[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