[Federal Register Volume 64, Number 61 (Wednesday, March 31, 1999)]
[Notices]
[Pages 15444-15457]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-7533]



[[Page 15443]]

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Part III





Department of Commerce





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International Trade Administration



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Final Determination of Sales at Less Than Fair Value: Stainless Steel 
Plate in Coils from Belgium, Canada, Italy, Korea, South Africa and 
Taiwan; Notices

  Federal Register / Vol. 64, No. 61 / Wednesday, March 31, 1999 / 
Notices  

[[Page 15444]]



DEPARTMENT OF COMMERCE

International Trade Administration
[A-580-831]


Notice of Final Determination of Sales at Less Than Fair Value: 
Stainless Steel Plate in Coils (``SSPC'') from the Republic of Korea

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

EFFECTIVE DATE: March 31, 1999.

FOR FURTHER INFORMATION CONTACT: Carrie Blozy or Rick Johnson, Import 
Administration, International Trade Administration, U.S. Department of 
Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 
20230; telephone: (202) 482-0165 or (202) 482-3818, respectively.

The 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 of Commerce 
(``Department'') regulations are to the regulations at 19 CFR part 351 
(1998).

Final Determination:

    We determine that stainless steel plate in coils (``SSPC'') from 
the Republic of Korea are being sold in the United States at less than 
fair value (``LTFV''), as provided in section 735 of the Act. The 
estimated margins are shown in the ``Continuation of Suspension of 
Liquidation'' section of this notice.

Case History

    Since the preliminary determination (Notice of Preliminary 
Determination of Sales at Less Than Fair Value: Stainless Steel Plate 
in Coils (``SSPC'') from the Republic of Korea (``Preliminary 
Determination''), 63 FR 59535 (November 4, 1998)), the following events 
have occurred:
    On November 5, 1998, petitioners alleged ``significant ministerial 
errors'' made in the Department's margin calculation for the 
preliminary determination. On November 6, 1998, respondent, Pohang Iron 
& Steel Co., Ltd. (``POSCO''), responded to petitioners'' comments. On 
November 23, 1998, the Department found that the errors alleged by 
petitioners were policy decisions and not unintentional errors of the 
kind covered by the ministerial error provision (see 19 CFR 
351.224(f)). See Memorandum to Edward Yang: Stainless Steel Plate in 
Coils from the Republic of Korea--Analysis of Alleged Ministerial 
Errors, dated November 23, 1998. POSCO submitted revisions and 
corrections to its questionnaire responses during October, November, 
and December 1998. During November 1998, we conducted the sales 
verification of POSCO's responses to the antidumping questionnaire. 
Following verification, we requested that POSCO submit a revised sales 
database, which POSCO submitted on November 30, 1998. During December 
1998, the Department conducted the cost verification of POSCO's 
responses to the antidumping questionnaire. On December 18, 1998, the 
Department postponed the final determination to 135 days after 
publication of the preliminary determination (see Postponement of Final 
Antidumping Determinations: Stainless Steel Plate in Coils from Canada, 
Italy, Republic of Korea, South Africa, and Taiwan, 63 FR 70101. On 
January 5, 1999, we issued our sales verification report (see 
Memorandum to the File: Report on the Sales Verification of Pohang Iron 
& Steel Company, Ltd. (``Sales Verification Report''), dated January 5, 
1999). Also, on January 12, 1999, we issued our cost verification 
report (see Memorandum to the Neal Halper, Acting Director, Office of 
Accounting: Cost Verification Report--Pohang Iron and Steel Company, 
Ltd. (``Cost Verification Report''), dated January 12, 1999. Finally, 
on January 14, 1999, the Department issued its report on the U.S. sales 
verification of Pohang Steel America (``POSAM'') (see Memorandum to the 
File: Report of the U.S. Sales Verification of Pohang Steel America 
(``POSAM Verification Report''), dated January 14, 1999).
    On January 19, 1999, petitioners withdrew their request for a 
public hearing. Petitioners and POSCO submitted case briefs on January 
26, 1999, and rebuttal briefs on February 2, 1999.

Scope of Investigation

    For purposes of this investigation, the product covered is certain 
stainless steel plate in coils. Stainless steel is an alloy steel 
containing, by weight, 1.2 percent or less of carbon and 10.5 percent 
or more of chromium, with or without other elements. The subject plate 
products are flat-rolled products, 254 mm or over in width and 4.75 mm 
or more in thickness, in coils, and annealed or otherwise heat treated 
and pickled or otherwise descaled. The subject plate may also be 
further processed (e.g., cold-rolled, polished, etc.) provided that it 
maintains the specified dimensions of plate following such processing. 
Excluded from the scope of this petition are the following: (1) Plate 
not in coils, (2) plate that is not annealed or otherwise heat treated 
and pickled or otherwise descaled, (3) sheet and strip, and (4) flat 
bars.
    The merchandise subject to this investigation is currently 
classifiable in the Harmonized Tariff Schedule of the United States 
(HTS) at subheadings: 7219.11.00.30, 7219.11.00.60, 7219.12.00.05, 
7219.12.00.20, 7219.12.00.25, 7219.12.00.50, 7219.12.00.55, 
7219.12.00.65, 7219.12.00.70, 7219.12.00.80, 7219.31.00.10, 
7219.90.00.10, 7219.90.00.20, 7219.90.00.25, 7219.90.00.60, 
7219.90.00.80, 7220.11.00.00, 7220.20.10.10, 7220.20.10.15, 
7220.20.10.60, 7220.20.10.80, 7220.20.60.05, 7220.20.60.10, 
7220.20.60.15, 7220.20.60.60, 7220.20.60.80, 7220.90.00.10, 
7220.90.00.15, 7220.90.00.60, and 7220.90.00.80. Although the HTS 
subheadings are provided for convenience and Customs purposes, the 
written description of the merchandise under investigation is 
dispositive.

Period of Investigation

    The period of investigation (``POI'') is January 1, 1997, through 
December 31, 1997.

Transactions Investigated

    As in the preliminary determination, the Department has excluded 
POSCO's sales to the affiliated service centers and considered the 
affiliates' resales of the subject merchandise. Also, as discussed in 
Comment 11, the Department has included POSCO's local letter of credit 
(``local'') sales in its margin analysis because these sales are 
consumed in the home market. Additionally, as described in Comment 2, 
the Department has determined that for U.S. and home market sales the 
date of invoice is the appropriate date of sale as this is the date on 
which the material terms of sale are set.

Product Comparisons

    In accordance with section 771(16) of the Act, we considered all 
products produced by the respondent, covered by the description in the 
Scope of Investigation section, above, and sold in the home market 
during the POI, to be foreign like products for purposes of determining 
appropriate product comparisons to U.S. sales. Where there were no 
sales of identical merchandise in the home market to compare to U.S. 
sales, we compared U.S. sales to the next most similar foreign like 
product

[[Page 15445]]

on the basis of the characteristics listed in the antidumping duty 
questionnaire and the May 27, 1998 reporting instructions.

Fair Value Comparisons

    To determine whether sales of SSPC from the Republic of Korea to 
the United States were made at less than fair value, we compared export 
price (``EP'') or constructed export price (``CEP'') to the Normal 
Value (``NV''), as described in the ``Export Price/Constructed Export 
Price'' and ``Normal Value'' sections of this notice, below. In the 
preliminary determination, for all sales, we compared EP to NV. 
However, as discussed in Comment 4, the Department has found that 
POSCO's U.S. sales through POSAM constitute CEP sales and has compared 
CEP to NV for those sales. In accordance with section 777A(d)(1)(A)(i) 
of the Act, we calculated weighted-average EPs or CEPs for comparison 
to weighted-average NVs.

Level of Trade

    In accordance with section 773(a)(1)(B)(i) of the Act, to the 
extent practicable, we determine NV based on sales in the comparison 
market at the same level of trade (``LOT'') as the EP or CEP 
transaction. The NV LOT is that of the starting price sales in the 
comparison market or, when NV is based on CV, that of the sales from 
which we derive selling, general and administrative expenses (``SG&A'') 
and profit. For EP, the LOT is also the level of the starting price 
sale, which is usually from the exporter to the importer. For CEP, it 
is the level of the constructed sale from the exporter to the importer.
    To determine whether NV sales are at a different LOT from EP or CEP 
sales, we examine stages in the marketing process and selling functions 
along the chain of distribution between the producer and the 
unaffiliated customer. If the comparison market sales are at a 
different LOT, and the difference affects price comparability, as 
manifested in a pattern of consistent price differences between the 
sales on which NV is based and comparison market sales at the LOT of 
the export transaction, we make a LOT adjustment under section 
773(a)(7)(A) of the Act. Finally, for CEP sales, if the NV level is 
more remote from the factory than the CEP level and there is no basis 
for determining whether the differences in the levels between NV and 
CEP sales affects price comparability, we adjust NV under section 
773(A)(7)(B) of the Act (the CEP offset provision). See Notice of Final 
Determination of Sales at Less Than Fair Value: Certain Cut-to-Length 
Carbon Steel Plate from South Africa, 62 FR 61731 (November 19, 1997).
    For the preliminary determination, we concluded that POSCO 
performed similar selling functions in the U.S. market and HM Channels 
1 (sales from POSCO to the unaffiliated customer) and 2 (sales from 
POSCO Steel Sales & Services Co., Ltd. (``POSTEEL''), POSCO's affiliate 
responsible for the majority of home market sales and all U.S. sales, 
to the unaffiliated customer) and that a LOT adjustment was not 
warranted for comparisons between the U.S. market and HM Channels 1 and 
2. No party to this investigation commented on this determination. 
However, as POSCO's response detailing the type of selling functions 
performed by the affiliated service centers (HM Channel 3) was not 
received until October 30, 1998, the Department could not make a 
determination for the preliminary determination whether the affiliated 
service centers' resales were sold at a different level of trade than 
other home market channels or U.S. channels. Additionally, as noted 
above, for the final determination we have classified POSCO's U.S. 
sales through POSAM as CEP sales.
    In its October 30, 1998 supplemental response, POSCO stated that HM 
Channel 3 sales were made at the same LOT as the U.S. sales and other 
HM sales. It reported that the only selling functions performed by the 
service centers are inventorying the subject merchandise and arranging 
for freight. Additionally, POSCO indicated that the sales process is 
the same for both service centers: The customers contact the service 
centers by fax or phone. If the requested merchandise is in inventory, 
the service centers issue a shipping order sheet with the merchandise. 
If the merchandise is not in inventory, the service centers will order 
the merchandise from POSCO. At verification, the Department confirmed 
the selling functions performed by the affiliates. See Sales 
Verification Report at pg. 5. Therefore, we determine that selling 
functions performed in HM Channel 3 are similar to the selling 
functions performed in HM Channels 1 and 2: Freight and delivery, 
invoicing, sales negotiation, and limited amounts of market research, 
warranty services, and technical advice. Consequently, we find that the 
home market constitutes a single LOT.
    In order to determine whether normal value was established at a 
different LOT than EP or CEP sales, we examined stages in the marketing 
process and selling functions along the chains of distribution between 
POSCO and its U.S. customers, and then compared those functions to the 
single LOT, we previously identified in the HM. In the U.S. we 
identified three channels of distribution: (1) Sales from POSTEEL 
directly to the unaffiliated U.S. customer (U.S. Channel 1); (2) sales 
from POSTEEL to POSAM to the unaffiliated U.S. customer (U.S. Channel 
2); and (3) sales from POSTEEL to the unaffiliated Korean trading 
company (U.S. Channel 3). For the EP sales, U.S. Channels 1 and 3, we 
verified that POSTEEL arranges freight and delivery, and performs sales 
negotiation and invoicing. We also found that POSTEEL provides limited 
amounts of market research, warranties, and technical advice. In 
examining the LOT of the CEP sales (U.S. Channel 2), after deducting 
for economic activities which occurred in the United States, pursuant 
to section 772(d) of the Act, we found that POSTEEL performs the 
following activities: arranging for freight and delivery to the U.S. 
port, sales negotiation, and invoicing. Because of the similar selling 
functions performed between the EP sales (U.S. Channels 1 and 3) and 
the CEP sales (U.S. Channel 2), we find that all U.S. sales are made at 
a single LOT. Finally, because of the similarity in the chains of 
distribution and selling functions performed for sales in the home 
market and in the U.S., we find that no LOT adjustment or offset is 
necessary.

