[Federal Register Volume 64, Number 1 (Monday, January 4, 1999)]
[Notices]
[Pages 76-85]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-34799]
-----------------------------------------------------------------------
DEPARTMENT OF COMMERCE
International Trade Administration
[A-201-809]
Certain Cut-to-Length Carbon Steel Plate From Mexico: Final
Results of Antidumping Duty Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of final results of antidumping duty administrative
review.
-----------------------------------------------------------------------
SUMMARY: On September 9, 1998, the Department of Commerce (the
Department) published the preliminary results of the 1996-97
administrative review of the antidumping duty order on certain cut-to-
length (CTL) carbon steel plate from Mexico. This review covers one
manufacturer/exporter of the subject merchandise. The period of review
(POR) is August 1, 1996 through
[[Page 77]]
July 31, 1997. We gave interested parties an opportunity to comment on
the preliminary results. Based on our analysis of the comments
received, we have not changed the results from those presented in our
preliminary results of review.
EFFECTIVE DATE: January 4, 1999.
FOR FURTHER INFORMATION CONTACT: Heather Osborne or Mike Heaney,
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) 482-3019
or 482-4475, respectively.
SUPPLEMENTARY INFORMATION:
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. In addition, unless otherwise
indicated, all references to the Department's regulations are to 19 CFR
Part 351 (1998).
Background
On September 9, 1998, the Department published the preliminary
results of the 1996-97 administrative review of the antidumping duty
order on certain CTL carbon steel plate from Mexico. See Preliminary
Results of Antidumping Administrative Review, Certain Cut-to-Length
Carbon Steel Plate from Mexico, 63 FR 48181 (Preliminary Results). This
review covers one manufacturer/exporter of the subject merchandise,
Altos de Hornos de Mexico (AHMSA). The POR is August 1, 1996 through
July 31, 1997. We gave interested parties an opportunity to comment on
the preliminary results and held a public and closed hearing on
November 4, 1998. The following parties submitted comments and/or
rebuttals: Bethlehem Steel Corporation, Geneva Steel, Gulf Lakes Steel,
Inc., of Alabama, Inland Steel Industries, Inc., Lukens Steel Company,
Sharon Steel Corporation, and U.S. Steel Group (a unit of USX
Corporation) (collectively the petitioners), and AHMSA.
The Department has now completed this administrative review in
accordance with section 751(a) of the Act.
Scope of the Review
The products covered in this review 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 coil and without patterns in relief), of
rectangular shape, neither clad, plated nor 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 nonmetallic 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 Schedule (HTS) under item numbers 7208.31.0000,
7208.32.0000, 7208.33.1000, 7208.33.5000, 7208.41.0000, 7208.42.0000,
7208.43.0000, 7208.90.0000, 7210.70.3000, 7210.90.9000, 7211.11.0000,
7211.12.0000, 7211.21.0000, 7211.22.0045, 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.
These HTS item numbers are provided for convenience and U.S.
Customs purposes. The written descriptions remain dispositive.
Analysis of Comments Received
We invited interested parties to comment on our preliminary
results. We received comments from AHMSA and the petitioners.
Comment 1: Reported Costs
AHMSA contends that the Department's rationale for using adverse
facts available is refuted by statements in the Department's cost
verification report which demonstrate that AHMSA's reported costs
reconciled to its accounting records and financial statements. AHMSA
cites to several statements in the cost verification report where the
Department performed tests of specific cost data and traced that cost
data to AHMSA's accounting records. AHMSA urges the Department to
reexamine its own findings, as set forth in the cost verification
report, and reconsider its conclusions. AHMSA contends that the cost
data is verifiable.
Petitioners claim that the fact that certain of AHMSA's costs in
the aggregate may have reconciled to AHMSA's financial statement does
not suggest that AHMSA's control number (CONNUM)-specific costs were
verified or reconciled to AHMSA's financial statements. Petitioners
note that the verification report identifies specific costs which, in
the aggregate, were verified, including the trace of trial balance
accounts to financial statement line items. Citing to Final Results of
Antidumping Duty Administrative Review) Antifriction Bearings (Other
Than Tapered Roller Bearings) and Parts Thereof from the Federal
Republic of Germany, 56 FR 31692, 31707 (July 11, 1991), petitioners
state that the verification of aggregate costs does not equate to the
verification of CONNUM-specific costs.
Department's Position: We were unable to verify the CONNUM-specific
costs reported by AHMSA. The individual verification procedures cited
by AHMSA are tests of individual elements of the submitted data and do
not, separately or combined, indicate that AHMSA correctly reported its
cost data.
Section 773(f)(1)(A) of the Act specifically requires that costs be
calculated based on the records of the exporter or producer of the
merchandise, if such records are kept in accordance with the generally
accepted accounting principles (GAAP) of the exporting country and
reasonably reflect the costs associated with the production and sale of
the merchandise. In accordance with the statutory directive, the
Department will accept costs of the exporter or producer if they are
based on records kept in accordance with GAAP of the exporting country
and reasonably reflect the costs associated with the production and
sale of the merchandise (i.e., the cost data can be reasonably
allocated to subject merchandise). In determining if the costs were
reasonably allocated to all products the Department will, consistent
with section 773(f)(1)(A) of the Act, examine whether the allocation
methods are used in the normal accounting records and whether they have
been historically used by the company.
Before assessing the reasonableness of a respondent's cost
allocation methodology, however, the Department must ensure that the
aggregate amount of the reported costs captures all costs incurred by
the respondent in producing the subject merchandise during the period
under examination. This is done by performing a reconciliation of the
respondent's
[[Page 78]]
submitted cost of production (COP) and constructed value (CV) data to
the company's audited financial statements, when such statements are
available. Because of the time constraints imposed on verifications,
the Department generally must rely on the independent auditor's opinion
concerning whether a respondent's financial statements present the
actual costs incurred by the company, and whether those financial
statements are in accordance with GAAP of the exporting country. In
situations where the respondent's total reported costs differ from
amounts reported in its financial statements, the overall cost
reconciliation assists the Department in identifying and quantifying
those differences in order to determine whether it was reasonable for
the respondent to exclude certain costs for purposes of reporting COP
and CV.
