[Federal Register Volume 62, Number 223 (Wednesday, November 19, 1997)]
[Notices]
[Pages 61754-61766]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-30391]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-823-808]
Notice of Final Determination of Sales at Less Than Fair Value:
Certain Cut-to-Length Carbon Steel Plate From Ukraine
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: November 19, 1997.
FOR FURTHER INFORMATION CONTACT: Nithya Nagarajan at (202) 482-1324 or
Eugenia Chu at (202) 482-3964, Import Administration, International
Trade Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, NW., Washington, DC 20230.
[[Page 61755]]
Applicable Statute: 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 Round Agreements Act (URAA). In addition,
unless otherwise indicated, all citations to the Department's
regulations are to 19 CFR part 353 (1997).
Final Determination: We determine that certain cut-to-length steel
plate (CTL plate) from Ukraine 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: Certain
Cut-to-Length Carbon Steel Plate From Ukraine, 62 FR 31958 (June 11,
1997), the following events have occurred:
In June 1997, we verified the respondent's questionnaire responses.
On July 23, 1997, the Department issued its report on verification
findings. Petitioners and Respondent submitted case briefs on August
22, 1997, and rebuttal briefs on August 29, 1997. A public hearing was
neither requested nor held.
On July 28, 1997, the Department provided interested parties the
opportunity to submit additional publicly-available information (PAI)
from surrogate countries to value certain factors of production. The
Department received responses on August 18, 1997, and comments on
August 25, 1997.
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 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. See memorandum on Scope of Investigations
on Carbon Steel Plate, from Joseph Spetrini to Robert S. LaRussa
(October 24, 1997).
Period of Investigation (POI)
The POI is April 1, 1996 through September 30, 1996.
Nonmarket Economy Status
In accordance with section 773(c) of the Act, the Department
normally uses a factor valuation methodology to calculate normal value
when the country involved is an NME country and the Department
determines that it cannot determine normal value based on the
respondent's prices or costs. In this investigation, the Government of
Ukraine claims that economic conditions now prevalent throughout
Ukraine warrant revocation of Ukraine's NME-country status.
Regarding the revocation of NME status, the Department's analysis
centers around the government's role in economic activity. See Final
Determination of Sales at Less Than Fair Value: Certain Cut-to-Length
Carbon Steel Plate from Poland (58 FR 37205, July 9, 1993). In
accordance with section 771(18)(B) of the Act, in considering a
country's status, the Department analyzes the extent to which resources
are allocated by the market or government, taking into account
government involvement in currency and labor markets, pricing, and
production and investment decisions. Where resources are not allocated
by the market, the Department cannot conclude that home market prices
or costs should be used to calculate normal value.
As discussed in detail in our Memorandum on Separate Rates (dated
June 3, 1997), since 1991 the Government of Ukraine has undertaken
significant market reforms and passed extensive legislation toward the
development of an economy which can operate based upon free market
principles. However, in applying the factors required under section
771(18)(B) of the Act, we have found that Ukraine's economy, while in
transition, does not yet qualify as a market economy under the
antidumping law. Therefore, we have determined that Ukraine remains an
NME within the meaning of the antidumping statute.
Section 771(18)(B)(i) of the Act instructs the Department to take
into account the extent to which the currency of Ukraine is convertible
into the currencies of other countries. Ukraine introduced a new
currency, the hryvnia, in August of 1996, which has remained quite
stable against the dollar and other currencies. While the hyrvnia is
traded with the Newly Independent States, it is not yet convertible
elsewhere. Additionally, the Government of Ukraine retains control over
the influx of foreign currency into its domestic economy by requiring
that 50% of foreign export earnings be converted to hryvnias through an
Interbank Currency Exchange set up by the Government of Ukraine for
this purpose. See Law On A System of Currency Regulation (August 1993).
Pursuant to section 771(18)(B)(ii) of the Act, the Department also
considers the extent to which wage rates in the foreign country are
determined by free bargaining between labor and management. Although
under the Law on Enterprises in Ukraine a collective bargaining
agreement between management and workers is obligatory, it appears that
with regard to wage rates and employment the government continues to be
heavily involved. For example, Ukraine's Tariff Rate System grades all
jobs and sets salaries based upon the level of complexity and workers'
qualifications, and the Ministry of Labor establishes job position
criteria through job evaluation catalogs. See Law On Remuneration on
Labor (March 1995). All state-owned enterprises must base their wage
and hiring decisions on this system. Non-state-owned enterprises must
compile their own job classification and wage rates to reflect the
government's system. The government also regulates where and in what
manner workers are paid and provides for criminal penalties for
violations by employers. Id.
Section 771(18)(B)(iii) directs the Department to examine the
extent to
[[Page 61756]]
which joint ventures or other investments by foreign firms are
permitted in Ukraine. As a general matter, Ukraine is open to foreign
investment and the necessary supporting legislation is in place. Under
Ukraine's Foreign Investment Law of 1996, its fourth foreign investment
law, registered foreign investors are guaranteed equal treatment with
local companies. The law also provides certain protections, including
general guarantees against expropriation, unhindered transfer of
profits and post-tax revenues, and a ten-year guarantee against changes
in legislation that affect these basic protections. In 1996, Ukraine
also added new laws and regulations on energy and mining investment and
taxation of goods and services imported by foreign investors. The U.S.-
Ukraine Bilateral Investment Treaty, which took effect on November 16,
1996, provides further protection for U.S. investors; other such
treaties exist with, among others, Canada, France, Germany, and Italy.
Finally, Ukraine is a member of the New York Convention of 1958 on the
Recognition and Enforcement of Foreign Arbitral Awards, and has enacted
an international commercial arbitration law. However, areas of concern
remain for foreign investors, in particular the reportedly burdensome
and unpredictable arbitration and enforcement system, and the
prohibition, contained in the Land Code of 1992, on foreigners owning
land in Ukraine.
With regard to the extent of government ownership or control of the
means of production, a factor considered under section 771(18)(B)(iv),
record evidence demonstrates that the Government of Ukraine has made
significant progress in privatizing state-owned business enterprises.
However, privatization has proceeded unevenly thus far, with relatively
rapid results in small-scale privatization and a slower pace for large-
scale privatization, and much of the economy remains in the hands of
the government. Notably, Ukraine has designated thousands of companies
in sectors such as energy, communications, metallurgy, defense
industries, and chemicals as ``strategic'' enterprises and therefore
not eligible for privatization. These firms include most of Ukraine's
largest companies and those with the greatest export potential. In
addition, foreign investors can participate in the privatization
process only through financial intermediaries (i.e., foreigners cannot
acquire privatization certificates directly).
Finally, in the case of the respondents in this investigation,
their status as privately-held companies is incomplete. Although
respondents both qualify as ``joint stock companies,'' the majority of
their shares are still owned by the government, which has yet to sell
its shares in either company, either through auction, public tender, or
other market mechanisms. Therefore, even though the Government of
Ukraine's submissions indicate that in 1995 and 1996, 34% and 44%
respectively of state-owned enterprises were privatized, it is unclear
whether those figures reflect 100 percent privatization of the
enterprises in question, or some continued level of government
ownership, as is the case with Azovstal and Ilyich.
Pursuant to section 771(18)(v), the Department must also address
the extent of government control over the allocation of resources and
over output and pricing decisions of enterprises. Even with the process
of privatization continuing, the Government of Ukraine still retains
significant control over the means of production and in allocating
resources regarding all state-owned business enterprises, as well as
those enterprises leasing state-owned enterprises. Under Ukraine's Law
on Enterprises, state-owned enterprises, or enterprises leasing state-
owned enterprises, are required to fill state orders at the request of
the government. Moreover, enterprises which the Government of Ukraine
deems monopolies are also required to fulfill state orders, regardless
of their form of ownership. See Law On Supply of Production For State
Needs.
The government also continues to set domestic prices in some areas
of the economy. According to the Law on Prices, the government has
authority to set prices on products which affect the entire economy, to
set domestic prices of monopolies, and to render to the government any
monopoly profits deemed excessive. Generally, the government will deem
an enterprise a monopoly where its commodity has 35 percent of the
domestic market share. See On Restricting Monopoly and Preventing
Unfair Competition.