Export Price/Constructed Export Price

    For those U.S. sales made through POSAM, we calculated CEP based on 
packed prices to unaffiliated customers in the United States. We made 
deductions for movement expenses in accordance with section 772 
(c)(2)(A) of the Act; these included, where appropriate, foreign inland 
freight, foreign brokerage and handling, international freight, marine 
insurance, U.S. inland freight, U.S. Customs Duty, and U.S. brokerage 
and wharfage charges. In accordance with section 772(d)(1) of the Act, 
we deducted those selling expenses associated with economic activity 
occurring in the United States, including direct selling expenses 
(credit costs, bank charges, and U.S. commissions) and indirect selling 
expenses. Also, we made an adjustment for CEP profit in accordance with 
section 772(d)(3) of the Act. Finally, we added to U.S. price an amount 
for duty drawback pursuant to section 772 (c)(1) (B) of the Act.
    We calculated EP based on the same methodology used in the 
preliminary determination.

[[Page 15446]]

Normal Value

    After testing home market viability and whether home market sales 
were at below-cost prices, we calculated NV as noted in the ``Price-to-
Price Comparisons'' and ``Price-to-CV Comparison'' sections of this 
notice.
1. Home Market Viability
    As discussed in the preliminary determination, we determined that 
the home market was viable and no parties have contested that decision. 
For the final determination, we have based NV on home market sales.
2. Cost of Production Analysis
    As discussed in the preliminary determination, we conducted an 
investigation to determine whether POSCO made sales of the foreign like 
product in the home market during the POI at prices below their cost of 
production (``COP''). In accordance with section 773(b)(3) of the Act, 
we calculated COP based on the sum of POSCO's cost of materials and 
fabrication for the foreign like product, plus amounts for home market 
SG&A, interest expenses, and packing costs. We used the information 
from POSCO's December 17, 1998 supplemental questionnaire response to 
calculate COP, except in the following instance.
    POSCO purchased a significant amount of ferroalloys from an 
affiliated party during the POI. For each affiliated purchase, we 
compared the prices paid to affiliates to the average market price and 
to the affiliated party's cost of production. Where appropriate, we 
increased POSCO's per unit costs to the higher of transfer price, 
market price, or cost of production. See Memorandum to Neal Halper, 
Acting Director, Office of Accounting: Cost of Production (``COP'') and 
Constructed Value (``CV'') Calculation Adjustments for the Final 
Determination of Pohang Iron & Steel Co., Ltd. (``POSCO'') (``Cost 
Analysis Memorandum''), dated March 19, 1999. See also, Comment 5.
3. Test of Home Market Sales Prices
    As in our preliminary determination, we compared the weighted-
average COP for POSCO, adjusted where appropriate (see above), to home 
market sales of the foreign like product as required under section 
773(b) of the Act. In determining whether to disregard home market 
sales made at prices less than the COP, we examined whether (1) within 
an extended period of time, such sales were made in substantial 
quantities, and (2) such sales were made at prices which permitted the 
recovery of all costs within a reasonable period of time. On a product-
specific basis, we compared the COP to home market prices, less any 
applicable movement charges and direct and indirect selling expenses.
4. Results of the COP Test
    Pursuant to section 773(b)(2)(C) of the Act, where less than 20 
percent of respondent's sales of a given product were at prices less 
than the COP, we did not disregard any below-cost sales of that product 
because we determined that the below-cost sales were not made in 
``substantial quantities.'' Where 20 percent or more of a respondent's 
sales of a given product during the POI were at prices less than the 
COP, we determined such sales to have been made in ``substantial 
quantities'', as defined in section 773(b)(2)(C)(i) of the Act, within 
an extended period of time in accordance with section 773(b)(2)(B) of 
the Act. In such cases because we compared prices to weighted-average 
COPs for the POI , we also determined that such sales were not made at 
prices which would permit recovery of all costs within a reasonable 
period of time, in accordance with section 773(b)(2)(D) of the Act. 
Therefore, we disregarded the below-cost sales. Where all sales of a 
specific product were at prices below the COP, we disregarded all sales 
of that product.

Calculation of CV

    As in our preliminary determination, we calculated CV based on the 
sum of respondent's cost of materials, fabrication, SG&A, interest 
expenses and profit. We calculated the COP included in the calculation 
of CV as noted above, in the ``Calculation of COP'' section of the 
notice. In accordance with section 773(e)(2)(A) of the Act, we based 
SG&A and profit on the amounts incurred and realized by the respondent 
in connection with the production and sale of the foreign like product 
in the ordinary course of trade, for consumption in the foreign 
country.

Price-to-Price Comparisons

    As in our preliminary determination, for those product comparisons 
for which there were sales at prices above the COP, we based NV on 
prices to home market customers. We made adjustments, where 
appropriate, for physical differences in the merchandise in accordance 
with section 773(a)(6)(C)(ii) of the Act.
    We calculated NV based on the same methodology used in the 
preliminary determination, with three exceptions. Where appropriate, we 
deducted from NV the amount of indirect selling expenses capped by the 
amount of the U.S. commissions. Also, we recalculated POSCO's indirect 
selling expenses reported for HM Channel 1 sales (sales through POSCO) 
and HM Channel 2 and U.S. Channel 3 sales (sales through POSTEEL). As 
discussed in Comment 7, we determined that POSCO incorrectly excluded 
sales to affiliated parties in its calculation of POSCO's indirect 
selling expense ration. Also, at verification, the Department found 
that POSCO had included PSC division figures in its calculation of 
indirect selling expenses for domestic sales through POSTEEL, based on 
the fact that, in the flat-rolled cases, PSC had a role in selling the 
merchandise. However, POSCO acknowledged that these divisional expenses 
should not have been included in this calculation. See Sales 
Verification Report at pg. 15. Therefore, for the final determination, 
we have recalculated the indirect selling expense for HM Channel 2 
sales and U.S. Channel 3 sales by excluding PSC division figures. Also, 
we added to NV an amount for duty drawback pursuant to section 772 
(c)(1)(B) of the Act, where appropriate.

Price-to-CV Comparisons

    For price-to-CV comparisons, we made adjustments to CV in 
accordance with section 773(a)(8) of the Act. If appropriate, we 
deducted from CV the amount of indirect selling expenses (adjusted as 
described in the ``Price-to-Price Comparisons'' section above) capped 
by the amount of the U.S. commissions.

Currency Conversion

    In the preliminary determination, the Department determined that 
the decline in the won at the end of 1997 was so precipitous and large 
that the dollar-won exchange rate cannot reasonably be viewed as having 
simply fluctuated during this time, i.e., as having experienced only a 
momentary drop in value. Therefore, the Department used daily rates 
exclusively for currency conversion purposes for HM sales matched to 
U.S. sales occurring between November 1 and December 31, 1997. See 
Preliminary Determination at 59539. As discussed in Comment 3, the 
Department continues to find that use of daily exchange rates is 
warranted during the November/December period.

Verification

    As provided in section 782(i) of the Act, we verified the 
information submitted by the respondent for use in our final 
determination. We used standard verification procedures, including 
examination of relevant accounting and production records and

[[Page 15447]]

original source documents provided by the respondent.

