[Federal Register Volume 64, Number 61 (Wednesday, March 31, 1999)]
[Notices]
[Pages 15459-15476]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-7536]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-791-805]


Notice of Final Determination of Sales at Less Than Fair Value; 
Stainless Steel Plate in Coils From South Africa

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

ACTION: Notice of Final Determination of Sales at Less Than Fair Value.

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EFFECTIVE DATE: March 31, 1999.

FOR FURTHER INFORMATION CONTACT: Robert James at (202) 482-5222 or John 
Kugelman at (202) 482-0649, Antidumping and Countervailing Duty 
Enforcement Group III, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW, Washington, DC 20230.

Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the Tariff Act of 
1930, as amended (the Tariff Act), are to the provisions effective 
January 1, 1995, the effective date of the amendments made to the 
Tariff Act by the Uruguay Round Agreements Act (URAA). In addition, 
unless otherwise indicated, all citations to the Department's 
regulations are to the regulations codified at 19 CFR part 351 (April 
1, 1998).

Final Determination

    We determine that stainless steel plate in coil (stainless coil) 
from South Africa is being, or is likely to be, sold in the United 
States at less than fair value (LTFV), as provided in section 735 of 
the Tariff Act. The estimated margins of sales at LTFV are shown in the 
``Suspension of Liquidation'' section of this notice.

Case History

    We published in the Federal Register the preliminary determination 
in this investigation on November 4, 1998. See Notice of Preliminary 
Determination of Sales at Less Than Fair Value; Stainless Steel Plate 
in Coils From South Africa, 63 FR 59540 (Preliminary Determination). 
Since the publication of the Preliminary Determination the following 
events have occurred:
    On November 5, 1998, the sole respondent in this investigation, 
Columbus Stainless (Columbus), requested postponement of the final 
determination, agreeing to the extension of preliminary measures, as 
required under section 735(a)(2) of the Tariff Act. Accordingly, we 
postponed the final

[[Page 15460]]

determination in this investigation on December 11, 1998. See 
Postponement of Final Antidumping Determinations: Stainless Steel Plate 
in Coils From Canada, Italy, Republic of Korea, South Africa and 
Taiwan, 63 FR 70101 (December 18, 1998).
    The Department verified Columbus's section D (Cost of Production) 
questionnaire response between November 9 and 13, 1998 at Columbus's 
headquarters in Middelburg, South Africa; we then verified sections A 
(General Information), B (Home Market Sales) and C (U.S. Sales) of 
Columbus's responses on November 16 through 20, 1998. See Memorandum to 
Neal Halper, Acting Director, Office of Accounting; ``Verification 
Report on the Cost of Production and Constructed Value Data Submitted 
by Columbus Stainless,'' January 15, 1999 (Cost Verification Report) 
and Memorandum For the File; ``Verification of Columbus Stainless,'' 
January 14, 1999 (Sales Verification Report). Public versions of these, 
and all other Departmental memoranda referred to herein, are on file in 
room B-099 of the main Commerce building.
    On December 4, 1998, Armco, Inc., J&L Specialty Steel, Inc., 
Lukens, Inc., North American Stainless, the United Steelworkers of 
America, AFL-CIO/CLC, Butler Armco Independent Union and Zanesville 
Armco Independent Organization, Inc. (petitioners) requested a public 
hearing in this case. However, on December 18, 1998, petitioners 
withdrew their request for a hearing and, as Columbus had not requested 
a hearing, none was held. On January 25, 1999, petitioners and Columbus 
filed case briefs in this matter; we received rebuttal briefs from 
petitioners and Columbus on February 1, 1999.

Scope of the 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 investigation 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.

Fair Value Comparisons

    To determine whether sales of stainless coil from South Africa to 
the United States were made at less than fair value, we compared export 
price (EP) to the normal value (NV), as described in the ``Export 
Price'' and ``Normal Value'' sections of this notice, below. In 
accordance with section 777A(d)(1)(A)(i) of the Tariff Act, we 
calculated weighted-average EPs for comparison to weighted-average NVs 
or constructed values (CVs).

Transactions Investigated

    For its home market and U.S. sales Columbus reported the date of 
invoice as the date of sale, in keeping with the Department's stated 
preference for using the invoice date as the date of sale. As explained 
in response to Comment 2, below, for this final determination we have 
continued to rely upon Columbus's invoice dates in the home and U.S. 
markets as the date of sale. However, should this investigation result 
in an antidumping duty order, we intend to scrutinize further this 
issue in any subsequent segment of this proceeding involving Columbus.

Product Comparisons

    In accordance with section 771(16) of the Tariff Act, we considered 
all products produced by the respondent covered by the description in 
the ``Scope of the 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 on the basis of the characteristics and reporting 
instructions listed in Appendix V of the Department's May 27, 1998 
antidumping questionnaire.

Level of Trade

    In our preliminary determination we agreed with Columbus that one 
level of trade (LOT) existed for Columbus in the home market. 
Furthermore, we agreed with Columbus that its EP sales in the United 
States were at a single LOT, and that sales in both markets were at the 
same LOT. No party to this investigation commented on this issue and 
the Department has no new evidence to alter its conclusion. Therefore, 
as in the preliminary determination, we find that sales within or 
between the markets were made at the same LOT and, therefore, a LOT 
adjustment pursuant to section 773(a)(7)(A) of the Tariff Act is not 
appropriate.

Export Price

    We calculated the price of United States sales based on EP, in 
accordance with section 772(a) of the Tariff Act, because the subject 
merchandise was sold to the first unaffiliated purchasers in the United 
States prior to the date of importation and because record evidence did 
not support basing price on constructed export price (CEP). We 
calculated EP using the same methodology employed in the preliminary 
determination with the following exceptions:
    Based on information discovered at verification we made deductions 
from EP for unreported credit memos issued on certain U.S. sales of 
subject merchandise; we have disregarded any such credit memos issued 
for home market sales. See Comment 3, below.
    We also recalculated Columbus's inventory carrying costs (ICC) 
based upon revisions to Columbus's reported cost of manufacture (COM) 
arising from verification. See Memorandum to Neal Halper, ``Cost of 
production (`COP') and constructed value (`CV') Calculation Memorandum 
for Final Determination,'' March 19, 1999 (Cost Calculation Memorandum 
(Final)).

Normal Value

Home Market Viability

    As discussed in the Preliminary Determination, in order to 
determine

[[Page 15461]]

whether the home market was viable for purposes of calculating NV 
(i.e., the aggregate volume of home market sales of the foreign like 
product was equal to or greater than five percent of the aggregate 
volume of U.S. sales), we compared the respondent's volume of home 
market sales of the foreign like product to the volume of U.S. sales of 
the subject merchandise, in accordance with section 773(a)(1)(C) of the 
Tariff Act. As Columbus's aggregate volume of home market sales of the 
foreign like product was greater than five percent of its aggregate 
volume of U.S. sales of the subject merchandise, we determined that the 
home market was viable. Therefore, we based NV on home market sales in 
the usual commercial quantities and in the ordinary course of trade.

Cost of Production Analysis

    In response to a timely allegation by petitioners we conducted an 
investigation to determine whether Columbus made sales of the foreign 
like product during the POI at prices below its COP. In accordance with 
section 773(b)(3) of the Tariff Act we calculated the weighted-average 
COP based on the sum of Columbus's cost of materials, fabrication, 
general expenses, and packing costs. We relied on Columbus's submitted 
COP except in the following specific instances where the submitted 
costs were not appropriately quantified or valued:
    We added depreciation expense to the reported COP and CV based on 
the ratio of depreciation expense to Columbus's variable overhead 
expenses. Likewise, we added certain additional depreciation expense to 
the reported COP and CV based on the ratio of this depreciation expense 
to variable overhead expenses. See Comments 13 and 14, below.
    We increased the cost of Columbus's affiliated-party purchases of 
the raw material input ferrochrome. See Comment 15.
    We increased Columbus's COP by adding the variances Columbus 
excluded from its reported costs. See Comment 16.
    We reallocated variable overhead expenses based on differences in 
the cost of producing the subject merchandise arising from the 
differences in physical characteristics of specific plate products. See 
Comment 17.
    We calculated a single COP for each product sold (i.e., each 
CONNUM), weighted by quantity produced during the POI, rather than 
quantities sold, as originally reported by Columbus. See Comment 18.
    Finally, we excluded certain selling expenses from the submitted 
general and administrative (G&A) expense ratio.
    We compared the weighted-average COP for Columbus to home market 
sales prices of the foreign like product, as required under section 
773(b) of the Tariff Act. In determining whether to disregard home 
market sales made at prices less than the COP we examined whether such 
sales were made (i) in substantial quantities within an extended period 
of time and (ii) at prices which permitted the recovery of all costs 
within a reasonable period of time. On a product-specific basis, we 
compared COP to home market prices, less any applicable movement 
charges, early payment and other discounts, and direct and indirect 
selling expenses.
    Pursuant to section 773(b)(2)(C)(i) of the Tariff Act, where less 
than twenty percent of a respondent's sales of a given product were at 
prices less than the COP, we do not disregard any below-cost sales of 
that product because we determine that the below-cost sales were not 
made in ``substantial quantities.'' Where twenty percent or more of a 
respondent's sales of a given product during the POI were at prices 
less than the COP, we determine such sales to have been made in 
substantial quantities, in accordance with section 773(b)(2)(C)(i) of 
the Tariff Act. In addition, we determine that such below-cost sales 
were made within an extended period of time, in accordance with section 
773(b)(2)(B) of the Tariff Act. In such cases, pursuant to section 
773(b)(2)(D) of the Tariff Act, we also determine that such sales were 
not made at prices which would permit recovery of all costs within a 
reasonable period of time. Therefore, we disregard the below-cost 
sales. Where all sales of a specific product were at prices below the 
COP we disregard all sales of that product.
    Our cost test for Columbus revealed that for certain products less 
than twenty percent of Columbus's home market sales were at prices 
below Columbus's COP. We retained all sales of those products in our 
analysis. For other products more than twenty percent of Columbus's 
sales were at prices below COP. In such cases we disregarded the below-
cost sales, while retaining the above-cost sales for our analysis. See 
Memorandum For the File, ``Antidumping Duty Investigation on Stainless 
Steel Plate in Coils from the Republic of South Africa--Final 
Determination Analysis for Columbus Stainless,'' March 19, 1999 (Final 
Determination Analysis Memorandum).

Price-to-Price Comparisons

    For those products with home market prices at or above the COP, we 
based NV on Columbus's sales to unaffiliated 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 Tariff 
Act. We continued to make circumstance-of-sale (COS) adjustments in 
accordance with section 773(a)(6)(c)(iii) of the Tariff Act, with the 
following exceptions.
    As Columbus had no short-term rand-denominated borrowings, we 
recalculated home market credit expenses (and ICC) using publicly-
available interest rates released by the South African Reserve Bank, as 
confirmed in the International Monetary Fund's International Financial 
Statistics series. See Comment 5.
    We have reclassified certain home market advertising expenses as 
indirect selling expenses and, with the exception of direct advertising 
expenses incurred on sales of 3CR12 steel, are not deducting Columbus's 
advertising expenses from NV as a COS adjustment. See Comment 7.
    Finally, we removed computer programming language calculating a 
``commission offset'' to NV for commissions on U.S. sales based upon 
the conclusions outlined in response to Comment 4.

Price-to-CV Comparisons

    In accordance with section 773(a)(4) of the Tariff Act, we based NV 
on CV if we were unable to find a home market match of identical or 
similar merchandise. We calculated CV based on the costs of materials 
and fabrication employed in producing the subject merchandise, SG&A, 
and profit. See section 773(e)(1). In accordance with section 
773(e)(2)(A) of the Tariff Act, we based SG&A expense 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 South Africa. We calculated the cost of 
materials, fabrication, and general expenses based upon the methodology 
described in the ``Cost of Production Analysis'' section, above. For 
selling expenses, we used the weighted-average home market selling 
expenses. Where appropriate, we made adjustments to CV in accordance 
with section 773(a)(8) of the Tariff Act. For comparisons to EP, we 
made COS adjustments by deducting home market direct selling expenses 
from NV and adding U.S. direct selling expenses.

[[Page 15462]]

Currency Conversion

    We made currency conversions into U.S. dollars based on the 
exchange rates in effect on the dates of the U.S. sales, as certified 
by the Federal Reserve Bank, in accordance with section 773A(a) of the 
Tariff Act.

Analysis of Interested Party Comments

Issues Relating to Sales

    Comment 1: Use of Facts Available. Petitioners press for the use of 
partial adverse facts available in calculating Columbus's antidumping 
margin for this final determination, insisting that Columbus ``failed 
to provide material information requested by the Department,'' and that 
much of the information Columbus did provide could not be verified. 
According to petitioners, these failures taint a broad range of both 
the sales and cost data submitted by Columbus during the course of this 
investigation. As examples petitioners charge Columbus with, inter 
alia:

     Failing to report properly home market and U.S. post-
sale price adjustments;
     Failing to provide a verifiable short-term interest 
rate for rand-denominated loans for calculating home market credit 
and ICC and, further, failing to inform the Department of the nature 
of its actual borrowing during the POI;
     Improperly omitting certain expenses in its reported 
COP and CV data 1;
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    \1\ The precise nature of these expenses necessitates reference 
to business proprietary information. For a full discussion of these 
issues, see the Cost Verification Report.
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     For one raw material input, ferrochrome, reporting 
prices paid to an affiliated party which do not reflect arm's-length 
prices, and refusing to provide either the affiliate's COP for 
ferrochrome or its prices to unaffiliated customers for comparison 
purposes;
     Failing to account for the different work stations and 
processing times required in the production of each specific 
stainless steel plate product;
     Calculating weighted-average COP and CV data on the 
basis of sales quantity rather than production quantity, as required 
by the Department; and
     Failing to reconcile reported COP and CV to Columbus's 
audited financial statements.
    See Petitioners' Case Brief, January 25, 1999, at 2 and 3.

