[Federal Register Volume 63, Number 115 (Tuesday, June 16, 1998)]
[Notices]
[Pages 32833-32849]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-15874]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-580-809]
Circular Welded Non-Alloy Steel Pipe From the Republic of Korea;
Final Results of Antidumping Duty Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of Final Results of Antidumping Duty Administrative
Review.
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SUMMARY: On December 8, 1997, the Department of Commerce published the
preliminary results of its administrative review of the antidumping
duty order on circular welded non-alloy steel pipe from the Republic of
Korea. This review covers imports of pipe from four producers/exporters
during the period November 1, 1995 through October 31, 1996.
Based on our analysis of comments received, these final results
differ from the preliminary results. In addition, we continue to find
for these final results that sales of subject merchandise were made
below normal value during the review period.
EFFECTIVE DATE: June 16, 1998.
FOR FURTHER INFORMATION CONTACT: Cynthia Thirumalai or Craig Matney,
Import Administration, International Trade Administration, US
Department of Commerce, 14th Street and Constitution Avenue, NW,
Washington DC 20230; telephone (202) 482-4087 and 482-1778,
respectively.
The Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute are
references to the provisions effective January 1, 1995, the effective
date of the amendments made to the Tariff Act of 1930 (the Act) by the
Uruguay Round Agreements Act (URAA). In addition, unless otherwise
indicated, all citations to the Department of Commerce's (the
Department's) regulations refer to the regulations, codified at 19 CFR
part 353, April 1997.
Background
This review covers four manufacturers/exporters, i.e., Hyundai Pipe
Co. Ltd. (Hyundai), Korea Iron and Steel Co., Ltd. (KISCO) and its
affiliate Union Steel Manufacturing Co., Ltd. (Union), SeAH Steel
Corporation (SeAH) and Shinho Steel Co., Ltd. (Shinho), collectively
referred to as ``the respondents.'' Since the publication of our Notice
of Preliminary Results of Antidumping Duty Administrative Review of
Circular Welded Non-Alloy Pipe from the Republic of Korea, (Preliminary
Results) 62 FR 64559 (December 8, 1997), we received revised home
market datasets from the respondents in December 1998. We also received
case briefs from the respondents and from the petitioners on January
20, 1998, and rebuttal briefs on January 30, 1998.
Scope of Review
The merchandise subject to this review is circular welded non-alloy
steel pipe and tube, of circular cross-section, not more than 406.4mm
(16 inches) in outside diameter, regardless of wall thickness, surface
finish (black, galvanized, or painted), or end finish (plain end,
beveled end, threaded, or threaded and coupled). These pipes and tubes
are generally known as standard pipes and tubes and are intended for
the low-pressure conveyance of water, steam, natural gas, air, and
other liquids and gases in plumbing and heating systems, air-
conditioning units, automatic sprinkler systems, and other related
uses. Standard pipe may also be used for light load-bearing
applications, such as for fence tubing, and as structural pipe tubing
used for framing and as support members for reconstruction or load-
bearing purposes in the construction, shipbuilding, trucking, farm
equipment, and other
[[Page 32834]]
related industries. Unfinished conduit pipe is also included in this
order.
All carbon-steel pipes and tubes within the physical description
outlined above are included within the scope of this review except line
pipe, oil-country tubular goods, boiler tubing, mechanical tubing, pipe
and tube hollows for redraws, finished scaffolding, and finished
conduit. In accordance with the Department's Final Negative
Determination of Scope Inquiry on Certain Circular Welded Non-Alloy
Steel Pipe and Tube from Brazil, the Republic of Korea, Mexico, and
Venezuela 61 FR 11608 (March 21, 1996), pipe certified to the API 5L
line-pipe specification and pipe certified to both the API 5L line-pipe
specifications and the less-stringent ASTM A-53 standard-pipe
specifications, which falls within the physical parameters as outlined
above, and entered as line pipe of a kind used for oil and gas
pipelines is outside of the scope of the antidumping duty order.
Imports of these products are currently classifiable under the
following Harmonized Tariff Schedule (HTS) subheadings: 7306.30.10.00,
7306.30.50.25, 7306.30.50.32, 7306.30.50.40, 7306.30.50.55,
7306.30.50.85, and 7306.30.50.90. Although the HTS subheadings are
provided for convenience and customs purposes, our written description
of the scope of this proceeding is dispositive.
Date of Sale
The respondents have argued that, contrary to the methodology used
in the Preliminary Results, we should use invoice date as the date of
sale for sales to the United States. For these final results, we
continue to find contract date to be the appropriate date of sale with
respect to sales to the United States. (For further discussion of this
issue, see Comment 1 in the General Comments section of this notice
below.)
Product Comparisons
On January 8, 1998, the Court of Appeals for the Federal Circuit
issued a decision in CEMEX v. United States (CEMEX), 1998 U.S. App.
LEXIS 163. In that case, based on the pre-URAA version of the Act, the
Court ruled that the Department may not resort immediately to
constructed value (CV) as the basis for foreign market value (now
normal value, or ``NV'') when the Department finds home market sales of
the identical or most similar merchandise 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 as the basis for NV
where 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
other sales of similar merchandise to compare to the US sales 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.
Accordingly, in this proceeding, when making comparisons in
accordance with section 771(16) of the Act, we considered all home
market sales of the foreign like product that were in the ordinary
course of trade for purposes of determining appropriate product
comparisons to US sales. Where there were no sales of identical
merchandise in the home market in the ordinary course of trade to
compare to US sales, we compared US 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. Thus, we have implemented the Court's decision in CEMEX
to the extent that the data on the record permitted.
Aside from the preceding, we followed the methodology outlined in
our Preliminary Results with the following exception: for certain of
Shinho's models that had identical product characteristics but were
assigned non-identical control numbers, we recoded them with identical
control numbers.
Export Price and Constructed Export Price
We followed the methodology in the Preliminary Results with the
following exceptions: (1) We used in our analysis all export price (EP)
transactions that were entered during the POR; (2) we recalculated
adjustments for duty drawback for SeAH; (3) we recalculated the short-
term interest rate for KISCO/Union on a collapsed basis; (4) we
included interest revenue in the calculation of net price for KISCO/
Union.
Normal Value
We used the same methodology outlined in the Preliminary Results
with the following exceptions: (1) For sales with weight conversion
factors below the allowed minimum, we used the minimum as non-adverse
facts available; (2) sales failing the arm's-length test and resales of
products purchased from other producers were not included in the
product-matching concordance for Hyundai and SeAH; (3) we reallocated
SeAH's foreign brokerage, US duty and US brokerage expenses on a value
basis; (4) sales of overruns were removed from the arm's length test
for SeAH; (5) indirect selling expenses for KISCO/Union were
recalculated; (6) the short-term interest rate for KISCO/Union was
recalculated on a collapsed basis; (7) we recalculated Shinho's CV
interest expenses with respect to short-term interest offsets and
foreign exchange gains/losses; 8) we recalculated the credit expenses
for one of Shinho's home market customers.
Level of Trade/CEP Offset
We received no comment from interested parties on the methodology
we employed in the Preliminary Results with respect to level of trade.
Based on our analysis of information on the record as articulated in
the Preliminary Results, we are not changing our methodology with
respect to level of trade for these final results.
Cost of Production Analysis
As discussed in the Preliminary Results, we conducted an analysis
to determine whether the respondents made sales of the foreign like
product in the home market at prices below their cost of production
(COP) within the meaning of section 773(b)(1) of the Act. We used the
same methodology employed in the Preliminary Results with the following
exceptions: (1) The general and administrative (G&A) and interest
factors for all respondents were recalculated using a denominator
inclusive of packing; (2) we recalculated KISCO/Union's G&A and
interest expense on a collapsed basis; (3) we recalculated Shinho's
interest expenses with respect to short-term interest offsets and
foreign exchange gains/losses.
Constructed Value
In calculating CV, we followed the methodology employed in our
Preliminary Results, with the following exceptions: (1) The SG&A and
interest factors for all respondents were recalculated using a
denominator inclusive of packing; (2) we adjusted Hyundai's CV for
direct selling expenses incurred in the home market; (3) we converted
CV profit to a theoretical-weight basis for Shinho; (4) we corrected
the circumstance of sale (COS) adjustment for credit expenses for
[[Page 32835]]
Shinho; (5) we recalculated Shinho's interest expenses with respect to
short-term interest offsets and foreign exchange gains/losses.
Interested Party Comments
General Comments
Comment 1: Invoice Date v. Contract Date as the Date of U.S. Sale
The respondents note that before the issuance of the original
questionnaire in this proceeding on January 13, 1997, the Department
adopted the policy of using invoice date as the presumptive date of
sale in February 1996 with the publication of its proposed antidumping
regulations (see Antidumping and Countervailing Duties: Notice of
Proposed Rulemaking and request for Public Comments, (Proposed
Regulations) 61 FR 7308, 7381 (February 27, 1996)). Consistent with the
instructions in the questionnaire, the respondents state that they used
invoice date as the date of sale for US sales and received no
indication from the Department that this was not acceptable until
October 30, 1997, despite meetings subsequent to the issuing of the
questionnaire with Department officials on this same issue.
The respondents acknowledge that the Proposed Regulations and Final
Regulations (i.e., Antidumping Duties; Countervailing Duties: Final
Rule, (Final Regulations) 62 FR 27926, 27411 (May 19, 1997) codified at
19 CFR Sec. 351.401(i)) speak of the use of dates other than invoice
date under circumstances involving long-term contracts, sales with
exceptionally long periods of time between invoice and shipment dates,
and situations involving large custom-made merchandise. However, the
respondents then point out that the particular circumstances in this
case with respect to US sales (i.e., long periods of time between the
date on which the material terms of sale are set and invoice date) do
not fall within these stated exceptions. The respondents also emphasize
that the Final Regulations clearly state that exceptions to the
presumption to use invoice date must be narrowly drawn. Indeed, the
respondents note that in Certain Stainless Steel Wire Rod from India:
Final Results of New Shipper Antidumping Duty Administrative Review,
(Certain Stainless from India) 62 FR 38976, 38978 (July 21, 1997), the
Department maintained that the use of invoice date as the date of sale
was appropriate over the objection of the petitioners that the lag time
of up to several months between purchase order date and invoice date
was too long. The respondents also cite other cases in which the
Department held that invoice date was the appropriate date of sale.
The respondents argue that since their sales processes are quite
typical for manufactured products, that they should be afforded typical
consideration--i.e., the use of invoice date as the date of sale.
Otherwise, argue the respondents, the exception of not using invoice
date as the date of sale would become the rule, and the selection of
the date of sale would be purely at the discretion of the Department.
The respondents point out that even if the sales terms rarely
change after the contract date, the possibility for change exists and
sometimes does occur. The respondents then cite to the Preamble to the
Final Regulations where it states that ``absent satisfactory evidence
that the terms of sale were finally established on a different date,
the Department will presume that the date of sale is the date of
invoice'' (Final Regulations at 27349). According to the respondents,
the sales terms in this case are subject to change and are not,
therefore, ``finally established'' within the meaning of the Preamble
to the Final Regulations until the date of invoice.