As the above analysis indicates, the Ukrainian government has put
into action a serious program of economic reform, particularly since
July 1994. While significant progress has been made in Ukraine's
transformation to a market economy, under the analysis required by
section 771(18)(B) of the Act, we cannot conclude that Ukraine should
be treated as a market economy for purposes of the antidumping duty
law. While many of the state controls have been abandoned, functioning
markets have not completely replaced government controls. Because the
evidence does not demonstrate that prices and costs in Ukraine
adequately reflect market considerations, we cannot at this time alter
Ukraine's designation as a nonmarket economy under the antidumping law.
Fair Value Comparisons
To determine whether certain carbon steel plate from Ukraine sold
to the United States by the Ukrainian exporters receiving separate
rates were made at less than fair value, we compared the EP to the NV,
as specified in the ``Export Price'' and ``Normal Value'' sections of
this notice.
Export Price
For Azovstal and Ilyich, we calculated EP in accordance with
section 772(a) of the Act, because the subject merchandise was sold
directly to the first unaffiliated purchaser in the United States prior
to importation and constructed export price (CEP) methodology was not
otherwise indicated. In accordance with section 777A(d)(1)(A)(i) of the
Act, we compared POI-wide weighted-average EPs to the factors of
production.
We corrected the respondent's data for errors and minor omissions
submitted to the Department and found at verification. We calculated EP
in accordance with our preliminary calculations.
Normal Value
Section 773(c) of the Act requires the Department to value the
factors of production, to the extent possible, in one or more market
economy countries that are at a level of economic development
comparable to that of the non-market economy country and that are
significant producers of comparable merchandise.
In our preliminary determination, we selected Brazil as our
surrogate country. Brazil is an appropriate country for the reasons set
forth in our preliminary determination. See the January 27, 1997
memorandum from the Office of Policy discussing our selection of
surrogate countries for Ukraine (Policy Memo). Since we find no
compelling reason to change this selection (see below for comments and
further analysis), we have continued to base FMV on the values of the
factors of production as valued in Brazil.
Factors of Production
We calculated NV based on factors of production cited in the
preliminary determination, making adjustments for specific verification
findings. To calculate NV, the verified amounts for the factors of
production were multiplied by the appropriate surrogate
[[Page 61757]]
value for the different inputs. We have used the same surrogate sources
as in the preliminary determination with the exception of overhead,
SG&A, and profit. For the final determination we based the percentages
for overhead, SG&A and profit on the detailed public version of CST's
and Usiminas' financial statements that was placed on the record of
this investigation by Respondents. See Comment 7, below.
Critical Circumstances
The Department has continued to find that critical circumstances
exist for cut-to-length carbon steel plate by all Ukrainian exporters.
Verification
As provided in section 782(i) of the Act, we verified the
information submitted by Respondents for use in our final
determination. We used standard verification procedures, including
examination of relevant accounting and production records and original
source documents provided by Respondents.
Separate Rates
Comment 1: Separate Rates
Petitioners oppose the Department's granting of separate rates to
Respondents. Petitioners argue that the Department should calculate and
apply a single country-wide rate because Respondents' exports of
subject merchandise from Ukraine were subject to de jure and de facto
government controls, including minimum price and registration
requirements, during the POI. At verification, Petitioners argue, the
Department found that the companies were required to register contracts
in order to control prices to avoid dumping. Also, Petitioners state
that the Department found that export contracts over $3.5 million are
subject to government approval and that minimum pricing is mandatory.
Petitioners argue that the inconsistencies between the governmental
Decrees requiring registration and a government official's
representation that registration is unnecessary until antidumping
proceedings have been initiated led the Department to conclude that
registration is for monitoring purposes only. However, Petitioners
claim that based on a straight reading of the laws, registration is
necessary for purposes of administering the minimum price requirements
and other actions controlling exports. Petitioners argue that this
requirement is part of a larger Ukrainian regime controlling export
activities, including the setting of minimum prices.
Petitioners stress that the Government of Ukraine publishes
``indicative prices'' pursuant to a February 10, 1996 Presidential
Decree but that the Department inappropriately concluded that the
decree did not apply to subject merchandise exported during the POI.
Petitioners contend that the categories are not exhaustive and include
goods where ``special regimes'' are applied. Petitioners argue that
this appears to give the government very broad legal control over
setting prices since the term is not defined or explained. Petitioners
contend that the Department should imply that investigations of subject
merchandise fit within the category of ``special regime'.
Furthermore, Petitioners interpret the February 24, 1996 Ministry
of Foreign Economic Relations and Trade (MFERT) Order to mean that the
export controls are applied not only after an antidumping investigation
has been initiated, but also to prevent the initiation of such an
investigation. Petitioners point out that the MFERT Order provides a
list of commodities aimed at preventing antidumping and that the
subject merchandise is on this list. Therefore the preventive nature of
this order indicates that special export requirements can, and did,
apply to subject merchandise prior to the initiation of the antidumping
investigation. Petitioners also point to statements as described in the
verification report by both Azovstal and Ilyich that pricing controls
have applied to their exports of steel plate since 1995. In addition,
Petitioners argue that the government-published price lists are
convincing evidence that minimum price restrictions were applied to
subject merchandise during the POI. Thus, the Department should not
find that Azovstal and Ilyich are entitled to separate rates in the
final determination.
Finally, Petitioners state that it is undisputed that upon
initiation of this investigation, at the very least, the minimum price
and registration requirements became applicable to Respondents' exports
of subject merchandise. Petitioners argue that the policy behind
applying a country-wide dumping margin, to avoid government
circumvention of antidumping orders, is prospective in nature.
Accordingly, Petitioners argue, even if the government controls had not
been in effect during the POI, the prospective nature of the country-
wide margin policy warrants application of a single-country-wide rate.
Lastly, Petitioners argue that the recent government decree ordering
the two respondents to merge makes clear that the government exercises
direct control. Petitioners argue that the government is the alter ego
of the companies and that this, combined with the registration and
minimum price requirements, is the type of government control that
warrants application of a single country-wide rate.
Respondents counter that the law and regulation issued on February
10, 1996 authorize the government to establish price guidelines for
monitoring purposes, in certain circumstances, but only under the
following conditions: (a) the prices are merely ``indicative'' and not
mandatory; (b) they may be issued only for certain goods subject to
antidumping procedures, import procedures, quotas, licenses, or other
special regimes; and (c) these indicative prices may be established
only to the extent that these goods may be exported free from state
control, as provided in Article 20 of Ukraine's Law ``On Foreign
Economic Activity.'' Respondents argue that Article 20, which discusses
antimonopoly must be read together with the February 10, 1996
Presidential Decree. Respondents argue that Article 20 provides for
state control of the export and import of weapons and certain other
items (not including the subject merchandise) and specifically provides
that any organizations, including state-owned ones, have no right to
prevent other subjects of foreign economic activity from the free
exercise of such activity. Respondents claim that this interpretation
is consistent with statements by a MFERT official that no pricing
controls were observed during the POI, and that the indicative prices
did not apply to the subject merchandise during the POI.
Respondents further argue that Petitioners' theory that a system of
indicative prices instituted after the POI retroactively translates
into a system of price controls is neither factually correct nor in
accordance with Department practice. Respondents argue that the intent
of the law and the Department's practice has been to permit the
calculation of separate rates where export prices, during the POI, were
set by respondents rather than the government. Respondents argue that
not only have all of the conditions for separate rates have been met,
as evidenced at verification, but the unilateral actions of both
Respondents to change their legal status from leaseholding societies to
that of stock companies, and the right to pursue litigation against the
government prove Respondents' independence from government control.
Respondents further argue that Petitioners' assertion that registration
requirements are part of the larger Ukrainian regime controlling
[[Page 61758]]
export activities is nonsense and that goods subject to export
controls, as defined in the February 10, 1996 Resolution, does not
include the subject merchandise.
Department Position
Based on evidence on the record and our verification findings, we
have determined that Azovstal and Ilyich are entitled to separate rates
in the final determination.
