[Federal Register Volume 63, Number 52 (Wednesday, March 18, 1998)]
[Notices]
[Pages 13170-13204]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-6883]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-580-815 & A-580-816]


Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat 
Products From Korea: Final Results of Antidumping Duty Administrative 
Reviews

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

ACTION: 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 the administrative 
reviews of the antidumping duty orders on certain cold-rolled and 
corrosion-resistant carbon steel flat products from Korea. These 
reviews cover three manufacturers/exporters of the subject merchandise 
to the United States and the period August 1, 1995, through July 31, 
1996. We gave interested parties an opportunity to comment on our 
preliminary results. Based on our analysis of the comments received, we 
have changed the results from those presented in the preliminary 
results of review.

EFFECTIVE DATE: March 18, 1998.

FOR FURTHER INFORMATION CONTACT: Fred Baker (Dongbu), Steve Bezirganian 
(POSCO), Thomas Killiam (Union), Alain Letort, or John Kugelman, AD/CVD 
Enforcement Group III--Office 8, Import Administration, International 
Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, N.W., Washington, D.C. 20230, telephone 
202/482-2924 (Baker), 202/482-0162 (Bezirganian), 202/482-2704 
(Killiam), 202/482-4243 (Letort), or 202/482-0649 (Kugelman), fax 202/
482-1388.

SUPPLEMENTARY INFORMATION:

Applicable Statute

    Unless otherwise indicated, all citations to the statute are 
references to the provisions effective January 1, 1995, the effective 
date of the amendments made to the Tariff Act of 1930 (``the Act'') by 
the Uruguay Round Agreements Act (``URAA''). In addition, unless 
otherwise indicated, all citations to the Department's regulations are 
references to the provisions codified at 19 CFR part 353 (April 1997). 
Although the Department's new regulations, codified at 19 CFR part 351 
(62 FR 27296--May 19, 1997) (``Final Rules''), do not govern these 
proceedings, citations to those regulations are provided, where 
appropriate, to explain current departmental practice.

Background

    The Department published antidumping duty orders on certain cold-
rolled and corrosion-resistant carbon steel flat products from Korea on 
August 19, 1993 (58 FR 44159). The Department published a notice of 
``Opportunity to Request Administrative Review'' of the antidumping 
duty orders for the 1995/96 review period on August 12, 1996 (61 FR 
41770). On August 30, 1996, respondents Dongbu Steel Co., Ltd. 
(``Dongbu'') and Pohang Iron and Steel Co., Ltd. (``POSCO'') requested 
that the Department conduct administrative reviews of the antidumping 
duty orders on cold-rolled and corrosion-resistant carbon steel flat 
products from Korea; respondent Union Steel Manufacturing Co., Ltd. 
(``Union'') requested a review of corrosion-resistant carbon steel flat 
products only. On the same day, the petitioners in the original less-
than-fair-value (``LTFV'') investigations (AK Steel Corp., Bethlehem 
Steel Corporation, U.S. Steel Group--a unit of USX Corporation, Inland 
Steel Industries, Inc., Geneva Steel, Gulf States Steel Inc. of 
Alabama, Sharon Steel Corporation, and Lukens Steel Company, 
collectively referred to as ``petitioners'') filed a similar request. 
We initiated these reviews on

[[Page 13171]]

September 13, 1996 (61 FR 48862--September 17, 1996).
    On October 7, 1996, the petitioners requested, pursuant to section 
751(a)(4) of the Act, that the Department determine whether antidumping 
duties had been absorbed by the respondents during the period of review 
(``POR''). Section 751(a)(4) provides for the Department, if requested, 
to 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 regulations governing these reviews do not address this 
provision of the Act. However, for transition orders as defined in 
section 751(c)(6)(C) of the Act, i.e., orders in effect as of January 
1, 1995, section 351.213(j)(2) of the Department's new antidumping 
regulations provides that the Department will make a duty-absorption 
determination, if requested, in any administrative review initiated in 
1996 or 1998. See 19 CFR Sec. 351.213(j)(2), 62 FR at 27394. As noted 
above, while the new regulations do not govern the instant reviews, 
they nevertheless serve as a statement of departmental policy. Because 
orders on certain cold-rolled and corrosion-resistant carbon steel flat 
products from Korea have been in effect since 1993, they are transition 
orders in accordance with section 751(c)(6)(C) of the Act. As these 
reviews were initiated in 1996, the Department has acceded to 
petitioners' request that it conduct a duty-absorption inquiry.
    The Act provides for a determination on duty absorption if the 
subject merchandise is sold in the United States through an affiliated 
importer. In these cases, all reviewed firms sold through importers 
that are ``affiliated'' within the meaning of section 751(a)(4) of the 
Act. We have determined that the following firms have dumping margins 
on the percentages of their U.S. sales, by quantity, indicated below:

------------------------------------------------------------------------
                                                              Percentage
                                                               of U.S.  
                                                             affiliate's
       Name of firm and class or kind of merchandise          sales with
                                                               dumping  
                                                               margins  
------------------------------------------------------------------------
Dongbu:                                                                 
  Cold-Rolled..............................................        65.34
  Corrosion-Resistant......................................         5.82
POSCO:                                                                  
  Cold-Rolled..............................................        35.54
  Corrosion-Resistant......................................        14.64
Union:                                                                  
  Cold-Rolled..............................................          (1)
  Corrosion-Resistant......................................        8.99 
------------------------------------------------------------------------
\1\ No U.S. sales in POR.                                               

    We presume that the duties will be absorbed for those sales which 
were dumped. This presumption can be rebutted with evidence that the 
unaffiliated purchasers in the United States will pay the ultimately 
assessed duty. However, there is no such evidence on the record. Under 
these circumstances, we find that antidumping duties have been absorbed 
by the above-listed firms on the percentages of U.S. sales indicated. 
Although we afforded interested parties the opportunity to submit 
evidence that unaffiliated purchasers in the United States will absorb 
duties, no party availed itself of this opportunity.
    On September 9, 1997, the Department published in the Federal 
Register the preliminary results of the third administrative reviews of 
the antidumping duty orders on certain cold-rolled and corrosion-
resistant carbon steel flat products from Korea (62 FR 47423). The 
Department has now completed these administrative reviews in accordance 
with section 751 of the Act.

Scope of the Reviews

    The review of ``certain cold-rolled carbon steel flat products'' 
covers cold-rolled (cold-reduced) carbon steel flat-rolled products, of 
rectangular shape, neither clad, plated nor coated with metal, whether 
or not painted, varnished or coated with plastics or other nonmetallic 
substances, 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 7209.15.0000, 7209.16.0030, 7209.16.0060, 
7209.16.0090, 7209.17.0030, 7209.17.0060, 7209.17.0090, 7209.18.1530, 
7209.18.1560, 7209.18.2550, 7209.18.6000, 7209.25.0000, 7209.26.0000, 
7209.27.0000, 7209.28.0000, 7209.90.0000, 7210.70.3000, 7210.90.9000, 
7211.23.1500, 7211.23.2000, 7211.23.3000, 7211.23.4500, 7211.23.6030, 
7211.23.6060, 7211.23.6085, 7211.29.2030, 7211.29.2090, 7211.29.4500, 
7211.29.6030, 7211.29.6080, 7211.90.0000, 7212.40.1000, 7212.40.5000, 
7212.50.0000, 7215.50.0015, 7215.50.0060, 7215.50.0090, 7215.90.5000, 
7217.10.1000, 7217.10.2000, 7217.10.3000, 7217.10.7000, 7217.90.1000, 
7217.90.5030, 7217.90.5060, 7217.90.5090. Included in this review are 
flat-rolled products of nonrectangular cross-section where such cross-
section is achieved subsequent to the rolling process (i.e., products 
which have been ``worked after rolling'')--for example, products which 
have been beveled or rounded at the edges. Excluded from this review is 
certain shadow mask steel, i.e., aluminum-killed, cold-rolled steel 
coil that is open-coil annealed, has a carbon content of less than 
0.002 percent, is of 0.003 to 0.012 inch in thickness, 15 to 30 inches 
in width, and has an ultra flat, isotropic surface.
    The review of ``certain corrosion-resistant carbon steel flat 
products'' covers 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 HTS under item numbers 7210.30.0030, 7210.30.0060, 
7210.41.0000, 7210.49.0030, 7210.49.0090, 7210.61.0000, 7210.69.0000, 
7210.70.6030, 7210.70.6060, 7210.70.6090, 7210.90.1000, 7210.90.6000, 
7210.90.9000, 7212.20.0000, 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, 7215.90.3000,

[[Page 13172]]

7215.90.5000, 7217.20.1500, 7217.30.1530, 7217.30.1560, 7217.90.1000, 
7217.90.5030, 7217.90.5060, 7217.90.5090. Included in this review are 
flat-rolled products of nonrectangular cross-section where such cross-
section is achieved subsequent to the rolling process (i.e., products 
which have been ``worked after rolling'')--for example, products which 
have been beveled or rounded at the edges. Excluded from this review 
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 from this 
review 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 from this review 
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 descriptions remain dispositive.
    The POR is August 1, 1995 through July 31, 1996. These reviews 
cover sales of certain cold-rolled and corrosion-resistant carbon steel 
flat products by Dongbu, Union, and POSCO.

Verification

    As provided in section 782(i)(3) of the Act, we verified 
information provided by the respondents using standard verification 
procedures, including on-site inspection of the manufacturers' 
facilities, the examination of relevant sales and financial records, 
and selection of original documentation containing relevant 
information. Our verification results are outlined in the public 
versions of the verification reports.

Fair-Value Comparisons

    To determine whether sales of the subject merchandise from Korea to 
the United States were made at less than fair value, we compared the 
export price (``EP'') or constructed export price (``CEP'') of the 
merchandise to the normal value (``NV''), as described in the ``Export 
Price (or Constructed Export Price)'' and ``Normal Value'' sections of 
Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products 
from Korea: Preliminary Results of Antidumping Duty Administrative 
Reviews, 62 FR 47422 (September 9, 1997).
    Since the publication of the preliminary review results, however, 
we have re-examined the facts of the record of these cases, our prior 
practice, and statutory definitions. As a result of our re-examination, 
we have concluded that treating certain transactions as indirect EP 
transactions is inappropriate. The Act defines the term ``constructed 
export price'' as ``the price at which the subject merchandise is first 
sold (or agreed to be sold) in the United States before or after the 
date of importation by or for the account of the producer or exporter 
of such merchandise or by a seller affiliated with the producer or 
exporter, to a purchaser not affiliated with the producer or exporter, 
as adjusted under subsections (c) and (d).'' In contrast, ``export 
price'' is defined as ``the price at which the subject merchandise is 
first sold (or agreed to be sold) before the date of importation by the 
producer or exporter of the subject merchandise outside of the United 
States.'' Sections 772(a)-(b) of the Act (emphasis added). In these 
cases, the record clearly establishes that the respondents' affiliates 
in the United States were in most instances the parties first contacted 
by unaffiliated U.S. customers desiring to purchase the subject 
merchandise and also that the sales affiliates in question signed the 
sales contracts and engaged in other sales support functions. These 
facts indicate that the subject merchandise is first sold in the United 
States by or for the account of the producer or exporter, or by the 
affiliated seller, and that the sales in question are therefore CEP 
transactions.
    Factors relevant to that analysis include: (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. sales affiliate was limited to that of a processor 
of sales-related documentation and a communications link with the 
unrelated U.S. buyer. Where the facts indicate that the activities of 
the U.S. affiliate were ancillary to the sale (e.g., arranging 
transportation or customs clearance, invoicing), we treated the 
transactions as EP sales. Where the U.S. affiliate had more than an 
incidental involvement in making sales (e.g., soliciting sales, 
negotiating contracts or prices) or performed other selling functions, 
we treated the transactions as CEP sales. For company-specific details 
on the application of this methodology, please refer below to the 
``Analysis of Comments Received'' section of this notice.
    On January 8, 1998, the Court of Appeals for the Federal Circuit 
issued a decision in CEMEX v. 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. Instead, the Department will use 
sales of similar merchandise, if such sales exist. 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 the Reviews'' 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.
    For purposes of these final review results, in accordance with the 
Department's regulations and the questionnaire issued to the 
respondents at the outset of these reviews, we have used the date of 
the invoice to the first unaffiliated purchaser in the United States as 
the date of sale, except for transactions where the date of invoice

[[Page 13173]]

occurred after the date of shipment, in which case we used the date of 
shipment as the date of sale.

Analysis of Comments Received

    We gave interested parties an opportunity to comment on the 
preliminary results. We received comments and rebuttal comments from 
Dongbu, POSCO, and Union, exporters of the subject merchandise 
(``respondents''), and from petitioners. POSCO requested a public 
hearing, which was held on November 7, 1997.

General Comments

Comments by Petitioners
    Comment 1. Petitioners argue that the Department must deduct actual 
antidumping (``AD'') and countervailing (``CVD'') duties paid by 
respondents' affiliated importers from the price used to establish EP 
or CEP.
    Department's Position. We disagree with petitioners. We continue to 
adhere to our longstanding practice as articulated in prior segments of 
these proceedings, which is not to make a deduction for antidumping 
duties. This practice was recently upheld by the Court of International 
Trade (``CIT'') in AK Steel Corp., et al. v. United States, CIT Slip 
Op. 97-160 (December 1, 1997).
    Comment 2. Petitioners contend the Department's duty absorption 
determination in the preliminary review results is flawed for two major 
reasons.
    First, petitioners assert that by inviting the parties to submit 
new factual information after verification in order to rebut its 
presumption that ``duties will be absorbed for those sales which were 
dumped,'' the Department undermined the statutory requirement that all 
information used in the final review results be verified. Petitioners 
argue that they were placed at a distinct disadvantage by the 
Department's decision to allow respondents to place information on the 
record which could not be verified. Petitioners argue that the 
Department's procedure is at odds with the ruling by the Court of 
Appeals for the Federal Circuit (``CAFC'') that ``the burden of 
production is properly placed upon the party in control of the 
necessary information.'' See Creswell Trading Co. v. United States, 15 
F.3d 1054, 1060 (Fed. Cir. 1994). Although petitioners recognize that 
their concerns are no longer an issue in these reviews, since no party 
submitted information pursuant to the Department's request, they urge 
the Department to discard this poorly conceived method and to collect 
all relevant duty absorption evidence at the same time as it collects 
information necessary to complete its dumping analysis.
    Second, petitioners believe the Department's methodology has the 
potential to understate the extent to which antidumping duties were 
absorbed. The Department's methodology, they argue, can give the casual 
reader the mistaken impression that the total amount of duties absorbed 
was limited to the dumped sales included in the final antidumping duty 
calculated. Because the overall dumping margin is weight averaged, 
petitioners contend, the true level of dumping and thus of duty 
absorption is significantly greater than the overall margin. To remedy 
this problem, petitioners suggest that the Department state its duty 
absorption finding as the percentage of sales dumped in conjunction 
with the average level of dumping for those sales (emphasis in the 
original). For example, if five percent of a respondent's sales were 
dumped, and the overall weighted-average dumping margin on the dumped 
sales was 40 percent, the Department should state that the respondent 
absorbed duties on five percent of sales at a margin of 40 percent.
    Petitioners reject the alternative methodology suggested by POSCO, 
which would measure duty absorption not on a sale-specific basis but 
rather across all sales made during the POR. Petitioners argue that 
POSCO's proposal to determine duty absorption by comparing the average 
U.S. price to the average normal value is contrary to the statute, 
which mandates that, in administrative reviews, dumping margins be 
calculated by comparing the U.S. price and normal value of each entry. 
Similarly, petitioners argue that POSCO's proposal to include sales 
with negative margins in the calculation is contrary to the 
Department's long-standing practice of treating such sales as zero-
margin sales. Petitioners maintain that calculating duty absorption 
levels on anything other than a transaction-specific basis undermines 
the presumption that ``current dumping margins calculated * * * in 
reviews may not be indicative of the margins that would exist in the 
absence of an order.'' Uruguay Round Agreements Act, Statement of 
Administrative Action (``SAA''), H.R. Doc. 103-316, Vol. I, 103rd 
Cong., 2nd Sess. (1994) at 885.
    Respondents argue that the Department's preliminary duty absorption 
determination violates the letter and intent of both the statute and 
Article 11.1 of the Agreement on Implementation of Article VI of the 
General Agreements on Tariffs and Trade (1994) (``UR Antidumping 
Agreement''). It violates the statute, say respondents, because the 
statute recognizes that the antidumping law must be implemented in a 
fair manner. This is why the Department calculates dumping margins on a 
weighted-average basis, and measures dumping over the 12-month period 
in order to eliminate the effects of abnormal, outlying instances of 
dumping. It violates Article 11.1, assert respondents, because that 
article states that antidumping measures shall remain in effect only as 
long as and to the extent necessary to counteract injurious dumping.
    Respondents maintain that the Department's current duty absorption 
methodology, as stated in the preliminary review results, would 
unlawfully make it more difficult for antidumping orders to be revoked 
by finding that duty absorption has occurred even in cases where the 
dumping margin is zero or de minimis. Respondents contend that the 
Department's present methodology implies that if a respondent, over a 
12-month period, has not engaged in dumping but has one or two outlying 
sales which were dumped, then the Department will determine that not 
only has the respondent engaged in duty absorption, but at the 
magnitude of those one or two sales. Respondents claim that such a 
distorted result makes it more likely that the International Trade 
Commission (``ITC'') will prolong the existence of the order, in 
violation of Article 11.1. Indeed, say respondents, one could envision 
a situation where the Department would revoke an order due to three 
consecutive years of zero or de minimis margins, yet recommend that the 
ITC not grant a ``sunset'' revocation because of duty absorption found 
under this distortive methodology.
    Respondents therefore recommend that the Department base a duty 
absorption determination on a respondent's overall pricing policies and 
not on individual, isolated instances of dumping. In addition, they 
contend the Department should include a credit for negative margins, in 
fulfillment of its Article 11.1 obligations.
    Department's Position. After carefully considering petitioners' and 
respondents' conflicting views, we have left our duty absorption 
methodology unchanged from the preliminary results.
    Contrary to petitioners' contention that we violated the statute by 
requesting new factual information after verification, our regulations 
allow us to request factual information from the parties at any time, 
even after verification. Had any party chosen to submit new factual 
information in

[[Page 13174]]

response to our request in the preliminary results notice, we would 
have afforded the other parties an opportunity to comment in writing on 
such information. The issue of whether or not such information would 
have been verified is moot since we received no new factual information 
on duty absorption pursuant to our request.
    We believe the approach suggested by petitioners is inappropriate 
because, as respondents point out, it would result in an artificially 
inflated duty absorption percentage and could mislead the ITC. In a 
hypothetical case where, out of 100 U.S. sales transactions, only one 
was dumped, but at a margin of 20 percent, petitioners apparently would 
have the Department determine that duty absorption had occurred at a 
rate of 20 percent on one percent of sales. We find this approach 
distortive and not mandated by either statute or regulation.
    We also reject POSCO's suggestion that we offset sales with 
positive dumping margins with sales with negative dumping margins 
because doing so would disguise the fact that duty absorption may have 
occurred, thereby obfuscating our duty-absorption inquiry. In 
administrative reviews, negative dumping margins are systematically 
disregarded, because there is no basis in the antidumping law to use 
negative margins as an offset or a ``credit'' against positive margins.
    Accordingly, for purposes of these final review results, we have 
left unchanged our duty absorption methodology.
    Comment 3. Petitioners assert that in the event the Department 
reclassifies certain EP transactions as CEP transactions, it must 
ensure that these sales are reviewed in either the third or fourth 
administrative review, and not permit certain sales to escape review in 
their entirety as a result of the Department's practice of determining 
whether or not a sale is subject to review based on the date of sale 
rather than the date of entry.
    Where reclassifying an EP sale as a CEP sale pushes that sale 
forward into the fourth administrative review, petitioners do not 
object. Where such reclassification, however, causes certain sales to 
be pushed backwards into the completed second review period, 
petitioners object strongly, because such sales will escape this 
review, which is contrary to the statutory provision that all entries 
be reviewed. See Sec. 751(a)(2) of the Act.
    Petitioners state that nothing prevents the Department from 
reviewing newly reclassified CEP sales even if the reported date of 
sale falls within the previous POR, since such transactions were not 
previously reviewed and will not be subject to review in the future.
    Respondents retort that petitioners are requesting the Department 
simultaneously to administer the antidumping law in two different and 
mutually exclusive directions. On the one hand, they say, petitioners 
ask that the Department reclassify certain EP transactions as CEP 
transactions, yet at the same time they ask the Department to ignore 
its standard date-of-sale methodology with regard to those sales and 
revert to an EP date-of-sale methodology. Respondents affirm that this 
argument is internally inconsistent and unsupported by statute or 
regulations. If the Department (wrongfully) decides to reclassify the 
sales in question as CEP transactions, argue respondents, then it 
should use its standard date-of-sale methodology to determine whether 
those sales fall within the POR, even at the risk of those sales 
falling out of the POR.
    Department's Position. We agree with petitioners. Although we have 
reclassified most of the respondents' U.S. sales as CEP transactions 
for purposes of these final review results, this change has no effect 
on the date of sale. As explained elsewhere in this notice (see the 
Department's Position to Comment 31, below), we have changed the date 
of sale for Dongbu and Union, but for reasons independent of the change 
from EP to CEP. There is no ``EP date-of-sale methodology,'' as 
respondents claim. Where sales are classified as CEP transactions but 
the date of sale occurs prior to importation, we generally cover all 
entries during the POR; where sales are classified as CEP transactions 
and the date of sale occurs after importation, we generally cover all 
sales during the POR. In these cases the earlier of these situations 
applies; therefore, we have analyzed all entries during the POR, and no 
sales were pushed backward into the completed second review period as a 
result of our changing the date of sale.

Company-Specific Comments

Comments by Petitioners
    Comment 4. Petitioners argue that the Department erred in its 
calculation of Dongbu's U.S. imputed credit by not adding to it the 
bank fees for opening letters of credit. (These letter-of-credit fees 
are charges that Dongbu incurs on the international letters of credit 
for transactions between Dongbu and Dongbu U.S.A.) Furthermore, they 
argue that, for two reasons, the Department should use facts available 
for the bank fee amounts. First, they argue that certain verification 
exhibits demonstrate Dongbu's calculation of its average letter of 
credit fees (submitted in exhibit C-20 of its January 31, 1997, 
supplemental questionnaire response) grossly misstates the amount of 
bank charges. Second, they argue that Dongbu's reported letter of 
credit charges failed verification. To support this latter claim, 
petitioners cite the following quotation from the U.S. verification 
report:

We discussed the bank charges for letter of credit transactions * * 
* We asked Dongbu to explain and document, for a sample transaction, 
how bank charges were calculated and allocated. Dongbu 
representatives were unable to volunteer a cogent explanation of how 
these charges were calculated, within a reasonable span of time. We 
therefore moved on to the next topic.