Although the format of the reconciliation of submitted costs to
actual financial statement costs depends greatly on the nature of the
accounting records maintained by the respondent, the reconciliation
represents the starting point of a cost verification because it assures
the Department that the respondent has accounted for all costs before
allocating those costs to individual products.
AHMSA, however, was unable to perform such a reconciliation. As
discussed in Comment 8 below, the Department found that AHMSA had
failed to include costs incurred in its coke plants, sinter plant,
blast furnaces, basic oxygen furnaces, and continuous casters. AHMSA
incurred all of these costs in the production of the subject
merchandise. These unreported costs were substantial and raise serious
concerns about whether there are additional cost center costs related
to the plate production process which were not reported by AHMSA and
not discovered by the Department at verification.
Moreover, even if AHMSA had been able to reconcile its submitted
costs to its financial statements, it still would have failed
verification due to its failure to use its normal cost accounting
system in developing its COP and CV data. AHMSA indicated in its
questionnaire response that its normal cost accounting system, which
AHMSA used to prepare its financial statements, is not maintained on
the product-specific level requested by the Department. See AHMSA's
Cost Questionnaire Response at D-46, D-47. Therefore, AHMSA claimed
that it was necessary to use a separate costing model to develop such
grade-specific COP and CV data. In an effort to verify AHMSA's
statements that its normal cost accounting system did not capture costs
at the product-specific level, the Department was obligated to review
and evaluate AHMSA's normal cost accounting system. As explained in the
preliminary results, AHMSA withheld its normal cost accounting system's
product-specific cost records until the end of verification. See
Preliminary Results, 63 FR at 48182, September 9, 1998. AHMSA's
withholding of this data precluded us from verifying AHMSA's COP/CV
data. However, we were able to determine that AHMSA's normal cost
accounting system included grade-specific slab cost data (the process
preceding the plate rolling process). This data was more detailed than
and significantly different from the data submitted by AHMSA. Based on
the foregoing, we determined that the data submitted by AHMSA was not
based on the allocation methods AHMSA historically used in its normal
cost accounting system, even though such data was available to AHMSA.
Comment 2: Verification
AHMSA argues that the purpose of the Department's verification is
to verify the information submitted on the record. AHMSA claims the
Department verifiers refused to examine the information that was
prepared in advance by AHMSA to support its COP/CV information. AHMSA
states the Department verifiers mistakenly concluded that AHMSA
maintains only standard costs in its normal accounting system, and
claims that the Department verifiers misunderstood its cost accounting
system and the submitted data. AHMSA maintains that it used actual
costs recorded in its normal accounting system to prepare its cost
response, and that the Department's insistence on examining its
standard costs was based upon a misunderstanding of AHMSA's accounting
system.
Petitioners state that there is no basis for AHMSA's claim that the
Department verifiers misunderstood its cost accounting system.
Petitioners assert that the Department's verification report clearly
indicates that it fully understood that AHMSA's normal accounting
records included both actual and standard costs. Petitioners note that
at verification the Department found that AHMSA has both a standard
cost report and a version of the report that adjusts standard costs to
actual costs. See Memorandum from Michael Martin to Christian Marsh,
Verification Report on the Cost of Production and Constructed Value
Data Submitted by Altos Hornos de Mexico, S.A. de C.V. (Cost
Verification Report) at 21 (August 27, 1998). A public version of this
report is available in Room B099 of the Main Commerce Building. (AHMSA
references these reports in its brief to indicate that it maintains
both standard and actual costs.)
Petitioners also note that in its questionnaire responses AHMSA
described its normal cost accounting system as being based on standard
costs which were adjusted to actual costs through the application of
variances. Petitioners contest AHMSA's assertion that because AHMSA
used actual average plate cost and not its standard costs in reporting
CONNUM-specific costs, the Department was not obliged to examine
AHMSA's standard cost build-ups during verification. Petitioners argue
that without substantiation, the standard input factors could be
manipulated to improperly shift plate costs to non-subject merchandise.
Further, petitioners argue, the only way to rule out mis-allocations to
non-subject merchandise was for the Department to review the standard
usage factors compared to the actual consumption for AHMSA's steel
grades. Accordingly, petitioners conclude that the standard cost build-
ups were crucial to the verification because they identify the types of
costs included in AHMSA's average plate cost calculation.
Department's Position: We agree with AHMSA that the purpose of
verification is to verify the accuracy of information submitted on the
record, and note that the Department verifiers adhered to this basic
tenet during verification. However, as discussed in our response to
Comment 1, it was necessary for the Department verifiers to fully
understand AHMSA's normal cost and financial accounting systems before
they could evaluate the reported product-specific costs. Therefore, it
was crucial for the verifiers to review the costs as maintained in the
normal cost accounting system. It was also essential that the
Department verify AHMSA's claim that it had to resort to a system
outside its normal cost accounting system to prepare the reported
grade-specific COP and CV data because, as explained by AHMSA, its
normal cost accounting system did not include grade-specific cost
information at the level of specificity required by the Department. As
noted in the verification report, we found that AHMSA's normal cost
accounting system cost build-ups did in fact distinguish between the
grades of product produced.
Additionally, the Department verifiers clearly understood AHMSA's
normal accounting system and realized that it included both standard
and actual costs. Moreover, it was clear from AHMSA's responses that
AHMSA's normal cost
[[Page 79]]
accounting system (used in the preparation of AHMSA's financial
statements) is based on standard costs adjusted to actual costs through
the application of variances. Thus, because the normal cost accounting
system was based on standards, the Department was obliged to review the
build-up of AHMSA's standard costs. Because AHMSA's normal cost
accounting system was based on standard costs, there is no basis for
AHMSA's assertion that it had to prepare the requested standard cost
data for the first time during verification.
