[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