See September 16, 1997 verification report (revised and reissued on 
November 18, 1997) at 2.
    Dongbu argues that its sample letter of credit calculation in 
exhibit C-20 of its supplemental questionnaire response did not fail 
verification, and that the verification exhibits fully support it. 
Furthermore, Dongbu argues that for two reasons the Department should 
not adjust the U.S. sales prices for letter of credit fees. First, 
Dongbu argues that the letter of credit fees are already included in 
Dongbu's reported imputed credit, and that to make an adjustment for 
the letter of credit fees in addition to the reported imputed credit 
would constitute double-counting an expense. It argues that because the 
imputed credit period begins with the date of shipment and ends with 
the date of payment, it covers the entire time the merchandise is in 
the accounts receivable ledgers of Dongbu, Dongbu Corporation, and 
Dongbu U.S.A. Therefore, Dongbu argues, the reported imputed credit 
incorporates all expenses associated with financing the intercompany 
payment, including the letter of credit charges.
    Moreover, Dongbu argues that its reported imputed credit figure 
includes the entire cost of financing receivables by virtue of the use 
of the short-term interest rate of Dongbu U.S.A. as the interest rate 
in the calculation. The assumption in using Dongbu U.S.A.'s rate, 
Dongbu argues, is that it is representative of the cost of financing 
receivables during the entire time the receivables are outstanding. 
Thus, to add the actual charge for taking out the letter of credit in a 
case where credit cost is fully imputed would be tantamount to double-
counting the cost of credit during the time covered by the letter of 
credit.
    Dongbu further argues that the Department's precedent supports this

[[Page 13175]]

interpretation. It cites a case where the Department stated that 
``deducting both the actual [letter of credit] fees and the imputed 
costs (which include these fees) would be double counting.'' See Final 
Determination of Sales at Less Than Fair Value: Bicycles from the 
People's Republic of China, 61 FR 19026, 19044 (April 30, 1996) 
(``Bicycles'').
    Second, Dongbu argues that the Department should not adjust the 
U.S. price for letter of credit fees because the record shows that the 
actual cost of the charges associated with the international letters of 
credit is such a minor expense that it is unnecessary to adjust the 
U.S. price.
    Petitioners argue that Dongbu is incorrect in stating that its 
letter of credit fees are already included in its imputed credit 
calculation, and that in fact the Department verified that these fees 
are not included in the imputed credit expense or separately reported 
elsewhere in Dongbu's responses. See the September 16, 1997 
verification report (revised and reissued on November 18, 1997), at 2 
(quoted above).
    Petitioners argue that this verification finding is further 
supported by other record evidence, such as the fact that Dongbu 
receives letters of credit from the Korean Exchange Bank, but this bank 
is not listed as a lending institution bank in the credit expense 
calculation that Dongbu prepared.
    Furthermore, petitioners argue that Bicycles is inapposite. In 
Bicycles, an affiliated U.S. importer paid fees to its corporate parent 
to cover interest charges on letters of credit, and the fees were 
already included in the reported credit expense. Here, petitioners 
argue, the Department verified that Dongbu did not include the letter 
of credit expenses in the imputed credit expense. Moreover, at issue in 
Bicycles were interest charges associated with letters of credit; here 
the issue is other types of expenses associated with letters of credit. 
Additionally, petitioners argue, at issue in Bicycles was the payment 
from the U.S. affiliate to its corporate parent. Here the issue is fees 
paid to unaffiliated lending institutions. Accordingly, petitioners 
conclude, Bicycles is inapposite.
    Therefore, petitioners argue, bank fees associated with letters of 
credit must be deducted from U.S. price as direct selling expenses in 
accordance with Porcelain-on-Steel Cookware from Mexico; Final Results 
of Antidumping Duty Administrative Review, 61 FR 54616, 54618 (October 
21, 1996) (``Cookware''). There the Department found that ``bank fees 
associated with the letter of credit transactions * * * are a direct 
selling expense * * * .'' Similarly, they argue, letter of credit fees 
were treated as direct selling expenses and deducted from U.S. price 
for both Union and POSCO in the preliminary results of this review, and 
therefore the Department must make a similar adjustment for Dongbu.
    Petitioners further argue that Dongbu is incorrect in saying that 
the adjustment is small. They argue that Dongbu's calculation is flawed 
and understates the actual expense associated with letter of credit 
fees.
    Department's Position. We agree with both parties in part. We agree 
with petitioners that we should deduct bank fees for letters of credit 
in addition to the calculated imputed credit figure. We do not agree 
with Dongbu's argument that an imputed credit figure covering the 
entire credit period inherently includes all credit/financing expenses. 
Where a respondent pays bank fees to finance a letter of credit related 
to a U.S. sale, we must adjust for these fees as they are direct 
selling expenses. Moreover, these fees are not implicitly included in 
the calculated imputed credit figure simply because the interest rate 
used is the interest rate of an American subsidiary.
    Furthermore, adjusting for bank fees associated with letters of 
credit is consistent with our past practice. As petitioners point out, 
Bicycles is inapposite because it dealt with an interest payment 
between two affiliated companies. Here the expenses at issue are 
charges paid to an unaffiliated bank. As we stated in Cookware, ``[w]e 
determined that bank fees associated with the letter of credit 
transactions for certain U.S. customers are a direct selling expense 
and have made a COS [circumstance-of-sale] adjustment for these fees.'' 
See Cookware at 45618. We have followed this precedent in these final 
results of review, and have adjusted for bank fees as a direct selling 
expense. See also Ferrosilicon from Brazil; Amended Final Determination 
of Sales at Less Than Fair Value, 59 FR 8598 (February 23, 1994) and 
Silicon Metal from Brazil; Final Results of Antidumping Duty 
Administrative Review and Determination Not to Revoke in Part, 62 FR 
1954, 1969 (January 14, 1997).
    However, we do not agree with petitioners that Dongbu's reported 
letter of credit fees failed verification, or that it is necessary to 
resort to facts available. At verification the Department found no 
inconsistencies in Dongbu's computation, which is supported by the 
verification exhibits. Therefore, in these final results, we have used 
the letter of credit fees as Dongbu reported them.
    Comment 5. Petitioners argue that the Department erred in treating 
all except one of Dongbu's U.S. sales as EP sales, rather than as CEP 
sales. They set forth three arguments to support this contention. 
First, they argue that it is Dongbu U.S.A.'s Los Angeles office 
(``DBLA''), and not Dongbu, that plays the primary role in setting the 
price to the ultimate U.S. customer. They state that the record 
demonstrates that virtually all sales contact with the U.S. customer 
occurs through DBLA, and that DBLA is actively involved in price 
negotiation. The only confirmation of price and product 
characteristics, petitioners argue, is the sales contract, which is 
signed by DBLA and the unaffiliated U.S. customer. Nothing on the 
document indicates Dongbu's or Dongbu Corporation's involvement in the 
sale, nor is either entity bound under the contract.
    Given this lack of involvement on the part of Dongbu, petitioners 
argue, Dongbu's statement that Dongbu approves all sales over the 
telephone, but has no written document showing the approval, is 
ludicrous. If Dongbu's approval is no more than a telephone approval, 
they state, with no written documentation showing the sales transaction 
and its terms, it can be no more than pro forma.
    Moreover, petitioners dismiss Dongbu's statement that there is 
little negotiation regarding price on the part of Dongbu because its 
loyal U.S. customers already know the prices based on past experience. 
Petitioners also state that it is demonstrably untrue, because over the 
course of three administrative reviews, Dongbu's antidumping duty rate 
has declined steadily. This means that either prices in the home market 
or the U.S. market have changed (or that Dongbu has inaccurately 
reported its sales and expenses). In the previous review Dongbu 
certified that its home-market prices do not fluctuate and have 
remained constant for extensive periods of time. See Certain Cold-
Rolled and Corrosion-Resistant Carbon Steel Flat Products from Korea; 
Final Results of Antidumping Duty Administrative Reviews, 62 FR 18404 
(April 15, 1997) (``Second Review Final Results'') at 18409. As home-
market prices have remained constant, and Dongbu's antidumping duty has 
not, this means, barring the intentional misreporting of data, that 
Dongbu's U.S. prices do in fact vary.
    The falsity of Dongbu's claim regarding its role in the price 
negotiation process, petitioners argue, is

[[Page 13176]]

demonstrated by the fact that Dongbu does not know the final price 
charged to the U.S. customer until long after the sale is completed. 
Furthermore, petitioners argue, the fact that Dongbu may give DBLA 
confirmation that it can produce merchandise ordered does not 
demonstrate Dongbu's involvement in the price negotiation.
    Petitioners further argue that the only record evidence speaking to 
Dongbu's involvement in the sales negotiation relates to two sales 
transactions discussed at verification. In the first transaction, 
Dongbu rejected a sale ``because the specifications * * * were not 
acceptable.'' Petitioners argue that this production issue is 
completely irrelevant to the question of Dongbu's role in price 
setting. In the second transaction, Dongbu denied a request by an 
American customer for a discount due to a delayed shipment. As with the 
first transaction, petitioners argue, this denial does not demonstrate 
Dongbu's control of the price negotiation.
    Petitioners argue that a more notable example of a discounted sale 
is observation 454, the sale which Dongbu reported as an EP sale and 
which the Department determined to be a CEP sale. There, they argue, 
the sales process was identical to all Dongbu's other U.S. sales which 
the Department treated as EP. For this sale, petitioners argue, DBLA 
located the U.S. buyer, negotiated the price, and arranged all other 
aspects of the sale. See Korean verification exhibit 13 at 21-22. Thus, 
petitioners argue, if the sales process for this sale qualifies as a 
CEP sale, as the Department has found, then the same sales process used 
for Dongbu's other U.S. sales must likewise be deemed CEP sales.
    Secondly, petitioners argue that in addition to playing a 
significant role in the setting of prices, documentation on the record 
demonstrates that DBLA is also involved with almost every other stage 
of the U.S. transaction. Specifically, they argue, DBLA arranges and 
pays for cash deposits for regular duties and for countervailing and 
antidumping duties, takes title to the subject merchandise and serves 
as importer of record, clears the subject merchandise through customs, 
invoices the U.S. customer, collects payment from the U.S. customer, 
finances the sale to the U.S. customer, and arranges warehousing and 
demurrage in the United States. The extent of DBLA's involvement in the 
U.S. sales process, petitioners argue, is also demonstrated by the 
value of its indirect selling expenses relative to the value of 
Dongbu's indirect selling expenses in Korea on behalf of its home 
market and U.S. sales. An analysis of Dongbu's role on behalf of U.S. 
sales shows, they argue, that it is limited to confirming the 
availability of production capacity and characteristics, arranging 
export transportation, and issuing pro forma approvals of DBLA's sales 
terms to the unaffiliated U.S. buyer.
    Finally, petitioners argue that the Department must classify 
Dongbu's U.S. sales as CEP transactions to be consistent with its 
analysis in Certain Cut-to-Length Carbon Steel Plate from Germany; 
Final Results of Antidumping Duty Administrative Review, 62 FR 18390 
(April 15, 1997) (``German Plate''). There the Department identified 
seven functions performed by the respondent's U.S. affiliate. The 
Department determined that these seven functions warranted classifying 
and analyzing the affiliates' resales as CEP transactions. Petitioners 
argue that with the possible exception of customer credit checks, DBLA 
performs all of those functions as Dongbu's selling affiliate in the 
United States. Perhaps more important, petitioners state, record 
evidence demonstrates that, like the U.S. affiliate in German Plate, 
DBLA plays the central role in negotiating U.S. transaction price.
    Dongbu argues that the U.S. sales the Department classified as EP 
transactions were correctly classified. First, they argue that the 
Department has considered and rejected petitioners' argument in the 
first and second administrative reviews of this order, and that nothing 
new--either factually or legally--has changed with respect to this 
issue since those reviews. Furthermore, they argue that the Department 
again examined this issue at the verifications in this review, and 
found nothing to support petitioners' argument.
    Second, Dongbu argues that petitioners' assertions that DBLA 
engages in substantial selling functions, which include price 
negotiation, have no basis in the record and are at odds with the 
Department's findings in the sales verification reports. It is a matter 
of record, Dongbu argues, that the most significant selling activities 
related to U.S. sales occur in Korea, including sales negotiation, 
production scheduling, shipping scheduling, Korean brokerage, handling, 
and loading expenses, Korean inland freight, and ocean freight. Dongbu 
states that DBLA has no direct role in these arrangements and that 
these expenses are all incurred in Korea.
    Furthermore, Dongbu argues that during the verification in Korea 
the Department examined and verified multiple transactions that 
demonstrated that Dongbu U.S.A. was merely a communications link, and 
that Dongbu approved the terms of all sales. One such sale, it argues, 
was the sale (cited by petitioners) in which Dongbu denied a requested 
discount from an American customer. Dongbu states that after receiving 
the request, it wrote directly to the U.S. customer, and explained that 
constant requests for discounts could warrant a termination of their 
relationship. Nothing could be more illustrative, Dongbu argues, of 
Dongbu U.S.A.''s function as a communication link and Dongbu's 
authority in setting the terms of sale. Dongbu also identifies 
observation 454 as another sale which serves as a prime example of 
Dongbu's ultimate authority over U.S. sales: in that transaction, 
Dongbu argues, it decided that a discount was appropriate, and 
confirmed the sale.
    Moreover, Dongbu argues that there are fundamental differences in 
the relationship between Dongbu and its subsidiary and the relationship 
between the respondent and its sales affiliate in German Plate. In this 
regard the U.S. verification report dated December 16, 1997, says (at 
2) that Dongbu U.S.A. ``act[s] solely as an intermediary, inasmuch as 
headquarters in Korea exercise[s] active authority over pricing and 
terms.'' In German Plate, the U.S. sales affiliate played a major role 
in negotiating price with customers. Thus, it argues, German Plate 
cannot serve as a basis to reclassify Dongbu's transactions as CEP.
    Third, Dongbu argues that all of DBLA's sales activities which 
petitioners argue warrant reclassifying Dongbu's sales as CEP sales are 
consistent with EP classification. To act as importer of record, to 
receive purchase orders to forward to Seoul for approval, to issue 
sales contracts once the quantities and prices have been approved by 
Seoul, to borrow to finance accounts receivable, to handle billing and 
accounting functions, and to contact U.S. customers, are all, Dongbu 
argues, well within the scope of activities normally associated with 
acting as a communications link and document processor. Furthermore, 
they argue that the CIT has consistently upheld purchase price (``PP'') 
(now called ``EP'') classification in circumstances in which the 
related U.S. company undertook activities equal to, or far more 
extensive than, those at issue here. Dongbu cites the following four 
examples:
     PP classification was upheld where U.S. affiliate first 
shipped merchandise to independent warehouses whose cost was borne by 
U.S. affiliate, U.S. affiliate was importer of record, U.S. affiliate

[[Page 13177]]

paid estimated antidumping duties on the merchandise, U.S. affiliate 
retained title prior to sale to the unrelated U.S. party, and U.S. 
affiliate received commissions for its role in the transactions. 
Outokumpu Copper Rolled Products v. United States, 829 F. Supp. 1371, 
1379-1380 (CIT 1993), appeal after remand dismissed, 850 F. Supp. 16 
(CIT 1994).
     PP classification was upheld where U.S. affiliate received 
purchase orders and invoiced related customer, U.S. affiliate was 
invoiced for and directly paid shipping company for movement charges, 
U.S. affiliate occasionally warehoused, at its own expense, and U.S. 
affiliate received ``substantial mark-up'' over price at which it 
purchased from exporter. E.I. Du Pont de Nemours & Co., Inc. v. United 
States, 841 F. Supp. 1237, 1248-50 (CIT 1993).
     PP classification was upheld where U.S. affiliate invoiced 
customers, collected payments, acted as importer of record, paid 
customs duties, and may have taken title to the goods when they arrived 
in the United States. Zenith Electronics Corp. v. United States, 18 CIT 
870, 873-874 (1994).
     PP classification was upheld where U.S. affiliate 
processed purchase order, performed invoicing, collected payments, 
arranged U.S. transportation, and served as the importer of record. 
Independent Radionic Workers v. United States, CIT Slip Op. 95-45 
(March 15, 1995).
    For all of these reasons, Dongbu argues, the Department should 
reject petitioners' argument.
    Department's Position. We agree with petitioners that Dongbu's U.S. 
sales should be treated as CEP transactions. In the final results of 
the prior reviews, in order to determine whether sales made prior to 
importation through Dongbu's affiliated U.S. sales affiliate (DBLA) to 
an unaffiliated customer in the United States were EP or CEP 
transactions, we analyzed Dongbu's U.S. sales to determine whether the 
following three factors were present: (1) whether the merchandise was 
shipped directly from the manufacturer (Dongbu) 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 affiliate (DBLA) was limited to that of a processor of sales-
related documentation and a communications link with the unrelated U.S. 
buyer. We concluded that DBLA was no more than a processor of sales-
related documentation and a communications link, and classified 
Dongbu's U.S. sales as EP transactions. Second Review Final Results at 
18423.
    As explained above in the ``Fair-Value Comparisons'' section of 
this notice, to ensure proper application of the statutory definitions, 
where a U.S. affiliate is involved in making a sale, we consider the 
sale to be CEP unless the record demonstrates that the U.S. affiliate's 
involvement in making the sale is incidental or ancillary. The 
statement in the verification report, quoted by Dongbu, that Dongbu 
U.S.A. ``act[s] solely as an intermediary, inasmuch as headquarters in 
Korea exercise[s] active authority over pricing and terms' is not 
dispositive. Rather, the totality of the evidence regarding Dongbu's 
sales process demonstrates that DBLA's role is more than ancillary to 
the sales process.
    We base this finding on several factors. First, we note that all of 
Dongbu's U.S. sales are made through DBLA, and that Dongbu's U.S. 
customers seldom have contact with Dongbu. Furthermore, it is DBLA (and 
not Dongbu) that writes and signs the sales contract. Though 
respondents claim that Dongbu approves all sales prices by telephone, 
such approval does not make DBLA's role in the sales negotiation 
process ancillary. Nor can we conclude that Dongbu's control over price 
discounts makes DBLA's role in the sales process ancillary. As with 
respondent A.G. der Dillinger Huttenwerke (``Dillinger'') in Plate from 
Germany, there is no evidence that Dongbu was involved in the sales 
process at all until after its U.S. subsidiary made the initial 
arrangements.
    Furthermore, we find that, in addition to playing a key role in the 
sales negotiation process, DBLA played a central role in all sales 
activities after the merchandise arrived in the United States. As 
petitioners have pointed out, these activities included issuing 
invoices, collecting payment, financing the sale to the U.S. customer, 
and arranging for warehousing and demurrage in the United States. 
Though Dongbu is correct that the CIT has upheld an PP (or EP) 
classification despite significant sales activities on the part of the 
U.S. subsidiary, that fact does not render these activities irrelevant 
in making this determination. These activities carried out by DBLA are 
both extensive and significant, as evidenced by the value of the 
indirect selling expenses incurred by DBLA relative to the value of the 
indirect selling expenses incurred by Dongbu. Further, the existence of 
significant selling expenses in the United States itself belies 
Dongbu's claim that the role of its U.S. affiliate was not meaningful. 
See Dongbu's January 31, 1997 submission, exhibit 22.
    In German Plate we stated, ``We consider [the U.S. subsidiary] 
Francosteel's extensive involvement in negotiating respondent's U.S. 
sale during this review, along with Francosteel's other sales 
activities, to warrant classifying this sale as CEP.'' German Plate at 
18392. For the same reasons, we have classified Dongbu's U.S. sales as 
CEP in these final results.
    Comment 6. Petitioners argue that the Department erred with respect 
to Dongbu by classifying U.S. sales observation 440 as an EP sale, 
rather than a CEP sale. They argue that for three reasons this sale 
must be classified as a CEP sale. First, they argue that evidence on 
the record suggests it was not sold until after importation. They cite 
a statement contained in Dongbu's supplemental questionnaire response 
in which Dongbu stated that ``Dongbu U.S.A. generally issues the 
invoice and sends it to the customer about a week before the expected 
arrival of the merchandise at the port.'' See Dongbu's January 31, 1997 
supplemental questionnaire response at 33 (emphasis in original). Based 
on this information and documentation contained in verification exhibit 
five (the verification exhibit associated with this sale), petitioners 
argue that observation 440 must have been sold after entry. Second, 
they argue that documents in verification exhibit five contain 
discrepancies which render Dongbu's reported contract date (which the 
Department used as the sale date in the preliminary results) 
demonstrably untrue. Specifically, they argue that the sales contract 
in that exhibit does not even pertain to observation 440. Third, they 
argue that evidence in verification exhibit five indicates that DBLA 
played the primary role in price negotiation.
    Furthermore, petitioners argue that the Department should resort to 
facts available in determining the warranty and warehousing expenses 
for this sale because Dongbu did not report any expenses for warranty 
and warehousing, and because information on the record suggests that 
Dongbu did not even report the correct sales price on its U.S. sales 
tape.
    Finally, petitioners argue that the Department should consider 
deducting warranty and warehousing expense amounts for all of Dongbu's 
U.S. sales. Their basis for this argument is that the Department 
discovered at verification that for two of six sales verified, Dongbu 
incurred additional, unreported sums for warehousing and warranty 
charges for discounts necessitated by late shipments. Petitioners 
believe, based on

[[Page 13178]]

proprietary information on the record, that it is not unlikely that 
additional sales were canceled, and that Dongbu did not fully report 
expenses associated with those sales.
    Dongbu argues that the petitioners have misrepresented what Dongbu 
reported as the date of sale. Dongbu states that the date it reported 
as the date of sale is not the contract date, but the date of the 
invoice between Dongbu and Dongbu Corporation. This date, it states, is 
before the entry date. Therefore, it argues, petitioners are incorrect 
in stating that there is evidence that the merchandise was not sold 
until after importation.
    With respect to petitioners' second argument, Dongbu argues that 
the contract contained in verification exhibit five does cover 
observation 440. With respect to petitioners' argument that the 
Department should make an adjustment for unreported warehousing and 
demurrage charges, Dongbu argues that the Department verified all 
expenses for sale 440, and that there is therefore no reason to impose 
any additional charges on any of Dongbu's U.S. sales.
    Department's Position.  We agree with petitioners in part, and 
disagree with petitioners in part. As indicated in the Department's 
response to Comment 5, we have determined to treat Dongbu's sales as 
CEP sales in these final results. Observation 440 is no exception. 
However, we disagree with petitioners that we should make additional 
deductions from observation 440 or any of Dongbu's other U.S. sales for 
allegedly unreported expenses. We find no evidence that this sale was 
warehoused or that it incurred warranty expenses, or that Dongbu failed 
to report the correct sales price. Thus, there is only one U.S. sale 
for which Dongbu failed to report warehousing expenses, and these 
expenses Dongbu reported in its supplemental questionnaire response 
prior to verification. We found no other unreported expenses at 
verification. Therefore, we find no reason to make additional 
adjustments for warranty or warehousing expenses (beyond what Dongbu 
reported) for any of Dongbu's U.S. sales.
    Comment 7. Petitioners argue that the Department erred in the 
calculation of Dongbu's U.S. imputed credit by using the bill of lading 
date as the start of the credit period, rather than the shipment date 
from Dongbu's production facility. They argue that in this review, 
unlike prior reviews, information is on the record demonstrating that 
there exists a significant time lag between the date of shipment from 
the factory and the bill of lading date. Thus, they argue, the 
Department is not bound by its decision in previous reviews to utilize 
the bill of lading date as the start of the credit period because the 
premise of that decision was that no discrepancy existed between the 
bill of lading date and the actual shipment date. The existence of the 
discrepancy, petitioners argue, distinguishes this case from Melamine 
Institutional Dinnerware Products from Indonesia; Determination of 
Sales at Less Than Fair Value, 62 FR 1719 (January 13, 1997) 
(``Dinnerware''), a case Dongbu has used to support its argument that 
the Department should use the bill of lading date as the start of the 
credit period. In Dinnerware the Department accepted the bill of lading 
date as the date of shipment because it verified that there was ``no 
evidence to indicate any difference between the date of factory 
shipment and the bill of lading date.'' Dinnerware at 1724. Such is not 
the case here, petitioners argue.
    Petitioners further argue that it would be especially inappropriate 
to use the bill of lading date here because in a supplemental 
questionnaire the Department requested that Dongbu calculate imputed 
credit based on the actual shipment date, and not the bill of lading 
date, but Dongbu refused to do so. They argue that the Department 
should not reward such recalcitrance. As an alternative, petitioners 
recommend that the Department use the date of the commercial invoice 
from Dongbu to Dongbu Corporation as the shipment date. Use of this 
date, petitioners argue, would neither reward Dongbu for its 
recalcitrance nor be unduly adverse. In addition, petitioners argue, 
the Department determined at verification that the commercial invoice 
between Dongbu and Dongbu Corporation is ``prepared at the same time 
that Dongbu Steel ships the merchandise * * * .'' See the July 8, 1997 
verification report at 4. As another possible alternative, petitioners 
suggest the Department add to Dongbu's reported imputed credit a credit 
amount reflecting the maximum period of time Dongbu estimated as 
existing between the date of factory shipment and the bill of lading 
date.
    Dongbu argues the Department was correct in using the bill of 
lading date as the shipment date. It argues, based on the fact that it 
reported and the Department accepted the bill of lading date as the 
shipment date in all prior reviews of this order, that its action here 
was not the product of recalcitrance, but of reliance. It argues 
further that it was justified in its action, as explained in its 
supplemental questionnaire response, because of the difficulties 
associated with specifying shipment dates for particular transactions 
of the subject merchandise. The petitioners' appeal to equity, Dongbu 
argues, is ironic given that the equities here run plainly in favor of 
Dongbu. A change in practice at this stage, it states, would implicate 
the specter of arbitrariness in the Department's action.
    Department's Position. We agree with petitioners in part. Unlike 
prior reviews of this order, the record of this review contains 
information that there is sometimes a significant difference between 
the date of shipment from the factory and the date of the bill of 
lading. Dongbu has stated that the bill of lading is consistently 
generated within a few days of actual shipment of the coil from the 
factory, but has also stated that the inventory carrying period is 
sometimes longer than a few days. See Dongbu's January 31, 1997 
submission at 35. Given these facts, we can no longer use the bill of 
lading date as the shipment date in the credit calculation.
    However, we also accept the argument Dongbu set forth in its 
January 31, 1997, supplemental questionnaire response that it would be 
an excessive administrative burden to report the shipment date for each 
sale because Dongbu does not have an automated system that links 
individual shipping invoices to commercial invoices and commercial 
invoice line items. Therefore, because its U.S. sales are sometimes 
shipped in lots from the plant to the port over a period of days, 
Dongbu would have to trace manually from coils reported on individual 
shipping invoices to the appropriate line items on commercial invoices. 
See Dongbu's January 31, 1997 supplemental questionnaire response at 3-
4. Given the administrative burden of such a task, it would be 
inappropriate for the Department to resort to adverse facts available 
to represent the credit period.
    Because we cannot use the bill of lading date as the shipment date, 
and because of the excessive administrative burden of reporting 
shipment dates for each sale, petitioners' suggestion that we use the 
date of the commercial invoice from Dongbu to Dongbu Corporation as the 
factory shipment date is not unreasonable. Our verification report 
states, ``At the same time that Dongbu ships the merchandise (or 
sometimes immediately thereafter), it prepares a * * * commercial 
invoice.'' See July 8, 1997 verification report at 4. Based on this 
information, we determine that the commercial invoice date is 
sufficiently close to the factory shipment date that it can serve as 
the start of the credit period without being adverse to Dongbu. 
Therefore, we