    Considered together, petitioners aver, these deficiencies 
necessitate the use of adverse facts available for all missing or 
unverifiable data. Further militating for the use of facts available, 
petitioners continue, is that each of these deficiencies was only 
disclosed during the Department's sales and cost verifications, in 
spite of numerous opportunities afforded Columbus by the Department to 
submit correct data in the form required. Id. at 4.
    According to petitioners, ``Columbus's behavior in this 
investigation cannot be characterized as a good faith effort to comply 
with the Department's investigation.'' Petitioners' Case Brief at 5. 
For example, petitioners contend that despite the Department's initial 
and supplemental requests for information on post-sale price 
adjustments in the home and U.S. markets, Columbus submitted no such 
data; however, petitioners note, at verification Columbus ``was able to 
provide . . . `a complete listing of all credit and debit notes issued 
during calendar 1997.' '' Id. at 5, quoting the Department's Sales 
Verification Report at 35. Similarly, petitioners insist, the 
Department repeatedly requested that Columbus submit its average COP 
and CV data weighted on the basis of production quantities, as required 
by the Department. Instead, petitioners charge, Columbus used sales 
quantity as the weighting factor, withholding the production quantity 
until Columbus provided it in the course of the Department's cost 
verification (i.e., over a month after the Department's preliminary 
determination). Petitioners charge Columbus with repeatedly failing to 
supply requested information in a timely manner, only to produce the 
information ``with no apparent difficulty'' once the Department 
uncovered the omissions during the sales and cost verifications. Id. at 
6.
    In light of what petitioners characterize as incomplete, untimely, 
and unverifiable sales and cost information, petitioners urge the 
Department to find that Columbus ``failed to satisfy the requirements 
of section 782(e) of the (Tariff) Act.'' 2 Id. Following the 
statutory language, petitioners detail these alleged failings: first, 
according to petitioners, Columbus untimely submitted its COM. Second, 
petitioners charge Columbus with failing to provide cost data which 
could be reconciled with Columbus's audited financial statements. 
Third, petitioners allege, Columbus's responses are so incomplete they 
cannot reliably serve as a basis for reaching the final determination 
in this investigation. Fourth, petitioners suggest that the sales and 
cost verifications proved that Columbus failed to act to the best of 
its ability in responding to the Department's requests for information. 
Finally, petitioners aver, the Department cannot use the data as 
submitted by Columbus without undue difficulty, arguing, for example, 
that it would be ``unduly burdensome'' for the Department to search out 
appropriate arm's-length short-term interest rates as surrogates for 
the rates reported by Columbus. Petitioners' Case Brief at 6 and 7.
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    \2\ Briefly, section 782(e) of the Tariff Act provides that the 
Department ``shall not decline to consider information that is 
submitted by an interested party and is necessary to the 
determination but does not meet all the applicable requirements 
established by (the Department) '' if the information is timely, can 
be verified, is not so incomplete that it cannot be used, and if the 
interested party acted to the best of its ability in providing the 
information, and the Department can use the information without 
undue difficulties.
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    According to petitioners, the numerous material discrepancies in 
Columbus's questionnaire responses require the Department to make the 
adverse inferences called for in section 776(b) of the Tariff Act. 
Petitioners view these deficiencies, affecting such ``core'' issues as 
the cost test, calculation of CV, differences-in-merchandise (difmer) 
adjustments, and other sales adjustments, as clear demonstration that 
Columbus failed to act to the best of its ability by cooperating with 
the Department's requests for information. Citing the Statement of 
Administrative Action (SAA) accompanying the URAA, petitioners note 
that the Department ``may employ adverse inferences about missing 
information to ensure that a party does not obtain a more favorable 
result by failing to cooperate than if it had cooperated fully.'' 
Petitioners' Case Brief at 8, quoting the SAA, as reprinted in H.R. 
Doc. No. 103-316 (1994). Therefore, petitioners conclude, the 
Department must apply adverse facts available ``to situations where 
Columbus was unable to provide any evidence in support of its 
response.'' Id.
    Columbus objects to these characterizations of its behavior in this 
proceeding, accusing petitioners of ``occasional lapses of reason.'' 
Columbus's Rebuttal Brief at 1. Petitioners' sole end, Columbus 
maintains, is to persuade the Department to disregard verified 
information and to ``punish'' Columbus through the use of 
``unreasonable adverse inferences.'' Columbus rejects petitioners' 
efforts to ``paint Columbus in the blackest of colors, making wild 
claims of `non-cooperation' that have absolutely no basis in fact.'' 
This proceeding, Columbus suggests, is an investigation, not ``a math 
test, for which the student is taken to task for every mistake.'' Id.
    Columbus denies each of petitioners' contentions that it acted in 
bad faith, submitted untimely or incomplete information, or failed to 
cooperate by acting to the best of its ability in this proceeding. 
Petitioners' charges, Columbus maintains, ``are either

[[Page 15463]]

demonstrably false or are so distorted as to be unreconcilable with the 
facts.'' Columbus's Rebuttal Brief at 2.
    Each claim of verification ``failures'' posited by petitioners, 
Columbus insists, is either untrue or represents an ``inadvertent 
omission.'' Id. at 3. However unfortunate, Columbus submits, Columbus 
corrected these omissions immediately upon discovery. In Columbus's 
view there is no justification for disregarding Columbus's submitted 
and verified information in favor of facts available. In fact, Columbus 
maintains, petitioners attempt to use Columbus's responsiveness in 
identifying and correcting problems at verification as evidence that 
Columbus was uncooperative. Such a view, Columbus argues, ``perversely 
twists'' Columbus's cooperation, especially when considering that 
Columbus was undergoing a simultaneous countervailing duty 
investigation before the Department and a separate antidumping 
proceeding brought by the European Union. Id. at 4.
    Columbus maintains that under the terms of sections 776 and 782 of 
the Tariff Act the Department must clear several statutory hurdles 
prior to resorting to facts available. Section 776(a), Columbus notes, 
limits the use of facts available to those situations where (i) 
necessary information is not on the record, (ii) an interested party 
withheld or refused to provide requested information, (iii) an 
interested party significantly impeded the proceeding, or (iv) the 
submitted information cannot be verified. Further, section 776(b) 
allows the use of adverse inferences only where ``an interested party 
has failed to cooperate by not acting to the best of its ability to 
comply with a request for information.'' Columbus's Rebuttal Brief at 5 
and 6. Finally, Columbus argues, even in cases where a respondent's 
submitted information fails to meet all of the Department's 
requirements section 782(e) of the Tariff Act provides that the 
Department will ``not decline'' to use that information if:

    (1) The information is submitted by the deadline established for 
its submission,
    (2) The information can be verified,
    (3) The information is not so incomplete that it cannot serve as 
a reliable basis for reaching the applicable determination,
    (4) The interested party has demonstrated that it acted to the 
best of its ability in providing the information and meeting the 
requirements established by the administering authority or the 
Commission with respect to the information, and,
    (5) The information can be used without undue difficulties.
    Columbus's Rebuttal Brief at 6, quoting section 782(e) of the 
Tariff Act.

    The use of adverse facts available in the instant case, Columbus 
avers, would meet none of these statutory requirements. According to 
Columbus, the record demonstrates that all necessary information was on 
the record, that Columbus responded in a timely manner by providing 
requested information, that Columbus did not impede the investigation, 
and that the Department was able to verify the submitted information. 
Any use of facts available, let alone adverse facts available, Columbus 
argues, would be ``illegal.'' Id.
    Columbus contends that the ``punitive'' use of facts available has 
been rejected by the courts. Id. at 7, citing Magnesium Corporation of 
America v. United States, 938 F. Supp. 835, 903 (CIT 1996), and Taiwan 
International Standard Electronics, Ltd. v. United States, 899 F.2d 
1185, 1190 (Fed. Cir. 1990). Further, Columbus maintains, the use of 
adverse inferences is especially unwarranted here, as Columbus ``never 
refused to cooperate.'' Id. (original emphasis). The use of adverse 
facts available in this case, Columbus continues, would also be 
contrary to Departmental practice in cases where a cooperative 
respondent nevertheless provided a deficient response. Columbus's 
Rebuttal Brief at 9, citing Final Determination of Sales at Less Than 
Fair Value: Certain Pasta From Italy, 61 FR 30326, 30329 (June 14, 
1996). Columbus also cites Circular Welded Non-Alloy Steel Pipe From 
South Africa, (61 FR 24271, 24272, May 14, 1996), where the Department 
found a respondent's questionnaire response ``unusable for purposes of 
margin calculations,'' yet did not draw adverse inferences in assigning 
facts available. Id.
    Columbus concludes by asserting that ``there is no justification or 
support whatsoever for the use of `facts available' against Columbus,'' 
and urges the Department to incorporate Columbus's verified data into 
this final determination. Columbus's Rebuttal Brief at 11.
    Department's Position: While the Department uncovered several 
deficiencies in Columbus's sales and cost data during the two 
verifications conducted at Middelburg, we believe petitioners' 
characterization of Columbus's cooperation throughout this proceeding 
is overdrawn. We agree with petitioners that Columbus, as described in 
the comments that follow, committed a number of errors in compiling its 
responses and in certain cases failed to follow the instructions 
provided in the Department's questionnaires. We have addressed each of 
these alleged shortcomings below and have, where appropriate, resorted 
to facts otherwise available, including adverse facts available, when 
faced with irreparable shortcomings in Columbus's responses. Overall, 
however, we find that Columbus attempted to cooperate in this 
proceeding and that the deficiencies in its responses, considered 
either singly or collectively, do not merit the application of adverse 
facts available in every instance.
    Petitioners appear to portray Columbus's alacrity at verification 
in identifying and correcting problems at verification as evincing bad 
faith as, in petitioners' telling, Columbus had the correct information 
in its possession all along yet withheld it from the Department. We 
agree that Columbus clearly failed to respond completely to each item 
in the Department's questionnaire (by not reporting credit memos, for 
example) and we have treated these shortcomings appropriately. However, 
Columbus, a first-time respondent to our questionnaires, attempted to 
comply with our requests for information. The record indicates that for 
the most part the errors and omissions in Columbus's responses were 
inadvertent in nature. In certain instances Columbus readily conceded 
errors in its response, such as its failure to include depreciation 
costs in its COP and CV data.
    For the purpose of this final determination, therefore, we have 
continued to rely upon Columbus's submitted sales and cost data, 
adjusted appropriately for any errors or omissions on Columbus's part.
    Comment 2: Date of Sale. Both petitioners and Columbus offer 
arguments concerning the proper date of sale for this investigation. In 
the Preliminary Determination the Department relied upon the invoice 
date as the date of sale, in keeping with the Department's regulatory 
preference for using the invoice date as the date of sale absent 
evidence ``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).
    Petitioners argue that in this case all material terms of sale are 
set at the time Columbus issues its order acceptance, a document 
confirming the quantity, price, grade, dimensions, and payment and sale 
terms of each order, to its customer. Petitioners further note that 
nothing in the regulations requires the Department to accept the 
invoice date as the date of sale in all cases. Citing

[[Page 15464]]