Interested Party Comments

    Comment 1. Sales to a Bankrupt Customer. Petitioners argue that by 
excluding POSCO's sales to a U.S. customer that later went bankrupt and 
making no other adjustments to account for these unpaid sales, the 
Department failed to follow its own precedent. Citing Color Television 
Receivers from the Republic of Korea: Final Results of Antidumping 
Administrative Review, 61 FR 4408, 4412 (February 6, 1996) (``Color 
Televisions''), petitioners maintain that it is the Department's 
practice to treat sales to a bankrupt customer as a direct selling 
expense. They contend that had the Department based its treatment of 
these sales on Color Televisions, the preliminary margin would have 
been approximately 11 percent, not the 2.77 percent margin POSCO 
received in the preliminary determination. Furthermore, they allege 
that the domestic industry continues to suffer from less than fair 
value sales of SSPC from Korea, notwithstanding the Department's 
preliminary determination.
    Petitioners contend that even if the Department disagrees with 
their argument that the sales were significant and were not 
``atypical'', the Department must consider the cost of these sales to 
POSCO to be direct selling expenses. Petitioners claim that POSCO mis-
characterized its sales to the bankrupt U.S. customer as insignificant. 
They maintain that these sales represent a significant portion of 
POSCO's U.S. sales by every measure, and as such, should have been 
included in the Department's analysis. They cite several cases in 
support of their contention that these sales are significant, including 
Gulf States Tube Div. v. United States, 981 F. Supp. 630 (CIT 1997). 
They maintain that prior to the URAA changes to the Act, the Department 
would consider respondent's request to exclude insignificant 
``outlier'' sales, if the inclusion of such sales would significantly 
complicate reporting or calculation aspects of the proceeding. They 
explain that respondent bore the burden of establishing the necessity 
of the exclusion and the exclusion acknowledged two salient practices 
of the time: first, the Department looked at a six-month period of 
investigation; and second, the Department calculated a transaction-
specific margin for each sale. Subsequent to the URAA, the Department 
uses a twelve month POI and calculates a weighted-average product 
specific margin. Based on the Department's current calculation 
methodology in which the Department seeks to capture a complete 
snapshot of a respondent's selling practices by using an expanded 
twelve-month period of investigation, petitioners question the 
Department's decision to exclude these sales due to their ``atypical'' 
nature.
    Petitioners argue that sales to customers who cannot pay for the 
merchandise are an everyday occurrence, and companies such as POSCO 
anticipate this fact. Further, they note that POSCO has many accounts 
and reserves to deal with potential bad debts. See POSCO's Section A 
questionnaire at Exhibit A-12. Petitioners contend that the 
Department's treatment of these sales is analogous to the Department 
excluding sales to a home market customer because the customer receives 
a significantly lower price than other home market customers because it 
purchases in large quantities. They argue that despite being 
``atypical'' of sales made during the 12-month period of investigation, 
the Department will not exclude these sales because these sales will 
continue to be weight-averaged with other sales and the customer will, 
presumably, continue to purchase in large quantities in the future. 
Citing POSCO's December 7, 1998 Supplemental Questionnaire Response in 
the investigation of Stainless Steel Sheet and Strip in Coils from 
Korea at pp. 4-5, petitioners note that POSCO made sales to this 
customer outside of the investigation. Furthermore, they speculate that 
POSCO continues to makes sales to this customer. Finally, they note 
that POSCO has stated that it expects to recoup some amount for the 
unpaid sales in bankruptcy court. See Id. at pg. 4.
    Petitioners allege that the Department's classification of unpaid 
sales in the companion investigation of stainless steel sheet and strip 
in coils (``SSSS'') from the Republic of Korea was incorrect. Although 
petitioners agree with the Department's decision to recognize the cost 
of these unpaid sales, they maintain that there was no basis for the 
Department to treat the cost of these sales as an indirect selling 
expense. They argue that the weaknesses in the Department's argument is 
apparent when one considers the reality under which these sales were 
made. First, they explain that POSCO classified (incorrectly, in 
petitioners' judgement) all of its U.S. sales as export price sales. 
They note that by treating these unpaid sales as an indirect selling 
expense, there is absolutely no consequence when an importer is not 
paid for merchandise. Additionally, they charge that POSCO must bear 
attorney fees, collections fees, court fees, and the cost of producing 
the merchandise. They maintain that these are clearly direct expenses, 
for if not for the customer's bankruptcy, POSCO would not incur the 
aforementioned charges. Petitioners argue that the best analogy for the 
expenses associated with these unpaid sales is a warranty expense. They 
explain that if the customer determined that the merchandise was 
defective, and failed to pay under a warranty agreement, the cost of 
the merchandise would be deducted as a warranty claim, a direct selling 
expense, charged against sales. They state that in SSSS from the 
Republic of Korea, the Department defined direct selling expenses as 
``a direct and unavoidable consequence of the sale (i.e., in the 
absence of the sale these expenses would not be incurred).'' SSSS at 
pg. 140. Petitioners argue that the facts in this case demonstrate that 
the loss resulting from these unpaid sales are ``a direct and 
unavoidable consequence of the sale.'' Petitioners maintain that not 
only is there a clear, factual basis for treating these unpaid sales as 
a direct selling expense, but it is also the Department's policy to 
treat sales to a bankrupt customer as such, citing CTVs from Korea.
    Additionally, petitioners allege that POSCO has failed to 
demonstrate that the cost of the unpaid sales are indirect selling 
expenses. Citing several cases, petitioners argue that Department 
precedent requires respondent to prove that the selling expenses 
incurred through sales to a bankrupt customer in the U.S. are indirect 
selling expenses. See, e.g., Timken Co. v. United States, 18 CIT 
486,852 F.Supp. 1122, 1125 (1994); Torrington Co. v. United States, 17 
CIT 672,832 F. Supp. 365,376,378 (1993) aff'd 68 F.3d 1347 (Fed. Cir. 
1995); Tapered Roller Bearings, Finished and Unfinished, and Parts 
thereof, from Japan: Final Results of Antidumping Duty Administrative 
Review, 57 FR 4951, 4955 (Feb. 11, 1992). They maintain that in this 
case POSCO has only argued that these sales should be ignored.
    In conclusion, petitioners argue that based on precedent which 
directs the Department to treat unpaid sales as direct selling expenses 
and the fact that POSCO has not demonstrated that the Department should 
treat these sales as indirect selling expenses, the Department must 
treat the cost of the unpaid sales as direct selling expenses for the 
final determination. Moreover, they maintain that the cost of these 
unpaid sales should be allocated to subject merchandise only. Citing 
Smith Corona Group v. United States, 1 Fed. Cir (T) 130, 713 F.2d 1568, 
1577 (1983),

[[Page 15448]]

they argue that a broader allocation would be inappropriate.
    Respondent argues that the Department properly excluded U.S. sales 
for which no payment was made. They note that because the material 
terms of sale were finalized when POSCO shipped the merchandise, they 
properly reported these transactions as U.S. sales, as required under 
19 U.S.C. 1677a(a) (1998). They explain that POSCO requested that the 
Department exclude these sales on the basis that the credit period 
associated with these sales would distort POSCO's margin. Respondent 
argues that the Department has the discretion to exclude U.S. sales in 
an investigation when it finds that the sales are atypical, not part of 
the respondent's ordinary business practice, and would undermine the 
fairness of the comparison, citing Final Determination of Sales at Less 
than Fair Value: Fresh Cut Roses from Columbia, 60 FR 6980, 7004 
(February 6, 1995); and Final Determination of Sales at Less Than Fair 
Value: Professional Electric Cutting and Sanding/Grinding Tools from 
Japan, 58 FR 30144, 30146 (May 26, 1993). Respondent adds that the 
reason for this discretion is that the initial cash deposit rate is 
intended as an estimate of future behavior, which should not be 
calculated on extraordinary or unusual circumstances. Finally, 
respondent alleges that petitioners' suggestion that the Department 
excluded the bankrupt sales on the basis that the sales were 
``insignificant'' was incorrect.
    Respondent contends that when it delivers merchandise to a 
customer, it expects to be paid. Furthermore, respondent adds that the 
Department verified that POSAM does not have an account for bad debts 
or unpaid sales and that POSCO officials had never before sold 
merchandise to the U.S. through U.S. Channel 2 to a customer that did 
not pay. Respondent claims that petitioners' analogy in which a 
customer receives a discount for high volume sales is misleading. They 
note that volume discounts are negotiated and voluntary terms of sale 
and, as such, represent a type of selling practice. They argue that it 
is not a selling practice of POSCO's to sell to customers that do not 
pay. Moreover, respondent notes that although it continues to sell to 
this customer, it does so on a pre-paid cash basis. See POSCO's October 
22, 1998 submission at pg. 4. Thus, POSCO argues that under these 
extraordinary circumstances, the Department correctly exercised its 
discretion and excluded these sales from its margin analysis.
    POSCO argues that the fact that it has not yet been paid for these 
sales does not alter their character from a sale to a bad debt. Citing 
several cases, they explain that in administrative reviews, the 
Department normally leaves unpaid sales in the database and applies a 
credit expense for the period the sales remain unpaid. See Brass Sheet 
and Strip from Sweden, Final Results of Antidumping Administrative 
Review (``Brass Sheet and Strip''), 60 FR 3617, 3621 (January 18, 
1995); Polyethylene Terephthalate Film, Sheet and Strip from Korea: 
Final Results of Administrative Review, 60 FR 42835, 42839 (August 17, 
1995); and Certain Internal-Combustion, Industrial Forklift Trucks from 
Japan; Final Results of Antidumping Administrative Review, 57 FR 3167, 
3173 (January 28, 1992). Also, respondent maintains that POSAM is in 
the process of collecting on unpaid invoices through bankruptcy 
proceedings and expects to be paid for these sales. See POSAM 
Verification Report at pg. 9. Respondent indicates that because POSCO 
has not accepted that payment will not be made on these sales, the 
Department cannot redefine these sales as bad debt.
    However, respondent continues, even if these sales could be 
characterized as bad debt, they could not be treated as a direct 
selling expense. They argue that petitioners' reliance on Color 
Televisions is inapposite as it was an administrative review and the 
characterization of the bad debt was never in issue. POSCO contends 
that it is the Department's policy to treat recognized bad debt as an 
indirect selling expense, rather than a direct selling expense, citing 
Final Determination of Sales at Less Than Fair Value: Certain Fresh Cut 
Flowers from Colombia, 52 FR 6842, 6850 (March 5, 1987); Notice of 
Final Determination of Sales at Less Than Fair Value: Stainless Steel 
Wire Rod from Korea, 63 FR 40,404, 40406 (July 29, 1998); and Notice of 
Final Determination of Sales at Less Than Fair Value: Bicycles from the 
People's Republic of China, 61 FR 19026, 19041 (April 30, 1996). Also, 
respondent notes that in the companion investigation of SSSS from the 
Republic of Korea, the Department classified the transfer cost of the 
unpaid sales as an indirect selling expense. Although respondent 
disputes the Department's characterization of these sales as bad debt, 
respondent maintains that the Department's logic was correct. 
Respondent adds that the cost incurred by POSAM, the transfer price, 
bears no direct relationship to any other sale, and that the cost would 
have been incurred even if POSCO made no other U.S. sales. Likewise, 
respondent maintains that had the sales been paid during the period of 
investigation, even petitioners would not suggest that the transfer 
price be deducted as a direct selling expense of those sales.
    In conclusion, respondent argues that the Department should 
continue to exclude the bankrupt sales from its margin analysis as it 
did in the preliminary determination to avoid distortions to the 
margin. However, respondent maintains that in the event the Department 
determines that these unpaid sales should be treated as bad debt, the 
law mandates that the Department treat the cost of these sales as 
indirect selling expenses, as the Department did in the preliminary 
determination in the SSSS investigation.
    Department's Position: We agree with petitioners in part. First, we 
find that the sales to the bankrupt customer for which payment was not 
received should be included in the margin analysis. In its U.S. sales 
file, POSCO reported the bankrupt sales as U.S. sales because the 
material terms of sale were final, as required under the statute. 19 
U.S.C. 1677a(a) (1998). However, POSCO requested that the Department 
exclude these sales based POSCO's stated belief that payment could 
still be collected, and thus that the extensive credit period 
associated with the outstanding payment would distort its margin. It 
has been the Department's recent practice to calculate the credit 
period for sales not paid during the POI using the last day of 
verification as the date of payment. See Comment 8. We agree with 
POSCO, however, that employing such a methodology in this instance 
would be inappropriate, albeit for different reasons. In this case, the 
Department verified that POSAM had reversed the sales in its books at 
at year-end by issuing negative invoices to the customer for the unpaid 
merchandise in question. See POSAM Verification Report at pp. 8-9 and 
POSAM Verification Exhibit 5. Therefore, POSCO has effectively written-
off the sales, its statements that it still expects payment 
notwithstanding. Consequently, the expense should be treated as bad 
debt.
    It is the Department's practice to include sales which incur bad 
debt in the database and treat the bad debt as a direct selling expense 
when the expense is incurred on sales of subject merchandise. See Color 
Televisions at 4412. As stated above, at verification, the Department 
found that POSAM reversed the sales in its books at year-end by issuing 
negative invoices to the customer for the unpaid merchandise in