At verification the Department must review the normal financial and
cost accounting systems before reviewing the reported cost allocation
methodologies. The cost questionnaire and verification agenda are
organized and presented so that the respondent is aware that it must
use its normal books and records in preparing its response. Both the
cost questionnaire and the verification agenda start with the
explanation of the normal financial accounting system, then progress to
the normal cost accounting system, and finally to the reported cost
methodology. In this case the verifiers attempted to proceed in this
fashion; however, they were hampered by AHMSA's refusal to provide the
standard cost build-ups used to prepare the financial statements until
late in the verification process.
As to the methods and techniques of verification, the Court of
International Trade (CIT), in Koenig & Bauer-Albert AG, et al., v.
United States, 15 F. Supp. 2d 834 (CIT 1998), acknowledged that
``[c]ongress has afforded ITA a degree of latitude in implementing its
verification procedures'' and that ``[t]he decision to select a
particular method of verification rests solely within the agency's
sound discretion. * * * If a reasonable standard is applied and the
verification is supported by substantial evidence, the court will
sustain the methodology.'' Consistent with its practice, the Department
first attempted to review AHMSA's normal financial and cost accounting
system. The problems encountered at this crucial first step were
significant (see Cost Verification Report at 2) and resulted in AHMSA's
failure of the cost verification. See Preliminary Results, 63 FR at
48182-84 (describing AHMSA's failure of the cost verification).
Contrary to AHMSA's arguments, the Department cannot simply verify
reported information in a vacuum. If reported cost information is not
verifiably grounded in a respondent's normal books and records, it is
meaningless to ``verify'' the reported information. This is because
deviating from the product-specific costs recorded in a respondent's
normal books and records can significantly distort reported COP and CV
data. AHMSA's failure to use the product-specific costs recorded in its
normal books and records prevents us from quantifying the magnitude of
the distortions which exist in its submitted data. Under these
circumstances, the Department's conduct of verification and
verification findings are reasonable.
Comment 3: Use of Normal Cost Accounting System
AHMSA claims that, contrary to the statements in the Department's
cost verification report, it did rely on its ``normal'' cost accounting
system to prepare its COP and CV data. AHMSA states that it maintains
both actual and standard costs in its normal cost accounting system.
The actual costs tie to the cost of goods sold on the income statement,
while the standard costs tie to the inventory value on the balance
sheet.
For purposes of preparing its COP and CV information, AHMSA
maintains that it reported the actual cost of producing plate, and then
used its quarterly cost model to determine the costs of specific grades
of plate. According to AHMSA, the Department incorrectly concluded that
AHMSA did not rely on its ``normal'' cost accounting system because it
failed to report standard costs.
AHMSA asserts it is being unfairly and improperly penalized because
of the Department's misunderstanding of AHMSA's normal cost accounting
system. AHMSA maintains that its normal cost accounting system
comprises both actual and standard costs. AHMSA contends that the
result is identical whether using standard costs adjusted for variances
or actual costs. However, to comply with the verifiers' requests for
standard cost build-ups, AHMSA claims it had to manually calculate
these standard costs, delaying the verification. AHMSA contends that
the Department's misunderstanding of its cost accounting system and the
verifiers' insistence on reviewing AHMSA's standard costs resulted in
the failed cost verification.
Petitioners note that AHMSA's method of deriving CONNUM-specific
COPs and CVs involves two major steps. First, petitioners claim AHMSA
derived an average cost for all plate based on standard costs adjusted
for variances. Second, according to petitioners, AHMSA calculated the
cost of specific plate grades using its costing model. In petitioners'
view this resulted in CONNUM-specific costs that are significantly
different than those recorded in its normal accounting records.
Petitioners contend that there is no basis for AHMSA's claim that
the Department misunderstood its normal cost accounting system.
Petitioners assert that the Department's verification report clearly
indicates that AHMSA normally maintains both actual and standard costs.
Petitioners claim that the Department's statement that AHMSA did not
use its normal cost accounting system to prepare the submitted COP and
CV data refers to AHMSA's use of a ``sales pricing model'' which AHMSA
admittedly does not use in its normal accounting system. Regardless of
the model's nomenclature, petitioners allege that it is disingenuous of
AHMSA to suggest that the Department's statement refers to anything but
AHMSA's cost/pricing model.
Department's Position: We disagree with AHMSA. The cost
verification report accurately reflected the procedures performed and
issues found during the verification. While AHMSA's reporting
methodology may have relied on certain total actual costs from its
accounting system in calculating the aggregate average cost of all
plate, AHMSA did not rely on the allocation methodologies used in its
normal cost accounting system, which are used to prepare the GAAP-based
financial statements to calculate the reported product-specific costs.
AHMSA concedes this point in its case brief at page 20.
Additionally, we disagree with AHMSA's assertion that the verifiers
misunderstood its normal cost accounting system. To the contrary, the
verifiers were fully aware that a standard cost accounting system and
financial accounting system includes both the standard costs and actual
costs. See response to Comment 2 above. We also disagree with AHMSA's
assertion that it is being unfairly and improperly penalized for the
Department's misunderstanding of its normal cost accounting system.
AHMSA did not use its normal cost allocation methodology as the basis
for its COP and CV submissions, as required by the Department.
Therefore, we were obligated to reject in its entirety the cost data
submitted by AHMSA.
Moreover, we disagree with AHMSA's claim that its methodology leads
to the same result as would adjusting AHMSA's standard costs for
variances. The Department's questionnaire requires respondents to
report product-specific costs as defined by product characteristics
identified by the Department. While AHMSA's contention that standard
costs plus
[[Page 80]]
variances are the same as actual costs may be true on an overall basis,
it does not hold true in this instance for the CONNUM-specific cost
data. The methodology used by AHMSA started with certain plate
production costs in total, from which AHMSA calculated an average plate
cost for all steel grades. AHMSA's cost model then attempted to
differentiate grade-specific cost differences. The costs derived from
the model were not representative of the more detailed costs maintained
in AHMSA's normal cost accounting system, which includes grade-specific
costs for different grades of steel slab.
