[Federal Register Volume 63, Number 172 (Friday, September 4, 1998)]
[Notices]
[Pages 47232-47235]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-23910]



[[Page 47232]]

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DEPARTMENT OF COMMERCE

International Trade Administration
[A-485-803]


Certain Cut-to-Length Carbon Steel Plate From Romania: Notice of 
Rescission of Antidumping Duty Administrative Review

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

ACTION: Notice of rescission of antidumping duty administrative review.

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SUMMARY: In response to a request from one respondent, the Department 
of Commerce (the Department) initiated an administrative review of the 
antidumping duty order on cut-to-length carbon steel plate from 
Romania. This administrative review covers one Romanian exporter of 
plate, Windmill International Romania branch (Windmill), for the period 
August 1, 1996 through July 31, 1997. We are rescinding this review as 
a result of the absence of any bona fide sales of subject merchandise 
during the period of review (POR).

EFFECTIVE DATE: September 4, 1998.

FOR FURTHER INFORMATION CONTACT: Fred Baker or John Kugelman, 
Enforcement Group III--Office 8, Import Administration, International 
Trade Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW, Washington, DC 20230; telephone (202) 482-2924 
(Baker), -0649 (Kugelman).

Applicable Statute

    Unless otherwise indicated, all citations to the Tariff Act of 
1930, as amended (the Act), are references to the provisions effective 
January 1, 1995, the effective date of the amendments made to the Act 
by the Uruguay Round Agreements Act (URAA). In addition, unless 
otherwise indicated, all citations to the Department's regulations are 
references to the provisions codified at 19 CFR Part 351 (62 FR 27296, 
May 19, 1997).

Scope of the Review

    These products include hot-rolled carbon steel universal mill 
plates (i.e., flat-rolled products rolled on four faces or in a closed 
box pass, of a width exceeding 150 millimeters but not exceeding 1,250 
millimeters and of a thickness of not less than 4 millimeters, not in 
coils and without patterns in relief), of rectangular shape, neither 
clad, plated, or coated with metal, whether or not painted, varnished, 
or coated with plastics or other nonmetallic substances; and certain 
hot rolled carbon steel flat rolled products in straight lengths, of 
rectangular shape, hot rolled, neither clad, plated, nor coated with 
metal, whether or not painted, varnished or coated with plastics or 
other non-metallic substances, 4.75 millimeters or more in thickness 
and of a width which exceeds 150 millimeters and measures at least 
twice the thickness, as currently classifiable in the Harmonized Tariff 
Schedules of the United States (HTSUS) under item numbers 7208.40.3030, 
7208.40.3060, 7208.51.0030, 7208.51.0045, 7208.51.0060, 7208.52.0000, 
7208.53.0000, 7208.90.0000, 7210.70.3000, 7210.90.9000, 7211.13.0000, 
7211.14.0030, 7211.14.0045, 7211.90.0000, 7212.40.1000, 7212.40.5000, 
and 7212.50.0000. Included in this review are flat-rolled products of 
non-rectangular cross-section where such cross-section is achieved 
subsequent to the rolling process (i.e., products which have been 
``worked after rolling''); for example, products which have been 
beveled or rounded at the edges. Excluded from this review is grade X-
70 plate.

Background

    Windmill International PTE Ltd. of Singapore, Windmill 
International Romania Branch, and Windmill International Ltd. (U.S.A.) 
(collectively ``Windmill''), an exporter and importer of Romanian 
plate, submitted a request on August 29, 1997, that the Department 
review its U.S. sales made during the period August 1, 1996 through 
July 31, 1997. The Department initiated the review on September 25, 
1997 (62 FR 50292).

