[Federal Register Volume 63, Number 124 (Monday, June 29, 1998)]
[Notices]
[Pages 35190-35200]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-17250]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-489-501]


Notice of Final Results and Partial Rescission of Antidumping 
Duty Administrative Review: Certain Welded Carbon Steel Pipe and Tube 
From Turkey

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

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SUMMARY: On February 6, 1998, the Department of Commerce published the 
preliminary results of its administrative review of the antidumping 
duty order on certain welded carbon steel pipe and tube from Turkey. 
The review covers shipments of this merchandise to the United States by 
one respondent during the period May 1, 1996, through April 30, 1997. 
Based on our analysis of comments received, these final results differ 
from the preliminary results. The final results are listed below in the 
section ``Final Results of Review.''

EFFECTIVE DATE: June 29, 1998.

FOR FURTHER INFORMATION CONTACT: Charles Riggle or Kris Campbell, 
Office of AD/CVD Enforcement 2, Import Administration, International 
Trade Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW, Washington, DC 20230; telephone: (202) 482-
0650 and (202) 482-3813, respectively.

SUPPLEMENTARY INFORMATION:

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 last codified at 19 
CFR part 353. While the Department's revised regulations, as codified 
at 19 CFR part 351 (Antidumping Duties; Countervailing Duties, 62 FR 
27296 (May 19, 1997) (``revised regulations''), do not govern this 
review, they do describe the Department's practice where cited in this 
notice.

Background

    This review covers one manufacturer/exporter, the Borusan Group 
(Borusan), of merchandise subject to the antidumping duty order on 
certain welded carbon steel pipe and tube from Turkey. On February 6, 
1998, the Department published the preliminary results of this review. 
See Notice of Preliminary Results of Antidumping Duty Administrative 
Review: Certain Welded Carbon Steel Pipe and Tube from Turkey, 63 FR 
6155 (Preliminary Results). On March 9, 1998, we received case briefs 
from Allied Tube & Conduit Corporation and Wheatland Tube Company 
(collectively, ``the petitioners'') and from Borusan. We

[[Page 35191]]

received rebuttal briefs from both parties on March 16, 1998.

Scope of Review

    Imports covered by this review are shipments of certain welded 
carbon steel pipe and tube products with an outside diameter of 0.375 
inch or more but not over 16 inches, of any wall thickness. Imports of 
subject merchandise are currently classifiable under the following 
Harmonized Tariff Schedule of the United States (HTSUS) 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, 7306.30.50.90. These products, commonly 
referred to in the industry as standard pipe and tube, are produced to 
various American Society for Testing and Materials (ASTM) 
specifications, most notably A-120, A-53 or A-135. Although the HTSUS 
subheadings are provided for convenience and customs purposes, the 
written description of the scope of this proceeding is dispositive.

Partial Rescission

    We originally initiated a review of three companies: Borusan, 
Yucelboru Ihracat Ithalat ve Pazarlama A.S./Cayirova Boru Sanayi ve 
Ticaret A.S. (Yucelboru), and Erbosan Erviyas Boru Sanayii ve Ticaret 
A.S. (Erbosan). See Notice of Initiation of Antidumping Duty 
Administrative Review, 62 FR 35154 (June 30, 1997). However, as noted 
in the preliminary results, Yucelboru and Erbosan notified us that they 
had no shipments of subject merchandise during the period of review 
(POR). Although we inadvertently did not publish a notice of rescission 
at the time of the preliminary results, we did confirm with the Customs 
Service that this was correct and so stated in the preliminary results. 
See Preliminary Results at 6155. We received no comments concerning 
either of these companies for the final results. Therefore, consistent 
with our practice (see, e.g., Certain Fresh Cut Flowers From Colombia; 
Final Results and Partial Rescission of Antidumping Duty Administrative 
Review, 62 FR 53287, 53288 (October 14, 1997), we have rescinded our 
review of the two companies with no shipments during the POR. See also 
19 CFR 351.213(d)(3) of the Department's revised regulations.

Fair Value Comparisons

    We calculated export price (EP) and normal value based on the same 
methodology used in the preliminary results. However, as discussed 
further below, due to a change in our matching methodology vis a vis 
sales disregarded as below cost, we were able to match all U.S. sales 
to sales of similar merchandise sold in the home market without 
resorting to constructed value (CV).
    On January 8, 1998, the Court of Appeals of the Federal Circuit 
issued a decision in Cemex v. United States, 1998 WL 3626 (Fed. Cir.) 
(Cemex). In that case, based on the pre-URAA Act, the Court discussed 
the appropriateness of using CV as the basis for foreign market value 
(normal value) when the Department finds home market sales to be 
outside the ``ordinary course of trade.''
    Although this issue was not raised by any party in this proceeding, 
in light of the Cemex decision the Department has reconsidered its 
practice with respect to any sales found to be outside the ``ordinary 
course of trade.'' Under the URAA, such sales now include sales 
disregarded as below cost. See Section 771(15). In accordance with 
Cemex, the Department has determined that it would be inappropriate to 
resort directly to CV, in lieu of comparison market sales, as the basis 
for normal value where sales of merchandise identical to, or most 
similar to, that sold in the United States are disregarded as below 
cost. Instead, we will use sales of similar merchandise, if such sales 
exist, and will resort to CV as the basis for normal value only when 
there are no above-cost sales that are otherwise suitable for 
comparison. Therefore, in this proceeding, when making comparisons in 
accordance with section 771(16) of the Act, we considered all products 
sold in the home market as described in the ``Scope of the Review'' 
section of this notice, above, that were in the ordinary course of 
trade for purposes of determining appropriate product comparisons to 
U.S. sales. Where there were no contemporaneous sales of identical 
merchandise in the home market made in the ordinary course of trade to 
compare to U.S. sales, we were able to compare U.S. sales to 
contemporaneous sales of the most similar foreign like product made in 
the ordinary course of trade, based on the matching characteristics 
identified in the preliminary results. See Preliminary Results at 6156.

Cost of Production

    As discussed in the preliminary results, we conducted an 
investigation to determine whether Borusan made home market sales of 
the foreign like product during the POR at prices below its cost of 
production (COP) within the meaning of section 773(b)(1) of the Act.
    We calculated the COP following the same methodology as in the 
preliminary results, with the following exceptions.
    1. While we based our calculation of interest expenses on the 
interest expenses of the consolidated Borusan Group companies, we have 
allocated this expense (which was reported on an annual basis) to each 
month of the POR using the ratio of monthly to annual interest expenses 
for the four largest of the Borusan Group companies, consistent with 
the 1994-95 review. We have also recalculated Borusan's amortized 
foreign exchange losses. See Comment 7.
    2. We have valued purchases of coil and zinc by Borusan's mills 
from affiliated parties at the higher of the cost of producing the 
input, the transfer price, or the market price. See Comment 8.
    3. We added packing to the cost of manufacturing (COM) in order not 
to understate the calculation of general and administrative expenses 
(G&A) and interest, because the cost of goods sold (COGS) used in the 
denominator to calculate the G&A and interest expense factor includes 
packing. See Comment 9.
    4. We deducted imputed credit expenses from CV. See Comment 10.
    5. We corrected a clerical error regarding indexation of monthly 
costs. See Final Results Analysis Memorandum from Case Analyst to File: 
Pipe and Tube from Turkey (June 8, 1998) (Final Results Analysis 
Memorandum).

Analysis of Comments Received

    We gave interested parties an opportunity to comment on the 
preliminary results. As noted above, we received comments and rebuttal 
comments from the petitioners and from Borusan.

Comment 1: Level of Trade

    The petitioners submit the following comments regarding the level-
of-trade analysis in the preliminary results: (1) the Department 
incorrectly determined that there are two levels of trade in the home 
market without sufficient record evidence that home market sales differ 
significantly in terms of the stage of marketing involved (see Comment 
1A, below); (2) because there is only one home market level of trade, 
the Department incorrectly granted a level-of-trade adjustment when 
comparing U.S. sales to one of the two purported home market levels 
(see Comment 1A, below); (3) even if the Department finds two home 
market levels of trade, no adjustment should be made because Borusan 
has not demonstrated a causal

[[Page 35192]]

link between (a) differences in the marketing stages between the two 
levels and (b) pricing differences between the two levels, i.e., it has 
not shown that marketing differences at the two purported levels have 
caused pricing differences at the two levels (see Comment 1B, below); 
and (4) if a level-of-trade adjustment is granted, it should be 
calculated on a reseller-specific basis (see Comment 1C, below).