The Department's NME separate rates policy is based upon a
rebuttable presumption that NME entities operate under government
control and therefore do not make independent business decisions. This
presumption can only be overcome by a respondent's affirmative showing
that it conducts its exporting activities without government control.
Evidence on the record supports a finding that Azovstal and Ilyich have
met their affirmative evidentiary burden.
To establish whether a firm is sufficiently independent from
government control to be entitled to a separate rate, the Department
analyzes each exporting entity under the test set forth in the Final
Determination of Sales at Less Than Fair Value: Sparklers from the
People's Republic of China, 56 FR 20588 (May 6, 1991) (Sparklers), and
as further developed in Final Determination of Sales at Less Than Fair
Value: Silicon Carbide from the People's Republic of China, 59 FR 2285
(May 2, 1994) (Silicon Carbide). The Department assigns separate rates
in nonmarket economy cases only if respondents can demonstrate the
absence of both de jure and de facto governmental control over export
activities.
The Department considers three factors which support, though do not
require, a finding of de jure absence of government control. These
factors include: (1) an absence of restrictive stipulations associated
with an individual exporter's business and export licenses; (2) any
legislative enactments decentralizing control of companies; or (3) any
other formal measures by the government decentralizing control of
companies. The Department typically considers four factors in
evaluating whether each respondent is subject to de facto governmental
control of its export functions: (1) whether the export prices (``EP'')
are set by or are subject to the approval of a governmental authority;
(2) whether the respondent has authority to negotiate and sign
contracts and other agreements; (3) whether the respondent has autonomy
from the government in making decisions regarding the selection of
management; and (4) whether the respondent retains the proceeds of its
export sales and makes independent decisions regarding disposition of
profits or financing of losses. See Silicon Carbide.
1. Absence of De Jure Control
As described in our Preliminary Determination and Memorandum on
Separate Rates, dated June 3, 1997, Respondents have placed on the
administrative record a number of submissions to demonstrate absence of
de jure control. These documents include laws, regulations, and
provisions enacted by the Government of Ukraine which deregulate
Ukrainian state-owned enterprises and Ukrainian export trade. Moreover,
Respondents provided laws and regulations specifically governing their
enterprises, which provide these companies with legal autonomy to make
their own operational and managerial decisions during the POI and are
evidence of the good faith effort on the part of the Government of
Ukraine to decentralize control of state-owned companies. For a more
detailed description of these laws, see Separate Rates Memorandum,
dated June 3, 1997.
Because the government has now created a right of ownership of
business enterprises for private persons and collectives, leaseholding
societies, such as Azovstal and Ilyich, formerly state-owned and
operated, are now distinct legal entities. In general, this ownership
right allows business enterprises to freely engage in economic
activity, negotiate and sign contracts, and independently develop
business plans. Collectives, like the leaseholding societies of
Azovstal and Ilyich, may independently select management through
elections by the workers collective and may exercise control and
direction over the general director through a contract between the
enterprise and the general director. Enterprises, including
collectives, may have their own bank account, and, after taxes, may
keep the profits from their sales, and engage in foreign economic
activity, generally, without government interference.
Although there is no longer a general export licensing regime in
place, the Ukrainian Government continues to retain de jure control
over exports for certain categories of goods, including goods subject
to antidumping duty investigations and antidumping duty orders.
Mandatory controls are in place regarding: (1) the registration of
contracts for export of these goods and (2) the setting of ``indicative
prices'' for these goods by the government.
With regard to registration, foreign economic agreements
(contracts) are registered with MFERT pursuant to the 1994 Order of the
President, On Registration of Certain Types of Foreign Economic
Agreements (Contracts) in Ukraine Order of the President of Ukraine,
November 7, 1994. Under the February 24, 1996 MFERT Order, during the
POI, it was necessary to register a contract for export of subject
merchandise to the United States because under this Order, the United
States is one of the listed countries and the subject merchandise is
one of the listed goods. Therefore, contrary to the Ukrainian
Government's assertions, contracts for export of the subject
merchandise to the United States during the POI were legally required
to be registered. However, we find that in this instance, registration
is for statistical and tax collection purposes, and for monitoring
compliance by exporters with international trading rules and
agreements. There was no evidence at verification to indicate that
through registration the Government of Ukraine did anything other than
monitor foreign economic activity of exports of certain goods in order
to prevent dumping by exporters subject to antidumping measures in
other countries and thereby ensure compliance with international
trading rules.
Moreover, even though MFERT must approve export contracts of over
$3.5 million, we find that the purpose of this exercise is to monitor
such activity for tax collection and to ensure that large volume
exports of goods subject to antidumping measures or other international
trade agreements are not being dumped and are in compliance with the
government's international agreements (e.g., suspension agreements with
the European Union). Therefore, we find no evidence to support
Petitioners' claim that by registering contracts for sales of subject
merchandise during the POI the government was controlling export
pricing, per se.
With regard to the setting of prices, since 1994 the government has
set minimum export prices for certain categories of goods. While some
minimum export prices are obligatory, others are more in the nature of
guidelines to assist Ukrainian exporters in pricing their goods
competitively in various export markets. During the POI, pursuant to
the Decree of the President of Ukraine On Measures Regarding the
Improvement of Price Policy Configuration in Foreign Economic Activity,
February 10, 1996, the Government of Ukraine published these so-called
``indicative prices'' on a
[[Page 61759]]
monthly basis. According to the 1996 Decree, minimum prices are
mandatory where the exporter of Ukrainian goods is subject to
antidumping measures applied by other countries, including the
initiation of antidumping investigations. The export of the subject
merchandise during the POI was not subject to the mandatory pricing
controls described. However, as Petitioners correctly point out, under
this 1996 Decree, merchandise covered by this investigation was subject
to mandatory pricing after the initiation of our antidumping
investigation. However, there is no evidence on the record to support
Petitioners presumption that the subject merchandise falls within the
``special regime'' referred to in the February 1996 Decree. Therefore,
we cannot find that subject merchandise is included in a special export
pricing regime.
In a somewhat analogous situation, the Department preliminarily
determined that mandatory minimum export prices set by the Chinese
government, intended to control worldwide prices of exported honey and
to increase such prices through macro-economic means, did not preclude
the respondent companies from receiving separate rates. See Notice of
Preliminary Determination of Sales at Less Than Fair Value: Honey from
the People's Republic of China, 60 FR 14725 (March 20, 1995) (Honey).
In Honey, the Department found that, among other things, the companies
were free to independently negotiate export prices with their customers
above the floor price. In other words, when considering the totality of
all circumstances, the Department found in Honey that the companies had
sufficient independence in their export pricing decisions from
government control to qualify for separate rates. This is also the case
with Azovstal and Ilyich, both of which the Department verified to have
independently negotiated export prices above the minimum prices set by
the Government of Ukraine. See de facto section below and the
Verification Report, dated July 25, 1997.
Based on evidence on the record, we find that during the POI there
was no de jure control of export prices of subject merchandise.
Moreover, we find that, even though there was de jure control of export
prices for subject merchandise after the initiation of our antidumping
investigation, because the stated purpose of these minimum prices was
to avoid dumping by Ukrainian exporters, such measures do not, in and
of themselves, indicate that the Government of Ukraine controls export
activities of companies. Rather, we have concluded that, similar to our
determination in Honey, such government action is not contrary to a
finding of separate rates, because its only purpose is to avoid dumping
measures applied by other countries and because it demonstrates an
effort on behalf of the government to comply with international trading
rules as it enters the world marketplace.
The purpose of applying one country-wide rate in an NME context is
to prevent an NME government from later circumventing an antidumping
order by controlling the flow of subject merchandise through exporters
which have the lowest margin. Here, the requirement of registration and
the setting of floor prices do not demonstrate that the government can
control exporters in such a manner. To the contrary, it is evidence of
the government's good faith attempt to monitor exports of certain goods
to ensure that such goods are not traded unfairly.
