[Federal Register Volume 63, Number 50 (Monday, March 16, 1998)]
[Notices]
[Pages 12725-12744]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-6689]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-122-822, A-122-823]


Certain Corrosion-Resistant Carbon Steel Flat Products and 
Certain Cut-to-Length Carbon Steel Plate From Canada: Final Results of 
Antidumping Duty Administrative Reviews

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

ACTION: Notice of final results of antidumping duty administrative 
reviews.

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SUMMARY: On September 9, 1997, the Department of Commerce (``the 
Department'') published the preliminary results of its administrative 
reviews of the antidumping duty orders on certain corrosion-resistant 
carbon steel flat products and certain cut-to-length carbon steel plate 
from Canada. These reviews cover five manufacturers/exporters of the 
subject merchandise to the United States during the period August 1, 
1995, through July 31, 1996. We gave interested parties an opportunity 
to comment on our preliminary results. As a result of these comments, 
we have changed the results from those presented in the preliminary 
results of review.

EFFECTIVE DATE: March 16, 1998.

FOR FURTHER INFORMATION CONTACT: Lyn Baranowski (Dofasco, Inc. and 
Sorevco Inc. (``Dofasco'')); Carrie Blozy (Continuous Colour Coat 
(``CCC'')); Rick Johnson (Algoma Inc. (``Algoma'')); Doreen Chen, 
Gerdau MRM Steel (``MRM'')); N. Gerard Zapiain (Stelco, Inc. 
(``Stelco'')); Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th and Constitution 
Avenue, N.W., Washington DC 20230; telephone: (202) 482-3793.

SUPPLEMENTARY INFORMATION:

The Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the Tariff Act of 
1930, as amended (``the Act''), are references to the provisions 
effective January 1, 1995, the effective date of the amendments made to 
the Act by the Uruguay Round Agreements Act (``URAA''). In addition, 
unless otherwise indicated, all citations to the Department's 
regulations are to the regulations set forth at 19 CFR part 353 (April 
1997).

Background

    On September 9, 1997, the Department published in the Federal 
Register (62 FR 47429) the preliminary results of its administrative 
reviews of the antidumping duty orders on certain corrosion-resistant 
carbon steel flat products and certain cut-to-length carbon steel plate 
from Canada (``Preliminary Results''). We gave interested parties an 
opportunity to comment on our preliminary results. We received written 
comments from Algoma, CCC, Dofasco, MRM, Stelco, and from the 
petitioners (Bethlehem Steel Corporation, U.S. Steel Group (a unit of 
USX Corporation), Inland Steel Industries, Inc., Gulf States Steel Inc. 
of Alabama, Sharon Steel Corporation, Geneva Steel, and Lukens Steel 
Company). We have now completed these administrative reviews in 
accordance with section 751(a) of the Act.
    On October 10, 1996, petitioners requested that the Department 
determine whether antidumping duties had been absorbed by Algoma, CCC, 
Dofasco, MRM, and Stelco during the period of review (POR), pursuant to 
section 751(a)(4) of the Act. Section 751(a)(4) provides that the 
Department, if requested, will determine during an administrative 
review initiated two years or four years after publication of the order 
whether antidumping duties have been absorbed by a foreign producer or 
exporter subject to the order if the subject merchandise is sold in the 
United States through an importer who is affiliated with such foreign 
producer or exporter. Section 751(a)(4) was added to the Act by the 
URAA. The Department's interim regulations do not address this 
provision of the Act. Section 351.213(j)(2) of the Department's May 19, 
1997 regulations provides that, for transition orders as defined in 
section 751(c)(6)(C) of the Act, i.e., orders in effect as of January 
1, 1995, the Department will make a duty absorption determination upon 
request in administrative reviews initiated in 1996 and 1998. See 
Antidumping Duties; Countervailing Duties: Final Rule, 62 FR 27296, 
27394 (``'new regulations'''). Although these new regulations do not 
govern these administrative reviews, they do constitute a public 
statement of how the Department will proceed in construing section 
751(a)(4) of the Act. This

[[Page 12726]]

approach assures that interested parties will have the opportunity to 
request a duty absorption determination prior to sunset reviews for 
entries for which the second and fourth years following an order have 
already passed. Because the orders on corrosion-resistant carbon steel 
flat products and cut-to-length carbon steel plate from Canada have 
been in effect since 1993, these are transition orders within the 
meaning of section 751(c)(6)(C) of the Act. Thus, as there has been a 
request for an absorption determination in these reviews (initiated in 
1996), we are making a duty-absorption determination.
    The statute provides for a determination on duty absorption if the 
subject merchandise is sold in the United States through an affiliated 
importer. Respondents are themselves the importers of record for either 
some (Algoma, Stelco, and Dofasco) or all (CCC and MRM) of their 
respective sales to the United States (i.e., the exporter and the 
importer are the same entity). In addition, some of Dofasco's U.S. 
sales are made through a U.S. affiliate. Therefore, the importer and 
the exporter are ``affiliated'' within the meaning of 751(a)(4) for all 
Dofasco, MRM and CCC transactions, and for some Algoma and Stelco 
transactions. For corrosion-resistant subject merchandise, with respect 
to CCC, we have determined that there is a dumping margin on 2.72 
percent of its U.S. sales during the POR. For corrosion-resistant 
subject merchandise with respect to Dofasco, we have determined that 
there is a dumping margin on 16.05 percent of its U.S. sales. For 
corrosion-resistant subject merchandise with respect to Stelco, we have 
determined that there is a dumping margin on 16.50 percent of its U.S. 
sales. In addition, for CCC, Dofasco, and Stelco corrosion-resistant 
product, we cannot conclude from the record that the unaffiliated 
purchaser in the United States will pay the ultimately assessed duty. 
Under these circumstances, therefore, we find that antidumping duties 
have been absorbed by Dofasco on 16.05 percent of its U.S. sales, by 
CCC on 2.72 percent of its U.S. sales and by Stelco on 16.50 percent of 
its U.S. sales of corrosion-resistant product. For Algoma, MRM and 
Stelco plate, we have determined that there are zero or de minimis 
dumping margins on their U.S. sales during the POR. For Algoma, MRM, 
and Stelco plate, because there are no dumping margins, we find that 
antidumping duties have not been absorbed.
    Under section 751(a)(3)(A) of the Act, the Department may extend 
the deadline for completion of administrative reviews if it determines 
that it is not practicable to complete the review within the 
established time limit. On January 7, 1998, the Department published a 
notice of extension of the time limit for the final results in this 
case to March 9, 1998. See Extension of Time Limits for Antidumping 
Duty Administrative Reviews, 63 FR 808. The Department is conducting 
these reviews in accordance with section 751(a) of the Act.

Scope of Reviews

    The products covered by these administrative reviews constitute two 
separate ``classes or kinds'' of merchandise: (1) certain corrosion-
resistant steel and (2) certain cut-to-length plate.
    The first class or kind, certain corrosion-resistant steel, 
includes flat-rolled carbon steel products, of rectangular shape, 
either clad, plated, or coated with corrosion-resistant metals such as 
zinc, aluminum, or zinc-, aluminum-, nickel- or iron-based alloys, 
whether or not corrugated or painted, varnished or coated with plastics 
or other nonmetallic substances in addition to the metallic coating, in 
coils (whether or not in successively superimposed layers) and of a 
width of 0.5 inch or greater, or in straight lengths which, if of a 
thickness less than 4.75 millimeters, are of a width of 0.5 inch or 
greater and which measures at least 10 times the thickness or if of a 
thickness of 4.75 millimeters or more are of a width which exceeds 150 
millimeters and measures at least twice the thickness, as currently 
classifiable in the Harmonized Tariff Schedule (HTS) under item numbers 
7210.31.0000, 7210.39.0000, 7210.41.0000, 7210.49.0030, 7210.49.0090, 
7210.60.0000, 7210.70.6030, 7210.70.6060, 7210.70.6090, 7210.90.1000, 
7210.90.6000, 7210.90.9000, 7212.21.0000, 7212.29.0000, 7212.30.1030, 
7212.30.1090, 7212.30.3000, 7212.30.5000, 7212.40.1000, 7212.40.5000, 
7212.50.0000, 7212.60.0000, 7215.90.1000, 7215.90.5000, 7217.12.1000, 
7217.13.1000, 7217.19.1000, 7217.19.5000, 7217.22.5000, 7217.23.5000, 
7217.29.1000, 7217.29.5000, 7217.32.5000, 7217.33.5000, 7217.39.1000, 
and 7217.39.5000. Included are flat-rolled products of non-rectangular 
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 beveled or rounded at the edges. 
Excluded are flat-rolled steel products either plated or coated with 
tin, lead, chromium, chromium oxides, both tin and lead (``terne 
plate''), or both chromium and chromium oxides (``tin-free steel''), 
whether or not painted, varnished or coated with plastics or other 
nonmetallic substances in addition to the metallic coating. Also 
excluded are clad products in straight lengths of 0.1875 inch or more 
in composite thickness and of a width which exceeds 150 millimeters and 
measures at least twice the thickness. Also excluded are certain clad 
stainless flat-rolled products, which are three-layered corrosion-
resistant carbon steel flat-rolled products less than 4.75 millimeters 
in composite thickness that consist of a carbon steel flat-rolled 
product clad on both sides with stainless steel in a 20%-60%-20% ratio. 
These HTS item numbers are provided for convenience and Customs 
purposes. The written description remains dispositive.
    The second class or kind, certain cut-to-length plate, includes 
hot-rolled carbon steel universal mill plates (i.e., flat-rolled 
products rolled on four faces or in a closed box pass, of a width 
exceeding 150 millimeters but not exceeding 1,250 millimeters and of a 
thickness of not less than 4 millimeters, 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 hot-rolled carbon 
steel flat-rolled products in straight lengths, 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 millimeters or more in thickness and of a width which 
exceeds 150 millimeters and measures at least twice the thickness, as 
currently classifiable in the HTS under item numbers 7208.31.0000, 
7208.32.0000, 7208.33.1000, 7208.33.5000, 7208.41.0000, 7208.42.0000, 
7208.43.0000, 7208.90.0000, 7210.70.3000, 7210.90.9000, 7211.11.0000, 
7211.12.0000, 7211.21.0000, 7211.22.0045, 7211.90.0000, 7212.40.1000, 
7212.40.5000, and 7212.50.0000. Included are flat-rolled products of 
non-rectangular 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 beveled or 
rounded at the edges. Excluded is grade X-70 plate. These

[[Page 12727]]

HTS item numbers are provided for convenience and Customs purposes. The 
written description remains dispositive.
    The POR is August 1, 1995, through July 31, 1996.

Fair Value Comparisons

    To determine whether sales of subject merchandise from Canada to 
the United States were made at less than fair value, we compared the 
Export Price (EP) to the Normal Value (NV), as described in the 
``Export Price'' and ``Normal Value'' sections of the preliminary 
results of review notice (see Preliminary Results at 47431). On January 
8, 1998, the Court of Appeals for the Federal Circuit issued a decision 
in CEMEX. United States, 1998 WL 3626 (Fed Cir.). In that case, based 
on the pre-URAA version of the Act, the Court discussed the 
appropriateness of using constructed value (CV) as the basis for 
foreign market value when the Department finds home market sales to be 
outside the ``ordinary course of trade.'' This issue was not raised by 
any party in this proceeding. However, the URAA amended the definition 
of sales outside the ``ordinary course of trade'' to include sales 
below cost. See Section 771(15) of the Act. Consequently, the 
Department has reconsidered its practice in accordance with this court 
decision and has determined that it would be inappropriate to resort 
directly to CV, in lieu of foreign market sales, as the basis for NV if 
the Department finds foreign market sales of merchandise identical or 
most similar to that sold in the United States to be outside the 
``ordinary course of trade.'' We will match a given U.S. sale to 
foreign market sales of the next most similar model when all sales of 
the most comparable model are below cost. The Department will use CV as 
the basis for NV only when there are no above-cost sales that are 
otherwise suitable for comparison. Therefore, in this proceeding, when 
making comparisons in accordance with section 771(16) of the Act, we 
considered all products sold in the home market as described in the 
``Scope of Review'' section of this notice, above, that were in the 
ordinary course of trade for purposes of determining appropriate 
product comparisons to U.S. sales. Where there were no sales of 
identical merchandise in the home market made in the ordinary course of 
trade to compare to U.S. sales, we compared U.S. sales to sales of the 
most similar foreign like product made in the ordinary course of trade, 
based on the characteristics listed in Sections B and C of our 
antidumping questionnaire. We have implemented the Court's decision in 
this case, to the extent that the data on the record permitted.

Analysis of Comments Received

Algoma

    Comment 1: Petitioners argue that Algoma improperly excluded what 
Algoma deemed to be ``excessively long'' production runs from its 
calculation of product costs. Petitioners cite Final Determination of 
Sales at Less Than Fair Value: Titanium Sponge from Japan (``Titanium 
Sponge'') 49 FR 38687 (October 1, 1984) and Final Determination of 
Sales at Less Than Fair Value: Oil Country Tubular Goods from Austria 
(``OCTG from Austria'') 60 FR 33551 (June 28, 1995) as cases in which 
the Department disallowed adjustments to a hypothetical production cost 
model. Petitioners assert that the Department should direct Algoma to 
recalculate its costs to account for these production runs.
    Algoma claims that, contrary to petitioners' implication, it did 
not exclude any costs by excluding aberrant production runs from its 
productivity analysis. Algoma argues that the productivity matrices are 
merely the means of allocating Algoma's aggregate costs. Therefore, 
according to Algoma, petitioners' reliance on Titanium Sponge and OCTG 
from Austria, two cases in which the Department was concerned with the 
completeness of the cost reporting, is misplaced.
    Algoma also notes that it reported and discussed its exclusion of 
aberrant production runs on the record of this review ``well in advance 
of'' the Department's verification. Nevertheless, according to Algoma, 
petitioners have not offered any specific modifications of Algoma's 
guidelines that would continue to identify and exclude aberrant 
production runs. Algoma further argues that inclusion of aberrant runs 
would be inappropriate.
    Finally, Algoma argues that the appropriate standard by which to 
judge an allocation methodology is whether it is reasonable and 
representative under the circumstances and does not lead to a 
distortion of costs. By this standard, Algoma believes that, by basing 
its allocation on actual and verified production run times, it has met 
these criteria.
    Department's Position: We agree with respondent. First, as Algoma 
has argued, the Department is not determining whether an adjustment to 
actual costs is appropriate, which was the question faced by the 
Department in Titanium Sponge and OCTG from Austria. For example, in 
OCTG from Austria, the Department did not allow two variances which 
were adjustments to actual costs, because (as petitioners have noted) 
they reflected ``an improper hypothetical normalization of actual costs 
incurred during the POI.'' See OCTG from Austria at 33552. In this 
case, the Department fully reconciled actual costs at verification (see 
Algoma Cost Verification Report, September 2, 1997, pp. 2-3), and 
Algoma is not seeking an adjustment to these costs by excluding 
aberrant production runs from its allocative system. Therefore, 
petitioners' reliance on Titanium Sponge and OCTG from Austria is 
misplaced.
    With respect to the appropriateness of using an allocation 
methodology which excludes certain time data, we agree with respondent 
that in this case, Algoma's exclusion of excessively long production 
runs yields more accurate results. Indeed, if we were to accept 
petitioners' argument that all runs should be included in the cost 
calculations, manipulation of product-specific cost reporting would in 
fact be facilitated. For example, a disproportionate share of actual 
costs could be shifted to a product not sold in the United States 
simply through the application of purported ``equipment breakdowns'' 
during production runs of that product. Clearly, such a result does not 
reflect a product's actual costs. In fact, in this case we believe that 
the integrity of the allocation system employed by Algoma is supported 
by the fact that the aberrant production runs have been excluded.
    Comment 2: Petitioners allege that, contrary to section 773A(a) of 
the statute, Algoma failed to report U.S. inland freight expenses in 
the currency incurred. Specifically, petitioners assert that Algoma's 
U.S. inland freight expenses incurred in U.S. dollars were converted 
using Algoma's ``projection'' of what the average exchange rate was 
going to be for the month in which the payment was made, instead of 
using the actual exchange rate.
    Petitioners further point out that, because Algoma reports currency 
gains and losses, it must maintain records of its U.S. inland freight 
expenses in the currency incurred. Petitioners note that, given the 
number of U.S. sales, reporting would not have imposed a burden on 
respondents. Petitioners also point out that, because Algoma is 
participating in its third administrative review, it ``clearly'' had 
notice of the reporting requirement.
    According to petitioners, the Department should apply adverse facts 
available to Algoma's U.S. inland freight expenses, because Algoma 
withheld the requested information and thus did not