Comment 1A--Identification of Home Market Levels of Trade

    The petitioners state that there is only one level of trade in the 
home market because there are no significant differences in the stage 
of marketing for any of Borusan's purported levels of 
trade.1 The petitioners contend that, based on an analysis 
of the customer class and the selling functions involved, LOT C sales 
should not be considered as a separate level of trade.
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    \1\ Borusan initially claimed three home market levels of 
trade--sales shipped directly from the mill to distributors/
wholesalers (LOT A, ``mill direct''), sales made by affiliated 
resellers that also involve direct shipment from the mill to the 
customer (LOT B, ``reseller back-to-back''), and sales made by 
affiliated resellers out of locally maintained forward inventory 
(LOT C, ``reseller inventory sales''). As in the 1994-95 review, we 
collapsed LOTs A and B in the preliminary results, but found that 
LOT C sales were made at a level of trade separate from LOT A/B 
sales. Contrary to the 1994-95 review, however, we found a pattern 
of consistent price differences between the two levels, and made a 
level-of-trade adjustment when comparing U.S. sales with LOT C 
sales. See Preliminary Results at 6158; see also Notice of Final 
Results of Antidumping Duty Administrative Review: Certain Welded 
Carbon Steel Pipe and Tube from Turkey, 61 FR 69067, 69068-69069 
(December 31, 1996) (1994-95 Final Results).
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    The petitioners first emphasize that the type of customer is an 
important factor in the level-of-trade analysis. Referencing the 
preamble to the Department's revised regulations (Preamble to 
Antidumping Duties; Countervailing Duties, 62 FR 27296, 27371, (May 19, 
1997) (Preamble)) and Gray Portland Cement and Clinker from Mexico: 
Final Results of Antidumping Duty Administrative Review, 62 FR 17148, 
17156 (April 9, 1997) (Mexican Cement), the petitioners state that 
different levels of trade necessarily involve purchasers at different 
places in the chain of distribution. According to the petitioners, 
Borusan's mill direct sales at LOT A, back-to-back sales through 
resellers at LOT B, and reseller inventory sales at LOT C all involve 
sales to end users. The petitioners submit that Borusan has shown only 
that there are sales to different types of end users at all three 
claimed levels of trade, and argue that distinctions among types of end 
users are not relevant to a determination regarding whether such 
customers occupy different places in the chain of distribution.
    Regarding selling functions, the petitioners contend that four of 
the 12 claimed selling functions as reported by Borusan are not selling 
functions at all, and maintain that the remaining eight do not show any 
material difference in the nature or level of selling function being 
provided. The petitioners claim that inventory maintenance is the only 
significant selling function present in LOT C and not in LOT A/B. Even 
here, however, the petitioners contend that LOT A/B sales also involve 
maintaining inventory at the mill, and argue that any difference in the 
inventory maintenance at the two levels is not significant in terms of 
the level-of-trade analysis. Citing Notice of Final Determination of 
Sales at Less Than Fair Value: Certain Pasta from Italy, 61 FR 30326, 
30337 (June 14, 1996) (Pasta from Italy), the petitioners assert that 
mere differences in the degree to which a particular selling function 
is performed are given little weight in establishing separate levels of 
trade. The petitioners add that it is rare that the Department would 
find that any single selling function is so significant as to warrant a 
finding of different levels of trade, citing Preamble to Antidumping 
Duties; Countervailing Duties; Proposed Regulations, 61 FR 7308, 7348 
(February 27, 1996) (Proposed Regulations). The petitioners conclude 
that, since LOT C sales are not made at a level of trade separate from 
LOT A/B, no adjustment should be made for comparisons involving LOT C 
sales.
    Borusan responds that, although it disagrees with the Department's 
determination to collapse LOTs A and B, the Department should continue 
to find at least two levels of trade (LOT A/B and LOT C) because 
Borusan has adequately demonstrated the existence of separate and 
distinct levels of trade in the home market. Borusan characterizes its 
home market channels of distribution as follows: LOT A involves made-
to-order sales direct from the mill to sophisticated, unaffiliated 
distributor/resellers at high volumes; LOT B sales are made through 
affiliated resellers primarily to unaffiliated distributors, on an FOB-
mill basis where the merchandise is shipped directly to the customers 
without the merchandise entering the resellers' inventory; and, LOT C 
sales are made by the resellers out of locally maintained forward 
inventory to small local retailers and end users.
    Borusan argues that its sales at LOT C involve several 
qualitatively and quantitatively different selling functions than those 
involved in LOT A/B. Principally, Borusan claims, LOT C sales are made 
out of pre-positioned inventory from regional warehouses instead of 
directly from the mill. According to Borusan, this sales process does 
not involve only inventory maintenance, but also requires the 
performance of a number of additional functions (and the incurrence of 
certain additional selling expenses) at the LOT C level, including 
forecasting of regional demand for different products, inventory 
planning, placing orders with the mill, making arrangements for 
shipping from the mill, and incurring inventory carrying costs during 
the holding period. Borusan argues further that, since LOT C sales are 
routinely made to small, local retailers and end-users, LOT C resellers 
are involved in customer education and problem-solving, and providing 
advice on suitability, uses, and characteristics of Borusan's products.
    Finally, with respect to the petitioners' argument that inventory 
maintenance occurs at both LOT A/B and LOT C, Borusan notes that LOT C 
involves the pre-positioning of forward inventory, a selling function 
that the Department has recognized as both significant in and of 
itself, and distinct from the inventory maintenance that occurs at the 
mill, citing Pasta from Italy at 30341-30342.
    DOC Position: We continue to find that there are two home market 
levels of trade, LOT A/B and LOT C. We also find that LOT C involves a 
more remote level than LOT A/B. For these final results, we have 
continued to match U.S. sales first to LOT A/B; where we matched U.S. 
sales to LOT C, we have granted a level-of-trade adjustment, as 
discussed further in our response to Comments 1B and 1C below.
    In order to find that sales are made at different levels of trade, 
we must determine that such sales involve different stages of 
marketing. See 19 CFR 351.412(b)(2). As a threshold matter, we analyze 
selling functions to determine if the levels of trade identified by a 
party are meaningful. Preamble at 27371. Our examination of the record 
evidence in this case confirms that, consistent with our preliminary 
results and with the final results of the 1994-95 review,2 
there are significant differences in the selling functions involved in 
LOT A/B sales in comparison with those involved in LOT C sales.
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    \2\ No review was conducted with respect to the 1995-96 period.
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    At LOT A/B, Borusan makes home market sales directly from the mill 
to large, sophisticated customers or, in a

[[Page 35193]]