2. Absence of De Facto Control
Each respondent exporter has asserted, and we have verified, the
following: (1) each sets its own export prices subject to indicative
prices, as discussed below; (2) each negotiates contracts without
guidance from any governmental bodies; (3) each makes its own personnel
decisions with regard to selection of management through elections by
the members of the leaseholding societies, and the General Director and
his appointed Deputies have authority to negotiate and enter into
contracts on behalf of the enterprise; and (4) each has separate bank
accounts and retains the proceeds of its export sales (although 50
percent of foreign currency earnings must be converted into Ukrainian
currency), uses profits according to its business needs, and has the
authority to sell its assets and to obtain loans. See Verification
Report, dated July 25, 1997. In addition, there is no record evidence
indicating that company-specific pricing during the POI was coordinated
among exporters.
Both Azovstal and Ilyich stated that prices are negotiated with
their customers and are not subject to approval or review by the
government. However, both companies also told the Department's
verifiers that prior to, and during the POI they were required by
Ukrainian Customs officials to sell subject merchandise at the minimum
price published monthly by MFERT for all sales to the U.S. market. See
Verification Report, dated July 25, 1997. Thus, as discussed above,
while there was no de jure control of export prices for subject
merchandise during the POI, there was de facto control of such pricing
by the Government of Ukraine. Nevertheless, as discussed above, we do
not find that setting of minimum prices to eliminate dumping by
exporters creates sufficient government control over exporting
activities to disqualify Azovstal and Ilyich from receiving separate
rates.
Furthermore, at verification additional information and
documentation was provided which demonstrates that Azovstal and Ilyich
were not controlled by the government, but were separate legal entities
that were in control of their business operations and planning during
the POI. See Verification Report at 3-6. For example, during the POI,
both companies paid rent to the Ukraine State Property Fund, the
government entity owning the steel plants leased by both companies, and
entered into negotiations regarding an increase in rent due to
hyperinflation. Verification Report at 6. Additionally, during the POI,
a Cabinet of Ministers Decree was issued which attempted to merge the
two respondents. Verification Report, Exhibit SR-3. However, during
that time both companies continued the privatization process for state-
owned companies, as was their legal right under the reforms instituted
by the Government of Ukraine, discussed above. The merger did not
transpire and shortly after the POI both companies became public joint
stock companies. Verification Report at 6.
Additionally, when a decree was issued during the POI by the
Ukraine State Property Fund appointing another General Director in
place of the elected general director of Azovstal, the company went to
the Ukrainian Arbitration Court. Verification Report, Exhibit SR-3.
Azovstal claimed that by law the Ukraine State Property Fund had no
authority to issue a decree which directly conflicted with legal
reforms regarding a lease-holding society's right to elect its own
management. Id. As a result, the Ukraine State Property Fund issued a
second decree voiding the earlier decree, and Azovstal continues to
have the same duly elected General Director. Id. Taken together, these
findings provide further proof that Azovstal and Ilyich were not
controlled by the government but were independent during the POI.
Based on the record evidence, we find that various legal reforms
did provide Azovstal and Ilyich the ability to protect their rights to
autonomy in their day to day business operations, including their
exporting activities. See Separate Rates
[[Page 61760]]
Memorandum, dated June 3, 1997; Verification Report, dated July 25,
1997.
Consequently, we determine that there is, legally and factually,
absence of governmental control of export functions during the POI.
Contrary to Petitioners' arguments, the Department does not examine the
period after the POI to determine separate rates. However, we will
continue to closely examine the effect, in fact and in law, of actions
of the Government of Ukraine with respect to any reassertion of
government control over the export activities of these companies.
However, based on the evidence on the record, we have granted separate
rates for this final determination.
Ukraine-Wide Rate
As stated above, we have granted separate rates for Azovstal and
Ilyich. However, all other Ukrainian companies will be subject to the
Ukraine-wide rate.
U.S. import statistics indicate that the total quantity and value
of U.S. imports of certain cut-to-length carbon steel plate from
Ukraine is greater than the total quantity and value of steel plate
reported by all Ukrainian companies that submitted responses. Given
this discrepancy, we conclude that not all exporters of Ukrainian
certain cut-to-length carbon steel plate responded to our
questionnaire. Accordingly, we are applying a single antidumping
deposit rate--the Ukraine-wide rate--to all exporters in Ukraine (other
than the two named as receiving separate rates), based on our
presumption that those respondents who failed to respond constitute a
single enterprise, and are under common control by the Ukraine
government. See, e.g., Final Determination of Sales at Less Than Fair
Value: Bicycles from the People's Republic of China, 61 FR 19026 (April
30, 1996).
This Ukraine-wide antidumping rate is based on adverse 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 that party as the facts otherwise available. The
statute also provides that such an adverse inference may be based on
secondary information, including the information drawn from the
petition.
As discussed above, we have treated all Ukrainian exporters that
did not qualify for a separate rate as a single enterprise owned and
controlled by the Government of Ukraine. Because some exporters of the
single enterprise failed to respond to the Department's requests for
information, the single enterprise is considered to be uncooperative.
(See Concurrence Memorandum, dated October 24, 1997, for the list of
exporters.) In such situations, consistent with section 776(b)(1) of
the Act, the Department generally selects as adverse total facts
available the higher of the average of the margin from the petition or
the highest rate calculated for a respondent in the proceeding. See
also, Notice of Final Determination of Sales at Less Than Fair Value:
Persulfates from the People's Republic of China, 96 FR 27222 (May 19,
1997). In the present case, the average margin in the petition is
higher than any calculated rate. Accordingly, the Department has based
the Ukraine-wide rate on the average petition rate of 237.91 percent.
Section 776(c) of the Act provides that where the Department relies
on ``secondary information,'' the Department shall, to the extent
practicable, corroborate that information from independent sources
reasonably at the Department's disposal. The Statement of
Administrative Action (SAA), accompanying the URAA (H. Doc. 316, Vol.
1, 103d Cong., 2d Sess. 870 (1996)), clarifies that the petition is
``secondary information'' and that ``corroborate'' requires that the
information relied upon have probative value.
In accordance with section 776(c) of the Act, we corroborated the
margins in the petition to the extent practicable. The information
contained in the petition indicates that petitioners calculated export
price based on: (1) the import values declared to the U.S. Customs
Service, and (2) an average export price derived from actual U.S.
selling prices known to petitioners. We compared the starting prices
used by petitioners, less the importer mark-ups, to prices derived from
contemporaneous U.S. import statistics and found that the two sets of
prices were consistent. We also compared the movement charges used in
the petition with the surrogate values used by the Department in its
company-specific margin calculations and found them to be consistent.
The information in the petition with respect to the normal value
(NV) is based on factors of production used by the petitioners in the
production of steel plate. Petitioners submitted usage amounts for
materials, labor and energy, adjusted for known differences in
production efficiencies. To account for differences between the
production processes of petitioners and potential respondents,
Petitioners submitted three cost models in the petition: (1) Basic
Oxygen Furnace (BOF) Cost Model; (2) Open-Hearth Furnace Cost Model;
and (3) Weighted Average Normal Value of the BOF and Open-Hearth
methods.
The margins in the petition, which ranged from 201.61 to 274.82
percent, were obtained by Petitioners by comparing the normal values to
the export price developed from customs values and to export prices
developed from actual U.S. price quotes. For each method, petitioners
submitted estimated dumping margins for the BOF method, the open-hearth
method and a weighted-average of the two. See Corroboration Memorandum,
dated June 3, 1997.
Comment 2: Pirated Sales
Petitioners contend that certain ``pirated'' sales of steel plate
produced by Ilyich should be included in the margin calculation because
there is a strong likelihood that a large volume of similar sales may
have ultimately entered the United States. In addition, Petitioners
argue that there is a very high likelihood that these sales have gone
unreported and the Department should apply an overall facts available
rate for Ilyich because they did not properly respond to the
Department's questionnaires.
Ilyich argues that the Department properly excluded pirated sales
from the preliminary margin calculations and should continue to do so
for the final determination. Ilyich argues that it made these sales
believing they were destined to third countries and had no knowledge
that these sales were ultimately destined for the United States. Ilyich
argues that at verification the Department examined two of these
pirated sales and concluded that Ilyich had no prior knowledge that the
shipments were to be delivered to the United States. Ilyich further
claims that it is the Department's practice not to include such sales
in its determinations under these circumstances and cited several cases
as precedent.