[[Page 15449]]

question. Thus, although POSAM does not maintain separate bad debt 
accounts, these sales have been effectively classified as a type of bad 
debt. Although we disregarded the sales in the preliminary 
determination, we find that the sales account for such a large 
percentage of POSCO's U.S. sales that they cannot be dismissed as 
abnormalities. Moreover, the price of the sales themselves is not 
necessarily distortive because, at the time they were made, POSCO was 
not aware that the customer would declare bankruptcy. Therefore, these 
sales must be included in the database. However, these sales led to a 
bad debt expense which is directly related to sales of the subject 
merchandise. See, AOC International v. US, 721 F. Supp. 314 (CIT 1989) 
and Daewoo Electronics v. US, 712 F. Supp. 931 (CIT 1989). For 
calculation, see Analysis Memorandum.
    Comment 2. Date of Sale. Petitioners argue that both the 
Department's regulations and precedent recognize the Department's 
discretion in determining the appropriate date of sale. Moreover, they 
maintain that the facts of the record in this case clearly compel the 
Department to use order confirmation date as the date of sale. 
Moreover, citing Budd Co. v. United States, they contend that it would 
be an egregious error for the Department to convert orders that were 
agreed to at pre-currency-crisis prices using post-crisis exchange 
rates.
    In its analysis of the sales examined by the Department during the 
verification, petitioners contend that some of the sales records 
contain documentation that is incomplete. For example, they cite 
documentation that is sparse, poorly copied, and either partially 
translated or not translated at all. They argue that without a complete 
record documenting the reasons for a material change in the terms of 
sale, they must assume that the change was part of the initial 
negotiations between the parties. Moreover, they maintain that it is 
incumbent upon the respondents to ``prove'' that the material terms of 
sale changed between the order date and the invoice date. Finally, with 
respect to changes in quantity, they allege that POSCO knew what the 
quantity shipped would be well before the actual shipment date. 
Additionally, petitioners maintain that orders are routinely filled 
using multiple invoices. In other words, an order for 75 metric tons 
may be filled with three separate shipments of 25 metric tons each. In 
any event, petitioners claim that without proof of agreed-upon quantity 
changes, the Department should examine only changes in price between 
the order date and invoice date.
    Petitioners claim that where POSCO has provided adequate 
documentation, the record is clear that material terms of sale are set 
on order date, and that they do not change prior to shipment and 
invoice. They state that in all eight of the 13 U.S. sales where POSCO 
purportedly provided adequate documentation, it is clear that order 
date is the proper date of sale, and in five of the six home market 
sales with allegedly adequate sales documentation, it is clear that the 
terms of sale are set at order date.
    POSCO responds that consistent with its regulations, the Department 
used invoice date as date of sale for both the U.S. and home market and 
thoroughly verified this issue during verification. POSCO maintains 
that at verification the Department verified that all POSCO's sales 
were subject to change between order date and shipment, verified the 
number of instances in which the materials terms of sale change during 
the POI, and verified that POSCO records invoice date as the date of 
sale in its records. POSCO explains that the Department's regulations 
state that ``in identifying the date of sale of the subject merchandise 
or foreign like product, the Secretary normally will use the date of 
invoice as recorded in the exporter or producer's records kept in the 
ordinary course of business.'' 19 CFR 351.401(i) (1998). POSCO 
acknowledges that the Department may use a date other than invoice date 
as date of sale if it ``is satisfied that a different date better 
reflects the date on which the exporter or producer establishes the 
material terms of sale.'' 19 CFR 351.401(i).
    Respondent argues that the facts in this case do not warrant the 
Department using a date other than invoice date as the date of sale. 
Furthermore, respondent contends that petitioners' allegation that 
POSCO used the invoice date as date of sale due to the effect of 
exchange rates on margins is without merit. Although respondent 
disputes the fact that use of the invoice date requires that price and/
or quantity change frequently between order date and invoice date, it 
maintains that there were a significant number of changes in the 
material terms of sale between order date and invoice date during the 
POI, citing POSCO's Sales Verification Exhibit 10; and POSCO Sales 
Verification Report at pg. 18. Also, with respect to petitioners' 
dismissal of the changes in quantity, respondent notes that it provided 
the Department with a breakdown of quantity changes by order, not 
shipment, as evidenced by the inclusion of contract number, line 
number, and shipment date for each transaction. POSCO argues that under 
these circumstances, the Department's rules and precedent support using 
invoice date as date of sale, citing Certain Corrosion-Resistant Carbon 
Steel Flat Products and Certain Cut-to-Length Carbon Steel Plate from 
Canada, 64 FR 2173, 2178 (January 13, 1999). With respect to 
petitioners' allegation concerning the incompleteness of the sales 
records, POSCO responds that the verification report included no 
mention of these problems cited by petitioners. Furthermore, POSCO 
maintains that ``the Department has no statutory obligation to verify 
why, in every instance, price and/or quantity changed.'' See POSCO's 
Rebuttal Brief at 16. Citing Silicon Metal from Argentina; Final 
Results of Antidumping Administrative Review, 58 FR 65336, 65340 
(December 14, 1993), respondent notes that the Department is ``not 
required to verify every figure reported in the questionnaire response. 
The process of verification involves spot-checking and cross-checking 
the information that the Department selects for emphasis in analyzing 
each specific response.'' POSCO concludes that based on the evidence 
the Department examined at verification, the Department should continue 
to use date of invoice as its date of sale for the final determination.
    Department's Position: We agree with respondent. At verification, 
the Department throughly reviewed POSCO's claim that there were a 
significant number of changes in the material terms of sale (e.g., 
price, quantity, physical specifications) between invoice date and 
order date. Moreover, we find petitioners' contention that the record 
supports use of order confirmation date as date of sale to be without 
merit.
    Under the Department's regulations, we normally use date of invoice 
as the date of sale. 19 CFR 351.401(i). However, we may use another 
date, such as date of order confirmation, if that date better reflects 
the date on which the material terms of the sale were established. In 
adopting this regulation, we explained that the purpose was, whenever, 
possible, to establish a uniform event which could be used as the date 
of sale. Antidumping Duties; Countervailing Duties; Final Rule, 62 FR 
27296, 27348-49 (May 19, 1997). We further explained that we do not 
treat an initial agreement as establishing the material terms of sale 
between the buyer and seller when changes to such an agreement are 
common, even if, for a particular sale, the terms did not actually 
change. Consequently, our analysis focuses on whether changes are 
sufficiently

[[Page 15450]]

common to allow us to conclude that initial agreements should not be 
considered to finally establish the material terms of sale. As 
discussed in detail in the Analysis Memorandum (at pp. 1-3), a review 
of the sales documentation supports POSCO's contention that certain 
material terms of sale (i.e., price and quantity) are subject to change 
until the invoice date. In their analysis of sales documentation, 
petitioners focus on the price information listed on POSCO's and 
POSTEEL's order sheet. However, as POSCO explained, when price and/or 
quantity change subsequent to the date the order sheet is originally 
generated, POSCO simply changes the price on the order sheet. The date, 
however, remains the same. See POSCO's response to section B and C of 
the Department's supplemental questionnaire at pp. 6-7, dated August 
26, 1998. There is, therefore, at all times just a single order sheet 
with a single price, giving the impression of no change over time.
    Accordingly, due to the limitations of the order sheet, POSCO 
developed a methodology to determine the percentage of price changes 
between order date and invoice date. For example, POSCO calculated the 
number of price changes for U.S. sales of subject merchandise by 
manually comparing the purchase order to the commercial invoice issued 
by POSTEEL/POSAM. See Sales Verification Report at pg. 18. Also, for 
home market sales, POSCO calculated price changes subsequent to the 
original order sheet up to the invoice date by comparing monthly 
shipping lists (for both plate and sheet). See, e.g., Sales 
Verification Exhibit 10 at pp. 42-44. Finally, POSCO calculated 
quantity changes by comparing the quantity ordered to the amount 
shipped. In instances where the quantity shipped was outside of POSCO's 
internal tolerances (which are often greater than the industry standard 
of plus or minus ten percent) or outside of the industry standard, 
POSCO determined that the quantity ``changed'' between order date and 
invoice date. The Department verified the methodology employed by POSCO 
for calculating changes in material terms of sale and noted no 
discrepancies. See Sales Verification Report at pg. 18.
    Furthermore, we note that petitioners have not commented on POSCO's 
methodology. Indeed, petitioners have ignored this part of the 
Department's verification in its analysis of the appropriate date of 
sale in this investigation. We find that the record evidence cited by 
petitioners in their analysis does not support their conclusion that 
date of order is the appropriate date of sale. A review of the sales 
documentation supports the Department's finding at verification (for 
the Department's analysis of the sales documentation on the record of 
this investigation, see Analysis Memorandum at pp. 1-3). Although we 
agree with petitioners that it is likely that POSCO knew some time 
before actual shipment date how much would be shipped, we note that 
petitioners have not proposed an alternative date to order date and 
invoice date. Also, we disagree with petitioners that respondent's 
methodology of calculating quantity changes is distortive, because (as 
we reviewed at verification) the ``changes'' are calculated based on a 
comparison of the quantity ordered to the total quantity shipped under 
that specific contract/line number. See, e.g., Sales Verification 
Exhibit 6.
    We also disagree with petitioners' arguments concerning the 
supposed incompleteness of the sales records. During the course of 
verification, it is normal for the Department to request additional 
information or documentation from a respondent. The sales verification 
of POSCO in this investigation was no exception. Had POSCO not provided 
the Department with the requested information or had the Department 
determined that the information provided was insufficient, this fact 
would have been duly noted in the verification report. In this case, 
the Department was satisfied as to the sufficiency of the information 
POSCO provided on the date of sale issue. We also note that because of 
the large number of documents examined during the course of 
verification, the Department does not necessarily take all documents 
viewed as verification ``exhibits''. Rather, the Department only takes 
copies of representative or particularly significant documents. 
Finally, we disagree with petitioners' assertion that the Department 
should have reviewed the reasons why changes in the essential terms of 
sale occurred. Nowhere in the Department's regulations, the statute, or 
Departmental practice is the cause of a change to an essential term of 
sale a relevant factor in determining the date of sale. Therefore, the 
reason for the change is immaterial to the Department's analysis; it is 
important that the terms of sale changed, not why they changed. 
Nevertheless, for several sales, the Department did review the cause 
for the material change in sale. See, e.g., Sales Verification Exhibit 
10 at pp. 5-6; POSAM Verification Exhibit 8; POSAM Verification Exhibit 
9; and POSAM Verification Exhibit 10.
    Therefore, based on the Department's findings at verification and 
the record evidence, the Department is satisfied that the date of 
invoice is the most appropriate measure of when POSCO establishes the 
material terms of sale. Accordingly, we have continued to use invoice 
date as the date of sale for the final determination.
    Comment 3. Devaluation. Petitioners allege that the currency 
conversion methodology used by the Department in the preliminary 
determination does not adequately account for the sudden and dramatic 
drop in the value of the won during November and December 1997. 
Alternatively, petitioners propose that the Department calculate two, 
separate weighted-average price comparisons for each product under 
investigation; one for the first ten months of the POI, and another for 
the November-December period. Petitioners charge that failure to employ 
two comparison periods will result in the elimination of pre-existing 
dumping margins based solely on exchange rate changes, and not in any 
change in POSCO's pricing practice.
    Petitioners argue that the statute and legislative history provide 
the Department with the authority to rely on multiple averaging 
periods. They maintain that section 777A (d)(1)(A) of the Act gives the 
Department the discretion to use varying methods for comparing prices 
in determining whether sales at less than fair value exist. 
Furthermore, they state that the SAA provides that in determining sales 
comparability for purposes of inclusion in a particular average, ``time 
is a factor which may affect the comparability of sales.'' SAA at 842-
843. Finally, petitioners note that in its Notice of Proposed 
Rulemaking and Requests for Public Comment, 61 FR 7308, 7349 (February 
27, 1996), the Department stated that it has the discretion to use 
abbreviated time periods when the NV, EP, or CEP prices included in an 
averaging group differ significantly over the course of the POI.
    In this case, petitioners argue that when NV is converted to U.S. 
dollars in the first ten months of the POI, the effect of time is 
nominal. However, when NV is converted during the last two months of 
the POI, they maintain that NV is dramatically reduced. Petitioners 
contend that the Department has exercised its authority to rely on 
multiple averaging periods in prior cases, citing Notice of Final 
Determination of Sales at Less Than Fair Value: Polyvinyl Alcohol from 
Taiwan, 61 FR 14064, 14069 (March 29, 1996) (``Polyvinyl Alcohol''). In 
Polyvinyl Alcohol, the respondent entered into long-term contracts at 
the