[[Page 12728]]

act to the best of its ability in providing the information.
    Algoma contends that it was not reasonably possible to report these 
amounts in U.S. dollars because that information is not maintained 
electronically in Algoma's accounting records. Algoma does not regard 
as credible petitioners' contention that the recording of gains and 
losses on foreign currency transactions indicates an ability to report 
transaction-specific data to the Department. Specifically, Algoma 
claims that these gains and losses are based on account balances, not 
on individual transactions.
    Furthermore, Algoma argues that there would have been no advantage 
to the company to deliberately withhold the data, because the exchange 
rate fluctuated very little during the POR.
    Finally, Algoma argues that its reporting of these expenses in 
Canadian dollars was consistent with its practice in the normal course 
of business and with the manner in which these expenses have been 
reported in past reviews.
    Department's Position: We agree with respondent. First, we note 
that Algoma has reported U.S. inland freight expenses in Canadian 
dollars in past reviews of this case. Moreover, the Department reviewed 
Algoma's reporting of these expenses at verification in the most 
recently completed segment of this proceeding. See Memorandum to the 
File: Algoma Sales Verification Report, August 12, 1996, which has been 
added to the record of this proceeding, at page 6 (``Algoma stated that 
it bills its U.S. customers in U.S. dollars but that Algoma maintains 
its records in Canadian dollars.'' See also pp. 10-13, the Department's 
review of ten U.S. sales traces, which revealed no discrepancies in 
Algoma's reporting). The Department accepted Algoma's method of 
reporting these expenses. Furthermore, Algoma stated for the record of 
this review that there ``have been no changes to Algoma's financial 
accounting practices since the Department conducted its verification of 
Algoma's COP questionnaire responses in the second administrative 
review'' (June 3-6, 1996). See Algoma's Section D response at page 16. 
We therefore do not believe that Algoma maintains these records in U.S. 
dollars.
    Algoma has reported these expenses in a manner consistent with 
their record-keeping in the normal course of business. Furthermore, 
given the relatively stable exchange rate over the period in which 
these sales occurred (the USD/CD exchange rate ranged from 
approximately .72 to .75 for the POR, with a beginning POR rate of 
approximately .732 and an ending POR rate of approximately .727), 
reporting these expenses in Canadian dollars would not produce a 
significant effect on the Department's dumping calculations. Therefore, 
we have made no adjustments to Algoma's reported U.S. inland freight 
expenses for the final results of review.
    Comment 3: Petitioners allege that Algoma may not have reported 
certain U.S. sales, based on the fact that Algoma reported commissions 
for some U.S. customers in the last six months of 1995, yet did not 
report sales to these customers in the 1995 portion of the POR (i.e., 
August through December).
    Algoma notes that the Department traced and reconciled its sales 
quantities and values at verification. Algoma maintains that the 
apparent discrepancy identified by petitioners is explained by the way 
Algoma pays its commissions. See Rebuttal Brief at page 15 (business 
proprietary version).
    Department's Position: We disagree with petitioners. Petitioners' 
speculation that Algoma may not have reported certain U.S. sales is 
contradicted by information that the Department examined at 
verification, at which time we tied Algoma's reported U.S. sales to its 
sales register and annual report. See Algoma Cost Verification Report, 
Exhibit 17. Furthermore, record evidence supports Algoma's explanation 
of the way Algoma pays its commissions. As the discussion of this issue 
involves business proprietary information, see Exhibit 7 of Algoma's 
supplemental questionnaire response (December 20, 1996) (business 
proprietary version).
    Based on these facts, we determine there is no basis to suspect 
that Algoma did not report certain U.S. sales.
    Comment 4: Petitioners contend that Algoma should have reported 
commissions on a transaction-specific basis, instead of on a six-month 
average basis, given that Algoma has reported the ``exact payment 
schedule'' for its commission sales.
    Algoma asserts that transaction-specific reporting in this instance 
is neither warranted nor possible because of the manner in which 
commissions were actually calculated and paid in the normal course of 
business. Furthermore, Algoma states that petitioners' alternative 
methodology would be mathematically incorrect and would not reflect the 
actual amount of commissions paid on the individual sales in question. 
Finally, Algoma argues that its allocation of commissions is in 
accordance with the Department's policy to accept such allocations if 
they are not inaccurate or distortive.
    Department's Position: We agree with petitioners in part and 
respondents in part. With regard to reporting U.S. direct expenses such 
as commissions, the Department permits respondents to use averages only 
for expenses that cannot be tied to a specific sale. See Antidumping 
Questionnaire at page 4. When direct expenses cannot reasonably be tied 
on a sale-by-sale basis, it is the Department's clear preference to 
apply an allocation methodology at the most specific level permitted by 
the respondent's records kept in the normal course of business. See, 
e.g., Certain Porcelain-on-Steel Cookware from Mexico: Final Results of 
Antidumping Duty Administrative Review, Comment 6, 62 FR 42496, 42501 
(August 7, 1997), in which the Department accepted respondents' 
allocation of a direct expense (freight).
    Based on information on the record with respect to how Algoma pays 
commissions (see Exhibit 7 of Algoma's supplemental questionnaire 
response), we believe that it was appropriate for Algoma to report 
commissions on a customer-specific basis over a period of time. 
However, it is also clear that commissions were paid by Algoma based on 
monthly shipments, and not semi-annually. Therefore, Algoma should have 
reported its U.S. commissions on a monthly basis instead of a semi-
annual basis.
    The Department has therefore adjusted Algoma's reported commissions 
as appropriate for the final results of review. See Algoma's Final 
Analysis Memorandum at page 2.
    Comment 5: Petitioners argue that Algoma's adjustment to normal 
value for pre-processing freight must be denied, as such charges should 
be included in the cost of manufacture. First, petitioners note that 
section 773(a) of the statute requires that only those movement charges 
``incident to bringing the foreign like product from the original place 
of shipment to the place of delivery to the purchaser'' shall be 
deducted from normal value. According to petitioners, the Department 
has interpreted ``original place of shipment'' to mean the production 
facility. Because the cost of the outside processing has been included 
in the cost of manufacture, petitioners conclude that the outside 
processor's plant is a production facility.
    Second, petitioners argue that, if the Department were to allow 
such freight expenses to be deducted from normal value, a respondent 
could manipulate dumping margins by, for example, performing certain 
processing at its own

[[Page 12729]]

facility for U.S. sales, while having the same processing performed by 
an outside processor for the comparison sales in the home market.
    Third, petitioners claim that the Department has determined in 
other cases that the cost of shipping unfinished merchandise to outside 
processors should be treated as a cost of manufacturing, and not a 
movement charge, citing, inter alia, the less-than-fair-value (LTFV) 
investigation of this proceeding. Furthermore, petitioners contend that 
respondents CCC and Stelco in this proceeding have been reporting such 
charges as manufacturing costs.
    Accordingly, petitioners assert that the Department should deny 
these normal value adjustments, and should upwardly adjust Algoma's 
costs to include these freight expenses.
    Petitioners additionally contend that, in the event the Department 
does not deny this adjustment in full, it should reduce the claimed 
adjustment using the average freight costs to the outside processors at 
one location (and increase the manufacturing costs for the affected 
control numbers by the same amount).
    Algoma argues that the Department addressed this precise issue in 
the last review, and that the Department's position in that review 
should be upheld in this review.
    Department's Position: We agree with respondent that Algoma's 
adjustment to normal value for pre-processing freight is allowable. As 
stated in the final results of the second review of this proceeding, 
``the freight from Algoma to the further processor is a movement charge 
deductible pursuant to section 772(a)(6)(B)(ii) of the Act because it 
is not freight incurred in the process of manufacturing subject 
merchandise but freight incurred in sending subject merchandise for 
further processing at the customer's request as part of the sale . . . 
In order to insure that a proper comparison is made with ex-factory 
home market products and ex-factory U.S. market products, all ex-
factory freight expenses need to be excluded from the price.'' See 
Final Results of Antidumping Administrative Reviews on Certain 
Corrosion-Resistant Carbon Steel Flat Products and Certain Cut-to-
Length Carbon Steel Plate from Canada (``1994/95 Canadian Steel''), 62 
FR 18448, 18453 (April 15, 1997). As there is no record evidence of any 
change in the facts of the case, and because there has been no change 
in statute or Department regulations since the publication of the final 
results of the second review, there is no basis to revisit our 
decision, with the exception of the additional argument raised by 
petitioners for this review.
    With respect to petitioners' new argument in this review that the 
allowance of such freight deductions could lead to margin manipulation 
by respondent, we note that the rationale for allowing such a deduction 
in the first place is to compare ex-factory prices for U.S. sales to 
ex-factory prices of home market sales, in order to ensure that there 
are no distortions to actual prices. Moreover, petitioners have pointed 
to no evidence on the record suggesting that Algoma has positioned its 
own processing facilities, in Canada, significantly closer to its U.S. 
customers. Finally, even if such processing facilities owned by Algoma 
did exist, petitioners have not even attempted to show that the pattern 
suggested by petitioners exists with respect to Algoma: namely, that 
respondent could manipulate its dumping margins by performing 
processing at its own facility for U.S. sales, while having the same 
processing performed by an outside processor for the comparison sales 
in the home market. Therefore, we do not find that petitioners' 
speculation in this regard warrants reversal of our position on 
Algoma's freight expenses.
    Comment 6: Petitioners allege that the Department made a 
ministerial error involving a currency conversion with regard to 
Algoma's U.S. inland freight expenses. Respondent agrees with 
petitioners.
    Department's Position: We agree and have corrected this error. See 
Algoma's Final Results Analysis Memorandum at page 2.

CCC

    Comment 7: Petitioners argue that CCC improperly reported the value 
of steel substrate purchased from Stelco. Petitioners state that the 
Department's July 17, 1997 questionnaire directed CCC to recalculate 
its cost data for Stelco substrate based on its transfer price and to 
submit a new COP/CV cost file reflecting only this change. Petitioners 
note that the cost of Stelco substrate as well as non-Stelco substrate 
changed in the revised cost submission. See CCC's response to the 
Department's supplemental questionnaire (July 31, 1997). Petitioners 
continue that because the cost of non-Stelco substrate changed, the 
Department should not rely on the cost data from CCC's third 
supplemental response. Moreover, they argue that because there is no 
reliable means of identifying Stelco substrate and non-Stelco 
substrate, the Department should recalculate CCC's cost data for all 
control numbers, citing Final Results of Antidumping Administrative 
Reviews on Certain Corrosion-Resistant Carbon Steel Flat Products and 
Certain Cut-to-Length Carbon Steel Plate from Canada (``1994/95 
Canadian Steel''), 62 FR 18448, 18463 (April 15, 1997). Petitioners 
maintain that the Department should change the value of all control 
numbers by an amount equal to the difference between reported transfer 
price and cost for products reported by CCC as Stelco substrate.
    Respondent argues that, in its July 31, 1997 response to the 
Department's supplemental questionnaire, it revised the cost of all 
control numbers that used Stelco substrate to reflect the invoice price 
charged by Stelco. CCC notes that changes were made on a work order-
specific basis, and that control numbers were comprised of numerous 
work orders, some of which used Stelco substrate and others which did 
not. CCC concedes that the data field in the sales response which 
identifies the control number as containing either Stelco or non-Stelco 
coils is incorrect with respect to certain sales. CCC acknowledges that 
many control numbers contain both Stelco and non-Stelco coils. CCC 
maintains, however, that the accuracy of the cost submission is 
unaffected by the error in the sales response.
    CCC asserts that the accuracy of its July 31, 1997 cost submission 
can be verified by cross-referencing control numbers to work orders 
provided in Exhibit 28 of CCC's December 20, 1996 Supplemental 
Response. CCC adds that cost data changed for a control number that was 
reported in the sales response as being produced from non-Stelco 
substrate for one of two reasons: either the sales response 
misidentified the coil origin; or CCC was unable to identify the 
specific work orders for the merchandise. CCC reports that, in the 
latter case, it used a weighted average of all work order costs for 
either painted or unpainted merchandise, as appropriate.
    In conclusion, CCC argues that the Department should accept CCC's 
cost response as correct. CCC further contends that, in the event the 
Department determines that an adjustment is necessary, the Department 
should use CCC's calculation for the weighted average difference 
between Stelco's transfer price and cost of manufacture.
    Department's position: While we agree with petitioners that there 
are some minor discrepancies concerning CCC's costs, we do not agree 
that these discrepancies are sufficient to discredit CCC's cost data. 
In the Department's

[[Page 12730]]

July, 17, 1997 letter to CCC, we requested that:

    ``[f]or all production of subject merchandise using steel 
substrate provided by Stelco, Inc., please recalculate CCC's cost 
data based on the transfer price (not cost of production) of such 
steel substrate. Please submit your COP/CV cost file (which, with 
the exception of this revision to the cost data, should be identical 
to your most recent submission) * * *''