[[Page 61761]]
Department Position
We agree with Respondent. It is the Department's practice to
include as U.S. sales only those sales known by the producer/exporter
to be destined for the United States at the time of sale and delivery.
See, e.g., Final Determination of Sales at Less Than Fair Value:
Manganese Sulfate from the People's Republic of China, 60 FR 52155,
52158 (October 5, 1995); Notice of Final Determination of Sales at Less
Than Fair Value: Pure Magnesium and Alloy Magnesium from the Russian
Federation, 60 FR 16440, 16445 (March 30, 1995). Based on findings at
verification, the Department has determined that these originally non-
U.S. bound shipments were delivered to the U.S. without prior knowledge
of Ilyich. Therefore, consistent with our preliminary determination and
Department practice, we have not included the pirated sales in the
final margin calculation for Ilyich.
Comment 3: Surrogate Country Selection
Respondents argue that Brazil is an inappropriate surrogate for
Ukraine for several reasons. Respondents state that, because Ukraine's
economy has undergone radical transformations in recent years, the
Department should reconsider its choice of a surrogate country based
upon changed economic conditions and/or possible industrial
incomparability. Respondents claim that the Department has shown its
willingness to reconsider its choice of a surrogate country if a given
country is no longer comparable and cite Certain Helical Spring Lock
Washers from the People's Republic of China: Memorandum to David Binder
from David Mueller, Office of Policy re: AD Investigation of Sebacic
Acid from the PRC: Non-market Economy Status and Surrogate Country
Selection (9/23/93), among others, to support their argument.
Next, Respondents argue that it is the Department's preference to
select the country closest to the NME country under investigation in
terms of the GDP when faced with multiple potential surrogates and cite
several cases to support this position. For instance, Respondents
compare the instant case to Final Determination of Sales at Less Than
Fair Value: Beryllium Metal from Kazakstan, 62 FR 2648 (June 11, 1997),
where the Department rejected Brazil as a surrogate because Brazil's
GDP was far in excess of Kazakstan's. Respondents argue that the
variance between Ukraine's GDP and Brazil's GDP is similarly excessive.
Respondents contend that Brazil's Gross Domestic Product (GDP) is now
more than double that of Ukraine and the World Bank classifies Brazil
within a different tier of countries than Ukraine. Furthermore,
Respondents claim that Brazil's industrial data is maintained via an
accounting system which deviates from generally accepted accounting
principles because it requires producers to maintain two separate sets
of financial records, one to report historical costs of corporate
activities and another to report the effects of inflation and currency
fluctuations on those corporate costs and revenues. Respondents further
argue that the Department's use of Brazilian labor rates also
illustrates the inappropriateness of using Brazil as a surrogate.
However, if Brazil is chosen as a surrogate, Respondents argue that
surrogate prices from other countries should be used where the use of
Brazilian prices will produce distorted results and cite Certain Cased
Pencils from the People's Republic of China, 59 FR 55625 (Nov. 8, 1994)
(Pencils), as precedent.
Respondents submit that Poland is a preferable surrogate choice
because it is the only country which satisfies both statutory criteria
of comparable economic development and significant production of CTL
plate. Respondents argue that in practice the Department will change
its choice of surrogate where it finds a compelling reason to make the
change and cite Notice of Final Determination of Sales at Less Than
Fair Value: Pure and Alloy Magnesium from the Russian Federation, 60 FR
16440 (March 30, 1995) (Pure Magnesium from Russia) and Notice of Final
Determination of Sales at Less Than Fair Value: Pure Magnesium From
Ukraine, 60 FR 16432 (March 30, 1995) (Pure Magnesium From Ukraine).
Respondents argue that Poland is an appropriate surrogate in terms of
the similarity of its history of economic development, industrial
infrastructure and distribution of labor and production. In addition,
Respondents submit that the quality of data publicly available from
Polish companies compares to that of Brazil.
Petitioners counter that there is no basis nor compelling reason
for changing surrogate countries in the final determination and further
emphasize that the cases Respondents cite, Pure Magnesium from Russia
and Pure Magnesium from Ukraine, did not affirmatively state that the
Department will change surrogate countries where ``compelling reasons''
exist. The Department did not change surrogate countries in either
case.
Furthermore, Petitioners argue that Brazil is comparable to Ukraine
in terms of economic development, as recognized in this case and in
other cases involving Ukraine. Petitioners claim that the World Bank's
classification for Ukraine is preliminary and moreover, that this
category contains countries whose per capita GNPs vary widely,
including some that differ more widely from Ukraine's GNP than does
Brazil's. Furthermore, Petitioners add that when the Department issued
its surrogate country selection memorandum, it was aware of the GNP
levels of Brazil, Poland, and Ukraine and stated that all countries are
equally comparable to Ukraine in terms of economic development.
Petitioners argue that even if Poland's GNP is closer, the Department
has already determined that any such difference is insignificant.
Petitioners argue that per capita GNP is only one of several measures
the Department considers in determining the most appropriate surrogate
country and cite Final Results of Antidumping Duty Administrative
Review: Tapered Roller Bearings and Parts Thereof, Finished and
Unfinished, from Romania, 62 FR 31075 (June 6, 1997). Petitioners
further argue that Poland's rate of per capita GNP growth was positive,
while that of both Brazil and Ukraine was negative. Additionally, the
purchasing power parity GNP for Brazil and Poland are virtually the
same. Moreover, citing Technoimportexport v. United States, 15 CIT 250,
255, 766 F. Supp 1169, 1175 (1991) (Technoimportexport), Petitioners
argue that the Department does not have to choose the most comparable
surrogate country and cite petitioners claim that Brazil also satisfies
the Department's other criteria for selection of a surrogate country.
For example, Petitioners contend, Brazil is a significant producer
of subject merchandise and there is a wealth of publicly available
information on factor prices in Brazil. Furthermore, Petitioners claim
that use of Brazil as the surrogate country will not produce
aberrational results in this investigation and argue that in the case
cited by Respondents, Pencils, the Department rejected certain
surrogate data because it pertained to a type of material not used to
produce the subject merchandise. Moreover, Petitioners claim that the
alleged inconsistencies between Brazilian accounting methods and GAAP
are not sufficient grounds to deem financial ratios aberrational since
the Department has extensive experience dealing with Brazilian
financial statements.
[[Page 61762]]
Petitioners argue that the Department has obtained reliable
Brazilian surrogate values for virtually all factors of production and
stress that the record does not contain complete surrogate values for
Poland. Moreover, Petitioners argue that the data available for Poland
is of lesser quality. For example, Petitioners claim that the format
used in the Polish financial statements renders them virtually
impossible to use for purposes of calculating surrogate financial
ratios. Petitioners therefore argue that Poland does not satisfy the
information-availability criterion that the Department uses to assess
the appropriateness of a potential surrogate country.
Finally, Petitioners argue that the Department should rely only on
Brazil for all surrogate values in the final determination based on its
preference for using only one surrogate country.
Department Position
We agree with Petitioners and have continued to use Brazil as the
surrogate country in the final determination. Section 773(c)(4) of the
Act requires the Department to value the NME producer's factors of
production, to the extent possible, in one or more market economy
countries that: (1) are at a level of economic development comparable
to that of the NME and (2) are significant producers of comparable
merchandise. As discussed in the preliminary determination, Brazil is
at a level of economic development comparable to Ukraine in terms of
per-capita GNP levels and distribution of the labor force in the
varying sectors of the economy. Furthermore, Petitioners are correct in
stating that even if Poland's GDP is closer to that of Ukraine's than
is Brazil's, per capita GNP is only one of the measures that the
Department considers in determining the most appropriate surrogate
country. Furthermore, Brazil is a significant producer of comparable
merchandise. Thus, Brazil fulfills both statutory criteria and
qualifies as an acceptable surrogate for Ukraine under section
773(c)(4) of the Act. See also the January 27, 1997 memorandum from the
Office of Policy discussing our selection of surrogate countries for
Ukraine (Policy Memo).