As described in Comment 1 above, the underlying basis for
formatting AHMSA's COP/CV response should have been AHMSA's normal cost
accounting system. The Department allows a respondent to deviate from
its normal cost accounting system only if the normal cost accounting
system does not allocate product-specific costs to the level of detail
required or does not appropriately allocate costs to products, and only
after consulting with representatives from the Department (see
Questionnaire, Section D-III, Response Methodology). AHMSA deviated
from its normal accounting system, and never discussed the deviation
with the Department prior to filing its cost response. In its response,
AHMSA claimed that it did not account for grade-specific cost
differences in its accounting records; yet at verification, the
Department found that in fact it did account for such differences.
Therefore, the Department found AHMSA's reported product-specific costs
were based on a methodology that was completely separate from AHMSA's
normal cost accounting system.
Comment 4: Grade-Specific Slab Costs
AHMSA argues that it did not withhold information about its grade-
specific slab costs from the verifiers. AHMSA insists that its
questionnaire response at pages D-46 and D-47 indicated that the
company maintains grade-specific costs for slab, but does not maintain
grade-specific costs for plate. According to AHMSA, if the Department
had wanted AHMSA to recalculate grade-specific plate costs using the
grade-specific slab costs as the starting point, then it was incumbent
upon the Department to notify AHMSA of this requirement prior to the
verification. AHMSA argues that the methodology it employed to report
its costs should not be considered unreasonable and inappropriate
simply because the Department believes there is a more appropriate
methodology for reporting costs.
Petitioners claim that AHMSA's failure to provide the standard cost
build-ups prevented verification of its submitted CONNUM-specific
costs. Petitioners argue that the average plate cost is a function of
the standard costs that are used to produce the plate. Petitioners
contend that it was imperative for the Department to review the
underlying standard costs of slab to determine if the reported CONNUM-
specific costs were consistent with costs actually incurred to produce
the merchandise. Because AHMSA did not provide the standard cost build-
ups until very late in the verification, petitioners argue the
Department was deprived of its opportunity to examine the grade-
specific slab costs normally maintained by AHMSA.
Department's Position: We agree with petitioners that AHMSA
withheld from the Department information concerning its grade-specific
slab costs. There is no record evidence supporting AHMSA's claim that
AHMSA explained in its questionnaire response that grade-specific slab
costs were maintained in its normal accounting system. The evidence
cited to by AHMSA at pages D-46 and D-47 of its questionnaire response,
where AHMSA asserts it ``notified'' the Department that the normal cost
accounting system included grade-specific slab costs, reads:
These actual costs are the costs recorded in AHMSA's plate mill
cost center and include all costs incurred in prior production
processes. Given AHMSA's accounting system, it is most appropriate
to cost product at this level since slab is used to produce a number
of different products, including many types of non-subject
merchandise. Thus, the most accurate measure of the amount of slab
(which is the compilation of all materials and other inputs up to
that point in the production process) used to produce a ton of plate
occurs at the plate mill cost center.
This cannot reasonably be construed as notification that AHMSA's normal
cost accounting system included grade-specific slab costs. In fact,
AHMSA's response arguably gave no indication that its normal cost
accounting system was more detailed with respect to grade-specific slab
costs. Had AHMSA provided the Department with a clear, complete, and
accurate response to the questionnaire regarding its normal cost
accounting system, we would have been able to address these concerns in
a supplemental questionnaire.
Because AHMSA had described its normal cost accounting system as a
standard cost system which was adjusted to actual costs through the
application of variances, the verification agenda sent to AHMSA prior
to the verification indicated that the Department would review the
normal accounting system. This verification agenda included standard
cost build-ups. The data withheld by AHMSA, and used by AHMSA in its
normal accounting records, is clearly more detailed than the data
submitted by AHMSA in its cost questionnaire response. Accordingly,
there is no basis for AHMSA's assertion that it was obligated to use a
methodology which was outside the normal cost accounting system to
develop product-specific costs.
Comment 5: Reconciliation of Costs
AHMSA contends that the Department reconciled AHMSA's reported
costs to its accounting system and to the audited financial statements.
AHMSA explains that when the Department verifiers requested the general
ledger in order to trace amounts from the trial balances, AHMSA did not
understand what the Department wanted, because those specific amounts
could not be seen directly in the general ledger. AHMSA acknowledges
that the Department has the authority to review documentation other
than that specified in the verification outline. However, AHMSA claims
that it was wrong for the Department to conclude that AHMSA failed to
reconcile its costs when it was able to tie its reported costs to the
company's trial balances. AHMSA states that the Department's
verification outline does not require that the trial balances be
reconciled to the general ledger. Moreover, AHMSA contends that the
statement in the verification report that the Department reconciled the
total cost, which AHMSA identified as plate cost per the accounting
system, to the total reported cost of manufacture (COM), refutes the
Department's conclusion that AHMSA's costs could not be reconciled to
its accounting records.
Petitioners disagree with AHMSA's claim that a reconciliation of
its financial statement to its trial balances would be sufficient for
its reported costs to verify. According to the petitioners, the
verification of certain aggregate costs neither constitutes
reconciliation of costs nor constitutes verification of AHMSA's CONNUM-
specific plate costs.
Responding to AHMSA's claim that the agenda did not require the
Department to trace the amounts from the trial balance to the general
ledger, petitioners note that a company's general ledger links the
individual trial balance amounts to the source documentation that
substantiate the trial balance amounts. Additionally,
[[Page 81]]
petitioners note that in Toyota Motor Sales U.S.A., Inc. v. United
States, Slip Op. 98-95 (CIT July 2, 1998) the CIT upheld the
Department's practice of using facts available when a respondent fails
to provide basic accounting documentation such as expense ledgers.
Department's Position: We disagree with AHMSA's claim that a
general ledger does not include amounts shown on a trial balance. To
the contrary, the trial balance is simply a summary of the account
balances from the general ledger. The general ledger contains
transactions, and is the connection between the trial balance and the
underlying source documents. Because AHMSA did not provide the general
ledger, we were unable to make the connection between total amounts
shown on the trial balance and the source documents.
Moreover, we disagree with AHMSA's assertion that its reported
costs were reconciled to the financial statements. See complete
discussion of this issue in Comment 1 above. When we discovered that a
significant percentage of costs were excluded from the reported costs,
AHMSA attempted to distinguish total costs recorded for all products
from total costs allocated to plate. See Comment 8 below. The statement
cited by AHMSA simply indicates that the total costs AHMSA allocated to
plate were reconciled to the total reported COM (i.e., multiplication
of the reported per-unit COM and the production quantity).