`back-to-back' manner, where the sale is made by an affiliated reseller 
who does not take the merchandise into its inventory. In both 
instances, sales are made on an FOB-mill basis, and Borusan's customers 
make their own transportation arrangements regarding delivery of the 
merchandise from the mill. At LOT C, Borusan: (1) makes low-quantity 
sales to smaller customers through affiliated resellers who take the 
merchandise into inventory prior to the sale; (2) provides delivery 
services once the sale is made; and (3) maintains more intensive and 
frequent interactions with the customer. Thus, contrary to the 
petitioners' assertions, we find that there is more than one 
significant selling function that occurs at LOT C and not at LOT A/B. 
We discuss each in turn, below.
    First, while it is not the only difference between LOT C sales and 
LOT A/B sales, inventory maintenance is a principal selling function 
that distinguishes these levels. Since LOT C sales are made out of 
stock, the affiliated resellers at LOT C have the responsibility of 
storing merchandise before purchasers have been found. The additional 
responsibility of maintaining merchandise in inventory also gives rise 
to related selling functions that are performed at LOT C. These include 
forecasting of regional demand for different products, inventory 
planning, placing orders with the mill, and incurring inventory 
carrying costs during the holding period. We also note that, in taking 
merchandise into inventory at LOT C, Borusan's affiliated resellers 
perform delivery-related functions that are not performed at LOT A/B, 
including: (1) arranging for shipment of merchandise involved in LOT C 
sales from the mill to the affiliated reseller's warehouse; and (2) 
providing immediate local delivery of such pre-positioned inventory 
once the sale is made to the final customer. See Borusan Questionnaire 
Response Section A (Borusan section A response) at 14 (resellers making 
LOT C sales ``specialize in providing immediate local delivery of 
standard grades which they keep in inventory'').
    The additional forward warehousing and related activities performed 
by the affiliated resellers in making LOT C sales, as described above, 
constitute a distinct set of selling activities separate from any 
inventory maintenance performed at the mill. Thus, we disagree with the 
petitioners' contention that, since some form of inventory maintenance 
is conducted at each level of trade, any differences in this selling 
function are insufficient to support a finding of different levels of 
trade. Considering the additional selling functions associated with 
maintaining inventory at the affiliated reseller's warehouse for LOT C 
sales, we do not accept the petitioners' claim that the inventory 
maintenance performed at Borusan's mills is so similar to the reseller 
forward warehousing performed by affiliated resellers making LOT C 
sales as to render the differences in inventory maintenance between LOT 
A/B and LOT C sales insignificant for our analysis.
    In addition to the inventory-and delivery-related selling 
activities described above, LOT C sales, which are typically smaller-
volume sales, involve customer-based selling activities specific to the 
customers involved in such sales, which, as further discussed below, 
differ in the aggregate from the customers served by LOT A/B. These 
include customer education and advice on the suitability, uses, and 
characteristics of Borusan's products.
    Based on the above analysis of selling activities, we have 
determined that there are meaningful distinctions between LOT A/B and 
LOT C. Aside from selling functions, we also consider the type of 
customer and the level of selling expenses in determining whether sales 
are made at different stages of marketing. See Preamble at 2731. 
Regarding the petitioners' arguments with respect to customer class, 
while we agree with the petitioners that the type of customer is an 
important indicator in identifying levels of trade (id.), we disagree 
with their assertion that the fact that both levels of trade involve 
some sales to end-users requires a finding that there are no customer 
differences between these levels. First, as a point of clarification, 
Borusan's LOT C sales are made not only to end users, but also to local 
distributors and small retailers. Second, the relevant standard, 
regardless of customer labels, is whether the customers involved at 
each purported level of trade constitute purchasers at different stages 
in the chain of distribution. See Antifriction Bearings from France et 
al.; Final Results of Antidumping Duty Administrative Reviews, 62 FR 
54053, 54055 (October 17, 1997) (AFBs 1995-96).
    The record evidence before us indicates that LOT C customers occupy 
a different place in the chain of distribution than do LOT A/B 
customers. At LOT C, the affiliated resellers tend to make sales in 
small quantities (``sometimes just a few pieces of pipe at a time'') to 
these customers. Borusan section A response at 13. In contrast, Borusan 
makes mill direct sales only to the following customers: affiliated 
companies, customers requiring special technical services, or customers 
located in Istanbul that purchase at high volume. Id. at 12.
    Finally, with respect to the level of selling expenses involved at 
each channel of distribution, our examination of the expenses reported 
on home market sales indicates that, as Borusan claims, the per-unit 
indirect selling expenses are higher for sales made through LOT C than 
for those made at LOT A/B. Consistent with the Department's practice 
and regulations, we have considered this as an additional factor in our 
determination that LOT C is separate from, and more advanced than, LOT 
A/B.

Comment 1B--Price Differences Between Levels of Trade

    The petitioners contend that, even if the Department correctly 
determined that Borusan's LOT C sales were made at a different level of 
trade than its LOT A/B sales, the Department erred in granting a level-
of-trade adjustment with respect to comparisons made to LOT C sales. 
According to the petitioners, Borusan has not demonstrated that any 
price differences that exist between LOT A/B and LOT C are due to the 
difference in level of trade. The petitioners note that the Statement 
of Administrative Action accompanying the URAA (SAA) provides that the 
Department will grant a level-of-trade adjustment only where there is a 
difference in level of trade and the difference affects price 
comparability. Therefore, the petitioners claim, the burden is on 
Borusan to demonstrate a ``causal link'' between the difference in 
selling functions and the difference in prices.
    The petitioners argue that, in this case, one likely reason that 
prices for sales at LOT C are higher than at LOT A/B is because of the 
smaller volumes involved in LOT C sales. In this respect, the 
petitioners reference the SAA (at 830) for the proposition that the 
Department must ``ensure that a percentage difference in price is not 
more appropriately attributable to differences in the quantities 
purchased in individual sales.'' The petitioners also suggest that 
another factor in higher LOT C prices is the fact that trade discounts 
are offered at LOT A/B but not at LOT C. The petitioners conclude that, 
because Borusan has made no effort to discount the impact of non-level-
of-trade factors that account for the difference in prices, it is not 
entitled to a level of trade adjustment.
    Borusan responds that there is no provision in the statute or 
regulations that requires that there be a causal link

[[Page 35194]]

between different selling functions and differences in prices. Rather, 
Borusan asserts, after finding separate levels of trade, the Department 
need only find that a pattern of price differences exists at different 
levels of trade, which allows the presumption that the price 
differences are attributable to different levels of trade. Borusan 
agrees in part that the price differences here arise because of a 
difference in quantities sold at each level; however, Borusan disagrees 
with the petitioners' interpretation of the SAA's provision regarding 
quantities and level-of-trade adjustments. Borusan argues that the 
petitioners have taken this quote out of context, as it is only 
intended to be illustrative of the Department's concern against double-
counting when a party claims both a level-of-trade adjustment and an 
adjustment for differences in quantities.
    DOC Position: We agree with the petitioners that we may adjust for 
differences in levels of trade only when such a difference is 
``demonstrated to affect price comparability,'' as provided at section 
773(a)(7)(A)(ii) of the Act. However, this sub-section also explicitly 
provides for how any such effect on price comparability is to be 
determined, i.e., based on ``a pattern of consistent price differences 
between sales at different levels of trade in the country in which 
normal value is determined.'' Id. In this case, as stated in the 
preliminary results, we determined that a pattern of consistent price 
differences existed because we found the monthly average prices were 
higher at one level of trade for virtually all models and months as 
well as for virtually all sales. See Preliminary Results at 6158. 
Therefore, we cannot accept the petitioners' argument that Borusan must 
otherwise demonstrate a ``causal link'' between the difference in 
selling functions and prices in order to receive a level-of-trade 
adjustment for comparisons involving LOT C sales.
    The Department ruled definitively on this issue in Antifriction 
Bearings from France et al., 62 FR 2081, 2108 (January 15, 1997) (AFBs 
1994-95). In addressing an argument made by the petitioner in that case 
that various respondents had failed to demonstrate that differences in 
prices were due to differences in the selling functions performed at 
each level of trade, the Department stated:

    The adoption of [the petitioner's] ``due to'' standard would 
impose an independent causation requirement upon both the level-of-
trade adjustment and CEP-offset provisions. Such a requirement is 
neither required by the statute nor administratively feasible.

Id.
    We also note the following regarding the petitioners' arguments 
concerning the effect on prices of (1) Borusan's discount policy and 
(2) the quantities sold at each level of trade. First, regarding the 
argument that the lower net prices at LOT A/B are caused in part by 
greater discounts granted at this level versus those granted at LOT C, 
while we agree that such differences in Borusan's discount policy 
between levels of trade may result in lower net prices at LOT A/B, this 
does not change that fact that such differences in net prices between 
levels of trade exist. Regarding the petitioners' argument concerning 
differences in quantities sold, the SAA provision cited by the 
petitioners regarding quantity differences vis a vis the level-of-trade 
analysis concerns the importance of not double-counting any quantity 
adjustment already granted (no quantity adjustment was made in this 
case). In this respect, the SAA provides:

    Commerce will isolate the price effect, if any, attributable to 
the sale at different levels of trade, and will ensure that expenses 
previously deducted from normal value are not deducted a second time 
through a level of trade adjustment.