    There is no evidence to suggest that CCC failed to comply with the 
Department's request to revalue, at the invoice price paid by CCC, all 
control numbers that used Stelco substrate. In addition, based on 
information on the record of review, we agree with CCC that the 
original reporting for certain control numbers was inaccurate. 
Moreover, the accuracy of CCC's revised costs for those control numbers 
can be confirmed by information on the record. See CCC Final Results 
Analysis Memorandum at pages 2 and 3.
    With respect to CCC's decision to report average costs for certain 
control numbers for which it could not identify the source of the 
substrate, we find respondent's methodology to be reasonable. 
Petitioners have provided no basis for concluding that CCC could have 
identified the source of the substrate, nor have they provided a 
``neutral'' basis for calculating the costs. Pursuant to section 776(b) 
of the statue, the Department may not apply an ``adverse'' inference 
unless the respondent has not acted to the best of its ability in 
complying with the Department's requests for information. Respondent's 
methodology represents an appropriate use of the ``facts available'' 
pursuant to section 776(a) of the statute.
    Comment 8: Petitioners argue that the Department should not accept 
CCC's allegedly improperly allocated price adjustments. Citing Final 
Results of Antidumping Duty Administrative Reviews Antifriction 
Bearings (Other than Tapered Roller Bearings) and Parts Thereof from 
France, Germany, Italy, Japan, Singapore, and the United Kingdom 
(``AFBs 1996''), 61 FR 66472, 66498 (December 17, 1996), Final Results 
of Antidumping Duty Administrative Reviews Antifriction Bearings (Other 
than Tapered Roller Bearings) and Parts Thereof from France, Germany, 
Italy, Japan, Singapore, and the United Kingdom (``AFBs 1995'') 60 FR 
10900, 10929 (February 28, 1995), and Final Results of Antidumping Duty 
Administrative Reviews Antifriction Bearings (Other than Tapered Roller 
Bearings) and Parts Thereof from France, Germany, Italy, Japan, 
Singapore, and the United Kingdom (``AFBs 1993'') 59 FR 39729, 39759 
(July 26, 1993), petitioners maintain that longstanding Department 
practice requires price adjustments to be reported on a transaction-
specific basis. In support, they also cite to NSK Ltd. v. United 
States, 910 F Supp. 365 (CIT 1995) and Torrington Co. v. United States, 
926 F. Supp. 1151, 1159 (CIT 1996). Additionally, citing Torrington Co. 
v. United States, 832 F Supp. 365, 376 (CIT 1993) and Smith Corona v. 
United States, 713 F.2d 1568 (Fed. Cir. 1983), petitioners maintain 
that a price adjustment must have actually been paid on all sales to 
which it is allocated.
    Petitioners argue that CCC did not report price adjustments on a 
transaction-specific basis. They claim that in some cases CCC allocated 
adjustments on invoices without determining whether the adjustment 
applied to all transactions recorded on the invoice. They also assert 
that, for some customers, CCC applied adjustments across all sales 
(including subject and non-subject merchandise) when they could only 
tie the credit or debit note to a particular customer. Finally, 
petitioners maintain that CCC incorrectly allocated the adjustments.
    Petitioners state that the Department's new regulations (see 
Antidumping Duties; Countervailing Duties, 62 FR 27296 (May 19, 1997)) 
concerning allocated price adjustments are contrary to the Department's 
longstanding practice, established case law, and the URAA. However, 
petitioners argue that, even under its new regulations, the Department 
must continue to deny CCC its claimed price adjustments.
    Petitioners maintain that CCC was able to report some of its price 
adjustments on a transaction-specific basis, and this indicates that 
CCC therefore could have reported all of its price adjustments in this 
manner. Because CCC did not do so, petitioners contend that CCC did not 
act to the best of its ability in responding to the Department's 
request for information. They continue that, because CCC did not report 
the total number of sales to which allocated adjustments applied, an 
adverse inference must be applied. Petitioners argue that the 
Department should reject all of CCC's claimed adjustments in both the 
home market and the U.S. market. As facts available, petitioners argue 
that the Department should apply the highest debit for any sale in the 
home market to all sales for which a debit was reported. In the U.S. 
market, petitioners argue that the Department should apply the highest 
credit for any sale to all sales for which a credit was reported.
    Respondent argues that CCC's reported price adjustments should 
again be accepted by the Department as they were in the first and 
second administrative reviews. Respondent notes that the Department 
rejected petitioners' arguments concerning CCC's price adjustments in 
the first and second administrative reviews and that the Department 
verified CCC's methodology in the second administrative review. CCC 
maintains that it has applied pricing adjustments in the same manner in 
this review.
    CCC argues that the Department's decision to accept CCC's claimed 
price adjustments is consistent with its decisions in other cases, 
citing Final Results of Antidumping Duty Administrative Reviews on 
Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts 
Thereof From France, Germany, Italy, Japan, Romania, Singapore, Sweden 
and the United Kingdom (``AFBs October 1997''), 62 FR 54043 (October 
17, 1997); Final Results of Antidumping Duty Administrative Reviews on 
Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts 
Thereof From France, Germany, Italy, Japan, Romania, Singapore, Sweden 
and the United Kingdom (``AFBs January 1997''), 62 FR 2081 (January 15, 
1997); and AFBs 1996. CCC states that the Department has verified in 
past reviews that CCC has applied its price adjustments using the most 
precise methodology possible and in a manner not unreasonably 
distortive. Therefore, CCC argues that, based on the precedents in this 
proceeding and the law, the Department should accept CCC's price 
adjustments.
    Department's Position: We agree with respondent. In light of the 
Department's determination in recent cases and the facts of the record, 
we accept CCC's post-sale price adjustments.
    In its rebuttal brief, CCC cites to AFBs January 1997 and AFBs 
October 1997, in which the Department allowed the use of allocations 
where they did not cause unreasonable inaccuracies or distortions. The 
Department, citing section 776 of the Tariff Act, determined that ``it 
is inappropriate to reject allocations that are not unreasonably 
distortive in favor of facts otherwise available where a fully 
cooperating respondent is unable to report the information in a more 
specific manner'' (AFBs January 1997 at 2090 and AFBs October 1997 at 
54049). Significantly, the Department treated these discounts, rebates 
and billing adjustments not as direct (or indirect) selling expenses 
but as ``direct adjustments necessary to identify the correct starting 
price.'' Id.

[[Page 12731]]

    The Department's policy represented a departure from earlier AFBs 
cases, to which petitioners cite in their case brief. In these earlier 
cases, the Department only permitted adjustments if they were reported 
on a transaction-specific basis or granted on a fixed and constant 
percentage of sales on all transactions which were reported. See AFBs 
1993 at 39759, AFBs 1995 at 10929, and AFBs 1996 at 66498.
    In the most recent AFBs cases, the Department addressed the 
relevance of Torrington Co. v. United States, 82 F.3d 1039, 1047-51 
(Fed. Circ 1996) (``Torrington I''), to the allocation of adjustments. 
The Department noted that, while the Court of Appeals for the Federal 
Circuit (``CAFC'') in its decision in Torrington I questioned whether 
price adjustments constituted expenses (see Torrington I at n.15), the 
Court maintained that, if the adjustments were expenses, they had to be 
treated as direct selling expenses. Significantly, ``the CAFC did not 
find that such price adjustments could not be based on allocations'' 
(AFBs October 1997 at 54050).
    In its rebuttal brief, CCC notes that it has allocated price 
adjustments in the same manner as in previous reviews. In the second 
administrative review, the Department conducted a verification of CCC's 
response, in which the Department examined many home market and U.S. 
market sales, several of which contained adjustments similar to the 
ones in question in this review (see CCC Verification Report for 
Certain Corrosion-Resistant Carbon Steel Flat Products From Canada at 
pp. 11-15 (August 8, 1996)). We note that while there were some 
discrepancies, CCC accounted for these discrepancies to the 
Department's satisfaction. In our final results in the second 
administrative review, the Department accepted CCC's allocation of 
price adjustments.
    Based on information on the record of this review, we find CCC to 
have fully cooperated and to have allocated its price adjustments using 
a methodology which is not unreasonably distortive. With respect to 
petitioners' comments on the legality of the Department's May 1997 
regulations, we note that this case is being conducted under the 
Department's regulations as they existed prior to May 1997, and 
therefore petitioners' comments are not applicable here.
    Comment 9: Respondent argues that the Department should recalculate 
G&A expenses to exclude antidumping legal expenses. CCC notes that the 
Department consistently has held that legal fees paid in connection 
with participating in an antidumping investigation or administrative 
review are not selling expenses. See Final Results of Administrative 
Review of Antidumping Duty Order on Color Television Receivers from the 
Republic of Korea, 58 FR 50333, 50366 (September 27, 1993); Final 
Results of Antidumping Duty Administrative Review on Television 
Receivers, Monochrome and Color, from Japan, 56 FR 28417, 38419 (August 
13, 1991). CCC also notes that the Court of International Trade has 
affirmed the Department's exclusion of antidumping legal expenses in 
the margin calculation. See, e.g., Federal-Mogul Corp. v. United 
States, 813 F. Supp. 856, 871 (CIT 1993) Daewoo Electronics Co., Ltd. 
v. United States, 712 F. Supp. 931, 947 (CIT 1989). CCC argues further 
that, in the second administrative review of this proceeding, the 
Department determined that CCC's antidumping legal expenses should be 
excluded from its calculation of the G&A expense ratio. See CCC Final 
Results Analysis Memo for Certain Corrosion-Resistant Carbon Steel Flat 
Products From Canada (August 13, 1997).
    Furthermore, CCC maintains that the Department has the information 
on the record needed to calculate G&A expenses exclusive of antidumping 
legal expenses. Respondent states that the antidumping legal expenses 
for the case were calculated from invoices received and paid by CCC 
during the POR. Respondent notes that, in its preliminary results 
notice, the Department rejected CCC's POR G&A calculations and 
recalculated the G&A expense ratio based on CCC's eleven month internal 
financial statement (see CCC's Supplemental Response at Exhibit 6, pg. 
14 (December 20, 1996)). CCC states that the Department failed to 
deduct the antidumping legal expenses when the Department recalculated 
the G&A expense ratio. CCC argues that, if the Department does not deem 
the exclusion of the antidumping legal expenses from the G&A to be a 
ministerial error, the Department should exclude antidumping legal 
expenses from total selling and administrative expense as a matter of 
law.
    Petitioners did not comment on this issue.
    Department's Position: We agree with respondent that the Department 
made a ministerial error in the calculation of the G&A expense ratio, 
and that antidumping legal expenses should have been deducted from 
total selling and administrative expenses. We have recalculated the 
general and administrative expense ratio to exclude antidumping legal 
expenses. See CCC Final Results Analysis Memorandum at page 3.
    Comment 10: Petitioners state that the Department should correct a 
ministerial error in its margin calculation program. They maintain that 
the Department erroneously calculated CCC's G&A for constructed value 
based on CCC's variable cost of manufacture. Instead, petitioners argue 
that G&A for CV should be calculated based on CCC's total cost of 
manufacture.
    CCC did not comment on this issue.
    Department's Position: We agree with petitioners. The Department 
has recalculated G&A for CV based on a percentage of total cost of 
manufacture. See CCC Final Results Analysis Memorandum at page 3.

Dofasco

    Comment 11: Respondent argues that the Department should value the 
painting services that Dofasco receives from Baycoat based on the cost 
of production, not the invoice price. Dofasco asserts that, although 
Baycoat initially invoices Dofasco at a price that is higher than its 
cost of production, Baycoat issues the equivalent of a cash ``rebate'' 
to Dofasco at year-end that reduces the invoice price so that it is 
equal to Baycoat's cost of production. This is required by the terms of 
the shareholder agreement. Dofasco maintains that it records both the 
initial invoice price and the year-end cash rebate in its accounting 
records. Consequently, Dofasco asserts that all painting services are 
effectively valued in Dofasco's normal accounting records at year-end 
at Baycoat's cost of production.
    Dofasco maintains that this situation is distinct from one in which 
intercompany profits are eliminated, because in this case, Dofasco 
actually receives a check from Baycoat at year-end. Dofasco argues that 
the Department should treat this situation as it would treat one 
involving a rebate that a company receives from a vendor. As such, 
respondent argues that the Department should change its methodology to 
include the rebate of profits from Baycoat to Dofasco in the 
calculation of total cost of manufacture.
    Alternatively, Dofasco urges the Department to offset Dofasco's 
general and administrative expenses (G&A) with the ``miscellaneous 
income'' that is the difference between the invoice price and the net 
cost to Dofasco. Respondent cites Final Determination of Sales at Not 
Less than Fair Value: Saccharin from Korea (``Saccharin from Korea'') 
59 FR 58826, 58828 (November 15, 1994) and U.S. Steel Group v. United 
States (``U.S. Steel v. United States''), Slip Op. 97-95,

[[Page 12732]]

CIT (July 14, 1997) as two cases in which the Department offset G&A by 
miscellaneous income relating to production operations of the subject 
merchandise. In the instant case, respondent maintains that the 
remission of profits constitutes miscellaneous income.
    Petitioners contend that it is the Department's practice, as 
reflected under 19 CFR 351.407(b) (regulations which the Department has 
noted, in the section of this notice entitled ``Applicable Statute and 
Regulations,'' do not apply to this case), to determine the value of a 
major input purchased from an affiliated person based on the higher of 
the price paid by the exporter, the amount usually reflected in sales 
of the major input in the market under consideration, or the cost to 
the affiliated person of producing the major input. Petitioners note 
that, in the most recently concluded segment of this proceeding, the 
Department valued Baycoat's services to Dofasco and Stelco based on the 
transfer price.
    Petitioners assert that the Department rejected a similar argument 
made by Stelco in the last review. In that case, Stelco argued that the 
profit remitted by Baycoat constituted a rebate on each invoice which 
should be deducted from transfer price. Petitioners note that the 
Department denied the requested adjustment under the major input rule. 
See 1994/95 Canadian Steel at 18464. Dofasco, petitioners assert, has 
made no compelling new arguments warranting a reversal of that prior 
decision. In addition, petitioners cite Mechanical Transfer Presses 
from Japan: Final Results of Antidumping Administrative Review (``MTPs 
from Japan''), 61 FR 52910, 52913-14 (October 9, 1996) as a case in 
which respondent's requested downward adjustment from transfer price to 
cost was not allowed.
    Petitioners additionally contend that Baycoat's profit remission is 
not analogous to a rebate. Rebates are generally related to sales in 
some way (i.e., Baycoat would offer Dofasco a rebate if Dofasco 
purchased a certain amount of goods from Baycoat), but in this case, 
Dofasco receives its share of Baycoat's profits without regard to 
Dofasco's purchases from Baycoat. There is nothing on the record which 
demonstrates that this distribution is in any way related to the 
quantity or value of specific sales. Consequently, petitioners argue 
that the Department should maintain the methodology it adopted in the 
second administrative review and value Baycoat's painting services at 
transfer price.
    Petitioners argue that Dofasco's suggested alternative, to offset 
Dofasco's G&A expenses by year-end profit received from Baycoat, is 
faulty for two reasons. First, petitioners contend that the remission 
of profits from Baycoat to Dofasco does not constitute miscellaneous 
income as it is not income which Dofasco receives from secondary or 
auxiliary activities, but instead is income that is produced by the 
corporation's principal business activities. In fact, petitioners argue 
that the record shows that Dofasco itself does not classify income it 
receives from Baycoat as ``miscellaneous income.'' Second, petitioners 
assert that even if the profit were to be considered miscellaneous 
income, an offset would be improper because an offset cannot be made to 
G&A when the cost relating to the activity in question is in the cost 
of manufacture. See Certain Cold-Rolled and Corrosion-Resistant Steel 
Flat Products from Korea: Final Results of Antidumping Administrative 
Review (``Steel from Korea'') 62 FR 18404, 18447 (April 15, 1997) and 
Final Determination of Sales at Less Than Fair Value: Canned Pineapple 
Fruit from Thailand (``Pineapple from Thailand''), 60 FR 29553, 29566 
(June 5, 1995).
    Nevertheless, should the Department consider granting the offset, 
petitioners maintain that the amount proposed by respondent must be 
rejected as it reflects the period of review rather than the calendar 
year 1995, which is the period upon which G&A is based. Petitioners 
assert that it would be distortive for the Department to apply the 
profit for one period to the G&A of another period. Finally, should the 
Department decide to include the profit from Baycoat as an offset, 
petitioners suggest that the Department also include other gains and 
losses related to other affiliates.
    Department's Position: We agree with petitioners that it is 
appropriate to use an unadjusted transfer price in valuing Baycoat's 
painting services to Dofasco. Sections 773(f)(2) and (3) of the Act 
direct the Department to value inputs supplied by affiliated persons at 
the transfer price between the entities provided that such a price 
reflects the price commonly charged in the market and, for major 
inputs, is not below the cost of producing the input. In AFBs January 
1997 (at 2115), the Department found that ``in the case of a 
transaction between affiliated persons involving a major input, we will 
use the highest of the transfer price between the affiliated parties, 
the market price between unaffiliated parties, and the affiliated 
supplier's cost of producing the major input.'' As painting services 
obtained from Baycoat constitute a major input, we will continue to use 
the transfer price, as it is above cost and we have no other 
information regarding market values. Furthermore, we will not adjust 
the transfer price in any manner, whether it be a year-end cash rebate 
or an offset to G&A, for the reasons stated in Comment 22 of this 
notice (Stelco).
    While it is inappropriate to adjust transfer price in any manner, 
there are further reasons to reject Dofasco's alternatives to adjusting 
the transfer price by a year-end cash rebate. With respect to a price-
to-cost offset to G&A, in MTPs from Japan, the Department rejected an 
argument to offset the transfer price and determined that as the 
transfer price is higher than the cost of production, ``it would be 
inappropriate to ignore the transfer price.'' See MTPs from Japan at 
52914. Also, we note that G&A expenses are defined as expenses incurred 
in performing general and administrative activities and are shown under 
the operating expense portion of a company's income statement. See 
Siegel, Joel G. and Jae K. Shim, Barron's Dictionary of Accounting 
Terms (1987), at 191. Profit remission from Baycoat is not an activity 
that Dofasco has classified in its own accounting records as a general 
or administrative expense.
    Respondent cites Saccharin from Korea and U.S. Steel Group v. 
United States as cases in which ``miscellaneous income'' was permitted 
as an offset to G&A because this income was related to production 
operations. However, in the instant case, remission of profits does not 
constitute miscellaneous income, which is traditionally defined as 
income received from secondary or auxiliary activities. See Kieso and 
Weygandt, Intermediate Accounting, 5th Ed. (1986) at 118. The record 
shows that Dofasco classifies this income as income from steel 
operations in its financial statements. See Dofasco's Cost Verification 
Report, July 17, 1997, Exhibit 4 at 12 (hereinafter ``Dofasco 
Verification Report'').
    Comment 12: Petitioners claim that the reconciliation Dofasco 
performed at verification between Dofasco's costs as kept in its normal 
accounting system and Dofasco's reported costs was incorrect, 
incomplete and based on unreliable information.
    First, petitioners suggest that the record shows that there were 
significant discrepancies in the total costs and quantities between the 
response and the financial statements in three out of the four prime 
product categories.
    Second, petitioners allege that Dofasco attempted to reconcile its 
reported costs to its earning statements, and not to its inventory 
values, which petitioners claim is standard practice.