In addition, the respondents argue that using a different date of
sale for home market sales than for US sales contradicts the
Department's preference of using a single date of sale for a given
respondent instead of a different date for each sale, as stated in the
Preamble to the Final Regulations (see 62 FR 27348). As support for
using the same date of sale in both markets, the respondents cite to
Small Diameter Circular Seamless Carbon and Alloy Steel Standard, Line
Pressure Pipe from Germany: Preliminary Results of Antidumping Duty
Administrative Review, (Germany Line Pipe) 62 FR 47446, 47448
(September 9, 1997) in which the Department used shipment date (a proxy
for invoice date which occurred after the shipment date) despite a long
lag time between order confirmation date and shipment date in order to
maintain dates of sale in the home market and the United States on the
same basis.
The petitioners point out that both the Proposed and Final
Regulations cited by respondents are not applicable to this proceeding
since it was initiated prior to the date on which these regulations
became effective. Even if they were, add the petitioners, the
Department's decision not to use invoice date as the date of sale for
US sales was fully consistent with those regulations as they state:
[T]he Department 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.
See Final Regulations at 27411. The petitioners take issue with the
respondents' assertion that the listed exceptions are the only
allowable circumstances under which the Department may abandon the use
of invoice date. Instead, state the petitioners, the list of exceptions
is illustrative and not exhaustive. The petitioners also note that
while the respondents cite to language in the regulations speaking
generically about the malleable nature of sales terms up until the time
that payment is demanded, they have not cited to evidence on the record
of this proceeding which would demonstrate that sales terms in this
case are not usually established on the contract date for sales to the
United States. Rather, state the petitioners, there is more than
satisfactory evidence on the record of this proceeding showing that
contract date better reflects the date on which material terms of sale
were established for US sales.
Department's Position
While we agree with the respondents that the Department prefers to
use invoice date as the date of sale, we are mindful that this
preference does not require the use of invoice date if the facts of a
case indicate a different date better reflects the time at which the
material terms of sale were established. Indeed, as all parties have
recognized, both the Proposed and Final Regulations speak to giving the
Department flexibility to abandon the use of invoice date. In granting
this flexibility, the regulations anticipate the possibility of
inappropriate comparisons via the strict use of invoice date as the
date of sale.
As for the respondents point that the facts in this case (i.e.,
long lag times between contract date and invoice date) do not fit the
exceptions articulated in the regulations, we note that the exceptions
listed are exemplary and are not intended to be limiting as can be seen
in the Proposed Regulations where it states:
[T]he Department recognizes that [invoice] date may not be
appropriate in some circumstances, such as those involving certain
long-term contracts or sales in which there is an exceptionally long
time between the date of invoice and the date of shipment. [Emphasis
added.] (Proposed Regulations at 7330.)
If invoice date does not reasonably approximate the date on which
the material terms of sale were made in
[[Page 32836]]
either of the markets under consideration, then its blanket use as the
date of sale in an antidumping analysis is untenable. The facts in this
case, as explained below, clearly demonstrate that the use of invoice
date as the date of sale in both markets would lead to inappropriate
comparisons.
In this case, the sales processes for US and home market sales
differ markedly. Sales in the home market are typically out of
inventory with the purchase order/contract, invoice and shipment dates
all occurring within a relatively short period of time. In contrast, US
sales are usually conducted on a made-to-order basis (CEP sales out of
inventory being an exception.). The material terms of sale in the US
are set on the contract date and any subsequent changes are usually
immaterial in nature or, if material, rarely occur. Most importantly,
due to the made-to-order nature of US transactions, there is a very
long period of time between the contract date, and the subsequent
shipment and invoicing of the sale. The long periods between the
contract date and invoice/shipment date for US transactions are
measured in multiple months with some reaching upwards of six months.
As can be seen from the foregoing, ``invoice'' dates in both markets,
while the same in name, are materially quite different for purposes of
determining price discrimination simply because the sales processes for
the two markets are quite different. If we were to use invoice date as
the date of sale for both markets, we would effectively be comparing
home market sales in any given month to US sales whose material terms
were set months earlier-- an inappropriate comparison for purposes of
measuring price discrimination in a market with less than very
inelastic demand. Notwithstanding the respondents' comment that the
terms of sale are subject to change and that, therefore, the final
terms are not known until the date of invoice, we find that, in this
case, there is no information on the record indicating that the
material terms of sale change frequently enough on US sales so as to
give both buyers and sellers any expectation that the final terms will
differ from those agreed to in the contract. Therefore, we are
continuing to use contract date as the date of sale with respect to US
sales for these final results, except for CEP sales out of inventory.
See also Notice of Final Results of Antidumping Duty Administrative
Review: Canned Pineapple Fruit From Thailand, 63 FR 7392, 7394
(February 13, 1998) (For CEP sales out of inventory, invoice date
reasonably approximates the date on which the material terms of sale
are set and is, therefore, appropriately used as the date of sale.).
As for the respondents' additional concern that using a
``different'' date of sale in home market than in the United States
would be contrary to the Department's preference of using a single date
of sale as articulated in the Preamble to the (see Final Regulations at
27348), we find such concern to be unwarranted. Given the sales
processes of the different markets, the only dates which are
substantively equivalent for purposes of measuring price
discrimination, although different in name, are the invoice date in the
home market and the contract date in the United States.
Comment 2: Inclusion of All EP Sales Entered During The POR
SeAH argues that the Department erroneously excluded from its
analysis EP sales entered during the POR but with dates of sale outside
the POR. According to SeAH, Sec. 751(a)(2)(A) of the Act requires that
the Department examine each entry, as opposed to sale, during the POR
by stating:
For the purpose of [administrative reviews of antidumping duty
orders], the administering authority shall determine
(i) the normal value and export price (or constructed export
price) of each entry of the subject merchandise * * *
The petitioners counter that the review covers all ``sales'' during
the POR as delineated in the questionnaire. According to the
petitioners, it is the questionnaire which determines the reporting
requirements during a review and the questionnaire clearly stated,
``State the total quantity and value of the merchandise under review
that you sold during the period of review'' (see January 13, 1997
questionnaire at A-1). As for the language in the statute cited by SeAH
in support of a review covering all entries, the petitioners cite to
American Permac v. United States, 783 F. Supp. 1421 (CIT 1992)
(American Permac) to show that the statute does not preclude the
Department from excluding certain sales if they are distortive where it
says:
The court has a difficult time reading the ``each entry''
language to compel inclusion of all sales, no matter how distorting
or unrepresentative. In actuality, both investigations and periodic
reviews examine sales, not entries, and the methodology is not
distinguishable in any relevant way.
The petitioners also cite to 19 CFR 353.22(b) and, inter alia,
Final Results of Antidumping Duty Administrative Reviews: Portable
Electric Typewriters from Japan, (Typewriters from Japan) 56 FR 56393,
56397 (November 4, 1991) to show that the Department has the discretion
to base administrative reviews on entries, exports or sales.
Department's Position
We agree with SeAH that all POR entries of EP sales should be
included in our analysis. The petitioners' citation to American Permac
does not apply to this case. In that case, the Court was examining the
issue of whether or not the Department had the authority to deny a
request which did not arise until the hearing to exclude a certain
number of US sales from the universe of reported transactions. One of
the Department's arguments in American Permac was that it was required
by the statute to examine all sales in the reported universe. While the
Court based its final decision to uphold the Department's denial of
exclusion based on the untimely nature of the exclusion request, it did
state that it doubted that Congress ``intended to compel distortions if
exclusion of a few sales would remedy the problem'' (see American
Permac at 1424). While American Permac does support the authority of
the Department to exclude certain US sales from its analysis, it does
not address the issue of whether the universe of reported sales is to
be based on entries or sales during the POR.
Section 751(a)(2)(A) of the Act states that a dumping calculation
should be performed for each entry during the POR. While the
Sec. 353.22(b) of the Department's regulations does give the Department
some flexibility in this regard by stating that the review can be based
on entries, exports or sales, it is our preference to base the review
on entries when possible. In this case, we find no compelling reason to
move away from the use of entries to determine the universe of US sales
to be reported for EP sales as there are no circumstances on the record
that would require such a move. Accordingly, we have included in our
analysis for these final results all entries of EP sales during the POR
as reported by SeAH. In addition, we have made the same revision in our
calculations for all of the other respondents.
Comment 3: Inaccurate or Missing Conversion Factors
The petitioners state the respondents have reported some conversion
factors for the conversion of home market sales and cost information to
a theoretical-weight basis that are below the minimum conversion factor
allowable in various grades of standard pipe, as
[[Page 32837]]
determined using maximum industry-standard tolerance of wall thickness.
Where no other conversion factor exists for such products, the
petitioners propose assigning the highest reported conversion factor
among transactions of the same specification. In the event there is no
available conversion factor for a particular product, the petitioners
argue that Department should not apply any conversion factor.
Hyundai acknowledges that a few of its conversion factors were
calculated incorrectly and requests that the Department allow them to
correct this error. Additionally, Hyundai notes that the error did not
impact the Preliminary Results as the products with the incorrect
conversion factors were not used in calculating the margin.
KISCO/Union contends that the petitioners' argument refers to the
conversion factor between theoretical and standard actual weight, which
may differ slightly from the actual weight and that the petitioners
have presented no evidence that the conversion factors from actual to
theoretical weight fall below the industry-standard. KISCO/Union also
states that the home market customers have accepted this merchandise
without noting any weight problems. In the case that the Department
determines that conversion factors which fall below the industry
standards should not be applied, KISCO/Union argues that the Department
should substitute the industry standard for the limited number of
incorrect conversion factors reported in the response.
SeAH and Shinho acknowledge that the conversion factors on some
home market sales are below the minimum but point to the extremely tiny
proportion these sales constitute. In addition, KISCO/Union, SeAH and
Shinho state that most of these sales were not used in the Department's
calculation for the Preliminary Results.
Department's Position
We disagree with the petitioners that what amounts to adverse facts
available should be applied to sales with conversion factors below the
minimum allowed. Such errors in the respondents' data affect only a
minuscule number of transactions and appear to be inadvertent. With
respect to KISCO/Union's argument, we agree the conversion factor
between the theoretical and standard actual weight may differ from the
factor used to convert the actual weight to the theoretical.
Nevertheless, we find that certain reported conversion factors at issue
are aberrational because it is impossible to produce a pipe that is
within the industry-standard tolerances with conversion factor below
this minimum. See Final Results of Antidumping Duty Administrative
Review: Circular Welded Non-Alloy Steel Pipe from the Republic of
Korea, (First Review Final Results) 62 FR 55574, 55577 (October 27,
1997). Therefore, we have calculated the minimum conversion factor
allowable in various grades of standard pipe by using the maximum
industry-standard tolerance of wall thickness. We used the calculated
minimum factor for those sales and costs where the reported factors
fell below the minimum.
Comment 4: SG&A and Interest Ratios
The petitioners state that the respondents have calculated their
SG&A and interest ratios based on a sales denominator that includes
packing. When this ratio is multiplied by a cost of manufacturing (COM)
that is exclusive of packing, as was done in the preliminary
calculations, the petitioners allege that the resulting SG&A amount is
understated. The petitioners suggest that the Department could add
packing to the COM before the SG&A and interest expenses are calculated
as was done in the First Review Final Results.