[[Page 13179]]

have used this date in the credit calculation in these final results of 
review.
    Comment 8. Petitioners argue that the Department erred in not 
making a deduction from Dongbu's export price for Korean warehousing 
expenses incurred on cold-rolled products. They argue that the statute 
requires that these expenses be deducted from U.S. price because it 
says that the price in the United States must be reduced by the amount 
of ``costs, charges, or expenses * * * incident to bringing the subject 
merchandise from the original place of shipment in the exporting 
country.'' See Sec. 772(c)(2)(A) of the Act. Furthermore, petitioners 
argue, according to the SAA, warehousing expenses are included among 
movement expenses. It states that the movement expense deduction 
includes a deduction for ``transportation and other expenses, including 
warehousing expenses * * * .'' SAA at 823. Moreover, the Department 
itself, petitioners argue, stated in the comments to the new 
regulations that the statute requires the deduction of ``all movement 
expenses (including all warehousing) that the producer incurred after 
the goods left the production facility.'' See Final Rules at 27345.
    Petitioners also argue that the reason the Department gave in prior 
reviews for not making the warehousing adjustment is not valid. In 
prior reviews, petitioners state, the Department failed to make the 
warehousing adjustment because it accepted Dongbu's characterization of 
these expenses as cost of manufacturing (``COM'') expenses. Petitioners 
argue that neither the statute nor the regulations permit exceptions to 
the mandatory nature of the deduction based on how the respondent 
characterizes the expenses or records them in its financial records. 
For the Department to make an exception here would be particularly 
unjust, petitioners argue, because the Department has not captured the 
warehousing expenses at issue in any direct price adjustment. To 
``capture'' them in cost data, petitioners argue, would never result in 
a direct adjustment to price as mandated by the statute.
    Dongbu argues that in accordance with its normal accounting 
practices which predate the antidumping duty orders, it reported these 
warehousing expenses as manufacturing overhead associated with its 
Seoul works. The cost of pre-shipment overhead of this kind, it argues, 
is no different from overhead expenses associated with temporarily 
storing semi-finished products between production lines. Therefore, it 
argues, to deduct them from U.S. price even though they are already 
accounted for in manufacturing overhead would constitute double 
counting. Thus, it states, in the prior review of this order the 
Department properly treated these costs as pre-shipment manufacturing 
costs, and not as selling expenses.
    Dongbu also argues that if the Department does decide to deduct 
this expense as a direct expense, it should make the deduction only for 
cold-rolled products, and not corrosion-resistant products, because 
corrosion-resistant products are never stored in the warehouse. It 
further argues that the Department should also adjust the reported cost 
of cold-rolled products downward by an offsetting amount to avoid 
double-counting of expenses.
    Department's Position. We agree with petitioners and Dongbu in 
part. We agree that we should make an adjustment to Dongbu's U.S. price 
for warehousing expenses incurred after the subject merchandise has 
left the Seoul plant. As the SAA specifies at 823, the URAA's mandate 
to deduct movement-related expenses specifically includes 
``warehousing'' expenses. Further, our new regulations (which, though 
not binding on this review, embody our latest practice) state that 
``[t]he Secretary will consider warehousing expenses that are incurred 
after the subject merchandise or foreign like product leaves the 
original place of shipment as movement expenses.'' See 19 CFR 
Sec. 351.401(e)(2) (May 19, 1997). Here, the original place of shipment 
is Dongbu's Seoul production facility, and the warehouse is in Inchon. 
Therefore, because these warehousing expenses are incurred after 
leaving Seoul, they must be considered movement expenses, and they must 
be deducted from Dongbu's export price.
    However, we agree with Dongbu that we should deduct these movement 
expenses only from the selling prices of cold-rolled products, and not 
corrosion-resistant products, because they are incurred only on cold-
rolled products. Furthermore, we agree with Dongbu that it would be 
double-counting to include these expenses as both a movement expense 
and overhead. Therefore, in these final results we have deducted them 
from Dongbu's COM for cold-rolled products.
    Comment 9. Petitioners argue that the Department erred by accepting 
Dongbu's calculation of inland freight costs incurred by an affiliated 
party in the home market, but not using a comparable formula for 
calculating transportation-related costs incurred by an affiliated 
party in the U.S. market. In the home market inland freight is incurred 
by Dongbu's affiliated entity Dongbu Express. In the U.S. market 
Dongbu's affiliate DBLA incurs expenses for arranging U.S. brokerage 
and handling, U.S. customs clearance, warehousing certain sales, and 
paying customs duties. Both of these entities contract with 
unaffiliated entities to perform the services. Petitioners argue that 
the Department erred by accepting Dongbu's reported home-market inland 
freight costs (which consist of the unaffiliated trucking company's 
charge to Dongbu Express plus a markup attributable to Dongbu Express' 
estimated overhead and profit), but not making a similar mark-up (and 
deducting that markup from U.S. price) for the profit DBLA realizes on 
its provision of transportation-related services.
    Petitioners argue that, to the extent that DBLA charges amounts in 
addition to its costs for the transportation services, these amounts 
represent expenses incurred in bringing the merchandise from the place 
of shipment to the unaffiliated U.S. customer. Thus, petitioners argue, 
the mark-ups DBLA and Dongbu Express charge are identical in substance 
even though they may be different in form, and consistency requires 
that the Department treat them the same way. Moreover, they argue that 
the Department's failure to adjust for the markup is inconsistent with 
its treatment of an affiliated-party markup in its analysis of POSCO. 
Finally, they argue that because Dongbu has failed to report the amount 
of DBLA's markup on these sales, the Department should rely on facts 
available. Petitioners suggest that as facts available, the Department 
should apply to DBLA the markup percentage that Dongbu Express charges 
for its services. As an alternative petitioners argue that, if the 
Department refuses to make a markup adjustment in the U.S. market, it 
should also not make a markup in the home market.
    Petitioners note that in the previous review the Department 
rejected this argument, and gave several reasons for this rejection. 
None of these arguments, petitioners state, withstand scrutiny. First, 
petitioners state, the Department argued that the sums DBLA paid to 
unaffiliated companies were already reported on the record. Petitioners 
argue that this is true, but irrelevant. Their argument, they state, is 
not that the cost to DBLA has not been fully reported, but that the 
ultimate cost to Dongbu for these services is understated, because it 
does not include the markup charged by DBLA.
    Second, petitioners state, the Department argued that because the 
U.S. affiliate did not directly perform these

[[Page 13180]]

services, but rather contracted for them, the adjustment should not be 
made. Petitioners argue that this statement too, though true, is 
irrelevant because neither Dongbu Express in the home market nor DBLA 
in the U.S. market directly perform the transportation services, but 
rather contract with unaffiliated service providers for them. 
Furthermore, POSCO's U.S. affiliates also do not directly perform the 
services in question, yet the Department made an additional deduction 
from U.S. price to account for markups.
    Third, petitioners state that the Department argued that there was 
no legal basis for the deduction of profit on these services because 
``U.S. profit deductions are allowed only in connection with CEP sales, 
and not EP sales.'' Petitioners see two flaws in this argument. First, 
they argue that the Department did not apply this argument to the 
deductions made for markups by POSCO's affiliates and Dongbu Express. 
Second, they state that it misconstrues the statute and petitioners' 
argument. They state that they do not seek the CEP deduction for profit 
earned in the United States which is provided for in section 772(f) of 
the Act. Rather, they ask that the Department fully account for all 
movement expenses because the statute requires that they be deducted in 
their entirety from U.S. price.
    Dongbu argues that the Department rejected petitioners' argument in 
the second review of this order, and should do so here as well. It 
argues that there the Department determined that Dongbu's transactions 
with DBLA and Dongbu Express were not identical in substance, and that 
the expenses at issue were fully reflected in the brokerage fees paid 
by DBLA, and reported by Dongbu in its response. It argues that given 
no change in the factual record or the manner in which Dongbu reported 
these expenses, the Department should adhere to its past practice and 
reject petitioners' arguments on this issue. It notes too that the 
third reason upon which petitioners allege the Department based its 
determination (i.e., that U.S. profit deductions are allowed only for 
CEP sales) was not a reason the Department gave to support its 
determination, but was a statement the Department used to summarize 
Dongbu's argument. Dongbu reiterates its position that there is no 
legal basis for deducting an amount for ``profit'' on these sales 
because U.S. profit deductions are permitted only in connection with 
CEP sales.
    Department's Position. We agree with petitioners in part, and have 
changed our position from the preliminary results of this review and 
the final results of the prior review. Because the amounts paid to 
Dongbu Express in the home market and to DBLA in the U.S. market are 
both for the provision of transportation-related services, we believe 
that they are similar in substance. Accordingly, the more reasonable 
approach for these final results is to treat these expenses in the same 
way.
    However, we do not agree with petitioners' preferred approach for 
treating the two markups identically. We are not satisfied from the 
information on the record that the markups between Dongbu and its 
affiliates in either market reflect arm's-length market values. Given 
the closeness of the affiliation between Dongbu and the affiliated 
entities at issue, we cannot presume the arm's-length nature of the 
markups, nor can we be certain that they are not simply intra-company 
transfers of funds. However, petitioners' suggestion that we use Dongbu 
Express's markup for export services as a surrogate for DBLA's markup 
for import services is inappropriate. The use of a surrogate for 
missing information is not justified where, as here, we never requested 
the respondent to provide the missing information, and where there are 
other options. Given the facts of this situation, we have determined 
that in this review we will adopt petitioners' alternative suggestion 
of not making a markup adjustment in either the U.S. or home markets.
    Comment 10. Petitioners argue that the Department erred in granting 
Dongbu a home market adjustment which Dongbu allegedly mischaracterized 
in its submissions. They base their argument that Dongbu 
mischaracterized this adjustment on the following allegations:
     The expense is identified differently in Dongbu's 
financial statements and in the list of general expenses (contained in 
Dongbu's questionnaire response) from the way it is identified in 
Dongbu's claim for an adjustment;
     The Department's translator translated the name of the 
adjustment differently at the Korean verification than Dongbu 
translated it in its various submissions;
     There is a distinction in how Dongbu treats the expense 
with respect to its end-user customers (on the one hand) and its 
distributor customers (on the other hand).
    Petitioners argue that Dongbu should be held to the way it 
characterizes these adjustments in its own financial records and 
agreements. Moreover, they argue, where the proper translation of a 
particular term is disputed, it is appropriate for the Department to 
rely upon its own translator, as it did in the second review of this 
order. See Second Review Final Results at 18411. Furthermore, 
petitioners argue that Dongbu's stated rationale for the distinction in 
treatment is not supported by evidence on the record. At the 
verification, Dongbu stated that the rationale behind the distinction 
is that distributors tend to buy in larger quantities than do end-
users. See July 8, 1997 verification report at 10. Petitioners' 
analysis (submitted in its case brief) allegedly demonstrates that this 
rationale is not supported by Dongbu's sales listing. Finally, 
petitioners argue that because Dongbu mischaracterized the adjustment, 
the Department should use adverse facts available with respect to it.
    Dongbu argues that petitioners' argument is not supported by record 
evidence. First, it argues that information on the record demonstrates 
that it does not, contrary to petitioners' argument, differentiate the 
expense at issue by class of customer. Second, it argues that the 
record of the review regarding the circumstances surrounding the 
expense should dispel any confusion resulting from translation 
questions. Third, it argues that petitioners are inconsistent in their 
own translation of the name of the expense.
    Department's Position. We agree with Dongbu. Based on analysis not 
capable of public summary, we have determined that no basis exists in 
the record evidence to reject Dongbu's characterization of the 
requested adjustment. See the Department's final results analysis 
memorandum for additional information.
    Comment 11. Petitioners argue, based on information given in the 
verification report, that Dongbu has understated its depreciation 
expense by not including the expenses related to the revaluation of 
depreciable assets. As a result, petitioners argue, Dongbu understated 
its cost of production and constructed value. Therefore, petitioners 
argue, in the final results the Department should revise Dongbu's costs 
upward to reflect the increase resulting from the company's revaluation 
of depreciable assets.
    Dongbu argues that petitioners have misstated the amount of the 
difference as given in the verification report. It argues that given 
the insignificance of the difference, the Department correctly 
determined that it was appropriate to accept the reported depreciation 
expenses without adjustment.
    Department's Position. We agree with petitioners in part. We agree 
that

[[Page 13181]]

Dongbu's reported depreciation is understated, and should therefore be 
adjusted. However, we agree with Dongbu that petitioners' case brief 
misstates the amount of the understatement. The correct amount is shown 
in the July 8, 1997 verification report at 14-15. In these final 
results we have adjusted Dongbu's reported depreciation to reflect the 
revaluation of the depreciable assets.
    Comment 12. Petitioners argue that there is overwhelming evidence 
on the record demonstrating that BUS and POSAM were much more than mere 
``processors of sales-related documentation'' or ``communication 
links'' for POCOS's and POSCO's U.S. sales. Petitioners note that the 
Department, in its preliminary results of German Plate, identified 
several functions performed by the respondent's U.S. affiliate that 
warranted classifying and analyzing the affiliate's resales as CEP 
transactions. Petitioners argue that, with the possible exception of 
customer credit checks, both BUS and POSAM performed all of those 
functions as POCOS's and POSCO's sales affiliates in the United States, 
and other functions as well.
    Petitioners state that record evidence and POCOS's and POSCO's own 
statements during verification demonstrate that, like Dillinger's U.S. 
affiliate, BUS and POSAM play the central role in negotiating U.S. 
transaction prices. Regarding BUS, petitioners cite statements in the 
Department's report of the verification of the POSCO Group conducted in 
Korea (``Korea verification'') that petitioners claim indicate, in 
contradiction to later statements made at the verification of BUS 
(``California verification''), that BUS could suggest prices to be 
charged to the U.S. customer and that BUS was involved in the 
establishment of quarterly base prices it would pay for the subject 
merchandise. Petitioners cite statements made by company officials and 
noted in the Department's California verification report that are 
seemingly contradictory: that BUS needed to know the quarterly base 
prices in order to be sure that it would not lose money, and that POCOS 
decided whether particular sales would be completed, and the prices, 
without input from BUS. Petitioners question the extent to which the 
U.S. customers are aware of POCOS pricing, given BUS's statement at the 
California verification that the U.S. customers were not informed of 
the quarterly base prices, and petitioners question how those U.S. 
customers could have proposed bid prices that were never rejected 
unless they consulted with BUS on the setting of the prices. 
Petitioners also argue that the fact that BUS is not controlled by 
POCOS provides further support for the conclusion that BUS acts 
independently to set transaction prices in the United States, and note 
that the respondent provided no tangible evidence of contact between 
U.S. customers and POCOS with regard to pricing.
    Petitioners argue that POSAM, like BUS, had considerable discretion 
in the setting of U.S. prices. Petitioners note that there is no 
evidence to suggest that any price proposed by a U.S. customer was ever 
rejected by POSCO, even though POSAM claimed at the verification of 
POSAM (``New Jersey verification'') that the U.S. customers were not 
aware of the quarterly base prices that had been provided to POSAM by 
POSCO.
    Petitioners argue that the Department's New Jersey verification 
report demonstrates that the format of the computer spreadsheet files 
containing POSAM's U.S. sale cost breakdowns indicates that POSAM 
actively determined the amount of profit it would realize on its sales. 
Petitioners argue that this conclusion is supported by the fact that 
the profit field amounts were entered into the files as discrete 
figures, rather than being calculated by a formula as a residual 
between POSAM's selling price and its costs.
    Petitioners argue that the record shows that, with the exception of 
POSCO sales to one specific U.S. customer, in which it was clear that 
POSAM was not included in the sales process, BUS and POSAM had the 
primary role with respect to every aspect of each transaction, and 
assumed the sole responsibility for the most significant portions of 
each transaction. Petitioners state that in addition to having 
significant discretion in pricing and active involvement in negotiating 
the terms of sale for each transaction, BUS and POSAM also arranged for 
a variety of expenses characterized by the Department under the broad 
category of movement expenses. Petitioners state that BUS and POSAM 
served as the importers of record, took title to the merchandise, and 
handled other administrative issues pertaining to the U.S. customers.
    Finally, petitioners argue that the levels of involvement of BUS 
and POSAM in the U.S. sales are consistent with the substantial amount 
of selling, general, and administrative expenses (``SG&A'') these 
companies incurred during the POR.
    The POSCO Group argues that its U.S. sales should be classified as 
EP sales because POSAM and BUS function as communications facilitators 
for U.S. sales, and POSCO and POCOS set the terms of sale, including 
price, for U.S. sales. The POSCO Group notes that the Department 
determined in its second review final results that these entities 
operated as communications facilitators, and that the existence of 
sales contacts between the U.S. customers and these U.S. affiliates 
indicates nothing more than this limited role in the process nor 
establishes that the affiliates played any role in the actual setting 
of the prices. The POSCO Group also argues that POSAM and BUS did not 
participate in negotiation of other key sales terms for U.S. sales, 
citing as evidence of this a sale examined at the California 
verification for which POCOS required that the product characteristics 
of the merchandise requested by the U.S. customer be changed.
    The POSCO Group argues that in numerous previous cases, including 
the first and second reviews of these orders, respondents' sales were 
classified as EP (or formerly purchase price) sales when their U.S. 
affiliates undertook activities identical to, or even in addition to, 
those undertaken here by POSAM and BUS. See, e.g., Brass Sheet and 
Strip from the Netherlands; Final Results of Antidumping Duty 
Administrative Review, 61 FR 1324, 1326 (Jan. 19, 1996); Certain 
Corrosion-Resistant Carbon Steel Flat Products from Korea: Final 
Results of Antidumping Duty Administrative Review, 61 FR 18547, 18551, 
18562 (Apr. 26, 1996); Final Determination of Sales at Less Than Fair 
Value: Stainless Steel Wire Rods from France, 58 FR 68865, 68869 (Dec. 
29, 1993) (``Wire Rod from France''); Final Determination of Sales at 
Less Than Fair Value: Coated Groundwood Paper from Finland, 56 FR 
56363, 56371 (Nov. 4, 1991); and Notice of Final Determinations of 
Sales at Less Than Fair Value: 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 France, 58 FR 37125, 37133 (July 9, 
1993). The POSCO Group argues that functions such as maintaining 
contact with customers requesting price quotations, invoicing 
customers, collecting payment from the customer, maintaining 
relationships with customers, serving as importer of record, arranging 
and paying cash deposits for antidumping and countervailing duties, 
arranging and paying for brokerage, and minimal roles in U.S. 
transportation services, are activities commonly undertaken by an 
affiliated selling entity that acts as a

[[Page 13182]]

communications link. The POSCO Group also states that the petitioners' 
case brief does not mention numerous functions performed by the Korean 
manufacturers in the sales process.
    With regard to the setting of prices, the POSCO Group states that 
record evidence indicates that negotiations with each customer for each 
individual sale typically began in one of two ways: the customer may 
suggest a price to POSCO or POCOS in the initial inquiry, which POSAM 
or BUS forwards to the Korean manufacturer; or if the customer does not 
suggest a price, POSAM or BUS, based on their knowledge of the 
quarterly base price already established by POSCO, sometimes suggest a 
price to POSCO or POCOS for the sale when transferring the inquiry to 
Korea. The POSCO Group states that the record indicates that POSAM and 
BUS did not negotiate with U.S. customers, but rather simply 
transmitted information to the U.S. customers and to the Korean 
entities. The POSCO Group argues that the record shows that U.S. 
customers were not notified of the quarterly base prices to POSAM and 
BUS, and that U.S. customers' bid prices were based in part not on 
those quarterly base prices but, rather, on knowledge of past pricing 
by POSCO and POCOS. Given the small number of U.S. customers and their 
ongoing, long-term relationship with POSCO and POCOS, the POSCO Group 
explains, those customers do not need guidance from POSAM or BUS 
regarding what their price offer should be.
    The POSCO Group argues that the fact that POSAM and BUS are 
informed in advance of the quarterly base price is irrelevant, and that 
the record is clear that POSCO and POCOS do not consult with the U.S. 
affiliates with regard to the setting of those quarterly base prices. 
The POSCO Group states that the U.S. affiliates need to be able to 
estimate quarter by quarter the general value of transactions for cash 
flow purposes, insuring for example that they have adequate credit 
available to support their business. The POSCO Group cites statements 
by company officials at the U.S. verifications that neither POSAM nor 
BUS provided input to the manufacturers as to the setting of the 
quarterly base prices for the U.S. market, and that neither POSAM nor 
BUS provided those quarterly base prices to the U.S. customers.
    The POSCO Group argues that the fact that a POSAM official 
``entered'' the value for the POSAM markups into its cost spreadsheets 
is no indication that POSAM has an influence over the magnitude of that 
amount, but rather that these markup values were in fact residual 
amounts that were calculated elsewhere prior to computer entry.
    The POSCO Group states that because there is no commercial reason 
to maintain records of an unsuccessful transaction and because POSAM's 
and BUS's communications with POSCO and POCOS, respectively, regarding 
customer price offers often occur by telephone, the fact that there is 
a lack of written proof of a rejection by POSCO or POCOS of a U.S. 
customer price offer is not surprising.
    The POSCO Group states that the Department's verification report 
refers to various instances in which U.S. customers were in direct 
contact with POSCO and POCOS. The POSCO Group cites company official 
statements made at verifications in Korea and California that a POCOS 
official dealt directly with U.S. customers and, therefore, 
petitioners' claim that the record contains no evidence of contact 
between U.S. customers and POCOS is incorrect.
    The POSCO Group challenges what it characterizes as petitioners' 
claim that POSCO's sales did not ``go through POSAM'' to the one 
specific customer whose sales petitioners state were correctly 
classified as EP sales in the preliminary results. The POSCO Group 
argues that POSCO's sales to that U.S. customer were no different than 
any other U.S. sales and that under petitioners' own logic, therefore, 
all of POSCO's U.S. sales are EP sales.
    The POSCO Group challenges the petitioners' argument that the 
levels of SG&A incurred by POSAM and BUS indicate they are more than a 
communications link. The POSCO Group states that sales of subject 
merchandise account for only a small fraction of the U.S. affiliates' 
total sales, so the bulk of SG&A is clearly related to non-subject 
merchandise; that POSAM and BUS are selling entities only, whereas 
POSCO and POCOS are both selling and manufacturing entities; and that 
petitioners erroneously compare POSAM's and BUS's total SG&A expenses 
only to POSCO's and POCOS's selling expenses.
    The POSCO Group argues that the key facts that led the Department 
to reclassify certain U.S. sales as CEP sales in German Plate are not 
present in these reviews. The POSCO Group indicates that in the German 
case the affiliate of the respondent Dillinger essentially negotiated 
all sales in accordance with the respondent's limited guidelines, that 
the U.S. affiliate had the power to negotiate and set the price for the 
respondent's single U.S. sale, that the foreign parent only set a 
minimum price floor after considering the order information provided by 
the U.S. affiliate, and that the U.S. affiliate was the one that 
negotiated with the single U.S. customer to try to obtain the best 
price. German Plate at 18391-92. The POSCO Group argues that POSAM and 
BUS, like the affiliates in other cases cited by the Department in 
German Plate as differing from Dillinger's affiliate, did not have or 
exercise such authority. See E.I. Du Pont de Nemours & Co. v. United 
States, 841 F. Supp. 1237, 1249-50 (CIT 1993), and International 
Radionic Workers of America v. United States, CIT Slip Op. 95-45 (March 
15, 1995). Finally, the POSCO Group argues that in another case the 
Department classified sales as EP sales even though the U.S. affiliate 
participated in the sales negotiations with U.S. customers, because the 
U.S. affiliate did not have the flexibility to set the price or terms 
of sale and acted only as a processor of sales-related documentation. 
Wire Rod from France at 68869.
    Department's Position. We agree with petitioners that respondent's 
U.S. sales (with the exception of those made to one customer) should be 
classified as CEP transactions. In the final results of the prior 
reviews, in order to determine whether sales made prior to importation 
through the POSCO Group's affiliated U.S. sales affiliates (POSAM and 
BUS) to an unaffiliated customer in the United States were EP or CEP 
transactions, we analyzed the POSCO Group's U.S. sales in light of 
three criteria: (1) whether the merchandise was shipped directly from 
the manufacturer (POSCO or POCOS) to the unaffiliated U.S. customer; 
(2) whether this was the customary commercial channel between the 
parties involved; and (3) whether the functions of the U.S. sales 
affiliates (POSAM and BUS) were limited to those of processors of 
sales-related documentation and communications links with unrelated 
U.S. buyers. We concluded that BUS and POSAM were no more than 
processors of sales-related documentation and communications links, and 
classified the POSCO Group's U.S. sales as EP transactions. Second 
Review Final Results at 18433.
    In this case, the record shows, and petitioners do not contest, 
that the first two criteria have been met. Consequently, the third 
criterion, pertaining to the level of affiliate involvement in making 
sales or providing customer support, is the determining factor in this 
instance. As explained above in the ``Fair-Value Comparisons'' section 
of this notice, to ensure proper application of the statutory 
definitions, where a U.S. affiliate is involved in making a sale, we

[[Page 13183]]

normally consider the sale to be CEP unless the record demonstrates 
that the U.S. affiliate's involvement in making the sale is incidental 
or ancillary. The record evidence here suggests that it is POSCO's and 
POCOS's roles that may be ancillary to the sales process (except with 
respect to one customer of POSCO, as noted below), and that in any case 
the record does not demonstrate that the U.S. affiliates' involvement 
in making the sales were incidental or ancillary.
    We base this finding on several factors. First, we note that POSCO 
and POCOS's U.S. sales (with the exception of those to one U.S. 
customer) were made through POSAM and BUS, respectively, and that U.S. 
customers seldom had contact with POSCO or POCOS. The record 
establishes that POSAM and BUS were typically the parties contacted 
first by unaffiliated customers desiring to purchase the subject 
merchandise and also that POSAM and BUS sign the sales contracts. Such 
facts indicate that the subject merchandise is first sold in the United 
States by or for the account of the producer or exporter, or by the 
affiliated seller, and therefore that the sales in question are CEP 
transactions.
    In addition to their key involvement in the U.S. sales process, the 
U.S. affiliates also played a central role in the sales activities 
after the merchandise arrived in the United States, including many of 
the criteria cited in German Plate. While the CIT has upheld a PP (or 
EP) classification despite such activities on the part of the U.S. 
subsidiary, that fact does not render these activities irrelevant in 
making this determination. While we disagree with petitioners' 
assertion that the record demonstrates that POSAM and BUS acted 
independently to set U.S. transaction prices and the other key terms of 
sale, the respondent's claim that the U.S. affiliates had no role in 
the setting of prices is not demonstrated by the record either.
    The respondent's claim regarding the lack of U.S. affiliate 
involvement in the negotiation of prices is actually called into 
question by various factors. For example, the respondent did not 
provide tangible evidence of price rejection by POSCO or POCOS. With 
respect to other terms of sale, POCOS's apparent rejection of the 
product characteristics proposed by a U.S. customer only suggests that 
BUS is not autonomous with respect to the sales process and that BUS 
does not have all information regarding the production process, not 
that BUS's role in the process is ancillary.
    While the fact that the ``markup value'' cell in POSAM's cost 
spreadsheets, unlike numerous other values, was entered by hand rather 
than as a formula does not appear to be relevant, a possible 
interpretation would be that the affiliate does in fact have some type 
of input into the magnitude of the markup it earns on the sales. More 
importantly, though, neither respondent's submissions nor its 
statements at verification explain the inconsistency of statements made 
during the California verification with respect to BUS's need to know 
the quarterly base prices.
    Furthermore, the respondent's claim that the absolute and relative 
levels of SG&A incurred by the U.S. affiliates with respect to U.S. 
sales of subject merchandise are well below those of their non-subject 
merchandise operations is unsupported by the record, at least in part 
because the respondent did not provide information concerning selling 
expenses incurred in the United States. The POSCO Group chose not to 
report the indirect selling expense and inventory carrying cost 
information in its U.S. sales response, despite the fact that such 
reporting for U.S. sales of subject merchandise was requested in the 
Department's original questionnaire. When the Department indicated in a 
supplemental questionnaire that it may use facts available to determine 
these expenses if they were not reported by the POSCO Group, the POSCO 
Group again failed to report those expenses. The POSCO Group's response 
was as follows:

``POSCO notes that it is not reporting these expenses because the 
Department has not notified POSCO that it believes that the sales at 
issue are not export price sales, and it does not want to burden the 
record with unnecessary data. POSCO's U.S. sales are export price 
sales and the Department ruled in the less than fair value 
determination and in the second review preliminary results that they 
were export price sales. POSCO has cooperated fully and will 
continue to cooperate fully with the Department. If the Department 
believes that it might reverse its practice from that in prior 
determinations, POSCO is willing to submit these expenses.'' See the 
March 3, 1997 supplemental Section C questionnaire response at 21.