[[Page 12733]]

Petitioners contend that Dofasco did not explain the relationship 
between values from earnings statements and inventory. Also, 
petitioners argue that Dofasco did not clarify which elements of cost 
are included in the costs of the earnings statements.
    Third, petitioners contend that the reconciliation was invalid 
because Dofasco's comparisons were not made on an ``apples-to-apples'' 
basis; the two sets of costs that were being compared did not reflect 
the same items and were not based on data from the same time periods.
    Fourth, petitioners further argue that Dofasco failed to include 
third country production costs in the calculation of the reported 
costs, and that this alleged failure is contrary to the Department's 
practice. See Certain Hot-Rolled Lead and Bismuth Carbon Steel Products 
from the United Kingdom: Final Results of Antidumping Administrative 
Review, 60 FR 44009, 44012 (August 24, 1995). Petitioners maintain that 
the Department's comparison of costs and quantities reported in the 
response (which petitioners insist did not include third country 
production) to costs and quantities in the earnings statements (which 
petitioners claim did include these costs) was improper; any 
reconciliation based on this inconsistent comparison, petitioners 
assert, is therefore meaningless.
    Fifth, petitioners state that an additional defect in Dofasco's 
reconciliation of cost concerns the fact that Dofasco reported cost of 
goods sold (COGS) instead of the cost of manufacture, which petitioners 
claim is contrary to the Department's practice. Petitioners argue that 
Dofasco's December 23, 1996 response indicates that Dofasco added an 
adjustment based on changes in inventory to COM to convert it to COGS. 
In the reconciliation, petitioners assert that Dofasco compared 
reported costs, based on COGS, to the costs in the earnings statement, 
based on cost of goods manufactured. Petitioners state that the 
verification exhibits show that costs from the earnings statement were 
adjusted by inventory change to reflect COM.
    Sixth, according to petitioners, Dofasco did not use the yield loss 
rates maintained in its normal cost accounting system to prepare the 
costs in its response. Instead, petitioners point out that Dofasco used 
yields calculated by PaYs, its management cost system. Petitioners 
maintain that Dofasco acknowledged that there were differences in the 
bases upon which yields were calculated under the two systems but it 
did not account for these differences in the reconciliation. In 
addition, petitioners contend that the Department did not verify 
seemingly aberrational yield loss rates at verification.
    Seventh, petitioners claim that Dofasco improperly included certain 
products and costs in its reconciliation for various product groups; 
this inclusion makes a proper reconciliation more improbable.
    Eighth, petitioners argue that Dofasco has not properly treated 
fixed costs. According to petitioners, in its reconciliation, Dofasco 
adjusted the ``costs per earning statement'' to arrive at a variable 
cost of manufacture (VCOM) amount and then added only one fixed cost 
(depreciation) to calculate a total cost of manufacture (TOTCOM). This 
reconciliation, petitioners maintain, is inconsistent with the response 
where Dofasco stated that TOTCOM included VCOM as well as ``numerous'' 
fixed costs, such as an allocation from sundry cost of sales, the 
ongoing costs of idled operations, and the expense portion of capital 
projects. Therefore, for the reconciliation, Dofasco compared VCOMs 
from the response, which petitioners argue must have no fixed costs, to 
VCOMs from the earnings statement, which petitioners surmise to include 
all fixed costs other than depreciation.
    Finally, petitioners assert that the total production costs and 
quantities which Dofasco attempted to reconcile to its accounting 
records were unreliable as their cost accounting (PaYs) categories were 
comprised of both subject merchandise and alloy products. The costs and 
quantities associated with the alloy products were important to a 
proper reconciliation, but petitioners argue that Dofasco did not 
explain its calculations relating to alloy products and did not 
properly corroborate quantities and costs for these products, thus 
making a proper reconciliation impossible.
    Petitioners maintain that all of these failures contributed to 
Dofasco's inability to reconcile its reported costs to the accounting 
records. As such, petitioners assert that the Department should reject 
the reported costs, citing numerous cases in support of this assertion 
See, e.g., Certain Welded Carbon Steel Piles and Tubes from Thailand: 
Preliminary Results of Antidumping Administrative Review, 62 FR 17590, 
17593-94 (April 10, 1997); and Cut-to-Length Carbon Steel Plate from 
Sweden: Preliminary Results of Antidumping Administrative Review, 61 FR 
51899 (October 4, 1996). Petitioners also argue, citing Notice of Final 
Determination of Sales at Less Than Fair Value: Certain Pasta from 
Turkey, 61 FR 30309, 30312 (June 14, 1996), that the Department's 
practice in such cases is to apply total facts available. Petitioners 
argue that, should the Department decide to use partial facts 
available, the Department should use the highest reported cost for each 
inventory category as the cost for all products in that category. See 
Granular Polytetrafluroethylene Resin from Italy: Final Results of 
Antidumping Administrative Reviews, 62 FR 5590 (February 6, 1997).
    Respondent asserts that petitioners' argument concerning Dofasco's 
cost reconciliation is without merit and demonstrates petitioners' 
basic misunderstanding of the thorough analysis performed by the 
Department verifiers. Dofasco states that the Department spent days at 
verification ensuring that detailed product costs properly reconciled 
to the average costs of the aggregate product groupings per Dofasco's 
financial statements. In fact, Dofasco asserts that the Department's 
cost verification report states that the Department was able to tie 
costs calculated by PaYs to costs per earnings statement.
    Regarding petitioners' contention that there is a fundamental flaw 
in Dofasco's reconciliation because costs were reconciled to the 
earnings statements and not to inventory values, Dofasco argues that a 
basic cost accounting concept is that inventory values represent the 
costs at one point in time and that the cost of goods manufactured from 
the earnings statement represents the costs over the period of time 
corresponding to the cost reporting period. The Department's 
reconciliation, therefore, was based on the reconciliation of reported 
costs for the one year period to the total costs actually incurred 
during the same period.
    Respondent also asserts that petitioners' argument that Dofasco 
performed its reconciliation solely on the basis of a comparison of 
per-unit costs is inaccurate. In fact, Dofasco claims that it 
reconciled the submission to both the per-unit costs and the total 
costs. Dofasco claims that the alleged differences in the total cost 
and total quantities in the verification exhibits are a result of 
timing differences in the reported production quantities and represent 
a reconciling item between the submission and the books. Thus, once the 
reconciling quantities are valued at the cost per the books, there is 
essentially no difference in the total costs. Dofasco states that, at 
verification, it was able to reconcile the fact that the per unit costs 
were comparable, and

[[Page 12734]]

also that the total costs were comparable.
    Dofasco disagrees with petitioners' argument that Dofasco failed to 
make ``apples-to-apples'' comparisons. According to Dofasco, the 
reported costs include all variances, sundry items, and depreciation. 
Dofasco contends that these same items were added to the earnings 
statement to ensure that the costs per the books for each of the 
selected product categories were on exactly the same basis as in the 
response. In addition, petitioners' allegation that the reported costs 
and the costs per the earnings statement are not for the same time 
period is factually incorrect, Dofasco maintains, as the earnings 
statement covers the period July 1, 1995 through June 30, 1996 
(Dofasco's fiscal period) and the Department expressly allowed Dofasco 
to base its reported costs on its fiscal period rather than the POR.
    Additionally, Dofasco disputes petitioners' claim that Dofasco did 
not include third country production costs in the calculation of the 
reported cost. Dofasco maintains that, as explained in its Section D 
response, Dofasco accumulates the costs for each factory process and 
weight averages the actual production cost and existing inventory cost 
of that process to arrive at an average product cost that flows into 
the next process. At the time that a product is manufactured, the mill 
floor is not aware of the destination of the order and is therefore 
unable to track the cost of North American and offshore orders 
separately. Hence, the total production cost at a factory process 
includes the cost of both North American and third country shipments.
    Dofasco maintains that reported costs do in fact reconcile to both 
cost of goods manufactured and COGS, contrary to petitioners' 
allegation. Dofasco asserts that it adjusted TOTCOM to account for 
changes in its inventory only as a result of petitioners' suggestions 
and the Department's subsequent request to calculate inventory change 
on a quarterly basis. Regardless, Dofasco argues that the difference 
between the cost of sales per earning statement and the reported TOTCOM 
is insignificant.
    Dofasco states that the allegation regarding yield loss rates is 
incorrect because the production data for financial statement purposes 
and PaYs flows from common systems and thus, the overall source of the 
production figures for calculating yields is the same for financial 
statement purposes as PaYs. In addition, respondent states that the 
Department did verify and accept Dofasco's explanation of the aberrant 
yield loss rates at verification.
    Dofasco also disputes petitioners' claim that several products 
exist in Dofasco's reconciliation that do not exist in Dofasco's cost 
database. Dofasco states that the products at issue were products that 
Dofasco sold during the third administrative review period but did not 
produce during this period. Because Sorevco (an affiliated producer of 
subject merchandise) had produced these products and because the 
Department treats Dofasco and Sorevco as one entity, Dofasco reported 
per unit costs for such products based on Sorevco's costs. At 
reconciliation, Dofasco reported the cost for such products based on 
its own second administrative review costs because these were the 
actual costs associated with the products. Regardless, respondents 
assert that the difference this makes to the TOTCOM field is 
insignificant and represents petitioners' continued ``nitpicking.''
    According to Dofasco, petitioners' argument that Dofasco's 
treatment of fixed costs was faulty and that sundry expenses were not 
included in the calculation of VCOM is ``ridiculous.'' Dofasco asserts 
that a careful examination of the calculations will show that sundry 
expenses were included in VCOM, which explains why depreciation is the 
only item added to VCOM to calculate TOTCOM. For the reconciliation, 
Dofasco states that all fixed overhead costs were included in 
calculating the unit cost for the selected product costs.
    Finally, Dofasco disputes petitioners' claim that it failed to 
explain the nature of its calculations relating to alloy products. In 
fact, for the reconciliation, Dofasco had to include the cost of alloy 
products in order to calculate the total (and per unit) costs for 
products within the broad inventory groupings. Dofasco states that the 
cost of alloy products was calculated in exactly the same manner as the 
cost of subject goods. For purposes of the administrative review, 
however, alloy products are not in the scope of the review and 
therefore, Dofasco asserts that it was not required to submit any data 
related to alloy products on the record.
    Department's Position: We agree with respondents that the 
Department was satisfied with the outcome of verification and note that 
one of the Department's principle mandates at verification is to 
reconcile the cost response with the financial statements to a point at 
which the accuracy of the response is confirmed. In this case, at 
verification, we reconciled the reported costs with the financial 
statements and determined that Dofasco properly reported costs as 
incurred. ``Dofasco's product costs, as calculated by PaYs and reported 
to the Department, were comparable to Dofasco's costs per earnings 
statement (and hence, Dofasco's normal cost accounting system).'' See 
Dofasco Verification Report at page 7. However, we will address each 
argument made by petitioners and respondent in turn.
(1) Discrepancies in Three Out of Four Prime Product Categories
    The Department notes that costs for all of the categories reviewed 
(with the exception of galvanized waste and seconds) were reconciled 
such that the Department deemed the average costs to be ``comparable''. 
First, Dofasco has stated that differences between reported production 
quantities and the financial statements are timing differences. 
Petitioners have pointed to no compelling reason to dispute this 
explanation.
    Moreover, and more importantly, the Department notes that minor 
differences between reported and financial costs are expected at 
verification. A company's inability to reconcile costs exactly does 
not, however, render a company's response unuseable. See, e.g. Brass 
Sheet and Strip from the Netherlands: Final Results of Antidumping 
Administrative Review, 62 FR 51449, 51453-454 (October 1, 1997) and 
Final Determination of Sales at Less Than Fair Value: Large Newspaper 
Printing Presses and Components Thereof, Whether Assembled or 
Unassembled, From Japan, 61 FR 38139, 38154 (July 23, 1996). Rather, 
the Department's responsibility is to ensure that costs incurred for 
production of the subject merchandise during the POR have been properly 
reported, and that the allocations employed are not distortive. The 
Department reviewed the reported quantities and costs for these three 
categories at verification, and found that the costs were comparable. 
Concerning the fourth prime category for which there were more 
substantial differences in cost, Dofasco provided a reasonable 
explanation for this discrepancy. See Dofasco Verification Report at 
page 7-8.
(2) Reconciliation to Earnings Statements, Not Inventory Values
    The Department has the discretion to determine how to best 
reconcile the cost response at verification, as long as the 
reconciliation serves to confirm the overall validity of respondent's 
reported costs. In this case, the Department accepted Dofasco's 
reconciliation of the response to the earnings statements and not to 
inventory values. Furthermore, the Department did not request an 
inventory value reconciliation at