SAA at 830. See also Senate Report on the Uruguay Round Agreements Act, 
which provides as follows:

    [S]ection 224 first creates section 773(a)(7)(A) providing for 
level of trade adjustments. Under this new provision, Commerce is 
directed to increase or decrease normal value to make due allowance 
for any difference (or lack of difference) between normal value and 
export price or constructed export price that is shown to be wholly 
or partly due to a difference in level of trade. To avoid double 
counting, however, this new section expressly precludes level of 
trade adjustments to account for differences for which an allowance 
has already otherwise been made.

Joint Report of the Committee on Finance et al., Uruguay Round 
Agreements Act, S. Rep. No. 103-412, at 70 (1994) (emphasis added).

Comment 1C--Reseller-Specific Level-of-Trade Adjustment

    The petitioners contend that, in the event the Department continues 
to grant a level-of-trade adjustment for comparisons involving home 
market sales made at LOT C, it should make the adjustment on a 
reseller-specific basis. The petitioners argue that this is a more 
accurate methodology because it reflects the average amount of 
additional inventory maintenance performed by the specific reseller 
involved in each transaction.
    Borusan responds that there is no legal basis for making the level-
of-trade adjustment on a reseller-specific basis. Borusan states that 
the Department's revised regulations regarding level of trade state 
that the Department will normally calculate the amount of a level-of-
trade adjustment by: (1) calculating the weighted-averages of the 
prices of sales at the two home market levels of trade; (2) calculating 
the average of the percentage differences between those weighted-
average prices; and (3) applying this average percentage difference to 
normal value. See 19 CFR 351.412(e). Thus, Borusan concludes, the 
adjustment is to be made using a combined weighted-average of all sales 
at a particular level of trade.
    DOC Position: We agree with Borusan that the revised regulations 
provide for a weighted-average adjustment. Further, the SAA states that 
``any adjustments under section 773(a)(7)(A) will be calculated as the 
percentage by which the weighted-average prices at each of the two 
levels of trade differ in the market used to establish normal value.'' 
See SAA at 830. Accordingly, we have not changed the manner in which we 
have calculated the adjustment for these final results.

Comment 2: Home Market Indirect Selling Expenses

    The petitioners argue that, because Borusan failed to follow the 
instructions in the Department's initial questionnaire regarding one of 
its two reported home market indirect selling expense fields, the 
Department should re-calculate these expenses based on adverse facts 
available. The petitioners' comments concern the INDIRSH1 expense, for 
which Borusan calculated separate factors based on the indirect selling 
expenses of each company that makes the final sale to the unaffiliated 
customer (i.e., expenses incurred by the mills--Borusan Boru (BBBF), 
Kartal Boru, and Bosas--for LOT A sales, and expenses incurred by 
resellers for LOT B 3 and LOT C sales), allocated across 
home market sales made by each company. Borusan's specific deficiencies 
with respect to the Department's instructions include the following, 
according to the petitioners: (1) the failure to provide a list of 
overhead expenses itemizing the specific elements of each company's 
expenses, and (2) the submission of worksheets that are meaningless 
because they do not demonstrate either the amount of each type of 
expense or

[[Page 35195]]

the manner in which it was derived and allocated.
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    \3\ Although, as noted above, we consider Borusan's claimed LOT 
A and LOT B sales to be made at the same level of trade, we continue 
to refer to sales made through the back-to-back reseller channel as 
`LOT B' sales for ease of reference and in keeping with the 
terminology used by the interested parties in this case.
---------------------------------------------------------------------------

    The petitioners also list a number of indirect selling expense and 
sales values that purportedly do not reconcile with Borusan's financial 
statements. Due to the proprietary nature of this list of selling 
expenses and sales values, we are unable to summarize or address the 
petitioners' specific comments in this regard. We address these claims 
further in the Final Results Analysis Memorandum.
    Noting that the Department did not conduct a verification of 
information provided by Borusan in this review, the petitioners assert 
that the accuracy of the Department's margin calculation depends almost 
entirely on Borusan's cooperation and responsiveness, and maintain that 
Borusan's disregard of the Department's instructions is tantamount to 
failing verification. The petitioners claim that Borusan should, 
therefore, be deemed an uncooperative respondent, and its indirect 
selling expenses should be calculated using adverse facts available, 
based on the precedent established in Olympic Adhesives, Inc. v. United 
States, 899 F.2d 1565, 1571 (Fed. Cir. 1990). The petitioners recommend 
that the Department apply the highest indirect selling expense factor 
calculated for any member of the Borusan Group to each producer and 
reseller in the Borusan Group.
    Borusan responds that its indirect selling expenses were adequately 
documented and, therefore, should not be modified. First, Borusan 
explains that, in response to the Department's instructions, it 
provided a complete explanation of how indirect selling expenses were 
calculated for BBBF, the largest pipe producer in the Borusan Group, 
and for Bozoklar, an affiliated reseller. Second, Borusan explains 
that, for this review, it used the same methodology that was verified 
and accepted by the Department in the 1993-94 and 1994-95 reviews.
    DOC Position: Consistent with the past two reviews involving this 
company, we have accepted Borusan's methodology for reporting indirect 
selling expenses.
    Section 776 of the Act provides, inter alia, that the Department 
shall apply facts available if an interested party withholds 
information that has been requested by the Department. In this case, 
there is no basis upon which to apply facts available as Borusan has 
provided the necessary information requested.
    First, we do not agree with the petitioners regarding the adequacy 
of the supporting documentation submitted by Borusan concerning its 
INDIRSH1 expense. In its response to our supplemental questionnaire, 
Borusan provided detailed support for indirect selling expenses 
incurred by the largest pipe producer (BBBF) and by one of its largest 
resellers (Bozoklar). See Borusan sections A-D supplemental 
questionnaire response (December 19, 1997) (Borusan supplemental 
response), at Exhibits 13-14. As we explain further in the Final 
Results Analysis Memorandum, this documentation supports the reported 
expense and is in accordance with the company's normal books and 
records.
    Regarding the petitioners' proposal that we treat Borusan as if it 
had failed verification due to the failure to provide information 
requested by the Department, as noted above, we have no basis for that 
decision; accordingly, we have not changed the calculation of Borusan's 
indirect selling expenses. In addition, we note that: (1) we conducted 
successful verifications of this company in the past two administrative 
reviews; (2) no verification was required for Borusan in this 
administrative review; and (3) the petitioners did not request that we 
verify Borusan's data in this review.

Comment 3: Allocation of Home Market Inland Freight From Plant to 
Warehouse, Warranty, and Interest Revenue

    The petitioners contend that Borusan's calculations of home market 
inland freight from plant to warehouse, warranty expenses, and interest 
revenue on an annual basis are distortive and should have been 
calculated on a monthly basis. Citing Tapered Roller Bearings and Parts 
Thereof, Finished and Unfinished, from Japan and Tapered Roller 
Bearings, Four Inches or Less in Outside Diameter, and Components 
Thereof, from Japan (TRBs from Japan), 63 FR 2565 (January 15, 1998), 
the petitioners state that the Department's practice is to accept 
allocations only if they are not distortive and the respondent is fully 
cooperative but unable to report the information in a more specific 
manner.
    With respect to inland freight from plant to warehouse, the 
petitioners argue that the allocation of freight charges across the 
entire POR is distortive, and maintain that Borusan has not shown that 
it is unable to report this expense on a monthly basis. Regarding 
warranty expenses, the petitioners assert that in addition to 
allocating this expense on an annual basis, Borusan has failed to 
comply with the Department's instructions to report such expenses on a 
model-specific basis, or on the most product-specific basis possible. 
Regarding interest revenue, the petitioners claim that Borusan's 
customer-specific allocations are insufficient because, as with inland 
freight and warranty, allocating this revenue on a yearly basis does 
not properly account for inflation in Turkey. The petitioners request 
that the Department base freight charges and warranty expenses on 
adverse facts available by not deducting these expenses from normal 
value; for interest revenue, the petitioners recommend the highest 
revenue reported for any customer during the POR.
    Borusan responds generally that: (1) its responses to the 
Department's information requests concerning these expenses were 
complete; (2) while the Department requested further explanation 
regarding how Borusan calculated these charges, it never instructed 
Borusan to recalculate the expenses once Borusan supplied these 
explanations; and (3) the petitioners have provided no evidence for 
their assertion that Borusan's methodology with respect to these 
expenses is distortive.
    Regarding inland freight expenses, Borusan cites to its 
supplemental questionnaire response, wherein the company provides an 
explanation regarding why it would be extremely burdensome to tie 
particular freight invoices to particular sales invoices. Borusan 
argues that its approach is reasonable given the large number of home 
market sales. In addition, Borusan notes that it based its reporting of 
freight charges on calendar year 1996, which the company maintains is 
conservative since, in so doing, it applied an average 1996 charge per 
ton to POR sales, including those made in 1997. According to Borusan, 
it is the Department's practice to accept values from the fiscal year 
that most closely approximates the POR when the POR spans two fiscal 
years.
    Regarding the warranty expense, Borusan states that the 
Department's supplemental questionnaire focused on inquiring into why 
Borusan had calculated warranty expenses on a calendar-year basis 
instead of on a POR basis. Borusan states that it explained in its 
responses the calculation of warranty on a fiscal year basis is 
appropriate because it most closely reflects the POR. Borusan adds 
that, as with inland freight, it is conservative to calculate home 
market warranty expenses on a calendar-year (1996) basis given the high 
inflation rate in Turkey.
    Finally, regarding interest revenue, Borusan states that, as 
explained in its supplemental response, it is unable to tie these 
charges to individual