Certain Welded Carbon Steel Pipes and Tubes From Thailand, 63 FR 55578 
(October 16, 1998) (Carbon Steel Pipes From Thailand), petitioners 
argue that the Department accepts the invoice date as date of sale 
``unless the record evidence demonstrates that the material terms of 
sale, i.e., price and quantity, are established on a different date.'' 
Petitioners' Case Brief at 10, quoting Carbon Steel Pipes From Thailand 
at 63 FR 55587 and 55588. Even more on point, petitioners suggest, is 
the Department's ruling in Circular Welded Non-Alloy Steel Pipe From 
the Republic of Korea, 63 FR 32833 (June 16, 1998) (Korean Non-Alloy 
Steel Pipe) which cites the Department's discretion to ``abandon the 
use of invoice date'' if doing so prevents ``inappropriate comparisons 
via the strict use of invoice date as the date of sale.'' Id., quoting 
Korean Non-Alloy Steel Pipe at 63 FR 32835.
    According to petitioners, the situation with respect to Columbus 
closely mirrors that found by the Department in Korean Non-Alloy Steel 
Pipe. Referring to the Department's findings during the sales 
verification of Columbus, petitioners note that upon receipt of an 
order Columbus conducts certain internal technical and credit checks 
and then issues an order acceptance reflecting the customer's purchase 
order number, customer information, payment and sales terms, quantities 
and prices. This demonstrates clearly, petitioners maintain, that the 
essential terms of sale are established upon issuance of the order 
acceptance. Such a conclusion, petitioners continue, is supported by 
Columbus's technical manager, who opined during a plant tour conducted 
as part of verification that changes to a production order are 
extremely rare once the order acceptance has been issued.
    Columbus in its Case Brief argues, contra petitioners, that the 
invoice date represents the only appropriate date of sale for purposes 
of the final determination because ``there can be changes to the price, 
volumes, specifications, or delivery terms (including partial non-
delivery) up until that date.'' Columbus's Case Brief at 17. Further, 
Columbus avers, use of the invoice date is consistent both with 
Columbus's internal records kept in its ordinary course of business, 
and also with generally-accepted accounting principles (GAAP) in South 
Africa. Columbus suggests that, contrary to petitioners' assertions, 
the Department's sales verification found specific examples during the 
POI of changes to the material terms of sale occurring at points 
between the order acceptance date and the invoice date. Columbus's Case 
Brief at 18, citing the Sales Verification Report at 7 through 9. 
``This discussion,'' Columbus insists, ``should settle the matter.'' 
Id.
    With respect to the comments of Columbus's Technical Manager, 
Columbus dismisses the importance of these statements. According to 
Columbus the key to this passage in the Sales Verification Report is 
the qualifying phrase ``to (his) knowledge . . .'' Columbus insists 
that ``many changes to the order . . . have nothing to do with the 
technical specifications of the product ordered. The technical manager 
would have no way of knowing about--and would not care about--such 
changes.'' Columbus's Case Brief at 18. Furthermore, Columbus avers, a 
customer's change in technical specifications could be satisfied by 
drawing merchandise from another order or from stock on hand; clearly, 
such changes in the material terms of sale would have no effect 
whatever upon Columbus's production schedule. Id. Columbus suggests 
that the resolution to this controversy over date of sale lies in 
Columbus's sales documentation and the Department's discussions with 
sales rather than production personnel. Accordingly, Columbus 
concludes, the Department should continue to use the date of invoice as 
the date of sale.
    Department's Position: Petitioners have presented cogent arguments 
in this case in support of using the order confirmation date as the 
date of sale. They have pointed out that the respondent is a mill which 
largely produces the merchandise under investigation to fill specific 
orders. Therefore, as petitioners see it, once the mill has scheduled 
the casting of a specific stainless slab for rolling to a given 
stainless coil, little room remains for altering the essential terms of 
sale.
    Columbus, for its part, has presented arguments that the material 
terms of sale are subject to change at any time between the order 
acceptance and invoice dates and has indicated that not all such 
changes would be reflected in the production department's order 
acceptance (for example, in cases where Columbus satisfied a changed 
order by either drawing merchandise from a different order already in 
production or from inventory, or in any cases involving price changes). 
Further, Columbus has noted that changes in prices ``may be influenced 
by a number of factors, such as a change in market circumstances, a 
delay in production and therefore delivery, a non-conformance to 
quality, or a change in the circumstances of the buyer.'' Columbus's 
November 2, 1998 supplemental response at 3. Indeed, we observed 
evidence of each of these types of changes during the Department's 
sales verification. When pressed at verification Columbus was able to 
produce specific examples involving both subject stainless coil and 
non-subject cut-to-length stainless steel where the material terms of 
sale did, in fact, change after the order acceptance date and before 
final shipping and invoicing. See, e.g., the Sales Verification Report 
at 7 through 9 and Appendix III.
    The Department's regulations establish a rebuttable presumption 
that the invoice date will serve as the date of sale unless record 
evidence demonstrates ``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). ``Our current practice, in a nutshell, is to 
use the date of invoice as the date of sale unless there is a 
compelling reason to do otherwise.'' Cold-Rolled and Corrosion-
Resistant Carbon Steel Flat Products From Korea, 63 FR 13170, 13194 
(March 18, 1998) (Korean Cold-Rolled Flat Products). After reviewing 
the evidence of record in this proceeding we have reached several 
conclusions. First, we agree with Columbus's assertion, borne out at 
verification, that its internal records and financial statements do not 
recognize a sale until dispatch and invoicing. For example, in an 
exchange with the Department over this issue Columbus noted that no 
merchandise leaves the mill (and, hence, no invoice will be issued) 
until Columbus has in hand a guarantee of payment, be it an irrevocable 
letter of credit or the extension of credit backed by an insurance 
policy against non-payment. Columbus stressed that ``[i]t is that 
clear--no payment, no sale.'' Columbus's November 2, 1998 supplemental 
response at 4. Second, we find that Columbus has presented evidence 
that the material terms of sale are, in fact, subject to change after 
the order confirmation date. As noted, Columbus presented examples from 
the POI where either quantity or price or both changed after the order 
acceptance had been issued, but prior to the invoice date, including 
one reported U.S. transaction selected at random by the Department for 
a ``surprise'' sales trace. Thus, as we concluded in Korean Cold-Rolled 
Flat Products, ``there is no record evidence indicating that a date 
other than the invoice date is the date after which the essential terms 
of sale could

[[Page 15465]]

not be changed.'' Id. at 13195 (emphasis added).
    Petitioners' citation to Carbon Steel Pipes From Thailand is 
instructive in this matter. In that case petitioners argued for use of 
the respondent's contract date as the date of sale noting that by using 
the invoice date ``(1) a different set of sales will be evaluated, (2) 
in a country subject to currency devaluation or inflation, the sales 
value may be distorted, and (3) incorrect dates lead to incorrect 
matching, all of which ultimately distorts the antidumping duty 
margin.'' Id. at 55587. The Department disagreed with petitioners in 
that case concluding that ``[p]etitioners'' claim that the contract 
date fixes prices and quantities is not supported by record evidence.'' 
Id. at 55588. As to the specific objections raised in Carbon Steel 
Pipes From Thailand to relying upon the invoice date as opposed to the 
order confirmation date, Columbus has adduced evidence that shifting to 
one or the other date of sale will not effect a substantive change in 
the Department's analysis. While a change to order acceptance date 
would mean that some transactions currently listed as taking place 
early in the POI would be omitted from our analysis, whereas other 
transactions presently considered as falling after the POI would be 
included, the resultant overall volumes under either scenario are 
comparable. See Columbus's November 2, 1998 supplemental response at 6 
and Appendix 1. Furthermore, the relative lag between order acceptance 
and invoice dates on home market and U.S. sales do not differ to a 
significant degree.3 Thus, the universe of sales subject to 
our analysis would not change substantially were we to opt for the 
order date as the date of sale. As for the second point noted in Carbon 
Steel Pipes From Thailand, the South African rand was stable against 
the U.S. dollar throughout our POI, as were interest rates in South 
Africa. Thus, concerns about devaluation and inflation are not at 
issue. As for the third point concerning model matching, the evidence 
of record indicates that Columbus sold the same limited number of 
grades of stainless steel in both the home and U.S. markets, thus 
attenuating fears that our model matches have been skewed by reliance 
on invoice date. As we concluded in Stainless Steel Wire Rod From 
Italy, ``(g)iven the circumstances and the fact that we compared POI-
average NVs to POI-average EPs, we find that no material distortion 
exists in our price-to-price comparisons.'' Notice of Final 
Determination of Sales At Less Than Fair Value: Stainless Steel Wire 
Rod From Italy, 63 FR 40422, 40425 (July 29, 1998).4
---------------------------------------------------------------------------

    \3\ The exact numbers of days for the respective markets is 
business proprietary information. See Columbus's November 2, 1998 
submission.
    \4\ It must be noted that in making this argument the Department 
agreed with petitioners that the customer's purchase order date, 
rather than respondent CAS's invoice date, represented the 
appropriate date of sale; that said, the point is no less relevant 
to the instant proceeding.
---------------------------------------------------------------------------

    The record does not indicate that changes in the essential terms of 
sale between order acceptance and invoice dates occur with high 
frequency. However, there is sufficient evidence of record that changes 
can and do occur to militate against petitioners' contention that we 
must abandon the presumptive date of sale identified in the 
Department's regulations in favor of using Columbus's order acceptance 
date. Therefore, because Columbus's internal records kept in its normal 
course of business do not recognize any sale until the invoice is 
issued, and because Columbus has presented evidence that the essential 
terms of sale can and do change between issuance of the order 
acceptance and subsequent invoicing, we have continued to rely upon 
Columbus's reported invoice dates as the dates of sale for this final 
determination. In the event this investigation should result in the 
publication of an antidumping duty order, however, we intend to re-
examine this issue thoroughly in any subsequent review involving 
Columbus.
    Comment 3: Post-Sale Price Adjustments. Columbus and petitioners 
both comment in their case and rebuttal briefs upon the Department's 
findings at verification concerning certain unreported post-sale price 
adjustments. During the POI Columbus issued credit notes (i.e., credit 
memos) adjusting prices on certain transactions either as a result of 
price discrepancies or quality complaints. However, Columbus's 
questionnaire responses did not include a claim for home market credit 
notes, nor did Columbus report any credit notes for its U.S. sales. At 
verification the Department discovered a limited number of these credit 
notes relating to Columbus's home market and U.S. sales of stainless 
coil.
    Columbus insists that the failure to report credit notes on sales 
of subject stainless coil stemmed from an inadvertent oversight. In 
Columbus's view, these omissions ``were minor, were not to the benefit 
of Columbus, did not impede the investigation, and were remedied as 
soon as they were discovered.'' Columbus's Case Brief, Executive 
Summary at page i. Columbus attributes its failure to include these 
credit notes in its sales database to an absence of any direct link in 
Columbus's accounting system between the credit notes and the 
applicable invoice.
    Columbus urges the Department to consider these credit notes in 
reaching its final determination in this case. However, Columbus 
asserts that the credit notes warrant differing treatment depending 
upon the market in which they were issued. Credit notes issued for home 
market sales, Columbus insists, should be treated as direct adjustments 
to price, as these represent corrections to incorrect price surcharges. 
In contrast, Columbus argues that credit notes issued for U.S. sales of 
subject coil should be afforded treatment as indirect selling expenses, 
as they represent voluntary ``goodwill payments'' arising from quality 
complaints. According to Columbus, credit notes on U.S. sales do not 
represent price adjustments, as the original price had been agreed upon 
and paid. Further, they do not arise from warranty payments since, 
Columbus insists, subject plate is not sold under warranty. Columbus's 
Case Brief at 2. Therefore, Columbus notes, it is under no legal 
obligation to issue these credits. Id. at 3. Citing Dry Cleaning 
Equipment From West Germany; Preliminary Results of Antidumping Duty 
Administrative Review, 52 FR 2124 (January 20, 1987), Columbus 
maintains that it is the Department's practice to treat voluntary 
goodwill payments as indirect selling expenses.
    Petitioners argue to the contrary that Columbus did, in fact, have 
a means of linking all credit notes issued during the POI to the 
original sales invoices. Petitioners assert that Columbus ``admitted'' 
that it could tie these credit notes to their applicable invoices 
through the Mill Production Order (MPO), a document generated for each 
order in Columbus's normal course of business. Petitioners' Case Brief 
at 13, citing the Sales Verification Report at 35. Petitioners argue 
that Columbus ``was aware that it had debit and credit notes that could 
and should have been reported to the Department in its home and U.S. 
market sales files.'' However, petitioners continue, Columbus 
``unilaterally decided not to report these data to the Department.'' 
Id. Accordingly, petitioners suggest that as partial facts available 
the Department should make adjustments only for debit notes issued in 
the home market and for credit notes issued on U.S. sales.
    In its rebuttal brief petitioners reject Columbus's 
characterization of this omission as ``minor and inadvertent.'' The 
Department's analysis, petitioners

[[Page 15466]]