Hyundai agrees with the petitioner that its SG&A ratio was
calculated with a packing-inclusive denominator and that packing should
be added to COM before calculating SG&A.
KISCO/Union, SeAH and Shinho state that the addition of packing to
the COM prior to calculating SG&A and interest expenses would have only
a negligible effect on the margin calculations and is, therefore, not
necessary.
Department's Position
In the preliminary results we did in fact understate SG&A and
interest expenses by multiplying a packing-exclusive COM by expense
ratios calculated based on a packing-inclusive amount. For these final
results, we have corrected this error by adding packing to the COM
before applying the ratios to calculate SG&A and interest expenses.
Comment 5: Duty Drawback Adjustment
The petitioners argue that duty drawback rebates received by
respondents, except for KISCO/Union, were based on a theoretical weight
basis while the payments of the original duties were on an actual
weight basis. As a result, the petitioners stated that total rebates
received exceed total duties paid. Since the Act allows only for the
addition to US price of import duties paid and rebated, the petitioners
point out than any adjustment should be capped by the amount of duty
actually paid. (See 19 U.S.C. Sec. 1677a(d)(B) (1994).)
The respondents point out that, contrary to the petitioners'
assertions, not all duty drawback rebates are excessive in that two
separate programs were used. In particular, state the respondents,
rebates under the individual-application system have been found by the
Department in previous segments of this proceeding to be non-excessive;
therefore, the Department was correct in adjusting US price by the
entire amount of the rebate. The respondents note that the Department
did limit the duty drawback adjustment to the amount of duties paid on
those transactions receiving rebates under the fixed-rate system in the
Preliminary Results.
Department's Position
As stated in the Preliminary Results at 64561, to the extent that
duty drawback rebates are in excess of the actual amount of duties
paid, we agree with the petitioners that adjustments to US price should
be limited to the amount of duties paid. The respondents received duty
drawback under two systems: the fixed rate system and the individual
application system. Rebates received under the individual application
system are limited to actual duties paid and are not excessive.
Therefore, we have used the full amount of rebates under the individual
application system in our analysis for these Final Results. Under the
fixed rate system, however, rebates exceed actual duties paid (see
First Review Final Results). In the Preliminary Results, we did cap the
amount of rebates received under the fixed-rate system, where
applicable, for all respondents except for SeAH. For these final
results, we have applied the cap to SeAH as well.
Comment 6: Income Offsets to G&A
The petitioners claim that Hyundai, KISCO/Union and Shinho have
understated their G&A expenses by offsetting such expenses by various
non-operating income items unrelated to the subject merchandise. Since
it is the Department's practice to limit offsets to G&A to income from
operations related to the production of subject merchandise, these
respondents' offsets should be denied. See, Final Determination of
Sales at Not Less Than Fair Value: Saccharin From Korea (Saccharin from
Korea) 59 FR 58828 (November 15, 1994) and Certain Fresh Cut Flowers
From Colombia: Final Results of Antidumping Duty Administrative Reviews
(Flowers from Colombia) 61 FR 42833, 42843 (August 19, 1996).
[[Page 32838]]
Hyundai maintains that its offsets to G&A do relate to the
production and sale of subject merchandise. KISCO/Union argues that
non-operating expenses should not be included in G&A if non-operating
income is found not to be an allowable offset. Shinho replies that it
has fulfilled the Department's requirement to include only items
related to production in its G&A offset.
Department's Position
The Department permits offsets to G&A expenses for income earned
from the company's production operations. During the course of this
proceeding, we have received from respondents responses to our original
questionnaire and multiple supplemental questionnaires. Based on our
examination of these responses with respect to the calculation of G&A
expenses and offsets, we are accepting what respondents have provided
with the exception of dividend income offsets claimed by Hyundai and
KISCO/Union. See U.S. Steel v. United States, Slip Op. 98-17, (CIT
February 25, 1998). In particular, we find that the items petitioners
complain about appear, on their face, to be of a general nature arising
from the companies' operations.
We are disallowing the offsets to G&A due to dividend income for
Hyundai and KISCO/Union. We note that dividend income is generally
claimed as an offset to interest expenses and is allowable when such
income arises from short-term investments of a company's working
capital. However, in this case, we find that Hyundai's and KISCO/
Union's dividend income has not been shown to be derived from short-
term investments.
Comment 7: CV Credit Expenses
The respondents argue that, in the Preliminary Results, the
Department double-counted imputed credit expenses in the calculation of
CV. The respondents state that this occurred because the Department
included both total actual interest expense and imputed U.S. credit
expenses in the CV calculation. The respondents state that it is the
Department's practice first to subtract home market imputed credit
expenses before adding U.S. imputed credit expenses in calculating a
circumstance-of-sale (COS) adjustment for CV. As evidence of this
practice, several respondents cite, inter alia, Certain Stainless Steel
Wire Rods from France: Final Results of Antidumping Duty Administrative
Review, (France Wire Rods) 62 FR 7206, 7209, (February 18, 1997).
The petitioners dispute that the Department double-counted the
respondents' imputed credit expenses in CV, and state that the
Department calculated CV in accordance with section 773(e) of the Act.
However, the petitioners concede that the Department's new-law practice
is to make a COS adjustment to NV for differences in credit expenses
between the US and exporting country markets.
Department's Position
We agree with the petitioners that we calculated CV in accordance
with section 773(e) of the Act. However, we also agree with both the
petitioners and the respondents that we made an error in our COS
adjustments to CV by not deducting home market credit expenses before
adding US credit expenses. It is the Department's standard practice to
make such an adjustment. See, e.g., France Wire Rods and Stainless
Steel Bar From India: Final Results of Antidumping Duty Administrative
Review, 63 FR 13622, 13624 (March 20, 1998) (Comment 5). We have
adjusted the calculations accordingly for these final results.
Company-Specific Comments
Hyundai
Comment 8: Further Processed Merchandise
Hyundai argues that, in the Preliminary Results, the Department
improperly treated sales of subject merchandise that were purchased
from unaffiliated suppliers and further processed. In Hyundai's view,
US sales of subject merchandise may only be compared to sales of the
foreign like product that were produced in the same country by the same
person. Hyundai states that if sales data consists of merchandise
produced by two different manufacturers, the Department normally
compares the sales produced by each company separately. Hyundai cites
Steel Wire Rope from the Republic of Korea: Preliminary Results of
Antidumping Duty Administrative Review and Intent To Revoke Antidumping
Duty Order in Part, 62 FR 64353 (December 5, 1997), noting that
respondents sold merchandise in both the US and home market that was
produced by the respondent and by unaffiliated suppliers and that the
Department compared the merchandise according to producer. Hyundai
continues its argument by saying that the further processing of the
purchased pipe does not convert the pipe from non-subject to subject
merchandise. It maintains that because the pipe was already subject
merchandise, the Department must segregate Hyundai's sales into two
categories (pipe purchased and further processed by Hyundai, and pipe
manufactured by Hyundai) and compare the two categories separately.
Petitioners argue that the Department's precedent supports treating
Hyundai as the producer of the finished products, citing Antifriction
Bearings and Parts Thereof from France, 61 FR 66,472 (December 17,
1996). In Antifriction Bearings, a respondent purchased finished
bearings from an unaffiliated subcontractor and resold them in the home
market and United States. According to the petitioners, the Department
treated sales of goods not manufactured by a company to be products of
that company because the subcontractor did not know the destination of
the products, and because the respondent company controlled the
production and sale of the product. The petitioners argue that the same
facts exist in this case.
Department's Position
Because Hyundai engages in what is often substantial further
manufacturing and because it sells and warrants the further-processed
merchandise as its own product, it is unclear whether the Steel Wire
Rope methodology is appropriate in this case. Nevertheless, the issue
is moot, as Hyundai was unable to provide the necessary information for
us to follow the methodology. In Steel Wire Rope, the specific
suppliers of each resold item were identifiable. In this case, the
suppliers for specific sales are not known; Hyundai is only able to
distinguish whether it manufactured the product from start to finish,
or whether it purchased the product before further processing. Thus,
even if it were appropriate, the information provided by Hyundai does
not allow us to employ the methodology used in Steel Wire Rope.
Comment 9: Arm's Length Freight
The petitioners argue that Hyundai did not adequately demonstrate
that the transactions between Hyundai and an affiliated transport
company were at arm's length. The petitioners state that the Department
requested information on the affiliated company's provision of shipping
services to non-affiliated customers and that, because Hyundai failed
to provide this information, Hyundai's ocean freight rates should be
based on facts available. Furthermore, the petitioners note that when
the affiliated transport company arranged for third parties to
transport the subject merchandise, the affiliate did not charge
[[Page 32839]]
any mark-up, thus providing services for free, suggesting again that
the transactions were not arm's length.
Hyundai rebuts that the information on the record does adequately
demonstrate that the transactions were arm's length. Hyundai points to
documents which support their claim, such as an invoice and other
documents from an unaffiliated company and their affiliate's tariff
schedule. Hyundai argues that it is not required to provide information
showing that the affiliate charged the same rates to unaffiliated
customers. It also notes that it provided the same kind of evidence
supplied in Certain Cut-to-Length Carbon Steel Plate from Germany:
Final Results of Antidumping Duty Administrative Review, 61 FR 13834
(March 28, 1996), in which the Department determined that freight
services were provided by an affiliate at arm's length prices. Lastly,
Hyundai rejects the petitioners' argument that, because they were not
charged a mark-up by the affiliate when arranging services from a third
party, the transactions were not arm's length. Hyundai states that the
affiliate is often involved in name only and that, regardless of any
supposed lack of mark-up, it otherwise demonstrated that the prices
paid to its affiliate were comparable to prices charged to unaffiliated
parties and thus at arm's length.
Department's Position
As stated in the questionnaire issued to the respondents on January
13, 1997, ``arm's length transactions are those in which the selling
price between the affiliated parties is comparable to the selling
prices in transactions involving persons who are not affiliated.''
Hyundai demonstrated that the prices charged by its affiliate were
comparable to prices it is charged by unaffiliated freight providers.
Hyundai is not required to show that the affiliate charged a third
party comparable prices, although this is another way in which arm's
length can be demonstrated. The Department never specifically asked
Hyundai to supply this kind of information; rather, we suggested it as
one option Hyundai could choose to demonstrate arm's length. The fact
that the affiliate may at times not charge Hyundai with a mark-up when
arranging third party transactions is not in itself demonstrative of a
non-arm's length transaction. Rather, the evidence in this case that
Hyundai pays the affiliate comparable prices to those paid to
unaffiliated providers is sufficient to demonstrate arm's length.
Comment 10: Additional Freight
The petitioners find Hyundai's additional freight costs to be
unreliable and argue that the Department should deny any adjustment to
NV for this additional freight. The petitioners claim that there are
several problems with Hyundai's reporting of this expense. They state
that Hyundai did not indicate whether the service was provided by an
affiliate. They also maintain that Hyundai has not substantiated the
claim that it is not able to report these costs on a shipment-specific
basis, nor have they explained sufficiently the basis on which the
charges are incurred. The petitioners argue that the information on
these additional freight costs is unreliable, noting for example a
change in the total cost reported from one supplemental response to the
next.