The POSCO Group incorrectly assumed that the Department was required to 
meet certain preconditions before requesting and obtaining the 
information in question. The Department may solicit any information it 
reasonably believes may be relevant to its determinations, and is not 
obligated to solicit this information three or more times, especially 
given that there are statutory deadlines to which we must adhere. At 
least in part as a result of the respondent's choice not to report the 
information we requested, we cannot determine the extent of U.S. 
selling expenses pertaining to sales of subject merchandise. We cannot 
presume that the information the POSCO Group failed to provide would 
support a conclusion that the operations of POSAM and BUS with respect 
to the U.S. sales of subject merchandise were ancillary. Further, we 
are using the aggregate information as the basis for estimating the 
unreported U.S. indirect selling expenses.
    We reject the POSCO Group's claim that the petitioners' admission 
that sales by POSCO to one U.S. customer were correctly classified as 
EP sales also suggests that all of the POSCO Group's U.S. sales should 
be classified as EP sales. For the sales to the one customer in 
question, POSAM was clearly not involved in the initial negotiations 
and the primary work relating to setting of price and other terms of 
sale. Given the information from the record indicating POSCO's 
substantial involvement in those sales and a very limited role for 
POSAM (see, e.g., Exhibit 45 of the Korea Verification report), we are 
not reclassifying sales to that one customer as CEP sales.
    Comment 13. Petitioners argue that the Department erred in its 
calculation of constructed value in its cold-rolled programming for the 
POSCO Group. Petitioners indicate that the Department deducted the 
variable representing credit expenses attributable to the gross unit 
price of the merchandise (``CRED1CV'') twice in the calculation of CV.
    The POSCO Group argues that this point is moot, given that normal 
value will not be based upon CV if the Department reverses its 
erroneous adjustment for alleged discrepancies in reporting methodology 
for cold-rolled product thickness.
    Department's Position. We agree with petitioners that the 
Department erred in its calculation of CV by deducting CRED1CV twice. 
We have corrected the programming to reflect this change.
    Comment 14. Petitioners argue that the Department should reverse 
its methodology and apply the major input and fair value provisions to 
transfers of substrate between POSCO, POCOS, and PSI. Petitioners note 
that the collapsing of entities does not negate the applicability of 
statutory provisions regarding affiliated persons. Petitioners state 
that the statute provides explicitly that the major input and fair 
value provisions are to be applied to transactions between affiliated 
persons, and that both the legislative history and public policy 
support the application of these provisions to all transactions 
involving transfers of substrate between affiliates. Petitioners assert 
that the

[[Page 13184]]

statute is silent with respect to the collapsing of entities for 
purposes of review, and consequently a decision to collapse entities 
cannot override the definition of ``affiliated persons'' which is 
explicitly mandated by statute.
    Petitioners assert that applying the major-input or fair-value 
provisions selectively based on the purported extent of affiliation 
would be contrary to the express language of the statute and 
regulations, would have the effect of reading these provisions out of 
the statute in certain cases, and would preclude the transparency and 
predictability of the law.
    Petitioners argue that collapsing is done when the Department finds 
that one party has a sufficient degree of control over another to 
create a significant possibility of price manipulation by the 
controlling party, and the Department's inherent authority to collapse 
two entities stems from several requirements: the need to review an 
entire producer or reseller, and not merely part of it; the need to 
ensure that antidumping margins are calculated as accurately as 
possible; and the need to prevent circumvention of antidumping duty 
orders by the establishment of alternate sales channels. See Queen's 
Flowers de Colombia et al. v. United States, CIT Slip Op. 97-120 
(August 25, 1997), at 7-8. Petitioners conclude that collapsing is done 
to ensure that all of a respondent's U.S. sales are included in the 
calculation of dumping margins, and that such a determination has no 
bearing on the Department's treatment of affiliated party transactions 
within the meaning of the fair-value and major-input provisions of the 
statute. A determination to collapse entities merely indicates that one 
party has sufficient control over another to be in a position to 
manipulate the controlled party's pricing decisions, but this does not 
mean that the two parties are so closely intertwined that one may be 
deemed to be merely a division of the other or that the separate 
corporate identities of these two entities suddenly cease to exist.
    Petitioners state that when the Department issued regulations to 
implement the URAA, it had the opportunity to limit the application of 
the major-input and fair-value provisions, but did not. Petitioners 
state that the legislative history is silent as to any limitation on 
the application of the major-input rule. Petitioners indicate that the 
methodology used by the Department in this instance would require in 
each case that the Department determine whether affiliated companies 
are operated as ``divisions'' of a whole, which would be burdensome, 
compared to simply applying the major-input rule and fair-value 
provisions to all affiliated parties.
    Petitioners note that the statute explicitly precludes use of the 
COP to value transfers of substrates between affiliates if the transfer 
price is greater than the COP. Therefore, the Department has the 
discretion to ignore the transfer price to use a higher market value, 
but does not have the discretion to ignore transfer price in order to 
employ a lower value.
    Petitioners note that the application of the major-input rule would 
not result in double-counting. Application of the major-input rule may 
result in an increase to a respondent's reported costs, but these 
adjusted costs also are used subsequently to calculate respondent's 
profits, and to the extent that costs are increased, the calculated 
profits are reduced. Furthermore, petitioners state that POCOS's profit 
is captured in the input price, and POSCO's profit is captured in the 
CV calculation.
    Petitioners note that the Department in its analysis completely 
ignored the fact that the three companies (POSCO, POCOS, and PSI) are 
indisputably separate and distinct legal corporate entities, unlike in 
the case of Certain Forged Steel Crankshafts from the United Kingdom; 
Final Results of Antidumping Duty Administrative Review, 61 FR 54613 
(October 21, 1996) (``Crankshafts''). In that case, the entities in 
question were divisions of the same corporation; in this one, POSCO, 
POCOS and PSI are indisputably separate corporate entities, and neither 
POCOS nor PSI is wholly-owned or controlled by POSCO. Petitioners cite 
various examples of factors affected by whether or not entities are 
divisions of another company or are separate entities, and which the 
Department should take into account if it chooses to ignore the 
distinction between these entities: Financing costs; tax impacts on 
working capital; and insurance costs.
    Petitioners indicate that in applying the major-input and fair-
value provisions, the Department should determine ``fair value'' for 
each specific control number (``CONNUM''), based on a comparison of 
POSCO's sales to POCOS, and POSCO's sales to all unaffiliated 
companies.
    Petitioners argue that if the Department continues to wrongly 
reject the application of the major-input and fair-value provisions, it 
must be consistent and find POSCO and Union Steel to be affiliated. If 
the Department treats POCOS and POSCO as one entity, petitioners argue, 
it must treat POSCO and Union as affiliated parties, because there is 
no doubt that Union and POCOS are affiliated.
    The POSCO Group argues that the Department addressed these same 
petitioner arguments in the final results of its second reviews, noting 
that the POSCO Group (encompassing POSCO, POCOS, and PSI) represents 
one producer of subject merchandise, that a decision to treat 
affiliated parties as a single entity requires that transactions among 
the parties also be valued based on the group as a whole, that 
transfers of substrate between the group companies should be valued at 
the cost of manufacturing the substrate, and that because the POSCO 
Group is one entity for these final results, the major-input rule and 
fair-value provisions of the Act cannot apply because there are no 
transactions between affiliated persons. See Second Review Final 
Results at 18430-31.
    The POSCO Group argues that it would be inappropriate to apply the 
fair-value and major-input provisions under the unusual circumstances 
presented in this case because the Department is reviewing the cost of 
transactions within a single entity. The provisions apply only to 
transactions between persons, not when the Department is examining one 
producer or a single entity. By collapsing the POSCO entity for 
purposes of the dumping and cost analysis in this proceeding, the POSCO 
Group argues, the Department has determined that there are no 
transactions between affiliated persons under the language of the 
major-input or fair-value provisions of the statute. The POSCO Group 
argues that this is consistent with the Department's decision in 
Crankshafts at 54614. The POSCO Group argues that the Department's 
practice of collapsing parties into a single entity for its analysis 
was a well-known practice that existed before Congress applied the 
fair-value provision and major-input rules to the COP, and had Congress 
intended for these provisions to apply to transactions within a 
collapsed entity, it would have drafted the provisions to cover 
transactions between ``affiliated and collapsed persons.'' The POSCO 
Group challenges petitioners' argument that the Department has to apply 
the major-input and fair-value provisions to a collapsed entity because 
the regulations do not proscribe their application in such an instance, 
arguing that the regulations by definition serve as general guidelines, 
and do not spell out the specific application of every rule contained 
in the regulations. Furthermore, the POSCO Group argues that 19 C.F.R. 
Sec. 351.407(b) explicitly

[[Page 13185]]

allows for the Department's discretion in the use of these provisions, 
and the agency that has the most experience and is most expert in 
analyzing these issues recognizes that there are limits to how closely 
it should scrutinize transactions within a single collapsed entity. The 
POSCO Group also challenges petitioners' assertion that there is a 
continuum of affiliation, upon which collapsed entities reside; the 
POSCO Group states that under Department case law and common sense, 
parties are either unaffiliated, affiliated, or collapsed, and that 
these categorizations are mutually exclusive.
    The POSCO Group states that petitioners, in challenging the 
reliability of the prices paid for inputs transferred among controlled 
entities, have in fact provided support for the Department's decision 
to value the inputs based on the objectively verifiable cost of the 
input. The POSCO Group rejects as irrelevant petitioners' argument that 
the provisions should be applied because calculating the COP based on 
POSCO's substrate production costs is difficult and requires numerous 
allocations between products, cost centers, and divisions.
    Regarding the issue of whether or not the application of the major-
input rule would result in double-counting, the POSCO Group argues that 
petitioners mischaracterized the POSCO Group's argument that it raised 
in the second administrative review. The POSCO Group argues that, 
contrary to the assertion of petitioners, profit is not to be included 
in the calculation of cost of production. The POSCO Group states that 
by using the transfer price from POSCO to POCOS, the Department would 
be double-counting SG&A and including an artificial element of profit, 
thereby resulting in more home market sales being found to be below 
cost than should be the case, and thus affecting the calculation of NV. 
The POSCO Group states that using transfer prices to value POSCO 
substrate used by POCOS would result in POSCO's profit and SG&A that 
are reflected in the sales to POCOS being included in the calculation 
of costs applied to POSCO sales, given that costs for each CONNUM are a 
weighted-average across each collapsed company. The POSCO Group argues 
that this is inappropriate because the statute does not provide for 
profit to be included as an element of the COP, and the portion that is 
SG&A would already be in POSCO's reported costs in the COP buildup. 
Furthermore, the POSCO Group argues, petitioners' methodology would 
lead to the illogical result of more sales failing the cost test if 
POSCO's internal sales of substrate earned a higher profit, even though 
actual costs remain unchanged.
    For instances where CV is used as the basis for NV, the POSCO Group 
argues, the aforementioned use of transfer prices would distort the 
calculation of profit. The POSCO Group states that, in its calculation 
of profit for CV, the Department only uses sales that are above the 
COP. Because, as argued earlier, costs would be overstated were 
transfer prices from POSCO to POCOS to be used (because of allegedly 
inappropriate additional amounts of SG&A and profit), the Department 
would inappropriately discard lower value home market sales, because of 
the cost test, prior to the Department's calculation of CV profit.
    Regarding petitioners' assertion that POSCO and Union be treated as 
affiliated parties, the POSCO Group argues that petitioners' case brief 
makes no factual or legal arguments whatsoever concerning why the 
Department should find POSCO to be affiliated with Union. The POSCO 
Group notes that the Department, in the second administrative reviews 
of the orders, rejected this petitioner assertion and the arguments 
upon which it was based, and concluded that this decision was not 
inconsistent with its decision not to apply the fair-value and major-
input rules to the collapsed POSCO entity.
    Department's Position. In our preliminary results in these reviews, 
as in the second administrative reviews, we treated the entire POSCO 
Group as one entity for cost purposes. The Department clearly has 
discretion in its application of the major-input and fair-value 
provisions, as admitted by petitioners with respect to Crankshafts. A 
more rigid interpretation of the statute, as proposed by petitioners, 
would imply that the Department could not make a distinction for 
wholly-owned entities either, as such an entity would also, under the 
Department's definition, be ``affiliated'' with its owner.
    We recognize that different types of affiliation exist, and that 
different treatment of such relationships may be appropriate. The 
Department also rejects the POSCO Group's assertion that adjustments to 
POCOS costs cannot be acceptable because they affect whether or not 
POSCO sales pass the cost test. The nature of collapsing POSCO and 
POCOS is that POCOS's costs affect whether or not POSCO sales pass the 
cost test, given that each CONNUM's costs are a weighted average of the 
costs for that product across all collapsed companies.
    However, because we are treating these companies as one entity for 
our analysis, intra-company transactions should be disregarded. As 
noted in our final results in the second administrative reviews, the 
decision to treat affiliated parties as a single entity necessitates 
that transactions among the parties also be valued based on the group 
as a whole and, as such, among collapsed entities the fair-value and 
major-input provisions are not controlling.
    As noted by the POSCO Group, the petitioners have not in these 
reviews demonstrated why Union Steel should be considered affiliated 
with POSCO. The POSCO Group is treated as one entity for various 
purposes, but they of course maintain their distinction as separate 
legal entities. Unlike the relationship of POSCO to POCOS, there is no 
evidence that POSCO or Union control or influence each other's 
operations, and there is no indication on the record of any type of 
interaction between POCOS and Union Steel relating to subject 
merchandise.
    Comment 15. Petitioners argue that the POSCO Group failed to 
incorporate into its submitted costs general and administrative 
expenses associated with severance benefits. Petitioners cite 
information in POSCO's U.S. SEC report indicating that POSCO calculated 
an estimate of its exposure relating to these benefits, which was still 
in litigation, but under Korean generally accepted accounting 
principles (``GAAP'') did not need to reflect this estimated expense in 
its financial statements.
    The POSCO Group argues that POSCO incurred no current expenses for 
these unresolved severance benefits claims. The POSCO Group asserts 
that the Department made an adjustment for severance benefits in the 
final results of the second administrative reviews because POSCO was 
required by a final Korean court decision to establish a reserve for 
additional severance benefits. The POSCO Group argues that in those 
reviews the Department attributed such expenses to G&A even if they 
related to years prior to the review in question. The severance 
benefits that petitioners argue should be included for the third 
reviews have not been incurred, and POSCO has only a future contingent 
liability for potential exposure from the unresolved litigation. The 
POSCO Group argues that under the plain language of the statute the 
Department is not authorized to adjust POSCO's G&A costs based on such 
potential exposure, as the costs should be calculated based on records 
that ``reasonably reflect the costs associated with the production and 
sale of the

[[Page 13186]]

merchandise'' (see section 773(f)(1)(A) of the Act), and the Department 
is limited to using ``a method that reasonably reflects and accurately 
captures all of the actual costs incurred in producing and selling the 
product under investigation or review'' (SAA at 835).
    The POSCO Group argues that the Department did not adjust for 
similar speculative potential liabilities in another case, where the 
Department decided that there was no justification for adjusting costs 
to include potential royalty payments which were speculative, that the 
respondents were under no legal obligation to pay, and for which the 
respondents had incurred no current expenses. See Final Determination 
of Sales at Less Than Fair Value: Dynamic Random Access Memories of One 
Megabit and Above from the Republic of Korea, 58 FR 15467, 15479 (March 
23, 1993) (``Semiconductors'').
    Department's Position. We agree with the POSCO Group that we should 
not increase the respondent's costs by the potential expenses in 
question, as Korean GAAP does not require that they be recorded as 
expenses, and it has not been demonstrated that the absence of this 
estimated potential expense is distortive. We further believe that it 
would be unreasonable to impute to POSCO costs that, depending on the 
outcome of the litigation, it may not incur.
Union
    Comment 16. Petitioners argue that Union failed to provide complete 
information regarding its U.S. affiliates, by failing to identify in 
its responses the existence of two different corporate entities, one 
being the Union America division of DKA (hereinafter ``UADD''), the 
other, which petitioners contend respondent concealed, Union Steel 
America Inc. (hereinafter ``UAC''). Petitioners further argue that 
Union refused to provide selling expense, financial, or sales 
information for UAC. Petitioners argue that the Department should apply 
adverse facts available and make a direct adjustment to Union's export 
price to account for any expenses incurred by UAC and possible 
unreported U.S. sales.
    Petitioners argue that ``[t]hroughout this administrative review, 
Union Steel hid from the Department the existence of two separate 
``Union Americas.' '' Petitioners argue that the distinction between 
the two corporate entities, and the existence of UAC as a separate 
entity, was not made clear until the home market sales verification in 
May of 1997, by which time it was too late, petitioners argue, for the 
Department to obtain and verify sales information for UAC specifically.
    Petitioners point out that UAC has separate expenses for U.S. 
operations from those of UADD, and that these separate expenses were 
not duly reported as indirect selling expenses. Petitioners note that 
the Department's supplemental questionnaire of April 18, 1997 
instructed the respondent to ``[r]evise [its] reported selling expenses 
to include expenses, both direct and indirect, incurred by Union 
America with respect to Union's U.S. sales.''
    Petitioners argue that the Department clearly intended to elicit 
information on expenses specifically tied to UAC, as the supplemental 
questionnaire followed on petitioners' own notification to the 
Department, in a letter of April 9, 1997, that UAC's financial 
statements contained expenses that had not been reported by Union. 
Petitioners note also that the Department's request asked for copies of 
each type of report that respondent submitted to Korean or U.S. 
national or local tax authorities, ``for affiliates involved with the 
manufacture and sale of subject merchandise in the United States and 
Korea,'' as well as the chart of accounts for Union America.
    Petitioners contend that by not furnishing these documents as 
requested for UAC in addition to UADD, despite multiple opportunities 
to do so in the course of the present and the preceding reviews, Union 
evaded the Department's request and failed to provide the requested 
information.
    Because Union only divulged the separate identity of UAC, as 
distinct from UADD, during the verification in May, petitioners argue, 
sales and expense information of the former remains unverified. 
Petitioners state that, respondent's claims notwithstanding, UAC must 
have performed functions during the POR, as its financial statements 
contain expenses and revenues. Petitioners argue that the revenues must 
be presumed to correspond to sales of subject merchandise.
    As a result of Union's failure to provide requested information 
about UAC's expenses and operations as a separate entity in a timely 
manner, petitioners argue, the Department was not able to verify data 
pertaining to UAC, still does not know all the facts concerning UAC, 
and has been precluded from performing a proper analysis of UAC.
    Petitioners argue that because Union failed to report expenses 
incurred by UAC despite the Department's requests, the Department, as 
facts available, should presume that any SG&A appearing on UAC's 
financial statement in 1995 and 1996 were costs incurred within the POR 
and were directly related to the subject merchandise.
    Petitioners note that Union did provide a printout for UAC's 
monthly sales income statement for June and July of 1995, but claim 
that there is no evidence that respondent also provided the verifiers 
with the documentation necessary to test the accuracy of the document, 
either by testing the underlying computer program or tying the printout 
to invoices.
    Because Union has stated that all its reported sales were made 
through UADD, petitioners argue, the Department should assume that any 
sales made by UAC were additional, unreported sales of subject 
merchandise. The petitioners urge the Department to derive a surrogate 
quantity based on the weighted-average value of reported sales, and to 
apply to that surrogate quantity a rate of 64.5 percent, the highest 
rate from the petition in the LTFV investigation.
    In rebuttal, Union argues that it clearly and unequivocally 
identified its relationship with UAC and provided the Department with 
requested information pertaining to UAC. Union argues that petitioners 
have mischaracterized the record, and states that it informed the 
Department in its response, at the outset of the review, of its 
corporate relationship with UAC and of UAC's lack of a role in the 
manufacture and sale of subject merchandise. Union further argues that 
the Department verified that UAC and UADD are separate corporate 
entities and that the Department confirmed that UAC has no involvement 
in the manufacture of subject merchandise. Respondent argues that for 
this reason, it had no information to report with regard to any 
purported selling activities of the subject merchandise by UAC, and 
that the Department should dismiss petitioners' claim.
    Referring to its submission of October 1995 submission and other 
documents, including a verification report, in connection with the 
preceding review, Union argues that the Department clearly understood 
the distinction between UAC and UADD at least as early as October 1995. 
In the current review, Union argues, it discussed the corporate 
relationship between Union and UAC at page 5 of its response, where it 
stated that UADD had taken over the selling functions for U.S. sales of 
subject merchandise, and that UAC continued to exist as a separate 
corporation but had no activity relating to the manufacture and sale of 
the merchandise under review.