argue, hinges on determining the prices actually paid for the 
merchandise in the respective markets. According to petitioners, 
Columbus cannot rely upon the ``excuse'' that it has no direct link 
between its credit notes and the original invoices, suggesting that 
this is ``true of many adjustments to price required by the statute.'' 
Petitioners'' Rebuttal Brief at 13. Petitioners renew their proposal 
that the Department as adverse facts available consider only credit 
notes issued on U.S. sales and disregard those reported on home market 
sales. Further, in adjusting for the U.S. credit notes, petitioners 
urge the Department to disregard Columbus's ``invitation'' to treat 
these as indirect selling expenses: ``[c]redit and debit notes are 
properly regarded as adjustments to gross price.'' Id. Petitioners also 
dismiss Columbus's suggestion that its U.S. credit notes were not price 
adjustments ``since the price had been agreed to and paid.'' Id. at 14, 
quoting Columbus's Case Brief at 2 and 3. Rather, petitioners continue, 
by issuing a credit note Columbus was agreeing to a modification of the 
original price in response to customer complaints; in keeping with the 
Department's practice, petitioners conclude, these credit notes must be 
applied to particular sales.
    Department's Position We agree with petitioners. The Department 
routinely asks respondents for information concerning billing 
adjustments and post-sale price adjustments during antidumping 
proceedings. For example, the Department's original antidumping 
questionnaire in this investigation asked Columbus to ``[r]eport any 
price adjustments made for reasons other than discounts or rebates. 
State whether these billing adjustments are reflected in your gross 
unit price.'' Antidumping Questionnaire, May 27, 1998, at page B-20 
(home market) and C-18 (United States). Columbus's response for the 
home market: ``This field is not applicable. No price adjustments were 
done after invoicing. The price as reflected on the invoice is the 
price paid by the customer.'' Columbus's July 20, 1998 questionnaire 
response at B-27. Likewise for its U.S. sales Columbus reported that 
``(n)o price adjustments were made after invoicing.'' Id. at C-27. For 
both markets Columbus stated that it did not offer any discounts other 
than home market early payment and distributor discounts. Columbus also 
reported that it granted no rebates and incurred no warranty or 
technical service expenses in either market. Id. at B-30, B-41, B-42, 
and C-29 and C-46.
    The Department's supplemental questionnaire asked several follow-up 
questions concerning both discounts and rebates in the home market. In 
its September 8, 1998 supplemental questionnaire response Columbus 
reiterated that it granted no rebates during the POI and noted that its 
export-promotion discounts did not apply to POI sales of subject 
merchandise. See Columbus's September 8, 1998 response at 26 and 27; 
see also the Department's Sales Verification Report at 51 (``Columbus 
did not include technical or warranty expenses in its home market or 
U.S. sales listings.'').
    At commencement of the Department's sales verification on November 
16, 1998, consistent with our standard practice, we provided Columbus 
with the opportunity to submit any corrections of minor errors 
discovered while preparing for verification. Columbus submitted a 
single correction pertaining to its indirect selling expenses; Columbus 
again did not report any credit notes or price adjustments on either 
U.S. or HM sales. However, several days into the verification, during a 
lengthy discussion of quantity and value, Columbus produced a list of 
home market and U.S. credit notes. Columbus acknowledged that it ``had 
made no provisions for credit or debit notes or returns,'' and further 
allowed that it could link any such credit or debit notes to the 
original invoices through the MPO, a document generated in its ordinary 
course of business. See Sales Verification Report at 35.
    The findings at verification amply demonstrate that Columbus not 
only issued credit notes pertaining to sales of subject plate in coil 
during the POI, but had the means to link each credit note to the 
appropriate invoice through the MPO. The record is also clear that 
Columbus reported none of these notes in spite of our manifest 
instructions that it do so. In view of the evidence of record we find 
that Columbus failed to act to the best of its ability in responding to 
this portion of the Department's original antidumping questionnaire. 
Section 776(a)(2) of the Tariff Act holds that if an interested party 
withholds information that has been requested by the Department or 
fails to provide such information by the deadlines for submission, the 
Department shall use the facts otherwise available in reaching its 
final determination. See Section 776(a)(2)(A) and (B). Further, 
pursuant to section 776(b) of the Tariff Act, if the Department finds 
that an interested party failed to cooperate by not acting to the best 
of its ability to comply with a request for information, the Department 
``may use an inference that is adverse to the interests of that party 
in selecting from among the facts otherwise available.''
    Furthermore, we find that the caveats set forth in section 782 
governing the use of facts otherwise available are inapplicable in the 
instant case. In response to our direct requests that Columbus report 
home market and U.S. billing adjustments, rebates, and technical and 
warranty expenses, Columbus answered specifically that none of these 
applied to Columbus's sales during the POI. At no time prior to 
verification did Columbus acknowledge that it did, in fact, issue 
credit notes pertaining to quality complaints involving subject 
merchandise, nor did Columbus ever plead that it was unable to submit 
information regarding these ``inapplicable'' price adjustments. 
Furthermore, subsection 782(e) is inapposite as the Department is not 
``declin[ing] to consider information that is submitted'' by Columbus. 
Columbus failed to submit this information in response to our requests. 
However, the information was belatedly provided by Columbus during the 
November 1998 verification and verified by the Department at that time.
    Accordingly, as facts available in the instant case we have 
allocated each U.S. credit note to its applicable invoice and have 
deducted a transaction-specific per-ton amount for those credit notes. 
Furthermore, as an adverse inference, we are disallowing all credit 
notes claimed by Columbus for sales in the home market. As the SAA 
makes clear, the Department ``may employ adverse inferences about 
missing information to ensure that a party does not obtain a more 
favorable result by failing to cooperate than if it had cooperated 
fully.'' SAA, as reprinted in H.R. Doc. No. 103-316 (1994). Columbus 
ignored our specific instructions that it report billing adjustments, 
including ``any price adjustments made for reasons other than discounts 
or rebates.'' Thus, to insure that Columbus does not ``obtain a more 
favorable result,'' we are allowing the U.S. credit notes while 
adopting the adverse inference that Columbus issued no credit notes in 
the home market. See, e.g., Gray Portland Cement and Cement Clinker 
From Mexico, 62 FR 17148, 17166, (April 9, 1997) (home market freight 
expenses disallowed because respondent's ``reported data (were) 
inconsistent with the Department's explicit instructions'').
    Comment 4: U.S. Commissions. Claiming that it pays commissions in 
the U.S. market but none in the home market, Columbus notes that the 
Department's practice in such situations is to make an adjustment to 
NV--the

[[Page 15467]]

``commission offset''--to account for the U.S. commission. Columbus's 
Case Brief at 1, citing section 19 CFR 351.410(e) of the Department's 
regulations. The Department, in fact, described this offset in its 
October 27, 1998 Preliminary Analysis Memorandum. However, Columbus 
maintains, Columbus's reported gross unit prices for its U.S. sales do 
not include the commission amounts. Accordingly, Columbus asks that the 
Department add U.S. commissions to the gross unit U.S. prices before 
making price-to-price comparisons. Columbus notes that although the 
Department discovered at verification that Columbus had made ``a small 
overstatement'' of the commissions, nevertheless, Columbus concludes, 
``the Department was able to verify the correct calculation of this 
commission.'' Id. at 2 and n. 1.
    Petitioners ``do not disagree with Columbus's suggestion'' to add 
U.S. commissions to the gross unit U.S. price. Petitioners' Rebuttal 
Brief at 1. However, petitioners assert that if the Department does so, 
it must also add U.S. commissions to the calculation of NV and CV to 
ensure the proper consideration of U.S. commissions in the Department's 
final determination.
    Department's Position: We disagree with both Columbus and 
petitioners. Columbus's position notwithstanding, we do not find the 
adjustments claimed as U.S. commissions are commissions at all for 
purposes of an antidumping analysis. As instructed in the Department's 
questionnaire, Columbus reported in its U.S. sales listing its first 
sales to unaffiliated customers in the United States. See, e.g., 
Columbus's June 24, 1998 section A response at 17 through 19. In its 
supplemental response Columbus, noting that it considers these 
unaffiliated customers as its agents, nonetheless stated that it 
invoices and sells the merchandise to these customers and receives 
payment from them. These companies then resell the product to their 
unaffiliated customers. See Columbus's September 8, 1998 supplemental 
response at 47 and 48. Thus, throughout this investigation the U.S. 
sales prices which have been subject to our analysis have been those 
reported by Columbus to its named EP customers.
    The amounts claimed as ``commissions'' for these transactions are 
not related in any way to the reported sales to Columbus's EP 
customers. Columbus has not reported any commissions paid in connection 
with its first sale to an unaffiliated party in the United States. 
Regardless of whether the amounts claimed by Columbus are commissions, 
or simply mark-ups passed on to the subsequent end-user customer, they 
are related to the resales by Columbus's EP customers, not the sales 
upon which our dumping analysis is based. We have accordingly limited 
our analysis of Columbus's EP transactions to those involving 
Columbus's first sales in the United States to unaffiliated parties and 
have not considered further the additional amounts claimed as 
commissions by Columbus.
    Comment 5: Home Market Short-Term Interest Rates. Petitioners urge 
the Department to treat Columbus's home market short-term interest rate 
as ``unverified'' and to disallow entirely Columbus's claimed 
adjustments for home market credit expenses and ICC. Petitioners point 
to statements made by Columbus officials at verification that it had no 
short-term rand-denominated borrowing; Columbus claimed, therefore, to 
have used ``call'' rates, or interest rate quotes supplied by 
Columbus's banks, in calculating home market credit expenses and ICC. 
Petitioners' Case Brief at 15, quoting Columbus's Section B response at 
pages 38 and 46. Petitioners note Columbus's admission at verification 
that it solicits these ``call'' rates via telephone and maintains no 
documentation to support these numbers. ``Without independent 
verification,'' petitioners insist, ``the Department is not in a 
position to confirm the accuracy of the submitted data.'' As a result, 
petitioners conclude, the Department must treat Columbus's home market 
interest rates as ``unverified'' and deny the claimed adjustments for 
credit expenses and ICC.
    Columbus argues in its case brief that rather than disregarding its 
claimed credit expense and ICC adjustments, the Department should rely 
upon the verified prime overdraft rates available in South Africa in 
the absence of any short-term rand-denominated borrowing by Columbus. 
Columbus insists that the Department verified fully that Columbus had 
no short-term borrowing in the home market currency; the Department's 
practice in such instances, Columbus maintains, is to base home market 
credit and ICC calculations upon the short-term interest rates 
generally available in the home market. Columbus's Case Brief at 6, 
citing Final Determination of Sales at Less Than Fair Value; Certain 
Pasta From Turkey, 61 FR 30309, 30324 (June 14, 1996), and Final 
Determination of Sales at Less Than Fair Value: Canned Pineapple Fruit 
From Thailand (Canned Pineapple Fruit), 60 FR 29553, 29557 (June 5, 
1995). Therefore, Columbus concludes, the Department should rely upon 
the verified prime overdraft rates submitted by Columbus at 
verification. Id.
    In rebuttal petitioners assert that the sales verification report 
clearly states that ``no existing documentation supports these 
numbers.'' Petitioners' rebuttal brief at 2, quoting the Sales 
Verification Report at 46. Petitioners likewise describe as unavailing 
Columbus's attempts during verification to substantiate its prime 
overdraft rates, insisting that Columbus's short-term interest rates 
were not verified.
    Columbus, in turn, argues in its rebuttal brief that its short-term 
interest rates were fully verified. Columbus acknowledges that its 
original response used ``call'' rates obtained by telephone by the 
Columbus official responsible for preparing Columbus's response. 
However, Columbus asserts, that official left the company and Columbus 
could not subsequently locate the underlying documentation for these 
rates. Therefore, in responding to the Department's October 15, 1998 
supplemental questionnaire, and well prior to verification, Columbus 
provided prime overdraft rates ``which represent the available short-
term rand interest rates in South Africa.'' Columbus's Rebuttal Brief 
at 17. Columbus insists that these prime overdraft rates were 
documented and verified. Therefore, Columbus avers, these rates should 
be used in calculating home market credit expenses and ICC.
    Department's Position: We agree with Columbus that the short-term 
prime overdraft rates available in South Africa should serve as the 
basis of Columbus's credit and ICC calculations in the absence of 
short-term borrowing in the home market. While petitioners note 
correctly that the Department could not verify the ``call'' rates used 
to calculate Columbus's credit and ICCs, as we will explain below, we 
do not believe this ``failure'' warrants application of adverse facts 
available. Columbus claimed at verification that the official 
responsible for compiling the ``call'' rates had since left Columbus's 
employ and that this individual's interest rate worksheets were no 
longer available. Thus, in response to our specific request, Columbus 
collected and presented information to substantiate the prime overdraft 
rates available to commercial borrowers in South Africa. We were able 
to document and verify these rates through records Columbus keeps in 
its normal course of business. Furthermore, we confirmed these rates 
using publicly-available data on interest rates in South Africa as 
published by the International Monetary Fund (the IMF) in its 
International Financial Statistics for September 1997, January

[[Page 15468]]

1998 and June 1998 (we selected all three volumes to capture monthly 
prime overdraft rates for each of the twelve months of calendar 1997).
    According to Columbus, it originally obtained the ``call'' rates 
used in calculating credit and ICC expenses by telephoning its leading 
commercial bank and inquiring about the interest rates that would be 
available to Columbus if it were seeking short-term rand-denominated 
loans. The bank, after considering prevailing interest rates and 
Columbus's history with the institution, responded with the ``call'' 
rates originally submitted by Columbus on July 20, 1998. Thus, these 
``call'' rates represented the interest rates available on rand-
denominated loans specifically to Columbus from this bank. These were 
the rates we referred to in our verification report when we noted that 
``no existing documentation supports these numbers.'' Sales 
Verification Report at 46.
    Once Columbus admitted during verification that it could not 
substantiate its credit expenses as reported using the ``call'' rates, 
it presented documentation on interest rates drawn from its internal 
cash management system. These rates coincide with those released by 
both the South African Reserve Bank and the IMF's International 
Financial Statistics. As discussed in the Sales Verification Report at 
pages 46 and 47, Columbus operates an internal system to manage daily 
cash flows which tracks the various interest rates available from 
certain commercial banks. This prime overdraft rate was constant from 
November 1996 5 through October 20, 1997, at which point it 
changed once for the duration of the POI. See the Sales Verification 
Report and Exhibit 15 thereto.
---------------------------------------------------------------------------

    \5\ The reference to ``November 1997'' at page 47 of the Sales 
Verification Report is a typographical error.
---------------------------------------------------------------------------

    The record establishes that Columbus had no short-term rand-
denominated loans from unaffiliated lenders. The Department's 
antidumping duty questionnaire at page B-27 asked Columbus for 
information on its short-term interest expenses and instructed Columbus 
to ``use a published commercial short-term lending rate'' if it had no 
short-term borrowings during the POI. With no actual home-market short-
term loans to serve as a basis for its interest rate, Columbus 
attempted to respond to this question by telephoning its bank and, in 
effect, asking this bank what interest rates would have been available 
to Columbus had it borrowed during the POI. In our October 15, 1998 
supplemental questionnaire the Department subsequently asked Columbus 
to substantiate the rates quoted by this bank and to ``provide South 
African interest rates for the POI obtained from publicly-available 
sources (such as those published on a monthly basis in business 
publications or released by the South African Reserve Bank).'' October 
15, 1998 supplemental questionnaire at 2. Columbus's response, while 
failing to indicate that its original interest rates could not be 
substantiated, nevertheless complied with our request for information 
on short-term interest rates available from the South African Reserve 
Bank.6
---------------------------------------------------------------------------

    \6\ Columbus submitted information on prime overdraft rates 
drawn from the South African Reserve Bank's Worldwide Web site 
(www.resbank.co.za) at Exhibit 3 of its November 2, 1998 
supplemental response. Columbus did not indicate that its reported 
short-term interest rates could no longer withstand verification, 
however, stating cryptically that ``[t]he final credit expenses may 
have to be calculated based on the attached.'' Id. at 8.
---------------------------------------------------------------------------