[[Page 35196]]

transactions. Borusan adds that calculating this item on an annual 
basis is less distortive than a monthly calculation because interest 
collected in one month generally relates to invoices from a prior 
month.
    DOC Position: We do not agree with the petitioners' claim that, 
because Borusan's home market inland freight expense, warranty expense, 
and interest revenue were not reported on a monthly basis, we should 
base these items on adverse facts available. However, we have 
determined that Borusan incorrectly reported home market inland freight 
expenses for certain LOT B sales, because the terms of sale indicate 
that these expenses were not incurred on such sales. We have not 
adjusted for inland freight with respect to LOT B sales.
    We first address the petitioners' claims regarding monthly versus 
annual expense allocations. In our supplemental questionnaire, we asked 
Borusan for further clarification regarding a number of aspects of its 
reporting of these items, including requests for further descriptions 
of the allocation methodologies used in calculating the per-unit 
amounts reported in Borusan's home market sales database. Our questions 
concerned primarily: (1) the allocation of the inland freight expense 
to subject versus non-subject merchandise; (2) the feasibility of 
reporting the inland freight expense on a transaction-specific basis; 
(3) the direct versus indirect nature of the warranty expense; and (4) 
the rationale for reporting the warranty expense on a calendar-year, as 
opposed to POR, basis. See, e.g., questions 34-36, and 39, of the 
Department's supplemental questionnaire (November 21, 1997). Borusan 
addressed each of our questions in turn in its supplemental response. 
See Borusan Supplemental Response at 29-33. Borusan's initial 
questionnaire response also addressed the basis for its reporting of 
interest revenue using a customer-specific methodology. See Borusan 
Questionnaire Response for sections B-D (September 8, 1997) (Borusan 
sections B-D response).
    While we requested further information regarding various aspects of 
Borusan's allocation methodologies, we did not request the company to 
report these items on a monthly basis in either the initial or the 
supplemental questionnaire. Given that we did not request that Borusan 
report these items in this manner, it would be inappropriate to resort 
to adverse facts available as requested by the petitioners.4
---------------------------------------------------------------------------

    \4\ In the event that future reviews of this order are 
requested, we will reconsider whether to request certain selling 
expense information on a monthly basis.
---------------------------------------------------------------------------

    However, we did not deduct freight expenses reported in the home 
market sales listing for LOT B sales, because Borusan has clearly 
indicated that such sales are made on an FOB-mill basis. Borusan 
allocated its freight expenses on a reseller-specific basis, allocating 
total freight expenses across all sales by each reseller, regardless of 
whether the sale was made at claimed LOT B or at LOT C. In response to 
our request that it report inland freight expenses on a transaction-
specific basis, Borusan explained in its supplemental response (at 30-
31) that it was unable to do so due to the large number of transactions 
involved, and, instead, continued to allocate these expenses across all 
sales by reseller. Thus, if a reseller made both LOT B and LOT C sales, 
Borusan reported per-unit freight expenses (Inland Freight, Plant to 
Distribution Warehouse; Inland Freight, Plant/Warehouse to Customer) 
for both LOT B and LOT C sales made by that reseller. In providing this 
explanation, Borusan referred to delivery expenses incurred on ``back-
to-back'' sales. However, Borusan has clearly indicated, in a number of 
places in its questionnaire responses and in its case briefs, that the 
terms of sale for LOT B sales do not include delivery. See Borusan 
section A response at 13 (describing the delivery process on LOT B 
sales: ``The customer arranges for the transportation of the 
merchandise from the mill to the intended destination.''); see also 
Borusan sections B-D response at B-15, regarding terms of delivery for 
each channel of distribution; see also Borusan rebuttal brief at 5: 
(``LOT B sales involve shipment of the merchandise on an FOB-mill basis 
directly to the customers without the merchandise entering into the 
resellers' inventory.'') Although one element of the inland freight 
from plant to warehouse expense (truck loading expense) is reportedly 
incurred on all domestic shipments of merchandise produced by one mill 
(BBBF), Borusan provided no means of isolating this expense from the 
other inland freight expenses that it did not in fact incur on LOT B 
sales. Accordingly, for these final results, we have not made a 
deduction for inland freight expenses with respect to sales made at LOT 
B.

Comment 4: Pre-Sale Warehouse Expenses

    The petitioners assert that the Department should deny any 
adjustment to normal value for Borusan's pre-sale warehouse expenses 
based on Borusan's failure to quantify these expenses properly. 
According to the petitioners, Borusan did not take the following 
actions, as required by the initial questionnaire: (1) Borusan did not 
list all warehouse locations used to distribute the foreign like 
product; (2) Borusan did not follow the instructions that it report as 
pre-sale warehouse expenses direct warehouse expenses only, and that it 
include indirect expenses for pre-sale warehousing among its reported 
indirect selling expenses; and (3) Borusan did not describe how the 
indirect and the direct costs of warehouse operations were separated. 
The petitioners state that, instead, Borusan simply calculated the 
reported pre-sale warehouse expense for each reseller by dividing the 
total warehouse expense incurred during 1996, including indirect 
expenses, by the total quantity of goods sold out of stock in 1996. In 
light of these alleged failures to comply with the Department's 
instructions, the petitioners assert that the Department should deny 
any deduction to normal value for pre-sale warehouse expenses.
    Borusan responds that it properly documented its pre-sale warehouse 
expenses incurred in connection with home market sales. First, Borusan 
claims, the Department's policy, pursuant to section 773(a)(6) of the 
Act, is to make an adjustment to normal value for warehouse expenses, 
such as these, that are incurred at remote selling locations, citing 
Certain Porcelain-on-Steel Cookware From Mexico: Final Results of 
Administrative Review, 62 FR 42496 (August 7, 1997) (Cookware from 
Mexico). Borusan adds that its calculation of pre-sale warehouse 
expenses was prepared according to the methodology that was verified 
and accepted by the Department during the two most recent reviews. 
Finally, Borusan states, the Department did not ask in a supplemental 
questionnaire for additional information regarding Borusan's 
calculation of pre-sale warehouse expenses and, because the petitioners 
have provided no evidence to serve as a basis for the denial of an 
adjustment for Borusan's pre-sale warehouse expenses, the Department 
should continue to make this adjustment to normal value.
    DOC Position: We have accepted as a movement expense the pre-sale 
warehouse expenses claimed by

[[Page 35197]]

Borusan. With respect to the petitioners' concern regarding the listing 
of warehouse locations, we note that Borusan did provide, in its 
initial questionnaire response (at Exhibit B-7), a list of locations 
for warehouses leased by its affiliated resellers. (Borusan incurred 
this expense for sales involving such leased warehouses but not with 
respect to warehouses owned by its affiliates.) With respect to the 
petitioners' concern regarding direct versus indirect warehouse 
expenses, first, we consider warehousing expenses that are incurred 
after the foreign like product leaves the original place of shipment as 
movement expenses. See 19 CFR 351.401(e)(2). Second, Borusan properly 
isolated this expense to only those sales on which it was incurred, 
i.e., sales of merchandise stored in leased warehouses. Accordingly, we 
have accepted Borusan's reporting of this expense.