[[Page 13187]]

    Union also points to UAC's 1995 audited financial statement, 
submitted with Union's Section A response, and to UAC's 1996 statement, 
provided at the Korean verification, as further evidence of timely 
disclosure of the corporate identity of UAC and of UAC's complete 
disassociation from the manufacture and sale of the subject 
merchandise. Thus, respondent argues, it had placed on the record of 
the present review in October of 1996 the information which petitioners 
claim it withheld, ten months prior to the U.S. sales verification in 
August of 1997.
    With regard to whether the information concerning UAC was duly 
reported, Union argues that there is no reason under the statute that 
Union need submit any further information regarding UAC, because it is 
not involved in any way in the production or sale of subject 
merchandise. Concerning verification, Union argues that the Department 
did verify that UAC in fact does not produce or sell subject 
merchandise. Union cites in this regard the Department's Korean 
verification report, which addresses the assignment of UAC's former 
functions to UADD and the inactive status of UAC.
    Regarding whether UAC made sales of subject merchandise, Union 
argues that the record shows that all such revenue had been earned on 
or before June 30, 1995, prior to the POR, as evidenced by UAC's 
financial statements submitted with its response and at the Korean 
verification.
    Concerning whether the general expenses which UAC showed in its 
income statement should be allocated to its U.S. sales in the present 
review, Union argues that because UAC's involvement with sales of 
subject merchandise ended with the second review, these general 
expenses, which it characterizes in any case as ``trivial,'' are not 
associated with third review sales of subject merchandise.
    Department's Position. We agree with Union. The record demonstrates 
that Union revealed the existence of the two corporate entities in 
question and did not understate its reportable expenses. On the basis 
of Union's submissions and our verification thereof, we are satisfied 
that Union shifted the responsibility for selling subject merchandise 
in the United States from UAC to UADD, and that the former was not 
involved with such sales during the POR.
    Comment 17. Petitioners argue that there are numerous instances 
throughout Union's sales database in which it failed to report U.S. 
warehousing expenses. The first such omission which petitioners allege 
concerns sales for which the terms were reported as being 
``delivered.'' For all these sales, petitioners argue, a time gap 
between reported entry date and date of shipment from the dock 
signifies that respondent must have incurred, and must have failed to 
report, warehousing or demurrage expenses.
    The second omission which petitioners allege Union made concerns 
warehousing expenses for sales with terms of sale of ``W&D,'' i.e., 
``warehoused and delivered to customer site.'' Petitioners note that 
for a certain subset of this type of sale, there is an apparent 
inconsistency: when inland freight expenses were incurred in the United 
States, and when merchandise apparently was not picked up for several 
or more days, warehousing expenses must also have been incurred and yet 
were not reported.
    The third omission which petitioners allege concerns sales with 
terms different from those mentioned above, and with delays between 
entry dates and shipment to the U.S. customer, but for which Union did 
not report any warehousing or demurrage expenses. Petitioners argue 
that these sales must have involved either demurrage or warehousing 
expenses. Petitioners further argue that respondent failed to provide 
proof, at verification, that such expenses were not in fact incurred.
    Petitioners argue that for all sales with a gap between entry and 
U.S. shipment dates, where no warehousing or demurrage and handling 
expenses were reported, the Department should calculate a facts 
available adjustment, based on the highest per-diem demurrage and 
handling expense which the company reported in its response. Further, 
petitioners argue that for all sales with terms of W&D, the Department 
should, as facts available, account for the possibility that 
warehousing expenses might have been incurred after the second shipment 
date (which in fact occurred for one particular transaction) by making 
a downward adjustment to reported U.S. price based on the highest 
reported warehousing expense.
    In rebuttal, Union argues that it fully reported its U.S. 
warehousing and inland freight expenses, that petitioners are factually 
incorrect, and that the Department verified the expenses in question to 
the full extent it considered necessary, finding no discrepancies. 
Union notes that the Department found no unreported expenses of the 
type imagined by petitioners. Union argues that the Department, not 
petitioners, determines what constitutes adequate verification, that 
petitioners err in thinking verification procedures and documents are 
limited to those discussed in the report, and that the explanations 
provided at the verification were included in the report precisely to 
answer petitioners' concerns on these subjects, as expressed prior to 
the verification.
    Concerning gaps between entry and invoicing to the U.S. customer 
for certain sales, Union states that the free warehousing which it is 
allowed accounts for nearly all the sales in question. For one of the 
sales with a lengthy gap of this type, Union argues, the Department 
investigated and found that there were special circumstances that led 
to the greater time period with no warehousing costs.
    As for sales with W&D terms, but no warehousing expense indicated, 
respondent states that the freight amounts which appear for the 11 
sales discussed by petitioners corresponded to actual freight expenses, 
that petitioners are wrong to suppose that warehousing expenses must 
have been incurred, that the expenses for these sales were correctly 
reported, and that warehousing expenses were not incurred for them.
    Department's Position. We agree with Union that there is no 
evidence that it failed to report the expenses in question. We were 
aware of petitioners' interest in establishing that warehousing and 
inland freight expenses were reported fully and properly, and their 
interest in understanding why such expenses were not incurred in 
particular instances. Accordingly, at verification, we examined 
relevant records with particular attention to these questions. We found 
no evidence that Union failed to report warehousing and inland freight 
expenses as incurred. Union's explanations and the documentation we 
examined at verification are both consistent with the response data. We 
verified that free warehousing was allowed for certain sales as Union 
claimed. For the sale with an especially long gap, we examined the 
documents supporting Union's explanation of the special circumstances. 
Similarly, for the sales made under W&D terms for which respondent 
reported no warehousing expenses, we verified that the expenses were 
correctly reported and that no warehousing expenses were incurred which 
were not reported.
    Comment 18. Petitioners argue that Union failed to report U.S. 
inland freight expenses for some U.S. sales. Petitioners' point 
concerns two data fields for this category of expense, one called 
INLFPWU (hereafter ``P''), the other INLFWCU (hereafter ``C''). 
Petitioners state that the Department's questionnaire called for 
reporting freight expenses as follows.

[[Page 13188]]

    For CEP sales, the P column should show freight expenses incurred 
on shipments from the U.S. port of entry to the affiliated reseller's 
U.S. warehouse or other intermediate location, and the C column should 
show expenses incurred on shipments from the affiliated U.S. reseller 
to the unaffiliated U.S. customer. For EP sales, petitioners argue, the 
P column should show expenses from the port of entry to an intermediate 
location and the C column should show expenses incurred on shipments 
from the port of entry or an intermediate location to the unaffiliated 
U.S. customer.
    Petitioners note that Union claimed to conform to the above 
requirements in its initial response, and did report that the P column 
contained amounts for ``occasional cases in which a customer requests 
delivery to a warehouse or its own facility,'' and the C column 
contained either freight from port to customer, when sales terms were 
``delivered,'' or freight from a warehouse to a customer's location, 
when sales terms were ``W&D.'' However, petitioners argue, there are 
inconsistencies and omissions in Union's reporting of freight expenses 
for certain sales for which the terms were ``DEL'' (delivered) and for 
certain others for which the terms were ``W&D'' (warehoused and 
delivered). Petitioners argue that certain of respondent's U.S. sales 
which would be expected to show expense amounts in both the C and the P 
fields by virtue of the terms of sale reported, do not show expense 
amounts in the C field.
    Petitioners note that the Department requested, in a supplemental 
questionnaire, that Union report charges for shipment to the customer 
where the terms indicated delivery to the customer was provided. 
Petitioners take issue with Union's answer to that request, which was 
that for those sales for which no inland freight was reported in the C 
column, inland freight was reported in the P column. Petitioners note 
that this answer contradicts the response, in which Union held that all 
sales for which the terms were ``DEL'' showed freight expenses reported 
in the C field. Petitioners argue that it remains totally unclear what 
Union has reported with respect to freight expenses for sales with 
delivery terms of ``DEL.''
    The freight expense reporting for sales with ``W&D'' terms, 
petitioners argue, is similarly confused. Petitioners suggest that 
record evidence strongly suggests that Union simply neglected to report 
freight expenses incurred in delivering merchandise from the warehouse 
to the customer. Petitioners assert that Union was unable to provide 
documentation at verification to show that it fully reported all U.S. 
inland freight expenses. Petitioners question why certain sales with 
``W&D'' terms have freight reported in the C column but not the P 
column.
    Petitioners argue that because respondent failed to provide the 
Department with a logical, coherent, and consistent explanation for its 
failure to fully report U.S. inland freight expenses, and failed to 
produce evidence at verification to support its claims, the Department 
should apply adverse facts available for unreported U.S. inland freight 
expenses. Petitioners suggest that the Department should apply the 
highest reported corresponding per-ton rate incurred to sales where 
terms are ``W&D'' and where no expense amount appears in either the C 
or P columns. For sales with terms marked ``DEL,'' petitioners argue, 
and where Union did not report any amount in either the C or P columns, 
the Department should insert the highest reported corresponding per-ton 
rate. Finally, petitioners argue that in instances where a significant 
number of days elapsed between entry and shipment to the customer, the 
Department should make an adjustment for freight to the warehouse, and 
from the warehouse to the customer, based on the highest reported rate 
for each.
    In rebuttal, Union argues that of those sales which petitioners 
highlight as having terms that ``should'' imply freight, most had 
``DEL'' terms, i.e., were delivered to a warehouse, and did have 
freight reported in the ``P'' field, indicating that Union delivered 
the merchandise to a warehouse. In its response, Union stated that 
``for the occasional cases in which a customer requests delivery to a 
warehouse or its own facility, U.S. inland freight has been reported on 
a transaction-by-transaction basis.''
    For the other sales which petitioners suggest ought to have borne 
freight expenses, those with ``DEL'' terms, Union argues that it 
reported freight in the ``C'' field. Union explains that the choice of 
field depended on whether a sale was delivered to a warehouse or to the 
customer's site.
    Union states that the only other sales about which petitioners 
raise concerns in their brief are transactions with ``W&D'' terms but 
no freight in the ``C'' field. Respondent states that these were simply 
picked up by customers from the warehouse, as called for in the terms 
of sale. Union further states that nothing in the record would support 
a reversal of the Department's verification findings.
    Union answers petitioners' concerns on the verification of its 
sales transactions by observing that petitioners cannot cite one 
instance of Union failing to provide requested documents or other 
information, nor any evidence of unreported expenses for any of the 
sales examined at verification. Union characterizes petitioners' 
concerns in this regard as speculation.
    Department's Position. We agree with Union. We verified that these 
expenses were fully reported, and the record of the review is 
consistent with Union's submissions and explanations. Petitioners' 
concerns about the possibility of unreported freight and warehousing 
expenses are not supported by any instances of verification 
discrepancies or documentation problems.
    Comment 19. Petitioners raise the following concerns with respect 
to six transactions which the Department traced at verification:
     Union failed to prove that it did not incur certain 
warehousing or demurrage and/or inland freight expenses;
     Union failed to provide adequate documentation of its 
claims and explanations as to sales terms;
     documentation which Union provided at verification raises 
the possibility that additional expenses for further processing may 
have been incurred but not reported;
     there are apparent inconsistencies between the reported 
sales terms and the reported expense amounts; from the reported sales 
terms it would appear some expenses were incurred but not reported.
    Union answers that petitioners' concerns are again merely 
speculative. Union further notes that petitioners' concerns come late, 
since the home market verification report in question was available 
over two months prior to the U.S. verification, so that petitioners 
could have requested further investigation of these matters at that 
time.
    Department's Position. We agree with Union that petitioners' 
concerns are speculative in nature and are not supported by the record 
evidence, including our verification findings. We are satisfied with 
Union's explanations, in its rebuttal brief, of the particular facts 
and circumstances of the sales in question. The response data and the 
documentary evidence from verification are consistent with Union's 
explanations in its rebuttal brief and with its response submissions.
    Comment 20. Petitioners argue that Union's U.S. affiliate, UADD, 
plays an active and substantive role in the U.S. sales process, that 
this role is not only greater than that of a mere processor of

[[Page 13189]]

documents, but greater than that of Union itself with respect to U.S. 
sales. Petitioners argue that the Department should therefore classify 
all of Union's U.S. sales as CEP sales, rather than EP sales, and, 
consistent with that action, deduct all of Union's direct selling 
expenses, indirect selling expenses and allocated profits from the 
reported gross unit price when calculating CEP.
    Petitioners summarize the three criteria for EP sales, as distinct 
from CEP sales, as follows: (1) The merchandise is not inventoried in 
the United States; (2) the commercial channel at issue is customary; 
and (3) the selling agent is not substantively more than a processor of 
sales-related documentation, or a communications link. Petitioners 
argue that all three of these criteria must be satisfied for a sale to 
qualify as an EP sale, then argue that in this case the Department must 
focus on the last of the three, i.e., the role of the U.S. affiliate in 
the U.S. sales process, and urge the Department to do so in the context 
of Union's customary selling practices. Petitioners argue that Union's 
U.S. affiliates perform significant selling functions in the United 
States and that its U.S. sales must be classified as CEP sales.
    Petitioners cite Department precedent and record evidence on the 
importance of the role of Union's U.S. affiliates in the U.S. sales 
process, and argue that the activities performed by these affiliates 
parallels those performed in German Plate by Francosteel, the U.S. 
affiliate of the German respondent (Dillinger). Petitioners summarize 
the activities performed by Francosteel as these were evaluated by the 
Department in that review, citing (1) Price negotiation and 
maximization, (2) establishing contact with the customer, (3) providing 
credit, (4) obtaining purchase orders, (5) invoicing, (6) taking title, 
and (7) acting as the importer of record. Petitioners state that the 
Department found in that review that Francosteel performed the above 
functions and was thus more than a mere processor of sales documents 
and communications link. Petitioners argue that in the instant review 
Union's U.S. affiliate performs even more functions than Francosteel.
    Petitioners cite a home-market sales verification exhibit, in which 
only intra-corporate transfer prices appear, and argue that this 
exhibit shows that UADD negotiates price without the Korean parent's 
involvement or its knowledge of the prices that were ultimately charged 
to the unaffiliated U.S. customers. Petitioners argue that at both the 
home-market and the U.S. verifications, the instances which Union 
provided as evidence of the Korean parent's control and involvement in 
the setting of prices paid by customers were essentially hand-picked 
and have not been shown to reflect the normal sales process. 
Furthermore, petitioners argue, these examples fail to document the 
parent's role in price-setting even for these selected examples. 
Petitioners argue that the exhibits thus supplied show only rejections 
based on limitations of production capacity, or unsatisfactory intra-
corporate transfer prices.
    Petitioners argue that the U.S. verification report, which mentions 
further examples of sales that the verifiers examined and where the 
parent initially disapproved certain terms, quantities, and prices, 
does not make clear what examples were examined, since the verifiers 
did not take exhibits for these sales. Petitioners suggest that these 
examples may be sales that were refused on the basis of transfer price 
or production capacity, not because of the price to the ultimate U.S. 
customer.
    Petitioners assert that aspects of UADD's commissionaires' roles, 
and the role of UADD in appointing commissionaires, as reflected in 
commissionaire agreements, shows that UADD has authority over the sales 
process, and that UADD establishes the first contact with U.S. 
customers. Petitioners argue that the gap in timing between UADD's 
payment to Union in Korea and UADD's collections from U.S. customers, 
shows that UADD provides credit to U.S. customers.
    Petitioners argue that UADD is responsible for handling purchase 
orders obtained directly from its U.S. customers, that UADD's 
commission agents, according to their contracts with UADD, may 
participate in the sales process actively, and that the commissionaires 
work directly for UADD. Petitioners also argue that the commission 
agent agreements contain clauses suggesting that UADD can make pricing 
decisions. Petitioners argue that UADD invoices its U.S. customers. 
Petitioners argue that UADD takes title to the subject merchandise, 
acts as the importer of record, and in so doing takes on a role so 
significant that, like Francosteel in the Dillinger review cited above, 
it rises above the role of a mere communications link and processor of 
sales-related documentation.
    Petitioners argue that UADD's selling functions far outweigh those 
performed by Union itself, ``which appear not to include anything more 
than producing and shipping the merchandise.'' Petitioners cite the 
following functions which UADD performed in the POR:
     Certain price agreement negotiations;
     Processing sales and import documents;
     Processing certain warranty claims;
     Paying customs and antidumping duties;
     Arranging warehousing and transportation at the customer's 
request;
     Accepting and reselling returned merchandise; and
     Engaging in communications with, and acting as point of 
contact for, U.S. customers.
    Petitioners further argue that based on certain accounting records 
UADD ``may carry inventories of the subject merchandise.'' Petitioners 
cite also some additional selling functions, which were ``revealed'' to 
have been performed by UADD in the prior review, pertaining to market 
research, planning, finding U.S. sales, negotiating purchase terms, 
maintaining customer relations, procurement services, and arranging and 
paying for post-sale warehousing and transportation to customers.
    In rebuttal, Union argues that petitioners fail to come up with any 
new arguments on this issue, severely distort the factual record, 
mischaracterize Union's sales process, and rely on sheer speculation. 
Union points to the final results of the first and second reviews, in 
which the Department rejected the same arguments by the petitioners. 
Union also points to the verifications, particularly the U.S. 
verification, of which the report discusses the Department's 
examination of the authority which the Korean-based Export Team 
exercised over pricing and sales terms. Union states that nothing has 
changed regarding the assignment of selling functions between the 
Korean and U.S. affiliates. Union reviews the sales process as 
documented in its response and the verification report, and points to 
record evidence supporting the claim that UADD has no price negotiating 
ability.
    Union further argues that no changes in the applicable law 
governing EP sales have emerged to alter the Department's position. 
Union contends that German Plate had an unusual aspect, in that the 
affiliated sales intermediary engaged in extensive price negotiations. 
Union cites Exhibit 3 of the U.S. verification report which shows an 
instance where Union disapproved a particular price and dictated a 
price different from that requested by the U.S. customer, via UADD. 
Union cites the U.S. verification report's description of the sales 
process as it relates to the determination, by the Export Team in 
Korea, of the final price to the unaffiliated U.S. customer. Union 
distinguishes these facts from those in

[[Page 13190]]

German Plate, where the Department found the foreign manufacturer's 
role in the sales process to be minimal, whereas the affiliated sales 
intermediary essentially negotiated all sales. Union points to the 
Department's finding at verification that the Union controlled all the 
terms of sale, price and otherwise, and notes that the Department 
reviewed four months of correspondence to test the accuracy of Union's 
statements that it approves prices for all sales. Union notes that the 
Department found nothing inconsistent with the responses, and that the 
Department found that Union sometimes rejected sales based on price and 
other terms.
    Concerning selling activities, Union notes that information on the 
record in this review confirms that, as the Department found in prior 
reviews, the commission agreement which establishes commission rates 
was drafted and controlled by Union. Union disputes petitioners' 
assertion that for at least one U.S. customer UADD has authority to 
adjust prices, and cites to its questionnaire response which states 
that Union itself retains that authority in full.
    Union argues that UADD's role in accepting payments from U.S. 
customers, and arranging for the extension of credit to them, is in 
keeping with the Department's definition of a sales processor. 
Regarding warehousing and transportation, Union retorts that UADD 
arranges for these services but does not directly provide them. 
Concerning warranty claims, Union confirms that UADD processes these, 
but notes that Union sales personnel in Korea decide all claims. Union 
similarly confirms that UADD receives purchase orders, but explains 
that, as the Department verified, it then forwards these directly to 
Union, which is responsible for approving the sale or proposing 
alternative terms or prices.
    With respect to the other selling functions enumerated by 
petitioners, Union confirms that UADD invoices U.S. customers, takes 
title to merchandise, pays duties and fees, and serves as a 
communications link and point of contact for U.S. customers. All of 
these functions, Union argues, are in keeping with the Department's 
definition of a sales processor, as discussed in the final results of 
the prior review.
    Concerning instances when UADD accepts and resells returned 
merchandise, Union states that such instances have properly been 
reported as CEP transactions.
    Department's Position. We agree with petitioners that Union's U.S. 
sales should be treated as CEP transactions. In the final results of 
the prior reviews, in order to determine whether sales made prior to 
importation through Union's affiliated U.S. sales affiliate (UADD) to 
an unaffiliated customer in the United States were EP or CEP 
transactions, we analyzed Union's U.S. sales in light of three 
criteria: (1) whether the merchandise was shipped directly from the 
manufacturer (Union) 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 affiliate (UADD) was 
limited to that of a processor of sales-related documentation and a 
communications link with the unrelated U.S. buyer. We concluded that 
UADD was no more than a processor of sales-related documentation and a 
communications link, and classified Union's U.S. sales as EP. Second 
Review Final Results at 18439.
    As explained above in the ``Fair-Value Comparisons'' section of 
this notice, to ensure proper application of the statutory definitions, 
where a U.S. affiliate is involved in making a sale, we normally 
consider the sale to be CEP unless the record demonstrates that the 
U.S. affiliate's involvement in making the sale is incidental or 
ancillary. The totality of the evidence regarding Union's sales process 
demonstrates it is Union's role that is ancillary to the sales process, 
and not that of UADD.
    We agree in large part with petitioners that UADD fulfills several 
of the criteria cited in German Plate, including price negotiation, 
initial customer contact with respect to individual sales, credit, 
purchase orders, invoicing, title and importation. We agree that the 
verification results are not dispositive. The few instances which Union 
offered of disapproved prices and terms do not establish that UADD's 
involvement in the selling functions was ancillary. The authority which 
Union's export team exercised over the final terms does not amount, in 
the end, to placing all of the primary selling function in Korea. 
Indeed, the paucity of evidence that the home office played any role in 
the sales process reinforces petitioners' argument as to UADD's active 
role, as does the fact that UADD employed the services of independent 
agents in the United States. Therefore, we concur with petitioners that 
UADD's role in the sales process is more than ancillary.
    Union's argument that the U.S. affiliate in German Plate engaged in 
extensive price negotiations is true, but does not nullify the fact 
that UADD is significantly involved in price negotiations and the other 
selling functions discussed above from the onset of client contact in 
each sale. We also note that the higher proportion of indirect selling 
expenses incurred in the United States in connection with Union's U.S. 
sales of subject merchandise, as opposed to those incurred in Korea, 
supports petitioners' contentions. Further, the existence of 
significant selling expenses in the United States itself belies Union's 
claim that the role of its U.S. affiliate was not meaningful. See 
Union's February 21, 1997 response at Volume II, Exhibit C-20. For the 
foregoing reasons, we have classified Union's U.S. sales as CEP 
transactions in these final results.
    Comment 21. Petitioners argue that the Department should make 
several adjustments to Union's COP and CV data. Because of Union's 
affiliation with POSCO, petitioners argue, the Department should make 
an adjustment for Union's purchases of substrate from POSCO to ensure 
that they reflect fair value and are above POSCO's COP. Petitioners 
argue that in the preliminary results the Department wrongly concluded 
with respect to POSCO that the fair-value and major-input provisions of 
the statute do not apply to POSCO's affiliated transactions with POCOS; 
if the Department retains this approach, petitioners argue, then to be 
consistent it must also consider Union to be affiliated with POSCO.
    Petitioners argue that the substrate which Union purchases from 
POSCO represents a major input and so must be assigned a value equal to 
the highest of (1) the transfer price from POSCO to Union, (2) POSCO's 
production cost, or (3) the market value. Invoking this last provision, 
petitioners argue that the Department should adjust Union's substrate 
costs by the difference between the price it paid POSCO and market 
value, as evidenced by purchases from unaffiliated entities.
    Addressing the issue of whether POSCO and Union are affiliated, 
Union cites to the final results of the second review, where the 
Department determined that POSCO had not been shown to control Union. 
Union argues that petitioners offer no new evidence to buttress their 
presumption that Union and POSCO are affiliated or to cause the 
Department to revise its view on this point.
    Department's Position. We agree with Union. We examined the basis 
for petitioners' concerns about the possibility of control of Union by 
POSCO in the prior review. We found insufficient evidence then in 
support of petitioners' assertion that the business relationship 
between POSCO and Union satisfies the Act's new affiliation criteria

[[Page 13191]]

at sections 771(33)(EG). Second Review Final Results at 18417-
18. No new evidence or argument has been offered in these reviews, and 
we again find that petitioner's assertion is not supported; therefore, 
for purposes of these final results, we have again treated Union and 
POSCO as unaffiliated. Accordingly, our position with regards to the 
fair-value and major-input provisions of the statute is that these do 
not apply.
    Comment 22. Petitioners argue that the Department should reject 
Union's change in depreciation methodology because it is contrary to 
longstanding Department precedent and practice and is contrived. Citing 
the Department's position in Semiconductors, as well as the decision of 
the CIT in Micron Technology, Inc. v. United States, CIT Slip Op. 95-
107 (June 12, 1997) (``Micron''), petitioners argue that a similar fact 
pattern is in evidence, that the change in methodology in accounting 
for depreciation expense understates respondent's fixed overhead, that 
the Department should reject the change for the same reasons as in 
Semiconductors, and increase respondent's fixed overhead amounts by a 
specific percentage rate. The petitioners suggest a rate, which they 
calculate on the basis of net asset value of the assets in Exhibit 9 of 
the Korean verification report, multiplied times a standard flat annual 
depreciation rate for assets with a remaining useful life of eight 
years. Petitioners argue that the Department should use the difference 
in percentage derived from this example and apply the differential to 
all of Union's fixed overhead expenses.
    In rebuttal, Union argues that petitioners' suggested method would 
double-count depreciation expenses, and notes that its auditors and the 
Korean tax authorities both approved the changes in depreciation 
methodology. Union argues that petitioners provide no argument in 
support of their thesis that it is distortive to depreciate the 
remaining value of assets when such a change in method is adopted.
    Union argues that if the Department wishes to use costs based on a 
double-declining balance method, the proper costs to use would be those 
contained in Union's supplemental response, which were verified, rather 
than those which would be obtained by relying on the straight-line 
method costs which were submitted later. Union also notes that if the 
Department wishes to use the later, straight-line data, petitioners' 
suggested ratio is too high, and would need to be decreased to reflect 
the actual proportion of depreciation within fixed overhead. Union 
supplies the revised factor which it claims the Department would need 
to make the adjustments using the correct ratio of depreciation to 
total fixed overhead expense.
    Department's Position. We agree with petitioners that Union's 
change in depreciation methods understates overhead and that there are 
similarities in the instant case with the facts of Semiconductors and 
the related court decision, Micron. We also agree that, even if Union's 
change in methodology is made according to local accounting standards, 
the Department may still find the change to be distortive and decline 
to use the revised costs. We note that the CIT in Micron found that:

    Commerce was entirely justified in concluding that Samsung's 
methodology, as implemented, distorted depreciation expense during 
the POI to the extent that Samsung used the full useful life of the 
asset rather than the remaining useful life at the time of the 
change in depreciation method.