Congress provided the Department with broad discretion in selecting
surrogate countries in NME cases. See 19 U.S.C. 773(c)(1)(B) (valuation
of factors of production shall be based on the best available
information from a market economy country(s) considered to be
appropriate); see also, Lasko Metals v. United States, 43 F3d. 1442,
1443 n.3 (Fed. Cir. 1994). As stated above, Brazil qualifies as an
appropriate surrogate because it satisfies the statutory criteria
listed. Furthermore, we were able to obtain publicly available
contemporaneous information on all factor inputs required. Thus, the
selection of Brazil also achieves the Department's goals of providing
transparency and reasonable accuracy in valuing factors. Moreover, our
choice of Brazil provides predictability for Ukrainian exporters as the
Department has used Brazil as a surrogate for Ukraine in past
antidumping proceedings. See Initiation of Antidumping Duty
Investigation: Pure and Alloy Magnesium for the people's Republic of
China, the Russian Federation, and Ukraine, 80 FR 21748 (April 26,
1994).
While we have used surrogate prices for selected surrogate values
from countries other than the selected surrogate country in previous
cases, to the extent possible it is the Department's preference and
practice to rely on information from the first choice surrogate country
to value all factors for which such information is available. See Final
Determination of Sales at Less Than Fair Value: Certain Carbon Steel
Butt-Weld Pipe Fittings from the People's Republic of China, 57 FR
21058 (May 18, 1992).
Thus, because acceptable public information from Brazil is
available for all material input factors, it is unnecessary for us to
use data from other countries. Therefore, the Department has continued
to use only Brazil as the most appropriate surrogate country for
purposes of this final determination. See generally, Policy Memo.
Comment 4: Commissions
Azovstal argues that commissions were properly excluded from its
database because the company receiving commissions was not an
affiliated reseller in the United States. Azovstal further argues that,
because the payment of a commission on a U.S. sale in a non-market
economy (NME) investigation is not offset by direct selling expenses on
home market sales, the Department ignores home market sales and relies
solely on surrogate SG&A expenses in calculating normal value. Azovstal
cites several cases where the Department has rejected similar
adjustments in prior NME proceedings, including Final Determination of
Sales at Less than Fair Value: Coumarin from the People's Republic of
China, 59 FR 66895 (December 28, 1994); Final Determination of Sales at
Less than Fair Value: Sparklers from the People's Republic of China, 56
FR 20588 (May 6, 1991); and Final Notice of Sales at Less than Fair
Value: Pure Magnesium from Ukraine, 60 FR 16432 (March 30, 1995).
Petitioners argue that, because these commissions have been
verified and there is no evidence to indicate that the rate of the
commission was other than arm's length, the Department must deduct
these commissions from U.S. price pursuant to 19 CFR section
353.41(e)(1). Furthermore, Petitioners claim that the cases cited by
Azovstal do not support its argument and that in this case, the
commissions paid to AST, Avostal's reseller in London, have not been
taken into account in the U.S. or the foreign market price.
Department Position
In accordance with section 772(d)(1)(A), in CEP circumstances, the
Department's normal practice is to deduct commissions from U.S. sales
price as direct selling expenses if the commissions were incurred when
making the sale to the United States. See, e.g., Notice of Final
Determination of Sales at Less than Fair Value: Bicycles from the
People's Republic of China, 61 FR 19026 (April 30, 1996). In the
present case, we do not have CEP sales and have not deducted
commissions in calculating EP. Azovstal did not incur any commissions
directly on U.S. sales, as all sales were made through trading
companies not located in the United States, which incurred the selling
expenses associated with the individual transactions. Therefore, we
have continued to utilize the methodology from our preliminary
determination and have not adjusted for commission expenses on U.S.
sales for this final determination.
Comment 5: Movement Charges
Petitioners argue that the Department should use facts available to
determine the surrogate value of movement and storage charges incurred
but not reported by both respondents. Petitioners argue that Azovstal
had unreported movement charges for which there are no surrogate values
on the record and that Ilyich did not report the costs for storage for
which there are also no surrogate values on the record. Therefore, the
Department should apply facts available.
Azovstal claims that it reported the appropriate movement charges
in its April 11, 1997 and August 22, 1997, responses as requested by
the Department. In regards to Petitioners allegations regarding storage
charges, Azovstal and Ilyich argue that these charges are not movement
expenses but are direct selling expenses. Respondents cite the
Department's Antidumping
[[Page 61763]]
Manual which indicates that expenses are directly related to the sales
under consideration and assert that it is the Department's practice to
make a circumstance of sale adjustment for such expenses. Moreover,
both Azovstal and Ilyich claim that the Department does not make these
adjustments in NME cases because there is no offset for home market
sales. Both Respondents argue that consistent with this methodology,
the Department did not even include a field for warehousing or storage
in its U.S. Sales file. Under the circumstances, Azovstal argues that
the Department should use its reported charges rather than facts
available. Therefore, both Azovstal and Ilyich argue that the
Department should make no adjustments for storage charges for either
company.
Department's Position
Pursuant to section 773(6)(B), the Department adjusts normal value
for movement expenses which are incident to bringing the subject
merchandise in condition packed ready for shipment to the United
States. We verified that Respondents reported movement expenses to our
satisfaction. Moreover, the surrogate value that we applied in our
preliminary determination included all movement and handling charges to
ship subject merchandise from the factory to the port, which also takes
into account storage/warehousing expenses. Therefore, any additional
deductions for movement expenses would, in effect, result in double-
counting.
Additionally, we agree with Respondents' claim that the Department
does not adjust EP sales for warehousing expenses under section
772(c)(2)(A). In an NME case, it is the Department's policy to not
deduct warehousing expenses from EP because there is no comparable
adjustment on the home market side.
Comment 6: Packing Expenses
Petitioners argue that, because there is no evidence to suggest
that the prices on Respondents' sales invoices do not include packing
costs, the Department incorrectly added packing expenses to
Respondents' reported U.S. prices for purposes of the preliminary
determination.
Respondents did not comment on this issue.
Department Position
We agree with Petitioners. We incorrectly added packing expenses to
export price in the preliminary determination. Accordingly, for the
final determination we have adjusted for packing expenses in the
calculation of normal value.
Comment 7: Factory Overhead, SG&A, and Profit
Petitioners claim that the Department's preliminary results did not
include all factory overhead costs and that a dumping margin cannot
accurately be calculated without the inclusion of non-depreciation
overhead costs. Although Petitioners have been unable to find publicly
available information in Brazil, they provided one integrated Korean
steel producer's public financial statement (Pohang Iron & Steel Co.,
Ltd. (``POSCO'')) which provided a detailed list of the types of non-
depreciation expenses incurred as manufacturing costs. Petitioners urge
the Department to either use the percentages from POSCO's financial
statement as facts available to approximate the proper amount of
factory overhead costs, or use the Department's resources to find
additional information on the surrogate value.
Respondents argue that Petitioners' claim that surrogate value
information from Brazil on factory overhead must be adjusted based upon
the experience of a Korean steel producer underscores the flawed nature
of this information and of the surrogate value information from Brazil
for SG&A and profit. Respondents argue that the Department should
reject information from Brazil, because it is insufficient and use
information from Poland in calculating normal value.
Respondents further argue that if the Department should continue to
use Brazil as the surrogate, it should recalculate the surrogate
overhead, SG&A, and profit rates in accordance with generally accepted
accounting principles as the Department did in Titanium Sponge from the
Russian Federation, 61 FR 3938 (July 29, 1996) (Titanium Sponge) (see
below). Furthermore, Respondents argue that the Department was
incorrect to use data from the Brazilian steel producers' financial
statements that was for the POI. Respondents argue that, consistent
with its prior practice, the Department should use financial data
contemporaneous with the POI and assert that the use of a ``constant of
currency'' accounting system is inappropriate now that Brazil's
inflation rate is only at 18 percent. Respondents provided the 1996
public financial statements of two Brazilian companies and provided
recalculated ratios for overhead, SG&A, and profit.
