculate
the adjustment correctly and reduce the payment period by 30 days for
all home market sales before performing the credit expense calculation.
Highveld claims that it properly reported home market credit
expenses. Highveld notes that the Department found a single calculation
error which was attributable to the calculation of credit expense on
the invoice amount due, not including a subsequently paid rebate.
Highveld states that payment can be received before or after the
reported payment date. Highveld explains that customers tend to pay as
late as possible, making Highveld's methodology a conservative one.
Highveld reiterates that it has reported the only payment date recorded
in its accounting system, and urges the Department to use its reported
home market credit expense, with the single exception noted above.
DOC Position
We agree in part with petitioners. Highveld did not demonstrate at
verification that its payment methodology is reflective of actual dates
of payment. There is no evidence on the record to suggest that payment
is only made at the end of the month. Additionally, the Department
notes that even using Highveld's reported methodology there are
disprepancies with Highveld's reported credit expenses and those
calculated by the Department. A single example of this was described in
the verification report. However, a review of verification exhibits and
other reported observations in Highveld's database indicates that there
were in fact pervasive discrepancies, some of which were minor. For
this final determination, as facts available, the Department has
calculated the actual home market credit expense for the limited number
of observations for which actual date of payment information was
supplied. This expense was compared to the reported expense and we
calculated an average percentage difference. We have adjusted all
reported home market credit expenses downward by this percentage
difference.
Highveld should have developed a verifiable methodology for
reporting date of payment or alternatively chosen a conservative
methodology for reporting these dates. See Certain Cut-To-Length Carbon
Steel Plate From Germany, 61 FR 13834, 13841 (March 28, 1996). By not
providing verifiable information for home market credit expenses when
such information was available to Highveld, we have determined that
Highveld failed to cooperate by not acting to the best of its ability
to comply with a request for information. See Pasta. Consequently, the
use of adverse facts available under section 776(b) of the Act is
warranted.
Comment 34
Petitioners stated that errors in the reported inland freight were
discovered at verification (Highveld's sales verification report, at
pages 44, 53). Petitioners explain that these errors included
miscalculations and freight markups by Highveld. Petitioners contend
that the Department should not adjust normal value for home market
freight expenses since there are obvious flaws in the reported data.
Petitioners state that if the Department does adjust normal value, it
should first reduce reported freight expenses on home market sales by
multiplying the correction value to account for calculation
inaccuracies, as well as multiply by the correction value to account
for the markup of freight charges.
[[Page 61749]]
Highveld counters that inland freight was not misreported. Highveld
states that the Department discovered a single error in home market
inland freight. With respect to markup charges, Highveld notes that
these charges only apply to road haulage, not to all sales. Highveld
claims that this percentage is an element of its accounting system,
designed to capture actual expenses (such as miscellaneous shipping
fees like waiting charges) and was not created for this investigation.
Highveld urges the Department to correct the single error and otherwise
use its reported home market inland foreign expenses.
DOC Position
We agree with respondents. Although petitioners are correct in
noting that during verification we found an error in one of the
calculated inland freight expenses, we also found instances where the
expense was reported correctly. Upon review of the verification
exhibits and the markup charges referred to petitioners, we agree with
Highveld that these charges only apply to road haulage, and not to all
sales, and that it is captured as an actual expense in its normal
course of business. As a result, we are correcting the error referred
to above and allowing all other home market inland freight charges as
reported.
Comment 35
Petitioners note that Highveld was unable to exclude returns from
its home market data. However, Highveld was able to report the refunded
amount for such sales in REBATE2H field. At verification, the
Department discovered that in several instances the amount reported in
REBATE2H field did not comply with those of the company's record
keeping system. Therefore, petitioners contend that the Department
should not reduce the home market price by REBATE2H when calculating
normal value. Additionally, petitioners state that for cases where the
REBATE2H field approximates gross unit price, the sale should be thrown
out of the data pool since a rebate that large would signify that most,
if not all, of the sale had been returned or canceled.