Hyundai responds that it did provide adequate information on the
additional freight expenses. It explains that the service in question
is not provided by an affiliate and that because these services are not
invoiced on a shipment-specific basis they cannot be reported on a
shipment-specific basis.
Department's Position
After reviewing the information on the record, we see no reason to
deny the adjustment. Contrary to the petitioners' claims, the loading
service was not provided by an affiliate. Further, the way in which
Hyundai incurs this cost prohibits shipment-specific reporting.
Comment 11: Export Price Adjustment
Petitioners assert that the Department should deduct certain
expenses that they claim relate to movement (e.g., communication costs
and markups) incurred by Hyundai's U.S. affiliates from export price
under section 772(c)(2)(A)of the Act. According to the petitioners,
these costs are incident to bringing the subject merchandise from Korea
to delivery in the United States, and thus should be deducted from U.S.
price. Because Hyundai has not reported all of these expenses in its
response, petitioners advocate that we should apply, as facts
available, a factor based on the affiliates' SG&A rates.
Hyundai argues that because its sales to the United States are
export price sales, the specific expenses discussed by petitioner
cannot be deducted.
Department's Position
Pursuant to section 772(c)(2)(A) of the statute, the export price
is to be reduced by any additional costs, charges, or expenses which
are incident to bringing the subject merchandise from the exporting
country to the United States. In this case, the Department has made the
appropriate movement-related reductions to export price by deducting
the costs incurred for moving the subject merchandise from Korea to the
customer in the United States. In accordance with our normal practice,
these costs included brokerage and handling, marine insurance,
international freight, U.S. brokerage and wharfage, and inland freight
charges incurred in both countries. The Department does not consider
the type of expenses that the petitioners ask us to deduct from export
price as costs that are incident to bringing the subject merchandise
from Korea to the place of delivery in the United States.
Comment 12: Overstatement of Inventory Carrying Cost
The petitioners state that rather than using the cost reported in
the inventory records, Hyundai incorrectly used sales value when
computing the inventory carrying cost adjustment. They assert that the
reported adjustment should be recalculated downward to compensate for
this difference.
Hyundai argues that it calculated the adjustment correctly, basing
inventory carrying cost on production cost, not sales value.
Department's Position
We agree with the petitioners that Hyundai's reported inventory
carrying cost adjustment is overstated. Upon examination of the record,
we are unable to substantiate the inventory carrying cost adjustment as
reported by Hyundai. It is not clear on what basis, value or cost, the
adjustment was calculated. In fact, Hyundai states in its original
response that it calculated the adjustment by using the ``value'' of
the inventoried merchandise. The Department requested that the
respondents calculate inventory carrying cost adjustment based on the
opportunity cost to maintain inventory, noting that the cost is
normally calculated by using the merchandise's cost or acquisition
price. Because Hyundai's inventory carrying cost adjustment is
overstated, we have recalculated this adjustment based on Hyundai's
reported COM.
Comment 13: Erroneous Coding
The petitioners note that Hyundai reported inland freight charges
on some home market FOB sales. They state that the Department should
deny any freight adjustment for these sales, but still reduce COP by
the amount of the claimed adjustment.
The respondent notes that these sales were incorrectly coded and
should have been reported delivered, not FOB.
[[Page 32840]]
Department's Position
We agree with Hyundai and have corrected the database for more
minor errors in reporting. Further, we find no reason to apply an
adverse inference to these transactions, as petitioners request.
KISCO/Union
Comment 14: Collapsing of Kisco and Union
KISCO/Union argues that the Department should reverse its decision
to ``collapse'' Union and KISCO and should instead calculate individual
dumping margins for each company based on the respective sales and cost
data, for the reasons set forth in previously submitted comments by
Union and KISCO on September 5, 1997 and September 11, 1997.
The petitioners first note that KISCO/Union's comment, other than a
reference to their previous submissions, presents no new arguments on
this issue. As such, the petitioners contend that KISCO/Union's comment
may not be considered, in accordance with section 353.38(c)(2) of the
Department's regulations which require that the case brief shall
separately present in full all arguments believed to be relevant to the
final results, ``including any arguments presented before the date of
publication of the preliminary determination or preliminary results.''
In case the Department chooses to reconsider Union and KISCO's previous
submissions on this issue, the petitioners argue that there is
overwhelming evidence that supports the Department's collapsing
decision, discussed in the petitioners' previously submitted comments
on October 16, 1997 and October 20, 1997.
Department's Position
For reasons discussed in our Preliminary Results, we continue to
find that it is appropriate to collapse Union and KISCO.
Comment 15: Kisco and Union's Collapsed Data
On October 22, 1997, the Department instructed KISCO/Union to
resubmit its cost and sales data on a consolidated basis. The
petitioners argue that KISCO/Union failed to do this properly. First,
the petitioners state that KISCO/Union's methodology of weighing each
field in the COP and CV databases by the production quantity in each
company's response creates varying G&A factors depending on each
company's production quantity of each product. The petitioners argue
that the Department should recalculate G&A expenses such that a single
entity-wide factor is applied to the weighted average cost of
manufacture or base KISCO/Union's G&A ratio on facts available.
According to the petitioners, a similar distortion is created for all
adjustments to NV or export price, such as indirect selling expenses
and all imputed expenses, that were based on individual company data
instead of aggregated data.
KISCO/Union first notes that the manner in which it reported its
data is materially identical to the methodology used by the Department
in the First Review Final Results, which was not challenged by the
petitioners. KISCO/Union disagrees with the petitioners' argument
relating to price adjustments, movement charges, and selling expenses,
arguing the Department's longstanding practice is to calculate such
adjustments as specifically as possible, which it claims was already
done in the individual companies' responses. Given such policy, KISCO/
Union further argues that use of a single indirect selling expense
ratio is inappropriate because KISCO and Union's sales are handled by
completely separate sales departments within their respective
companies, each with their own expenses. With respect to the
petitioners' arguments relating to the calculation of G&A and interest
expense, KISCO/Union contends recalculation is unnecessary because the
petitioners have failed to demonstrate that any material distortion
arose from the methodology used by it. Alternatively, KISCO/Union
states that the recalculation of G&A and interest expense on an entity-
wide basis can be performed using data already on the record and do not
require use of facts available.
Department's Position
We agree with the petitioners in part. Because the Department has
decided to collapse Union and KISCO and thus treat the two companies as
a single entity for purposes of calculating the dumping margin, we find
that G&A, interest expense, indirect selling expense ratio and interest
rate should be calculated on an entity-wide basis. We note that the
methodology employed by the Department in the First Review Final
Results was limited by the information that was available on the record
in that proceeding.
For these final results, we have recalculated G&A by adding the G&A
expenses from Union and KISCO and dividing this sum by the total sum of
cost of goods sold for the two companies. With respect to interest
expenses for companies that are part of a consolidated group, the
Department's policy is to base the interest expense calculation on the
consolidated financial statements of the group. Because Union and KISCO
are part of the Dongkuk Steel Mill Group (DSM group), the interest
expense for the collapsed entity of KISCO/Union should also be based on
the consolidated financial statement of that group. As pointed out by
KISCO/Union, however, Union is not included in the consolidated DSM
statements. Accordingly, we have re-calculated the interest expense on
an entity-wide basis by adding the net interest expense of the DSM
group with that of Union and dividing by the total cost of goods sold
for the combined DSM group and Union. To calculate a collapsed home
market indirect selling expense ratio, we divided the combined indirect
selling expenses of Union and KISCO by the combined total domestic
sales value of both companies. We also have re-calculated all imputed
expenses, including credit expenses and inventory carrying costs, using
the weighted-average interest rate for the collapsed entity.
With respect to other adjustments to price and NV or movement
charges, we used the information provided because such items were
reported properly by KISCO/Union.
Comment 16: Consistency of COP and CV Data
The petitioners argue that KISCO/Union has reported inconsistent
COP and CV data in their collapsed data. In one instance, the
petitioners state that the underlying components of total COM differ
between the COP and CV databases but the total is the same. The
petitioners also note that the production quantities for many products
differ between the two databases. The petitioners assert that KISCO/
Union has not provided sufficient explanation of its methodology to
account for such variations and as such, the Department must base its
final results on facts available.
KISCO/Union acknowledges that the databases do contain differences
but contend that they can be corrected easily. This error occurred when
products were sold only in one market. With respect to the one instance
where the cost fields varied while the total COM remained the same,
KISCO/Union explains that the discrepancy resulted when the conversion
factor for converting from an actual weight basis to a theoretical
weight basis was inadvertently applied twice to the costs but not to
the total COM itself. KISCO/Union argues that because only total
[[Page 32841]]
COM is used in the Department's dumping margin calculation, the error
has no effect on the margin calculation.
Department's Position
We have examined KISCO/Union's collapsed data and are satisfied
that the discrepancies resulted from simple ministerial errors. We also
find that KISCO/Union's error in applying the conversion factor does
not affect the Department's calculations. For these final results, we
corrected the databases and calculated weight-averaged total COMs using
the combined cost components and production quantities.
Comment 17: Interest Expenses
The petitioners contend that KISCO failed to demonstrate that the
``interest from short-term securities,'' reported in DSM financial
statement, was a proper offset to interest expenses. The petitioners
further argue that KISCO/Union failed to show why it did not account
for the foreign exchange and translation gains and losses as reported
in DSM's financial statements. Because KISCO/Union did not provide an
explanation that such gains and losses are unrelated to DSM's purchase
transactions or borrowing cost, petitioners urge that the Department
should include those items in the calculation of interest expenses.
KISCO/Union counters that the petitioners' argument does not apply
because the calculation of its combined interest expense was not based
on the DSM consolidated financial statements. Instead, KISCO/Union
explains that the collapsed data reported a weighted-average interest
expense by product, based on the company-specific interest expense.
KISCO/Union states that the use of interest rates based on the DSM
statements would be inappropriate because Union is not included within
the consolidated DSM statements.
With respect to foreign currency translation gains and losses,
KISCO/Union argues that the Department has previously held that such
items are properly included in G&A expenses, which are calculated at
the level of the operating companies, rather than interest expense,
which may be calculated at the level of the consolidated group of
companies. Accordingly, KISCO/Union contends that because DSM is itself
an operating company, its G&A expenses should be assigned to its own
production alone unless they are shown to be attributable to subject
merchandise or foreign like product.
Department's Position
As discussed in Comment 15, we calculated an entity-wide net
interest expense factor for KISCO/Union by combining Union's net
interest expense with the net interest expense from DSM's consolidated
income statement. Contrary to petitioners' argument, we find no basis
on which to exclude DSM's interest income as a reduction in the
company's interest expense. In fact, DSM's consolidated financial
statements identify the income amounts as having been earned by the
company from its investments in short-term securities. See, Final
Results of Administrative Review of Porcelain-on-Steel Cooking Ware
from Mexico, 61 FR 54,616, 54,621 (October 21, 1996) (describing the
Department's practice, in calculating COP and CV, of reducing
respondent's interest expense by interest income earned from short-term
investments).