SUPPLEMENTARY INFORMATION: In a January 16, 1998, submission Windmill 
explained that it made two sales during the POR. The first, shipped via 
ocean carrier, was made as a ``test shipment'' for the purpose of 
initiating this administrative review. When it became apparent in late 
July 1997 that this sale would not enter U.S. customs territory during 
the POR, Windmill and the same U.S. customer negotiated another sale, 
which was shipped by air, that entered U.S. customs territory on July 
31, 1997, the last day of the POR. See Windmill's November 20, 1997 
submission, p. C-15.
    On July 24, 1998, Bethlehem Steel Corporation and U.S. Steel Group 
(a division of USX Corporation) (petitioners) requested that the 
Department rescind this review. Petitioners argue that the Department 
should disregard Windmill's first U.S. sale because it entered U.S. 
customs territory after the POR. They also argue that Windmill's second 
U.S. sale was not a bona fide sale. Petitioners claim that, for a sale 
to be bona fide, it must:
    (1) Be at arm's length, and have a price that is negotiated, not 
artificially set;
    (2) Be consistent with good business practices; and,
    (3) Be sold pursuant to procedures typical of the parties' normal 
business practices.
    Petitioners base these criteria on Court of International Trade 
(CIT) rulings in PQ Corporation v. United States, 652 F. Supp. 724, 729 
(CIT 1987) (PQ Corporation) and Chang Tieh Industry Co. v. United 
States, 840 F. Supp. 141, 146 (CIT 1993) (Chang Tieh).
    Regarding the first criterion, petitioners argue that the sale was 
not an arm's-length transaction because both parties were guided by the 
same legal counsel in setting the price and the shipping terms. They 
further argue that the parties artificially set the price for this sale 
because Windmill and the U.S. customer (by their admission) fixed a 
price and structured the arrangement ``to protect Windmill from legal 
attack in the present proceedings.'' See Windmill's March 3, 1998 
submission, p. 5. Finally, petitioners argue that Windmill's U.S. 
customer cannot be viewed as an arm's-length buyer because it took a 
tremendous loss on the sale when it resold the merchandise. Petitioners 
argue that using the criteria outlined in PQ Corporation Windmill's 
sale to the U.S. is not an arm's-length transaction. In PQ Corporation 
(where the CIT found the sale at issue to be bona fide), the CIT based 
its determination in part on the fact that there was no danger of 
foreign producers creating fictitious markets in the United States 
because to do so a producer would have to raise the price above the 
market value. Here, petitioners argue, because Windmill's U.S. customer 
sold the merchandise for a lower amount than it paid for it, the 
Department cannot determine the market value, and the Department 
therefore cannot apply the reasoning of PQ Corporation.
    Regarding the second criterion, petitioners argue that Windmill's 
sale was not consistent with good business practices. They argue that 
there is no reasonable commercial justification for the U.S. customer 
to have participated in this transaction. First, the U.S. customer 
resold the merchandise for substantially less than what it paid 
Windmill. Second, the U.S. customer paid more to warehouse the

[[Page 47233]]