Highveld argues that REBATE2H should be granted in the calculation
of normal value. Highveld states that where the amounts of the rebate
approximate gross unit price, the amounts were reported as negatives
and the sale was effectively netted out. With respect to petitioners'
claim that this rebate was misreported, Highveld acknowledges that
there were a few discrepancies related to canceled sales, but states
that the Department verified that the amounts otherwise reported for
this rebate were accurate. Highveld urges the Department to use
Highveld's reported data for this variable for the final determination,
but agrees that the Department may exclude those sales where the
amounts of REBATE2H approximate gross unit price.
DOC Position
We agree with both parties that we should exclude for the final
determination those home market sales where the amounts of REBATE2H
approximate gross unit price. We note that the discrepancies found by
the Department at verification pertain to these sales that we are
excluding. Consequently, we do not agree with petitioners' argument
that this rebate should be disallowed for other home market sales.
Comment 36
Petitioners note that the Department found errors in the tonnages
used to calculate the data reported in the REBATE8H field (Highveld's
sales verification report, at page 51). Petitioners state that since
the Department could not verify the accuracy of REBATE8H, it should not
be used as an adjustment to normal value. However, petitioners state
that the Department should use the reported REBATE8H as a deduction to
price when doing the cost/price comparison.
Highveld argues that the Department should not deny it an
adjustment for this rebate. Highveld claims that the tonnage
discrepancy was insignificant. Highveld explains that the reason for
this difference was that the tonnage used in the calculation of this
rebate was based on the original sales submission, prior to the
exclusion of certain sales at the request of the Department.
DOC Position
We agree with respondent. We determined that the methodology used
to calculate the per customer amounts of the rebate was reasonable. As
described in the sales verification report, the discrepancy identified
was small, and there is no evidence that it affected the calculation of
this rebate. Therefore, for the final determination we are allowing the
reported amounts for REBATE8H as adjustments to NV.
Comment 37
Petitioners contend that the Department should use facts available
for all handling and brokerage charges on U.S. sales. Petitioners note
that verifiers found that stevedoring and total handling and brokerage
was understated. Petitioners explain that verifiers also discovered
that the shipping rates reported by Highveld were inaccurate
(Highveld's sales verification report, at page 54). Petitioners state
that the highest reported rate for any sale for each charge should be
used to calculate the adjustment as facts available.
Highveld maintains that handling and brokerage charges on U.S.
sales were properly calculated. Highveld claims that the discrepancies
identified at verification apply only to specific shipments, not to all
shipments. Highveld notes that the discrepancy amounts to less than a
rand per ton and that argues that the Department should make the
corrections described in the verification report, and otherwise use
Highveld's reported handling and brokerage charges.
DOC Position
We agree with both petitioners and respondent in part. For the
final determination we are using the reported and brokerage and
handling expenses for one shipment involving certain sales which we
found at verification to be correct. For a second shipment, we are
correcting the expenses reported for certain sales which we found at
verification involved only minor corrections (see Highveld's sales
verification report, at pages 53-54). For a third shipment we examined,
we found extensive inaccuracies. Because we are unable to determine the
full extent of the other inaccuracies found for other shipments, we are
applying the highest reported brokerage and handling expense for any
U.S. sale to this third shipment and the remaining U.S. shipments. See
Analysis Memo, dated October 24, 1997. By not providing verifiable
information for brokerage and handling expenses when such information
was available to Highveld, we have determined that Highveld failed to
cooperate by not acting to the best of its ability to comply with a
request for information. See Pasta. Consequently, the use of adverse
facts available under section 776(b) of the Act is warranted.
Comment 38
Petitioners contend that the Department should use facts available
for U.S. credit expenses because verifiers found that the U.S. sales
trace's credit expense was understated (Highveld's sales verification
report, at page 57).
Highveld claims that its U.S. credit expenses were properly
calculated.
[[Page 61750]]
Highveld acknowledges that credit expenses were understated for one
U.S. EP sale, but argues that there is no evidence that credit expenses
for other U.S. sales were misreported. Highveld states that the
Department should correct the single error discovered at verification,
but otherwise use Highveld's reported data.