[[Page 12735]]

verification, but determined that a reconciliation to Dofasco's 
earnings statement would appropriately indicate whether Dofasco's 
reported costs were in line with Dofasco's normal cost accounting 
records. As stated in the Verification Agenda dated June 9, 1997 at 3-
4, the Department specifically asked Dofasco to ``obtain a 
reconciliation of the total POR cost of manufacturing costs per cost 
accounting system to the total of the per-unit manufacturing costs 
submitted to the Department.'' This is in fact what was accomplished at 
verification. See Dofasco Verification Report at page 7.
(3) Timing and Product Differences
    We agree with respondents that Dofasco's earnings statements were 
adjusted so that the cost response and the earnings statements 
reflected the same items. In fact, the Department expressly allowed 
Dofasco to report costs based on its fiscal period rather than the POR, 
as the two periods differed by only a month. See the Department's 
Antidumping Questionnaire dated September 9, 1996 at page D-1; Memo to 
The File from Rick Johnson dated November 12, 1996, and Dofasco's 
Section D Response dated November 13, 1996 at page D-2 and D-3. As 
such, the cost response and the financial statements reflected data 
from the same period.
(4) Third Country Production Costs
    In the first administrative review of this case, petitioners raised 
the concern that Dofasco did not include third-country production in 
its weighted-average cost calculations. As we noted in that review, 
``[t]he Department verified that Dofasco used costs incurred in its 
total production to determine the COP and CV of subject merchandise. 
Third country information was only disregarded when Dofasco weight-
averaged its costs to determine U.S. specific CV data and home market-
specific COP data.'' See Certain Corrosion-Resistant Carbon Steel Flat 
Products and Certain Cut-to-Length Carbon Steel Plate From Canada: 
Final Results of Antidumping Administrative Reviews (``1993/94 Canadian 
Steel'') 61 FR 13815 (March 28, 1996). Significantly, the CIT upheld 
the Department's finding, stating that ``Commerce's acceptance of 
Dofasco's methodology essentially finds a middle ground. Total 
production costs are incorporated into the COM, but final COP and CV 
are determined based on a weighted-average reflecting production for a 
particular market.'' See AK Steel Corp. et al. v. United States, Slip 
Op. 97-152, CIT (November 14, 1997) at page 14.
    While Dofasco no longer reports market-specific costs for the same 
control number, its methodology with respect to the incorporation of 
third country production data has not changed since the first review. 
Thus, there is no compelling new information on the record which 
indicates any failure to include third country production costs in the 
calculation of COP and which would warrant a reexamination of this 
issue. Therefore, the Department is maintaining the position adopted in 
the first review and upheld by the CIT that third country production 
information has been properly included and accounted for in Dofasco's 
cost calculations.
(5) Reconciliation to Cost of Goods Sold
    We agree in part with petitioners and respondents. We agree with 
petitioners that at verification, we compared the TOTCOM (effectively, 
cost of goods sold) from Dofasco's response to the cost of good 
manufactured from their accounting records. It would have been more 
appropriate to compare the reported costs to the costs in the earnings 
statement, had the two sets of numbers been calculated based on the 
same items (i.e., both inclusive or exclusive of the inventory change 
adjustment). However, the difference between the two sets of figures 
resulting from the inventory change adjustment is insignificant. See 
Dofasco Final Results Analysis Memorandum, page 9.
(6) Calculation of Yield Loss Rates
    We agree with petitioners that there may be some minor differences 
in the bases upon which yield loss rates were calculated in PaYs and in 
Dofasco's normal accounting system. However, these minor differences do 
not constitute a serious enough reason for rejecting the entire cost 
verification. We note that Dofasco has already acknowledged that there 
are minor differences between the yields calculated by PaYs as opposed 
to the yields calculated with Dofasco's normal cost accounting system. 
See Dofasco's December 23, 1996 response at 35-38. Significantly, the 
Department did not, as a result of the information provided by Dofasco, 
inform the company at that time that the difference provided a 
sufficient basis to question the use of PaYs as a reporting tool. 
Furthermore, the Department has found no evidence to contradict 
Dofasco's explanation regarding the reasons for the differences in the 
yields calculated by the two systems. Id.
    Concerning petitioners' contention that the Department did not 
verify Dofasco's explanation concerning aberrational yield loss rates, 
we disagree. In the second administrative review, the Department 
adjusted certain yield loss rates reported by Dofasco because the 
Department determined that there were certain aberrant yield loss rates 
which affected the total yield loss rates generated by PaYs. See 1994/
95 Canadian Steel at 18459. The Department stated that Dofasco did not 
offer an explanation of the apparently aberrational data. As such, for 
the final determination in the second administrative review, the 
Department applied facts available by excluding sales orders which 
incorporated what appeared to be inaccurate data and by upwardly 
adjusting Dofasco's reported cost of manufacture on all models by the 
percentage difference between the reported yield loss rate and the 
corrected yield loss rate. See 1994/95 Canadian Steel at 18468 (April 
15, 1997).
    However, for this review, Dofasco has provided an acceptable 
explanation regarding these apparently ``aberrational'' yields. 
Specifically, Dofasco stated that ``customization of an order often 
involves adding a piece of steel with the same characteristics as the 
existing steel being processed. Dofasco added that this customization 
usually occurs at either the pickle line or the galvanizing line * * *. 
Therefore, Dofasco explained that the yield loss rates reported in the 
PaYs system with respect to these orders in fact is accurate. Dofasco 
also stated that, because the customization of these orders involves 
taking pieces originally processed for other orders, those other orders 
would have correspondingly low yields.'' See Dofasco Verification 
Report at pg. 20, Exhibit 24. Therefore, we disagree with petitioners' 
assertion that the Department did not verify these seemingly 
aberrational rates.
(7) Inclusion of Certain Products and Costs
    We disagree with petitioners concerning the allegedly improper 
inclusion of certain products and their costs in Dofasco's response. 
Petitioners are correct to point out that there are several CONNUMs 
reported in the response for which there are different costs per the 
earnings statement. The answer for this was presented by Dofasco at 
verification, when Dofasco noted that there were several products sold 
(by Sorevco) during the third administrative review period which were 
produced during the second administrative review. At reconciliation,

[[Page 12736]]

Dofasco reported the cost for such products based on verified second 
administrative review costs. See Dofasco Verification Report at pp. 18-
19.
(8) Calculation of Fixed Costs and Variable Cost of Manufacture (VCOM)
    We agree in part with petitioners and respondents. While the record 
shows that there may be some differences regarding the items Dofasco 
included in VCOM as reported to the Department, compared to those items 
included in the reconciliation at verification, we note that regardless 
of the individual classification of certain items in the 
reconciliation, the Department reconciled Dofasco's reported costs to 
the costs determined from Dofasco's normal accounting system examined 
by the Department at verification. The Department found that the 
average costs per product grouping for those product groupings examined 
at verification were comparable (with the exception of one grouping, 
for which Dofasco provided an explanation). See Dofasco Verification 
Report at page 7. The Department's concern with comparing total costs 
for each product grouping is reflected in the verification report, in 
which the Department discusses the comparison of total manufacturing 
costs, as opposed to variable manufacturing costs: ``[w]e then compared 
total per unit values per earnings statement after the above 
reconciling items to the average TOTCOM2 as calculated from the 
submission to the Department.'' (Emphasis added) See Dofasco 
Verification Report at page 7. Whether certain costs were included in 
VCOM or not, the most important aspect of the cost reconciliation is 
that the same costs were included in both the submission and Dofasco's 
normal cost accounting system.
(9) Verification of Alloy Products
    Concerning the inclusion of alloy products and costs, we disagree 
in part with both petitioners and respondents. For the reconciliation, 
the Department tied the costs per financial statements, exclusive of 
costs associated with alloy products, to the costs reported by Dofasco. 
See Dofasco Verification Report at pg. 7 (``We reviewed Dofasco's 
adjustment to exclude the cost of alloy products which are incorporated 
into Dofasco's normal cost accounting categories'').
    We note that, contrary to Dofasco's assertion, the Department is 
indeed entitled to examine costs for alloy products at verification, as 
such costs were necessary to perform an adequate reconciliation. 
However, the Department has the discretion in deciding the depth to 
which it will examine any information presented at verification. The 
fact that respondents did not provide more complete information, when 
the Department did not ask for it, cannot be held against respondents. 
The purpose of verification is not to examine every number submitted by 
respondent: instead, the objective is to ensure the integrity of the 
response. See, e.g., Silicon Metal from Argentina: Final Results of 
Antidumping Administrative Review, 58 FR 65336, 65340 (December 14, 
1993) (``the Department is not required to verify every figure reported 
in the questionnaire response. The process of verification involves 
spot-checking and cross-checking the information that the Department 
selects for emphasis in analyzing each specific response''); Porcelain-
on-Steel Cookware from Mexico: Final Results of Antidumping 
Administrative Review, 55 FR 21061, 21064 (May 22, 1990) (``The 
Department has discretion to decide which items to verify''); Monsanto 
Co. v. United States, 698 Fed. Supp. 275, 281 (CIT 1988) 
(``Verification is a spot check and is not intended to be an exhaustive 
examination of the respondent's business'').
    Comment 13: Petitioners maintain that Sorevco's reconciliation, 
which was placed on the record as part of its questionnaire response, 
shows a significant discrepancy. In attempting to show that the total 
cost of manufacture reported in its response agreed with the production 
costs in its financial statements, Sorevco determined the total of the 
COMs in the response for all products. However, Sorevco's database 
shows that Sorevco's total COMs (i.e. the sum of the COM for each 
CONNUM multiplied by the quantity for that CONNUM) is different. 
Petitioners state that where there is a discrepancy between the 
reported costs and the costs maintained in the financial statement, the 
Department has increased the reported costs by the difference. See 
Notice of Final Determination of Sales at Less Than Fair Value: Certain 
Pasta from Italy, 61 FR 30326, 30358 (June 14, 1996).
    Respondent states that petitioners' allegation that there is a 
discrepancy in Sorevco's reported costs is in error because petitioners 
incorrectly attempted to compare the total COM reported to the 
Department on the computer database with the reconciliation that 
Sorevco provided in Exhibit 4 of its December 23, 1996 supplemental 
response. According to Sorevco, this is not an appropriate comparison. 
The COM reported by Sorevco in the December 23, 1996 response reflected 
Sorevco's costs as the company maintains them in the normal course of 
business; that is, this COM reflects the transfer price at which 
Sorevco buys cold-rolled steel from Dofasco and Sidbec-Dosco. However, 
as a result of the Department's treatment of Dofasco and Sorevco, 
Dofasco provided its per-unit cost of production for the cold-rolled 
steel it sold to Sorevco. For each Sorevco product code, Dofasco's per-
unit cost of production was weight-averaged with Sidbec-Dosco's 
transfer price to arrive at a weight-averaged cost of production that 
was used in the response. Therefore, respondent states that in the 
computer database, Sorevco's COM is calculated using both cost and 
transfer price data for cold-rolled material. Respondent states that 
this same methodology was used in prior reviews, has been verified by 
the Department, and has never been challenged by petitioners.
    Department's Position: We agree with respondent. In past reviews 
and in the instant case, the Department has accepted Sorevco's 
methodology for reporting COM, including the valuation of substrate 
provided by related parties. This methodology leads to the difference 
between the costs reported to the Department and Sorevco's internal 
cost accounts. The difference is therefore adequately explained.
    Comment 14: Petitioners claim that on May 28, 1997, Dofasco for the 
first time submitted freight information that had been the subject of 
two prior information requests by the Department. Petitioners maintain 
that Dofasco had the information in its possession and claimed complete 
reporting but did not submit this information until petitioners 
demonstrated, in another review, that Dofasco's claim of complete 
reporting was incorrect. Petitioners further suggest that the 
Department use adverse facts available based on the fact that Dofasco 
did not comply to the best of its ability when it repeatedly failed to 
supply the necessary freight rates in response to the Department's 
information requests. As such, petitioners argue that the May 28, 1997 
response constitutes an untimely submission of factual information 
which warrants the application of facts available by the Department.
    Dofasco contends that it did not withhold information from the 
Department. According to Dofasco, in the second administrative review 
it became clear that there was a programming error which caused certain 
freight costs to be missing. As soon as this programming error was 
discovered in the second review,

[[Page 12737]]