merchandise than it received from the resale of the merchandise to its 
customer. Third, there was no commercial reason for the U.S. customer 
to pay the high shipping charges it paid to obtain the industry's 
cheapest and most common product.
    Regarding the third criterion, petitioners argue that the U.S. 
customer's sales procedures with respect to this sale were atypical of 
its normal business practices. First, Windmill's responses indicate 
that the U.S. customer functions as a trading company that typically 
purchases large quantities of steel in response to buyers' inquiries, 
and does not take physical possession of the merchandise. For this 
sale, however, the U.S. customer did not have an order until after it 
had purchased the product from Windmill and imported the plates into 
the United States. Additionally, the U.S. customer took possession of 
the steel plates for two weeks and paid the warehousing fees before the 
subsequent customer purchased the merchandise. Finally, petitioners 
argue that the U.S. customer would normally not resell products at a 
substantial loss.
    In an August 13, 1998 letter to Windmill, the Department explained 
that it intended to review Windmill's first sale (if a review is 
requested) in the review of the period covering the date on which the 
sale entered U.S. customs territory. The Department also explained that 
it considered Windmill's second sale to be not a bona fide sale. The 
Department gave the following reasons for this determination:
    a. The cost of the air freight, customs fees, brokerage expenses, 
warehousing, and miscellaneous expenses (which were borne by the U.S. 
customer, and not Windmill) was significantly greater than the total 
value of the sale.
    b. By Windmill's own admission, the decision to send the shipment 
by air, rather than by ocean, was based solely on the need to enter the 
merchandise into the United States before the end of the POR. There was 
no customer emergency or particular need for costly air shipment rather 
than the usual surface shipment.
    c. The quantity of the sale was atypical of that which Windmill 
normally sells to the U.S. customer, which was a trading company and 
not an end-user.
    d. The U.S. customer's purchase of the merchandise prior to 
receiving an order for it from a customer was atypical of its normal 
business practice.
    e. The same legal counsel guided both Windmill and the U.S. 
customer through the sales process, and by its admission helped 
negotiate a price for the sale solely for the purpose of obtaining for 
Windmill a lower cash deposit rate. There is no evidence that any 
commercial factors that normally influence price negotiations played 
any role in setting the price for this sale.
    f. The U.S. customer resold the merchandise at a substantial loss.
    We stated that we found these factors significant in light of the 
fact that the grade involved in this sale was one of the cheapest and 
most common grades of steel. Based on these factors we determined the 
sale was not commercially reasonable, and involved selling procedures 
atypical of Windmill's and the U.S. customer's normal selling 
procedures. We therefore concluded that it was not bona fide. Based on 
this determination, we indicated in our letter that we intended to 
rescind the review. We invited Windmill to comment on this 
determination. On August 20, 1998, we received comments from Windmill.
    Windmill argues that until now existing precedents have permitted 
the Department to rescind reviews only where the test shipment or sale 
to the United States was fraudulent. See PQ Corporation, Chang Tieh, 
Fresh and Chilled Atlantic Salmon from Norway, 62 FR 1430 (1997) 
(Salmon), and IPSCO, Inc., v. United States, 10 ITRD 1392, 1398, 687 F. 
Supp. 633, 641 (CIT 1988). The Department's determination, Windmill 
argues, creates a new, ``opaque'' standard which in effect changes the 
definition of bona fide to mean ``commercially reasonable,'' rather 
than its dictionary definition of ``legitimate.'' This new standard, 
Windmill argues, requires an artificially high standard of commercial 
and practical reasonableness. It would also require a test sale to be 
structured as if the antidumping order and high cash deposit rate did 
not exist before it could be accepted as bona fide.
    Furthermore, Windmill argues that because this new standard is 
discretionary and capricious, it violates the URAA's purpose of making 
antidumping procedures more transparent. It also violates the URAA's 
purpose of expanding access to administrative reviews of antidumping 
orders, because no sale by a new shipper (which Windmill claims it is) 
can be commercially reasonable and typical of normal business practices 
when there have been no sales because of high dumping margins. 
Moreover, there is nothing in the URAA or in section 772 of the 
applicable U.S. statute that suggests that ``unusual,'' ``strange,'' 
``atypical,'' or ``commercially unreasonable'' sales were to be 
excluded from antidumping calculations.
    Additionally, Windmill argues that this new standard would severely 
undermine the solely remedial purpose of the U.S. antidumping law 
because it would turn antidumping orders into exclusion orders by 
increasing tenfold the difficulties foreign exporters face in lowering 
antidumping margins and cash deposit rates. This result, Windmill 
argues, is essentially punitive.
    Furthermore, Windmill argues that the CIT and the Department have 
consistently declined to apply any ``ordinary course of trade'' 
requirement to U.S. sales. The Department's determination with regard 
to its sale in this review, Windmill argues, in effect reverses this 
practice. Windmill states that there is nothing commercially normal 
about any test shipment; by definition it differs from the normal 
course of business if only because it is the first sale in what the 
respondent hopes to establish as a major new market.
    Additionally, Windmill argues that because its sale was sold at 
arms length and at a market price, it was by definition bona fide.
    In addition to the above arguments, Windmill attempts a point-by-
point rebuttal of each of the six factors the Department cited in its 
August 13, 1998, letter as the bases for its determination. First, with 
respect to its movement expenses relative to the value of the sale, 
Windmill argues that this point is irrelevant because the terms of sale 
were ex-works, loaded on truck. By citing this factor, Windmill states, 
the Department is essentially dismissing the sale because it is 
inconsistent with good business practices or is outside the ordinary 
course of trade. Windmill argues that the fact that the sale may not 
have been commercially viable or normal in some or all respects cannot 
in itself make it not bona fide for purposes of qualifying as a test 
shipment. Moreover, Windmill states, freight costs often exceed the 
cost of the goods; particularly in the steel trade, steel is often 
flown via air freight to meet a deadline. Additionally, both Windmill 
and the U.S. customer found it commercially reasonable for the U.S. 
customer to pay higher transportation costs in order to complete a test 
sale and to get the current cash deposit rate lowered.
    Second, as for Windmill's decision to send the shipment by air 
being based solely on the need to have it enter the United States 
before the end of the POR, Windmill argues that the Department is again 
criticizing the sale as inconsistent with good business practices. 
Windmill states that there is nothing fraudulent about these 
circumstances, which is the