    While it is true that we could not verify the ``call'' rates used 
in Columbus's original and revised home market sales listings, we must 
point out that these ``call'' rates bear no relationship to any actual 
short-term loans taken by Columbus, nor did Columbus fail to disclose 
any home market borrowing or otherwise misstate its short-term interest 
expenses. This is not a case where Columbus had short-term loans in the 
home market, incurred actual short-term interest expenses, and then was 
unable to substantiate these expenses at verification. Rather, in 
response to a direct question from the Department, Columbus attempted 
to respond to the best of its ability by determining precisely what 
rates it could have obtained had it actually borrowed money in the home 
market. Petitioners' suggested response would have the Department 
penalize Columbus for failing to provide substantiation for interest 
rates which, in effect, never existed outside of an informal inquiry 
from Columbus to its bank.
    The Department has over time developed a policy to address 
specifically situations such as the instant case where a respondent has 
no short-term borrowing from unaffiliated parties in the currency of 
either the export market or the United States. On February 23, 1998, 
the Department promulgated Import Administration Policy Bulletin 98.2, 
``Imputed Credit Expenses and Interest Rates.'' As we explain in this 
document, the Department at one time calculated imputed interest 
expenses to reflect the ``opportunity cost of money'' incurred in 
extending credit by using the actual short-term interest rates incurred 
in the home market to calculate both home market and U.S. credit and 
ICC (except in exporter's sales price (now, CEP) situations, where we 
would use the short-term dollar-denominated interest rates for 
transactions in the United States). However, in 1990 the Court of 
Appeals for the Federal Circuit overturned this practice, stating that 
the cost of credit ``must be imputed on the basis of usual and 
reasonable commercial behavior,'' and that the short-term interest 
rates used should conform with ``commercial reality.'' LMI-La Metalli 
Industriale S.p.A. v. United States, 912 F.2d 455, 460 (Fed. Cir. 
1990). Our policy bulletin concluded that ``[i]n cases where a 
respondent has no short-term borrowings in the currency of the 
transaction, we will use publicly available information to establish a 
short-term interest rate applicable to the transaction.'' The bulletin 
further noted that in the rare cases where a respondent has no short-
term loans from unaffiliated parties in the home market currency we 
will establish interest rates on a case-by-case basis ``with a 
preference for published average short-term lending rates.'' Policy 
Bulletin 98.2 at 6.
    As Columbus had no short-term rand-denominated loans from 
unaffiliated parties, the alternative, and the Department's stated 
preferences in such cases, is to use publicly-available interest rate 
information. Thus, for purposes of this final determination we have 
recalculated Columbus's home market credit expenses and ICC using the 
publicly-available rates of the South African Reserve Bank as confirmed 
by the IMF's International Financial Statistics.
    Comment 6: Marketing and Market Development Costs. Petitioners urge 
the Department to recalculate Columbus's indirect selling expenses by 
deducting those expenses relating to ``sales and marketing'' and 
general market development. Petitioners note that the Department's 
Sales Verification Report described the cost centers identified by 
Columbus to determine the pool of expenses for use in calculating its 
indirect selling expenses. According to petitioners, Columbus added to 
its indirect selling expenses those costs relating to ``general 
expenses and salaries pertaining to its market development cost 
centers.'' Petitioners' Case Brief at 14, quoting the Sales 
Verification Report at 53 and 54. However, petitioners insist that 
general expenses not related to sales of such or similar merchandise do 
not qualify for treatment as indirect selling expenses.

[[Page 15469]]

Id. and n. 58, citing Antifriction Bearings (Other Than Tapered Roller 
Bearings) and Parts Thereof From France, et al., 58 FR 39729, 39749 
(July 26, 1993) (Antifriction Bearings). Rather, petitioners assert, 
the marketing and market development expenses at issue are by 
definition ``general expenses,'' which should be included in the 
general and administrative (G&A) expenses used to adjust COP and CV. 
Id. Petitioners further accuse Columbus of including in its G&A 
calculation certain costs and revenue they characterize as ``non-
operating items.'' Petitioners' Case Brief at 25. Columbus's G&A ratio, 
petitioners insists, must be adjusted by excluding all such items.
    Columbus argues that all expenses incurred by its sales department 
in ``marketing, selling and promoting sales of subject merchandise are 
plainly selling expenses'' which, Columbus maintains, should not be 
considered part of its G&A. Columbus's Rebuttal Brief at 15. Further, 
Columbus avers, in the sole case cited by petitioners to support the 
reclassification of its sales and marketing expenses, Antifriction 
Bearings, the Department concluded just the opposite, that the 
marketing and market development expenses at issue were, in fact, 
indirect selling expenses. ``Expenses incurred to market and to expand 
and develop the market for Columbus's products,'' Columbus insists, 
``are plainly associated with sales of those products.'' Columbus's 
Rebuttal Brief at 16.
    Treating these expenses as indirect selling expenses, Columbus 
argues, is consistent with the Department's own antidumping 
questionnaire. Further, Columbus asserts, petitioners' claim that these 
expenses should be classified as general expenses related to cost of 
production runs contrary to the Department's section D questionnaire, 
which defines ``general expenses'' as ``period expenses which relate 
indirectly to the general production operations of the company.'' 
Columbus's Rebuttal Brief at 16, quoting the Department's questionnaire 
at D-25. According to Columbus, marketing and market development 
expenses intended to promote sales ``do not belong in this category of 
expenses.'' Id. at 17.
    Department's Position: We agree with Columbus. We reviewed the 
expenses at issue during both the sales and cost verifications in this 
case (see, e.g., the Sales Verification Report at 53 and 54--``we 
examined the various expenses and noted no discrepancies''). As noted 
in the Sales Verification Report, Columbus has established cost centers 
for its export marketing and for each of its local sales offices. In 
addition, Columbus relies on a separate cost center to accrue expenses 
relating to its market development efforts in South Africa. Because 
these costs are related, albeit indirectly, to promoting sales in the 
home market, as opposed to Columbus's general operation or its 
production of stainless steel, we have continued to treat these costs 
as indirect selling expenses for this final determination.
    With respect to the amounts claimed by petitioners to be ``non-
operating items,'' our review of the relevant expenses and revenues 
indicates that these items relate to the general operations of the 
company as a whole and, therefore, are properly considered as part of 
Columbus's G&A.
    Comment 7: Home Market Advertising Expenses. Columbus reported 
adjustments for home market advertising expenses claiming these were 
``assumed'' on behalf of the buyer, thus warranting treatment as direct 
selling expenses pursuant to the COS provision of 19 CFR 351.410(d). 
These expenses fell into three categories: print advertising expenses, 
maintenance of a stadium box at the Ellis Park Stadium, and expenses 
arising from Columbus's sponsorship of an annual ``3CR12 Squash 
Tourney.''
    Petitioners maintain that Columbus's various claimed advertising 
expenses qualify as indirect rather than direct selling expenses. 
According to petitioners, Columbus has failed to demonstrate that any 
of the expenses relating to its magazine advertisements, as well as 
those stemming from the publication of Contact, an in-house newsletter, 
qualify as direct selling expenses. Further, petitioners argue, 
Columbus uses the hospitality suite at Ellis Park Stadium to entertain 
Columbus's customers, including distributors, at rugby matches, not to 
entertain its customers' customers. Similarly, the 3CR12 Squash Tourney 
fails to qualify as a direct advertising expense because the tourney 
was open to users of stainless steel generally, and not limited to 
specifiers of the specialty 3CR12 product (or, for that matter, subject 
stainless steel plate in coil). Petitioners' Case Brief at 17. 
Therefore, petitioners conclude, the Department must disallow any 
adjustment for advertising as a direct selling expense and instead 
treat the expenses as indirect selling expenses in their entirety.
    In their rebuttal brief petitioners note that to qualify for an 
adjustment as a direct selling expense, 19 CFR 351.410(d) requires 
advertising expenses to ``bear a direct relationship to (a) particular 
sale'' or to be ``assumed by the seller on behalf of the buyer.'' 
Petitioners' Rebuttal Brief at 3, quoting 19 CFR 351.410(d). 
Petitioners point to the findings in the Department's Sales 
Verification Report as demonstrating that ``all of Columbus'(s) claimed 
direct advertising expenses are general in nature, and fail to meet the 
criteria for consideration as an assumed selling expense.'' Id. at 4.
    Columbus argues that its advertising expenses incurred in the home 
market are assumed on behalf of the buyer and merit adjustment under 
the COS provision. For example, Columbus asserts, expenses relating to 
the corporate box at the Ellis Park Stadium and those connected to the 
squash tournament sponsored by Columbus qualify as direct advertising 
expenses. Conceding that ``some portion'' of the magazine advertising 
purchased by Columbus, as well as an unspecified portion of the Ellis 
Park Stadium expenses, may appropriately be considered indirect in 
nature, Columbus nonetheless urges the Department to either treat 
advertising costs as direct expenses in their entirety or to 
``apportion them reasonably between `assumed' and `indirect' 
expenses.'' Columbus's Case Brief at 7.
    In addition, Columbus notes that during the sales verification the 
Department discovered that some of the reported advertising expenses 
had been based upon budgeted, rather than actual, costs. Columbus urges 
the Department, therefore, to base any adjustment for advertising 
expenses upon the actual verified expenses in lieu of the incorrect 
budgeted amounts originally reported.
    Finally, Columbus disagrees with petitioners' contention that these 
advertising expenses cannot be considered as direct selling expenses 
because the advertising at issue may reach a broader audience than 
purchasers of subject stainless steel plate in coil; Columbus asserts 
that in many cases the customers of Columbus's customers are purchasing 
merchandise which has been further processed so as to no longer 
constitute the foreign like product. Columbus's Rebuttal Brief at 18. 
Columbus maintains that whether the downstream sale comprises subject 
or non-subject merchandise has no bearing on the proper treatment of 
the advertising expenses assumed by Columbus on behalf of the buyer 
(i.e., Columbus's customers).
    Department's Position: We agree in part with petitioners. We 
reviewed Columbus's claimed advertising expenses exhaustively at 
verification and found that most, if not all, of these

[[Page 15470]]

promotional expenses were incurred either in marketing to Columbus's 
customers, as in the case of the Ellis Park Stadium box, or as general 
corporate promotion in the case of Columbus's print advertising.
    With respect to this last category of expenses, we reviewed 
numerous samples of Columbus's print advertising which reflected high-
quality glossy art and copy suitable for publication as full-page 
advertisements. These advertisements are intended to promote either the 
benefits of stainless steel generally, or Columbus's image as a 
reliable supplier of high-quality stainless steel; by Columbus's own 
admission, most of these advertisements, including advertisements 
promoting sales of coiled hot-bands, are aimed at distributors; 
``Columbus acknowledged that end-users are not purchasing stainless 
coils, or large quantities of cut stainless sheet.'' Sales Verification 
Report at 49. Likewise, as petitioners note, Columbus's in-house 
publication Contact is addressed ``to you, our valued customers.'' 
Columbus's September 8, 1998 supplemental response at Exhibit K. Thus, 
we conclude that Columbus's print advertising expenses are aimed 
primarily at Columbus's customers, with the remaining expenses 
promoting Columbus's general corporate image. As such, these expenses 
do not represent expenses assumed by Columbus on behalf of its 
customers, and do not merit treatment as a COS adjustment.
    Similarly, the record indicates that the Ellis Park Stadium box is 
used primarily to entertain Columbus' customers at rugby matches. As 
Columbus noted, 13 of the 15 seats in the box are devoted to use by the 
local sales department. ``Columbus claims that employees of catalytic 
converter companies, tanktainer manufacturers, and Columbus' 
distributors were the most common recipients of passes to the box.'' 
Sales Verification Report at 49. Thus, we find that these expenses 
represent indirect selling expenses incurred by Columbus in marketing 
stainless steel products to its customers, not direct selling expenses 
assumed by Columbus on behalf of its customers.
    Finally, as regards the 3CR12 Squash Tourney, we discussed this 
tournament at verification with the public relations officials at 
Columbus and reviewed the list of participants included in the 
tourney's brochure. We confirmed that virtually all of the contestant 
teams represented mining companies or other end users of 3CR12 steel 
products. While Columbus acknowledged that ``the scope of the tourney 
extended beyond end users of 3CR12,'' the very name of the tournament 
coupled with the makeup of the tournament's competitors makes it clear 
that these expenses were incurred to promote sales of 3CR12 stainless 
to end-user customers. The Court of International Trade addressed a 
similar issue in Smith Corona Group v. United States, 540 F. Supp. 1341 
(CIT 1982), aff'd 713 F.2d 1568 (Fed. Cir. 1983). There, the Court 
found that

    [w]hile the challenged ads were not exclusively directed to the 
relevant merchandise, a portion of each advertising effort was. In a 
purely metaphysical sense, Smith Corona is correct in that the ad 
expense cannot be directly correlated with specific sales. Yet, the 
statute does not deal in imponderables.