Comment 6: Physical Characteristics Cost Differences
AHMSA claims that it informed the Department long before the start
of the verification that its reported COP and CV amounts do not capture
cost differences arising from products that undergo different levels of
rolling or slitting. AHMSA contends that characteristics such as
overruns vs. non-overruns, prime vs. non-prime, painted vs. non-
painted, checkered vs. non-checkered, and scaled vs. non-scaled, are
the same for all plate products produced by AHMSA. With respect to
products of different widths and thicknesses, AHMSA contends that these
cost differences are accounted for because its reported costs are
calculated on a per-ton basis.
Petitioners contend that AHMSA's cost reporting methodology is
inadequate because it did not reflect the level of CONNUM-specificity
requested by the Department. Citing the cost verification report,
petitioners state that thinner plates should incur greater costs
because they require more processing. Noting that AHMSA's normal cost
accounting system distinguished grade-specific slab costs, petitioners
claim that AHMSA could have provided costs with greater product
specificity if it had used its normal cost accounting system rather
than its quarterly costing model. Additionally, petitioners state that
AHMSA's failure to disclose accurately the level of product specificity
maintained in its normal accounting system prevented the Department
from notifying AHMSA of its response deficiency.
Department's Position: We agree with petitioners that AHMSA's cost
reporting methodology inadequately accounted for CONNUM-specific cost
differences. For steel grade differences, AHMSA used its cost model
rather than its normal cost accounting system. See Comment 3. Moreover,
we disagree with AHMSA's claim that its per-ton cost allocation
reasonably accounts for cost differences attributable to differing
widths and thicknesses. AHMSA's assertion that products with different
width and thicknesses both share the same processing cost is contrary
to our verification findings that thinner plate requires more
processing than thicker plate. By allocating processing costs equally
to all types of plate, regardless of its thickness, AHMSA significantly
understated the processing cost on its thinner plate sizes.
Comment 7: Raw Material Consumption
AHMSA contends that, contrary to the conclusion of the cost
verification report, the Department did in fact verify the actual
materials consumption upon which AHMSA's reported costs are based.
AHMSA claims that the monthly production reports included in one of the
verification exhibits contains information on actual consumption of all
raw material inputs used to produce plate.
Petitioners claim that AHMSA's refusal to provide the normal
accounting system cost build-ups prevented the Department from
verifying material costs.
Department's Position: We do not support AHMSA's claim that any
number appearing on a verification exhibit is a verified number.
Because AHMSA withheld standard cost build-ups which include standard
usage and standard prices, we were unable to verify the consumption
included in the reported costs to the consumption amounts reflected in
AHMSA's normal cost accounting system.
Comment 8: Unreported Costs
In a letter submitted to the Department on June 8, 1998, AHMSA
explained it found that certain depreciation and other expenses related
to processes occurring prior to the plate mill cost center had been
inadvertently omitted from the reported costs. AHMSA claims that the
Department's verification finding of additional unreported depreciation
costs was not discovered by the verifiers. Instead, AHMSA holds that
the identified costs were submitted to the Department at the
commencement of verification.
AHMSA maintains that it also inadvertently omitted certain fixed
costs associated with these same processes. AHMSA declares that these
additional unreported cost center costs were not found by the
verifiers. AHMSA claims that it discovered these unreported cost
centers, quantified them, and informed the Department verifiers of the
missing additional fixed costs on the morning of the second day of
verification. Additionally, AHMSA claims that its position is
substantiated by record evidence. AHMSA contends that the omitted costs
are shown in Verification Exhibit B14, AHMSA Total Cost Reconciliation,
on the line ``additional fixed costs.''
Petitioners contend that the cost verification report clearly
establishes that AHMSA failed to include a substantial portion of plate
manufacturing costs.
Department's Position: AHMSA did not identify the cost centers in
question at the onset of verification. While the Department verifiers
were reviewing the cost center list and the corrections presented by
AHMSA at the beginning of verification, the verifiers identified
several cost centers which AHMSA had excluded from the reported costs.
These cost centers relate to plate production incurred prior to the
plate mill, and should have been included by AHMSA. During our review
of AHMSA's cost centers, we asked AHMSA to quantify the costs incurred
in those cost centers and to provide an allocation of those costs to
plate. Only after we identified the cost centers and requested AHMSA to
quantify the amounts, did AHMSA provide the data. The cost centers
identified by the verification team were in addition to the cost
centers AHMSA identified at the beginning of verification.
Comment 9: Possible Unreported Costs
AHMSA claims that the Department's assumption that there may be
additional cost centers related to the production of plate which were
neither included in the reported costs nor identified at verification
is unwarranted. AHMSA contends that the Department could not have
reconciled these costs to its accounting system if there were
[[Page 82]]
additional missing fixed costs. AHMSA cites to the verification reports
which states, ``We reconciled the total costs which AHMSA identified as
plate cost per the accounting system, to the total reported COM (B14) *
* *'' AHMSA concludes that the Department's statement that there could
be other missing costs is illogical given that the Department verified
its total reported COM.
Petitioners cite the verification report which states that the
Department could not determine whether there were additional cost
centers related to plate which were not included in the reported costs.
Department's Position: We disagree with AHMSA's statement that we
performed an overall reconciliation of its total costs. As discussed in
Comment 5 above, the statement in the verification report only
indicates that the total reported COMs (i.e., multiplication of the
per-unit COM and the production quantity) reconciled to the amounts
AHMSA allocated to plate. However, it does not indicate that we were
able to reconcile the total costs for all products to the total costs
allocated to plate. See Comment 1 above.
Comment 10: Comparison of Reported Costs to Standard Costs
AHMSA claims that the cost verification report incorrectly
concluded that the actual costs AHMSA reported to the Department
differed significantly from the standard costs reviewed by the
Department at verification. Specifically, AHMSA contends that the
Department's conclusion that AHMSA had understated its reported costs
was erroneous based on the fact that the Department incorrectly
compared the inventory cost for one discrete product to the reported
average cost for all plate products. AHMSA maintains that it actually
overstated its reported costs based on a comparison of the company's
December 1996 average inventory value to the reported average POR plate
cost.