DOC Position
We disagree with both petitioners and respondent. For the two EP
sales examined at verification, one overstated U.S. credit expense and
the other sale understated this expense; on average Highveld has
overstated these expenses. Consequently, for this final determination
we are revising reported credit expense for these two sales and are
otherwise using the reported credit expenses.
Comment 39
Petitioners claim that Highveld did not report accurate data for
its home market and U.S. packing expenses (Highveld's sales
verification report, at pages 62-63). According to petitioners, packing
materials costs were not quantified, no accurate information on labor
and overhead was supplied, and all figures were based on estimates
provided by management of the company. Petitioners cite 19 U.S.C.
1677m(i) and state that the estimates of the management cannot be
empirically tested and thus, the data is unverified. Petitioners also
cite 19 U.S.C. 1677e that states that since the necessary information
is not on the record or cannot be verified, the Department should use
facts available. Petitioners suggest that as facts available, the
Department did not adjust the normal value for home market packing and
create a U.S. packing expense by inflating the packing material cost
reported for U.S. sales by the average ratio of all transformation and
overhead costs to all material costs.
Highveld claims that its packing expenses were calculated in a
reasonable manner. Highveld states that its accounting system does not
account for separate expense categories under packaging material.
Highveld states that it provided a reasonable estimate of packing
materials cost and the Department should use this information rather
than resort to facts available for the final determination.
DOC Position
We agree with petitioners. At verification we found that Highveld
was unable to provide an explanation for the estimated and average
costs used to calculate home market and U.S. packing expenses. Neither
was it able to provide any documentation to support its claimed
expenses. Because we were unable to verify this estimated information,
we are denying home market packing expenses as an adjustment to NV.
Comment 40
Petitioners argue that Highveld is not entitled to a deduction from
normal value for the RSPCC levy. In petitioners' view, this payment is
essentially a payment of dues to a voluntary organization. Petitioners
argue that this levy is not a tax, and that the only provision under
which this adjustment could be made would be as a circumstances of sale
adjustment. However, petitioners claim, it would not be appropriate to
make a circumstances of sale adjustment for this levy as adjustments
under this provision are limited to expenses that are bona fide
circumstances of sale and bear a direct relationship to the sale.
Petitioners note that with respect to credit, warranties or technical
assistance the seller is conveying to the purchase something of value.
See Certain Welded Carbon Steel Pipe and Tubes from India, 56 FR 64753,
64757 (December 12, 1991); see also Mantex v. United States, 841 F.
Supp 1290, 1302-3 (CIT 1993). Petitioners argue that the RSPCC levy
does not convey any value to the purchaser of the steel product, and
that the levy is not a function of the buyer-seller relationship at
all, but is a function of the relationship between the seller and the
South African Steel Association. Petitioners claim that the levy is
neither a circumstance of the sale nor directly related to the sale,
and question the existence of any evidence of a causal link between the
levy and home market prices.
Highveld maintains that it is entitled to a deduction from normal
value for the RSPCC payment as a direct selling expense. Highveld
argues that this payment is directly related to sales as the amount of
the payment is calculated based on the value of local sales. While
admitting that payment of the RSPCC is voluntary, Highveld states that
it benefits from the RSPCC payment in the form of increased home market
steel sales and that steel purchasers also receive benefits from RSPCC
programs. Highveld claims that this payment does bear a causal
relationship to the sale as Highveld would not make the payment in the
absence of home market sales. Highveld maintains that it is not
necessary to demonstrate a causal effect on prices for the Department
to accept a direct selling expense and that there is a presumption that
the customer is absorbing the cost of the payment as part of the total
price of the steel.
DOC Position
We agree with petitioners. As Highveld's sales verification report
and exhibit 24 indicate, the RSPCC levy is assessed as a fee based on
the quantity of sales. The amount of the levy is paid monthly to a fund
to which Highveld voluntarily is a member. The purpose of the fund is
to promote the export sales of steel produced in the local market.