With respect to the net foreign currency exchange loss reported in
DSM's consolidated financial statements, we have included this amount
in our calculation of KISCO/Union's combined net interest expense. As
noted by petitioners, KISCO/Union did not explain why it did not
account for any of DSM's foreign exchange gains or losses in
calculating COP and CV. Rather, KISCO/Union stated that it excluded
these amounts from costs because they were properly categorized as G&A
expenses. In past antidumping cases, however, the Department has
treated the gains and losses arising from the restatement of foreign
currency debt as part of the respondent's net financing costs. See,
Notice of Final Determination of Sales at Less Than Fair Value: Static
Random Access Memory Semiconductors from Korea, 63 FR 8934, 8940
(February 23, 1998) (where the Department treated foreign exchange
losses on long-term debt as part of interest expense). Here, DSM's
consolidated financial statements report that the group holds loans
denominated in foreign currencies. DSM, however, did not attribute to
its net financing costs any of the foreign exchange gain or loss
resulting from restatement of these loan balances. Therefore, for the
final results, we have recalculated KISCO/Union's financial expense to
include the net foreign exchange loss reported in DSM's consolidated
income statement as non-adverse facts available.
Comment 18: Indirect Selling Expenses
The petitioners argue that Union's indirect selling expense ratio
must be recalculated before being collapsed with KISCO's data.
Specifically, they claim Union has misallocated its home market
indirect selling expenses on the basis of percentage of employees
involved in domestic sales compared to export sales or sales
administration. Instead, the petitioners claim that the Department, in
accordance with its normal practice, should allocate such expenses
based on costs of sales in each market.
KISCO/Union contends that the Department has accepted Union's
allocation methodology in every previous review involving Union and has
no reason to depart from the past practice in the present proceeding.
Department's Position
Where transaction-specific reporting is not feasible, the
Department's general practice is to allow companies to allocate
expenses, provided that the allocation method used does not cause
inaccuracies or distortions. See Statement of Administrative Action,
(SAA), H.R. Doc. No. 103-316, vol. 1 (1994) at 153-154. Whether a
particular allocation methodology used is reasonable is determined on a
case-by-case basis. In this instance, we find Union's methodology of
allocating its indirect selling expenses based on the number of
employees may cause inaccurate results because a large portion of the
indirect selling expenses were not incurred based on the number of
employees. Therefore, we have recalculated Union's indirect selling
expense by allocating the total expense on the basis of percentage of
domestic sales to total sales.
Comment 19: Union's Freight Forwarder
The petitioners argue that Union failed to demonstrate that its
transactions with Kukje Transportation, Union's affiliated freight
forwarder, were at arm's length prices. The petitioners state that the
sample trucking lists provided by Union do not show that the prices
charged by Kukje were comparable with those charged by an unaffiliated
freight forwarder. Specifically, the petitioners claim that the freight
fee schedule does not show that the prices were based on the same
destination and that schedule does not identify the trucking firm to
which it applies. Accordingly, the petitioners urge the Department to
calculate Union's freight forwarding expenses based on facts available.
KISCO/Union contends that the destination codes in the freight fee
schedule that Union provided show clearly that the rates were based on
the same destination, and demonstrate that identical rates were charged
to affiliated and unaffiliated parties. KISCO/Union also points out
that the name of the
[[Page 32842]]
trucking firm was clearly identified and the higher rate applies to a
later time.
Department's Position
We disagree with the petitioners. Upon a careful examination of the
information submitted by Union regarding its transactions with Kukje,
we find there is sufficient evidence to demonstrate that the
transactions were at arm's length. The sample trucking lists and fee
schedules, which clearly identify the destination codes and the name of
the unaffiliated trucking firm, demonstrate that the prices charged by
Kukje were comparable to that charged by unaffiliated firms.
Comment 20: Home Market Credit Period For Letter-of-Credit Sales
The petitioners argue that the Department should deny KISCO/Union's
claim for credit expenses for ``cash'' sales in the home market for the
time period when Union must submit appropriate shipment documents for
review by the bank before payments can be credited to Union's account.
The petitioners state that the adjustment must be denied because there
is no evidence that the check or local letter of credit is not
negotiable by Union upon receipt. According to the petitioners, Union's
claimed adjustment actually constitutes an imputed credit expense for
that waiting period involved in clearing check or local letter of
credit deposits. The petitioners argue that because there is no
indication that a similar waiting period is included in calculating
Union's credit expenses on US sales, the claim must be rejected.
KISCO/Union asserts that there is no support for the petitioners'
claim that the adjustment represents an imputed credit expense for the
waiting period for clearing check deposits. KISCO/Union clarifies that
``cash'' sales simply refer to local letter of credit sales. KISCO/
Union states that Union has merely calculated the credit expenses
associated with the period from the date merchandise is shipped to the
date that Union actually receives payment by negotiating the shipping
documents. KISCO/Union points out that the Department has previously
adjusted for the credit expense incurred in such sales in the First
Review Final Results and in other cases in which Union was a
respondent.
Department's Position
We agree with KISCO/Union. We normally adjust for imputed credit
expense to account for the opportunity cost associated with the period
of time between shipment and payment. Because payment by the bank is
not made until the required documents are presented by Union, an
adjustment for imputed credit expense for the waiting period is proper.
We have no reason to believe that the letter of credit is actually
negotiable upon receipt.
Comment 21: Union's Warehousing Expenses
The petitioners contend that Union's reported pre- and post-sale
warehousing costs are overstated. They argue that these costs should be
calculated by applying the ratio between the volume of pipe warehoused
for a specific sale and the total volume of all other products
warehoused, whether as inventory or in connection with specific sales.
The petitioners argue that the adjustment must be denied because there
is no information on the record to determine what share of total
warehousing labor and identifiable costs were incurred as direct
warehousing costs.
KISCO/Union counters that pursuant to the URAA, warehousing is
treated as a movement expense without drawing a distinction between
direct and indirect expenses. Further, KISCO/Union contends that the
Department has repeatedly accepted Union's allocation methodology in
the past reviews and there is no evidence that a volume-based
allocation methodology should be used instead.
Department's Position
We agree with KISCO/Union. KISCO/Union is correct in stating under
the URAA, home market movement charges, which include warehousing
expenses, are to be deducted from NV regardless of the direct or
indirect nature of the expenses. See section 773(a)(6)(B)(ii) of the
Act. In general, all warehousing expenses that are incurred after the
merchandise leaves the original place of shipment are considered as
movement expenses. See, e.g., Certain Cold-Rolled and Corrosion
Resistant Carbon Steel Flat Products From Korea: Final Results of
Antidumping Duty Administrative Reviews, 63 FR 13170, 13179 (March 18,
1998). Here, the original place of shipment is Union's Pusan plant and
the warehouse is located in Seoul. Because these warehousing expenses
are incurred after leaving the original place of shipment, we consider
the expenses proper movement charges.
Where transaction-specific reporting is not feasible, the
Department's general practice is to allow companies to allocate
expenses, provided that the allocation method used does not cause
inaccuracies or distortions. See SAA at 153-154. Whether a particular
allocation methodology used is reasonable is determined on a case-by-
case basis. In this instance, we find that there is no evidence to
indicate that the allocation methodology used by KISCO/Union causes
inaccuracies or distortions.
Comment 22: Duty Drawback
The petitioners claim that based on the reported total weight of
hot-rolled coil imported during the POR the amount of duty drawback
reported by KISCO on US sales appears to be excessive when compared to
import duties included in CV. The petitioners argue that in the First
Review Final Results the Department adjusted the US price only by the
amount of duties actually included in the product. Using the same
argument, the petitioners contend that because the CV is intended to
value merchandise exported to the United States, the actual amount of
duties included in the exported product for CV purposes should be equal
to the amount of duties paid on the imported inputs as reported in CV.
Accordingly, the petitioners state that where NV is based on CV, the
Department must reduce the amount of duty drawback to that reported in
CV, or in the alternative, lower CV by the amount of duties and make no
adjustment for duty drawback.
KISCO/Union first points out that duty drawback is received on the
amount of imported coil incorporated into merchandise exported by KISCO
during the POR, rather than the amount of coil imported during the POR.
KISCO/Union explains that because the duty drawback system in Korea
permits refunds of duties for merchandise exported up to two years
after importation, KISCO was entitled to receive duty drawback during
the POR on coil imported before the POR. KISCO/Union argues that the
amount of duties included in the exported product is the actual amount
and cannot be made to vary depending on the comparison NV. Citing
Avesta Sheffield, Inc. v. United States, 838 F. Supp. 608 (CIT 1993),
KISCO/Union states that it is well-established that the duty drawback
adjustment is not limited by the amount of duties included in NV.
Department's Position
Pursuant to section 772(c)(1)(B) of the Act, the Department is
required to adjust the EP and CEP by the amount of duty drawback
received on the imported inputs. As we stated in the First Review Final
Results, the amount of the adjustment is limited to the amount of
duties actually paid on the input of the exported product. Because both
Union and KISCO have received duty drawback under the individual-
[[Page 32843]]
transaction provision of the Korean duty drawback law, there is no
reason to believe that the duty drawback reported reflects an amount
other than the actual duties paid (see comment 5 above).
We disagree with the petitioners' contention that the amount of
duties included in CV should be equal to the amount of actual duties
paid on the imported inputs. As held by the CIT, the Department is not
required to limit the drawback adjustment by an average rate of duty
for all raw materials utilized. See Avesta, 838 F. Supp. at 612 (``As
concerns either raw materials or sales, there is no requirement that
ITA match overall rebates to overall duties to achieve balanced numbers
on both sides of the comparison.''). No changes to the duty drawback
adjustment are therefore necessary for KISCO/Union.
Comment 23: Packing Costs
The petitioners argue that the Department should reject KISCO's
packing costs because they are unexplained and distortive. The
petitioners contend that KISCO did not submit any supporting
documentation for packing costs charged by subcontractors that would
explain how costs were derived. In particular, the petitioners object
to KISCO's calculation of thinner and lacquer costs and suggest that
KISCO has ``simply posit(ed)'' a per-unit cost of thinner and lacquer.
Furthermore, the petitioners assert that KISCO's methodology of
allocating packing costs, including costs for thinner and lacquer, tags
or bands, on the basis of the number of bundles or tonnage packed is
unreasonable because such costs vary depending on pipe thickness or the
surface area of the particular product. The petitioners argue that
these alleged problems provide more reasons to base the final results
on facts available.
With respect to KISCO's allocation methodology, KISCO/Union states
that the petitioners' argument is ``speculative and trivial'' in terms
of costs involved, and also asserts that the same packing cost
methodology was verified and accepted by the Department in the First
Review Final Results. KISCO/Union points out that KISCO was never
requested to provide copies of subcontractor fees schedules or related
documents. KISCO/Union also argues that KISCO's original questionnaire
response clearly shows that the per-unit cost of lacquer and thinner
was calculated by dividing the total cost of materials by the total
quantity packed during the period.