    In a later case involving the same parties, Smith Corona v. United 
States, 771 F. Supp. (CIT 1991), the Court likewise concluded that 
``(e)ven if the evidence that the advertisements contained 
institutional or corporate themes were substantial, it would still not 
undermine the agency's determination, for the existence of such themes 
does not necessarily diminish direct promotion therein of particular 
products.''
    As with Smith Corona's advertisements, so too Columbus' 3CR12 
Squash Tourney is directed towards end users of 3CR12 steel, i.e., the 
customers of Columbus' customers. That Columbus realizes some measure 
of general corporate promotion at the same time ``does not necessarily 
diminish direct promotion therein of particular products.'' 
Accordingly, while we have disallowed the balance of Columbus' claimed 
advertising expenses as COS adjustments, treating these instead as 
indirect selling expenses, we have treated the actual costs of 
sponsoring the 3CR12 Squash Tourney as direct selling expenses assumed 
by Columbus on behalf of its customers and have allocated these 
expenses over home market sales of 3CR12 steel only.
    Comment 8: Other Direct Selling Expenses for 3CR12 Steel. 
Petitioners, noting that Columbus incurs certain expenses in the United 
States in selling 3CR12 stainless steel, argue that the Department must 
calculate an amount for ``other direct'' selling expenses for sales of 
this product. Petitioners' Case Brief at 17. These expenses, 
petitioners argue, include those relating to sales visits paid by 
employees of a wholly-owned Columbus subsidiary to its customer's 
customers. As such, petitioners insist, the costs relating to these 
visits represent direct expenses Columbus has assumed on behalf of its 
customer, an unaffiliated distributor.
    In response Columbus avers that its expenses relating to U.S. sales 
of 3CR12 steel are indirect in nature, arising primarily from general 
market promotion for this specialty product. ``[T]here is no 
indication,'' Columbus insists, ``that the visits to the customers were 
an `assumed' expense.'' Columbus' Rebuttal Brief at 18 and 19. Further, 
Columbus argues, the customer visits were just one of a range of 
activities of these employees. Even if the attendant expenses qualify 
as `assumed' expenses, Columbus submits, the resulting adjustment 
``would plainly be de minimis,'' and could not support treating all 
fixed expenses in the U.S. as direct selling expenses. Id.
    Department's Position. During our verification in Middelburg we 
reviewed the activities of personnel stationed in the United States and 
agree with Columbus that the expenses arising from these activities 
represent indirect selling expenses. Columbus maintains a wholly-owned 
subsidiary in the United Kingdom whose ``sole function is the sale and 
distribution of 3CR12 and the development of the market for 3CR12, 
primarily in Europe.'' Columbus' September 8, 1998 supplemental 
response at 9. As Columbus explained at verification, the personnel 
maintained by Columbus' subsidiary have technical expertise necessary 
to develop the market for 3CR12, a unique, corrosion-resistant 
``utility'' steel ``which is used extensively in the mining, sugar, and 
coal industries, and in the manufacture of railway wagons, bus bodies 
and automobile frames.'' Columbus' June 24, 1998 section A response at 
8, n.1. According to Columbus, it developed this grade of steel and 
currently holds patents and trademarks on it.
    After successfully introducing the steel in South Africa, Columbus 
noted, it is now attempting to promote this grade in the export market, 
focusing on the same industry sectors. However, Columbus maintains, 
because of 3CR12's unique properties, for example, its weldability, it 
required individuals with specific technical expertise to promote sales 
of Columbus' 3CR12 products to its customers. See, e.g., Columbus' 
September 8, 1998 supplemental response at 9. At verification we 
confirmed that all sales and distribution of 3CR12 steel in the United 
States are the responsibility of an unaffiliated distributor which 
purchases the material from Columbus' wholly-owned subsidiary in the 
United Kingdom. The individuals stationed in the United States, on the 
other hand, act only to distribute technical information about 3CR12's 
characteristics to potential customers and to promote new

[[Page 15471]]

applications for a grade of steel that is relatively little-known in 
the United States.
    Because there is no evidence of record that the expenses associated 
with the personnel stationed in the United States by Columbus' U.K. 
subsidiary are direct in nature or that these expenses were assumed by 
Columbus on behalf of its U.S. customers the expenses are properly 
considered indirect selling expenses, and have been so reported by 
Columbus. We have continued to treat these expenses as such for this 
final determination.
    Comment 9: Inland Insurance Expenses Incurred In South Africa for 
U.S. Sales. According to petitioners, the Department should apply 
partial facts available to calculate inland insurance expenses incurred 
in South Africa for sales to the United States. Petitioners note that 
Columbus reported these insurance premiums using the policies' formula 
of multiplying a stated premium factor by 110 percent of the invoice 
value. However, petitioners accuse Columbus of: (i) Reporting an 
incorrect amount for inland insurance, (ii) reporting the premiums in 
the wrong currency, and (iii) failing to offset its premium expenses 
with a rebate Columbus received for overpayments of its premiums. 
Further clouding the issue, petitioners maintain, is that Columbus's 
insurance broker ``was originally founded specifically to provide 
insurance underwriting for Columbus Joint Venture.'' Petitioners' Case 
Brief at 18, quoting the Sales Verification Report at 44. For these 
reasons petitioners insist that the Department should disregard 
Columbus' reported inland insurance, applying instead the highest 
reported insurance expense to all U.S. sales whose terms were either 
CFR or FOB.
    Columbus accuses petitioners of distorting the Department's 
findings at verification with respect to its foreign inland insurance, 
asserting that it is ``flatly wrong'' that Columbus mis-reported this 
expense, used the inappropriate currency, or failed to account for a 
substantial rebate. According to Columbus, the company reported this 
expense ``exactly as it is incurred,'' multiplying the premium rate by 
110 percent of the invoice price. The reason Columbus is unable to 
trace specific insurance payments for specific shipments, Columbus 
explains, is that it pays these premiums in advance against anticipated 
shipments. The exact amount is adjusted after the fact to reconcile the 
pre-paid premiums based upon estimated shipments to those based upon 
actual shipments during the period. ``It is absurd,'' Columbus 
complains, ``to claim that this is a verification failure.'' Columbus' 
Rebuttal Brief at 19. Columbus also dismisses petitioners' insinuations 
that its insurance provider is affiliated with Columbus. The insurance 
brokerage's name was chosen, Columbus maintains, when the company was 
founded to provide insurance underwriting for Columbus Joint Venture 
and the name was thought to lend status to the new concern. There is no 
relationship, Columbus insists, between Columbus and its insurance 
broker. Id. at 20.
    Department's Position. Petitioners' objections to Columbus' inland 
insurance expenses appear to arise from a misreading of the 
Department's Sales Verification Report. We verified fully Columbus' 
inland insurance expenses and noted no discrepancies in these expenses 
or the reporting methodology employed by Columbus. Calculating this 
insurance is simply a matter of multiplying the invoice value by 1.1 
and multiplying that product by the premium rate specified in Columbus' 
insurance policy. As to petitioners' contention that Columbus reported 
this expense in the ``wrong'' currency, although Columbus remits its 
prospective payments in rand, the insurance premiums are based upon the 
value in U.S. dollars of each shipment and are properly reported in 
U.S. dollars. Further, as this expense is calculated as a fixed 
percentage of value multiplied by a fixed premium rate, whether 
Columbus reports it in dollars or in rand converted to dollars has no 
effect on our calculations. Finally, with respect to the rebate for 
overpayments of premiums, the Sales Verification Report failed to make 
clear that this represented monies paid in advance by Columbus but 
subsequently refunded by the insurance brokerage when Columbus' 
prospective payment based upon anticipated shipments exceeded the 
premium charges based upon actual shipments. This refund did not 
reflect a price concession by the insurance broker. Thus, the refund 
had no effect upon the inland insurance expenses reported by Columbus 
in its sales listings. Therefore, we have accepted Columbus' reported 
inland insurance amounts for this final determination.
    Comment 10: Recalculation of Inventory Carrying Costs. Columbus 
points out that the COM used as the basis for calculating Columbus's 
ICC in its home market and U.S. databases has been subjected to several 
revisions as a result of supplemental cost questionnaires and the 
Department's cost verification. These ``various adjustments to COM,'' 
Columbus asserts, explain why ``Columbus was unable to reconstruct the 
reported ICC'' at verification. Columbus's Case Brief at 5, quoting the 
Sales Verification Report at 53. Reconstructing the original ICC would 
not be helpful, Columbus insists, because changes resulting from the 
supplemental cost questionnaires and verification would necessitate a 
recalculation in any event. The only outstanding verification issue 
relating to ICC, Columbus maintains, is a discrepancy of one day 
between the weighted-average days in inventory. ``Such a small 
difference does not mean,'' Columbus avers, ``that Columbus'' inventory 
carrying costs could not be verified.'' Id.
    Department's Position: We agree with Columbus, and have used the 
revised COM calculated for this final determination as the basis for 
calculating Columbus's ICC. As explained in the comments under ``Cost 
Issues,'' below, we have made a number of adjustments to Columbus's COP 
data as a result of either findings at the Department's cost 
verification or comments by the interested parties or both. See the 
Cost Verification Report and the Cost Calculation Memorandum (Final). 
Just as we have determined that it would be inappropriate to use 
Columbus's reported COM as the basis for its COP and CV data, it would 
likewise be inappropriate to use demonstrably inaccurate COM data as 
the basis for Columbus's ICC expenses. Accordingly, we are using 
Columbus's COM, as adjusted for this final determination, in 
calculating ICCs.
    Comment 11: Other Corrections. Columbus, noting that the Department 
conducted separate sales and cost verifications, requests that any 
changes in Columbus's data arising from one verification be reflected 
in the data verified at the other. This is necessary, Columbus insists, 
to avoid double-counting any expenses. For example, Columbus continues, 
the Department found that certain public relations expenses had been 
included both as a general overhead cost in Columbus's COP data and as 
a direct selling expense in Columbus's home market sales data. 
Similarly, certain marketing expenses were reported as G&A in both the 
sections B and D responses. When adding these expenses to Columbus's 
indirect selling expenses, Columbus urges the Department to make an 
offsetting deduction from G&A in Columbus's reported COP to avoid 
double-counting.
    Petitioners suggest without further elaboration that the Department 
correct a number of errors in Columbus's response, referring to various 
points in the Department's Sales Verification

[[Page 15472]]

Report. Petitioners' Case Brief at 19, citing pages 34 and 42, and 
Appendices IV, II and III of the Sales Verification Report.
    Department's Position: As noted in the comments herein, we have 
attempted to adjust expenses appropriately to reflect any revaluations 
or recalculations performed on Columbus's sales and cost data. Wherever 
a recalculation has affected one set of data we have, as appropriate, 
made the corresponding adjustments to Columbus's other data.
    As to petitioners' contentions, we are unable to find any specific 
errors needing remedy in the first two cites offered. The third 
citation involved installment payments for one home market sale; we 
have continued to rely upon the reported date of payment, as this 
represented the date of receipt of the customer's final payment. The 
fourth item related to wharfage expenses incurred on U.S. sales and we 
have adjusted this expense to reflect the actual verified amount. The 
final item concerns the reported date of payment for one U.S. 
transaction; we find that Columbus reported properly the payment date 
and no correction is necessary for this transaction.

Issues Relating to Cost of Production

    Comment 12: Revaluation of Raw Material Costs. Columbus explains 
that its accounting system kept in its normal course of business 
records raw material costs as of the date the finished product is sold. 
These costs, in turn, form Columbus's cost of sales. Columbus will then 
adjust its raw material costs back to their ``cost as purchased'' by 
means of a revaluation adjustment. Columbus's Case Brief at 8. Columbus 
claims that the Department erred in its Cost Verification Report when 
it stated that Columbus's internal system for accounting for variances 
in raw material costs has no impact on Columbus's reported COP. Id., 
citing the Cost Verification Report at 8. It would be wrong, Columbus 
insists, for the Department to disregard the revaluation adjustment 
when calculating Columbus's COP.
    Columbus notes that section 773(f)(1)(A) of the Tariff Act calls 
for the Department normally to calculate COP on the basis of the 
records of the exporter or producer, provided these records i) are kept 
in accordance with GAAP in exporting country, and ii) ``reasonably 
reflect the costs associated with the production and sale of the 
merchandise.'' Columbus's Case Brief at 8, quoting section 773 of the 
Tariff Act. The company's records are kept in accordance with GAAP, 
Columbus submits, and include the provision for revaluation of raw 
material costs as part of its COP for sales made during the POI. By 
means of the revaluation adjustment, Columbus argues, Columbus's 
records ``precisely track the actual costs incurred with respect to the 
subject merchandise.'' Id. at 9. Columbus asserts that stainless steel 
sold in, e.g., January would have been produced from raw materials 
purchased in a prior month; thus, valuing the raw material costs based 
upon the date of sale has the effect of distorting these costs. ``It 
would be wrong,'' Columbus submits, ``to assert that a sale is below 
cost because its price fails to cover, not the actual raw material cost 
of the product, but the cost of raw materials being purchased in 
January for production later in the year.'' Id. at 9.
    Even if the Department concludes that only costs incurred during 
the POI (calendar 1997) should serve as the basis for COP for sales 
during the POI, disregarding the revaluation adjustment will not 
accomplish this end. As reported, Columbus argues, Columbus's 
revaluation adjustment includes not only adjustments between the last 
quarter of 1996 and the first quarter of 1997, but also the adjustments 
applied for each quarter of 1997 (i.e., during the POI). Thus, such a 
calculation would inappropriately include in Columbus's COP costs it 
did not incur with respect to producing the subject merchandise. 
Columbus's Case Brief at 10.
    Petitioners suggest that Columbus has incorrectly included an 
accounting adjustment made to its cost of sales in its reported cost of 
production. ``As we understand it,'' petitioners submit, Columbus's 
revaluation adjustments are applied to its finished goods inventory and 
its cost of goods sold (COGS), but not to its COP. The COP, petitioners 
aver, is ``unaffected by this revaluation process.'' Petitioners' 
Rebuttal Brief at 7. Therefore, petitioners conclude, Columbus's 
revaluation adjustments must be excluded from Columbus's reported COP.
    Department's Position: We disagree with Columbus that the 
revaluation adjustment should be included in reported COP and CV. The 
Department's long-standing practice is to calculate COP and CV based on 
the COM of the subject merchandise produced during the POI, rather than 
on the COGS during the POI, because the COM represents the costs 
incurred in manufacturing the product during the relevant period. The 
Department does not use the COGS because it includes the value of 
merchandise held in inventory at the beginning of the period and 
excludes the value of merchandise produced but not sold during the 
period. The value of the merchandise sold from beginning inventory 
reflects the COM of the previous period. Additionally, COGS may include 
inventory values that have been adjusted (e.g., through inventory 
write-down) to the lower of cost or market value and, therefore, do not 
reflect the actual production costs. This methodology is supported by 
section 773(b)(2)(D) of the Tariff Act, which states that the recovery 
of costs is provided for ``(i)f prices which are below the per unit 
cost of production at the time of sale are above the weighted average 
per unit cost of production for the period of investigation or 
review.'' (emphasis added). Sections 773(b)(2)(D) and 773(e)(1) of the 
Tariff Act state that the cost of the products shall be determined 
``during a period which would ordinarily permit the production of the 
merchandise in the ordinary course of business.'' In the instant case 
using the COM during the POI covers the period needed to produce the 
subject merchandise just prior to export and excludes the changes in 
inventory. See Notice of Final Determination of Sales at less Than Fair 
Value: Certain Preserved Mushrooms from Indonesia, 63 FR 72268, 72273 
(December 31, 1998).
    We have used the reported COM incurred during the POI to calculate 
COP and CV because it was never revalued to current prices, and 
therefore does not need to be adjusted back to the original cost. The 
revaluation adjustment proposed by Columbus does not affect the 
reported COPs and CVs which are based on COM because, as Columbus 
notes, the revaluation adjustment is recorded as part of the COGS, not 
the COM. Therefore, we have not considered the revaluation adjustment 
in calculating COP and CV.
    Comment 13: Inclusion of Depreciation Expenses in Cost of 
Production. Petitioners aver that Columbus's reported costs of 
manufacture must be adjusted to account for certain depreciation 
expenses excluded from the original COP data.7 Petitioners 
note Columbus's suggestion at the cost verification that this amount be 
added to G&A expenses; however, petitioners argue, ``depreciation 
expense is one component of COM,'' which in turn serves as the basis 
for calculating G&A