Highveld claims that it gains benefits from belonging to the fund by
way of increased home market sales. However, even if these claims are
true, we do not consider this evidence of the value gained by
purchasers of products subject to this investigation. As petitioners
correctly point out, the RSCPP levy appears to represent a function of
the relationship between Highveld and the organization to which the
levy payments are made, rather than of the relationship between
Highveld and purchasers of subject merchandise. We do not believe this
to be a characteristic of a direct selling expense. Therefore, for
purposes of the final determination, we have not deducted Highveld's
home market payments of the levy from NV.
Comment 41
Petitioners claim that the Department made a clerical error in the
preliminary determination regarding the calculation of CEP. According
to petitioners, the Department intended to deduct indirect selling
expenses incurred in South Africa converted from rand to U.S. dollars,
but did not do so.
Highveld takes issue with petitioners suggestion. Highveld rejects
the argument that the Department should deduct expenses from normal
value after conversion into a dollar amount. Highveld also rejects the
argument that indirect selling expenses incurred in the home market
should be deducted from CEP. Highveld notes that the Department only
deducts from CEP those indirect selling expenses associated with a sale
to an unaffiliated customer in the United States. Highveld states that
the expenses at issue were incurred for activities performed
exclusively in South Africa, are general in nature, and are incurred
for all export sales. Because these expenses do not specifically relate
to U.S. commercial activity, Highveld claims they were properly not
deducted. See Calcium Aluminate Flux From France: Preliminary Results
of Antidumping Duty Administrative Review, 61 FR 40396, 40397 (August
2, 1996). Highveld adds that to the extent that
[[Page 61751]]
some portion of these general expenses might be broadly attributable to
U.S. sales, they would only relate to the sale by Highveld to Newco and
are, therefore, not expenses attributable to the sale to the
unaffiliated purchaser.
DOC Position
We agree with respondents. The Department only deducts indirect
selling expenses incurred in the country of manufacture which are
specifically related to commercial activity in the United States. (See
Calcium Aluminate Flux From France: Preliminary Results of Antidumping
Duty Administrative Review, 61 FR 40396, 40397 (August 2, 1996).) At
verification, we found that the expenses at issue were general in
nature and did not relate specifically to U.S. commercial activity.
Therefore, consistent with our preliminary determination, we did not
deduct these expenses from CEP for the final determination.
Suspension of Liquidation
On October 24, 1997, the Department signed a suspension agreement
with Iscor and Highveld suspending this investigation. Pursuant to
section 734(f)(2)(A) of the Act, we are instructing Customs to
terminate the suspension of liquidation of all entries of cut-to-length
carbon steel plate from South Africa. Any cash deposits of entries of
cut-to-length carbon steel plate from South Africa shall be refunded
and any bonds shall be released.
On October 14, 1997, we received a request from petitioners
requesting that we continue the investigation. We received a separate
request for continuation from the United Steelworkers of America, an
interested party under section 771(9)(D) of the Act on October 15,
1997. Pursuant to these requests, we have continued and completed the
investigation in accordance with section 734(g) of Act. We have found
the following margins of dumping:
------------------------------------------------------------------------
Weight-
average
Manufacturer/producer/exporter margin
percentage
------------------------------------------------------------------------
Highveld.................................................... 26.01
Iscor....................................................... 50.87
All Other................................................... 38.36
------------------------------------------------------------------------
ITC Notification
In accordance with section 735(d) of the Act, we have notified the
ITC of our determination. As our determination is affirmative, the ITC
will determine, within 45 days, whether these imports are causing
material injury, or threat of material injury, to an industry in the
United States. If the ITC's injury determination is negative, the
agreement will have no force or effect, and the investigation will be
terminated (see section 734(f)(3)(A) of the Act). If the ITC's
determination is affirmative, the Department will not issue an
antidumping duty order as long as the suspension agreement remains in
force (see section 734(f)(3)(B) of the Act).
This determination is published pursuant to section 735(d) of the
Act.
Dated: October 24, 1997.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 97-30389 Filed 11-18-97; 8:45 am]
BILLING CODE 3510-DS-P