    Union's adoption of a new depreciation method similarly would 
entail a restatement of asset values and depreciation expenses over 
multiple years, including years for which an investigation and 
subsequent reviews have already been conducted. The restatement would 
therefore also mean that ``greater costs were attributed to products 
manufactured before the change than subsequent to the change.'' 
Semiconductors at 15479. Thus, here, as in Semiconductors, we find that 
``the basis used for the financial statement, even if stated in 
accordance with Korean GAAP at the time of the change, would be 
distortive for purposes of our antidumping analysis.'' Id.
    Accordingly, we have determined not to accept Union's reported 
depreciation expense. Instead, for purposes of these final review 
results, we applied petitioners' suggestion, in part, by compensating 
for the accounting change; we also took into account Union's concern 
that we reflect the accurate proportion of depreciation within 
overhead, and used the amount indicated by multiplying Union's fixed 
overhead expenses times the ratio of straight-line (non-restated) 
depreciation in fixed overhead.
    Comment 23. Petitioners argue that the Department should reduce 
Union's claimed offset for revenue from the sale of scrap, which Union 
based on theoretical amounts related to its production yield ratios, to 
reflect instead Union's actual scrap generation rate. Petitioners base 
their argument on verification results which indicated, petitioners 
argue, that the recovery rate which Union used was not accurate. 
Petitioners suggest a percentage by which they urge the Department to 
adjust the scrap offset to reflect the difference they describe.
    Union answers that the difference in the numbers compared by 
petitioners can be accounted for by changes in work-in-process 
(``WIP'') inventory. Union argues that scrap temporarily stored on the 
floor, prior to entering inventory, would not be accounted for 
immediately as it is produced, and that any change in the amount of 
scrap WIP inventory between the beginning and the end of the cost 
reporting period would not be captured in the production figures 
reviewed at verification. Union argues that the Department's test was a 
reasonableness check, not an attempt to recalculate the quantity of 
scrap through another means, and Union believes that the amount noted 
at verification falls within reasonable limits for such a by-product.
    Alternatively, Union argues, if the Department determines it should 
reduce the reported scrap quantity, then it should adjust yield rates 
simultaneously, multiplying each by a factor of 0.84, then re-compute 
COP and CV based on the revised scrap and yield totals.
    Department's Position. We agree with petitioners that it is more 
appropriate to use the corrected scrap recovery rate as discovered at 
verification. Accordingly, for these final results, we have adjusted 
the scrap rate as petitioners suggest; we have also revised the yield 
rate in keeping with Union's concern regarding the need for consistency 
in these two factors.
    Comment 24. Petitioners argue that, as in the second review, the 
Department should revise Union's submitted costs to account for 
differences between submitted costs and actual costs of manufacturing 
(costs based on Union's financial statements).
    Union argues that the difference in costs is less than petitioners 
assert once the change in accounting methodology is accounted for. 
Union also argues that the difference between the two sets of costs, 
i.e., its questionnaire response costs and its financial statement 
costs, are trivial, and the Department's tests at verification were 
only to determine the reasonableness of Union's submissions.
    Department's Position. We agree with petitioners. The record shows 
that there is a noticeable difference between the actual manufacturing 
costs (from the audited financial statements) and the manufacturing 
costs submitted by Union. The difference is not trivial since we 
disagree with the change in depreciation method which Union argues 
would narrow the cost difference. Our verification test is not

[[Page 13192]]

only a test of the reasonableness of a respondent's submissions but 
also a check on accuracy. When we find, as we did here, that submitted 
costs are less than actual costs, and when the information which would 
allow us to use the more accurate cost figure is on the record and is 
easily incorporated into our analysis, we have no reason not to use the 
more accurate figure. Accordingly, we have applied the corrected cost 
figure as suggested by petitioners.
    Comment 25. Petitioners argue that the Department should account 
for the difference between costs which Union incurred during its fiscal 
period and the higher costs it incurred during the POR. Petitioners 
note that the Department allowed Union to report costs based on its 
corporate record-keeping period provided that this methodology did not 
distort the calculation of costs. Petitioners argue that the analysis 
which Union provided demonstrates that its methodology has a 
``noticeable'' impact on the calculation of costs, reducing them by a 
percentage difference which petitioners assert is significant, unlike 
the difference in the same costs in the prior review. Petitioners urge 
the Department to revise Union's submitted costs to include a specific 
adjustment for the effect of Union's use of its record-keeping period.
    In rebuttal, Union argues that for the sake of consistency with 
past practice, and relative ease of submission and of verification, 
Union requested that the third review cost reporting be on the same 
basis as the prior reviews, July through June, a difference of one 
month from the August-July POR. Union argues that it gave evidence 
showing that this method would not distort costs and that the 
Department did not find the method distortive, though Union concedes 
that the Department also later requested it to submit its costs for the 
POR itself rather than for the fiscal year.
    Union argues that petitioners are wrong in at least two respects, 
since they have not supported their claim that the change in reporting 
period had a noticeable effect on submitted costs, and since the 
Department concluded previously that the choice of periods was not 
distortive. Concerning the magnitude of the difference in average unit 
costs, Union explains that it could be due to a change in the product 
mix, even if all unit costs remained unchanged. Union argues that the 
case has proceeded on the basis that the change in periods was not 
distortive, and petitioners cannot now claim differently.
    Department's Position. We agree with petitioners that the POR costs 
are indeed higher than the fiscal-year costs, as is shown by Union's 
own information. When we allowed Union to report on the basis of a 
different period we also requested the information which would permit 
us to compare the reported numbers to those of the POR and to apply the 
latter if these were different enough to affect the results of our 
analysis, as we found they were. We disagree with Union's argument that 
petitioners failed to support their claim that the change in reporting 
period had a noticeable effect, and we disagree with the 
characterization of the change as less than noticeable. Finally, the 
argument that the difference in costs could have arisen from a 
difference in product mix is unpersuasive: the potential effect of the 
change is noticeable, and we find it is therefore more reasonable to 
revert to the actual POR data. Accordingly, for purposes of these final 
results, we based our margin calculations on the POR costs rather than 
on the fiscal period costs.
    Comment 26. Petitioners argue that the Department should revise 
Union's submitted interest expense to account for expenses incurred by 
the Dongkuk Steel Mill (``DSM'') group. Petitioners argue that it is 
the Department's longstanding policy to employ the financial expense 
incurred by the consolidated entity, not the unconsolidated entity, in 
calculating the interest expense component of COP and CV. Petitioners 
note that the Department obtained the necessary consolidated rate 
information from Union but failed to apply it in the preliminary 
results. Accordingly, petitioners argue that, for purposes of these 
final results, the Department should substitute the consolidated rate 
for the rate initially supplied by Union.
    In rebuttal, Union concedes that it is Department policy to use the 
interest expense of the entity at the highest level of consolidation, 
but argues that Union is not further consolidated with any other 
entity, and its financial statements represent the highest level of 
consolidation. Union notes that at the petitioners' request, it 
provided the financing costs for DSM and DKI in its supplemental 
response, but that this does not signify that Union's interest costs 
are in any way consolidated with those of the other two firms. Union 
argues that the Department correctly applied its practice in the 
preliminary results and should continue to do so in the final results.
    Department's Position. As in the prior review, where the same issue 
arose (though in the prior review the issue concerned all general and 
administrative expenses (``G&A'') rather than merely interest 
expenses), we agree with petitioners. The ownership and affiliation 
ties at issue have not substantially changed. It is our practice to 
include a portion of the G&A expense incurred by the parent company on 
behalf of the reporting entity. We disagree with Union's arguments that 
Union's financial statements reflect the highest level of 
consolidation. Since Union is affiliated with the DSM group, we agree 
with petitioners that a portion of the interest expenses for the DSM 
group should be allocated to Union's costs. Accordingly, for these 
final results, we applied the interest expense ratio suggested by 
petitioners.
    Comment 27. Petitioners note that the Department recently changed 
its policy regarding the calculation of interest expense for CV, and no 
longer includes imputed credit expenses or inventory carrying cost 
expenses in its calculation of CV, but uses the same interest expense 
ratio as it does for COP. In support of this argument, petitioners cite 
Notice of Final Results of Antidumping Duty Administrative Review: 
Certain Welded Carbon Steel Pipe and Tube from Turkey, 61 FR 69067, 
69075 (December 31, 1996) and Notice of Final Results of Antidumping 
Duty Administrative Review and Determination Not To Revoke Order In 
Part: Dynamic Random Access Memory Semiconductors of One Megabyte or 
Above from the Republic of Korea, 62 FR 39809, 39822 (July 24, 1997). 
Accordingly, petitioners argue, for the final results the Department 
should ensure that the interest expense ratio used for CV reflects this 
new policy. Union offers no rebuttal.
    Department's Position. We agree with petitioners and have amended 
our calculations accordingly for these final results.
    Comment 28. Petitioners argue that the Department asked Union to 
``provide an analysis that compares year-end adjustment amounts 
provided in [its] responses to the amounts reported in [its] audited 
financial statement,'' but that the Union failed to provide this 
analysis. Petitioners note that such an analysis would have enabled the 
Department to determine whether the submitted costs reflect the year-
end adjustments which are included in the financial statements, but 
which are not always incorporated in the normal accounting system. 
Petitioners argue that since Union neglected to provide the analysis, 
``the Department should apply facts available and increase Union's 
submitted costs by 8 percent (or \1/12\).''
    In rebuttal, Union argues that the July 1995-June 1996 costs which 
it

[[Page 13193]]

submitted included the full year-end adjustments for 1995 in accordance 
with Department practice. Union later supplied audited year-end 1996 
adjustments when these became available. Union argues that petitioners 
have not claimed any significant changes from 1995 to 1996 in kind or 
in number, other than the change in depreciation method, to which 
petitioners have objected. Union argues that petitioners' claim that it 
failed to provide relevant information has no support in the record.
    Union further points out that the Department verified its 
responses, including 1996 year-end adjustments, with its full 
cooperation.
    Department's Position. We agree with Union. Union provided the 
information we requested as it became available, and the year-end 
adjustments in question were duly verified. We see no need for the 
application of facts available in this instance.
    Comment 29. Petitioners note that in its deficiency questionnaire, 
the Department requested that Union revise its submitted G&A and 
interest expense calculations to make them consistent with the 
Department's final results in the second administrative review, with 
respect to the scrap revenue offset. Petitioners argue that Union 
failed to do so, causing a critical inaccuracy in the Department's 
analysis. Petitioners urge the Department to apply facts available and 
to use the financial statement entries for ``Sales--Other'' and ``Non-
operating Income `` Miscellaneous'' as offsets to the cost of sales.
    Union argues that to be consistent with the Department's 
calculation of costs on a per-unit basis, a different, lower, 
adjustment would be called for, but that, if the Department begins 
adjusting the denominator for the cost of manufacturing, it must also 
take into account the fact that the denominator includes an offset for 
duty drawback, which unit costs do not include. Union suggests that 
there is a rough balance between the scrap and drawback adjustments, 
but that if both are made, the cost of manufacturing would decrease.
    Department's Position. We agree in part with each party. We agree 
with petitioners that Union failed to make the adjustments to the G&A 
and interest expense calculations we requested. We agree with Union 
that for consistency, all relevant factors must be duly reflected in 
the revised expense ratios. For these final results, therefore, we have 
used revised expense ratios that are consistent with the prior review 
and which incorporate the relevant adjustments suggested by Union.
    Comment 30. Petitioners urge the Department to increase Union's 
submitted G&A expenses to take account of corporate overhead expenses 
of DSM, as in the final results of the second review. In rebuttal, 
Union argues that nothing in the record suggests that DSM provides 
goods or services to Union, and that petitioners' argument should be 
rejected.
    Department's Position. We agree with petitioners. It is our 
practice, as we stated in the final results of the prior reviews, and 
as mentioned above in the Department's Position on Comment 26 in 
connection with interest, to include a portion of the G&A incurred by 
the parent company on behalf of the reporting entity. For these final 
results, therefore, we allocated a portion of DSM's G&A to Union's G&A.

Respondents' Comments

Comments by Dongbu and Union
    Comment 31. Dongbu and Union argue that the Department erred in 
using the contract date, rather than the commercial invoice date, as 
the date of sale for their U.S. sales. They base this argument on 
several considerations. First, they argue that the Department's stated 
rationale for using the contract date as the date of sale is 
fallacious. In the preliminary results the Department stated:

The questionnaire we sent to the respondents on September 19, 1997 
(sic) instructed them to report the date of invoice as the date of 
sale; it also stated, however, that ``[t]he date of sale cannot 
occur after the date of shipment.'' Because in these reviews the 
date of shipment in many instances preceded the date of invoice, we 
cannot use the date of invoice as the new regulations prescribe.

Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products 
from Korea; Preliminary Results of Antidumping Duty Administrative 
Review, 62 FR 47422, 47425 (September 9, 1997) (``Preliminary 
Results''). Dongbu and Union state that this rationale is factually 
incorrect. They state that for Dongbu there are no instances in which 
shipment date preceded invoice date. As for Union, it acknowledges that 
only three line items in the U.S. data base have a shipment date prior 
to the invoice date, but state that this reporting was a trivial data 
input error which the Department should ignore. Furthermore, it states 
that these three line items all pertain to a single shipment, and that 
the reported shipment date preceded the invoice date by only one day.
    Second, Dongbu and Union state that using the contract date as the 
date of sale was inconsistent with the Department's regulations and 
recent case law, citing 19 CFR Sec. 351.401(i):

In identifying the date of sale of the subject merchandise or 
foreign like product, the Secretary normally will use the date of 
invoice, as recorded in the exporter or producer's records kept in 
the ordinary course of business. However, the Secretary may use a 
date other than the date of invoice if the Secretary is satisfied 
that a different date better reflects the date on which the exporter 
or producer establishes the material terms of sale.

Dongbu and Union argue that the invoice date is presumptively the date 
of sale, and that exceptions to this presumption must be narrowly 
drawn. Furthermore, they argue that the preamble to the regulations 
makes explicit the Department's intent to restrict the exceptions to 
the presumption when it says that the regulations put parties ``on 
notice'' that ``in the absence of information to the contrary, the 
Department will use date of invoice as the date of sale.'' Final Rules 
at 27349.
    Furthermore, they argue that recent case law demonstrates the 
Department's intention to restrict the exceptions to the presumption. 
As an example, they cite Stainless Steel Wire Rod from India; Final 
Results of New Shipper Antidumping Review, 62 FR 38976 (July 21, 1997) 
(``Wire Rod from India''), in which the Department rejected a 
petitioner's argument that the Department should use the purchase order 
date, rather than the invoice date, as the date of sale. There the 
petitioner based his argument on the allegation that there was too long 
an interval--presumably several months--between the purchase order date 
and the invoice date. However, the Department, citing its proposed 
regulations, stated that alternatives to invoice date are acceptable 
where there are long-term contracts or where there is an 
``exceptionally long lag time between date of invoice and shipment 
date.'' See Wire Rod from India at 38979. In Wire Rod from India, 
however, the Department noted that there were no long-term contracts 
and the lag between purchases and invoices during the period of review 
is not considered exceptionally long. Dongbu and Union note, however, 
that if in this instance the Department uses the contract date as the 
date of sale, there is a much longer lag between the sale date and 
invoice date.
    As a further demonstration of recent Departmental practice, Dongbu 
and Union cite to Seamless Pipe from Germany; Preliminary Results of 
Antidumping Duty Administrative Review, 62 FR 47446 (September 9,

[[Page 13194]]

1997) (``Seamless Pipe''). There the Department rejected a respondent's 
use of the date of invoice as the date of sale in the home market and 
the ``date of order confirmation'' as the date of sale in the U.S. 
market. Instead, the Department used the shipment date and stated that 
``[s]ince there can be several months between order confirmation and 
shipment, using shipment date in both markets puts home market and U.S. 
sales on the same basis for date of sale.'' Dongbu and Union argue that 
the Department's date of sale determination in the preliminary results 
of this review cannot be reconciled with its determination in Seamless 
Pipe because there it used the shipment date as the date of sale in the 
home market and the contract date as the date of sale in the U.S. 
market, and thus placed home market and U.S. sales on entirely 
different bases.
    Third, Dongbu and Union argue that the Department's determination 
to use contract date as the date of sale is inconsistent with its 
determination to use date of shipment as the date of sale for POSCO. 
They argue there is no apparent justification for treating Union and 
Dongbu differently from POSCO. Both Union and POSCO have a shared sales 
channel. They argue that the Department has not articulated any reason 
that the contract should be used as the date of sale for Union, but 
that the shipment date should be used as the date of sale for POSCO.
    Fourth, Dongbu and Union argue that the Department's determination 
with respect to Union in this review is inconsistent with its 
determination in the first administrative review of this order. There 
the Department determined that it was inappropriate to use the date of 
contract as the date of sale, and instead used the date of shipment, 
basing its decision on the fact that quantities changed between order 
and shipment. Moreover, Dongbu and Union note that unlike this review, 
the Department in the first review had stated no preference for using 
invoice date as date of sale.
    For all of these reasons Dongbu and Union state that the Department 
should use the invoice date as the date of sale. For those limited 
instances in which the date of shipment preceded the date of invoice, 
they argue, the Department should use shipment date as the date of 
sale, as this most clearly implements the Department's narrowly 
construed exceptions to the invoice date preference.
    Petitioners argue that the Department was correct in using the 
contract date as the date of sale for both Union and Dongbu.
    They argue, first, that Dongbu and Union misinterpreted the 
Department's statement in the preliminary results notice (cited above) 
that there were many instances in which the date of shipment preceded 
the date of invoice. Petitioners claim that this statement referred 
not, as Dongbu and Union believe, to the date of invoice between Dongbu 
and Union and their U.S. affiliates, but between their U.S. affiliates 
and their U.S. customers. Thus, petitioners argue that Dongbu's and 
Union's comments regarding the lag time between contract dates and 
invoice dates are inapposite.
    Second, petitioners argue that the proposed regulations give the 
Department the latitude to use a date other than the invoice date as 
the date of sale. The proposed regulations state that the invoice date 
``may not be appropriate in some circumstances'' for use as the date of 
sale. See Notice of Proposed Rulemaking and Request for Public Comment, 
61 FR 7308, 7330 (February 27, 1996) (``Proposed Regulations''). 
Petitioners argue that one such circumstance would be where the 
potential for manipulation exists; that potential, they argue, exists 
where, as here, the invoices are between affiliated parties. Indeed, 
given the Department's traditional scrutiny of affiliated-party 
transactions, petitioners argue, it is not unreasonable to assume that 
the preference stated in the Proposed Regulations for using the invoice 
date as the date of sale applies only to invoices between unaffiliated 
parties.
    Third, petitioners argue that reliance on Dongbu's reported date of 
invoice would be particularly unwise. The Department's verification 
report, petitioners argue, indicates that the commercial invoice from 
Dongbu Steel to Dongbu Corporation (which Dongbu reported as its date 
of sale) is not a formal accounting record, but is prepared for purely 
collateral purposes, such as securing payment on letter of credit 
sales. This invoice, therefore, is not corroborated by reference to 
unaffiliated parties or even by reference to Dongbu Steel's own 
internal accounting records. Thus, petitioners argue, the date 
reflected on this invoice cannot be verified from Dongbu's accounting 
records, and does not meet the Department's verification requirements.
    Fourth, petitioners argue that the Department should reject, with 
respect to Dongbu, Dongbu's and Union's proposal that the Department 
use the shipment date as the date of sale if it refuses to use the 
invoice date as the date of sale. Petitioners argue that because Dongbu 
reported the bill of lading date as the date of shipment, and not the 
date of shipment from its manufacturing plant, the reported shipment 
date is subsequent to the invoice date, which even Dongbu acknowledged. 
Therefore, petitioners argue, the Department cannot use it as the date 
of sale. Thus, with respect to Dongbu, petitioners argue that there was 
no other date on the record that the Department could use as the date 
of sale other than the contract date.
    Fifth, petitioners note that the Department's determination 
regarding the correct date of sale is consistent with its determination 
in the most recently completed review of this order. See Certain Cold-
Rolled and Corrosion-Resistant Carbon Steel Flat Products from Korea; 
Preliminary Results of Antidumping Duty Administrative Review, 61 FR 
51882, 51885 (October 4, 1996).
    Department's Position. We agree with Dongbu and Union that we 
should use the invoice date as the date of sale. While petitioners are 
correct that the Proposed Regulations give the Department the latitude 
to use a date other than the date of invoice as the date of sale, 
Dongbu and Union are also correct that our current practice with 
respect to the selection of the date of sale adheres to the our 
regulations and recent case law. Our current practice, in a nutshell, 
is to use the date of invoice as the date of sale unless there is a 
compelling reason to do otherwise. The reason underlying this 
preference is that typically the material terms of sale are established 
on that date. See 19 CFR 351.401(i).
    In these cases, there is no record evidence indicating that a date 
other than the invoice date is the date after which the essential terms 
of the sale could not be changed. Moreover, the fact that Dongbu's 
reported invoice date is not a ``formal accounting record'' does not, 
contrary to petitioners'' argument, make it unverifiable. We are not 
using the date of invoice between affiliated parties, but rather the 
date of invoice to the first unaffiliated purchaser in the United 
States, as the date of sale. In light of the foregoing, after 
reconsidering our use of the contract date as the date of sale in the 
preliminary results, we now find no compelling reason to deviate, in 
these cases, from the Department's current practice of using the 
invoice date as the date of sale.
Comments by Dongbu
    Comment 32.  Dongbu argues that the Department erred in determining 
that one of its U.S. sales was a CEP transaction rather than an EP

[[Page 13195]]

transaction. The sale at issue is one in which the U.S. customer who 
ordered the material canceled the purchase while the material was on 
the water en route from Korea to the United States. Dongbu subsequently 
resold the material to another customer (for a discount) after it 
entered U.S. customs territory. Between the time of its arrival and its 
subsequent resale, DBLA incurred warehousing and demurrage charges on 
this shipment.
    Dongbu argues that for two reasons the Department should classify 
this sale as an EP sale for the final results. First, it argues that 
information gathered at verification conclusively demonstrates that 
Dongbu (and not DBLA) bore the cost of all the warehousing and 
demurrage charges and the discount, and was thus ultimately responsible 
for the disposition of the merchandise.
    Second, Dongbu argues that the sale was not in Dongbu's normal 
business channel. Thus, classifying this sale as a CEP sale, Dongbu 
argues, is inconsistent with Seamless Pipe in which the Department 
considered the role that unusual transactions should play in 
determining whether an exporter sells on an EP or CEP basis. In 
deciding the proper classification, the Department examined the four 
criteria consistently applied in making this determination. The first 
two criteria, and the ones relevant to this discussion, Dongbu states, 
are: (1) Whether the merchandise is shipped directly to the 
unaffiliated buyer without being introduced into the affiliated selling 
affiliate's inventory, and (2) whether this procedure is the customary 
sales channel between the parties. In Seamless Pipe the Department 
found that application of these criteria was an insufficient basis to 
classify sales as CEP sales. The Department stated:

In applying the first two criteria to the present review, we found 
that for the majority of sales, the merchandise was shipped directly 
to the unaffiliated U.S. customer without being introduced into 
MPS's [the respondent's affiliated sales agent's] inventory. We 
found that MPS occasionally buys for its own inventory, but we did 
not find any subject merchandise purchased for inventory during the 
POR. In addition, several sales were warehoused upon arrival in the 
U.S. when the original customer canceled its order * * *. The 
Department verified that the terms of sale during the POR were CIF 
duty paid to a port of entry near the customer's plant, and that MPS 
did not take physical possession of the shipment, except in the 
unusual instance described above.

Seamless Pipe at 47448. In Seamless Pipe the Department ultimately 
determined, based on the third and fourth criteria, that the sales were 
all CEP. However, Dongbu states that what this citation shows is that 
the existence of a few unusual transactions was not sufficient evidence 
to classify the U.S. sales as CEP sales. It argues that the decision in 
Seamless Pipe to consider the way the majority of sales were made is a 
much more reasonable application of the criteria, particularly 
considering that the ultimate responsibility for the sale was borne by 
Dongbu.
    Petitioners argue that the Department correctly classified the sale 
at issue as a CEP sale. They cite the statutory definitions of EP and 
CEP sales:

[T]he term ``export price'' means the price at which the subject 
merchandise is first sold (or agreed to be sold) before the date of 
importation * * *. Section 772(a) of the Act.

[T]he term ``constructed export price'' means the price at which the 
subject merchandise is first sold (or agreed to be sold) in the 
United States before or after the date of importation. Section 
772(b) of the Act.