[[Page 15451]]

end of the POI which served to drastically lower NV during the last six 
weeks of the POI. In the instant case, the Department found that ``the 
change in selling practices enhanced the effect of time on price 
comparability'' and used separate averaging periods. See Id.
    Petitioners maintain that the case for using separate averaging 
periods in this investigation is even more compelling than the 
comparison case given that the dramatic decline in NV is solely a 
result of the currency conversion methodology employed by the 
Department, not any action undertaken by POSCO. They assert that the 
influence of time on the margin calculation is further exacerbated by 
the fact that POSCO's cost for raw materials, which are increasing as 
the won depreciates, are combined with pre-crisis raw material costs. 
They speculate that were separate costs available for the two averaging 
periods, all November/December NV's would be below POSCO's increasing 
costs, and that dumping would be found on comparisons between POSCO's 
U.S. prices and constructed value prices for that same period. 
Furthermore, they note that although POSCO is likely lowering its U.S. 
prices during this period, no dumping was found under the Department's 
current conversion methodology.
    Citing Melamine Chem. Inc. v. United States, 732 F.2d 924, 929-932 
(Fed. Cir. 1984), petitioners note that the Courts have recognized that 
dumping margins should not be ``artificially'' created simply due to 
unforseen changes in the exchange rate. Likewise, petitioners argue 
that dumping margins should not be ``artificially'' eliminated due to 
unforseen changes in the exchange rate. They maintain that in similar 
situations the Department adjusted a respondent's costs to account for 
extraordinary events which occurred during the period of investigation 
or review. As an example, petitioners cite the case of Floral Trade 
Council v. United States in which the Court recognized that the 
Department could take into account ``extraordinary events'' that were, 
among other things, ``infrequent in occurrence'' (16 CIT 1014, 1016-17 
(1992)). They also note that the Department has made adjusts for 
extraordinary events in cases such as Newspaper Presses from Japan. See 
Notice of Final Determination of Sales at Less Than Fair Value: Large 
Newspaper Presses and Components Thereof, Whether Assembled or 
Unassembled, from Japan, 61 FR 38139, 38153 (July 23, 1996). Also, 
petitioners state that these adjustments have included altering the 
period of investigation to account for extraordinary events. See, e.g., 
Final Determination of Sales at Less Than Fair Value: Fresh Kiwi Fruit 
from New Zealand, 57 FR 13695, 13697 (April 17, 1992); Preliminary 
Determination of Sales at Less Than Fair Value and Postponement of 
Final Determination: Antidumping Investigation of Color Negative 
Photographic Paper and Chemical Components Thereof from the 
Netherlands, 59 FR 15,181, 16,192 (April 6, 1994). Finally, petitioners 
argue that the Department has consistently recognized and attempted to 
mitigate the effects of severe currency devaluation. They explain that 
in Industrial Nitrocellulose from Brazil, the Department accounted for 
the hyperinflation present during the period of investigation by 
calculating a separate foreign market value for each price list period. 
See Final Determination of Sales at Less Than Fair Value: Industrial 
Nitrocellulose from Brazil, 55 FR 23120 (June 6, 1990). They also note 
that in Fresh Cut Flowers from Columbia, the Department revised its 
methodology to account for the ``devaluation of the Colombian 
currency.'' See Certain Fresh Cut Flowers from Colombia: Final Results 
and Partial Recission of Antidumping Duty Administrative Review, 62 FR 
53287, 53297 (October 14, 1997). Acknowledging that the facts in this 
investigation are not identical to the facts in the cases cited, 
petitioners state that these cases demonstrate the Department's 
authority, under section 777 A(d)(1)(A) of the Act, to use a variety of 
methods to compare prices to determine whether sales at less than fair 
value exist, citing 19 U.S.C. 1677f-1(d)(1)(A).
    In closing, petitioners argue that were it not for the rapid and 
unexpected devaluation of the won, POSCO's level of dumping would have 
been the same during the November and December 1997. They contend that 
the Department not only has the authority, but also the obligation, to 
rely on an alternative method to calculate dumping margins to ensure a 
fair result. They urge the Department to use two separate averaging 
periods to calculate dumping margins.
    POSCO rebuts petitioners' assertion that the Department incorrectly 
applied its exchange rate policy in this case. POSCO maintains that 
petitioners' suggestion of an alternative comparison period is 
inapposite. POSCO explains that in addition to accounting for large 
fluctuations in the currency, the policy on currency conversion was 
also designed to ``ensure that all exporters, when they set their U.S. 
prices and whether under order or not, can know with certainty the 
daily exchange rate the Department will use in a dumping analysis.'' 
See Policy Bulletin 96-1 Currency Conversions, 61 FR 9434 (March 8, 
1996). Respondent argues that the facts in this case do not warrant the 
use of an adjusted comparison period. In addition, POSCO contends that 
the use of an alternative comparison period would eliminate the 
certainty created under currency conversion policy and result in 
artificial, exchange-rate based margins. Citing the Department's 
regulations, respondent maintains that the Department's policy is to 
establish an average price for all comparable sales across the entire 
period of investigation. See Antidumping Duties; Countervailing Duties, 
62 FR 27296, 27473.
    POSCO notes that in certain cases it is within the Department's 
discretion to use shorter comparison periods when prices or costs vary 
significantly over the twelve-month POI. However, citing the 
preliminary determination in Certain Preserved Mushrooms from 
Indonesia, respondent argues that the Department does not vary the 
averaging period due to exchange rate fluctuations alone. See Notice of 
Preliminary Determination of Sales at Less Than Fair Value Postponement 
of Final Determination: Certain Preserved Mushrooms from Indonesia 
(``Mushrooms''), 63 FR 41783, 41785 (August 5, 1998). POSCO explains 
that the Department distinguished Mushrooms from Polyvinyl Alcohol 
based on the fact that in Polyvinyl Alcohol, ``the respondent changed 
the way it conducted business with its principal home market customers, 
including its price structure, while at the same time, U.S. prices and 
input cost trends moved in tandem.'' See Id. at 41785. As in Mushrooms, 
POSCO claims that petitioners have provided no evidence for, nor 
alleged, that POSCO changed its business practice or pricing structure 
during the POI. Also, POSCO argues that the cases cited by petitioners 
in their defense are not relevant to this case. For example, in Kiwi 
Fruit and Color Negative Photographic Paper, the issue concerned the 
appropriate period of review to use. Additionally, respondent notes 
that Industrial Nitrocellulose from Brazil was a pre-URAA case and, in 
any event, the economy was hyper-inflationary and the exchange rate was 
controlled by the government. Finally, POSCO maintains that in Flowers 
from Colombia there was never an issue of averaging periods. In 
closing, respondent argues that the Department has already developed a 
clear policy to address large and precipitous declines in the value of 
home market currencies and should continue to apply its currency

[[Page 15452]]