Department's Position
Although KISCO did not submit any supporting documentation for its
packing costs charged by subcontractors, use of facts available would
be clearly inappropriate in this case where the information was never
requested specifically by the Department. Moreover, there is no
evidence on the record that would indicate that the packing costs
provided by KISCO and the allocation methodology used by it are
inaccurate or distortive. With respect to the allocation of lacquer and
thinner costs, KISCO's response clearly shows that the per-unit cost
was properly calculated by dividing the total cost of materials by the
total quantity packed during the period. Moreover, the petitioners have
provided no evidence that variations in the pipe thickness or surface
area of the particular product, if any, would have more than an
insignificant effect on the per-unit cost.
Comment 24: Loading Charges
The petitioners contend that KISCO failed to respond adequately to
the Department's inquiry regarding KISCO's affiliated company, Chunyang
Transportation Company (``Chunyang''). The petitioners assert that
despite the Department's request to provide evidence demonstrating the
arm's length nature of the transactions between KISCO and Chunyang,
KISCO failed to do so by merely submitting Chunyang's fee schedule for
KISCO without any other evidence of comparable fees charged by
unaffiliated parties. Consequently, the petitioners argue that KISCO's
loading charges must be based on facts available.
KISCO/Union counters that KISCO could not provide other evidence of
comparable fees because KISCO and Chunyang dealt exclusively with each
other during the POR. Therefore, KISCO/Union asserts that by providing
Chunyang's fee schedule, KISCO provided all of the information
available to it. Further, KISCO/Union claims that in the First Review
Final Results, the same documentation was accepted by the Department as
evidence of arm's length nature of transactions, without protest by the
petitioners. KISCO/Union also notes that the Department did not find
any indications of less than arm's length dealings in the verification
of the First Review Final Results. As such, KISCO/Union argues that the
use of facts available is unwarranted.
Department's Position
We agree with the petitioners. There is no evidence supporting
KISCO's claim that its transactions with Chunyang for this period of
review were at arm's-length. As such, the Department has no way of
establishing that the prices charged to KISCO are at arm's-length. In
the absence of price information, KISCO should have provided
information relating to the costs of Chunyang. Since KISCO did not
provide this information, we find that the use of facts otherwise
available is appropriate pursuant section 776(a)(1) of the Act. As
facts available, we have used the highest reported rate of loading
charges of all the respondents in the present review, which has
resulted in the use of KISCO's own charges.
Comment 25: Double-Counting of Inventory Carrying Costs
KISCO/Union claims that the Department erroneously double-counted
inventory carrying cost for purposes of the cost test and in the
calculation of CV. According to KISCO/Union, inventory carrying cost is
deducted in the calculation of net price in the cost test of the margin
program but the COP to which the net price is compared includes total
actual interest expense and therefore includes imputed inventory
carrying cost. Consequently, KISCO/Union argues that the Department's
calculations unfairly compares a net price for home market sales that
does not include imputed inventory carrying cost to a COP that does.
KISCO/Union asserts that because the Department's current policy is to
make no deductions for imputed expenses (i.e., imputed credit and
inventory carrying costs) in calculating the net home market price for
the cost test, the program must be corrected so that inventory carrying
cost is not deducted in the calculation of net price to be compared to
COP. Similarly, KISCO/Union argues that the Department double-counted
inventory carrying cost in the calculation of CV by including both
total actual interest with no offset for imputed expenses, and indirect
selling expenses inclusive of inventory carrying cost.
The petitioners counter that the Department was correct to add
imputed inventory carrying costs in COP and CV. The petitioners contend
that the actual net interest expense included in COP and CV does not
include imputed interest expenses for inventory carrying costs, which
represents an opportunity cost that is not reflected in the actual
interest expenses of the company. Therefore, the petitioners state that
the Department correctly deducted inventory carrying costs from net
price before comparison to COP and correctly included inventory
carrying costs in CV.
[[Page 32844]]
Department's Position
We agree with KISCO/Union and have corrected our program to remove
the deduction of inventory carrying cost from the net price to be
compared with COP and in from the build up of CV. As for the
petitioners argument that inventory carrying costs are not included in
a company's interest expense, we note that a company's ``interest''
expenses will include, among other items, cost that it incurs in
financing its inventory. While such costs are not directly calculated
as imputed expenses and directly entered into the company's books, they
are, nonetheless, costs that are covered by its financing expenses.
SeAH
Comment 26: Duty Drawback Adjustment
The petitioners contend that SeAH can report duty drawback on a
sales-specific basis, but point out that SeAH has asked for the duty
drawback adjustment to be made on the basis of an average amount
allocated across all US sales. The petitioners request that this duty
drawback adjustment be denied.
SeAH states that it provided transaction-specific data in general,
but could only provide an average for CEP sales because these sales
could not be linked to individual shipments. SeAH notes that in the
LTFV investigation and in the Preliminary Results, the Department
accepted the average as a reasonable methodology for calculating duty
drawback.
Department's Position
We find that where a respondent cannot report transactions-specific
adjustments, reasonable allocations are acceptable. Here, SeAH has
calculated average POR amounts for duty drawback on its CEP sales since
it is unable to link shipments to subsequent sales. For CEP sales, we
find SeAH's methodology to be reasonable.
Comment 27: US Duty, Brokerage, and Handling on CEP Sales
The petitioners argue that SeAH should not be allowed to allocate
US Duty, Brokerage, and Handling on CEP sales. Because SeAH has
reported these foreign charges on an average weight basis, rather than
the value basis in which they were incurred, and because the statute
requires that margins be calculated on a sale-specific basis (see 19
U.S.C. Sec. 1675(a)(2)(A)), the petitioner contends that we should not
accept the allocations. The petitioners suggest a facts available rate
of the highest rate for any EP sale of that product or the highest rate
reported for any sale for each expense where EP sales data is not
available.
SeAH states that it is not able to link inventory sales to original
shipments and therefore must report the charges in question on an
average basis. SeAH emphasizes that while it may be theoretically
possible to link imports of subject merchandise with the reported sale,
neither SeAH nor its affiliates maintain their sales data in this way.
A link could only be found if done manually. SeAH insists that this
methodology was used in the LTFV investigation and has not been further
questioned by the Department.
Department's Position
We find that SeAH's reporting of US Duty, Brokerage, and Handling
as allocations on CEP sales is reasonable, in that CEP sales can not be
linked to shipment-specific information for these expenses. We agree
with the petitioner, however, in that the allocation for US Duty and
Brokerage on volume is distortive because it is not on the same basis
in which it is incurred. For these final results, we have reallocated
US Duty and Brokerage based on value for CEP sales because these
expenses are incurred on a value basis. We will continue to accept the
allocation of Handling because it is incurred on a weight basis.
Comment 28: International Freight
The petitioners suggest that SeAH's international freight expenses
should be based on facts available because SeAH has failed to support
its ocean freight expenses and the information in the responses is
inconsistent. The petitioners suggest that the Department use an
adverse facts available rate based on the highest rate charged for any
single shipment.
SeAH reexamined its response and found that though their source
documents and data presented are correct, several of their sample
calculations were incorrectly presented. SeAH insists that this was an
error only in the sample calculation attachments and not in the sales
databases. In addition, SeAH has provided in an attachment to the
rebuttal brief a sales trace showing the correct amounts.
Department's Position
While there were several clerical errors in the sample
calculations, the source documents and data support the amounts
reported by SeAH for international freight expenses. Accordingly, we
have not made any changes to SeAH's reported international freight
expenses.
Comment 29: US Packing Costs
The petitioners suggest that SeAH's US packing costs should be
based on facts available because SeAH has ignored the Department's
requests to provide information on the type of packing materials used,
as well as the average labor hours by packing type and the average
labor cost per hour. The petitioners also point out that SeAH has
failed to provide a list of overhead expenses incurred in packing or to
demonstrate how these expenses were allocated in each packing type. The
petitioners insist that SeAH should have provided a better explanation
of why it cannot calculate the amount of packing material used for each
product as well as the methods used to derive the packing labor costs.
The petitioners suggest a facts available rate of the highest packing
cost for any product reported by SeAH for US sales and the lowest
reported for home market sales.
SeAH contends that it has provided in its responses the basis for
each packing calculation by calculating the packing costs on a metric
ton basis, distinguishing between domestic and export markets, black
and galvanized pipe, outside diameter dimension categories, and
standard and conduit pipe. SeAH argues that because packing labor costs
were consistent with the fee schedule of its subcontractors, they
should be acceptable. SeAH insists that the allocation of material
costs on a metric-ton basis is appropriate because these costs were
based on the actual average per metric ton of materials used during the
POR, depending on the type of pipe and its destination.
Department's Position
We agree with SeAH that its methodology for reporting packing costs
is reasonable because it has allocated the costs on the basis on which
they are incurred. This methodology has been accepted in prior segments
of this review. We have no reason to believe, based on the information
on the record, that the reported costs are unreliable.
Comment 30: Affiliated Producers' Costs
The petitioners find that SeAH's reported costs should be rejected
because it has failed to report the costs of certain affiliated
producers. The petitioners describe the decision by SeAH not to report
these costs as ``unilateral'', and suggest that SeAH has not reported
direct materials, labor, and other costs incurred to produce the
merchandise under review. The petitioners find that products
[[Page 32845]]
manufactured by affiliated producers are a significant portion of the
total merchandise produced and sold in the home market, and would have
been a more significant portion if home market sales reporting had not
be limited to merchandise comparable to that sold in the United States.
The petitioners point out that excluding some costs from reporting can
cause a large number of additional sales to fall below cost and result
in a substantial increase in the use of CV, which can have a
significant effect on the margin calculated. The petitioners suggest
that the Department reject SeAH's CV and COP information.
SeAH responds by claiming that the decision not to report the costs
in question was not ``unilateral'' because the Department agreed that
SeAH did not have to report these costs. SeAH reiterates that the costs
of the affiliated producers are minimal compared to SeAH's total costs
and would have no impact on the reported COM. SeAH also notes that the
petitioners' suggestion that not all of the merchandise produced by
affiliated producers has been reported is unsubstantiated. According to
SeAH, comparison merchandise has been distinguished from non-comparison
merchandise in it responses. As for the inclusion of the affiliated
producers' general expenses in calculating general expenses for SeAH,
SeAH argues that these expenses apply to very few models and would have
no impact on the CV.
Department's Position
In the course of this proceeding, we informed SeAH that it need not
report costs for its affiliated producers pending the examination of
information on their percentage of SeAH's production by model type (see
Memorandum to the File, from IA analyst/Marian Wells, November 18,
1997). Upon examining information submitted by SeAH on the percentage
of production by the affiliated producer, we decided not to request
these costs for purposes of this review. For any given model, the
affiliated producer's percentage of production was small compared to
SeAH's production; as a result; including the costs of this affiliated
producer would have had almost no effect on our calculations.
Comment 31: Indirect Selling Expenses and ISE Ratio
The petitioners claim that SeAH did not include several expenses in
its reporting of indirect selling expenses. The petitioners provide
specific examples of indirect selling expenses for SeAH's affiliated
resellers that were not fully explained or appear to be inconsistent
with SeAH's financial statements.
SeAH responds to the petitioners' allegations by stating that it
has reported all incurred expenses either as SG&A or, if they fit the
criteria, as movement expenses reported as outbound freight or direct
selling expenses. SeAH notes that the Department has accepted its
reporting methodology since the beginning of the case.