Respondents argue that in Titanium Sponge from the Russian
Federation, 61 FR 3938 (July 29, 1996) (Titanium Sponge), the
Department used only the line item expenses which corresponded directly
to the factor values which were calculated. Respondents argue that the
Department should make adjustments to the reported net income data and
further asserts that, when calculating the SG&A factor the Department
incorrectly included profit sharing expenses. Respondents state that
profit sharing expenses do not represent actual expenses incurred by
the companies but reflect the value of profits shared with employees
and management, dividend distributions to employees, and annual taxes
on net income.
Petitioners rebut by stating that the Polish financial statements
are substantially less reliable than the Brazilian financial
statements. Petitioners claim that, because the Polish financial
statements fail to separately account for costs of sales and SG&A
costs, any ratios calculated from the financial statements would be
distorted. Also, Petitioners state that one of the Polish financial
statements contains no specific information on factory overhead costs.
Petitioners additionally argue that the Department's preliminary
calculations are consistent with Brazilian GAAP and the Department's
normal methodology for calculating costs. The Petitioners maintain
that, while the methodology used in Titanium Sponge was required by the
insignificance of the operating costs in that case, in this case, the
other general expenses are not insignificant and were properly included
in the calculated ratios. Petitioners argue that it is the Department's
practice to include all non-extraordinary cost items in its
calculations. Thus, Petitioners argue because SG&A normally includes
other costs like non-operating costs, the Department should disregard
Respondents' claim that only those items nominally identified as SG&A
should be included. Petitioners further argue that the Department
appropriately included social contributions and profit sharing costs in
its SG&A calculation. Petitioners additionally assert that constant
currency financial statements provide the most reasonable measure of
the overhead, SG&A, and profit ratios because it is the Department's
preference to base its calculations on such statements and because the
ratios would be calculated on values that are on the same basis.
Petitioners argue that the Department should use the 1996 financial
statements of CSN previously submitted by Petitioners.
Finally, Petitioners argue that, if the Department does use the
financial statements prepared under the corporate legislative method of
accounting or
[[Page 61764]]
historical cost method, it should revise the calculations submitted by
Respondents. Petitioners argue that Respondents have understated the
SG&A costs by excluding certain non-operating costs and have
artificially reduced net income by ignoring income actually earned by
the companies while at the same time failing to account for the
increase in net income that results from not taking certain expenses
into account.
Department Position
We disagree with Petitioners' suggestion to use the data from a
Korean steel producer's financial statement to calculate factory
overhead and we also disagree with Respondents' suggestion to use
Polish data. It is the Department's practice to only use data from
those countries listed as potential surrogates identified in the Policy
Memo (see cases cited above.) Korea was never identified as a potential
surrogate for the Ukrainian economy. Although Poland was identified as
a potential surrogate, it is the Department's preference to use a
single surrogate country as the source of data in a NME investigation
unless such value is aberrational or otherwise inappropriate. See
Comment 3. Therefore, the Department will continue to use Brazilian
data for the final determination.
We agree with Respondents that the Department should use the
financial data of producers in the surrogate country which are
contemporaneous with the POI, and we have done so for this final
determination. In general, the Department will not seek information
from particular producers in the surrogate country to value material
inputs or electricity. The exception to this rule is for overhead,
SG&A, and profit. For these categories of costs, the Department will
seek product-specific information from producers in the surrogate
country, where possible. See Notice of Final Determination of Sales at
Less Than Fair Value: Melamine Institutional Dinnerware Products from
the People's Republic of China, 62 FR 1708 (January 13, 1997). Based on
the submitted information and the Department's own research, we agree
with Respondents that the financial data from the 1996 income
statements of the two Brazilian steel companies we used in the
preliminary determination, CST and Usiminas, are the most appropriate
surrogate information available to calculate the percentages for
overhead, SG&A, and profit for our final determination. In the
preliminary determination the Department determined that both CST and
Usiminas were significant producers of merchandise similar to that
under investigation and both had public financial statements available
for the Department's calculations.
When using Brazil as a surrogate country in the past, including in
our preliminary determination, the Department used constant currency
financial statements because they adjust costs for the effects of
inflation. Brazil, in the past, has experienced significant inflation
and significant changes in the value of its currency. However, in 1996,
the Brazilian economy was no longer in a state of hyperinflation as its
inflation rate dropped to 18 percent and its currency stabilized. In
non-hyperinflation situations, it is the Department's practice to
calculate ratios based upon historical cost financial statements. See
generally, SAA at 164. The corporate legislative method of accounting
is the primary source for GAAP in Brazil. Therefore, we have used the
1996 income statements of CST and Usiminas, prepared under the
corporate legislative method of accounting in our final determination.
In contrast to our preliminary determination, for this final
determination, in order to ensure that all costs are properly accounted
for, we revised the overhead ratio to include employee profit sharing
in accordance with our practice. Despite the manner in which labor
costs are packaged (i.e., either through straight salary, profit
sharing, etc.), total labor costs remain the same to the employer. This
includes all profit sharing expenses. See Porcelain-on-Steel Cookware
from Mexico: Notice of Final Results of Antidumping Duty Administrative
Review, 62 FR 25908 (May 12, 1997), where the Department determined
that profit sharing expenses relate to the compensation of direct
labor. Labor is captured in the cost of manufacturing which is part of
the cost of sales. Thus, we have included profit sharing in overhead.
However, if a company broke out profit sharing between employees and
management, as CST has done, we included management profit sharing in
the SG&A calculation and employee profit sharing in the overhead
calculation. See Final Determination Calculation Memorandum, dated
October 24, 1997.
Consistent with prior Department practice, we have continued to
include social contributions in SG&A for the final determination. See
Final Determination Calculation Memorandum, dated October 24, 1997. See
also, Notice of Preliminary Determination of Sales at Less Than Fair
Value and Postponement of Final Determinations: Certain Hot-Rolled
Carbon Steel Flat Products, Certain Cold-Rolled Carbon Steel Flat
Products, Certain Corrosion-Resistant Carbon Steel Flat Products, and
Certain Cut-to-Length Carbon Steel Plate From Brazil, 58 FR 7080
(February 4, 1993).
Comment 8: Usage Factors
In the preliminary determination, the Petitioners argue that the
Department did not calculate the dumping margin for all of Respondents'
U.S. sales. Petitioners argue that the Department's inability to
calculate dumping margins results directly from Respondents' failure to
provide the factor usage data required to determine normal value and
that, as a result, the Department should use adverse facts available to
determine the dumping margins for all U.S. sales for which Respondents
failed to provide the usage factor information.
Respondents argue that the Department should not use adverse facts
available to determine dumping margins for any U.S. sales by Azovstal
and Ilyich because the absence of normal value matches for these sales
was not due to the companies' failure to report factor usage for those
sales. Rather, it was the result of typographical errors which resulted
in incorrect CONNUMU designations. Respondents argue that factor usage
was provided by both companies for all sales and should be used to
determine dumping margins. Azovstal argues that its missing matches
were the result of a typographical error in the field ``PLCHECK'' and
an error in the related portion of the CONNUMU which described the
product as such. Azovstal argues that for all of Azovstal's products,
the field ``PLCHECK'' should be categorized the same way because
Azovstal only produces merchandise with that characteristic. Azovstal
claims that a review of those CONNUMUs described by Petitioners as not
having matching normal values in relation to other CONNUMUs in
Azovstal's U.S. Sale Listing and Azovstal's Section D computer response
clearly shows that the absence of corresponding factor usages for the
CONNUMUs in question is the result of an inadvertent error.
Ilyich argues that its two CONNUMUs without corresponding factor
usages are for products identical to those listed under two other
CONNUMUs. Ilyich argues that when preparing its Section C Response it
inadvertently used two CONNUMUs for the same products in two instances.
Ilyich argues that, as such, there is no need to use facts available.
Rather, the Department has all necessary data and should treat each
pair of corresponding CONNUMUs as a single CONNUMU.