[[Page 15473]]

and interest expenses. Petitioners' Case Brief at 19 (original 
bracketing omitted). If the calculation of COM is flawed, petitioners 
note, any subsequent calculations based on that number will suffer the 
same defect. Petitioners recommend that the Department correct the 
error by including the omitted depreciation in Columbus's COM, thereby 
increasing the total costs.
---------------------------------------------------------------------------

    \7\ Petitioners bracketed the word ``depreciation'' as business 
proprietary information subject to protection from disclosure under 
administrative protective order. However, Columbus in its Rebuttal 
Brief publicly disclosed the specific nature of the expenses; 
therefore, we are free to discuss the expense in this public forum. 
See Columbus's Rebuttal Brief at 20.
---------------------------------------------------------------------------

    Columbus acknowledges that it inadvertently excluded depreciation 
from its reported COP. Columbus attributed the oversight to a 
misunderstanding between Columbus officials as to the proper 
classification of the expense. Accordingly, Columbus points out, it 
presented its correction of this error at the start of the Department's 
cost verification. As to its suggestion that depreciation be included 
in the pool of G&A expenses, Columbus insists it offered this proposal 
``for simplicity's sake;'' Columbus has no objection to including 
depreciation in COM as long as G&A and other adjustments to COP are 
calculated using the corrected COM. Columbus's Rebuttal Brief at 21.
    Department's Position: We agree with petitioners and Columbus and 
have included Columbus's depreciation expenses in its COP and CV. See 
Comment 14, immediately below.
    Comment 14: Inclusion of Additional Depreciation Expenses. 
Petitioners insist that Columbus's COP and CV data must also include 
additional depreciation expenses omitted by Columbus.8 
Petitioners insist that these expenses, attributable to a new 
production facility, are properly included in COP, arguing that 
Columbus's internal accounting system so treats these costs. Therefore, 
in accordance with Columbus's own accounting policies, the depreciation 
expenses at issue must be factored into the calculation of Columbus's 
COP.
---------------------------------------------------------------------------

    \8\ The precise nature of these expenses involves discussion of 
business proprietary information. See Cost Calculation Memorandum 
(Final).
---------------------------------------------------------------------------

    Columbus notes that the Department's Cost Verification Report 
implies that the Department will add this depreciation to COP, and 
argues that it would be incorrect to include expenses not recognized by 
either Columbus's audited financial statements or South African GAAP. 
Citing section 773(f)(1)(a) of the Tariff Act, Columbus notes that COP 
will normally be calculated using the records kept by the exporter or 
producer if the records are kept in accordance with local GAAP and 
``reasonably reflect the costs associated with the production and sale 
of the merchandise.'' Further, the Department

shall consider all available evidence on the proper allocation of 
costs * * * if such allocations have been historically used by the 
exporter or producer, in particular for establishing appropriate 
amortization and depreciation periods, and allowances for capital 
expenditures and other development costs.
    Columbus's Case Brief at 13, quoting section 773 of the Tariff 
Act.

    Columbus avers that its cost accounting system, in full accordance 
with South African GAAP, does not consider the depreciation at issue a 
cost of production, but instead allocates the depreciation of assets 
over their average useful life. Accordingly, Columbus notes, it did not 
take the full charge for depreciation during its build-up to full 
design production capacity, but instead has spread its depreciation 
over the span of the useful life of the facility. Further, Columbus has 
historically treated these expenses in precisely this fashion. 
Consistent with the Department's determinations in Certain Preserved 
Mushrooms From Chile (63 FR 56613, 56620, October 22, 1998) and Static 
Random Access Memory Semiconductors From the Republic of Korea, (63 FR 
8934, February 23, 1998), Columbus suggests, the Department must not 
adjust for these depreciation expenses.
    In its rebuttal Columbus suggests that petitioners ``completely 
misconstrue Columbus's financial statements'' in arguing that 
Columbus's internal accounting policies support petitioners' proposed 
treatment of these expenses. Columbus's Rebuttal Brief at 21. Columbus 
accuses petitioners of quoting from the incorrect and irrelevant 
passage from Columbus's accounting policies and asserts that the 
depreciation expenses at issue are not properly considered part of 
Columbus's COP.
    Petitioners reject Columbus's contention that its accounting for 
these expenses is either in accordance with South African GAAP or 
``reasonably reflect[s] the cost of producing the subject 
merchandise,'' citing Final Determination of Sales at Less Than Fair 
Value: Steel Wire Rod From Canada, 63 FR 9182, 9187 (February 24, 
1998), and Final Determination of Sales at Less Than Fair Value: 
Furfuryl Alcohol From South Africa, 60 FR 22520, 22526 (May 8, 1995). 
Petitioners note that Columbus stated in its section A questionnaire 
response that it employs a straight-line method for depreciating 
assets. This, petitioners assert, is consistent with South African 
GAAP, which provides for the depreciation of plant and equipment ``on a 
systematic basis over its useful life.'' Petitioners' Rebuttal Brief at 
8, quoting South African GAAP, AC 123.44 (December 1994). The problem, 
petitioners maintain, is that South African GAAP defines ``useful 
life'' as either a specified period of time or the number of production 
units expected to be obtained. ``Thus, the useful life can either be a 
period of time or a number of production or similar units, not a hybrid 
of the two.'' Id. at 9. Further, petitioners insist, under South 
African GAAP ``straight-line depreciation results in a constant charge 
over the useful life of the asset.'' Id., quoting South African GAAP at 
AC 123.51 (petitioners' emphasis omitted). Petitioners suggest that 
U.S. GAAP further stipulates that straight-line depreciation ``is a 
function of the passage of time and * * * is not affected by asset 
productivity, efficiency, or degree of use.'' Id., quoting Seidler, Lee 
J., and D.R. Carmichael, Accountant's Handbook, (New York, Ronald 
Press, 1981) (petitioners' emphasis omitted).
    Petitioners conclude that Columbus's chosen method of accounting 
for its depreciation expenses significantly understates Columbus's COM. 
This ``distortive'' methodology, petitioners aver, should be rejected 
by including the additional depreciation in Columbus's costs.
    Department's Position: We agree with petitioners that these 
depreciation amounts should be included in Columbus's cost of producing 
merchandise during the POI. In accordance with section 773(f)(1)(A) of 
the Tariff Act, the Department normally relies on data from a 
respondent's books and records if those records are prepared in 
accordance with the home country's GAAP, and where they reasonably 
reflect the costs of producing the merchandise. Typically, GAAP 
provides both respondents and the Department with a reasonably 
objective and predictable basis by which to compute costs for the 
merchandise under investigation. However, in those instances where the 
Department finds that a company's normal accounting practices result in 
a mis-allocation of production costs, the Department will adjust the 
respondent's costs or use alternative calculation methodologies that 
more accurately capture the actual costs incurred to produce the 
merchandise. See, e.g., New Minivans from Japan: Final Determination of 
Sales at Less Than Fair Value, 57 FR 21937, 21952 (May 26, 1992) 
(adjusting a respondent's U.S. further manufacturing costs because the 
company's normal accounting methodology did not result in an accurate 
measure of production costs).

[[Page 15474]]

    In the instant case we have determined that the exclusion of this 
depreciation expense would result in an understatement of the actual 
costs of producing the subject merchandise. We have therefore included 
this item in Columbus's COP. Further discussion of the precise nature 
of these depreciation expenses necessitates reference to business 
proprietary information. For a full discussion of this depreciation 
adjustment see the Department's Cost Calculation Memorandum (Final).
    Comment 15: Columbus's Costs for Ferrochrome. Both petitioners and 
Columbus make affirmative arguments on Columbus's reported costs for 
input ferrochrome used in producing stainless steel. Petitioners, 
noting that Columbus purchases ferrochrome from an affiliated party, 
submit that Columbus should have reported the supplier's cost of 
production for ferrochrome and the supplier's prices for ferrochrome 
sold to unaffiliated customers. Despite the Department's specific 
requests (and petitioners' comments on this specific issue), 
petitioners maintain that Columbus failed to provide this information, 
relying instead upon the transfer prices between the affiliated 
supplier and Columbus to value its ferrochrome inputs. Petitioners 
argue that, consistent with the findings of the Department's cost 
verification, the Department must disregard the transfer prices between 
Columbus and its affiliated supplier and instead use market prices as 
quoted in the Metal Bulletin to value ferrochrome.
    Conversely, Columbus argues that the Department should rely upon 
the ferrochrome prices it reported in its COP response. Columbus 
maintains that the reason it did not submit the cost and price data of 
its affiliated supplier is because it does not have access to the 
affiliated supplier's cost data, not due to any lack of willingness or 
diligence on its part. In any event, Columbus asserts, verification 
demonstrated that the prices Columbus paid the affiliate for 
ferrochrome were at arm's length, as required by the terms of the joint 
venture agreement. Columbus insists that the international benchmark 
price data it provided at verification further attest to the 
reasonableness of its reported ferrochrome costs. While claiming that 
Columbus has no access to its affiliated supplier's cost data, Columbus 
avers that it is clear that the supplier is a profitable concern. The 
supplier's financial statements, reviewed at the cost verification, 
reveal that ferrochrome production is a major business activity for the 
supplier and that Columbus was one of the supplier's largest purchasers 
of ferrochrome. According to Columbus, the supplier ``is a profitable, 
successful supplier of ferrochrome, and it could not be so if it were 
selling ferrochrome below its cost of production.'' Columbus's Case 
Brief at 17. Further, Columbus charges, the suggestion that the 
supplier would sell ferrochrome at below-cost prices to an affiliate in 
which it has only a one-third share is ``contrary to all evidence and 
to logic,'' as any such below-cost sales would redound to the benefit 
primarily of the other shareholders, and not to the supplier. Columbus 
closes by asserting that there is no evidence that the ferrochrome 
prices are not at arm's length or that these prices are below the 
supplier's cost of production. Therefore, Columbus insists, there are 
no grounds for disregarding the affiliated supplier's prices in valuing 
this input.
    In rebuttal petitioners suggest Columbus's direct presentation 
``makes no new arguments, only repeat[ing] the ones the Department has 
rejected in the past.'' Petitioner's Rebuttal Brief at 10. In fact, 
petitioners continue, Columbus admits in its case brief that the so-
called arm's-length prices it pays are then adjusted for certain 
expenses. Id. at 11 and n.38. ``These adjustments,'' petitioners aver, 
``are exactly the kinds of things the Department wants and needs to 
scrutinize but could not because Columbus has not provided the 
necessary information.'' Further, in petitioners' view Columbus failed 
to demonstrate that it had no access to its affiliated supplier's cost 
data, and ``totally disregarded petitioners' suggestion'' that the 
affiliated supplier provide its cost data directly to the Department 
(thus bypassing its customer Columbus and protecting these data from 
disclosure). Petitioners also reject Columbus's argument that it would 
be neither reasonable nor logical for its affiliated supplier to 
provide Columbus ferrochrome at less than its cost of production. 
Rather, petitioners insist, ``these intertwining relationships are 
exactly the reason the Department has requested the information'' on 
the affiliate's cost and pricing to unaffiliated customers. Id. at 12 
(original emphasis). Petitioners point to Columbus's ``nebulous'' price 
adjustments, inconsistent statements, and lack of documentation as 
bases for disregarding Columbus's acquisition prices for ferrochrome. 
As petitioners frame it, ``Columbus has said, in effect, `trust us.' '' 
Id. The Department cannot do so, petitioners argue, and must therefore 
base ferrochrome costs on published market prices.
    Columbus, in turn, claims it provided ``everything it could'' to 
support its contention that its ferrochrome costs reflected arm's-
length and above-cost prices. The sole reason Columbus failed to 
provide the affiliated supplier's cost of production, Columbus avers, 
is that it simply did not have access to the information. Thus, 
Columbus insists, Columbus did not ``choose not to, but could not 
supply'' the requested data. Columbus's Rebuttal Brief at 23 (original 
emphasis). Columbus characterizes petitioners' comparison of its 
ferrochrome costs to international prices as spurious, accusing 
petitioners of comparing Columbus's ex-works price per metric ton of 
ferrochrome to the published delivered price per pound of chrome 
(ferrochrome is 52 percent chrome). If one converts Columbus's price 
appropriately and adjusts for commissions, international freight and 
delivery expenses, Columbus suggests, one arrives at a price ``entirely 
in line with international prices.'' Id. Columbus reiterates that there 
is no evidentiary basis for the Department to believe or suspect that 
the affiliated supplier's prices for ferrochrome are below either its 
cost of production or arm's-length prices. The Department, therefore, 
must use Columbus's reported ferrochrome prices in calculating COP.
    Department's Position: We agree with petitioners that, in 
accordance with section 776 of the Tariff Act, we should use the facts 
available to determine Columbus's ferrochrome costs. Sections 773(f)(2) 
and (3) of the Tariff Act specify the treatment of transactions between 
affiliated parties for purposes of reporting cost data (used in 
determining both COP and CV) to the Department. Section 773(f)(2) 
states that the Department may disregard such transactions if the 
amount representing that element (the transfer price) does not fairly 
reflect the amount usually reflected (typically the market price) in 
the market under consideration. Under these circumstances the 
Department may rely on the market price to value inputs purchased from 
affiliated parties.
    Section 773(f)(3) states that if transactions between affiliated 
parties involve a major input, then the Department may value the major 
input based on its COP if the cost is greater than the amount that 
would be determined under 773(f)(2) (i.e., the higher of the transfer 
or market price). Additionally, section 773(f)(3) applies if the 
Department ``has reasonable grounds to believe or suspect that an 
amount represented as the value of such input is less than the COP of 
such input,'' the Department may disregard that price. See also, 19 CFR 
351.407(b) (the Department will determine the value of a major input 
purchased from an affiliate based upon the higher of