Department's Position
All of SeAH's expenses are identified and there is nothing on the
record to indicate that these expenses have been mischaracterized.
Comment 32: Inland Freight Costs and Plant-To-Warehouse Freight Costs
in G&A
The petitioners argue that SeAH did not adequately report its
inland freight costs concerning freight from the plant to the warehouse
and from the plant to the distribution point in its initial submission.
When SeAH responded to supplemental questionnaires, the petitioners
point out, freight costs and warehousing costs were inconsistent with
estimates described in SeAH's initial response. For example, SeAH
initially stated that it shipped pipe from the factory to the Pohang
warehouse only occasionally. Later, SeAH found that it actually shipped
much more frequently than previously reported. Because of
inconsistencies like this one, the petitioners suggest that SeAH's
freight and warehousing costs are incomplete and unreliable. According
to the petitioners, SeAH has also failed to report inland freight costs
on a shipment-by-shipment basis and should therefore be considered non-
responsive.
The petitioners maintain that because certain delivery charges have
been taken out of SeAH's G&A accounts and there is no indication that
they have been accounted for elsewhere, the use of facts available is
required. As facts available, the petitioners state that these expenses
should be returned to the calculation of G&A, and inland freight costs
should be based on facts available and SeAH's plant-to-warehouse
freight costs should be added to SeAH's reported G&A expense.
SeAH states that the petitioners used the last reported home market
sales database based on the revised date of sale methodology to
calculate the total number and volume of warehoused sales and then
compared these figures to the total sales volume in the earlier
response with a smaller home market database. This overstated the
proportion of domestic sales that were warehoused. This same error by
the petitioners led them to overestimate the number of warehoused sales
of comparison merchandise. Also, SeAH argues that the calculation of
average per metric ton cost was necessary because there is no link
between shipments to the warehouse and the sales from the warehouse
inventory. Regarding the calculation of the average factory-to-
warehouse freight charges, SeAH states that the petitioners were in
error when they divided (for the sample months) sales shipped by truck
only by the total quantity shipped by truck and rail, thus understating
the per-ton freight charge. SeAH did this calculation correctly and
found that the variance between the annual average and the monthly
average was relatively small. Monthly freight charges may contain some
variance because freight charges per ton vary by the size/type of truck
used. Regarding SG&A charges, SeAH clarifies that the inland freight
charge is recorded in its books as an indirect selling expense but was
not ``included'' as an indirect selling expense for purposes of
responding to the antidumping questionnaire. SeAH maintains that it has
excluded all freight from its calculation of indirect selling expenses.
Department's Position
We agree with SeAH that the petitioners made errors in their
calculations by mixing together information from earlier HM datasets
not used for these final results with newer information that was used.
We find that SeAH has explained sufficiently how their calculation was
performed in regards to each of the petitioner's claims, and its
reporting was reasonable. Where possible, i.e., for EP sales, SeAH has
reported shipment-by-shipment freight costs. Because SeAH is unable to
link shipments to the warehouse and sales from the warehouse for CEP
sales, we consider the average per-metric ton costs to be the most
reasonable methodology available for reporting CEP sales.
We have also found that while SeAH recorded these plant-to-
warehouse expenses as selling expenses in its books, this does not mean
that they must be reported for the Department's purposes as selling
expenses. SeAH's plant-to-warehouse freight costs should not be added
to SeAH's reported G&A expense because plant-to-warehouse freight costs
are considered movement expense for antidumping calculation purposes.
Comment 33: Foreign Brokerage Charges
The petitioners find that SeAH's foreign brokerage charges have
been calculated incorrectly because they are
[[Page 32846]]
based on the FOB value of each shipment divided by the number of tons
in each shipment. The petitioners find that this calculation results in
distortions because it does not account for variance in value. The
petitioners suggest that the Department recalculate foreign brokerage
charges by multiplying, for each observation, the per-unit value by the
ad valorem charges for foreign brokerage. For brokerage on CEP sales,
the petitioners suggest the use of on facts available because SeAH has
not acted to the best of its ability in reporting expenses on a
transaction-specific basis.
SeAH states that its foreign brokerage methodology based on volume
has not been questioned by the Department. SeAH conducted a sample
value allocation of 50 observations (27 sales) and found it made little
difference to the calculation. SeAH argues that its methodology is
sound and that there is no reason for a change in methodology for the
final results. If, in fact, the Department finds reason for a change in
methodology, SeAH provides several suggestions for the revised
calculation.
Department's Position
We agree with the petitioners. We have reviewed SeAH's responses
and found that foreign brokerage should be reallocated based on value
because it is incurred based on value. We have made this reallocation
in our final results.
Comment 34: SG&A Expenses
The petitioners state that SeAH has erred in reducing the SG&A
component of CV by the amount of expenses in its books for factory-to-
warehouse freight. In addition, the petitioners claim that SeAH is not
clear in explaining whether the credit expenses, container stuffing
charges and postage expenses recorded in its books that were not
included in SG&A have been included elsewhere.
SeAH states that credit expenses, container stuffing charges and
postage, as documented in its response, were incurred on exports of
non-subject merchandise. As for the factory-to-warehouse freight, SeAH
explained that this was reported as a movement expense in the response
to the questionnaire.
Department's Position
SeAH used the accounts for SG&A from its books and then deducted
various costs from those accounts when appropriate (i.e., costs not
associated with subject merchandise and freight costs which were
reported separately). Therefore, we have not changed SeAH's SG&A
component of CV.
Comment 35: Selling Expenses of Affiliated Importers
The petitioners point out that regardless of how selling expenses
of SeAH's affiliated importers are characterized, they should be
deducted from CEP. Each of these companies incurs SG&A expenses in
performing selling functions that have been relocated from Korea,
including shipping arrangements, arranging for entry of the
merchandise, issuing invoices, inventory maintenance, and collecting
payment. Whether they are considered direct or indirect selling
expenses, the petitioners find that they should be deducted from the
price used to establish CEP.
SeAH does not disagree that indirect selling expenses should be
deducted from CEP sales. SeAH stated that indirect selling expenses
were deducted from CEP sales in the Preliminary Results margin
calculation program. SeAH believes that there is no reason to change
this portion of the programming for the final results.
Department's Position
We deducted indirect and direct selling expenses from CEP sales for
the Preliminary Results of this review and have continued to do so for
these final results.
Comment 36: Marine Insurance Costs
The petitioners suggest that based on information provided in
SeAH's response, SeAH is able to calculate its marine insurance costs
on a product-specific basis. The petitioners also find that SeAH's
method of calculating marine insurance is distortive because it is an
average over all products and not based on a per-transaction basis.
Because SeAH is able to determine the marine insurance premium rate
applicable to all reported shipments of subject merchandise, and can
trace the C&F value of each product for each shipment, the petitioners
claim that it should have calculated an average per-metric ton
insurance expense on a transaction-specific basis. The petitioners
state that SeAH has further proven itself uncooperative by not at least
reporting average marine insurance on a product-specific basis. The
petitioners suggest that SeAH's marine insurance costs be based on
facts available.
SeAH argues that the Department should reaffirm the methodology
used in the first reviews of this case. SeAH maintains that it has
explained adequately why it cannot calculate marine insurance on a
transaction-specific basis in its response.
Department's Position
We agree with SeAH that it has used a reasonable and appropriate
methodology to report their marine insurance costs. SeAH has calculated
the reported amount of marine insurance on the same basis that it is
incurred by applying the insurance premium rate to the C&F value of the
shipment as shown on the commercial invoice. We are accepting SeAH's
methodology for these final results.
Comment 37: Transaction-specific Entered Values for CEP Sales
The petitioners suggest that SeAH is able to calculate the average
entered value during the POR for sales on a product-specific basis. The
petitioners maintain that SeAH's reporting of an average per-unit
entered value by surface finish rather than a transaction-specific
entered value proves that SeAH has not responded to the best of its
ability. The petitioners suggest entered values for CEP based on facts
available.
SeAH argues that its methodology is consistent with that used in
the First Review, but has provided information if the Department
chooses to calculate an approximate entered value.
Department's Position
Since we are calculating assessment rates on a per-volume, as
opposed to value, basis, this issue is moot.
Shinho
Comment 38: Basis of Indirect Selling Expense Allocations
The petitioners argue that Shinho failed to justify its allocation
of indirect selling expenses by the number of employees in its various
divisions. The petitioners note that the Department stated in a
supplemental questionnaire that its preferred methodology is to
allocate such expenses on the basis of sales volume. Furthermore, the
petitioners cite the Notice of Final Determination of Sales Less Than
Fair Value: Certain Cut-to-Length Carbon Steel Plate From South Africa,
(Carbon Steel Plate) 62 FR 61731, 61736 (November 19, 1997), as stating
that the Department normally allocates G&A expenses based on the cost
of sales because an allocation ``based on a single factor (e.g., head
counts, fixed costs) is purely speculative.'' The petitioners also
point to Carbon Steel Plate which it states that to deviate from this
methodology requires ``evidence that our normal G&A allocation
methodology unreasonably states G&A costs.'' Therefore, the petitioners
conclude that the Department should allocate
[[Page 32847]]
Shinho's indirect expenses based on the cost of sales.
Shinho states that its accounting records do not separately record
(SG&A) expenses. Thus, in order to assign costs to each of these
functions, Shinho allocated those expenses not directly assignable to
each division on the basis of a headcount. Shinho claims that its
allocation methodology for indirect selling expenses is consistent with
its practice in the original investigation, which was verified and
accepted by the Department. Furthermore, Shinho asserts that while the
Department prefers to allocate such expenses based on sales volume, it
will accept alternatives that are reasonable and fully explained.
Shinho states that it adequately explained its methodology and that it
is reasonable because many such expenses are related to the number of
employees in each division.
Department's Position
Contrary to the petitioner's assertions, we note that Shinho did
allocate some indirect selling expense items by value. As for the items
that Shinho allocated by number of employees, we find its methodology
to be reasonable because these items vary according to the number of
employees. This methodology is consistent with that used in the
original investigation (see, LTFV at 57).
Comment 39: Allocation of Packing Expenses
The petitioners maintain that Shinho misallocated the cost of
packing clips and bands by allocating their cost by metric ton rather
than by bundle. The petitioners argue that Shinho has not shown that
its per-bundle usage rate approximates its calculated weight basis.
Additionally, the petitioners state that Shinho has not been
cooperative in reporting its packing costs by (1) failing to report the
average cost of each packing material as requested by the Department,
(2) not reporting a cost for the white steel bands noted in their
response, (3) providing packing cost worksheets that are inconsistent
and irreconcilable, (4) not identifying the composition of ``common''
packing material costs, (5) not fully explaining the derivation of the
allocated coating materials costs, and (6) using an improper
methodology for calculating packing labor costs. Thus, the petitioners
argue that the Department should double Shinho's reported home market
packing costs for use as facts available for its U.S. packing costs. In
support of this recommendation, the petitioners cite Circular Welded
Non-Alloy Steel Pipes and Tubes from Mexico: Final Results of
Antidumping Duty Administrative Review, 62 FR 37014, 37020 (July 10,
1997), where the Department followed such a methodology when the
respondent had been uncooperative.
