[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