Dofasco alleges that its counsel contacted the Department to inform the 
Department that the same error existed in the third review. Dofasco 
contends that as a result of this conversation, the Department issued a 
supplemental questionnaire on this issue which was intended to allow 
Dofasco to explain whether any freight costs were missing and provide 
any missing data. At that time, Dofasco explains that it informed the 
Department of the programming error and provided the data for the 
locations in question. Dofasco maintains that it could not have 
withheld information because Dofasco did not even know that an error 
existed at the time it filed its first supplemental questionnaire 
response in the third review.
    In addition, Dofasco claims that section 782(d) of the Act provides 
the Department with the discretion to allow respondents to remedy or 
explain deficiencies. Respondent states that this was exactly what the 
Department did when it issued the supplemental questionnaire to Dofasco 
requesting information on the missing maximum freight rates. After 
receiving the information from Dofasco, Dofasco maintains that the 
Department appeared to be satisfied with the information and used it in 
the preliminary results over three months later.
    In conclusion, Dofasco argues that the information was submitted in 
a timely manner according to the second supplemental questionnaire, 
could be verified, was not incomplete, and could be used without undue 
difficulty. Moreover, Dofasco maintains that it acted to the best of 
its ability to provide the information as soon as it was discovered 
that it was missing. As a result, Dofasco argues that the Department 
should continue to use the information supplied by Dofasco in the final 
results.
    Department's Position: We agree with respondent. In its original 
questionnaire, the Department required Dofasco to report the freight 
cost incurred for each sale to the United States. Dofasco stated that 
for certain sales, it was unable to report the actual freight charges; 
instead, it reported maximum freight for each destination. See 
Dofasco's November 13, 1996 response at C-22, 23 (proprietary version). 
In the database submitted in the response dated November 13, 1996, 
however, there were numerous sales in the United States for which 
Dofasco reported a prepaid freight but failed to report a maximum 
freight rate. In a supplemental questionnaire, the Department asked 
Dofasco to explain why it had not reported a maximum freight rate for 
certain sales. See the Department's Supplemental Questionnaire dated 
December 5, 1996 at page 4. Dofasco responded that it had reported 
maximum freight for these sales, either in the MAXFRTU field or else in 
the DINLFTWU field. See Dofasco's December 23, 1996 response at 16 
(proprietary version). In early May of 1997, it became apparent, in the 
second review of this proceeding, that there was a programming error 
which caused certain freight costs to be missing. The Department issued 
Dofasco a second supplemental questionnaire dated May 16, 1997, which 
asked Dofasco to explain why there were certain sales with no 
associated maximum freight value, despite Dofasco's statement to the 
contrary. Dofasco explained that due to a programming error, it 
inadvertently failed to report maximum freight charges for certain 
sales; it supplied the missing maximum freight rates for four customer 
shipping locations. See Dofasco's response dated May 28, 1997 at page 
2.
    Section 782(d) of the Act and section 353.31(b)(1) of the 
Department's regulations permit the Department to solicit and consider 
information which was not supplied in the original or first 
supplemental questionnaire responses. Based on this statutory and 
regulatory authority, the Department accepted this information as 
reported. Since Dofasco's May 28, 1997 response to the Department's May 
16, 1997 questionnaire was submitted by the deadline, there is no basis 
to petitioners' claim that the information was not submitted in a 
timely manner. Therefore, we have continued to use this information for 
the final results of this review.
    Comment 15: Petitioners argue that the Department has traditionally 
treated sales to the United States as constructed export price 
(``CEP'') sales when the sale is made through a foreign producer's U.S. 
subsidiary. Petitioners claim that, where sales are made prior to 
importation, the Department will classify such U.S. sales as export 
price (``EP'') sales when the merchandise is shipped directly to an 
unaffiliated buyer without being introduced into the affiliated selling 
agent's inventory or where this procedure is the customary sales 
channel between the parties and the affiliated selling agent only acts 
as a processor of paper and a communications link between the 
unaffiliated buyer and the foreign producer.
    In the instant case, petitioners maintain that the record shows 
that Dofasco's U.S. subsidiary, Dofasco U.S.A. (``DUSA''), introduced 
the merchandise into its inventory and performed an active role in 
selling the merchandise. Thus, petitioners contend that CEP treatment 
is warranted.
    First, petitioners allege that DUSA introduces merchandise into its 
physical inventory in cases where it stores the merchandise at 
independently-owned warehouses prior to delivery. The Department's 
practice, petitioners contend, has been to classify sales as CEP 
whenever the merchandise is warehoused by the affiliate. See Certain 
Cut-to-Length Carbon Steel Plate from Germany: Final Results of 
Antidumping Administrative Review, 62 FR 18390, 18391 (April 15, 1997). 
Petitioners allege that in the instant case, a significant portion of 
Dofasco's sales were warehoused in the United States prior to delivery.
    In addition, petitioners maintain that DUSA plays an active role in 
Dofasco's selling activities. They maintain that the Department has 
accorded CEP treatment to sales where the foreign producer attended 
meetings with U.S. customers, reserved the right to approve all orders, 
and limited the affiliate's ability to negotiate prices within certain 
ranges. See Small Diameter Circular Seamless Carbon and Alloy Steel 
Standard, Line and Pressure Pipe From Germany: Preliminary Results of 
Antidumping Administrative Review, 62 FR 47446 (September 9, 1997) and 
Cut-to-Length Carbon Steel Plate from Belgium: Preliminary Results of 
Antidumping Administrative Review, 62 FR 48213, 49214-15 (September 15, 
1997). In the instant case, petitioners claim that the issue is not 
whether DUSA has negotiating authority, but instead whether DUSA's 
level of participation in the selling process is sufficiently 
substantial. Petitioners cite certain letters on the record which they 
believe demonstrates DUSA's substantial involvement in the selling 
process. Furthermore, they point out several documents on the record 
which discuss DUSA's involvement in arranging further manufacturing and 
warehousing, which they claim the Department has determined in other 
cases to constitute more than simply routine selling functions (thus 
meriting CEP treatment). See, e.g., Notice of Final Determination of 
Sales at Less Than Fair Value: Large Newspaper Printing Presses and 
Components Thereof, Whether Assembled or Unassembled from Germany 
(``Printing Presses from Germany''), 61 FR 38166 (July 23, 1996).
    Dofasco asserts that the Department correctly determined that all 
of Dofasco's U.S. sales were EP transactions based on the fact that the

[[Page 12738]]

sales were made before importation. Dofasco maintains that the 
Department's practice has been to treat U.S. sales through a U.S. 
affiliate as EP transactions if the following three criteria are met: 
(1) the merchandise is shipped directly to the U.S. customer without 
entering the affiliate's inventory; (2) this is the customary channel 
of trade and (3) the affiliate only acts as a sales document processor 
and communications link. See Steel from Korea, 62 FR 18404, 18423 
(April 15, 1997) and Printing Presses from Germany, 38175.
    Dofasco argues that the Department defines ``inventory'' as 
merchandise that is in storage and is available for sale to various 
customers. See Certain Cut-to-Length Steel Plate from Germany: Final 
Results of Antidumping Administrative Review (``Steel Plate from 
Germany''), 61 FR 13834, 13843 (March 28, 1996) and Final Determination 
of Sales at Less Than Fair Value: Certain Stainless Wire Rods from 
France (``Wire Rod from France''), 58 FR 68865, 68868-69 (December 29, 
1993). Dofasco maintains that the Department has held that even though 
a U.S. affiliate may have taken title to the imported merchandise and 
arranged for its warehousing in the U.S., if the merchandise was 
warehoused to await delivery to a specific customer or if the customer 
dictated that merchandise be warehoused, then the sale is not 
considered to be a CEP transaction. See Zenith Electrical Corp. v. 
United States (``Zenith''), Slip Op. 94-146 at 7-8 (CIT 1994) and 
Cellular Mobile Telephones and Subassemblies from Japan: Preliminary 
Results of Antidumping Administrative Review, 54 FR 48922, 48923 (Nov. 
28, 1989). In this case, Dofasco contends that for the few sales 
through DUSA that were warehoused, this merchandise was warehoused in 
independent warehouses after the sale, and thus was not stored awaiting 
sale.
    Dofasco also maintains that DUSA's role is that of a paper 
processor and communications link that does not negotiate prices or 
market products. Even were the affiliate to extend credit to U.S. 
customers, process warranty claims, and engage in project development, 
Dofasco argues that the Department has held that a sale through the 
U.S. affiliate is properly an EP transaction because the affiliate's 
selling functions are of a kind that the exporter or foreign producer 
would normally perform. Dofasco argues that an affiliate ceases to be a 
paper processor and communications link only if it controls the terms 
of sale. See Certain Corrosion-Resistant Carbon Steel Flat Products 
from Korea: Final Results of Antidumping Administrative Review, 61 FR 
18547, 18552 (April 26, 1996); Steel Plate from Germany at 13842-43; 
and Wire Rod from France at 68869. In this case, Dofasco alleges that 
DUSA does not perform any additional selling functions that Dofasco 
would normally perform; documents on the record demonstrate that 
Dofasco is responsible for conducting sales activities.
    Department's Position: We agree with respondents. The Department, 
in the first and second administrative reviews of this proceeding, 
determined that Dofasco's sales through DUSA were EP transactions. The 
Department noted that ``while the Department usually finds further 
manufacturing of merchandise occurs in the context of ESP (now CEP) 
sales, and while 19 U.S.C. section 1677a(e)(3), discussing adjustments 
to ESP, is the only explicit reference to further manufacturing in the 
statute, it would clearly be a mistake to define the sale as an ESP 
sale simply because there is further manufacturing.'' See Memorandum 
for Roland McDonald: Administrative Review of Corrosion Resistant 
Carbon Steel Flat Products from Canada: Categorization of Sales of 
Dofasco, Inc. (``Memorandum for Roland McDonald''), page 2 (July 12, 
1995) (Public Version).
    In the second administrative review, the Department determined that 
sales through DUSA should not be classified as CEP sales based on the 
following: (1) warehousing inventory destined for specific customers at 
privately owned warehousing facilities does not constitute taking the 
merchandise into DUSA's physical inventory; (2) Dofasco's channels of 
delivery remain the same--that is, the Department verified that the 
merchandise is delivered directly from Dofasco to the U.S. customer; 
and (3) DUSA's role in the sales process constitutes only that of a 
communications link and paper processor. See 1994/95 Canadian Steel at 
18460-18462 (April 15, 1997).
    A further discussion of this policy exists in Certain Cold-Rolled 
and Corrosion-Resistant Carbon Steel Flat Products from Korea: Final 
Results of Antidumping Administrative Review (``Korean Steel Final 
Results''), which was signed March 9, 1998. In that notice, we explain 
that CEP treatment is appropriate where certain facts indicate ``that 
the subject merchandise is first sold in the United States by or for 
the account of the producer or exporter'' and not sold by the producer 
or exporter outside the United States. Such a finding requires that 
certain criteria be met, such as: (1) whether the merchandise was 
shipped directly from the manufacturer to the unaffiliated U.S. 
customer; (2) whether this was the customary commercial channel between 
the parties involved; and (3) whether the function of the U.S. selling 
agent is limited to that of a ``processor of sales-related 
documentation'' and a ``communication link'' with the unrelated U.S. 
buyer. Where the factors indicate that the activities of the U.S. 
affiliate are ancillary to the sale (e.g. arranging transportation or 
customs clearance, invoicing), we treat the transactions as EP sales. 
Where the U.S. affiliate has more than an incidental involvement in 
making sales (e.g., solicits sales, negotiates contracts or prices) or 
providing customer support, we treat the transactions as CEP sales.''
    For this administrative review, petitioners do not present any new 
arguments regarding this issue, nor is the fact pattern pertaining to 
DUSA sales significantly different from past reviews. Moreover, as we 
also indicate in Comment 16 below, we believe that evidence on the 
record indicates that DUSA's involvement in the sales process is 
ancillary. Therefore, we are maintaining the methodology we adopted in 
the first and second administrative reviews and classifying DUSA's 
sales as EP transactions.
    Comment 16: Petitioners urge that, in the event the Department does 
not agree with petitioners with respect to the classification of all 
DUSA sales as CEP sales, the Department should classify all further 
manufactured sales as CEP sales. Petitioners cite Certain Cold-Rolled 
and Corrosion-Resistant Carbon Steel Flat Products from Korea: 
Preliminary Results of Antidumping Administrative Review (``Korean 
Steel''), 62 FR 47422, 47425-26 (September 9, 1997) as a case in which 
the Department found that certain sales made by a respondent prior to 
importation had substantial involvement on the part of the U.S. 
subsidiary. Petitioners argue that the same facts apply here.
    Dofasco argues that sales through DUSA which were further processed 
should not be treated as CEP transactions solely because of this 
further processing. Dofasco argues that the Department's position in 
the first and second administrative reviews (that it would be incorrect 
to define the sale as CEP simply because there is further processing) 
is still valid as there is no additional information on the record in 
this review which would merit a revisiting of this issue.
    Department's Position: We disagree with petitioners that the 
information on the record proves that DUSA plays an ``active'' role in 
the selling process. In fact, the evidence on the record does not 
suggest that DUSA's role in the selling

[[Page 12739]]

process was anything beyond an ancillary role. As much of this 
information is business proprietary, please refer to Dofasco's Final 
Results Analysis Memorandum, page 5 (business proprietary version). In 
addition, Korean Steel discussed four factors in its determination of 
CEP/EP treatment for sales with further processing, not all of which 
apply to this case. See Dofasco's Final Results Analysis Memorandum, 
page 5 (business proprietary version). Therefore, for these final 
results, we have classified all sales made through DUSA as EP 
transactions.
    Comment 17: Petitioners contend that Dofasco improperly calculated 
home market credit expenses in its response by applying the interest 
rate to the gross unit price plus the amount of the goods and services 
tax (``GST''). Petitioners maintain that the Department's clearly 
stated practice is that home market credit expenses are to be 
calculated on the basis of gross unit price exclusive of any value 
added tax (``VAT''). See Certain Cut-to-Length Carbon Steel Plate from 
Brazil: Final Results of Antidumping Administrative Review (``Carbon 
Steel Plate from Brazil''), 62 FR 18486, 18487-88 (April 15, 1997), 
Silicon Metal from Brazil: Final Results of Antidumping Administrative 
Review and Determination not to Revoke in Part, 62 FR 1954, 1961 
(January 14, 1997), Ferrosilicon from Brazil: Final Results of 
Antidumping Administrative Review, 61 FR 59407, 59410 (November 22, 
1996), Steel Wire Rope from the Republic of Korea: Final Results of 
Antidumping Administrative Review, 60 FR 63499, 63504 (December 11, 
1995), and Circular Welded Non-Alloy Steel Pipe and Tube from Mexico: 
Final Results of Antidumping Administrative Review (``Steel Pipe and 
Tube from Mexico''), 62 FR 37014, 37016 (July 10, 1997). Accordingly, 
petitioners contend that the Department should recalculate Dofasco's 
home market credit expense exclusive of the seven percent GST.
    Dofasco does not dispute that the Department's practice has been to 
exclude VAT from the calculation of credit expense. See, e.g., Steel 
Pipe and Tube from Mexico at 37106. However, they allege that the 
Department's reasoning for doing so is incorrect. Dofasco claims that 
the Department's statement that VAT is a revenue for the government is 
correct. However, Dofasco claims that the Department is incorrect in 
stating that credit expenses for VAT payment by the company is a 
government expense. In fact, Dofasco maintains that because there is a 
lag between the time that it pays the tax (the date of shipment) and 
the date it receives payment from the buyer, Dofasco incurs an 
opportunity cost associated with the time it does not have use of the 
money. Dofasco requests that the Department reconsider its position on 
this issue and calculate Dofasco's credit expense inclusive of VAT.
    Department's Position: We agree with petitioners and respondents 
that it has been the Department's long-standing practice to calculate a 
company's credit expense exclusive of VAT. However, we disagree with 
respondents that the Department should revisit this position. In Carbon 
Steel Plate from Brazil at 18486, the Department rejected the argument 
Dofasco makes here, stating that ``there may be a potential opportunity 
cost associated with the respondents'' prepayment of the VAT, [however] 
this fact alone is not a sufficient basis for the Department to make an 
adjustment in price-to-price comparisons. Thus, to allow the type of 
credit adjustment suggested by the respondents would imply in the 
future the Department would be faced with the virtually impossible task 
of trying to determine the potential opportunity cost or gain of every 
charge and expense reported in the respondents' home market and U.S. 
databases.'' Therefore, for the final results of this review, the 
Department has recalculated Dofasco's credit expense so that it is 
exclusive of VAT, as suggested by petitioners.
    Comment 18: Respondent argues that the Department should correct 
certain clerical errors it made in the preliminary results of review. 
Specifically, Dofasco claims that the Department: (1) incorrectly 
subtracted prepaid freight from the reported gross unit price in the 
margin calculation program; (2) failed to use the proper exchange rate 
conversions in the calculation of direct selling expenses; and (3) used 
maximum freight expenses instead of actual freight expenses, where 
provided, to calculate U.S. movement expenses. Additionally, as stated 
above in Comment 11, Dofasco disagrees with the Department's use of 
Baycoat's invoice prices. However, if the Department uses those prices, 
Dofasco asserts that it must also use the reported G&A and interest 
expenses that are based on the invoice price.
    Petitioners disagree that the Department should value U.S. movement 
expenses based on actual, instead of maximum, freight as the record 
allegedly shows certain inconsistencies which suggest that the computer 
system which tracks actual freight is not yet functional. In 
particular, petitioners contend that an invoice submitted in order to 
confirm the validity of the computer program which tracks actual 
freight in fact proves that the program is not working properly, since 
the database reflects a different number than that reported in the 
invoice. See Dofasco's December 23, 1996 Response (proprietary version) 
at Exhibit 17, compared to, inter alia, observation number 1921 in 
Dofasco's December 23, 1996 Section C computer printout.
    Petitioners agree with respondents that the Department should 
include reported G&A and interest expenses for reported costs based on 
Baycoat's invoice prices.
    Petitioners argue that the Department failed to include all 
relevant freight charges for certain U.S. sales. In particular, 
petitioners assert that the Department should add inland freight from 
the warehouse to the U.S. customer (INLFWCU) to its calculation of U.S. 
moving expenses for these sales.
    Department's Position: We agree with respondent that we incorrectly 
subtracted prepaid freight from the reported gross unit price in the 
margin calculation program and have corrected this error for the final 
results. We also agree with respondents that we should revise our 
exchange rate conversion errors in the calculation of direct selling 
expenses for the final results.
    We agree with petitioners that the record demonstrates that the 
computer program which Dofasco has begun using to calculate actual 
freight expenses is not working properly as the actual freight charge 
which is shown on the invoice does not match that reported in Dofasco's 
database. As there is nothing on the record that can demonstrate the 
accuracy of the actual freight field, we are continuing to use the 
maximum freight field when determining U.S. moving expenses for certain 
sales in the final results of this review.
    We agree with both respondents and petitioners that we should use 
the reported G&A and interest expenses based on Baycoat's transfer 
price and have corrected this error for the final results of this 
review.
    We disagree with petitioners that the Department should add inland 
freight from the warehouse to the U.S. customer (INLFWCU) to its 
calculation of U.S. moving expenses for certain sales. The Department 
understands the MAXFRTU field to represent the maximum freight expenses 
from the warehouse to the customer. See the Department's questionnaire 
dated September 19, 1996 at page C-30 and Dofasco's November 13, 1996 
response to the Department's questionnaire at page C-21-23. As such, we 
will treat U.S. movement expenses consistently

[[Page 12740]]

with our treatment of movement expenses in earlier segments of this 
proceeding. See, e.g., 1994/95 Canadian Steel at 18462.