Petitioners argue that Dongbu's argument ignores these statutory 
definitions under which all sales made after importation must be 
classified as CEP transactions. They argue further that even if it were 
appropriate for the Department to consider selling functions in making 
this determination, the sale would still be a CEP sale because all 
relevant sales activity occurred in the United States.
    Finally, petitioners argue that Seamless Pipe is inapposite. There, 
they state, the vast majority of U.S. sales were sold prior to 
importation, and the Department thus applied its three-prong test to 
determine whether those sales were properly classified as EP or CEP 
transactions. There is no indication in the notice, petitioners state, 
that the Department applied that test to those sales which had been 
sold after importation. Rather, in its discussion of the three-prong 
test, the Department noted that the only incidences of warehousing 
involved those sales which had been resold due to customer 
cancellations.
    Department's Position. We disagree with Dongbu. As indicated above 
in the Department's response to Comment 5, we have treated all of 
Dongbu's U.S. sales as CEP sales in these final results. Therefore, 
Dongbu's argument that the sale at issue was an ``unusual transaction'' 
is moot. Furthermore, the statutory definition of a CEP sale requires 
that the sale at issue be classified as a CEP sale because it was sold 
after importation into U.S. customs territory. That it was Dongbu, 
rather than Dongbu U.S.A., that bore the costs of the U.S. warehousing 
and demurrage is not determinative.
Comments by POSCO
    Comment 33. The POSCO Group argues that in its preliminary results 
the Department erroneously disallowed an adjustment for post-sale 
warehousing expenses incurred in connection with certain sales made 
through the Pohang Service Center (``PSC''). The POSCO Group claims 
that the Department verified the calculation of this allocated expense 
in its review of a pre-selected home market sale, and the Korea 
verification report does not indicate that any of the data reviewed 
with respect to this sale, including that relating to post-sale 
warehousing expenses, was not verified or otherwise raised concerns for 
the Department.
    Department's Position. As noted by the POSCO Group, pages 20 and 21 
of Korea verification Exhibit 29 contain information detailing how a 
calculation of the expense in question was made. Neither the 
information in this exhibit, nor the Department's writeup of its review 
of this transaction in its verification report, indicates whether the 
values and per/ton calculated amounts are based on POSCO's payment to 
PSC, or, alternatively, on the expenses actually incurred by PSC. As 
noted by the Department in its September 2, 1997, preliminary analysis 
memorandum at 6, ``it is not clear from the record what that amount 
represents.'' Furthermore, the Department had not been made aware of 
even the basic information relating to these alleged expenses prior to 
verification, although the Department's original questionnaire asked 
for a complete explanation of all parties involved in the provision or 
receipt of post-sale warehousing with respect to the respondent's home 
market sales, as well as other information pertaining to such services. 
By introducing this topic for the first time during the Department's 
review of the pre-selected sale in question, the POSCO Group prevented 
the Department from conducting a timely inquiry into the nature of 
these transactions, including whether or not the warehousing services 
allegedly provided by PSC were at arm's length. Consequently, we are 
continuing to disallow this adjustment for the final results.
    Comment 34. The POSCO Group argues that the Department should not 
have disallowed a portion of reported post-sale warehousing provided 
for certain home market sales by a company in which POSCO owns a small 
stake. The POSCO Group argues that there is no evidence on the record 
to support the Department's apparent assumption that the expense was 
not made at arm's

[[Page 13196]]

length, and that the Department should correct its calculation of post-
sale warehousing by eliminating the reduction to that expense utilized 
in the preliminary review results for the transactions in question.
    Petitioners argue that the absence of information on the record is 
due to the POSCO Group's failure to supply information demonstrating 
that the transaction was at arm's length, despite the fact that the 
Department had made a similar downward adjustment to this expense in 
the previous review. Petitioners argue that it is the POSCO Group's 
burden to demonstrate the arm's-length nature of such transactions, and 
consequently the Department should maintain the adjustment that it made 
in its preliminary results.
    Department's Position. We agree with petitioners. The record does 
not demonstrate the arm's-length nature of a certain part of the 
reported post-sale warehousing expense for transactions involving the 
affiliated party in question. In our preliminary results, we reduced 
this reported expense by only a small portion of the part of the 
expense associated with the affiliated party, to reflect POSCO's 
ownership stake in that company. We have continued to make this 
adjustment in our final results. See Preliminary Results Analysis 
Memorandum for the POSCO Group, September 2, 1997, at 6.
    Comment 35. The POSCO Group argues that it reported all movement 
expenses associated with U.S. sales, and that the Department should not 
deduct from U.S. price any portion of the markups charged by AKO and 
BUS. The POSCO group states that these deductions contradict the plain 
language of the statute and the Department's uniform practice in prior 
cases, including all prior steel cases, and that, if accepted, the 
Department's reasoning reflects a major shift in practice that would 
have to be applied in all instances in cases where sales are made 
through affiliated parties, including Union and Dongbu.
    The POSCO Group argues that the Department's deduction of a portion 
of the markups charged by AKO and BUS constitutes a reduction of the 
price of EP sales for profit, which is contrary to the law, and if 
adopted would impact the vast bulk of the Department's dumping cases. 
The POSCO Group states that the law only allows for a deduction for 
profit from CEP. The POSCO Group states that it is not aware of a 
single other instance involving the steel industry or any other 
industry in which the Department deducted profit earned by affiliated 
parties on the purchase and resale of subject merchandise.
    The POSCO Group argues that the Department's long-standing policy 
concerning EP sales is to utilize the price paid by the first 
unaffiliated U.S. customer, and to deduct only direct selling expenses 
from that price, and that the Department disregards transactions 
between affiliated parties, such as between POCOS and AKO and BUS, when 
calculating EP. The POSCO Group cites as an example Certain Iron 
Construction Castings from Canada: Final Determination of Sales at Less 
Than Fair Value, 51 FR 2412 (January 16, 1986) (``Castings''), where 
the Department rejected petitioners' request that a markup earned by a 
related U.S. distributor be deducted from purchase (now export) price.
    The POSCO Group notes that AKO and BUS perform no movement services 
themselves but pay unaffiliated customs brokers to perform the services 
at issue. The POSCO Group states that in the final results of the 
second review and the preliminary decision in this review, the 
Department refused to deduct any portion of markup earned by U.S. 
affiliates for Dongbu or Union sales because those affiliates, 
likewise, did not provide movement services themselves but utilized 
customs brokers or other unaffiliated parties to perform movement 
services. The POSCO Group notes that in the final results of the second 
administrative reviews the Department determined that Union's U.S. 
affiliate did not directly perform the brokerage and handling services 
but rather employed brokers to do so, that all U.S. brokerage and 
handling expenses incurred by the affiliate on behalf of Union were 
fully reported, and that there is no legal basis for deducting an 
amount for U.S. profit on these sales because U.S. profit deductions 
are only allowed in connection with CEP sales, not EP sales. See Second 
Review Final Results at 18441. The POSCO Group states that for Dongbu 
the Department noted that the cost of arranging for U.S. brokerage and 
handling, U.S. Customs clearance, payment of customs duties, and for 
being the importer of record, are reflected in the brokerage fees paid 
by the U.S. affiliate, Dongbu USA.
    The POSCO Group states that BUS paid the customs broker a fixed fee 
that covers the customs brokers' administrative and overhead costs 
incurred in arranging for and paying those expenses, and that applying 
a markup to those expenses to allegedly reflect BUS's overhead in 
effect improperly double counts those overhead expenses because the 
flat fee already paid to the customs broker includes any overhead and 
general expenses incurred in arranging for and paying for those 
expenses. Furthermore, the POSCO Group states that the Department 
deducted a portion of the markup purportedly relating to inland freight 
costs, and that this was factually incorrect because BUS in fact 
performed no U.S. inland freight services, nor did it even arrange for 
those services.
    The POSCO Group argues that the Department's purported 
justification for the deduction is incorrect because the Department 
never asked for information relating to other supposed expenses 
incurred by AKO and BUS that the Department is associating with 
movement services. The POSCO Group indicates that the Department 
refused such information at verification that allegedly showed that no 
adjustment was necessary because the purported expenses, like those 
incurred by POSTRADE and POSAM in relation to U.S. sales, were de 
minimis.
    Similarly, the POSCO Group argues that the Department's apparent 
reasoning that AKO's entire markup should be deducted because AKO only 
performs movement services is incorrect because AKO performs no 
movement services. The POSCO Group states that AKO performed the same 
services and played the same role for POCOS as POSTRADE did for POSCO. 
The POSCO Group alleges that the Department verified that POSTRADE 
incurs no additional expenses for movement services, and that the 
Department as a result determined that POSTRADE's markup should not be 
deducted, citing the Department's statement in its preliminary analysis 
memorandum that POSTRADE and POSAM ``incurred virtually no additional 
expenses as a result of the services in question.'' Furthermore, the 
POSCO Group asserts that there is no information on the record 
contradicting its assertion in its Section C supplemental questionnaire 
response at 25 that AKO was not involved in any activities associated 
with the movement of subject merchandise to POCOS's U.S. customers, but 
rather that AKO only helps generally to facilitate communications 
between POCOS and the U.S. customers, transferring documents between 
BUS and POCOS, and that AKO took title to the merchandise for U.S. 
sales and relinquished it in back-to-back transactions by issuing 
invoices to BUS. Therefore, the POSCO Group concludes, there is no 
rationale for the Department's deduction of the markup earned by AKO.
    The POSCO Group argues that the Department's reasoning that AKO's 
and BUS's markups should be deducted because they are only indirectly

[[Page 13197]]

affiliated with POCOS, while POSTRADE and POSAM are wholly-owned by 
POSCO, creates an artificial distinction between wholly-owned and 
affiliated firms that has no legal or factual basis. The POSCO Group 
also states that the Department made no such distinction for indirect 
affiliation for Union in either the final results of the second 
administrative reviews or in the preliminary results of these reviews, 
choosing not to make any adjustment for markups earned by its U.S. 
affiliate. The POSCO Group states that there is no basis in the law for 
the notion that profits should be deducted from ``indirectly'' 
affiliated parties, whereas they should not be deducted for 
transactions between wholly-owned parties. The POSCO Group claims that 
if this rationale is accepted, the Department would need to create an 
entirely new methodology for something called ``indirectly affiliated'' 
parties, a distinction which the statute does not make. The POSCO Group 
states that two parties either are or are not affiliated, and the 
``degree'' of affiliation is irrelevant to the dumping analysis. The 
POSCO Group claims that the Department's decision in Certain Internal 
Combustion Industrial Forklift Trucks from Japan; Final Results of 
Antidumping Duty Administrative Review, 57 FR 3167, 3179 (January 28, 
1992) (``Forklifts'') to deduct the markups made by an affiliated 
trading company was due to the fact that the markups represented actual 
expenses relating to movement of the subject merchandise, a situation 
which the POSCO Group asserts is not the case in these proceedings.
    The POSCO Group states that the Department uniformly looks at the 
costs to the collapsed entity consisting of affiliated parties rather 
than to the transfer prices between affiliated parties. For example, 
the Department routinely disregards commissions between affiliated 
parties because it considers such commissions to be mere intra-
corporate transfers of funds. See Final Determination of Sales at Less 
Than Fair Value: Fresh Cut Roses from Colombia, 60 FR 6980 (February 6, 
1995) (``Roses''). The POSCO Group states that in Timken v. United 
States, 630 F.Supp. 1327, 1342 (CIT 1986) (``Timken''), the CIT held 
that the statutory deduction for commissions did not require the 
Department to also deduct the profit earned by a U.S. subsidiary. The 
POSCO Group states that the Department's decision to deduct the entire 
markup earned by AKO and a portion of the markup earned by BUS flies in 
the face of this logic and constitutes the deduction of profit earned 
by related parties on EP sales.
    In any case, the POSCO Group argues that the Department's resort to 
an adverse facts available calculation based upon a third party's data 
is highly inappropriate because it did not request such information for 
AKO and BUS, that it refused such information when it was supplied at 
verification, and because the Department verified that the alleged 
``unreported movement expenses'' for POSAM and POSTRADE were de 
minimis, and therefore should have used this information as the most 
accurate and reasonable ``facts available'' for the AKO/BUS purported 
``unreported movement expenses.'' Furthermore, the POSCO Group states 
that the Department, in utilizing information from Dongbu Express as 
the basis for the adjustment for BUS, erred in that BUS, unlike Dongbu 
Express, is not a freight forwarder. The POSCO Group asserts that 
Dongbu Express actually performs transportation services, while BUS 
does not.
    Furthermore, in applying the Dongbu Express data to BUS, the POSCO 
Group asserts that the Department utilized an inappropriate 
methodology, and suggests several alternatives that utilize Dongbu 
Express public information from the record. Finally, the POSCO Group 
asserts that the Department, in applying the Dongbu Express data to 
BUS, utilized incorrect calculations, and presents what it 
characterizes as more reasonable alternative applications utilizing 
Dongbu Express public information from the record.
    Petitioners retort that the Department properly deducted from U.S. 
price the markups charged by AKO and BUS for their role in arranging 
for the provision of movement-related services. Petitioners cite Final 
Determination of Sales at Less Than Fair Value: Certain Internal-
Combustion, Industrial Forklift Trucks from Japan, 53 FR 12552 (April 
15, 1988), and Second Review Final Results at 18433-18435, as 
precedents for such a deduction from U.S. price. Furthermore, 
petitioners note that the precedent was in fact established in the 
first administrative reviews of these orders with respect to Dongbu 
Express, a party affiliated with Dongbu Steel, for instances involving 
home market sales of that respondent. Petitioners argue that the POSCO 
Group is correct in its determination that the Department acted 
inconsistently across respondents on this issue in its preliminary 
results, but was wrong in its prescription for eliminating the 
inconsistency. Petitioners indicate that this inconsistency should be 
rectified not by dropping the adjustment for AKO and BUS, but by 
deducting from U.S. prices the markups charged by all of the 
respondents' Korean and U.S. affiliates to the extent that they can be 
linked to movement-related services.
    Petitioners argue that even if it is assumed that the affiliates in 
question do not function as freight forwarders or customs brokers, they 
do act as intermediaries between the producers and the independent 
providers of movement-related services for U.S. sales. Contrary to 
certain claims of the POSCO Group, petitioners state, these affiliates 
do incur additional expenses and earn profit for performing this type 
of liaison and coordination function pertaining to movement services. 
Petitioners note that the Department previously has determined that 
intermediaries between the respondent and independent providers of 
movement-related services, such as Dongbu Express, incur expenses and 
earn profits that constitute legitimate movement-related expenses. 
Petitioners note that given that the affiliates of POSCO and of POCOS 
serve as intermediaries in a manner substantially identical to that of 
Dongbu Express, their markups charged for arranging for movement-
related services also are legitimate movement expenses that must be 
included among the others for U.S. sales.
    Petitioners state that the record establishes that the affiliated 
Korean and U.S. trading companies do perform movement-related services 
and incur expenses in the process in addition to what they are billed 
by the independent providers of movement-related services. Petitioners 
also state that it is clear that POSAM and BUS act as intermediaries 
between POSCO and POCOS and the independent movement-related service 
providers, and as such are integrally involved in the movement of 
subject merchandise. Consequently, the POSCO Group's characterization 
of the markups of the trading companies as solely intra-company profit 
is incorrect, because they also capture actual expenses. Petitioners 
argue that the record does not establish that the expenses incurred by 
AKO and BUS in providing movement-related services were de minimis. 
Regardless of the magnitude of those expenses, though, petitioners note 
that the entire portion of the markup that can be attributed to such 
services, including both profit and expenses, should be deducted from 
U.S. price. The Department has included in its deduction from home 
market price for Dongbu the entire payment to Dongbu Express, 
reflecting both the amounts paid by Dongbu Express to independent 
providers and its markup (which itself

[[Page 13198]]

includes additional Dongbu Express expenses and Dongbu Express profit). 
Consequently, petitioners argue, the Department should deduct the 
entire markup on movement-related services for POSAM, POSTRADE, AKO, 
and BUS, as a proxy for the amount of markup that the respondent would 
have to pay if it employed an independent party to arrange for 
movement-related services.
    Petitioners argue that the Department should deduct POSAM's markups 
from POSCO's U.S. selling prices. Petitioners note that the Department, 
in its preliminary results, concluded that the amount of actual 
expenses incurred by POSAM in arranging for the provision of movement-
related services, after the elimination of ``internal transfers'' 
between POSAM and POSCO, was not sufficiently material to warrant the 
calculation of an adjustment. Petitioners argue that this conclusion 
apparently is based on POSCO's flawed calculation during verification 
of the amount of actual expenses POSAM purportedly incurred in 
arranging for movement-related services. Petitioners argue that POSCO 
provided no explanation of how it determined the total expense pool 
used in the calculation of POSAM's markup, and therefore the Department 
should use POSAM's total SG&A as the appropriate basis for the 
calculation. Petitioners also question as unsupported by the record the 
percentage factor POSCO claimed at the Korea verification as the 
appropriate basis for determining the portion of the total expense pool 
to be attributed to the expenses in question. Finally, petitioners 
question the POSCO Group's cited total quantity of steel used to 
determine the per-ton expense, indicating that the quantity used was 
significantly larger than the total quantity of subject merchandise 
(cold-rolled and corrosion-resistant) reported in the databases.
    The POSCO Group, responding to petitioners' arguments regarding the 
POSAM markup, states that petitioners' arguments are moot because there 
is no basis for the deduction of any markup for the affiliated parties 
in question. Nevertheless, the POSCO Group argues that the portion of 
the markup that constitutes an internal transfer cannot possibly be 
deducted from U.S. price, and the POSCO Group asserts that POSAM did 
not incur any movement expenses that it did not report in its tape 
submission. The POSCO Group argues that even under the Department's 
``stretched rationale,'' the only direct movement expenses even 
theoretically at issue would be those de minimis telephone and fax 
charges incurred by POSAM to contact customs brokers, and the 
Department's Korea verification Exhibit 41, its Korea verification 
report, and its preliminary analysis memorandum demonstrate these 
expenses were in fact de minimis. The POSCO Group argues that 
petitioners' challenge to the data in verification Exhibit 41 is based 
on the faulty assumption that the costs indicated in that exhibit 
should be compared to POSAM's overall SG&A expenses, when sales of 
subject merchandise account for only a small portion of POSAM's sales, 
and petitioners' incorrect assumption that indirect expenses indicated 
in verification Exhibit 41 should be relevant, when in fact the 
Department is only concerned with direct expenses if it is trying to 
estimate movement expenses. The POSCO Group says it obviously was not 
able to segregate out telephone and fax charges relating solely to 
imports of subject merchandise versus imports of all merchandise, so 
the total pool of expenses is for imports of all merchandise, and the 
corresponding quantity figures used in the calculation of the per-ton 
expense are for all imports.
    Department's Position. We examined at verification the actual 
additional unreported movement expenses incurred by POSCO's affiliates 
(e.g., expenses associated with telephone calls from POSAM to customs 
brokers). Because the actual unreported movement expenses are 
insignificant in relation to the prices of each respondent's 
merchandise, we are making no special adjustment to U.S. price for 
them. See section 777A(a)(2) of the Act. There is no evidence that 
POCOS's affiliates had any substantive unreported movement expenses, 
either. In any case, such unreported movement expenses for POSCO and 
POCOS will be accounted for in the additional deductions made from U.S. 
price resulting from our reclassification of all of the POSCO Group's 
U.S. sales (except for those made to one customer, as also noted 
earlier) as CEP sales, as such expenses are reflected in the trading 
companies' SG&A expenses that we are using as a basis for estimating 
the U.S. indirect selling expense variable.
    With respect to the profit earned by those affiliates, we have 
determined those profits should be disregarded as an internal transfer. 
There is nothing unique about the affiliations between the 
manufacturers and the trading companies that would warrant a departure 
from this standard practice. Consistent with our practice in cases such 
as Roses, for purposes of these final results we are treating the 
profits earned by the affiliates as a result of these back-to-back 
transactions as intracorporate transfers of funds, and are thus making 
no adjustments to CEP to account for them.
    Comment 36. The POSCO Group argues that the Department erred in 
adjusting POSCO's reported cold-rolled costs for alleged discrepancies 
in thickness. First, the POSCO Group states that its submitted costs 
accurately reflect the Department's required thickness product 
characteristic. POSCO's RPG system tracks products' thicknesses in 
bands that overlap various Department model-match characteristic 
thickness bands, and for instances where more than one RPG thickness 
band crossed into a Department thickness band, the POSCO Group says it 
reported costs reflecting each RPG thickness included in that 
Department thickness band.
    The POSCO Group asserts that the Department erred in its conclusion 
that POSCO had been inconsistent in its application of this 
methodology. The Department's assertion that the POSCO Group had failed 
to include the costs of one RPG thickness band group of products in the 
calculation of costs for a certain CONNUM (possessing a specific 
Department thickness band) was based on the Department's failure to 
take into account that while POSCO sells products and tracks cost data 
on a nominal basis, the Department's thickness bands are specified in 
the questionnaire in actual terms. The POSCO Group notes that exhibit 
SD-12 of the March 3, 1997, supplemental submission indicates that the 
RPG system is based on nominal thickness.
    The POSCO Group also argues that the Department, even if it 
persists in incorrectly characterizing the situation as a reporting 
inconsistency, was not justified in applying an adverse adjustment to 
the reported costs for the CONNUM in question, that the Department had 
not requested the necessary information and cannot penalize a 
respondent because it does not maintain its records in a manner in 
which the Department would prefer, and that the Department had access 
to data that would allow a less unreasonable adjustment.
    Petitioners argue that the Department should make additional 
adjustments to POSCO's submitted cost information consistent with its 
sampling methodology. Petitioners argue that a large proportion of the 
CONNUMs reviewed contained problems involving understatements of cost 
to the POSCO Group's benefit. They cite, in addition to the example 
noted by the Department in its preliminary results, an example where 
the POSCO Group followed its

[[Page 13199]]

stated methodology so that a thicker, and hence probably a less costly, 
RPG grouping that barely overlapped into a Department thickness 
category was utilized in that calculation of costs for CONNUMs 
possessing thicknesses in that Department thickness category band. 
Because this is an indication that the problem may be pervasive, 
petitioners argue, the Department should make additional adjustments to 
CONNUMs exhibiting similar overlapping of RPG and Department thickness 
categories for both cold-rolled and corrosion-resistant products.
    The POSCO Group reiterates that petitioners, like the Department, 
have failed to convert POSCO's nominal thickness information to an 
actual-thickness basis. The POSCO Group also argues that the 
petitioners have suggested that the POSCO Group should have altered its 
reporting methodology for certain unspecified instances. The POSCO 
Group argues that such an approach would have been subjective and would 
undoubtedly have raised concerns precisely because it would be ripe for 
manipulation. The POSCO Group argues that there is no evidence 
supporting petitioners' observation that a thinner RPG is more 
expensive to produce than a thicker RPG, and that the record 
demonstrates that the differences in costs between individual RPGs may 
not be due solely to differences in thickness. The POSCO Group argues 
that there is no basis for such an adjustment to corrosion-resistant 
CONNUMs either, and that there is no basis for any adverse adjustment 
such as that suggested by petitioners.
    Department's Position. We agree with the POSCO Group that in its 
preliminary results the Department failed to account for the fact that 
POSCO's thickness groupings are based upon nominal thickness, as was 
noted in Exhibit SD-12 of the March 3, 1997, submission. When 
conversions are made to account for this, it is clear that there was in 
fact no discrepancy, and that the Department erred in making any 
adjustment to the POSCO Group's costs with respect to the thickness of 
cold-rolled merchandise. For the final results, we have removed the 
programming language that adjusted the costs for the CONNUMs at issue. 
The parties' other arguments, therefore, are moot.
    Comment 37. The POSCO Group argues that the Department should 
reduce POSCO's reported costs by the amount of the requested startup 
adjustment for extraordinary costs associated with the startup phase of 
a facility. The POSCO Group states that the statute requires the 
Department to make an adjustment for startup operations where the 
producer is using new production facilities or producing a new product 
that requires substantial additional investment, and where production 
levels are limited by technical factors associated with the initial 
phase of commercial production.
    The POSCO Group argues that a substantial investment was required 
to increase significantly its capability of producing a certain range 
of products. The POSCO Group claims that it has demonstrated it was 
using new facilities and manufacturing new products at those facilities 
during the POR, and as such POSCO met the first prerequisite for a 
startup adjustment under the statute.
    The POSCO Group argues that the second prerequisite, that 
production levels during the POR were limited by technical factors 
associated with the startup, was also fulfilled, as demonstrated by 
data provided on the record. The POSCO Group asserts that POSCO's Korea 
verification exhibit 37 indicates at 3 that production was limited 
during the initial months so that the products would meet required 
stringent quality standards before full production ensued. The POSCO 
Group argues that it is clear that other factors unrelated to startup, 
such as demand, business cycles, chronic production problems, or 
seasonality do not account for the limited production quantities. It 
argues that demand was consistently high, with POSCO's other lines 
operating at full capacity and that production from the new line rose 
steadily throughout the startup period. POSCO noted that it was clear 
as of October 1996 that it had reached full capacity.
    The POSCO Group states that the costs for products manufactured on 
this line were allocated over only a very small amount of production, 
and that this naturally resulted in abnormally high unit production 
costs for the affected merchandise. The production from the facility 
during the POR accounted for only a small percentage of total 
production of the general type of product, but, the POSCO Group notes, 
the Department requires that respondents provide a single weighted-
average CONNUM-specific cost, regardless of the facility; consequently, 
the POSCO group states, it provided data showing the impact on the 
CONNUM-specific cost. The POSCO Group asserts that based on facts 
essentially identical to those in this case the Department recently 
granted a startup adjustment. See Notice of Preliminary Determination 
of Sales at Less Than Fair Value and Postponement of Final 
Determination: Static Random Access Memory Semiconductors from Taiwan, 
62 FR 51442, 51448 (October 1, 1997). The POSCO Group states that the 
adjustment factors listed in Korea verification Exhibit 1 should be 
used to reduce the reported costs.
    Petitioners argue that the Department should reject the POSCO 
Group's claim for a startup adjustment because, contrary to the POSCO 
Group's assertions, it has not met the statutory requirements for 
receiving such an adjustment, which are to demonstrate that it is using 
new production facilities or producing a new product that requires 
substantial additional investment, and that the production levels 
associated with the startup are limited by technical factors associated 
with the initial phase of commercial production. See section 
773(f)(1)(C) of the Act.
    Regarding the first prong, petitioners state that evidence on the 
record clearly demonstrates that POSCO's purported ``startup'' 
operations do not constitute ``new production facilities,'' nor do they 
result in production of a ``new product'' that requires substantial 
additional investment. Petitioners note that the SAA at 836 defines 
``new production facilities'' to include ``the substantially complete 
retooling of an existing plant,'' and that ``[m]ere improvements to 
existing products or ongoing improvements to existing facilities will 
not qualify for a startup adjustment.'' Petitioners state that the 
addition is simply of one line amidst others in the same facility, ``a 
mere addition to an already existing facility,'' and that the POSCO 
Group has not shown that the new line is comprised of different 
machinery requiring different technicians or workers, or whether the 
production process differs from that of other lines.
    Petitioners characterize the expansion of capacity resulting from 
the line as insufficient grounds for a startup adjustment, as the SAA 
states at 836 that an expansion of the capacity of an existing 
production line could be considered for a startup adjustment only if 
the expansion constitutes such a major undertaking that it requires the 
construction of a new facility, and that it results in a depression of 
production levels below previous levels due to technical factors 
associated with the initial phase of commercial production of the 
expanded facilities. The petitioners state that no new facility was 
constructed, and that the POSCO Group admits that overall production 
levels did not decrease during the POR.