Comment 5: Packing Costs

    The petitioners argue that Borusan failed to create a factual 
record supporting its calculation of packing costs for both the 
comparison market and the United States market and, therefore, the 
Department should calculate Borusan's packing costs using adverse facts 
available.
    First, the petitioners claim that sections B and C of the 
Department's questionnaire instructed Borusan to do the following: (1) 
Describe the packing types used in the comparison market and those used 
to prepare merchandise for shipment to the United States; (2) submit 
worksheets listing the packing materials used, the average cost of each 
material, how much of each material was used, the average labor hours 
by packing type and the average per-hour labor cost, including 
benefits; and, (3) provide a list of overhead expenses incurred in 
packing and demonstrate how those expenses were allocated by packing 
type.
    Instead, the petitioners argue, Borusan merely stated that: (1) It 
packs standard pipe for shipment in both the export and the domestic 
markets by tying bundles of pipes together with metal straps; and, (2) 
the reported packing cost includes the costs of labor, materials and 
overhead incurred during each month allocated over the total metric 
tons packed.
    The petitioners argue further that, while section D of the 
Department's questionnaire requests a complete and detailed description 
of each stage of the production process, Borusan's description of the 
packing stage merely states that the pipe is marked and bundled for 
final shipment. While acknowledging that Borusan lists some packing 
materials in response to this item, the petitioners maintain that 
Borusan neglected to explain whether all bundles are packed in the same 
manner, or to report the quantities and costs of each packing material 
used. Likewise, the petitioners argue, Borusan failed to provide 
average labor hours and average labor costs per hour for packing, and 
provided no explanation for its allocation of packing overhead 
expenses. Finally, the petitioners challenge Borusan's methodology for 
allocating packing costs by weight, and insist that packing costs in 
the pipe industry are largely a function of the number of pieces being 
packed, not the weight.
    For these reasons, the petitioners suggest that, consistent with 
Circular Welded Non-Alloy Pipe and Tube From Mexico: Final Results of 
Antidumping Duty Administrative Review, 62 FR 37014, 37020 (July 10, 
1997) (Pipe and Tube from Mexico), the Department should double the 
average reported home market packing costs and use that as the U.S. 
packing cost as adverse facts available.
    Borusan responds that the petitioners' arguments are without merit, 
and maintains that the petitioners have overlooked important 
information contained in Borusan's response. First, Borusan asserts 
that varnishing costs are materials costs (and were fully discussed in 
Borusan's sections B-D response at D-41-42) and not packing costs as 
argued by the petitioners. Second, Borusan claims that it provided 
allocation worksheets (at Exhibit D-13) that clearly explain the 
derivation of the reported per-unit costs for each month of the POR.
    With respect to the petitioners' argument that Borusan failed to 
provide a list of variable overhead expenses incurred in packing, 
Borusan points out that it reported (at D-8) a list of the packing 
material used to bundle the pipes for shipment, plus the amount and 
description of each overhead expense incurred in packing.
    Finally, Borusan claims that, while the petitioners objected to 
Borusan's allocation of packing costs based on weight, they offered no 
evidence to support a claim that Borusan's allocation methodology is 
distortive or inaccurate. Instead, Borusan argues, the methodology is 
reasonable and, furthermore, is consistent with the methodology 
verified and accepted by the Department during the two most recent 
reviews.
    DOC Position: The petitioners' argument in favor of calculating 
Borusan's packing costs by use of adverse facts available is 
essentially two-pronged: (1) That Borusan has failed to act to the best 
of its ability to provide the complete information requested, and (2) 
that Borusan's chosen methodology, which allocates packing costs on the 
basis of weight, instead of pieces, is not reflective of actual 
practice in the pipe industry.
    Regarding the first point, Borusan listed (at D-8) its material 
inputs by type, including packing materials. Further, Borusan's product 
brochure (at Exhibit A-27) explains that the merchandise is packaged as 
``bare bundles.'' The petitioners have provided no evidence to indicate 
that Borusan has neglected to report all packing materials by type.
    In addition, in response to our questionnaire, Borusan provided (at 
Exhibits D-13, D-14 and D-15) monthly transformation cost tables for 
its three production facilities. Borusan also provided (at Exhibits D-
21 and D-23, respectively) worksheets illustrating the cost 
calculations for the highest volume U.S. product and the highest volume 
home market product. Borusan explained in its questionnaire response 
(at D-44) that all of the costs used in Exhibits D-13, D-14 and D-15 
were taken from data contained in the company's internal monthly 
ledgers.
    Regarding the second point, we note that in Pipe and Tube From 
Mexico, the petitioners' suggested model by which we use adverse facts 
available to calculate packing costs, the packing costs were calculated 
on a weight basis, the same methodology challenged as unreliable by the 
petitioners in this review. Furthermore, our acceptance of Borusan's 
methodology, which was verified and accepted by the Department in the 
two most recent reviews, is consistent with prior segments of this 
proceeding.

Comment 6: Allocation of Domestic Brokerage and Handling on U.S. Sales

    The petitioners argue that Borusan should not have reported Turkish 
lashing charges, customs charges, loading charges, and port fees based 
on the weight of each U.S. shipment, since such charges are actually 
incurred on an ad valorem basis. The petitioners explain that basing 
such charges on weight results in a distortion when entries cover 
merchandise of varying values. Therefore, the petitioners assert, the 
Department should apply the highest domestic brokerage and handling 
amount reported for any U.S. transaction to all U.S. sales as facts 
available.
    Borusan responds that the petitioners assertion that brokerage and 
handling

[[Page 35198]]

costs are incurred on an ad valorem basis is incorrect. Borusan asserts 
that a percentage charge contained in Borusan's response, which is 
cited by the petitioner in support of its claim that these expenses are 
incurred on an ad valorem basis, is in fact simply the value-added-tax 
rate collected on the customs charges and does not relate to the amount 
of the customs charges in any way.
    DOC Position: The information on the record supports Borusan's 
position that the brokerage and handling charges, which Borusan 
reported on a shipment-specific basis, reflect the actual charges 
incurred by Borusan in connection with its U.S. shipments. See Borusan 
sections B-D response at Exhibit C-5. Therefore, we have not accepted 
the petitioners' arguments.

