[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