conversion policy to the facts of this case, using daily exchange rates 
for the November and December 1997 period.
    Department's Position: We have continued to use daily exchange 
rates in this case, for the reasons explained in the preliminary 
determination. However, we agree with petitioners that separate 
averaging periods should be used. Under section 777A(d)(1)(A) of the 
Act, the Department has wide latitude in calculating the average prices 
used to determine whether sales at less than fair value exist. More 
specifically, under 19 CFR 351.414(d)(3), the Department may use 
averaging periods of less than the POI when normal value, export price, 
or constructed export price varies significantly over the POI. In the 
instant case, NV (in dollars) in the last two months of the POI differs 
significantly from NV earlier in the POI due primarily to a significant 
change in the underlying dollar value of the won. In this case, the 
change is evidenced by the precipitous drop in the won's value that 
began in November 1997 and continued through the end of the POI, 
without a quick, significant rebound. In the span of two months, the 
won's value decreased by more than 40 percent in relation to the 
dollar. Consequently, it is appropriate to use two averaging periods to 
avoid the possibility of a distortion in the dumping calculation. 
Moreover, we disagree with respondent's claim that the use of averaging 
periods is dependent upon a change in a respondent's selling practices. 
In the final determination of certain preserved mushrooms from 
Indonesia, the Department stated that ``in addition to changes in 
selling practices, we believe that we should also consider other 
factors, such as prolonged large changes in exchange rates, in 
determining whether it is appropriate to use more than one averaging 
period.'' See Notice of Final Determination of Sales at Less Than Fair 
Value: Certain Preserved Mushrooms from Indonesia, 63 FR 72268, 72272 
(December 31, 1998). Therefore, we have used two averaging periods for 
the final determination: January through October and November through 
December, 1997.
    Comment 4 EP vs. CEP. Petitioners argue that Department should re-
classify U.S. sales involving POSAM (i.e., U.S. Channel 2 sales) as CEP 
sales. They contend that it is indisputable that the activities 
performed by POSAM meet the criteria the Department has used for 
evaluating whether a U.S. subsidiary's involvement rises to the level 
of CEP classification for U.S. sales. Petitioners state that the 
Department has classified sales as CEP sales when the following 
criteria are met: (1) The U.S. subsidiary was the importer of record 
and took title to the merchandise; (2) the U.S. subsidiary financed the 
relevant sales transactions; (3) the U.S. subsidiary arranged and paid 
for further processing; and (4) the U.S. subsidiary assumed the 
seller's risk, citing Certain Cold-Rolled and Corrosion-Resistant 
Carbon Steel Flat Products from Korea; Preliminary Results of 
Antidumping Duty Administrative Review, 61 FR 51882, 51885 (October 4, 
1996); and Certain Cold-Rolled and Corrosion-Resistant Carbon Steel 
Flat Products from Korea; Final Results, 62 FR 18404 (April 15, 1997) 
(``Carbon Steel from Korea''). Additionally, petitioners note that in 
Extruded Rubber Thread from Malaysia, the Department determined that 
the sales in question were CEP sales, despite not being entered into a 
U.S. affiliate's inventory, when the U.S. sales force contacted the 
U.S. customer, negotiated sales terms, arranged for production and 
shipment, and issued final invoices and collected payment. See Extruded 
Rubber Thread from Malaysia: Final Results of Antidumping Duty 
Administrative Review, 63 FR 12752 (March 16, 1998). Petitioners also 
point to several other cases where the Department re-classified 
respondent's U.S. sales as CEP transactions because significant selling 
functions were performed in the United States. See, e.g., Small 
Diameter Circular Seamless Carbon and Alloy Steel Standard, Line and 
Pressure Pipe from Germany: Preliminary Results of Antidumping Duty 
Administrative Review, 62 FR 47446, 47448 (September 9, 1997); Notice 
of Preliminary Determinations of Sales at Less Than Fair Value and 
Postponement of Final Determinations: Brake Drums and Brake Rotors from 
the People's Republic of China, 61 FR 53190, 53194 (October 10, 1996); 
Certain Cut-to-Length Carbon Steel Plate From Germany: Final Results of 
Antidumping Duty Administrative Review, 62 FR 18390, 18392 (April 15, 
1997); and Sebacic Acid From the People's Republic of China; Final 
Results of Antidumping Duty Administrative Review, 62 FR 10530, 10532 
(March 7, 1997).
    Furthermore, petitioners argue that based on the record evidence 
obtained, the Department should infer that POSAM is involved in setting 
U.S. prices. They claim that POSTEEL would not provide POSAM with 
quarterly price guides if POSAM were not meant to have at least some 
autonomy in day-to-day negotiations with customers, citing POSAM 
Verification Report at pg 7. Moreover, they argue that even if the 
Department remains unconvinced that POSAM sets prices, involvement in 
setting prices is not the only criterion for classifying a sale as CEP. 
Petitioners maintain that such activities as making contact with the 
U.S. customer, contacting the factory to arrange for production and 
shipment, and issuing the final invoice to, and collecting payment 
from, the customer all indicate that sales through POSAM are CEP 
transactions. Also, petitioners assert that the mere existence of a 
U.S. based subsidiary is itself a strong indicator that the activity of 
the sales force must be considered significant. Finally, petitioners 
propose that the Department adjust POSAM's indirect selling expenses 
for POSAM's sales to affiliates. Petitioners have provided this 
calculation on pages 40-41 of their case brief, dated January 26, 1999.
    Respondent contends that the Department's classification of POSCO's 
U.S. sales through POSAM as EP sales in the preliminary determination 
was correct. Respondent argues that the EP classification is supported 
by the verified record evidence and is consistent with the Department's 
recent determination in Stainless Steel Wire Rod from Korea that U.S. 
sales through POSAM were properly classified as EP sales. See Notice of 
Final Determination of Sales at Less Than Fair Value: Stainless Steel 
Wire Rod from Korea (``Stainless Steel Wire Rod''), 63 Fr 40404, 40417-
40418 (July 29, 1998). Respondent contends that in Stainless Steel Wire 
Rod, POSAM's role in sales from Changwon, a POSCO affiliate, was 
identical to its role in subject sales from POSTEEL. Furthermore, 
respondent notes that petitioners have failed to distinguish the wire 
rod determination from this determination.
    Respondent argues that it has met the conditions of the three-prong 
test used by the Department in determining whether U.S. sales made by 
an affiliated U.S. importer prior to importation should be classified 
as EP or CEP sales. With respect to the first two criteria, respondent 
maintains that it is undisputed that POSCO's sales through POSAM were 
shipped directly from the manufacturer to the unaffiliated U.S. 
customer and that is the customary channel of distribution for U.S. 
sales. Citing Preliminary Determination at 59538. Finally, with respect 
to the final criterion, respondent contends that evidence on the record 
and verified by the Department demonstrates that POSAM's selling 
functions were limited to that of a processor of sales-related 
documentation and a communications link with POSCO's unaffiliated U.S. 
customer.

[[Page 15453]]

    Respondent states that for U.S. sales through POSAM, POSTEEL 
determined price and terms of sale and performed all sales-related 
activities (with the exception of arranging for U.S. freight for 
certain delivered sales and extending credit for certain transactions). 
Citing Groundwood Paper from Belgium, respondent notes that the fact 
that an affiliated U.S. company quotes prices to U.S. customers on 
behalf of its affiliated exporter does not lead to CEP designation of 
the sale. See Final Determination of Sales at Less Than Fair Value: 
Coated Groundwood Paper from Belgium, 56 FR 56359, 56362 (November 4, 
1991). Respondent also argues that the Department has determined that 
``identifying and maintaining contact with customer'' is not sufficient 
in and of itself to warrant CEP treatment of a sale. See Final 
Determination of Sales at Less Than Fair Value: Coated Groundwood Paper 
from Finland, 56 FR 56359, 56363, 56371 (November 4, 1991); see also, 
Stainless Steel Wire Rod at 40417-19. Challenging petitioners' argument 
that the post-importation services performed by POSAM (i.e., collecting 
payment and arranging for U.S. inland freight) are significant enough 
to warrant CEP treatment of the sales, respondent states that the 
Department has found that a branch office whose functions include 
``receiving orders, preparing and executing order confirmations, 
invoices, packing lists, and other sales-related documentation, and 
receiving and processing payments from customers,'' was not so 
substantial to conclude that it was more than a processor of documents 
or communications link. See Final Determination of Sales at Less Than 
Fair Value: Extruded Rubber Thread from Malaysia, 57 FR 38465, 38469 
(August 25, 1992); see also, Stainless Steel Wire Rod at 40417-19. 
Additionally, respondent asserts that the Department has never 
classified a sale as CEP based on the U.S. affiliate's status as 
importer of record, citing Final Determination of Sales at Less Than 
Fair Value: Coated Groundwood Paper from France, 56 FR 56384; E.I. 
DuPont de Nemours & Co. v. United States, 841 F. Supp. 1237, 1249-1250 
(Ct. Int'l Trade 1994); Independent Radionic Workers of America, 19 CIT 
at pg. 375; and Stainless Steel Wire Rod at 40419. Finally, respondent 
disputes petitioners' contention that existence of a U.S.-based 
subsidiary is enough to warrant CEP treatment, and states that 
petitioners have greatly overstated the size and significance of POSAM.
    Department's Position: We agree with petitioners that sales through 
POSAM are more appropriately treated as CEP transactions. Although the 
facts in this investigation are similar to the facts in the stainless 
steel wire rod determination cited by respondent, there are several 
significant differences on the record of the present case which lead 
the Department to change its decision from the preliminary 
determination and conclude that POSCO's U.S. sales through POSAM 
warrant classification as CEP sales.
    The Department treats sales through an agent in the United States 
as CEP sales, unless the activities of the agent are merely ancillary 
to the sales process. Specifically, where sales are made prior to 
importation through a U.S. based affiliate to an unaffiliated customer 
in the United States, the Department examines several factors to 
determine whether these sales warrant classification as EP sales. These 
factors are: (1) Whether the merchandise was shipped directly from the 
manufacturer to the unaffiliated U.S. customer without being introduced 
into the physical inventory of the affiliated selling agent; (2) 
whether this sale is the customary commercial channel between the 
parties involved; and (3) whether the function of the U.S. selling 
agent is limited to that of a ``processor of sales-related 
documentation'' and a ``communication link'' with the unrelated U.S. 
buyer. Where the factors indicate that the activities of the U.S. 
selling agent are ancillary to the sale (e.g., arranging transportation 
or customs clearance), we treat the transactions as EP sales. Where the 
U.S. selling agent is substantially involved in the sales process 
(e.g., negotiating prices), we treat the transactions as CEP sales. See 
Certain Cut-to-Length Carbon Steel Plate from Germany: Final Results of 
Antidumping Administrative Review, 62 FR 18389, 18391 (April 15, 1997); 
Mitsubishi Heavy Industries v. United States, Slip Op. 98-82 at 6 (CIT, 
June 23, 1998).
    We note that neither party has disputed that POSCO's U.S. sales 
through POSAM meet the first two criterion of the Department's 
standard. Therefore, the determining factor in this case is the degree 
of involvement by POSAM in the sales process. In the preliminary 
determination, the Department based its EP classification of sales 
through POSAM on POSCO's statement that POSTEEL determined price and 
terms of sale. However, in our preliminary determination, we noted that 
we would conduct an in-depth examination of the most appropriate 
classification of POSCO's U.S. sales through POSAM (i.e., CEP versus 
EP) at verification. See Preliminary Determination at 59538.
    Although it is clear that POSTEEL performs many selling activities 
for U.S. sales through POSAM, including undertaking business trips to 
meet with potential U.S. customers of the subject merchandise (see 
Sales Verification Exhibit 17), the record contradicts POSCO's 
assertion that POSAM is merely a processor of sales-related 
documentation. First, POSAM is the first and only point of contact for 
the U.S. unaffiliated customer. POSAM officials explained that because 
of the time zone difference and the cost of long distance, it would be 
expensive and inconvenient for the customer to contact POSTEEL 
directly. See POSAM Verification Report at pg. 6. While a U.S. 
affiliate may act as a communications link without transforming the 
sales into CEP, POSAM acts as more than a conduit between the 
unaffiliated U.S. customer and POSTEEL.
    Also, as demonstrated by the unpaid sales to the bankrupt customer, 
POSAM incurs the ``seller's risk'' for U.S. Channel 2 sales. The record 
indicates that it was POSAM, not POSTEEL, who incurred the cost of the 
unpaid sales, as POSAM pre-pays POSTEEL. See POSAM Verification Report 
at pg. 9. Moreover, it is POSAM, not POSTEEL, who is responsible for 
collecting payment from the customer through bankruptcy proceedings. 
Bearing such financial risk is indicative of a seller, not a mere 
facilitator. This selling arrangement between POSAM and POSTEEL differs 
from the one between POSAM and Changwon, addressed in Stainless Steel 
Wire Rod, where the ``U.S. customers remit payment to POSAM, which 
subsequently transfers the payment to POSTEEL, which, in turn, 
transfers it to Changwon.'' See Stainless Steel Wire Rod at 40419 
(emphasis added). In addition, for one of the five sales examined by 
the Department during the POSAM verification, we found that POSAM was 
given discretion in adjusting the price of the sale. See POSAM 
Verification Report at pg. 5 and POSAM Verification Exhibit 10. Thus, 
although POSAM is not independent from POSTEEL, we believe that the 
record evidence shows that it has sales negotiating authority, at least 
in some instances.
    Therefore, because of the significant risk incurred by POSAM in 
addition to its other selling activities, we find that POSAM's 
activities are more than ancillary to the sales process and have 
classified POSCO's U.S. sales through POSAM as CEP transactions. We 
note that the Department's classification of