[[Page 47234]]

correct standard to be applied. Furthermore, Windmill states that, 
contrary to the Department's assertion, there was a commercial need, 
namely, Windmill's need to have the sale enter U.S. customs territory 
by July 31, 1997.
    Third, with respect to the quantity of the sale being atypical, 
Windmill argues that there is no ``typical quantity'' because it was a 
test shipment.
    Fourth, with respect to the U.S. customer's purchase of the 
merchandise prior to receiving an order for it from a customer being 
atypical of its normal business practices, Windmill argues that, based 
on the CIT's determination in Chang Tieh, the issue is not whether the 
test shipment was ``atypical'' but whether the transaction was tainted 
by fraud. Furthermore, because the sale was a test shipment, it is 
irrelevant whether the selling procedures were typical. Moreover, 
Windmill did not learn the identity of the U.S. customer's buyer except 
in the context of these proceedings.
    Fifth, with respect to the Department's statement that the same 
legal counsel helped negotiate a price for the sale, Windmill argues 
that the Department's information is incorrect. Windmill states 
Windmill itself negotiated the price, and that its legal counsel ``only 
advised Windmill to land a shipment in the United States by the end of 
July and to make the sale a bona fide arm's-length transaction at a 
market price.'' Furthermore, it argues that petitioners have submitted 
no evidence of what the market price was at the time of the sale. The 
standard reference for such price, Windmill states, is the journal 
Metals Bulletin. Windmill argues that Metals Bulletin substantiates 
that its price was a market price.
    Finally, with respect to Windmill's U.S. customer having sold the 
merchandise at a substantial loss, Windmill argues that this loss is 
irrelevant because only Windmill's price to its U.S. customer is 
relevant to the new cash deposit rate.
    We disagree with Windmill and find that its U.S. sale is not bona 
fide. In conducting an administrative review, section 751(a)(2) of the 
statute instructs the Department, in general, to determine a dumping 
margin for each entry. The CIT has, however, recognized that the 
Department has the authority to disregard a sale to the United States 
that is not bona fide. See Chang Tieh at 146. Therefore, we are 
disregarding the sale in question; moreover, because this sale is 
associated with the only entry during the period of review and there 
are no other entries to review, we are rescinding the review.
    We disagree with Windmill's argument that the Department has 
improperly established a new, ``opaque'' standard which equates the 
term bona fide with ``commercially reasonable.'' In determining whether 
Windmill's sale is bona fide in this case, as in past cases, we have 
looked to whether the transaction has been so artificially structured 
as to be commercially unreasonable. The CIT has agreed, stating that 
where a transaction is an orchestrated scheme involving artificially 
high prices, the Department may disregard the sale as not resulting 
from a bona fide transaction. Chang Tieh at 146. Thus, evidence 
concerning whether the transaction is commercially reasonable is 
relevant to whether a sale is bona fide. Moreover, such evidence has 
been examined by the Department in past cases. For example, in 
Manganese Metal from the Peoples' Republic of China, 60 FR 56045 
(November 6, 1995) (Manganese Metal), based on the timing of the single 
sale by one respondent relative to the filing of the petition, the 
price, which was significantly higher than the market price, and other 
commercially unusual facts about the transaction (these were 
proprietary), the Department found that the sale was not bona fide and 
disregarded it. Thus, judicial precedent and agency practice 