Petitioners did not comment on this issue.
Department's Position: We disagree with AHMSA's claim that the
actual costs it reported to the Department did not differ significantly
from the standard costs reviewed by the Department at verification. A
comparison of AHMSA's product-specific standard costs of production, as
recorded in its normal accounting records for ten sampled products, to
the reported per-unit costs for the same ten products, reveals
significant differences in the per-unit costs between the reporting
methodology and AHMSA's normal books and records (see Cost Verification
Report at 2). This inconsistent difference in per-unit costs between
its reporting methodology and its normal books and records supports the
Department's contention that the cost model used by AHMSA to determine
product-specific costs for its COP and CV response generated per-unit
costs that differed significantly from those maintained in its normal
accounting records.
Comment 11: Use of Facts Available
AHMSA contests the Department's characterization of the company as
uncooperative and claims it did not withhold information. AHMSA claims
to have complied with every request for information made by the
Department. AHMSA notes that it submitted sales and expense data on
over 25,000 home market plate sales during a 14-month period, and that
it also submitted information indicating that it reported all home
market plate sales of all plate products sold during the 12-month
period of review and the two months following the last month in which
AHMSA had sales.
As evidence of its cooperation, AHMSA notes that it reported the
COP for every plate product sold in the home market during the 14-month
period, which totaled over 200 different products, as well as CV
information for merchandise exported to the United States.
AHMSA also notes that it allowed the Department to spend two full
weeks at its Monclova, Mexico facility to verify its reported sales and
cost data. AHMSA emphasizes that the submitted sales data was verified
without any problems or discrepancies. AHMSA objects to the
Department's statement that AHMSA failed to cooperate to the best of
its ability, given the amount of information that it compiled and
reported to the Department. Because AHMSA claims to have cooperated to
the best of its ability, it disputes the Department's decision to apply
adverse facts available in this case. Finally, as an alternative to
total adverse facts available, AHMSA suggests that the Department use
data contained in petitioners' sales-below-cost allegation to determine
normal value. AHMSA further suggests that the Department base CV on the
highest cost reported for any single plate product, and calculate a
margin using the verified sales information and the highest reported
cost.
Petitioners contend that the Department's practice is to use total
adverse facts available in cases in which the absence of reliable cost
data renders a respondent's entire response unusable. Petitioners argue
that the Department's use of facts available in this case is consistent
with its position in Certain Cut-to-Length Carbon Steel Plate from
Sweden: Final Results of Antidumping Administrative Review, 62 FR
18396, 18398 (April 15, 1997).
Department's Position: Section 776(a) of the Act provides that, if
an interested party withholds information that has been requested by
the Department, fails to provide such information in a timely manner or
in the form or manner requested, significantly impedes a proceeding
under the antidumping statute, or provides information which cannot be
verified, the Department shall use, subject to sections 782(d) and (e),
facts otherwise available in reaching the applicable determination. In
this review AHMSA had described its normal cost accounting system as a
standard cost system which was adjusted to actual costs through the
application of variances. The verification agenda sent to AHMSA prior
to the verification indicated that the Department would review the
normal accounting system including the standard cost build-ups. As
noted in the Cost Verification Report, AHMSA withheld from the
Department this data which clearly indicated that its normal cost
accounting system maintained more detailed costs than claimed in the
cost questionnaire response (i.e., the normal cost accounting system
did include grade-specific costs). Therefore, AHMSA's claim that it had
to use its model (a methodology which was outside the normal cost
accounting system) to develop product-specific costs, was incorrect.
Since AHMSA failed to provide the necessary information in the form and
manner requested, and in some instances the submitted information was
found to be inaccurate, we conclude that, pursuant to section 776(a) of
the Act, use of facts otherwise available is appropriate.
Section 782(d) of the Act provides that, if the Department
determines that a response to a request for information does not comply
with the request, the Department will inform the person submitting the
response of the nature of the deficiency and, to the extent
practicable, shall provide that person the opportunity to remedy or
explain the deficiency. If that person submits further information that
continues to be unsatisfactory, or this information is not submitted
within the applicable time limits, the Department, subject to section
782(e), may disregard all or part of the original and subsequent
responses, as appropriate. In this case, we were unable to inform AHMSA
of its deficiency of not using its normal
[[Page 83]]
accounting system to report grade-specific costs because, until
verification, we relied upon AHMSA's claim that its normal standard
cost accounting records did not account for grade-specific cost
differences. At verification, after significant delays in providing its
standard cost build-ups, we noted that AHSMA's standard cost accounting
system did in fact account for grade-specific cost differences.
The Department rejects AHMSA's suggestion that we should determine
normal value by relying on the data contained in the petitioners's
sales-below-cost allegation. Although this information was sufficient
to warrant a cost investigation, we have no assurance that petitioners'
alleged costs capture all of AHMSA's costs. Because we could not
confirm that the petitioners' cost allegation fully reflected AHMSA's
costs, we could not determine whether sales were made above or below
COP in this review. Similarly, we could not base CV on the highest cost
reported by AHMSA for any single plate product because, as shown at
verification, we could not verify the full extent of AHMSA's costs.
Comment 12: Use of Adverse Facts Available (FA)
AHMSA claims the Department's assertion that AHMSA failed to
cooperate to the best of its ability is not supported by record
evidence. Citing to the Notice of Final Determination of Sales at Less
than Fair Value: Grain-Oriented Electrical Steel from Italy, 59 FR
33952 (July 1, 1994), AHMSA claims the Department's prior precedent
suggests that despite a failed cost verification, AHMSA should not be
considered uncooperative. Like the respondent in Grain Oriented
Electrical Steel from Italy, AHMSA claims it responded to all
information requests from the Department and permitted verification of
its sales and cost data. Due to its degree of cooperation, AHMSA
considers a determination based on total adverse FA to be unwarranted
in this case.