[[Page 15454]]

POSCO's U.S. sales through POSAM as CEP transactions is consistent with 
the Department's decision in the third review of carbon steel flat 
products from Korea. See Certain Cold-Rolled and Corrosion-Resistant 
Carbon Steel Flat Products From Korea: Final Results of Antidumping 
Duty Administrative Reviews, 63 FR 13170, 13182-83 (March 18, 1998). 
Additionally, we disagree with petitioners that the reported indirect 
selling expenses for POSAM should be adjusted. Petitioners have not 
stated that POSCO's calculation was incorrect or is in any way 
distortive. We verified POSCO's calculation of POSAM's indirect selling 
expense at verification and noted no discrepancies. See POSAM 
Verification Report at pp. 5-6. Thus, for CEP sales, we have deducted 
an amount for indirect selling expenses incurred in the United States 
using POSCO's reported indirect selling expense for POSAM.
    Comment 5. Affiliated Party Purchases. Petitioners argue that 
POSCO's purchases from affiliated parties should be valued at the 
higher of transfer price, the affiliate's COP, or market value. 
Petitioners listed five specific examples where the affiliate's COP was 
higher than the transfer price for the particular item purchased. 
Petitioners cite 19 U.S.C. 1677b(f)(3) as the basis for valuing the 
major input at the higher COP amount. 19 U.S.C. 1677b(f)(3) states, 
``If, in the case of a transaction between affiliated persons involving 
the production by one of such persons of a major input to the 
merchandise, the administering authority has reasonable grounds to 
believe or suspect that an amount represented as the value of such 
input is less than the cost of production of such input, then the 
administering authority may determine the value of the major input on 
the basis of the information available regarding such cost of 
production.''
    POSCO argues that the price paid to the affiliated parties 
represents an arm's length transaction and the purchases do not qualify 
as major inputs. POSCO contends that prices for alloys are governed by 
the international market rather than by affiliation. According to 
POSCO, at verification the Department had the opportunity to compare 
the transfer price to the market price and concluded that there were 
minimal or no differences between the prices charged by affiliated and 
unaffiliated suppliers. Any differences between the price charged by 
the affiliate and the cost of that affiliate are connected with the 
world market and not with affiliation. POSCO asserts that no adjustment 
is necessary because, on average, it paid its affiliated suppliers a 
higher price than it paid to its unaffiliated suppliers. Furthermore, 
the impact on the cost of production would be so minor as to have 
virtually no effect on the final cost of production.
    Department's Position: We agree with petitioners in part. In 
accordance with section 773(f)(3) of the Act, we have treated as major 
inputs materials that both were purchased from affiliated suppliers in 
significant quantities and represented a significant portion by value 
of the per-unit cost of SSPC. Accordingly, we have applied the higher 
of the materials' transfer price, cost of production or market value. 
Therefore, we have treated ferroalloys as major inputs and adjusted 
costs to reflect the higher of the input's cost, market price, or 
transfer price. In accordance with section 773(f)(2) of the Act, when 
the materials supplied by affiliated parties were not major inputs, we 
only compared transfer price to market price, when market price was 
available and cost was not necessary to establish market price. In this 
case, the relatively large percentage of purchases from unaffiliated 
suppliers, the relatively small percentage of the elements' value to 
the per-unit cost, and the relatively small difference between transfer 
price and market value, rendered any adjustment to cost insignificant. 
Moreover, our analysis (see Cost Analysis Memorandum) shows that on 
average the transfer price and market value for purchases from these 
affiliated and unaffiliated suppliers were comparable.
    Comment 6. Credit Expense. Petitioners maintain that POSCO 
improperly excluded U.S. dollar denominated usance loans from its 
calculation of the home market interest rate. They argue that the 
Department should recalculate the home market interest rate. Also, 
petitioners state that if the Department uses the short-term interest 
rate provided by POSCO in determining the short-term interest rate for 
U.S. sales through POSTEEL, the Department should recalculate the 
interest rate based on the average monthly balance. Petitioners contend 
that POSCO's method of calculating its interest rate is only reasonable 
when a loan balance remains fairly constant; however, it will overstate 
the interest rate when the balance is declining and understate the 
interest rate when the balance is increasing. In their rebuttal brief, 
petitioners provide the calculation of POSTEEL's interest rate based on 
the average monthly loan balance. See Petitioners' Rebuttal Brief at 
pp. 4-6.
    Respondent argues that it calculated its short-term interest rates 
for U.S. and home market sales in accordance with the Department's 
policy, citing Import Administration Policy Bulletin 98-2 (February 23, 
1998). POSCO notes that the home market interest rates submitted for 
POSCO (HM Channel 1) and POSTEEL (HM Channel 2) were based on the 
short-term, Korean won borrowings of each company during the POI. POSCO 
notes that U.S. market interest rates submitted for POSTEEL (U.S. 
Channel 1 and 3) and POSAM (U.S. Channel 2) were based on short-term, 
U.S. dollar denominated loans. Additionally, respondent states that at 
verification the Department confirmed that the short-term interest rate 
for U.S. sales through POSTEEL was denominated in U.S. dollars, citing 
Sales Verification Report at pg. 15.
    Department's Position: We agree with respondent. The Department's 
stated policy on imputed credit expenses and interest rates is to ``use 
a short-term interest rate tied to the currency in which the sales are 
denominated.'' See Policy Bulletin 92-2 at pg. 6, dated February 23, 
1998, which is an attachment to the Analysis Memorandum. During its 
verification of POSCO, the Department confirmed that the interest rates 
calculated by POSCO were based on short-term loans denominated in the 
currency in which the sales were made. See, e.g., Sales Verification 
Report at pp. 14-15 and Sales Verification Exhibit 40 and 41.
    Also, we disagree with petitioners' argument that POSCO's 
calculation of POSTEEL's U.S. interest rate is distortive (see Analysis 
Memorandum). At verification, the Department confirmed that, in its 
normal course of business, POSCO records the monthly ending balance of 
its short-term borrowings. See, e.g., Sales Verification Exhibit 39 and 
40. Based on this and other information that is business proprietary, 
we find respondent's methodology of calculating POSTEEL's interest rate 
to be reasonable and have accepted respondent's reported credit expense 
for U.S. Channel 1 and 3 sales. For a further discussion of this issue, 
see Analysis Memorandum.
    Comment 7. Indirect Selling Expenses. Petitioners argue that the 
Department should adjust POSCO's reported home market indirect selling 
expenses by allocating the indirect selling expense over sales both to 
affiliated and unaffiliated parties. Citing the Department's 
verification report, petitioners note that POSCO has excluded sales to 
affiliated parties from the denominator of its calculation of the home 
market indirect selling expense ratio. See Sales Verification Report at 
pg. 15. They state that if the Department

[[Page 15455]]