demonstrate that the standard applied by the Department in this case is 
neither new nor opaque.
    In the present case Windmill has acknowledged that its ``test'' 
shipment was structured to address what it views as a commercial 
problem presented by the existence of the antidumping order and the 
high ``all others'' rate. The Department recognizes that exporters may 
make only a single sale in order to establish their own antidumping 
duty rate, particularly where the ``all others'' rate is high. We have, 
in fact, conducted reviews of single shipments. See, e.g., Salmon; 
Chang Tieh; PQ Corp. However, in all of those cases the evidence 
indicated that the sales were commercially reasonable. Salmon at 1432 
(no evidence to indicate sale was not bona fide; no unusual sales 
procedures; price was consistent with the market at the time); Chang 
Tieh at 146 (no evidence that price was outside the appropriate market 
range); PQ Corp. at 729 (no evidence of dealings or relationship 
between exporter and buyer to indicate sale was other than bona fide; 
price was lower than that of U.S. supplier, therefore, consistent with 
good business practice). In contrast, in Manganese Metal, discussed 
above, where the evidence indicated that the sale was orchestrated to 
manipulate the margin calculation and was not commercially reasonable, 
we excluded it. To do otherwise would be a fraud upon the proceeding. 
See Chang Tieh at 144; American Permac, Inc. et al., v. United States, 
783 F. Supp. 1421 (Ct. Int'l Trade 1992) (noting that ``although 
periodic reviews set final duty rates for certain sales, they also set 
deposit rates for future years'').
    The evidence in the present case leads us to conclude that 
Windmill's ``test'' sale was made solely for the purpose of obtaining a 
separate rate for Windmill. Such a purpose does not render a sale non-
bona fide as long as the sale itself is at least arguably commercially 
reasonable. Here, although the price charged by Windmill does not 
appear to be unreasonable, the reasonableness of the transaction must 
be judged by the total costs borne by the U.S. importer. The 
extraordinarily high transportation costs incurred by the importer, 
combined with other expenses borne by the importer in connection with 
this sale and the fact that the merchandise was subsequently resold at 
a significant loss (excluding transportation and other costs) lead us 
to conclude that there is no basis upon which it could be found that 
the sale was commercially reasonable. Therefore, we find that the sale 
is not bona fide.
    The fact that Windmill has not acted fraudulently, in the sense 
that it has not attempted to deceive the Department about the nature of 
the transaction, is irrelevant. That Windmill may have acted out of an 
erroneous interpretation of the law and the agency's practice, rather 
than an intent to deceive, does not change the nature of the 
transaction itself.
    Moreover, on the facts of this case, finding that the sale is not 
bona fide does not, as respondent asserts, equate antidumping orders 
with exclusion orders. As noted above, single sales, even those 
involving small quantities, are not inherently commercially 
unreasonable and do not necessarily involve selling practices atypical 
of the parties' normal selling practices. Thus, we do not believe that 
the determination in this case violates the statute's remedial purpose 
or acts to exclude the respondent from the market.
    For the foregoing reasons, we are rescinding this administrative 
review in accordance with section 751(a)(1) of the Tariff Act (19 
U.S.C. 1675(a)(1)) and section 351.213(d)(3) of the Department's 
regulations.


[[Page 47235]]


    Dated: August 31, 1998.
Joseph A. Spetrini,
Deputy Assistant Secretary for Import Administration
[FR Doc. 98-23910 Filed 9-3-98; 8:45 am]
BILLING CODE 3510-DS-P