Petitioners argue that the statute gives the Department ample
discretion to draw an adverse inference where a respondent has failed
to cooperate by not acting to the best of its ability. Petitioners
claim that the Department could not verify AHMSA's information because
AHMSA failed to provide necessary supporting documentation in a timely
fashion, failed to provide CONNUM-specific costs, and omitted a
significant portion of its total cost of manufacturing. Additionally,
petitioners note that AHMSA submitted incomplete and erroneous
responses to the Department's questionnaire.
Regarding whether the highest rate from the petition is the most
appropriate adverse FA rate, petitioners cite section 776(b) of the
Act, which allows the Department to use as FA information derived from
a petition, a final determination, any previous administrative review,
or any other information placed on the record.
Petitioners distinguish Grain Oriented Electrical Steel from Italy
from the present case because the respondent in that case was
considered cooperative, while AHMSA was determined not to have acted to
the best of its ability.
Finally, citing Notice of Final Results and Partial Rescission of
Antidumping Administrative Review of Roller Chain, Other than Bicycle,
from Japan, 62 FR 60472 (November 10, 1997), petitioners note that when
considering whether the FA selected are sufficiently adverse, a factor
to consider is the extent to which a party may benefit from its own
lack of cooperation.
Department's Position: We disagree with AHMSA's argument that the
Department should not use an adverse inference in selecting FA. Section
776(b) of the Act provides that adverse inferences may be used when a
party that has failed to cooperate by not acting to the best of its
ability to comply with requests for information. As discussed in our
positions in the comments above and in the verification report, AHMSA
failed to use its normal cost accounting system to report the submitted
COP and CV data and, as a result, failed to reconcile the reported
costs to its normal cost accounting system. Moreover, the Department
was unable to reconcile AHMSA's submitted costs to its financial
statements because, among other issues, AHMSA failed to report costs
from a number of relevant cost centers. Reporting of costs based on a
respondent's normal books and records and reporting of all relevant
costs are both central to the Department's cost questionnaire. By
failing to comply with the information requests in the questionnaire
and by failing to notify the Department or request assistance on these
issues as instructed in the questionnaire, the Department finds that
AHMSA failed to cooperate to the best of its ability. Furthermore, in
certain instances, AHMSA failed to cooperate with even minimal requests
for information at verification (such as presentation of its general
ledger). Hence, an adverse inference is warranted.
The statute provides no clear obligation or preference for relying
on a particular source in choosing information to use as adverse FA. In
this case, as adverse FA we have used the highest rate from any prior
segment of the proceeding, 49.25 percent. This rate was used as the
best information available rate in the LTFV investigation and was based
on information in the petition. As determined in Certain Cut-to-Length
Carbon Steel Plate from Sweden: Final Results of Antidumping Duty
Administrative Review, 62 FR 18396, 18398 (April 15, 1997), the
Department may use as FA the final determination in the less-than-fair-
value (LTFV) proceeding, even when the LTFV determination is based on
best information available.
When making adverse inferences, the Statement of Administrative
Action (SAA) authorizes the Department to consider the extent to which
a party may benefit from its own lack of cooperation (SAA at 870).
Because AHMSA's current cash deposit rate is 49.25 percent, the
Department believes that assigning a 49.25 percent rate will prevent
AHMSA from benefitting from its failure to respond to the Department's
requests for information. Anything less than the current cash deposit
rate would effectively reward AHMSA for not cooperating to the best of
its ability. The cash deposit rate at the time AHMSA requested this
review was 49.25 percent and we presume that the 49.25 percent rate is
sufficiently adverse to induce cooperation in future segments of this
proceeding. Generally in cases resulting in adverse determinations the
assigned rate is greater than the current cash deposit rate. In this
case, however, the only rate comparable to AHMSA's current cash deposit
rate is the highest rate from the petition.
In Grain Oriented Electrical Steel from Italy the Department
indicated that as best information available it would have used the
higher of (1) the average of the margins alleged in the petition or (2)
the calculated dumping margin for another respondent; however, it would
not make an adverse inference that resulted in a rate lower than the
current cash deposit rate for the company. Although in Grain Oriented
Electrical Steel from Italy the Department deemed the respondent to be
cooperative, despite a failed cost verification, it rejected in full
the information submitted during the review and relied on the margin
alleged in the petition. In this review, we also are rejecting in full
the information submitted during the course of the review and instead
are using the margin alleged in the petition. In contrast to Grain
Oriented Electrical Steel from Italy, we do not consider AHMSA's
efforts to comply with the
[[Page 84]]
Department's requests, reflective of its ability to provide the
information or its willingness to cooperate. It is not our practice to
use dumping margins based on adverse FA that effectively reward a
respondent's failure to cooperate to the best of its ability. Because
we will not use a dumping margin based on adverse FA that is less than
the current cash deposit rate, we determine the most appropriate rate
to apply as adverse FA in this review is the rate from the LTFV
investigation of 49.25 percent.
Comment 13: Corroboration
AHMSA states that if the Department maintains its position in the
preliminary results and applies adverse FA, the Department must
adequately corroborate the information. AHMSA claims that the
Department took no affirmative action in the preliminary results to
corroborate the information in the 1992 petition.
Petitioners consider the rate from the petition to be sufficiently
probative, citing the Final Results of Administrative Review in Certain
Welded Stainless Steel Pipe from Taiwan, 62 FR 37543 (July 13, 1997),
where the Department determined that the highest margin is the most
probative evidence of current margins because, if it were not so, the
importer, knowing of the rule, would have produced current information
showing the margin to be less.
Department's Position: We disagree with AHMSA's contention that the
Department has not corroborated the facts available rate assigned to
AHMSA. The 49.25 percent rate is based on the LTFV final determination,
which in turn was based on information in the petition. Section 776(b)
of the Act authorizes the Department to use as adverse FA information
derived from, among other places, the petition or the final
determination from the LTFV investigation. This type of information is
considered secondary information. See SAA at 870; 19 CFR 351.308(c)(1).