[[Page 13200]]

    Petitioners argue that the POSCO Group also failed to demonstrate 
that its purported ``startup'' operations resulted in production of a 
``new product.'' Petitioners note that the SAA at 836 defines a ``new 
product'' to include ``one requiring substantial additional investment, 
including products which, though sold under an existing nameplate, 
involve the complete revamping or redesign of the product.'' 
Petitioners state that while the POSCO Group claims that the new line 
produces or is capable of producing products with different physical 
characteristics for a specific class of end-users, the POSCO Group 
admitted at verification that its other lines could also be used to 
manufacture products with those same characteristics and for the same 
end-users. Petitioners state that the POSCO's Group's reported sales 
databases indicate that it produced substantial quantities of products 
with such physical characteristics prior to the operation of the new 
line. Petitioners also note that POSCO's product brochures pre-dating 
the new line explicitly indicate that the products with the 
characteristics in question were previously available, and thus should 
not be considered ``new'' to respondent's production. Furthermore, 
petitioners argue that the magnitude of the investment in the new line, 
relative to that of POSCO's total value of property, plant, and 
equipment, was not a ``substantial additional investment,'' as is 
required by the SAA in order for the startup adjustment to be 
considered in the context of a ``new product.'' Finally, petitioners 
argue that the SAA at 836 indicates that improved or smaller versions 
of a product will not render the product a ``new product,'' and that 
the products to which the POSCO Group refers would be disqualified on 
this basis.
    Regarding the second prong, petitioners state that evidence on the 
record clearly demonstrates that POSCO's production levels were not 
affected by its ``startup'' operations, and that the POSCO Group failed 
to demonstrate that ``technical factors'' negatively affected 
production. As noted earlier, petitioners argued that production levels 
were not depressed, and in fact they note that information on the 
record demonstrates that the difference between the monthly average 
production for the startup period as defined by the POSCO Group and the 
monthly production level for the line in question at the end of this 
period only represents a very small percentage of total estimated 
production of corrosion-resistant products. With regard to the 
influence of technical factors upon production levels, petitioners 
argue that the POSCO Group, in its own case brief, acknowledged that 
POSCO experienced no chronic production difficulties, and that it 
experienced no significant technical difficulties preventing it from 
bringing the line in question to commercial production levels in 
relatively short order.
    Petitioners state that the SAA provides that to the extent 
necessary the Department would consider other factors, such as 
historical data reflecting producers' experiences in producing the same 
or similar products, and whether factors unrelated to startup 
operations may have affected the volume of production, such as market 
conditions of supply and demand, or seasonality or business cycles. SAA 
at 836-7. However, petitioners argue, the POSCO Group provided no such 
support, but rather only unsupported claims. For example, petitioners 
challenge the POSCO Group's assertion in its case brief that POSCO's 
substantial experience in starting up similar operations is relevant in 
helping explain what might be characterized as low initial production 
levels in this instance.
    Petitioners argue that if a startup adjustment is granted, it 
cannot cover a period beyond May 1996, given the reported production 
levels for June 1996 and the POSCO Group's statement in its March 3, 
1997, Supplemental Section D response at 31 that the company completed 
test production at the end of May 1996 and followed this testing period 
with commercial production. Petitioners also argue that any such 
adjustment would need to be limited to the specific operation in 
question, and that, because such information is not available on the 
record, the actual amounts of the adjustment cannot be calculated.
    Department's Position. We agree with petitioners that the POSCO 
Group failed to demonstrate that it is entitled to a startup adjustment 
for the line in question. The POSCO Group's assertions regarding the 
output of the line constituting a ``new product'' are contradicted by 
the record. For example, the POSCO Group's databases and product 
brochures indicate that the POSCO Group manufactured products such as 
those produced from the new equipment prior to its installation. The 
POSCO Group indicated at verification ``that the new line is capable of 
processing thinner and narrower merchandise than its other galvanizing 
lines, and that the intended uses of steel produced on the new line 
were for home appliances'' produced by companies such as two Korean 
manufacturers, but the POSCO Group conceded upon later questioning 
``that the galvanized steel produced on its other lines could also be 
used for home appliances.'' June 27, 1997, Korea verification report at 
2. The information noted at verification also indicates that the 
product range of the line in question is basically comparable to that 
of other POSCO Group lines with respect to dimensions.
    If the products in question were truly new, as the POSCO Group has 
argued, assertions regarding the consistently high demand for POSCO's 
other products and its high capacity utilization at other lines would 
be irrelevant with respect to the second prong of the startup cost 
test, which requires that the production levels were limited by 
technical factors. The demand and supply associated with POSCO's other 
galvanizing lines could be unrelated to the supposedly thinner products 
being manufactured for appliance manufacturers on the new line. 
Furthermore, if the products were in fact new, there is no reason for 
distributing an adjustment concerning products in CONNUMs allegedly 
targeted to Korean appliance manufacturers to all galvanized products, 
including products in other CONNUMs purchased by U.S. customers. As 
noted by petitioners, such line-specific information is not available 
on the record.
    In addition, it is not clear that the new line in question 
constitutes a new facility, as required by the new startup adjustment 
provision. The line is one of many producing merchandise similar to 
that manufactured on numerous other lines by POSCO and POCOS. The POSCO 
Group provides no convincing evidence that the new line should be 
considered ``new production facilities'' or ``the substantially 
complete retooling of an existing plant.''
    The POSCO Group's assertion that it met both prongs of the 
requirement fails on other grounds. Even accepting that the general 
demand for POSCO galvanized merchandise, relative to overall capacity, 
was high, the POSCO Group has not demonstrated that production levels 
on the new line were limited by technical factors. At verification in 
Korea, the Department ``requested additional information pertaining to 
the claimed startup adjustment'' (June 27, 1997, Korea verification 
report at 2), and the POSCO Group provided what is contained in Korea 
verification Exhibit 37. The POSCO Group is incorrect in its assertion 
that that exhibit indicates at 3 that production was limited during the

[[Page 13201]]

initial months so that the products would meet required stringent 
quality standards before full production ensued. That page provides no 
information detailing the reasons for the variations in monthly output. 
Furthermore, even assuming that production levels were limited by 
technical factors (as also noted by petitioners), it is not clear from 
the record when commercial production levels were reached.
    Because the POSCO Group has not met both conditions for being 
granted a startup adjustment, we have not made such an adjustment in 
the final results.
    Comment 38. The POSCO Group argues that the Department erred when 
it adjusted POCOS's reported costs for quality. The POSCO Group argues 
that POCOS's cost accounting system does not track the quality of the 
input, so an adjustment was not warranted. The POSCO Group argues that, 
when reporting costs, the Department requires that companies rely on 
the actual costs as recorded in the normal accounting system if that 
system is in accordance with the foreign country's GAAP and it is clear 
that the figures do not distort the dumping calculations. See 
Ferrosilicon from Brazil; Final Results of Antidumping Duty 
Administrative Review, 61 FR 59407, 59409 (November 22, 1996) 
(``Ferrosilicon''). The POSCO Group notes that in many cases where 
respondents have not relied on their normal accounting system to report 
costs, the Department has applied adverse facts available. See Certain 
Cut-to-Length Carbon Steel Plate from Sweden; Preliminary Results of 
Antidumping Duty Administrative Review, 61 FR 51898, 51899 (October 4, 
1996) (``Swedish Plate''). The POSCO Group argues that the Department 
has only adjusted a respondent's reported costs which are based on its 
normal accounting system where the Department determined that those 
normal practices resulted in an unreasonable allocation of production 
costs. Semiconductors at 15472. The POSCO Group argues that in cases 
where a company has been unable to provide costs at the level of detail 
requested by the Department, the Department has accepted the reported 
costs where it was satisfied that those costs nonetheless reasonably 
reflected the actual costs of producing the subject merchandise during 
the POR. 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, 61 FR 13815, 13817 (March 28, 
1996). The POSCO Group characterized cost differences between 
commercial, drawing, and deep drawing products as ones ``perceived'' by 
the Department. Finally, based on a reference elsewhere to the 
Department's preliminary adjustment for coating weight costs, the POSCO 
Group seemingly characterized the adjustments made by the Department 
for quality as the use of adverse facts available.
    Petitioners argue that the facts in these reviews for this issue 
are identical to those in the second administrative reviews, where the 
Department made a similar adjustment to the POSCO Group's reported 
costs. Petitioners argue that the adjustment in question is not 
adverse, though the Department would have been justified in making the 
adjustment based upon adverse facts available because the POSCO Group 
did not provide product-specific cost information as requested by the 
Department and, in not doing so, it did not act to the best of its 
ability to comply with the Department's request for information. See 
section 776(b) of the Act.
    Petitioners' argue that the POSCO Group's reference to Ferrosilicon 
is inapposite because the Department's decision to use the respondent's 
reported costs in that case was based upon the conclusion that the 
figures did not distort the dumping calculations, which clearly is not 
so in this case. Petitioners argue that submitted cost data for POSCO, 
which accounts for quality differences, suggest that failure to account 
for quality differences may lead to significant understatement of 
certain products' costs. Petitioners state that the POSCO Group's 
reference to Swedish Plate is also inapposite, because the Department 
resorted to facts available in that case not because the respondent 
failed to rely on its normal cost accounting system or developed a new 
cost system just for purposes of reporting, but rather ``[b]ecause the 
company was unable to reconcile the submitted cost data to its normal 
accounting books and records.'' Id. at 51899.
    Furthermore, petitioners argue that the Department's use of facts 
available 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, 58 FR 37091 (July 9, 1993) (``Flat-Rolled Steel from 
Brazil'') supports the Department's preliminary decision in these 
reviews. In the Brazilian case, petitioners note, the Department found 
that the respondent had improperly aggregated its production costs 
based on certain product characteristics, and submitted production 
costs which included the average cost of extras, with the result that, 
according to the Department, the respondent's submitted costs, as 
averaged over several different products, ``did not appropriately 
specify the cost of individual extras, as required by the Department.'' 
Id. at 37097.
    Finally, petitioners note that if POCOS is selling products with 
different quality characteristics, it presumably would take this fact 
into account in pricing its products.
    Department's Position.  The Department has relied upon POCOS's 
normal accounting system, except to the extent that it determined that 
doing so would result in an unreasonable allocation of production costs 
and a possible distortion of dumping margins. The apparent inability of 
POCOS to distinguish costs on the basis of quality indicates that its 
reported costs do not reflect the actual costs of producing the subject 
merchandise at the level of detail desired by the Department. The 
quality characteristic is relatively high in the Department's model-
matching hierarchy, and the POSCO Group companies distinguish between 
qualities in their selling practices. The presence of non-trivial 
differences between costs of CONNUMs produced by POSCO that differ in 
terms of the Department's hierarchy only for quality supports the 
contention that this is a characteristic for which differences should 
be reflected in costs, and the Department's approach in Ferrosilicon 
would not be appropriate here.
    As noted in the Department's September 2, 1997, preliminary 
analysis memorandum at 7, the adjustment made to the costs for POCOS 
commercial, drawing, and deep-drawing qualities reflected a methodology 
comparable to that used in the final results of the second 
administrative reviews. At no time during these reviews did the POSCO 
Group suggest an alternative methodology, even though the Department's 
questionnaire indicated that the POSCO Group should report a single 
weighted-average cost for each unique product as represented by a 
specific CONNUM. However, because POCOS does not track costs based on 
quality, and because the Department did not insist that the POSCO Group 
devise a methodology to estimate differences in POCOS costs for 
quality, the use of adverse facts available, such as that used in 
Swedish Plate and in Flat-Rolled Steel from Brazil, would not be 
appropriate. The non-adverse nature of the adjustment the Department 
made in its preliminary results is demonstrated by the fact that the 
Department utilized data from POSCO CONNUMs that were chosen based on 
their aggregate

[[Page 13202]]

production quantity, rather than on the magnitude of the differences in 
cost, and upon the fact that the methodology utilized resulted in the 
costs of some CONNUMs being decreased, while the costs of others were 
increased. Id. at 8. Furthermore, the Department's use of POSCO data to 
adjust the costs of POCOS production for quality is reasonable because 
the Department has collapsed these companies. The POSCO Group, in fact, 
urged the Department to base POCOS's substrate input costs upon POSCO's 
actual costs of producing that input, and the use of POSCO's costs as a 
basis for adjusting reported POCOS costs for quality is consistent with 
this approach.
    Comment 39. The POSCO Group asserts that the Department, in its 
preliminary results, penalized the POSCO Group for submitting average 
costs for merchandise with different coating weights. The POSCO Group 
states that these average costs reflect the treatment of coating weight 
in POSCO's normal accounting system, that the Department had no basis 
for applying adverse facts available for different coating weights, and 
that the same arguments that it made for the Department's adjustments 
for quality apply to this issue. The POSCO Group argues that the costs 
reported were consistent with POSCO's accounting system. The POSCO 
Group states that based upon its experience in the distribution of 
produced coating weights, the product distribution of POSCO galvanized 
products is ``skewed toward one value,'' and cites figures that it 
alleges are based upon reported home market sales information. 
Consequently, the POSCO Group argues, its decision not to track such 
costs is reasonable and its normal system not distorting. The POSCO 
Group argues that average costs for specific costs are often reported 
to and accepted by the Department.
    The POSCO Group argues that the Department's methodology for 
calculating the adjustment for coating weight of POSCO products is 
erroneous, in that it was based upon information derived from POCOS 
production. The POSCO Group argues that even if one were to assume that 
coating weight cost differences at POCOS are the same as at POSCO, the 
Department's applied cost differentials for each coating weight 
implicitly assumes that POSCO's distribution of production of coated 
products is identical to that of POCOS. The POCOS Group argues that if 
the Department continues to adjust for POSCO coating weight 
differences, it should base its cost differential adjustments upon the 
distribution of production of POSCO coated products.
    Petitioners argue that, as in the case of the adjustment for 
quality, the Department's adjustment for the POSCO Group's failure to 
account for the distribution of coating weight costs across different 
products was appropriate. Petitioners state that the POSCO Group did 
not report to the best of its ability, and that its reported costs 
distort the dumping analysis. Petitioners state that reported data for 
POCOS, which tracks costs by coating weight, indicate that the costs of 
certain products may be significantly understated if coating weight is 
not taken into account. Petitioners contest the POSCO Group's assertion 
regarding the distribution of POSCO production by coating weight, and 
the POSCO Group's conclusions from these data regarding the 
acceptability of the reported costs for POSCO products and the 
appropriateness of the Department's adjustment based upon POCOS 
production.
    Petitioners counter the POSCO Group's statement that the Department 
often accepts the use of average costs for various items, such as 
labor, overhead, and SG&A, noting that it is the Department's clear 
practice to reject averages in cost reporting where it prevents the use 
of product-specific costs in its margin calculations, and that the 
Department usually prefers weighted averages to simple averages.
    Finally, petitioners note that if POSCO is selling products with 
different coating weights, it presumably would take this fact into 
account in pricing its products.
    Department's Position. The Department has relied upon POSCO's 
normal accounting system, except to the extent that it determined that 
doing so would result in an unreasonable allocation of production costs 
and a possible distortion of dumping margins. The apparent inability of 
POSCO to distinguish costs on the basis of coating weight indicates 
that its reported costs do not reflect the actual costs of producing 
the subject merchandise at the level of detail desired by the 
Department. The coating weight characteristic is relatively high in the 
Department's model-matching hierarchy, and the POSCO Group companies 
distinguish between coating weights in their selling practices. The 
presence of non-trivial differences between costs of CONNUMs produced 
by POCOS that differ in terms of the Department's hierarchy only for 
coating weights supports the contention that this is a characteristic 
for which differences should be reflected in costs, and the 
Department's approach in Ferrosilicon would not be appropriate here.
    As noted in the Department's September 2, 1997, preliminary 
analysis memorandum at 8, the adjustment made to the costs for POSCO 
coating weights reflected a methodology comparable to that used in the 
final results of the second administrative reviews. At no time during 
these reviews did the POSCO Group suggest an alternative methodology, 
even though the Department's questionnaire indicated that the POSCO 
Group should report a single weighted-average cost for each unique 
product as represented by a specific CONNUM. However, because POSCO 
does not track costs based on coating weight, and because the 
Department did not insist that the POSCO Group devise a methodology to 
estimate differences in POSCO costs for coating weight, the use of 
adverse facts available, such as that used in Swedish Plate and in 
Flat-Rolled Steel from Brazil, would not be appropriate. The non-
adverse nature of the adjustment the Department made in its preliminary 
results is demonstrated by the fact that the Department utilized data 
from POCOS CONNUMs that were chosen based on their aggregate production 
quantity, rather than on the magnitude of the differences in cost, and 
upon the fact that the methodology utilized resulted in the costs of 
some CONNUMs being decreased, while the costs of others were increased. 
Id. at 8-9.
    The Department's use of POCOS data to adjust the costs of POSCO 
production for coating weight is reasonable because the Department has 
collapsed these companies. The POSCO Group in fact urged the Department 
to base POCOS's substrate input costs upon POSCO's actual costs of 
producing that input, and the use of POCOS's costs as a basis for 
adjusting reported POSCO costs for coating weight is consistent with 
this approach. Basing an adjustment upon a distribution of POSCO 
products, as the POSCO Group requests, is not feasible for the simple 
reason that POSCO does not track costs for coating weight. A completely 
neutral redistribution of costs relating to coating weights is not 
possible. Furthermore, basing an adjustment to costs upon verified cost 
information such as the Department did in its preliminary results is 
preferable to basing one upon unsubstantiated assertions about 
production that the respondent has founded upon ambiguous references to 
sales data and introduced late in the proceedings in its case brief.
    The POSCO Group could have proposed alternative methodologies 
earlier in the process, and in fact did not

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immediately provide all of its information pertaining to POSCO tracking 
of coating weights. In its original questionnaire response, the POSCO 
Group failed to identify the meaning of certain digits in the POSCO RPG 
product code. Asked about those digits in a supplemental questionnaire, 
the POSCO Group stated that they related to coating weight and were not 
utilized for cost purposes (see the March 3, 1997, Section D 
supplemental questionnaire response at 22-23), but this explanation 
significantly understated the extent to which such information had been 
previously utilized. Id. and the June 27, 1997, Korea verification 
report at 10-11.
Comments by Union
    Comment 40. Union contends that the Department improperly 
classified Union's post-sale warehousing expenses as indirect selling 
expenses, instead of as movement expenses, contrary to Department 
practice.
    Department's Position. We agree with respondent and have adjusted 
our analysis accordingly for these final results.
    Comment 41. Union asserts that the Department improperly 
reclassified certain EP sales as CEP sales on the basis of some 
reported expenses, which appeared to suggest that further processing 
had been incurred, whereas the amounts in question merely reflected 
demurrage and handling, a fact which was reported in Union's response.
    Petitioners do not agree that the Department can conclude that 
there was no further processing done on subject merchandise in the 
United States. Petitioners mention that Exhibit 29 of Union's home-
market verification report, in which a warehousing provider enumerated 
its policies, together with the absence of certain warehousing-related 
charges on a sale examined at verification, suggests that further 
processing must have been performed. Petitioners also reiterate their 
argument that all of Union's U.S. sales should be reclassified as CEP 
sales due to the active role it alleges UADD played in selling subject 
merchandise.
    Department's Position. This comment is moot as a result of our 
reclassification of most of Union's U.S. sales as CEP transactions, as 
explained above in the ``Fair-Value Comparisons'' section of this 
notice and in the Department's Position in response to Comment 20.

Final Results of Reviews

    As a result of these reviews, we determine that the following 
margins exist for the period August 1, 1995 through July 31, 1996:

------------------------------------------------------------------------
                                                               Weighted-
                                                                average 
               Producer/manufacturer/exporter                   margin  
                                                               (percent)
------------------------------------------------------------------------
Certain Cold-Rolled Carbon Steel Flat Products                          
------------------------------------------------------------------------
Dongbu......................................................        1.21
POSCO.......................................................        0.63
------------------------------------------------------------------------
Certain Corrosion-Resistant Carbon Steel Flat Products                  
------------------------------------------------------------------------
Dongbu......................................................        0.60
POSCO.......................................................        0.53
Union.......................................................        0.39
------------------------------------------------------------------------

    The Department shall determine, and the U.S. Customs Service shall 
assess, antidumping duties on all appropriate entries. As discussed 
above, because the number of transactions involved in this review and 
other simplification methods prevent entry-by-entry assessments, we 
have calculated exporter/importer-specific assessment rates. With 
respect to both EP and CEP sales, we divided the total dumping margins 
for the reviewed sales by the total entered value of those reviewed 
sales for each importer. We will direct the U.S. Customs Service to 
assess the resulting percentage margins against the entered customs 
values for the subject merchandise on each of that importer's entries 
under the relevant order during the review period. While the Department 
is aware that the entered value of the reviewed sales is not 
necessarily equal to the entered value of entries during the POR 
(particularly for CEP sales), use of entered value of sales as the 
basis of the assessment rate permits the Department to collect a 
reasonable approximation of the antidumping duties which would have 
been determined if the Department had reviewed those sales of 
merchandise actually entered during the POR.
    Furthermore, the following deposit requirements shall be effective 
upon publication of this notice of final results of review for all 
shipments of certain cold-rolled and corrosion-resistant carbon steel 
flat products from Korea entered, or withdrawn from warehouse, for 
consumption on or after the publication date, as provided for by 
section 751(a)(1) of the Act: (1) The cash deposit rate for the 
reviewed companies will be the rates stated above, except for Union, 
which had a de minimis margin, and whose cash deposit rate is therefore 
zero; (2) for merchandise exported by manufacturers or exporters not 
covered in these reviews but covered in a previous segment of these 
proceedings, the cash deposit will be the company-specific rate 
published for the most recent segment; (3) if the exporter is not a 
firm covered in this review or the LTFV investigation, but the 
manufacturer is, the cash deposit rate will be that established for the 
manufacturer of the merchandise in the most recent segment of these 
proceedings; and (4) if neither the exporter nor the manufacturer is a 
firm covered in this review or the LTFV investigation, the cash deposit 
rate will continue to be 14.44 percent (for certain cold-rolled carbon 
steel flat products) or 17.70 percent (for certain corrosion-resistant 
carbon steel flat products), which were the ``all others'' rates 
established in the LTFV investigations. See Flat-Rolled Final at 37191.
    Article VIpara.5 of the GATT (cited earlier) provides that ``[n]o 
product * * * shall be subject to both antidumping and countervailing 
duties to compensate for the same situation of dumping or export 
subsidization.'' This provision is implemented by section 772(d)(1)(D) 
of the Act. Since antidumping duties cannot be assessed on the portion 
of the margin attributable to export subsidies, there is no reason to 
require a cash deposit or bond for that amount. Accordingly, the level 
of export subsidies as determined in Final Affirmative Countervailing 
Duty Determinations and Final Negative Critical Circumstances 
Determinations; Certain Steel Products from Korea (58 FR 37328--July 9, 
1993), which is 0.05 percent ad valorem, will be subtracted from the 
cash deposit rate for deposit purposes.
    These deposit requirements shall remain in effect until publication 
of the final results of the next administrative review.
    This notice also serves as final reminder to importers of their 
responsibility 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 antidumping 
duties occurred and the subsequent assessment of double antidumping 
duties.
    This notice also is the only reminder to parties subject to 
administrative protective order (``APO'') of their responsibility 
concerning the return or destruction of proprietary information 
disclosed under APO in accordance with section 353.34(d) of the 
Department's regulations (19 CFR 353.34(d)). Timely notification of 
return/destruction of APO materials or conversion to judicial 
protective order is

[[Page 13204]]

hereby requested. Failure to comply is with the regulations and the 
terms of an APO is a sanctionable violation.
    These administrative reviews and notice are in accordance with 
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and section 353.22 
of the Department's regulations (19 CFR 353.22).

    Dated: March 9, 1988.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-6883 Filed 3-17-98; 8:45 am]
BILLING CODE 3510-DS-P