[[Page 61765]]
Department Position
Petitioners are correct that we did not calculate the dumping
margin for all U.S. sales because of the absence of some normal value
matches, as described above. However, while the Department is always
concerned with such discrepancies, we did not identify any attempt by
Respondents to mislead the Department or to distort information on the
record, nor does the record indicate that Respondents were
uncooperative. Rather, the record indicates that, while the Respondents
inadvertently misreported their CONNUM listings, they nevertheless
complied with all Department requests to the best of their ability
under the circumstances. Therefore, we have determined that such
inadvertent errors do not warrant an overall application of adverse
facts available. Accordingly, for this final determination we have
corrected all such errors using an overall average of the final dumping
margins for each Respondent's U.S. sales. The details of these errors
and steps we have taken to correct them are set forth in the Final
Determination Calculation Memorandum, dated October 24, 1997. See also,
Concurrence Memorandum, dated October 24, 1997.
Comment 9: Surrogate Value for Labor
Respondents argue that the Department's calculation of a surrogate
value for labor illustrates the distorted effects which result from
using Brazil as a surrogate for Ukraine. Respondents argue that the
Department's BISNIS report indicates that Ukraine's hourly labor rate
is less than $1.00. Therefore, Respondents argue, Poland is a
preferable surrogate because, when compared to Brazil it is more
comparable in terms of its labor rates. Furthermore, Respondents claim
that Poland is also more comparable to Ukraine in terms of the makeup
of its workforce and the percentage of the workforce engaged in
industrial activity.
Petitioners argue that Respondents are comparing general employment
data for Ukraine to inadmissible new information regarding Poland.
Petitioners further argue that even if the Polish information was
admissible, it does not support Respondents' challenge to the use of
Brazil as a surrogate country because the information does not provide
surrogate values related to labor costs for making steel or the costs
of providing housing for workers.
Department Position
As discussed in Comment 3, we have determined that Brazil is the
appropriate surrogate country for this investigation. Furthermore, the
Department has determined, that Brazilian wage rates are not
aberrational but provide a reasonable surrogate value for the cost of
labor for producing steel and thus, do not warrant an attempt to find
more comparable values. Therefore, we have continued to use the same
labor calculation used in the preliminary determination in the final
determination.
Comment 10: Labor Usage Rates
Petitioners argue that, because the Department examined Azovstal's
reported labor usage rates at verification and determined that they
were inaccurate, the Department should revise Azovstal's reported labor
usage rates to reflect its verification findings.
Respondents did not comment on this issue.
Department Position
We agree with Petitioners. We verified the correct labor rates and
have incorporated those figures for the purpose of our final
determination.
Comment 11: Siliconmanganese Slag
Respondents claim that slag is a by-product that has relatively
little value in relation to the primary product produced, with the
slag's market value depending on its use. Respondents argue that the
Department should not value siliconmanganese slag using the full value
of ferroalloys since to do so would produce an aberrational surrogate
factor that is far greater in value than the slag at issue. Respondents
argue that siliconmanganese slag is a substitute for manganese ore and
is valued in the market based on its manganese content. Respondents
assert that the proper valuation for Ukrainian siliconmanganese slag is
a percentage of the surrogate value of manganese ore, rather than 100
percent of the value of ferroalloys.
Petitioners argue that the value of siliconmanganese should be
based on the value of ferroalloys because Respondents claim that the
input is used only as a substitute for manganese ore is unsupported.
Furthermore, Petitioners argue that the figures quoted by Respondents
regarding the alleged percentage of manganese content in
siliconmanganese slag and the alleged value of siliconmanganese as a
percentage of manganese ore are based on an unverified, untimely
submitted letter. However, Petitioners argue that if the Department
does decide to use the information provided by Respondents, as facts
available, the value of siliconmanganese slag should be calculated at a
higher percentage of the value of manganese ore.
Department Position
We agree with Respondents in part. Based on the Department's
knowledge of the steel production process and independent research
(including 15 Encyclopedia of Chemical Technology (4th Ed. 1995) at
963-980 and Velichko, et al., 1 Stal' (1993), a Ukrainian article which
explains the typical composition of siliconmanganese for a specific
Ukrainian plant), we have determined that the chemical makeup of
siliconmanganese is primarily manganese. Therefore, we have valued
siliconmanganese slag at 100 percent the value of manganese ore.
Comment 12: Limestone, Dolomite
Respondents claim that the Department should not value limestone
and dolomite based upon the full value of lime. Respondents argue that,
not only is limestone probably the least expensive of all raw materials
used in the industry, but, based on information from the U.S.
Geological Survey, in the United States limestone and dolomite are
valued at 8.39 percent and 8.68 percent of lime, respectively.
Respondents claim that the Department should, therefore, value
limestone and dolomite using the Survey's percentages.
Petitioners argue that the Department's valuation of limestone and
dolomite is correct. Petitioners claim that a single value was applied
to both products as information available because Respondents failed to
provide separate information on each factor. Petitioners claim that
Respondents are now attempting to file new information which is
untimely, and assert that, even if this information were admissible, it
is unusable because the alleged values are based on U.S. statistics.
Petitioners further argue that nothing in the record supports
Respondents' implication that the relative value of lime to limestone
in the United States is equivalent to that in Brazil and that there is
no information regarding the value of dolomite to limestone in any
country.
Department Position
We agree with Petitioners. Moreover, the Department's research
indicates that both limestone and dolomite are equivalent to lime. See
Making, Shaping and Treating of Steel (10th ed. 1985). We have,
therefore, continued to value limestone and dolomite at the full value
of lime for the final determination.
[[Page 61766]]
Comment 13: Wood
Respondents claim that the wood it utilizes in packing/loading was
verified through invoices provided to the Department.
Petitioners argue that the Department should use its PAI
information and conversion factor to value wood.
Department Position
Based on both Petitioners' and Respondents' submissions and briefs,
we have used Respondents' value for softwood and applied Petitioners'
conversion methodology to calculate a factor for wood packing. See
Final Determination Calculation Memorandum, dated October 24, 1997.
Comment 14: Publicly Available Information (PAI)
Petitioners argue that the Department should use the factor value
information contained in it submissions because this information is the
only reliable PAI on the surrogate values of the factors, and because
the information submitted by Respondents is based on an inappropriate
surrogate country and is fraught with errors.
Respondents argue that the Department should not use Petitioners'
PAI. Respondents argue that the Department should change its surrogate
from Brazil to Poland (Comment 3). Respondents argue that much of the
information on the record concerning material factors for Poland are UN
statistics corresponding to the statistics submitted by Petitioners
themselves for Brazil, as well as to statistics used by the Department
in its preliminary determination.
Department Position
We do not agree with Petitioners' contention that its own publicly
available information is the only reliable information for valuing
factors. However, as stated throughout this notice, the Department has
continued to use Brazil as the surrogate for the final determination.
Therefore, whether the information on Poland is reliable is irrelevant,
as we have only used PAI from Brazil to value factors in this
investigation.
Continuation of Suspension of Liquidation
On October 24, 1997, the Department signed a suspension agreement
with the Government of Ukraine (the Agreement). Therefore, we will
instruct Customs to terminate the suspension of liquidation of all
entries of cut-to-length carbon steel plate from Ukraine. Any cash
deposits of entries of cut-to-length carbon steel plate from Ukraine
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 from the United Steelworkers of America, an interested party
under section 771(9)(D) of the Act, on October 14, 1997. Pursuant to
these requests, we have continued and completed the investigation in
accordance with section 734(g) of the Act. We have found the following
margins of dumping:
------------------------------------------------------------------------
Weight-
average
Manufacturer/producer/exporter percentage
margin
------------------------------------------------------------------------
Azovstal................................................... 81.43
Ilyich..................................................... 155.00
Ukraine-Wide Rate.......................................... 237.91
------------------------------------------------------------------------
The Ukraine-wide rate applies to all entries of subject merchandise
except for entries from Azovstal and Ilyich.
ITC Notification
In accordance with section 735(d) of the Act, we have notified the
ITC of our determination. As our final 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 shall
be terminated. See section 734(f)(3)(A) of the Act. If, on the other
hand, the Commission's determination is affirmative, the Agreement
shall remain in force but the Department shall not issue an antidumping
duty order so long as (1) the Agreement remains in force, (2) the
Agreement continues to meet the requirements of subsection (d) and (1)
of the Act, and the parties to the Agreement carry out their
obligations under the Agreement in accordance with its terms. 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. 97-30391 Filed 11-18-97; 8:45 am]
BILLING CODE 3510-DS-P