Comment 7: Interest Expense Factor

    The petitioners make the following comments regarding Borusan's 
reported interest expense factor. First, they raise a general 
allocation claim, i.e., that Borusan incorrectly calculated this factor 
by taking the Borusan Group companies' annual expense amounts and 
dividing by 12. The petitioners propose that, as in the 1994-95 review, 
the Department should allocate the annual interest expense reported by 
Borusan to each month of the POR using the ratio of monthly-to-annual-
interest expenses for the four largest of the Borusan Group firms.
    Regarding the specific items that comprise Borusan's reported 
interest expense, the petitioners comment on the calculation of this 
item in the preliminary results as follows: (1) The Department 
correctly denied the claim made by Borusan in its supplemental response 
that foreign exchange losses should be excluded because they are due to 
inflation; (2) Borusan incorrectly included foreign exchange gains 
related to sales; (3) Borusan incorrectly amortized foreign exchange 
losses; and (4) Borusan incorrectly included various income items as 
offsets to its financial expenses, while improperly excluding a 
miscellaneous ``other financial expenses'' item. Regarding each of 
these items, the petitioners also claim that it is not possible to 
reconcile Borusan's breakout of reported income and expense items with 
the totals reported in Borusan's financial statements.
    The petitioners' primary arguments concerning each of these issues 
are as follows. With respect to (1), the petitioners state that 
Borusan's own financial statement treats foreign exchange losses as an 
expense, not as an inflation adjustment. Regarding (2), while the 
petitioners acknowledge that gains on financial assets such as cash 
balances are appropriate offsets to financing costs, they maintain that 
Borusan has not explained sufficiently why its reported gains are 
appropriate offsets, particularly in light of the fact that the 
Department excluded Borusan's foreign exchange gains in the past two 
reviews (finding that Borusan's reported foreign exchange gains were 
related to sales, not production operations). Regarding (3), the 
petitioners state that exchange rate losses should not be amortized 
but, instead, all period losses should be included in the interest 
expense factor, and maintain that Borusan has not reported this expense 
in accordance with its normal books and records. Finally, with respect 
to (4), the petitioners state that the Department should not allow 
Borusan's claimed offsets for various categories of interest income 
(which concern offsets other than the exchange rate gain offset 
discussed in item 2, above), but should include the ``other financial 
expenses'' item because Borusan did not explain sufficiently why this 
should be excluded.
    While Borusan does not address the petitioners' general comment 
that the Department should allocate interest expenses to each month of 
the POR using the ratio of monthly-to-annual-interest expenses for the 
four largest of the Borusan Group firms, it does respond to each of the 
other comments raised by the petitioners.
    First, Borusan contends that, as claimed in the supplemental 
questionnaire, exchange rate losses are caused by inflation and should 
not be included in interest expense. Second, Borusan states that, 
consistent with the two most recent reviews, it did not make any offset 
for exchange gains related to sales. Third, Borusan disagrees with the 
petitioners' contention that there is no precedent for Borusan's 
amortization of exchange rate losses on foreign currency debt. In fact, 
Borusan claims, it is the Department's practice to amortize such 
translation losses over the life of the loan. Fourth, Borusan disputes 
the petitioners' suggestion that it did not substantiate its claimed 
interest income offsets, and maintains that its ``other financial 
expenses'' item should be excluded because it concerns bank 
commissions, which are reported in a separate field.
    DOC Position: We first note that, consistent with prior segments of 
this proceeding and with the petitioners' arguments in this segment of 
the proceeding, we have allocated Borusan's interest expenses to each 
month of the POR using the ratio of monthly-to-annual-interest expenses 
for the four largest of the Borusan Group companies. See 1994-95 Final 
Results at 69074.
    Regarding the petitioners' comments on the calculation of the 
interest factor, we agree with the petitioners that exchange losses on 
foreign currency debt represent a cost of borrowing and, therefore, 
should be included in the financial expense calculation. See 1993-94 
Final Results at 51632 (``The Department has clearly established that 
translation losses on dollar-denominated loans, as reflected in the 
company's income statement, are appropriately included in the cost of 
production because they reflect an actual increase in the amount of 
local currency that will have to be paid to settle these loans.'') We 
have continued to include such losses in the interest expense 
calculation.
    We disagree, however, with the petitioners' assertion that none of 
Borusan's reported exchange rate gains should be allowed. Our practice 
is to include foreign exchange gains as an offset to finance expenses 
if they are related to the cost of acquiring debt for purposes of 
financing production operations, and to exclude this item if it relates 
to sales. See Notice of Final Determination of Sales at Less Than Fair 
Value: Certain Steel Concrete Reinforcing Bars from Turkey (Rebar from 
Turkey), 62 FR 9737, 9741 (March 4, 1997); see also Notice of Final 
Determination of Sales at Less Than Fair Value: Certain Pasta from 
Turkey, 61 FR 30309, 30324 (June 14, 1996). In applying this standard 
in the prior two segments of this proceeding, we did not allow any of 
Borusan's reported exchange rate gains as an offset, finding that such 
gains ``were not debt-related, but rather involved export sales 
activities (i.e., the gains arising from foreign-currency denominated 
export receivables).'' 1994-95 Final Results at 69074; see also 1993-94 
Final Results at 51632 (``In this case, we find that foreign exchange 
gains are related to sales, not production; therefore, they should not 
be used as an offset for calculating home market interest expenses.'')
    However, unlike prior reviews, in the instant proceeding Borusan 
has included in its interest expense calculation only those exchange 
rate gains related to cash balances and inventory, while excluding 
those related to sales (accounts receivable). See Borusan sections B-D 
response at Exhibit D-20 (separating exchange rate gains ``earned on 
accounts receivable'' from those earned on ``cash balances and other,'' 
and demonstrating that these two items equal ``total foreign exchange 
gains''); see also Borusan

[[Page 35199]]

supplemental response, Attachment J 5). Exchange rate gains 
on cash balances and inventory are short-term in nature and do not 
constitute a separate investing activity. Accordingly, we have accepted 
these exchange gains as an offset to finance expenses.
---------------------------------------------------------------------------

    \5\ The petitioners argue, based on proprietary information, 
that the information provided in this exhibit is insufficient to 
allow the Department to change its position from the past two 
reviews and grant an offset for exchange gains. We address this 
aspect of the petitioners' argument in the Final Results Analysis 
Memorandum.
---------------------------------------------------------------------------

    We also disagree with the petitioners' contention that Borusan 
should not be permitted to amortize its exchange rate losses. For 
purposes of our analysis, it is appropriate to amortize the foreign 
exchange losses over the life of the associated debt, since the gain or 
loss is realized only as the loans are paid. See, e.g., Rebar from 
Turkey at 9743. However, we also disagree with Borusan's proposed 
weighted-average amortization of the foreign exchange losses. Instead, 
we have amortized the foreign exchange loss incurred on each loan over 
the life of the associated loan.
    Finally, regarding Borusan's claimed ``other income'' offsets and 
its rationale for not including its ``other financial expenses'' item, 
we note the following. First, as a general matter, we disagree with the 
petitioners' contention that it is not possible to substantiate the 
breakout of reported income and expense items from the totals reported 
in the financial statements. In fact, other than an amount called 
discount on term transactions, Borusan provided a detailed breakdown of 
the items listed in its financial expense calculation and a brief 
description of each item included therein. See Borusan sections B-D 
response at D-20.
    It is the Department's practice to allow a respondent to offset 
financial expenses with short-term interest income earned from the 
general operations of the company. See, e.g., Timken v. United States, 
852 F. Supp. 1040, 1048 (CIT 1994). The Department does not, however, 
offset interest expense with interest income earned on long-term 
investments because long-term investment does not relate to current 
operations. See Notice of Final Determination of Sales at Less Than 
Fair Value: Small Diameter Circular Seamless Carbon and Alloy Steel, 
Standard, Line and Pressure Pipe From Italy, 60 FR 31981, 31991 (June 
19, 1995). Therefore, we have included income offsets that Borusan 
demonstrated were short-term in nature. We note in particular that the 
largest such offset, Borusan's `other financial income,' relates to 
short-term bank interest; the absence of long-term notes receivable on 
Borusan's financial statements indicates that this amount is from 
short-term sources. We did not allow one claimed offset, `discount on 
term transactions,' for which Borusan failed to explain either the 
source of the income or the short or long-term nature of the item.
    We also agree with Borusan that `other financial expenses' concern 
bank commissions, which were reported separately. Accordingly, we have 
not added such expenses to Borusan's interest expense calculation, as 
requested by the petitioners.

Comment 8: Purchases From Affiliated Suppliers

    The petitioners argue that the Department should revalue the costs 
of coil and zinc purchased by Borusan's mills (BBBF, Kartal Boru, and 
Bosas) from affiliated parties. The petitioners state that the 
following data in Borusan's response indicate below-market pricing of 
such inputs: (1) BBBF's coil purchases from an affiliated party covered 
only the cost of production, plus transportation, exclusive of the 
affiliated party's selling, general and administrative expenses or 
profit; and (2) proprietary information in Borusan's response (as 
further described in the Final Results Analysis Memorandum) indicates 
that Kartal Boru's and Bosas' coil purchases, and BBBF's zinc purchases 
also were not made at market prices.
    Borusan responds that the petitioners' allegation regarding prices 
paid to suppliers selectively ignores information provided in Borusan's 
supplemental response that demonstrates that the mills paid market 
prices for affiliated party coil and zinc inputs. Borusan claims that 
the petitioners distort the administrative record by characterizing 
BBBF's coil purchases from its affiliated supplier as `substantial.'
    DOC Position: We consider the inputs in question (coil and zinc) to 
be major inputs with respect to the production of subject merchandise. 
Accordingly, we have valued purchases of coil and zinc by Borusan's 
mills from affiliated parties at the higher of the cost of producing 
the input, the transfer price, or the market price. See section 
773(f)(3) of the Act; see also 19 CFR 351.407(b). We describe our 
methodology for doing so in the Final Results Analysis Memorandum.