Section 776(b) of the Act mandates that the Department, to the
extent practicable, shall corroborate that secondary information from
independent sources reasonably at its disposal. In accordance with the
law, the Department, to the extent practicable, will examine the
reliability and relevance of the information used. However, in an
administrative review the Department will not engage in updating the
petition to reflect the prices and costs that are found during the
current review. Rather, corroboration consists of determining that the
significant elements used to derive a margin in a petition are reliable
for the conditions upon which the petition is based. With respect to
the relevance aspect of corroboration, the Department will consider the
information reasonably at its disposal as to whether there are
circumstances that would render a margin not relevant.
To corroborate the LTFV rate of 49.25 percent, we examined the
basis of the rates contained in the petition. The U.S. price in the
petition was based on actual prices from invoices, quotes to U.S.
customers, and IM-145 import statistics. Additionally, the foreign
market value was based on actual price quotations to home market
customers, home market price lists, and published reports of domestic
prices. Home market price quotations were obtained through a market
research report. (See Initiation of Antidumping Duty Investigations and
Postponement of Preliminary Determinations: Certain Hot-Rolled Carbon
Steel Flat Products, Certain Cold-Rolled Carbon Steel Flat Products,
Certain Corrosion-Resistant Carbon Steel Flat Products, and Certain
Cut-to-Length Carbon Steel Plate From Various Countries, 57 FR 33488
(July 29, 1992).)
We were able to corroborate the 1991 fourth quarter average unit
values listed in the petition by comparing these values to publicly
available information compiled by the U.S. Census Bureau and made
available by the International Trade Commission (ITC). The ITC reports
quantity and value by HTS numbers. Using the same HTS numbers as listed
in the petition (HTS 7208.42 and 7208.43), we divided the total
quantity by the total volume for the fourth quarter 1991 and noted the
average unit values were very similar to those reported in the original
petition. In addition, export prices which are based on U.S. import
statistics are considered corroborated. Price lists and published
reports of domestic prices which support the petition margin are
independent sources. With regard to the normal values contained in the
petition, the Department was provided no useful information by the
respondent or other interested parties and is aware of no other
independent sources of information that would enable us to further
corroborate the margin calculation in the petition. Furthermore, with
respect to the relevance of the margin used for adverse FA, the
Department stated in Tapered Roller Bearings from Japan; Final Results
of Antidumping Duty Administrative Review, 62 FR 47454 (September 9,
1997), that it will consider information reasonably at its disposal as
to whether there are circumstances that would render a margin
irrelevant. Where circumstances indicate that the selected margin is
not appropriate as adverse FA, the Department will disregard the margin
and determine an appropriate margin. See also Fresh Cut Flowers from
Mexico; Preliminary Results of Antidumping Duty Administrative Review,
60 FR 49567 (September 26, 1995). We have determined that there is no
evidence on the record that would provide a more appropriate adverse FA
rate than the petition rate.
Finally, we note that the SAA at 870 specifically states that where
``corroboration may not be practicable in a given circumstance,'' the
Department may nevertheless apply an adverse inference. The SAA at 869
emphasizes that the Department need not prove that the facts available
are the best alternative information. Therefore, based on our efforts,
described above, to corroborate information contained in the petition,
and mindful of the legislative history discussing FA and corroboration,
we consider the petition margin we are assigning to AHMSA in this
review as adverse facts available to be corroborated to the extent
practicable.
Final Results of the Review
As a result of this review, we have determined that the following
weighted-average dumping margin exists for the period August 1, 1996
through July 31, 1997:
------------------------------------------------------------------------
Margin
Manufacturer/exporter Period (percent)
------------------------------------------------------------------------
AHMSA.................................... 8/1/96-7/31/97 49.25
------------------------------------------------------------------------
The Department shall determine, and the U.S. Customs Service shall
assess, antidumping duties on all appropriate entries. The Department
shall issue appraisement instructions directly to the Customs Service.
For assessment purposes, we normally calculate importer-specific duty
assessment rates for the merchandise based on the ratio
[[Page 85]]
of the total amount of antidumping duties calculated for the examined
sales during the POR to the total entered value of sales examined
during the POR. Because we could not calculate a margin based on sales
during the POR, and had to base the margin on adverse FA, we have
determined that importer-specific duty assessments rates are not
necessary for this review.
Furthermore, the following deposit requirements shall be effective
upon publication of this notice of final results of review for all
shipments of certain CTL carbon steel plate from Mexico, entered, or
withdrawn from warehouse, for consumption on or after the publication
date, as provided for by section 751(a)(1) of the Tariff Act: (1) the
cash deposit rate for the reviewed company will be the rate stated
above; (2) for previously investigated companies not listed above, the
cash deposit rate will continue to be the company-specific rate
published for the most recent period; (3) if the exporter is not a firm
covered in these reviews, or the original LTFV investigation, but the
manufacturer is, the cash deposit rate will be the rate established for
the most recent period for the manufacturer of the merchandise; and (4)
if neither the exporter nor the manufacturer is a firm covered in this
review, the cash deposit rate for this case will continue to be 49.25
percent, the ``All Others'' rate in the LTFV investigation. These
deposit requirements shall remain in effect until publication of the
final results of the next administrative review.
This notice serves as a final reminder to importers of their
responsibility under 19 CFR 351.402(f) to file a certificate regarding
the reimbursement of antidumping duties prior to liquidation of the
relevant entries during this review period. Failure to comply with this
requirement could result in the Secretary's presumption that
reimbursement of antidumping duties occurred and the subsequent
assessment of double antidumping duties.
This notice also serves as a reminder to parties subject to
administrative protective orders (APO) of their responsibility
concerning the disposition of proprietary information disclosed under
APO in accordance with 19 CFR 353.34 (1997). Timely written
notification of the return or destruction of APO materials, or
conversion to judicial protective order, is hereby requested. Failure
to comply with the regulations and terms of an APO is a sanctionable
violation.
This administrative review and notice are in accordance with
sections 751(a)(1) and 777(i)(1) of the Act and 19 CFR 351.213.
Dated: December 22, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-34799 Filed 12-31-98; 8:45 am]
BILLING CODE 3510-DS-P