MRM

    Comment 19: Petitioners argue that MRM has reported estimated 
freight expenses despite its ability to report actual freight expenses 
on an invoice-by-invoice basis. Therefore, petitioners contend that the 
Department should reject MRM's reported freight expense. Because MRM 
allegedly withheld information requested twice by the Department, 
petitioners contend that the Department should apply adverse facts 
available in calculating MRM's freight expenses for both the home 
market (by disallowing all reported freight expenses) and the U.S. 
market (by applying the highest reported freight expense to all sales).
    MRM maintains that it does not track actual freight costs on an 
invoice-specific or transaction-specific basis in the ordinary course 
of business. For this administrative review, MRM reported an estimated 
freight cost based on the application of MRM's freight rate to each 
specific shipment. MRM claims that when the actual freight costs are 
available, it records this information in its accounts payable files. 
MRM contends that reporting actual freight expense instead of the 
estimated freight expense would have been extremely tedious and 
burdensome for MRM and would have little effect on the Department's 
margin analysis. Moreover, MRM claims that the Department accepted 
MRM's allocation method for freight expenses for the first review. See 
1993/94 Canadian Steel at 13829. MRM argues that the Department 
verified MRM's treatment of freight expenses and the Department's 
questionnaire did not prohibit the use of an appropriate allocation 
methodology in determining freight expense.
    MRM argues that the Department has consistently allowed the use of 
reasonable allocative methodologies in reporting freight expense. See 
Notice of Final Determination of Sales at Less Than Fair Value: Small 
Diameter Circular Seamless Carbon and Alloy Steel, Standard, Line and 
Pressure Pipe from Italy, 60 FR 31981, 31987 (June 19, 1995), and Final 
Determination of Sales at Less Than Fair Value: Oil Country Tubular 
Goods from Korea, 60 FR 33561, 33563 (June 28, 1995).
    Department's Position: We agree with respondent. First, we note the 
Department's standard questionnaire explicitly contemplates a 
respondent's inability to report actual freight expenses. See 
Antidumping Duty Questionnaire, page 4 (``Averages may only be used for 
expenses that can be tied to a particular sale (e.g., freight) when to 
do otherwise would create a significant burden because of the manner in 
which your accounting records are maintained''). Second, the Department 
has in the past allowed the reporting of estimated freight expenses as 
long as the freight estimates are reasonable and any differences 
between estimated amounts and actual freight charges are minor. See, 
e.g., Notice of Final Determination of Sales at Less Than Fair Value: 
Small Diameter Circular Seamless Carbon and Alloy Steel, Standard, Line 
and Pressure Pipe from Italy, 60 FR 31981, 31987 (June 19, 1995).
    In this review, MRM reported that it does not track the actual 
freight payment on an invoice-by-invoice basis in the normal course of 
business. See Verification of Gerdau MRM Steel's (``MRM'') Sales 
Response at pp. 6-9. At verification, we examined documentation 
concerning MRM's freight expenses and tied them to the response. In 
addition, we examined the variances between actual and estimated 
freight payments for both home market and U.S. sales and found that the 
variances were either nonexistent or minimal. Consequently, we 
determine that MRM's freight methodology is reasonable and have allowed 
the adjustments for the final results.
    Comment 20: Petitioners argue that MRM improperly reported credit 
expense. Specifically, petitioners argue that MRM inappropriately 
calculated credit expense using the average payment date information 
instead of actual payment date information. Petitioners claim that MRM 
recorded actual payment data but then deleted this information from its 
computer system. Because MRM allegedly deleted this information, 
petitioners insist that the Department must disallow MRM's reported 
home market credit expense. Furthermore, petitioners urge the 
Department to apply adverse facts available for credit expense for U.S. 
sales by using the highest reported credit period.
    MRM argues that it reported estimated dates based on each 
customer's terms of payment because it does not maintain records of the 
actual date of payment received for each invoice in its ordinary course 
of business. MRM asserts that its ordinary operating procedures do not 
provide for the maintenance of information on the date of payment. MRM 
notes that the maintenance of information on the date of payment is 
neither relevant to MRM from a business perspective, nor mandated under 
Canadian GAAP. Further, MRM argues that the Department verified the 
methodology used by MRM in this review, and accepted MRM's methodology 
for approximating the date of payment in the first review of plate from 
Canada. See 1993/94 Canadian Steel at 13829.
    MRM contends that they were not instructed by the Department in the 
first administrative review to follow any particular methodologies in 
future reviews. MRM also notes that in the first review, the Department 
accepted the same method utilized in this case for purposes of 
calculating MRM's credit expense. Id. Further, MRM asserts that in the 
litigation arising from the review, the Department withdrew its request 
for a remand on the issue of the allowance of the adjustment to FMV for 
MRM's credit expenses. Finally, MRM argues that, even if MRM's U.S. 
credit expense was uniformly increased by the amount suggested by 
petitioners, the result would be a minimal decrease in MRM's ``large'' 
negative margins.
    Department's Position: We disagree with petitioners that MRM's 
credit expenses should be denied. Based on the results of verification, 
we find MRM's use of the average age of invoices for each month of the 
POR to be an acceptable methodology for determining credit expenses. At 
verification, we found that MRM was unable to report the actual expense 
because in the normal course of business, MRM does not maintain 
information on the date of payment in its computer system. We reviewed 
MRM's credit information contained in their sales response and 
determined that actual accounts receivable balances were divided by 
average daily sales figures to arrive at average days outstanding 
balances for Canadian customers and U.S. customers. Furthermore, MRM 
stated that this is the same methodology it uses in submitting 
information to its parent company in the normal course of business. See 
Verification of Gerdau MRM Steel's (``MRM'') Sales Response at pg. 9. 
Finally, petitioners have pointed to no record evidence showing that 
MRM's methodology has led to a distortion of reported credit expenses. 
Therefore, we have allowed MRM's reported credit expenses for the final 
results.
    Comment 21: Petitioners argue that MRM failed to substantiate its 
claimed home market rebate adjustment. Petitioners charge that MRM did 
not meet its burden of showing that its customers had prior knowledge 
of the rebates. Because MRM has not established its entitlement to this

[[Page 12741]]

adjustment, petitioners urge the Department to reject MRM's claim.
    MRM argues that there is substantial evidence on the administrative 
record to support the Department's decision to adjust normal value for 
claimed rebate amounts. MRM insists that the Department routinely 
grants adjustments to normal value for rebates or other post-sale price 
adjustments. Smith-Corona Group v. United States, 713 F.2d 1568 (1983). 
MRM notes that the Department deducted rebate amounts from FMV in the 
first administrative review of steel plate from Canada. See 1993/94 
Canadian Steel at 13829. MRM argues that since it used the same 
methodology to derive and report transaction-specific rebate amounts in 
the first review, the Department's preliminary decision to reduce 
normal value for these amounts should be adopted in the final results 
of the instant review.
    MRM further argues that they have satisfied the legal criteria for 
rebates and therefore should receive an adjustment to normal value on 
that basis. See Smith-Corona Group, Consumer Products Division, SCM 
Corp. v. United States, 3 CIT 126, 146-49 (1982). MRM asserts that it 
is the Department's ``general policy to allow rebates only when the 
terms of sale are predetermined.'' Antifriction Bearings (Other Than 
Tapered Roller Bearings) and Parts Thereof from France et al.; Final 
Results of Antidumping Duty Administrative Review, Partial Termination 
of Antidumping Reviews, and Revocation in Part of Antidumping Duty 
Orders, 60 FR 10900, 10930 (Feb. 28, 1995).
    MRM argues that the rebate amounts are properly viewed as 
``predetermined.'' MRM claims that customers had prior knowledge of the 
rebate amount since customers were informed of the MRM's rebate 
practices through telephone contacts and invoices which indicated the 
total rebate amount. MRM maintains that the method of setting rebates 
and the level of rebates are based on MRM's standard business 
practices. In addition, MRM maintains that the Department verified 
written agreements with regard to rebates.
    If, in the alternative, the Department declines to adjust normal 
value for rebates granted by MRM, MRM urges the Department to grant an 
adjustment to normal value for the same amounts as post-sale price 
adjustments. MRM maintains that the Department makes post-sale price 
adjustments that reflect a respondent's ``normal business practice.'' 
MRM claims that there is substantial evidence on the administrative 
record of these proceedings to support MRM's assertion that MRM's 
rebate program is an integral part of MRM's business practice. MRM adds 
that the Department found the payments in question to be ``part of the 
company's ``normal business practice''' in the first administrative 
review. See 1993/94 Canadian Steel at 13828.
    Department's Position: We agree with respondent that these 
adjustments are allowable as rebates. At verification, we examined 
documentation which sufficiently demonstrated that MRM's customers had 
prior knowledge of MRM's rebate program. We also confirmed that in the 
normal course of business, MRM normally made verbal agreements with its 
customers concerning rebates, and that its rebate program has not 
changed since 1993. We examined a letter of confirmation of a rebate 
agreement for one of MRM's customers. Finally, we also examined 
correspondence between MRM and another customer which indicated the 
customer's acknowledgment of MRM's rebate policies. See Verification of 
Gerdau MRM Steel's (``MRM'') Sales Response at p. 11, and Exhibit S-36. 
Therefore, because substantial record evidence indicates that MRM's 
customers were aware of the rebate prior to the time of sale, we have 
continued to adjust normal value to account for rebates for these final 
results of review.

Stelco

    Comment 22: Stelco argues that there is no factual or legal basis 
for the Department's decision to increase Stelco's submitted actual 
costs of production for certain inputs supplied by Baycoat (painting 
services), Z-Line Company (galvanizing services), and iron ore obtained 
from Stelco's affiliated mines for both corrosion-resistant and plate 
products. Stelco maintains that the Department erroneously ``grossed 
up'' the costs beyond Stelco's actual costs of production, to what the 
Department claimed to be the ``unadjusted transfer price'' of these 
inputs. Stelco asserts that (1) the antidumping statute requires that 
the Department use the actual costs of production of the company as it 
calculates them, provided that these are not distortive; (2) the 
statutory language of the ``major input rule'' does not require the 
Department to increase an affiliated supplier's actual cost of 
production in valuing its major inputs; and (3) the major input rule 
does not apply to affiliated suppliers that are collapsed with the 
respondent.
    Stelco continues that, in any event, the Department's methodology 
for comparing the transfer price to the affiliated supplier's cost is 
incorrect, because it used a transfer price that did not accurately 
reflect how Stelco records its cost of inputs, which resulted in double 
counting of expenses.
    Petitioners, in response to Stelco's argument, state that the 
Department correctly valued at transfer price the inputs received from 
Stelco's affiliated suppliers. Petitioners continue that the statute 
does not permit valuation of a major input based on an affiliated 
supplier's cost when such cost is below the transfer price and that it 
is the Department's practice to value a major input based on transfer 
price where such price exceeds the affiliated supplier's COP.
    Petitioners further argue that Stelco's assertion that the 
Department should treat Stelco and its affiliated suppliers as a single 
entity is baseless. Petitioners state that Stelco has failed to 
establish (1) that the affiliated suppliers are ``divisions'' of 
Stelco, or (2) that the requirements for collapsing, which petitioners 
assert are not even applicable to this situation, have been satisfied 
with respect to any of its affiliates.
    Petitioners conclude that the Department properly rejected Stelco's 
adjustments to transfer prices. Petitioners maintain that transfer 
prices should not be reduced by the affiliated suppliers' profit, G&A 
and interest expense.
    Department's Position: We agree with petitioners that it is 
appropriate to use the transfer price to value Stelco's major inputs. 
Under section 773(f)(2) of the Act, the Department's current practice 
is to request information on both the transfer price and the market 
value of the input and to choose the higher of the two valuations. 
Pursuant to section 773(f)(3) of the Act, the Department may alter this 
valuation only in those cases where the input is ``major'' and the 
value determined under section 773(f)(2) is lower than the COP of the 
inputs. All parties agree that the inputs in question are major inputs 
within the meaning of section 773(f)(3); we have determined that the 
value determined under section 773(f)(2) is not lower than the COP of 
the inputs.
    Stelco cites Torrington Co. v. United States (``Torrington'') (881 
F. Supp 622, 642-643 CIT 1995) and SKF USA Inc. v. United States 
(``SKF'') (888 F. Supp 152, 156 CIT 1995) to support its contention 
that a COP valuation is appropriate when it is below transfer price. 
However, in those cases, which concerned the calculation of CV, the 
Department had not requested or received information on the transfer 
prices of the inputs. The CIT did not say that the Department was 
prohibited