[[Page 15475]]

transfer price, market price, or the affiliate's cost of producing the 
input). The Department generally finds that such ``reasonable grounds'' 
exist where it has initiated a COP investigation of the subject 
merchandise (see, e.g., Small Diameter Circular Seamless Carbon and 
Alloy Steel Standard, Line and Pressure Pipe From Germany: Final 
Results of Antidumping Duty Administrative Review, 63 FR 13217, 13218 
(March 18, 1998), and Silicomanganese from Brazil; Final Results of 
Antidumping Duty Administrative Review, 62 FR 37869, 37871 (July 15, 
1997).
    Because petitioners timely filed an allegation of sales below cost 
providing ``reasonable grounds to believe or suspect'' that Columbus 
made sales of the foreign like product in South Africa at prices below 
its COP, on August 24, 1998, we directed Columbus to respond to section 
D of our original antidumping questionnaire. See Letter from Richard 
Weible to Columbus, August 24, 1998. That questionnaire explicitly 
instructed Columbus to report the unit COP incurred to produce the 
major inputs obtained from affiliated suppliers. Our October 7 and 
October 23, 1998, supplemental questionnaires reiterated this 
instruction specifically for the affiliated purchases of ferrochrome 
(see questions 13 and 8, respectively). Columbus asserted that it did 
not have access to the affiliate's COP of ferrochrome and argued that 
it was sufficient that the affiliated party transactions were at arm's 
length. However, Columbus failed to provide evidence that the prices it 
paid the affiliate for ferrochrome were at arm's length. Moreover, 
Columbus's argument that its purchases of ferrochrome from its 
affiliate were at arms's length prices does not satisfy the requirement 
that the transfer price be above the affiliated supplier's actual COP.
    In the absence of COP for the major input ferrochrome, the 
Department was unable to perform an analysis to determine whether the 
transfer prices were at or above the affiliated supplier's COP. Section 
776(a) of the Act requires that the Department use the facts otherwise 
available when necessary information is not on the record or an 
interested party withholds requested information, fails to provide such 
information in a timely manner, significantly impedes a proceeding, or 
provides information that cannot be verified.
    Due to Columbus's failure to provide the affiliated party's 
ferrochrome COP we cannot determine whether the reported transfer 
prices are at or above COP. As a result we find that we must rely upon 
the facts otherwise available for the cost of ferrochrome purchased 
from the affiliate. In this case Columbus did not provide any evidence 
indicating that it even attempted to obtain the affiliate's COP data, 
or otherwise supporting its claim that it could not obtain the 
requested data. Therefore, we determine that Columbus failed to act to 
the best of its ability to comply with these requests for information; 
accordingly we are making an adverse inference in selecting among the 
facts otherwise available, as provided in section 776(b) of the Tariff 
Act.
    Columbus's ferrochrome transfer price is below the international 
market price as published in the Metals Bulletin submitted by Columbus 
for the record of this investigation. We have therefore increased 
Columbus's prices for ferrochrome by adding the difference between 
Columbus's transfer price plus estimated freight and the market price 
(delivered, customer's works, major European destination) as published 
in the Metals Bulletin. We have not included the other adjustments 
proposed by Columbus (e.g., commissions) since it is not clear from the 
record to what extent these other items are included in the Metals 
Bulletin price. Finally, we note that, contrary to Columbus's 
assertion, a net profit reflected in the affiliated supplier's 
financial statements does not provide evidence that its transfer prices 
were above COP, since such aggregated revenue and cost-of-sales data 
would include all products sold by the affiliated supplier to all 
customers.
    Comment 16: Allocation of Variances. Petitioners accuse Columbus of 
failing to allocate properly two specific variances by including these 
variances in its reported COP. ``Since the amount should be included in 
Columbus's costs, and since the amount is known, the Department should 
adjust Columbus's COM by adding the (specific) variance(s) to it.'' 
Petitioners' Case Brief at 22 and 23.
    Columbus agrees that it inadvertently omitted one variance and 
slightly understated another when preparing its COP response, and that 
both variances should be accounted for in correcting Columbus's COP. 
Columbus's Rebuttal Brief at 24.
    Department's Position: We agree with Columbus and petitioner that 
these variances should be applied to the reported COM. Therefore, we 
have included both variances in the COM for this final determination.
    Comment 17: Allocation of Costs Based on Product Characteristics. 
According to petitioners, Columbus failed to account for differing 
physical characteristics of its products in allocating its costs of 
production. Petitioners maintain that factors such as the processing 
steps (e.g., the number of passes through a given rolling mill) and 
processing times 9 will vary for different stainless steel 
products with these differences reflected in the costs of manufacture. 
Petitioners suggest that the Department can recalculate Columbus' COP 
by backing out certain costs associated with the different production 
cost centers (roughing mill, Steckel mill, annealing and pickling) and 
allocating them back on the basis of product specifications. For 
example, roughing and Steckel mill costs could be allocated on the 
basis of production quantities and either the number of passes, 
processing time, or both. It would be clearly wrong, petitioners 
insist, for merchandise with different specifications to have the same 
COP; the Department, therefore, must recalculate Columbus' COM to 
account for these differences.
---------------------------------------------------------------------------

    \9\ Petitioners bracketed this information in keeping with the 
draft copy of the Cost Verification Report they had at the time they 
prepared their case and rebuttal briefs. Columbus, however, 
discusses this issue publicly. See, e.g., Columbus' Rebuttal Brief 
at 25.
---------------------------------------------------------------------------

    Columbus argues that any significant cost differences attributable 
to physical differences have been captured by its normal cost 
accounting system. As for differences which are not captured, Columbus 
insists these differences are both insignificant and unquantifiable. 
Columbus' Rebuttal Brief at 25. For example, the number of passes 
required at the Steckel mill depends on such factors as the temperature 
and condition of the steel, and not just the final physical 
characteristics as the product passes to the next work station. Thus, 
Columbus submits, ``[t]here is no straight correlation'' between the 
product's physical characteristics and the processing time required at 
each station. Columbus maintains that it quite properly did not report 
cost differences which could not be substantiated through empirical 
observation or through Columbus' normal cost accounting system. Id. at 
26.
    Department's Position: We agree with petitioners that differences 
in the cost of producing the subject merchandise due to differences in 
physical characteristics should be accounted for in the reported COP 
and CV. While we have determined in this case that the cost differences 
due to certain physical characteristics are either insignificant or are 
adequately taken into account by Columbus' reporting methodology, we 
have adjusted the reported costs for certain other physical 
characteristics. A full

[[Page 15476]]

discussion of this issue necessarily involves a discussion of business 
proprietary information; see the Cost Calculation Memorandum (Final).
    Comment 18: COP Allocated on the Basis of Sales Volumes Rather than 
Production Volumes. Petitioners note that Columbus reported its 
weighted-average costs based on sales quantities rather than production 
quantities, as requested by the Department. Since the Department has 
data on Columbus' production quantities, petitioners insist, the 
Department should recalculate Columbus' weighted-average COP on that 
basis.
    Columbus counters that its records kept in the normal course of 
business track costs based on tons sold, not tons produced. Further, 
Columbus avers, the Department is investigating sales during the POI, 
not production during the POI. To avoid distorting Columbus' costs, 
Columbus argues, the Department should calculate COP on the same basis 
as does Columbus in its ordinary course of business. Columbus' Rebuttal 
Brief at 26.
    Department's Position: We agree with petitioners that costs should 
be weight-averaged using production quantities. As noted in Comment 12, 
above, it is the Department's long-standing practice to calculate COP 
and CV based on the cost of manufacturing the subject merchandise 
produced during the POI, rather than on a COGS figure and its 
associated sales quantity, which includes inventory changes during the 
POI. Moreover, since the costs the Department is relying upon only 
include the costs for products produced during the POI, the 
corresponding production quantities must also serve as the appropriate 
base for allocation. Therefore, we have used the quantities produced 
during the POI (i.e., the quantities corresponding to the submitted 
COM) rather than quantities sold to calculate weighted-average COP and 
CVs.

Continuation of Suspension of Liquidation

    In accordance with section 735(c)(1)(B) of the Tariff Act, we are 
directing the Customs Service to suspend liquidation of all imports of 
subject merchandise 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.
    Article VI.5 of the General Agreement on Tariffs and Trade (GATT 
1994) provides that ``[n]o product . . . shall be subject to both 
antidumping and countervailing duties to compensate for the same 
situation of dumping or export subsidization.'' This provision is 
implemented in section 772(c)(1)(C) of the Tariff Act. Since 
antidumping duties cannot be assessed on the portion of the margin 
attributed to export subsidies there is no reason to require a cash 
deposit or bond for that amount. The Department has determined in its 
Final Affirmative Countervailing Duty Determination: Stainless Steel 
Plate in Coils From South Africa that the product under investigation 
benefitted from export subsidies. Normally, where the product under 
investigation is also subject to a concurrent countervailing duty 
investigation, we instruct the Customs Service to require a cash 
deposit or posting of a bond equal to the weighted-average amount by 
which the NV exceeds the EP, as indicated below, minus the amount 
determined to constitute an export subsidy. See, e.g. Notice of 
Antidumping Duty Order: Stainless Steel Wire Rod From Italy, 63 FR 
49327 (September 15, 1998). Accordingly, for cash deposit purposes we 
are subtracting from Columbus' cash deposit rate that portion of the 
rate attributable to the export subsidies found in the countervailing 
duty investigation involving Columbus (i.e., 3.84 percent). We have 
made the same adjustment to the ``All Others'' cash deposit rate by 
subtracting the rate attributable to export subsidies found in the 
countervailing duty investigation of Columbus.
    We will instruct the Customs Service to require a cash deposit or 
the posting of a bond for each entry equal to the weighted-average 
amount by which the NV exceeds the EP, adjusted for the export subsidy 
rate, as indicated below. These suspension-of-liquidation instructions 
will remain in effect until further notice. The weighted-average 
dumping margins are as follows:

----------------------------------------------------------------------------------------------------------------
                                                                                      Bonding/Cash Deposit Rate
                Exporter/Manufacturer                    Weighted-Average Margin              (percent)
----------------------------------------------------------------------------------------------------------------
Columbus Stainless..................................                        41.63%                         37.79
All Others..........................................                        41.63%                         37.79
----------------------------------------------------------------------------------------------------------------

International Trade Commission Notification

    In accordance with section 735(d) of the Tariff Act, we have 
notified the International Trade Commission (the Commission) of our 
determination. As our final determination is affirmative, the 
Commission will determine within 45 days after our final determination 
whether imports of stainless steel plate in coils are materially 
injuring, or threaten material injury to, the U.S. industry. If the 
Commission determines that material injury, or threat thereof, does not 
exist, the proceeding will be terminated and all securities posted will 
be refunded or canceled. If the Commission 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, or withdrawn from warehouse, for 
consumption on or after the effective date of the suspension of 
liquidation.
    This determination is issued and published in accordance with 
sections 735(d) and 777(i)(1) of the Tariff Act.

    Dated: March 19, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-7536 Filed 3-30-99; 8:45 am]
BILLING CODE 3510-DS-P