Comment 9: G&A and Interest Expense

    The petitioners argue that the G&A and interest expense factors 
must be recalculated because the denominator (COGS) includes packing, 
which, when the factors are applied to COMs exclusive of packing, 
understates the G&A and interest expense calculations. The petitioners 
suggest that the Department should add packing to COM to correct the 
understatement of G&A and interest expenses, citing Circular Welded 
Non-Alloy Steel Pipe from the Republic of Korea, 62 FR 55574, 55581 
(October 27, 1997).
    Borusan responds that it has used the same methodology in the two 
most recent reviews and that this methodology was verified and accepted 
by the Department. Borusan contends that packing represents an 
insignificant portion of the understatement and is more than offset by 
applying historical G&A and interest expense factors to replacement 
costs.
    DOC Position: We agree with the petitioners and have added packing 
to COM when calculating the G&A and interest expenses. Although Borusan 
asserts that the distortion is negligible, there is still an 
understatement of these expenses. As for Borusan's claim that we are 
applying a historical G&A and interest expense factor to replacement 
costs, both G&A and interest have been adjusted to account for 
inflation before calculating the G&A and interest expense factors.

Comment 10: Circumstance-of-Sale Adjustment for Imputed Credit

    Borusan claims that the Department failed to make a circumstance-
of-sale (COS) adjustment to normal value for imputed credit expenses 
when normal value was based on CV. Borusan argues that, pursuant to 
section 773(a)(8) of the Act, the Department's well-established 
practice dictates that it make such an adjustment, citing, e.g., Notice 
of Final Determination of Sales at Less Than Fair Value: Steel Wire Rod 
From Canada, 63 FR 9182, 9195 (February 24, 1998); TRB's From Japan at 
2583; Amended Final Results of Antidumping Duty Administrative Review: 
Fresh Kiwi Fruit From New Zealand, 62 FR 47440 (September 9, 1997)).
    The petitioners respond that: (1) due to Borusan's failure to 
quantify the COS adjustment it seeks, no such adjustment is warranted, 
and (2) if the Department does grant a COS adjustment, such adjustment 
should be based on a proper calculation of Borusan's net prices. 
Regarding the adequacy of Borusan's credit calculation, the petitioners 
claim that Borusan calculated a POR-average home market interest rate, 
and maintain that Borusan's failure to provide monthly interest rates 
makes it impossible to properly calculate home market credit expenses 
for purposes of

[[Page 35200]]

the COS adjustment. The petitioners assert that the various interest 
rates charged to Borusan during the POR vary widely, and suggest that, 
due to the high inflation in Turkey, it would be unfair to calculate 
interest expense on an average basis. Further, the petitioners add, it 
is the Department's practice to calculate costs on a monthly basis, 
citing Pipe and Tube from Mexico at 37016.
    The petitioners argue in the alternative that, if the Department 
does make the COS adjustment requested by Borusan, imputed home market 
credit expenses must be based on a proper calculation of Borusan's net 
prices. Specifically, the petitioners argue, Borusan's calculation of 
net price does not include a deduction for the quantity rebate granted 
to certain customers by Borusan, thereby overstating the net price to 
which the credit expense is applied.
    DOC Position: Pursuant to section 773(a)(8) of the Act, a COS 
adjustment for home market imputed credit expenses should be made when 
CV is the basis for normal value. We use imputed credit expenses to 
measure the effect of a specific respondent's selling practices in the 
United States and in the comparison market. Because Borusan's U.S. 
sales were export price sales, the adjustment entails adding U.S. 
imputed credit to the CV, and subtracting home market imputed credit 
from the CV. Although we added the U.S. imputed credit for the 
preliminary results, we neglected to deduct the home market imputed 
credit. We have made this correction for the final results.
    We disagree with the petitioners' assertion that, because Borusan 
did not calculate its home market credit expense using monthly interest 
rates, we should disallow this adjustment. Borusan calculated this 
expense on a weighted-average basis, i.e., the total principle times 
the number of days utilized for each short-term loan. This methodology 
is consistent with that used in calculating interest for both the 1993-
94 and the 1994-95 reviews of this proceeding, and we did not request 
that Borusan recalculate this expense using monthly interest rates. 
Under these facts, it would be inappropriate to deny this adjustment.
    We also disagree that a deduction for the quantity rebate, as 
proposed by the petitioners, is appropriate, because the quantity 
rebate is not part of the opportunity cost of the use of money in each 
sale. Instead, the quantity rebate is given after payment has been made 
by Borusan's customer.

Final Results of Review

    As a result of our review, we determine that the following margin 
exists for the period May 1, 1996, through April 30, 1997:

------------------------------------------------------------------------
                                                                Margin  
                   Manufacturer/exporter                      (percent) 
------------------------------------------------------------------------
The Borusan Group..........................................         0.02
------------------------------------------------------------------------

    The Department shall determine, and Customs shall assess, 
antidumping duties on all appropriate entries. As discussed above, 
because the number of transactions involved in this review and other 
simplification methods prevent entry-by-entry assessments, we have 
calculated importer-specific assessment rates. We divided the total 
dumping margins for the reviewed sales by the total entered value of 
those reviewed sales. We will direct Customs to assess the resulting 
percentage margin against the entered customs values for the subject 
merchandise on each of that importer's entries under the relevant order 
during the review period.6 While the Department is aware 
that the entered value of the reviewed sales is not necessarily equal 
to the entered value of entries during the POR, use of entered value of 
sales as the basis of the assessment rate permits the Department to 
collect a reasonable approximation of the antidumping duties which 
would have been determined if the Department had reviewed those sales 
of merchandise actually entered during the POR.
---------------------------------------------------------------------------

    \6\  We note that, in the preliminary results, we erroneously 
indicated that if the assessment rates that we calculated for the 
final results were de minimis, we would not instruct Customs to 
assess duties. However, section 353.6 (b) of our regulations 
requires the assessment of duties for any importer-specific 
assessment rates greater than zero. Accordingly, we have not 
disregarded de minimis rates for assessment purposes.
---------------------------------------------------------------------------

    Furthermore, the following deposit requirements will be effective 
for all shipments of the subject merchandise 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) 
of the Act: (1) the cash deposit rate for Borusan will be zero; (2) for 
merchandise exported by manufacturers or exporters not covered in this 
review but covered in a previous segment of this proceeding, the cash 
deposit rate will continue to be the company-specific rate published in 
the most recent final results in which that manufacturer or exporter 
participated; (3) if the exporter is not a firm covered in this review 
or in any previous segment of this proceeding, but the manufacturer is, 
the cash deposit rate will be that established for the manufacturer of 
the merchandise in these final results of review or in the most recent 
final results in which that manufacturer participated; and (4) if 
neither the exporter nor the manufacturer is a firm covered in this 
review or in any previous segment of this proceeding, the cash deposit 
rate will be 14.74 percent, the all others rate established in the 
less-than-fair-value investigation. These deposit requirements shall 
remain in effect until publication of the final results of the next 
administrative review.
    This notice also serves as final reminder to importers of their 
responsibility to file a certificate regarding the reimbursement of 
antidumping duties prior to liquidation of the relevant entries during 
this review period. Failure to comply with this requirement could 
result in the Secretary's presumption that reimbursement of antidumping 
duties occurred, and in the subsequent assessment of double antidumping 
duties.
    This notice also is the only reminder to parties subject to 
administrative protective order (APO) of their responsibility 
concerning the return or destruction of proprietary information 
disclosed under APO in accordance with 19 CFR 353.34(d). Failure to 
comply is a violation of the APO.
    This determination is issued and published in accordance with 
sections 751(a)(1) and 777(i)(1) of the Act.

    Dated: June 18, 1998.
Richard W. Moreland,
Acting Assistant Secretary for Import Administration.
[FR Doc. 98-17250 Filed 6-26-98; 8:45 am]
BILLING CODE 3510-DS-P