[[Page 12742]]

from requesting the transfer prices of the inputs; rather, it said that 
the Department was within its discretion to choose to rely on cost 
information. Here, because of the Department's current policy, the 
Department requested and received the transfer prices of the inputs. 
These transfer prices are greater than the affiliated suppliers' COP.
    The policy applied here was the policy applied by the Department in 
the second review of this case. The Department held in the second 
administrative review (the most recently completed segment of this 
proceeding) that the statute directs it ``to value inputs supplied by 
affiliated persons at the transfer price between the entities provided 
that such a price reflects the price commonly charged in the market 
and, for major inputs, is not below the cost of producing the input.'' 
See 1994/95 Canadian Steel at 18464.
    Stelco also argues that it and its affiliated suppliers should be 
treated as a single entity for determining cost of production. However, 
Stelco has not established either that the affiliated suppliers are 
``divisions'' of Stelco or that the requirements for sales collapsing 
have been satisfied with respect to its affiliates. In Certain Forged 
Steel Crankshafts from the United Kingdom, 61 FR 54613, 54614 (October 
21, 1996), (``Crankshafts'') respondent argued that because it and its 
affiliated supplier were ``both unincorporated operating divisions 
within a single entity, * * * they are parts of the same company and 
share a common steel COP.'' The Department ruled that the record 
evidence indicated that they were divisions of the same corporation and 
found that the major input rule did not apply. Unlike the respondent in 
Crankshafts, Stelco does not contend that the affiliated suppliers are 
actual divisions of a single entity. Rather, Stelco contends that the 
affiliated suppliers and the manufacturer should be treated as a single 
entity for purposes of the major input rule. The Department rejected a 
similar argument in Mechanical Transfer Presses from Japan 55 FR 335 
(January 4, 1990) (``MTPs from Japan'') in which respondent maintained 
that its wholly-owned subsidiaries ``function[ed] as divisions.'' The 
Department noted that the ``wholly-owned subsidiaries are separate 
legal entities,'' and thus applied the major input rule. The 
subsidiaries in question here are clearly separate legal entities and 
thus the rule of Crankshafts does not apply.
    Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat 
Products from Korea, 62 FR 18404, 18430 (April 15, 1997) (``Korean 
Steel'') represents another instance where we have determined that the 
major input rule does not apply. In that case, the Department 
disregarded the major input rule for transactions between producers of 
the subject merchandise where it had determined that such producers 
should be collapsed into a single respondent for purposes of analyzing 
sales. The criteria applied for determining whether sales collapsing is 
appropriate do not apply in cases where the affiliated supplier does 
not have the capacity to produce the subject merchandise. See 19 FR 
351.401(f) (new regulation which does not, technically, apply in this 
proceeding, but which restates the Department's practice on 
collapsing).
    The criteria applied by the Department for purposes of sales 
collapsing do not, on their face, apply to affiliations with suppliers 
that do not produce the subject merchandise. We agree with petitioners 
that Stelco has not established a basis for the treatment of Stelco's 
affiliated suppliers as ``collapsed'' entities.
    Finally, a year-end profit distribution does not function as an 
adjustment to price. The entitlement to a profit distribution arises 
from the ownership interest, not from the sale. The Department has 
therefore allowed no adjustments to the transfer price between Stelco 
and its affiliated suppliers.
    Comment 23: Petitioners argue that the Department must recalculate 
home market credit expenses, because they maintain that Stelco's 
inclusion of the GST and provincial sales tax (``PST'') in its home 
market credit expense calculation was improper. GST and PST are not 
revenues for the company, but for the government, and thus, according 
to petitioners, Stelco's home market credit expenses should be 
recalculated to exclude such taxes.
    Department's Position: We agree with petitioners. Accordingly, the 
Department has corrected Stelco's home market credit expenses to 
exclude both GST and PST.
    Comment 24: Petitioners maintain that Stelco failed to use the 
interest rate on actual borrowings by its U.S. subsidiary to determine 
credit expense on U.S. dollar-denominated sales. Petitioners argue 
that, during the POR, Stelco USA borrowed against a line of credit. 
Petitioners contend that it is the Department's practice to use a 
respondent's actual cost of short-term financing in the currency of 
sale. Because money is fungible, argue petitioners, and a corporate 
parent determines the capital structure of a company, it does not 
matter whether the entity doing the actual borrowing is a parent or its 
subsidiary. Therefore, conclude petitioners, the Department should 
recalculate the credit expense on Stelco's U.S. dollar-denominated 
sales, using the rate on actual borrowings by Stelco USA.
    Stelco argues that there is no basis for modification of the 
interest rate utilized to calculate imputed credit for Stelco's U.S. 
sales. Stelco argues that: (1) Stelco Inc. (and not Stelco USA) was the 
only entity that made sales of subject merchandise (corrosion-resistant 
and cut-to-length plate) to the United States; (2) Stelco Inc. did not 
borrow U.S. dollars during the POR; and (3) Stelco Inc. had access to 
borrowed funds at the LIBOR rate through an open line of credit. See 
Stelco's section B questionnaire response of November 4, 1996 and its 
supplemental response of December 24, 1996. Respondent states that 
there is evidence on the record regarding what rate it would have 
received had it borrowed U.S. dollars. Consequently, the Department was 
correct to use the LIBOR rate to calculate imputed credit expense for 
Stelco's U.S. sales.
    Department's Position: We disagree with both respondent and 
petitioners. As we stated in Import Administration Policy Bulletin 98.2 
(February 23, 1998) at pg. 6, ``[i]n cases where a respondent has no 
short-term borrowings in the currency of the transactions, we will use 
publicly available information to establish a short-term interest rate 
applicable to the currency of the transaction. * * * For dollar 
transactions, we will generally use the average short-term lending 
rates calculated by the Federal Reserve to impute credit expenses.'' 
Therefore, for the final results of review, we have recalculated 
imputed credit expense based on Federal Reserve rates. See Stelco's 
Final Results Analysis Memorandum for Corrosion-Resistant Products.
    Comment 25: Petitioners argue that certain sales of both corrosion-
resistant and plate products in the home market were erroneously 
matched to sales made in the United States, and that the Department 
should adopt certain proposed corrective steps.
    Stelco argues that petitioners' suggestion would result in a 
``wholesale change in the reporting of product characteristics.'' 
Stelco concludes that petitioners' suggestion would result in a 
completely unworkable change in the Department's questionnaire.
    Department's Position: We agree with Stelco, and will not make 
petitioners' proposed change to the Department's program. For further 
discussion of this comment, including business

[[Page 12743]]

proprietary information, please see Stelco's analysis memorandum, at 
pg. 13.
    Comment 26: Petitioners contend that Stelco failed to properly 
report pension expense in accordance with its actual funding 
obligations based on independent actuarial assessments. Thus, 
petitioners argue that the Department must disallow Stelco's reporting 
methodology calculated for financial statement purposes, even though 
these pension expenses were reported in accordance with Canadian GAAP. 
Petitioners argue that Stelco adjusted its standard product costs to 
reflect a different pension amount. Petitioners argue that, in the 
investigation in this proceeding, the Department determined that 
Stelco's pension expense should be reported in accordance with Canadian 
GAAP. Petitioners continue that the Department stated that, because the 
difference between the CICA pension expense and the higher required 
funding was ``recorded as a deferred asset on Stelco's financial 
statements,'' it is ``not properly included in current expenses.'' See 
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 Canada, 
Final Determination (``Canadian Steel Investigation'') 58 FR 37099, 
37120 (July 9, 1993). Petitioners state that under nearly identical 
circumstances in 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; Final Determination, 58 FR 37091 (July 9, 1993), the 
Department rejected pension expense reporting under Brazilian GAAP and 
accepted pension expense reporting in accordance with an independent 
actuary's report. Petitioners conclude that it is the Department's 
practice, now codified at section 773(f)(1)(A) of the Tariff Act of 
1930, as amended, to rely on a company's normal books and records if 
such records are in accordance with home country GAAP and reasonably 
reflect the costs associated with production of the merchandise. In 
this instance, although it conforms to Canadian GAAP, petitioners argue 
that the CICA pension expense reflected in Stelco's financial 
statements does not reasonably reflect the costs associated with 
producing the subject merchandise. Petitioners reason that therefore, 
the CICA pension adjustment must be disallowed for purposes of the 
final results.
    Stelco states that the Department should reject petitioners' 
suggestion to reverse the Department's precedent regarding its 
methodology for calculating pension costs. Stelco asserts that the 
appropriate methodology to value its pension obligations is the 
methodology required by Canadian GAAP, and not the cash outlay 
(actuarial) methodology petitioner suggests. Stelco concludes that the 
Department followed this methodology in the investigation and in both 
subsequent reviews. See Canadian Steel Investigation at 37120. Stelco 
states that petitioners confuse cash outlay in an accounting period 
with cost of production, and that for any company which operates on an 
accrual accounting basis, the amount of cash paid in a year does not 
accurately reflect the cost of production in that year. Stelco 
continues that this is the case for pension costs. According to Stelco, 
CICA (which establishes Canadian GAAP) prohibits companies from 
declaring the cash value of their pension outlays in a year as the cost 
of the pensions in that year because using the cash methodology 
distorts pension costs. That is, according to Stelco, companies make 
cash payments to pension funds for reasons that have ``nothing to do 
with'' the nature of a company's pension obligations. To permit 
companies to account for pension costs on the basis of cash outlays 
would, in CICA's view, severely distort a company's true cost picture.
    Stelco continues that petitioners imply that Stelco's standard 
costs value pension costs at their actuarial value, and that 
petitioners erroneously imply that this treatment carries through to 
Stelco's calculation of its cost of production. Stelco further notes 
that petitioners state that the CICA pension adjustment, which adjusts 
pension costs to conform to GAAP, is for financial purposes only. 
Stelco argues that its standard costs are budgeted costs set at the 
beginning of the year on the basis of estimates, and because these are 
estimates, the Department requires that costs not be reported purely on 
a standard basis, but rather that all standard costs be adjusted to 
reflect actual outlays. Stelco states that, in order for its standards 
to be corrected on an actual basis, they must be adjusted monthly and 
annually to take into account appropriate variances. Stelco argues that 
its true costs of production are therefore not calculated using the 
cash outlay methodology of pension costs, just as the standard cost of 
production is not fully reflective of their actual cost of production. 
Hence, the application of such pension outlays would not properly 
reflect the true costs of producing this merchandise. Stelco concludes 
that the Department's long-standing precedent in this case requires the 
use of CICA methodology in calculating pension costs.
    Department's Position: We agree with respondent. Stelco's treatment 
of its pension costs is in accordance with both Canadian and U.S. GAAP. 
These accounting principles are not arbitrary, but are established as 
the method deemed to be the most accurate representation of a company's 
costs. Furthermore, in Canadian Steel Investigation (58 FR 37099, 37120 
(July 9, 1993)), the Department determined that the appropriate 
methodology for Stelco to value its pension obligations is the 
methodology required by Canadian GAAP, not the cash outlay (actuarial 
methodology). Petitioners' reliance on Certain Hot-Rolled Carbon Steel 
Flat Products, etc., from Brazil, Final Determination, 58 FR 37091 
(July 9, 1993) is misplaced because in it, the Department noted that 
the respondent acknowledged that according to an independent actuary's 
report, these costs (as recorded in the company's books) may not be 
sufficient to cover the respondent's ultimate liability. The actuary's 
report apparently indicated that the normal accounting treatment did 
not fully reflect the company's cost obligations, and the respondent 
did not contest that conclusion. The nature of the reports and the 
nature of the cost situations involved are very different in these two 
cases. Therefore, for the final results of review, we have used 
Stelco's pension costs as reported and have not applied the cash outlay 
methodology to determine Stelco's pension funding cost.
    Comment 27: Petitioners allege that the Department made the 
following ministerial errors in its margin calculation program for both 
corrosion-resistant and plate products:
    For corrosion-resistant: (1) The Department revised Stelco's total 
cost of manufacture for cost of production purposes using the variable 
name ``TCOM.'' However, in revising Stelco's general and administrative 
and interest expenses, the Department failed to use the revised TCOM, 
using ``TOTCOM'' instead. (2) The Department recalculated general and 
administrative expenses for constructed value purposes, using the 
variable name ``GNACV.'' Similarly, the Department renamed the interest 
variable for CV purposes ``INTEXCV.'' However, when calculating GNA and 
interest factors as a percentage of the total cost of

[[Page 12744]]

manufacture, the Department failed to use the recalculated GNACV and 
the renamed INTEXCV. (3) The Department erroneously converted PACKU 
into U.S. dollars twice. (4) The Department revised respondent's total 
cost of manufacture for CV purposes using the variable name ``TCOM.'' 
Subsequently, the Department failed to use the variable ``TCOM,'' using 
``TOTCOMCV'' instead.
    For plate: The Department revised respondent's total cost of 
manufacture for CV purposes using the variable name TCOM. However, when 
the Department recalculated CV profit and total CV, the Department 
failed to use the variable name TCOM, using ``TOTCOMCV'' instead.
    Department's Position: We agree with petitioners and have made the 
appropriate modifications to the Department's margin calculation 
programs. See Stelco's Final Results Analysis Memorandum for Corrosion-
Resistant Products, pp. 3 and 4 and Stelco's Final Results Analysis 
Memorandum for Plate, pg. 3.

Final Results of Review

    As a result of our review, we determine the dumping margin (in 
percent) for the period August 1, 1995, through July 31, 1996 to be as 
follows:

------------------------------------------------------------------------
                                                                Margin  
                    Manufacturer/exporter                      (percent)
------------------------------------------------------------------------
Corrosion-Resistant Steel:                                              
  Dofasco...................................................        0.72
  CCC.......................................................        0.54
  Stelco....................................................        3.48
Cut-to-Length Plate:                                                    
  Algoma....................................................    \1\ 0.44
  MRM.......................................................        0.00
  Stelco....................................................   \1\ 0.23 
------------------------------------------------------------------------
\1\ Deminimis.                                                          

    The Department will determine, and the U.S. Customs Service shall 
assess, antidumping duties on all appropriate entries. For assessment 
purposes, we have calculated importer-specific ad valorem duty 
assessment rates for the merchandise based on the ratio of the total 
amount of antidumping duties calculated for the examined sales during 
the POR to the total quantity of sales examined during the POR. 
Individual differences between U.S. price and normal value may vary 
from the percentages stated above. The Department will issue 
appraisement instructions directly to the Customs Service.
    Furthermore, the following deposit requirements will be effective 
upon publication of these final results for all shipments of the 
subject merchandise entered, or withdrawn from warehouse, for 
consumption on or after the publication date provided by section 
751(a)(1) of the Act: (1) The cash deposit rates for the reviewed 
companies will be the rates stated above; (2) if the exporter is not a 
firm covered in this review, a prior review, or the original less than 
fair value (LTFV) investigation, but the manufacturer is, the cash 
deposit rate will be the rate established for the most recent period 
for the manufacturer of the merchandise; and (3) the cash deposit rate 
for all other manufacturers or exporters will continue to be the ``all 
others'' rate made effective by the final results of the 1994-1995 
administrative review of this order (See Certain Corrosion-Resistant 
Carbon Steel Flat Products and Certain Cut-to-Length Carbon Steel Plate 
from Canada: Final Results of Antidumping Duty Administrative Reviews 
62 FR 18448 (April 15, 1997)). As noted in those final results, these 
rates are the ``all others'' rates from the relevant LTFV 
investigations which were 18.71 percent for corrosion-resistant steel 
products and 61.88 percent for plate (See Final Determination, 60 FR 
49582 (September 26, 1995)). These deposit requirements, when imposed, 
shall remain in effect until publication of the final results of the 
next administrative review.

Notification of Interested Parties

    This notice also serves as a final reminder to importers of their 
responsibility under 19 CFR 353.26 to file a certificate regarding the 
reimbursement of antidumping duties prior to liquidation of the 
relevant entries during this review period. Failure to comply with this 
requirement could result in the Secretary's presumption that 
reimbursement of the antidumping duties occurred and the subsequent 
assessment of double antidumping duties.
    This notice also serves as a reminder to parties subject to 
administrative protective orders (APOs) of their responsibility 
concerning the disposition of proprietary information disclosed under 
APO in accordance with 19 CFR 353.34(d)(1). Timely written notification 
of the return/destruction of APO materials or conversion to judicial 
protective order is hereby requested. Failure to comply with the 
regulations and the terms of an APO is a sanctionable violation.
    This administrative review and notice are in accordance with 
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 
353.22(c)(5).

    Dated: March 9, 1998.
Robert S. LaRussa
Assistant Secretary for Import Administration
[FR Doc. 98-6689 Filed 3-13-98; 8:45 am]
BILLING CODE 3510-DS-P