With regard to the manner in which it allocated its packing bands
and clips, Shinho asserts that the distinction drawn by the petitioners
between a per-bundle and a per-metric ton allocation is a ``distinction
without a difference.'' Next, Shinho states that ``white'' steel bands
do not refer to a separate packing material but rather to the bands
used to bind galvanized pipe (internally referred to as ``white'' pipe)
and are included already in the reported costs. Additionally, Shinho
disputes the petitioners' claim that the worksheets it provided with
its response are inconsistent. According to Shinho, its worksheets
contain the information necessary to calculate the average cost of each
packing material, including coating materials, on a product-specific
basis and that these product-specific costs reconcile with the total
material usage. Moreover, Shinho states that its allocation of packing
labor expenses is consistent with its normal accounting methodology.
Shinho further asserts that a per-metric ton allocation of packing
labor expense is appropriate because Shinho's operation of a crane
accounts for a substantial amount of the packing labor expense.
According to Shinho, the capacity of the crane used for packing is
measured in tons, the same basis used to allocate the expense. For the
aforementioned reasons, Shinho argues that the Department should reject
the petitioners' call for the use of adverse facts available for
Shinho's home market packing costs.
Department's Position
For purposes of this review, we find Shinho's allocation of the
cost of bands and clips to be reasonable. With regard to the
petitioners' other points, we find that the information submitted by
Shinho with regard to packing costs supports the reported amounts.
Therefore, we find no reason to apply facts available with regard to
Shinho's packing costs.
Comment 40: Home Market Credit Period
The petitioners assert that it is unclear whether Shinho calculated
its customer-specific average credit period on a monthly or annual
basis because Shinho stated that it maintains its accounts receivables
on a monthly basis and its notes receivables on an annual basis.
Additionally, the petitioners cite the example Shinho prepared
comparing a specific customer's monthly average accounts receivable
period to the year-end accounts receivable for the same customer. The
petitioners state that this example, based on a customer that Shinho
hand-picked, shows that Shinho overstated its home market credit
period. Given these apparent discrepancies, the petitioners request
that the Department not adjust NV for home market credit expenses.
Shinho states that, in this review, it reported its home market
credit period on an annual, customer-specific basis. According to
Shinho, this method most closely approximates the invoice-specific
credit period, which is the Department's preferred methodology. Shinho
states the Department has accepted customer-specific reporting in other
cases. See Final Results of Antidumping Duty Administrative Reviews and
Revocation in Part of an Antidumping Duty Order: Antifriction Bearings
and Parts thereof from France, Germany, Italy, Japan, Romania,
Singapore, Sweden, Thailand, and the United Kingdom, 58 FR 39729, 39747
(July 29, 1993) and Industrial Belts and Components and Parts Thereof,
Whether Cured or Uncured from Japan: Final Results of Antidumping
Administrative Review, 58 FR 30018, 30023 (May 25, 1993).
Department's Position
We find that Shinho's use of average annual customer-specific home
market credit periods is reasonable giving the limitations of its
accounting system. Therefore, we are using Shinho's reported customer-
specific home market credit periods for these final results with the
exception of one customer. We agree with the petitioners that the
supporting documentation Shinho provided comparing the customer-
specific monthly average to the year-end average credit period for this
one customer showed that the reported credit period is overstated.
Therefore, we have adjusted the home market credit period for this
customer.
Comment 41: Reliability of Home Market Short-term Interest Rate
The petitioners argue that the Department should not make an
adjustment for home market credit expenses because Shinho's reported
home market interest rate is unreliable. The petitioners assert that
Shinho's trial balance, used by Shinho to support its claim for its
reported US interest rate, refutes Shinho's home market credit
calculation. The petitioners state that if the Department does not
reject Shinho's home market credit expense adjustment in its entirety,
as facts available, it
[[Page 32848]]
should instead calculate the expense using the US interest rate.
Shinho states that the Department should not reject the firm's
calculation of its home market short-term interest rate based on a
document provided to support its calculation of its corresponding US
interest rate. Shinho argues that the Department did not request that
the company reconcile its home market credit expense calculation to
supporting company accounting records, including its trial balance.
Shinho contends, however, that had the Department made such a request,
the company could easily have shown how it had derived the figures used
in its home market credit calculation. Furthermore, Shinho states that
the same methodology was accepted and verified by the Department in the
prior review.
Department's Position
We agree with Shinho that we should not reject or adjust its
reported home market interest rate. We requested a reconciliation of
Shinho's reported US interest rate; however, we did not request such a
reconciliation for its home market interest rate. Thus, we have no
reason to believe that the reported home market interest rate is
inaccurate.
Comment 42: Interest Expense Factor
The petitioners state that it is the Department's policy to require
that interest income used to offset interest expense for the purpose of
calculating CV be related directly to production and short-term in
nature. See, First Review Final Results at 55583 and Flowers from
Colombia, at 42833, 42843.
According to the petitioners, Shinho estimated its short-term
interest income by calculating its ratio of short-term to long-term
deposits. Shinho applied this ratio to the total interest earned to
calculate the amount of short-term interest it earned. The petitioners
assert that this ratio overstates the short-term interest earned
because short-term deposits typically earn less interest than similar
long-term deposits. Furthermore, the petitioners claim, Shinho did not
identify the short-term deposits that earned interest income or show
that its accounting records do not track separately short-term interest
income. Finally, the petitioners argue that Shinho did not show that
the interest earned from securities was related to production. For each
of these reasons, the petitioners state that the Department should
reject Shinho's claimed interest income as an offset to its interest
expense.
Shinho argues that the Department should continue to offset the
firm's interest expense with the short-term interest income that it
reported. Shinho asserts that its methodology of calculating short-term
interest income is reasonable given that short-term interest income
earned is not recorded separately from long-term interest income in its
financial statements. Shinho states that the Department accepted a
similar approach in the Final Determination of Sales at Less Than Fair
Value: Certain Stainless Steel Wire Rods from France, 58 FR 68865,
68872 (December 29, 1993). Shinho maintains that the petitioners'
citation of the previous review is erroneous because, in that review,
the Department rejected the inclusion of a particular investment
because it was not short-term, rather than rejecting the full offset
because it was calculated by applying a ratio of short-term to total
deposits. Finally, Shinho states that the Department did not question
the company's methodology and that the petitioner, prior to its briefs,
did not raise the issue.
Department's Position
We agree with the petitioners' assertion that Shinho's methodology
for calculating the interest income offset to interest expense would be
distortional when short-term and long-term deposits earn interest at
different rates. Given that the records of interest income earned by
Shinho maintained in the normal course of business do not track
interest income vis-a-vis the term of the deposit, we have adjusted
Shinho's reported interest income offset based on the difference
between the short-term deposit rate and the long-term government bond
rate in Korea. Additionally, with respect to petitioners' argument that
we reject the nature of Shinho's interest income from securities, there
is no information on the record which indicates that this income earned
from securities was other than short-term in nature. Therefore, we have
retained this income in our calculation of Shinho's interest expense
for COP and CV.
Comment 43: Exchange Rate Gains & Losses
The petitioners assert that Shinho failed to account for its
foreign exchange gains and losses in its cost calculations. The
petitioners state that it is the Department's standard practice to
account for these gains and losses when they are related to production.
Therefore, the petitioners state that the Department should make the
appropriate adjustment to Shinho's net interest expense factor.
Shinho agrees that it did not adjust its interest factor for
foreign exchange gains and losses. However, Shinho states that it did
provide the Department with the information necessary to make the
adjustment. Shinho notes that the requested adjustment is relatively
insignificant.
Department's Position
It is the Department's standard policy to adjust for foreign
exchange gains and losses in a respondent's net interest expense
factor. We have made this adjustment for these final results.
Comment 44: Control Number Uniqueness
The petitioners state that the Department should consolidate
several of Shinho's control numbers that have identical matching
criteria.
Shinho agrees that two of the control numbers at issue are
identical under the Department's concordance hierarchy, but that this
discrepancy did not have an impact on the margin calculations in the
Prelimary Results. Shinho disagrees with the petitioner that a third
product is identical under the Department's hierarchy because one of
the matching characteristics is different.
Department's Position
We have combined the two products that have identical matching
criteria. We agree that the third product differs in one of the
matching criteria; therefore, we have not reclassified this product.
Currency Conversion
We made currency conversions in accordance with section 773A of the
Act based on the rates certified by the Federal Reserve Bank. Section
773A(a) directs the Department to use a daily exchange rate to convert
foreign currencies into U.S. dollars unless the daily rate involves a
``fluctuation.'' It is our practice to find that a fluctuation exists
when the daily exchange rate differs from a benchmark rate by 2.25
percent. See Preliminary Results of Antidumping Duty Administrative
Review: Certain Welded Carbon Steel Pipe and Tube from Turkey, 61 FR
35188, 35192 (July 5, 1996). The benchmark rate is defined as the
rolling average of the rates for the past 40 business days.
Final Results of the Review
As a result of this review, we find that the following margin
exists for the period November 1, 1995, through October 31, 1996:
[[Page 32849]]
------------------------------------------------------------------------
Margin
Manufacturer/exporter (percent)
------------------------------------------------------------------------
Hyundai..................................................... 4.01
KISCO/Union................................................. 0.71
Shinho...................................................... 3.34
SeAH........................................................ 3.51
------------------------------------------------------------------------
Parties to the proceeding may request disclosure within five days
of the date of publication of this notice. In accordance with the
methodology in First Review Final Results we calculated exporter/
importer-specific assessment values by dividing the total dumping
duties due for each importer by the number of tons used to determine
the duties due. We will direct Customs to assess the resulting per-ton
dollar amount against each ton of the merchandise entered by these
importers' during the review period.
Furthermore, the following deposit requirements will be effective
for all shipments of welded non-alloy steel pipe from Korea entered, or
withdrawn from warehouse, for consumption on or after the publication
date of these final results of administrative review, as provided by
section 751(a)(1) of the Act: (1) The cash deposit rate for the
reviewed companies will be the rates established in the final results
of this administrative review (except no cash deposit will be required
for those companies whose weighted-average margin is de minimis, i.e.,
less than 0.5 percent); (2) for merchandise exported by manufacturers
or exporters not covered in this review but covered in the original
less-than-fair-value investigation or a previous review, the cash
deposit will continue to be the most recent rate published in the final
determination or final results for which the manufacturer or exporter
received an individual rate; (3) if the exporter is not a firm covered
in this review, the previous review, or the original investigation, but
the manufacturer is, the cash deposit rate will be the rate established
for the most recent period for the manufacturer of the merchandise; and
(4) if neither the exporter nor the manufacturer is a firm covered in
this or any previous reviews, the cash deposit rate will be 4.80
percent, the ``all others'' rate established in the less-than-fair-
value investigation. See LTFV at 42942.
This notice serves as a preliminary 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 administrative review and notice are in accordance with
sections 751(a)(1) and 777(i)(1) of the Act.
Dated: June 8, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-15874 Filed 6-15-98; 8:45 am]
BILLING CODE 3510-DS-P