finds that POSCO misreported its home market indirect selling expense 
ratio or provided an incomplete record it should recalculate POSCO's 
indirect selling using information on the record of this investigation.
    Respondent states that it reported all domestic selling expenses 
incurred during the POI, and allocated those expenses over the related 
sales. Respondent maintains that the domestic sales divisions do not 
``sell'' to affiliated customers, but on the contrary, the affiliated 
customers are used as an extension of POSCO's sales division. As an 
example, respondent notes that the large majority of sales of the 
subject merchandise during the POI were made to POSTEEL, and that 
POSCO's involvement in POSTEEL's sales is limited to receiving the 
order and producing the merchandise. Thus, respondent continues that 
the focus of the domestic sales divisions is sales to unaffiliated 
customers and, by extension, the expenses incurred by those divisions 
are on sales to unaffiliated customers. Finally, respondent maintains 
that their allocation methodology is reasonable.
    Department's Position: We agree with petitioners. At verification, 
POSCO provided no material support for its claim that sales to 
affiliated parties (e.g., POSTEEL) should be excluded from the 
denominator of its home market indirect selling expense calculation 
other than to state that it ``would not waste resources'' on sales to 
affiliates. See Sales Verification Exhibit at pg. 15. Moreover, we note 
that it is standard Departmental practice to allocate indirect selling 
expenses over all sales. For its U.S. sales, POSCO has calculated the 
indirect selling expense ratio consistent with this methodology. See 
Sales Verification Exhibit 41 and POSAM Verification Exhibit 6. 
Additionally, at least some of the selling expenses reported by POSCO 
as indirect (i.e., payroll) are associated with sales to affiliates and 
non-affiliates. Therefore, we have recalculated POSCO's reported 
indirect selling expense for HM Channel 1 sales by including POSCO's 
sales to affiliates. For calculation, see Analysis Memorandum.
    Comment 8. Unpaid U.S. Sales. Petitioners argue that POSCO should 
not be permitted to estimate payment dates when payment has not been 
made. Citing Sales Verification Report at pg. 2. They advocate that the 
Department apply an adverse inference regarding the payment date for 
any unpaid sales.
    POSCO responds that there is no basis on which to apply adverse 
inferences. Respondent explains that as it indicated to the Department 
during verification, it used the first day of verification as the 
payment date for the small portion of two sales that remained 
outstanding as of verification. Citing Sales Verification Report at pg. 
2 and Sales Verification Exhibit 1. POSCO argues that this approach is 
consistent with the Department's normal treatment of unpaid sales. 
Citing Stainless Steel Wire Rod from Japan, 63 FR 40434, 40448 (July 
29, 1998).
    Department's Position: We disagree with respondent and petitioners. 
As noted by respondent, for the two sales which remained partially 
unpaid, POSCO did not estimate payment dates, but rather used the date 
of first date of the sales verification. However, the Department's 
recent practice regarding this issue has been to use the last day of 
verification as the date of payment for all unpaid sales. See, e.g., 
Notice of Final Determination of Sales at Less Than Fair Value: 
Stainless Steel Wire Rod From Italy, 62 FR 40422, 40428 (July 29, 
1998); Extruded Rubber Thread from Malaysia; Final Results of 
Antidumping Duty Administrative Review (``Extruded Rubber Thread from 
Malaysia''), 63 FR 12752,12757 (March 16, 1998); and Notice of Final 
Determination of Sales at Less Than Fair Value: Static Random Access 
Memory Semiconductors From Taiwan, 63 FR 8909 (February 23, 1998). 
Therefore, for the final determination, we are applying the last day of 
the U.S. sales verification (November 20, 1998) as the date of payment 
for the two unpaid U.S. sales. For the calculation of the credit period 
for these sales, see Analysis Memorandum, dated March 19, 1999.
    Comment 9. Sales of Non-Prime Merchandise. Respondent argues that 
the Department should distinguish between prime and non-prime 
merchandise for purposes of the cost test and margin analysis in the 
final determination. Respondent maintains that it is the Department's 
policy to differentiate between prime and non-prime merchandise in its 
analysis. Citing Memorandum from Roland L. MacDonald to Joseph A. 
Spetrini, dated April 19, 1995 (``Carbon Steel Memorandum'') and 
Certain Cold-Rolled Carbon Steel Flat Products from the Netherlands 
(``Carbon Steel from the Netherlands)'', 61 FR 48465, 48466 (September 
13, 1996). A copy of the Carbon Steel Memorandum is an attachment to a 
Memorandum to the File from Carrie Blozy, dated March 19, 1999.
    Petitioners support the Department's decision to ``collapse'' sales 
of prime and non-prime merchandise for purposes of the cost test. They 
note that in Carbon Steel from the Netherlands, the Department stated 
that it continues to follow IPSCO and that prime and secondary 
merchandise incur identical costs. See Id. at 48461-67. Moreover, in 
Extruded Rubber Thread from Malaysia, petitioners note that the 
Department stated that it is not its practice to distinguish prime and 
non-prime merchandise for the cost test. See Extruded Rubber Thread 
from Malaysia at 12757.
    Department's Position: We agree with respondent. As noted in the 
Carbon Steel Memorandum, ``separating prime and seconds for the cost 
test has the benefit of facilitating an untainted analysis of the 
majority of sales (prime merchandise).'' See Carbon Steel Memorandum at 
pg. 4. Consistent with Carbon Steel from the Netherlands and IPSCO, in 
this case, POSCO has reported the same cost of production for sales of 
prime and non-prime merchandise. See Cost of Production Sales Listing 
which is attached to POSCO's December 17, 1999 submission. However, we 
do not regard prime and non-prime merchandise as identical. Finally, we 
note that the Extruded Rubber Thread from Malaysia case cited by 
petitioners has been taken out of the context in which it was made. The 
language quoted by petitioners merely states that the Department, 
consistent with the IPSCO case, calculated the same costs for prime and 
non-prime merchandise. However, while using the same costs, consistent 
with the Carbon Steel Memorandum, in Extruded Rubber Thread from 
Malaysia, the Department ran separate cost tests for prime and non-
prime merchandise in order to avoid distortions. Thus, for the final 
determination, we have used POSCO's reported control numbers (which 
differentiate between prime and non-prime merchandise) in our margin 
analysis.
    Comment 10. Local Letter of Credit Sales. POSCO argues that the 
Department should include local letter of credit sales (``local 
sales'') in its calculation of normal value. Also, respondent maintains 
that its calculation of normal value should be based on the U.S. dollar 
price at which the local sales were invoiced. Respondent states that 
local customers pay POSCO in Korean won based on the U.S. dollar 
invoiced price. Moreover, respondent notes that it reported the U.S. 
dollar price for local sales consistent with the Department's 
requirements and practice. Respondent explains that in Fresh Cut Roses 
from Colombia, the respondent also invoiced home market sales in U.S. 
dollars but like POSCO, received payment from the

[[Page 15456]]

customer in the home market currency, pesos in that case. See Final 
Determination of Sales at Less Than Fair Value: Fresh Cut Roses from 
Colombia (``Fresh Cut Roses from Colombia''), 60 FR 6980, 7006 
(February 6, 1995). POSCO states that in this case, the Department 
accepted the U.S. prices for the calculation of normal value. See Id. 
Respondent contends that not using the U.S. dollar value in its 
calculation of normal value in this investigation could have a 
potentially significant distortive effect on the margin.
    Although petitioners' support the inclusion of local sales in the 
analysis, they object to POSCO's request to use nominal dollar prices 
for home market customers. Instead, they recommend that the Department 
use the won price that the customers actually pay. They argue that it 
would be bad policy to use nominal prices in the margin analysis. 
Further, they continue that even if the Department were to find that in 
some instances use of the nominal price is warranted, the facts in this 
case do not support such a methodology. Petitioners allege that the 
Fresh Cut Roses from Colombia case cited by POSCO differs from this 
case in several important aspects. Specifically, in Fresh Cut Roses 
from Colombia: (a) The effect of inflation in Colombia was being taken 
into account in the Department's cost of production analysis and costs 
were being converted to dollars; (b) the Department stated that it had 
verified that the payments in pesos had reflected the prevailing 
dollar/peso exchange rates at the time of payment; and (c) all home 
market sales were invoiced in dollars and paid in pesos. See Fresh Cut 
Roses from Colombia at 6980. In contrast, they note that in this case 
the Department has not accounted for the effects of inflation on 
POSCO's costs and prices. Also, they state that the Department did not 
verify whether the exchange rates used were proper. Finally, they note 
that in this case, home market sales were also quoted in won. 
Therefore, because the Department has not accounted for inflation and 
did not verify the dollar won exchange rates used, petitioners argue 
that POSCO's dollar prices are meaningless because POSCO's customers 
pay in won.
    Department's Position: We agree with both parties that local sales 
should be included in the margin analysis. At verification, the 
Department found that local sales were made to end-users and, as such, 
must be properly considered as home market sales. Accordingly, these 
sales should be accounted for in our margin analysis. However, we 
disagree with respondent that the Department should use the U.S. dollar 
invoiced price for the purposes of calculating normal value. Based upon 
the facts of the record, as discussed below, we find that it is more 
appropriate to use the won price in which the customer pays.
    For HM sale number 1, POSCO provided an internal document which 
shows the exchange rates used by POSCO to convert U.S. dollar prices 
into Korean Won prices for the month of November 1997. See Sales 
Verification Exhibit 6. The record indicates that although customers 
are invoiced in U.S. dollars (for HM Channel 2 sales the shipping 
invoice also shows the won price), the customer pays in won, not U.S. 
dollars, and the sales value of the merchandise is charged to the sales 
ledger in won, based on the aforementioned exchange rate. See Id. 
Moreover, a comparison of the internal exchange rate used by POSCO to 
the market exchange rate used by the Department shows that the two 
exchange rates are quite dissimilar (see Analysis Memorandum). We note 
that this is in contrast to Fresh Cut Roses from Colombia in which the 
Department verified that the payment in pesos reflected the market 
exchange rate at the time of payment. See Fresh Cut Roses from Colombia 
at 6980. Therefore, for the final determination, we have used the won 
price for home market local sales.
    Comment 11. Date of Sale--U.S. Channel 2. Petitioners allege that 
POSCO improperly reported POSTEEL's invoice to POSAM as the date of 
sale for U.S. Channel 2 sales. They maintain that the use of the date 
of POSTEEL's invoice to POSAM is incorrect because the price is a 
transfer price on an intra-company transaction. Conversely, they argue 
that it is the date on POSAM's invoice to its customer that controls 
whether a transaction was invoiced during the POI. Finally, they 
contend that to the extent that any U.S. sales were not reported based 
on POSCO's reporting of date of sale for U.S. Channel 2 sales, the 
Department should apply adverse facts available to the unreported 
quantity.
    POSCO maintains that it properly used the date of POSTEEL's invoice 
to POSAM as the date of sale for U.S. Channel 2 sales because the 
material terms of sale were finalized upon shipment to the customer. 
Furthermore, respondent argues that it is the Department's well-
established practice that the date of sale must precede or be equal to 
the date of shipment, citing Certain Cold-Rolled and Corrosion 
Resistant Carbon Flat Products from Korea, 63 FR 13170, 13172-3. POSCO 
notes that the date of shipment to the unaffiliated customer is the 
date that the merchandise left the Korean port of exportation for 
delivery to the unaffiliated U.S. customer. Moreover, respondent 
alleges that petitioners have ignored the statutory definition of 
export price and the Department' definition of date of sale.
    Department's Position: We agree with petitioners. As noted in 
Comment 4, the Department has classified POSCO's U.S. sales through 
POSAM as CEP sales. Therefore, for U.S. Channel 2 sales we have used 
the date of POSAM's invoice to the unaffiliated customer as the date of 
sale.

Continuation of Suspension of Liquidation

    In accordance with section 735(c)(1)(B) of the Act, we are 
directing the Customs Service to continue to suspend liquidation of all 
entries of subject merchandise from the Republic of Korea, that are 
entered, or withdrawn from warehouse, for consumption on or after 
November 4, 1998 (the date of publication of the preliminary 
determination in the Federal Register). The Customs Service shall 
continue to require a cash deposit or posting of a bond equal to the 
estimated amount by which the normal value exceeds the U.S. price as 
shown below. These suspension of liquidation instructions will remain 
in effect until further notice. The weighted-average dumping margins 
are as follows:

------------------------------------------------------------------------
                                                              Weighted-
                                                               average
                   Exporter/manufacturer                        margin
                                                              percentage
------------------------------------------------------------------------
Pohang Iron & Steel Co., Ltd...............................        16.26
All others.................................................        16.26
------------------------------------------------------------------------

ITC Notification

    In accordance with section 735(d) of the Act, we have notified the 
International Trade Commission (``ITC'') of our determination. As our 
final determination is affirmative, the ITC will, within 45 days, 
determine whether these imports are materially injuring, or threaten 
material injury to, the U.S. industry. If the ITC determines that 
material injury, or threat of material injury does not exist, the 
proceeding will be terminated and all securities posted will be 
refunded or canceled. If the ITC determines that such injury does 
exist, the Department will issue an antidumping duty order directing 
Customs officials to assess antidumping duties on all imports of the 
subject merchandise entered for consumption on or after the effective 
date of the suspension of liquidation.

[[Page 15457]]

    This determination is issued and published in accordance with 
sections 735(d) and 777(i)(1) of the Act.

    Dated: March 19, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-7533 Filed 3-30-99; 8:45 am]
BILLING CODE 3510-DS-P